rit Petition No 1032 of 1986
Under Article 32 of the Constitution of India
Soli J Sorabjee Ms section Ralhan SC Dhande and Ms Rekha Pandey for the petitioners
770 VS Desai AS Bhasme and Khanwilkar for the respondents
The Judgment of the Court was delivered by PATHAK CJ
The petitioners manufacture electronic goods including television sets television cameras and television monitors
The factories are located at Delhi and the goods are sold through sales organisations spread all over India including the State of Gujarat
Section 7 of the Gujarat Sales Tax Act 1969 provides for the levy of sales tax on the turnover of sales of goods specified in Part A Sch
II appended to the Act
Entry 80Aa of Part A of Sch
II specifies the rate of tax applicable to the turnover of television sets
The rate was 15 originally upto 1981 the Entry applied to all television sets whether manufactured and sold within the State of Gujarat or imported from outside the State
No distinction was made between the goods on the basis of the place of manufacture
Sub section
2 of section 49 of the Act empowers the State Government to exempt in the public interest any specified class of sales from payment of the whole or any part of the tax payable under the Act
In 1981 while the rate for electronic goods entering the State for sale therein was maintained at 15 the rate in respect of locally manufactured goods was reduced to 6 by Notification No GHN 51 GST 1081 section 49109 TH issued under sub section
2 of section 49 of the Act
The Notification introduced a new entry in the Schedule dealing specifically with electronic goods manufactured in the State of Gujarat
Thereafter in 1986 the rate of sales tax in respect of television sets imported from outside the State was reduced from 15 to 10 and for goods manufactured within the State of sales tax was reduced to 1 by Notification No GHN 22 GST 1086S 49173 TH dated 29 March 1986
The petitioner contends that by lowering the rate of tax in respect of goods manufactured within the State the State Government has created an invidious discrimination which is adversely affecting the free flow of inter state Trade and commerce resulting in a contravention of Article 301 of the Constitution
It is pointed out that a purchaser buying a television set manufactured within the State of Gujarat pays about Rs250 to 300 less for a black and white model and Rs750 to Rs1000 for a colour model
It is said that the sales of electronic goods manufactured by the petitioner have been prejudicially affected within the State of Gujarat
article 301 of the Constitution declares that subject to the provi 771 sions of Part XIII trade commerce and intercourse throughout the territory of India shall be free
Clause 1 of article 303 prohibits the legislature of a State from making any law giving or authorising the giving of any preference to one State or 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
The terms of the prohibition are subject to article 304 which provides Notwithstanding anything in article 301 or article 303 Legislature of a State may by law a impose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in that 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 Provided that no Bill or amendment for the purpose of clause b shall be introduced or moved in the Legislature of a State without the previous sanction of the President
 It is apparent that while a State Legislature may enact a law imposing a tax on goods imported from other States as is levied on similar goods manufactured in that State the imposition must not be such as to discriminate between goods so imported and goods so manufactured
In the Firm ATB Mehtab Majid  Co vs State of Madras  Anr 1963 Suppl
2 SCR 435 this Court was called upon to consider the validity of Rule 16 of the Madras General Sales Tax Rules under which tanned hides and skin imported from outside the State of Madras were subject to a higher rate of tax then the tax imposed on hides and skins tanned and sold within the State
Referring to its earlier decisions in Atiabari Tea Co Ltd vs The State of Assam and Ors
1961 1 SCR 809 and The Automobile Transport Rajasthan Ltd vs The State of Rajasthan  Ors 1963 1 SCR 491 where the scope and significance of article 301 were explained it proceeded to observe It is therefore now well settled that taxing laws can be restrictions on trade commerce and intercourse if they hamper the flow of trade and if they are not what can be termed to be compensatory taxes or regulatory measures
772 Sales tax of the kind under consideration here cannot be said to be a measure regulating any trade or a compensatory tax levied for the use of trading facilities
Sales tax which has the effect of discriminating between goods of one State and goods of another may affect the free flow of trade and it will then offend against article 301 and will be valid only if it comes within the terms of article 304a
article 304a enables the Legislature of a State to make laws affecting trade commerce and intercourse
It enables the imposition of taxes on goods from other States if similar goods in the State are subjected to similar taxes so as not to discriminate between the goods manufactured or produced in that State and the goods which are imported from other States
