Holding

Clause (a) of Entry 24 of the Andhra Pradesh General Sales Tax Act, 1957 is unconstitutional as it violates Articles 301‑304 by imposing a higher tax on groundnut oil imported from another State.

Summary

Mis Anand Commercial Agencies, a partnership engaged in manufacturing groundnut oil, imported oil from Karnataka and was taxed at the higher rate of 6½ paise per rupee under Entry 24(a) of the Andhra Pradesh General Sales Tax Act, 1957. The firm contended that this rate was discriminatory and violated Articles 301‑304 of the Constitution guaranteeing free trade across India. The State argued that the lower rate of 2½ paise under Entry 24(b) applied because the groundnuts had already been taxed in Andhra Pradesh, and that the total tax burden on imported oil (groundnut tax + oil tax) equaled that on locally produced oil. The Supreme Court examined the constitutional provisions and prior case law on inter‑state trade discrimination, finding no factual basis for the State’s claim of a compensatory lower rate for local manufacturers. It held that Clause (a) of Entry 24 imposes a higher tax on oil not taxed under the Act and is violative of Articles 301‑304. Consequently, the Court declared the clause unconstitutional, held that imported groundnut oil cannot be taxed at a higher rate than that prescribed in Clause (b), and allowed the appeal, setting aside the High Court’s order.

Issues considered

Whether Clause (a) of Entry 24 of the Andhra Pradesh General Sales Tax Act, 1957, which levies a higher rate of tax on groundnut oil imported from another State, violates Articles 301‑304 of the Constitution by discriminating against inter‑state trade.
Whether the State can justify the differential tax rates by invoking the tax already levied on groundnuts under Entry 6 of the Third Schedule.

Legislation cited

Andhra Pradesh General Sales Tax Act, 1957s. Entry 24(a), s. Entry 24(b), s. Entry 6 of Third Schedule
Constitution of Indias. Article 301, s. Article 302, s. Article 303, s. Article 304

Subjects

Sales TaxFreedom of TradeInter‑State CommerceDiscriminationConstitutional ValidityGroundnut OilArticle 301Article 304Tax Rate Differential

Judgment

A MIS ANAND COMMERCIAL AGENCIES ETC.
v.
THE COMMERCIAL TAX OFFICER VI CIRCLE,
HYDERABAD AND ORS. ETC.

NOVEMBER 6, I997
B
[S.P. BHARUCHA AND SUHAS C. SEN, JJ.]

Sales Tax:

c Andhra Pradesh General Sales Tax Act 1957-First Schedule-Ent1y
24 Clauses (a) and (b)-lmposition of Sales Tax-Groundnut oil-Imported
from Karnataka for sale in Andhra Pradesh-Groundnut not faxed under the
Andhra Pradesh General Sales Tax Act-Higher rate of tax imposed on
groundnut oil-Validity of-Held, groundnut oil imported by appellant cannot
D be taxed at higher rate than the rate prescribed in clause (b) of Entry 24
of first Schedule.

Co.nstitution of India, I 950:

Articles 301, 302, 303, and 304~Andhra Pradesh General Sales Tax
E Act, I957-Clause (a) of Entry 24 of the First Schedule-Imposition of
higher rate of tax on groundnut oil-Held, violative of Articles 301 to 304
of Constitution of India, I950 :

The appellant-firm was engaged in manufacturing and selling groundnut
oil. Under Entry 24(b) of the First Schedule to the Andhra Pradesh General
F Sales Tax Act, 1957 tax was payable on groundnut oil at the rate of2-l/2
paise per rupee of the sale price. Under Entry 24(a), tax was payable on
groundnut oil or refined oil obtained from groundnut which has not been
taxed under the Andhra Pradesh Act, at the rate of 6-1/2 paise per rupee of
the sale price. For the relevant assessment year tax at a higher rate was
demanded from appellant as the groundnut oil was imported from Karnataka
G for sale in Andhra Pradesh. The appellant challenged the imposition of
higher levy. The claim of appellant was rejected by both the Sales Tax Officer
and the Assistant Commissioner. On further appeal, the High Court dismissed
the petition. Hence the present appeal.

