Civil Appeal No 167274NT of 1990
From the Judgment and Order dated 1061988 of the Karnataka High Court in WP Nos 14255 to 14257 of 1983
B Sen H Raghvendra Rao and Vineet Kumar for the Appellant
PR Ramasesh for the Respondent
The Judgment of the Court was delivered by V RAMASWAMI J
Special leave granted
The appellant is a registered dealer under the Karnataka Sales Tax Act hereinafter called the Act 
The appellant hereinafter referred to the assessee  purchases iron scrap from dealers inside and outside the State of Karnataka for the purpose of manufacturing iron ingots steel rounds and tot steel
These manufactured goods were 254 sold mostly within the State
In respect of the Assessment Years 1972 73 to 1974 75 accepting the contentions of the assessee that the goods sold were manufactured out of tax suffered iron scrap the Commercial Tax Officer exempted the sales turn over of the manufactured goods
The Deputy Com missioner of Commercial Taxes in exercise of his powers under section 21 of the Act restricted the exemptions but otherwise confirmed the assessment order by his order dated 115
The respondent Commissioner of Commercial Taxes Bangalore initiated proceedings under section 22A of the Act for revising the order of the Deputy Commissioner on the ground that the assessee had been allowed exemption in respect of the turn over of manufactured goods without verifying as to whether the inputs iron scrap nag suffered taxes and that Explanation II to Schedule IV of the Act was applicable or not
The appellant filed the writ petition praying for the issue of a writ certiorari to quash the show cause notice issued by the respondent under section 22A of the Act challenging the constitutional validity of section 54 of the Act in so far as it pertains to item 2 of Sched ule IV to the Act read with Explanation II thereof in re spect of its application for the period prior to 14
1978 as violative of Article 304a of the Constitution
It may be pointed out at this stage that in Mangalore Metal House vs State of Karnataka 1986 63 STC 482 the High Court upheld the Explanation II to Schedule IV of the Act which is differently worded in its application for the period subse quent to 141978
It may also be mentioned that the High Court had confined itself only to the challenge of the constitutional validity of the provision and left open the other question on merits including the validity of the notices to be agitated after exhausting the appellant s remedy before the Sales Tax authorities
The High Court was of the view that the provision pro viding for not levying tax if at an earlier stage tax has been paid is only in the nature of exemption and the exemp tion arises only on proof that the tax has been paid at an earlier stage on the goods out of which the goods in ques tion were manufactured that there is nexus between the finished goods and the raw material used for manufacturing the same that it is not correct to state that the tax is not payable on the finished goods manufactured out of local raw material but the discrimination if at all would arise only in the quantum of tax payable for the tax on finished goods will be definitely higher than on the raw material
The High Court was of the further view that there is no discrimina tion in the rate of tax between the imported items and the local items of finished goods of iron steel as such and that the variation in the quantum of tax is on account of the scheme of taxation working diffe 255 rently on different dealers those who import raw material and manufacture and those who locally purchase and manufac ture and hence such an effect is only indirect result and not having direct or immediate impact
In that view the High Court dismissed the writ petition and gave liberty to the appellant to file objections before the Commissioner of Commercial Taxes for dealing with questions on merits
This appeal has been filed against the said judgment of the High Court
The main point that was urged in this appeal was that section 54 of the Act in so far as it pertains to item 2 in the IV Schedule read with the Explanation II is violative of Article 304a of the Constitution as under that provi sion the sale of finished goods manufactured out of imported raw material is taxed but the sale of finished goods manu factured out of locally purchased raw material is not taxed and that amounts to hostile discrimination in the rate of tax or quantum of tax
Section 54 of the Act is the charging section in respect of declared goods and the relevant portion reads as follows 4 Notwithstanding anything contained in sub section 1 or section 5 B or section 5 C a tax under this Act shall be levied in respect of the sale or purchase of any of the declared goods mentioned in column 2 of the Fourth Sched ule at the rate and only at the point specified in the corresponding entries of columns 4 and 3 of the said Schedule on the dealer liable to tax under this Act on his taxable turnover of sales or purchases in each year relating to such goods Provided that where tax has been paid in respect of the sale or purchase of any of the declared goods under this sub section and such goods are subsequently sold in the course of inter state trade or commerce and tax has been paid under the Central Act 74 of 1956 in respect of the sale of such goods in the course of inter state trade or commerce the tax paid under this Act shall be reimbursed to the person making such sale in the course of inter state trade or commerce in such manner and subject to such condition as may be prescribed
Provided further that in respect of the sale of cereals 256 mentioned in serial number 9 of the Fourth Schedule made by any person to a procurement agent appointed by the Govern ment of Karnataka or to any sub agent of such procurement agent in pursuance of the Karnataka Rice Procurement Levy Order 1981 or any other foodgrains