This means that if the effect of the sales tax on tanned hides or skins imported from outside is that the latter becomes subject to a higher tax by the application of the proviso to sub rule of r 16 of the Rules then the tax is discriminatory and unconstitutional and must be struck down So also in H Anraj vs Government of Tamil Nadu and Dipak Dhar  Ors
vs State of West Bengal  Anr this Court struck down the levy of tax imposed by the State of Tamil Nadu on lottery tickets issued by other States and sold within the State of Tamil Nadu while exempting from such levy lottery tickets issued by the Government of Tamil Nadu
In answer to the writ petition the respondents point out that the rate of tax was reduced in the case of goods manufactured locally in order to provide an incentive for encouraging local manufacturing units
Reference is made to clb and c of article 39 of the Constitution
We do not think that any support can be derived from the two clauses of article 39
a of article 304 is clear in meaning
An exception to the mandate declared in article 301 and the prohibition contained in Cl
1 of article 303 can be sustained on the basis of cl
a of article 304 only if the conditions contained in the latter provision are satisfied
In the result the discrimination effected by applying different rates of tax between goods imported into the State of Gujarat and goods manufactured within that State must be struck down
The next question is whether for the purpose of ensuring the 773 same rate of tax between the petitioners and the local manufacturers the levy of the higher rate of tax suffered by the petitioners should be quashed and they be held entitled to the levy of the lower rate applied to the local manufacturers or should the higher rate imposed on the petitioners be maintained and the notifications imposing the lower rate on local manufacturers be quashed
A perusal of the record shows that the grievance of the petitioners has arisen only because the local manufacturers have been favoured by a lower rate of tax
So long as the higher rate of tax imposed on the petitioners was also suffered by the local manufacturers no complaint was voiced by the petitioners
It is the levy of the lower rate on local manufacturers that constitutes the substance of the grievance
That is borne out by the terms of the relief specifically claimed by the petitioners that the notifications specifying a lower rate for local manufacturers should be quashed
Moreover the rate levied on the petitioners is the rate prescribed under section 7 of the Act
That is the rate applied generally
It represents the normal standard of levy
The lower rate applied to local manufacturers has been applied by invoking sub section
2 of section 49 of the Act
It represents a departure from or exception to the general norm
In cases such as this the Court should when granting relief choose the alternative which would give effect to the statutory intention
And therefore in this case what is called for is the quashing of the impugned notifications reserving a lower rate of tax for local manufacturers
Accordingly the writ petition is allowed and the Notifications No GHN 51 GST 1081 section 49109 TH dated 23 July 1981 and No GHN 22 GST 1086S49173 TH dated 29 March 1986 prescribing a lower rate of tax for local manufacturers in respect of television sets and other electronic goods are quashed
The petitioners are entitled to their costs
HLC Petition allowed


Summary:
One D executed on May 22 1950 a deed of gift in favour of the appellants his wife and sons
Upon the application of his creditors D was adjudged an insolvent on August 21 1951 and his estate vested in the respondent
On September 26 1951 the respondent took out a notice of motion under section 55 of the Presidency towns Insolvency Act for a declaration that the deed of gift was void
In reply the appellants pleaded that the transaction though it purported to be a gift was in reality a transfer for valuable consideration
The respondent objected that the evidence which the appellants sought to lead in support of their plea was inadmissible under section 92 of the Indian Evidence Act  Held that section 92 of the Evidence Act was not applicable to the proceedings and the appellants were entitled to lead evidence in support of the plea raised by them
Section 92 is only applicable to cases as between parties to an instrument or their representatives in interest
Where however the dispute is between a stranger to an instrument and a party to it or his representative in interest section 92 is inapplicable and both the stranger and the party or his representative are at liberty to lead evidence of oral agreement notwithstanding the fact that such evidence if believed may contradict vary add to or subtract from its terms
In the present case though the appellants were the representatives in interest of the insolvent the respondent when he made the petition under section 55 of the Presidency towns Insolvency Act was not acting as a representative in interest of the insolvent and therefore the proceedings were not between the parties to the instrument or their representatives in interest