The contention of the appellant was that the oil had been extracted out
H
76
ANAND COMMERCIAL AGENCIES v. COMMERCIAL TAX OFFICER 77
of groundnuts which had already been taxed under the Karnataka Sal.es Tax ·.A
Act. The levy of higher tax on the oil imported from Karnataka into Andhra .
Pradesh was discriminatoryand violative of right of freedom of trad.e and
commerce throughout India..

The contention of the respondents was that if a manufacturer of oil
does not purchase groundnut oil from the market but has his own supply of B
groundnut he pays tax at 6-1/2 paise in the rupee which was the rate at which
imported oil was taxed. The distinction was only in the case of oil
manufactured out of groundnut which has borne tax at the rate of 4 paise
in the rupee in Andhra Pradesh. In such a case; the tax was at the rate of
2-1/2 paise in the rupee so that the manufacturer pays 6-1/2 paise in the C
rupee as tax in all. Therefore, no discrimination was being practised by
taxing the imported oil at the rate of 6-1/2 paise in the rupee.

· Allowing the appeal, this Court

HELD: I.I. Clause (a) ofEntry 24 of the First Schedule to the Andtira D
Pradesh General Sales Tax Act, 1957 is violative of the provisions of Articles
301 to 304 of the Constitution of India, 1950 in so far as it imposes a higher
rate of tax on groundnut oil or refined oil which has been .obtllined from
groundnuts that have not been taxed under the Andhra Pradesh Act.
187cC-DJ
E
1.2. The groundnut oil imported by the appellant from Karnataka for
sale in Andhra Pradesh cannot be taxed at a rate higher than the rate
prescribed in clause (b) of Entry 24 of the First Schedule to the Andhra
Pradesh Act. Under Entry 24 of the First Schedule a lower rate of duty was
imposed oil groundnut oil or refined oil obtained from groundnuts that have F
been taxed under the Andhra Pradesh Act. Groundnut oil manufactured in
Andhra Pradesh has not generally been charged at a lower rate of tax has
not been substantiated by any fact or figure. It is not the case of the state
that only a small portion of the oil manufactured by local manufacturers is
produced from groundnuts purchased in Andhra Pradesh. Unless that can be
established, it cannot be held that groundnut oil or refined oil within the G
State is generally charged at the same rate as the imported oil.
[87-D; 86-F-H]

1.3. The oil manufactured in Karnataka which was imported into
Andhra Pradesh was manufactured out of groundnuts which had also borne
tax under the Karnataka Sales Tax Act. Therefore, it cannot be said that oil H
78 SUPREME COURT REPORTS (1997] SUPP. 5 S.C.R.

A manufacturers in Andhra Pradesh are in a disadvantageous position and had
to be compensated by a lower rate of tax. No special case has been made out
by State of Andhra Pradesh for imposing a lower rate of tax on groundnut
oil produced within the State. 187-A-B]

Mis Video Electronics Pvt. Ltd v. State of Punjab, AIR (1990) SC 820;
B Firm A. T. B. Mehtab Majid & Co. v. State of Madras, AIR (1965) SC 928
and Weston Electronics & Anr. v. State of Gujarat & Anr. etc., AIR (1968)
SC 2038 and Shri Mahavir Oil Mills and Anr. v. State of Jammu & Kashmir
& Ors., JT (1996) I SC 837, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1220 of 1988
C Etc.
From the Judgment and Order dated 25.9.87 of the Andhra Pradesh High
Court in W.P. No. 4415of1980.
R. Sundaravardhan, R.N. Keshwani and Ms. Janaki Ramachandran for
D the Appellant.
The Judgment of the· Court was delivered by
SEN, J. The appellant, Mis. Anand Commercial Agencies, is a
partnership firm. It is regularly assessed under the Andhra Pradesh General
Sales Tax Act. The dispute in this case arose in the course of assessment for
E the assessment year 1977-78. Under Entry 24(b) of the First Schedule to the
Act, tax is payable on groundnut oil at the rate of 2-1/2 paise per rupee of
the sale price. Under Entry 24(a), tax is payable on groundnut oil or refined
oil obtained from groundnut which has not borne any tax under the A.P. Act
at the rate of 6-1 /2 paise per rupee of the sale price. The assessee at the
p relevant period had a total turnover of Rs. 31,35,000 out of which Rs. 14,76,000
was on account of sale of groundnut oil and refined oil obtained from
groundnut which had not borne.tax under the A.P. Act because the oil was
imported into Andhra Pradesh from the State of Karnataka.

The case of the appellant is that the oil had been extracted out of
G groundnuts which had borne tax under the Karnataka Sales Tax Act. The levy
of tax on the oil imported from Kamataka into Andhra Pradesh at a rate higher
than the rate at which the oil manufactured in Andhra Pradesh is taxed is
discriminatory and violative of the appellant's right of freedom of trade and
commerce throughout India.

H !his contention of the assessee was rejected by the Sales Tax Officer
ANAND COMMERCIAL AGENCIES v. COMMERCIAL TAX OFFICER [SEN, l ] 79

and also by the Assistant Commissioner (C.T.), Appeals, Secunderabad. A
The assessee thereafter challenged the decision of the Assistant
Commissioner by filing a writ petition in the Andhra Pradesh High Court
challenging the constitutional validity ofthe levy. There was a difference of
opinion between the two Judges who heard the matter. The case was referred
to a third Judge who was of the view that the writ petition was without any B
merit and should be dismissed.
The assessee has appealed to this Court.
To appreciate the controversy, it is necessary to set out Entry 24 of the
First Schedule to the Andhra Pradesh General Sates Tax Act:-
c
Description of goods Point of levy Rate of tax
(I) (2) (3)

24. Groundnut oil or
refined oil: (1024)
D
(a) Groundnut oil or refined At the point of first 6-1/2 paise in
oil not covered by sub- sale in the State. the rupee.
item (b) below.
(b) Groundnut oil or refined At the point of first 2-1 /2 paise in
oil obtained from ground- sale in the State. the rupee.
nut that has met tax E
under the Act.

Entry 6 of the Third Schedule which relates to declared goods:-

Description of the goods Point of levy Rate of tax F
(I) (2) (3)

6. Groundnut or peanut When purchased by a 4 paise in
(Arachis Hypogaea) miller other than a the rupee.
(3006) decorticating miller in the
State, at the point of purc- G
hase by such miller and in
all other cases at the point
of purchase by the last
dealer who buys in the
State. H
80 SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R.

A It is clear from these entries that groundnut oil or refined oil is liable
to be taxed at the rate of 6-1 /2 paise in the rupee at the point of first sale in
the State but under Entry 24(b) it is liable to be taxed at the rate of2-l/2 paise
in the rupee if the oil is obtained from groundnut which has already suffered
tax under the A.P. Act. Under Entry 6 groundnut is liable to be taxed at the
B point of purchase by the last dealer in the State at the rate of 4 paise in the
rupee.

On behalf of the appellant, it has been contended that on oil obtained ·
from groundnut purchased locally the rate of tax is 2-1 /2 paise in the rupee
whereas in t~e case of oil imported from other States, the rate of tax on local
C sales is higher, namely, 6-1/2 paise in the rupee. Entry 24(a) is discriminatory
and violativ.e of Articles 30 I and 304 of the Constitution of India inasmuch
as imported oil has to bear a higher rate of tax than locally produced oil.

On behalf of the State of Andhra Pradesh, it has been contended that
there was no discrimination .in the rate of tax on oil indigenously produced
D within the State and imported oil: It has to be borne in mind that there was
a tax on sale of groundnut at the rate of 4 paise in the rupee under item 6
of the Third Schedule to the A.P. Act. If this is taken into account, a further
levy of 4 paise in the rupee. in effect amounts to a total levy 6-1 /2 paise per
rupee which'is levied to the tax imposed on the imported oil.

·E The majority view in the High Court was that having regard to the tax
levied on groundnut in the State which was 4 paise in the rupee, the tax on
imported oil and indigenously produced oil within the State was the same, i.e.,
6-1/2 .paise in the rupee. It was observed:-

·"Under Entry 6 of the Third Schedule tax is levied at the rate of 4 paise
F in a i'upee on groundnuts at the point of purchase by the last dealer.
Groundnut is the material from which groundnut oil is obtained. It is
in respect of oil obtained from groundnut that suffered the tax, Entry
24(b) prescribes a rate of 2-112 paise in the rupee on the first sale.
Otherwise, groundnut oil whether imported or' made from groundnut
locally tax is leviable at the rate of 6-1/2 paise in the rupee. Take for
G
instance a dealer who sells ojl which had been obtained from groundnut
which has not suffered tax, he having not purchased the groundnut
at all as it was from his own field or grown by him. Such sale are also
liable to be taxed at the rate of 6-1 /2 paise in the rupee. The
discrimination if at all is because of Entry 24(b ). Since the groundnut
H from· which the oil is obtained had already suffered tax which is the
I
I
ANAND COMMERCIAL AGENCIES,;, COMMERCIAL TAX OFFICER [SEN, J] 81

maximun that can be levied under the Central Sales Tax Act in the A
State at the rate of 4 paise in the rupee at the purchase point by the
last dealer, it is subjected to lesser rate. Though groundnut oil is to
be treated separate commodity from groundnuts there is a clear nexus
between groundnuts and groundnut oil,"

Raghuvir, J. in his dissenting Judgment took the view that the argument B
that groundnut oil or refined oil in the State of Andhra Pradesh is not taxed
at the rate of 6-1/2 paise in the rupee because the groundnuts have been
subjected to tax at the rate of 4 paise in the rupee is an argument without any
substance. The imported groundnut oil or refined oil was taxed at 6-1 /2 paise
in the rupee, even when groundnuts out of which such oil was extracted had C
met sales tax under the local Sales Tax law of the State from which oil was
imported. Raghuvir, J. was of the view that to argue that refined oil processed
in the State is in effect taxed at the rate of 6-1/2 paise in the rupee is to
overlook the issue that imported oil has been extracted out of the groundnuts
which were also taxed under the local tax laws.
D
Articles 301, 302, 303, and 304 are relevant for the purpose of deciding
this controversy:-

"30 I. Freedom of trade, commerce and intercourse'-Subject to the
other provisions of this part, trade, commerce and intercourse
throughout the territory of India shall be free. E
302. Power of Parliament to impose restrictions on trade, commerce
and intercourse.-Parliament may by law impose such restrictions on
the freedom of trade, commerce or intercourse between one State and
another or within any part of the territory of India as may be required F
in· the public interest.

303. llestrictions on the legislative powers of the Union and of the
States with regard to trade and corrimerce.- (1) Notwithstanding
anything in article 302, neither Parliament nor the Legislature of a
State shall have power to make any law giving, or authorising the G
giving of, any preference to one State over another, or making, or
authorising the making of, any discrimination between one State and
another, by virtue of any entry relating to trade and commerce in any
of the Lists in the Seventh Schedule.

(2) Nothing in clause (I) shall prevent Parliament from making any H
82 SUPREME COURT REPORTS f1997] SUPP. 5 S.C.R.

A law giving, or authorising the giving of, any preference or making, or
authorising the making of, any discrimination if it is declared by such
law that it is necessary to do so for the purpose of dealing with a
situation arising from scarcity of goods in any part of the territory of
India.

B 304. Restrictions on trade, commerce and intercourse among States-
Notwithstanding anything in article 301 or article 303, the Legislature
of a State may by law-

(a) impose on goods imported from other State or the Union territories
any tax to which similar goods manufactured or produced in that
c State are subject, so, however, as not to discriminate between
goods so imported and goods so manufactured or produced; and

(b) impose such reasonable restrictions on the freedom of trade,
commerce or intercourse with or within that State as may be
required in the public interest;
D
Provided that no Bill or amendment for the purpose of clause (b)
shal I be introduced or moved in the Legislature of a State without the
previous sanction of the President."

Freedom of trade, commerce and intercourse guaranteed by Article 301
E means freedom to carry on business throughout the territory of India without
any obstruction and hindrance. The question whether a fiscal barrier will
amount to interference with the right to carry on trade, commerce and inter-
course throughout the territory of India is not an easy question to answer.
Every State has a right to impose tax on subjects which fall within its
jurisdiction under List-II of the Seventh Schedule to the Constitution. This
F includes taxes on sale or purchase of goods other than newspapers. Fiscal
powers of the State can be utilised not only to collect revenue but also to
regulate economic development of a State. A backward State may try to
encourage development of industries within the State by grant of subsidy and
also by low rate of tax on goods manufactured by local industries. If small
G newly set up industries in the State have to compete with big industries, small
units may not survive at all. In such a case, the State is entitled to prop up
the local industries by taking fiscal measures. This may be done by providing
subsidies or by imposing low rate of sales tax on the goods manufactured
within the State. This aspect was explained in the case of Mis. Video Electronics
Pvt. Ltd v. State of Punjab, AIR (1990) SC 820, by Sabyasachi Mukharjee,
H C.J., in the following words:-
ANAND COMMERCIAL AGENCIES v. COMMERCIAL TAX OFFICER [SEN, J.] 83
"It is manifest that free flow of trade between two States does not A
necessarily or generally depend upon the rate of tax alone. Many
factors including the cost of goods play an important role in the

- movement of goods from one State to another. Hence the mere fact
that there is a difference in the rate of tax on goods locally manufactured
and those imported would not amount to hampering of trade between
the two States within the meaning of Art. 30 l of the Constitution. As B
is manifest, Art. 304 is an exception to Art. 30 l of the Constitution.
The need of taking resort to exception will arise only ifthe tax impugned
is hit by Arts. 30 I and 303 of the Constitution. If it is not then Art.
304 of the Constitution will not come into picture at all."

But barring special circumstances, as stated hereinabove, the view of
c
this Court has consistently been that a State is not entitled to tax locally made
goods at a lower rate while taxing similar goods manufactured in other States
at a higher rate.

In the case of Firm A. T.B. Mehtab Majid & Co. v. State of Madras, AIR D
(1963) SC 928, hides and skins imported from outside the State were subjected
to higher rate of tax than the rate of tax imposed on hides and skins tanned
and sold within the State by Rule 16 of the Madras General Sales Tax (Turnover
and Assessment) Rules, 1939. The effect of this Rule was that tanned hides
or skins imported from outside the State and sold within the State were
subject to a higher rate of tax than the tax imposed on hides or skins tanned E
and sold within the State, inasmuch as sales tax on the imported hides or
skins tanned outside the State was on their sale price whereas the tax on
hides or skins tanned within the State was on the sale price of these hides
or skins when they were purchased in the raw condition which wa!;
substantially less than the sale price of tanned hides or skins. F
It was held that the taxing laws can be treated as restrictions on trade,
commerce and intercourse, if they hamper the flow of trade and if they are
not compensatory or regulatory. Sales tax which had the effect of discriminating
between goods of one State and goods of another might affect free flow of
trade and offend Article 301 and could be saved only if it came within the G
terms of Article 304 (a).

It was further held that the provisions of Rule 16(2) discriminated
against the imported hides or skins which had been purchased or tanned
outside the State and contravened the provisions of Article 304(a) of the
Constitution. It was pointed out that "the similarity contemplated by Article H
84 SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R.

A 304(a) is in the nature of the quality and kind of the goods and not with
respect to whether they were subject of a tax already or not."

In Weston Electronics & Anr. v. State of Gujarat & Anr. etc., AIR (1988)
SC 2038, the notification fixing lower rate of tax for local manufacturers of
e_lectronic goods was quashed. It was observed that an exception to the
-
B mandate laid down by Article 30 I and the prohibition contained in Article
• 303(1) could be sustained on the basis of clause (a) of Article 304 only ifthe
conditions contained therein were satisfied.

In the case of Video Electronics Pvt. Ltd. & Anr. v. State of Punjab,
AIR (1990) SC 820, the constitutional validity of notifications issued by the
C Government of Uttar Pradesh was challenged by the writ petitioners who
carried on the business of selling cinematographic films and other equipments,
like projectors, sound recording and reproducing equipment, industrial X-ray
films, graphic art films photo films etc. in the State of Uttar Pradesh and Delhi.
The petitioners sold these goods after receiving them from the manufacturers
D from outside the State of Uttar Pradesh. They were dealers of Hindustan
Photo Films Manufacturing Co. Ltd., a Government of India undertaking. In
Uttar Pradesh, there was a single point levy of sales tax. The State of Uttar
Pradesh had issued two notifications under the U.P. Sales Tax Act and Central
Sales Tax Act exempting new units of manufacturers as defined in the Act in
respect of the various goods for different periods ranging from 3 to 7 years
E as the case may be, from payment of any sales tax. The benefit of the
notifications could be availed of by the new industries set up in the State
which were divided into two categories -(1) units with capital investment not
exceeding three lakhs of rupees and (2) units with capital investment exceeding
three lakhs of rupees. The period of exemption varied from 3 to 7 years in
different districts.
F
The case. of the writ petitioners in that case was that the dealers had
become liable to pay sales tax at 12% +10% surcharge under the U.P. Sales
Tax Act on photographic and graphic art material and at the rate of8% + 10%
surcharge on medical X-ray films and minimum of I0% on their inter-State
G turnover. But the manufacturers in the State of U.P. had no tax liability by
virtue of exemption granted under the impugned notifications. The case of the
petitioners was that the goods sold by them had become costlier by 8.8. %
to 13.2% depending upon the items sold compared to the goods manufactured
in the State of Uttar Pradesh. Apart from the challenge based on Articles
19( I )(g) and 14 of the Constitution, the petitioners based their case on the
H provisions of Articles 301 to 305 of Part Xlll of the Constitution of India.
ANAND COMMERCIAL AGENCIES v. COMMERCIAL TAX OFFICER [SEN, J l 85

·After an elaborate review of the case law, it was held : A
"Where the general rate applicable to, the goods locally made and on

.. those imported from other States is the same nothing more normally
and generally is to be shown by the State to dispel the argument of
discrimination under Art. 304(a), even though the resultant tax amount
on imported goods may be different. Here, reference may be made to B
Ratan Lal's case AIR (1970) SC 1742 (supra). In the instant writ
petition, in the State ofU.P. those producers or manufacturers who do
not come within the ambit of notifications, have to pay tax on their
goods at the general rate prescribed and
I
there is no differentiation or
discrimination qua the imported goods. The question naturally arises C
whether the power to grant exemption to specified class of
manufacturers for a limited period on certain conditions as provided
by S. 4-A of the U.P. Sales Tax Act is violative of Art. 304(a)."

The Court ultimately held that if the general rate of tax imposed upon
the locally made goods and the imported goods was the same, the State , in D
order to give incentives to certain industries, could lawfully reduce the rate
of tax for a limited period of time. In the facts of that case, the period of
exemption from tax for certain type of goods were from three to seven years.
Sabyasachi Mukharji, C. J. held that granting of such exemption for a limited
period only to certain industries in the State from payment of sales tax was
not violative of the provisions of Article 30 l because the general rate of tax E
payable on thes_e goods manufactured by other units were the same as the
rate applicable to goods imported from outside the State.

This question was once again examined in the case of Shree Mahavir
Oi!Mills and Anr. v. State of Jammu & Kashmir & Ors., JT (1996) 10 S.C.
839. In that case, with a view to protect local edible oil industry, Government F
of Jamrriu & Kashmir issued_an order exempting goods manufactured by small
scale deafors within the State from payment of sales tax for a specified period.
The rate of sales tax payable for. other industries including manufacturers of
the adjoining States was four per cent. A subsequent notification was issued
on Q,ecemb~r 20, 1993 as a result of which the general rate of sales tax payable G
on edible oil became 8%. The manufacturers of edible oil from the adjoining
States claimed that the exemption granted from payment of tax to the local
industries was discriminatory. The exemption given by the Government of
Jammu & Kashmir to the manufactures of the edible oil was total and the
period of exemption was five years-which was later extended by another five
years. It was held that the unconditional exemption granted to edible oil H
86 SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R.

A industry within the State for a period of ten years and at the same time
subjecting edible oil industries from other States to Sales Tax at 8% was
discriminatory and violative of Article 304(a) of the Constitution.

In the case before us, exemption has not been granted to a new industry -.
or specially handicapped industry for any special reason for a limited period
B of time. Groundnut oil manufacturers within the State have been generally
given the benefit of a lower rate of tax whereas the importers will have to pay
sales tax at a higher rate. It is not even the case of the State that if imported
oil was manufactured out of tax paid groundnut the rate of tax on imported
oil would be lower.
c On behalf of the State, it has been argued that if a manufacturer of oil
does not purcha~e groundnut from the market but has his own supply of
groundnut he pays tax at 6-1/2 paise in the rupee which is the rate at which
imported oil is taxed. This is the rate of tax applicable to locally manufactured
oil as well as on imported oil. The distinction lies only in the case of oil
D manufactured out of groundnut which has borne tax at the rate of 4% in A.P.
In such a case, the tax is at the rate of 2-112 paise in the rupee so that the
manufacturer pays 6-1/12 paise in the rupee as tax in all. Therefore, no
discrimination is being practised by taxing the imported oi I at the rate of 6-
112 paise in the rupee.

E This has been countered by the appellants by contending that the
groundnuts sold in Karnataka also bear sales tax. When oil manufacturers
purchase groundnuts in Karanataka and manufacture oil, they pay sales tax
on the groundnuts first and then they pay 6-112 paise in the rupee as sales
tax under the A.P. Act when the goods are sold in A.P.

F We are of the view that the contention of the appellant is not without
substance. What has been done by Entry 24 of the First Schedule is to
impose a lower rate of duty on groundnut oil or refined oil obtained from
groundnuts that have been taxed under the A.P. Act. The contention that
groundnut oil manufactured in Andhra Pradesh has not generally been charged
G at a lower rate of tax has not been substantiated by any fact or figure. It is
not the case of the State that only a small portion of the oil manufactured by
local manufacturers is produced from groundnuts purchased in Andhra
Pradesh. Unless that can be established , it cannot be held that groundnut
oil or refined oil within the State is generally charged at the same rate as the
imported oil. The only justification that has been made out for this
H discrimination is that groundnut out of which the oil is manufactured locally
ANAND COMMERCIAL AGENCIES v. COMMERCIAL TAX OFFICER [SEN, J.] 87

has already borne tax. The appellant's contention, which has not been denied A
by the State, is that the oil manufactured in Karnataka which was imported
into Andhra Pradesh was manufactured out of groundnuts which had also
borne tax under the Karnataka Sales Tax Act. Therefore, it cannot be said that
oil manufacturers in Andhra Pradesh are in a disadvantageous position and
had to be compensated 'by a lower rate of tax. The State of Andhra Pradesh
has not been able to make out any special case for imposing a lower rate of B
tax on groundnut oil produced within the State.

In that view of the matter and having regard to the interpretation given
to Articles 30 I to 304 of the Constitution by the Courts in the various
decisions referred to hereinabove, we are of the view that the appeal must C
succeed.

Clause (a) of Entry 24 of the First Schedule to the Andhra Pradesh
General Sales Tax Act is declared violative of the provisions of Articles 30 I
to 304 in so far as it imposes a higher rate of tax on groundnut oil or refined
• oil which has been obtained from groundnuts that have not been taxed under D
the Andhra Pradesh Act. It is declared that the groundnut oil imported by the
appellant from Karnataka for sale in Andhra Pradesh cannot be taxed at a rate
higher than the rate prescribed in clause (b) of Entry 24 of the First Schedule
to the Andhra Pradesh Act.

The appeal is, therefore, allowed. The judgment and order under appeal E
dated 25.9.97 passed by the Andhra Pradesh High Court is set aside. Civil
Appeal Nos. 8343-8344 of 1995 are also allowed. There will be no order as to
costs.

S.V.K.I. Appeals allowed.
F