procurement Levy Order of the Government of Karnataka for the time being in force such sale shall not be deemed to be but the subse quent sale by the said procurement agent or sub agent shah be and shah be deemed to be the point at which the tax under this Act shah be levied
Provided also that where tax has been paid under this sub section on the purchase of paddy and such paddy is either subsequently sold to or is hulled and the resultant rice is sold to a procurement agent appointed by the Govern ment of Karnataka or to any sub agent of such procurement agent in pursuance of the Karnataka Rice Procurement Levy Order 1984 or any other Foodgrains Procurement Levy Order of the Government of Karnataka for the time being in force the tax paid under this Act on the purchase of such paddy shah be reimbursed to the person making such sale to such procurement agent or his sub agent as the case may be in such manner and subject to such conditions as may be pre scribed
 The IV Schedule to the Act contains a list of declared goods specifying the point of levy and the rate of tax
Item 2 of this Schedule relates to iron steel since the interpretation of this item is in question the relevant portion of item 2 may be extracted and reads as follows FOURTH SCHEDULE S1
Description of the goods Point of Rate of No levy tax 1 2
i pig iron and cast iron including Sale by the first ingot moulds bottom plates iron or earliest succes scrap cast iron scrap runner sive dealer in the scrap and iron skull scrap
state liable to tax under this Act
257 ii steelsemis ingots slabs blooms and billets of all qualifies shapes and sizes
iii skelp bars tin bars sheet bars hoebars and sleeper bars
iv Steel bars rounds rods squares 4 percent fiats octagons and hexagons plain and ribbed or twisted in coil form as well as straight lengths
v Steel structurals angles joists channels tees sheet piling sections or any other rolled sections vi sheets hoops strips and skelp both black and galva nised hot and cold robed plain and corrugated in all qualifies in straight lengths and in coil from as rolled and in revitted condition
vii plates both plain and cheque red in qualities
viii discs rings forgings and steel 3 percent castings
ix tool alloy and special steels of any of the above categories
x steel melting scrap in all forms including steel skulls turnings and borings
xi steel tubes both welded and seamless of all diameters and lengths including tube fittings
xii tin plates both not dipped and electrolytic and tin free plates
258 xiii fish plate bars beating plate bars crossing sleeper bars fish plates bearing plates crossing sleepers and pressed steel sleepers railsheavy and light crane rails
xiv wheels tyres axles and wheel sets
xv wire rods and wires rolled drawn galvanised alumi nised tinned or coated such as by Copper
xvi defectives rejects cuttings or end pieces of any of the above categories
By Karnataka act 13 of 1982 Explanation II was added to item 2 of the IV Schedule with retrospective effect from 110 1957 and to be effective tilt 313
1978 and that Explana tion reads as follows Explanation 11 Where tax has been paid in respect of the sale or purchase of i iron scrap cast iron scrap runner scrap and iron skull scrap referred to in entry i of serial number 2 or in respect of steel melting scrap in all forms including steel skull turnings and borings referred to in entry x of serial number 2 and out of the said scrap steel semis ingots slabs blooms and billets of all qualities shapes and sizes referred to
m  entry ii of serial number 2 are manufactured and sold or ii steel semis ingots slabs blooms and billets of all qualities shapes and sizes referred to in entry ii of serial number 2 and out of the said steel semis any re rolled products of iron and steel referred to in anyone or more of the entries at iii v vii and xv serial No 2 are manufactured and sold no tax shall be leviable on the sale of the said steel semis or the re rolled products as the case may be
Provided that the dealer claiming exemption of tax under this explanation furnished before the assessing au thority concerned proof of levy and payment of tax by 259 the previous or earliest of successive dealers on the said scrap or steel semis used in the manufacture of the steel semis re rolled products as the case may be
Provided further that in respect of the said steel semis or the said re rolled products of iron and steel no amount was collected by the dealer from his customers by way of tax or purporting to be by way of tax As already stated the appellant purchases iron scrap both from local registered dealers and also from the dealers outside the State of Karnataka and manufactures ingots and sells the same mostly within the State of Karnataka
The constitutional validity of the above said provision is challenged on the ground that while the appellant s sale of ingots manufactured out of locally purchased scrap will not be subjected to tax the appellant s sale of ingots manufac tured out of scrap purchased from outside the State of Karnataka would be subjected to tax
In the Firm ATB Mehtab Majid and Co vs State of Madras and Anr 1963 Suppl 2 SCR 435 this Court con sidered the constitutional validity of Rule 16 of the Madras General Sales Tax Rules
Rule 16 of the Rules which was impugned in the case read as follows 161 In the case of untanned hides andor skins the tax under section 31 shall be levied from the dealer who is the last purchaser in the State not exempt from taxation under section 33 on the amount for which they are brought by him
2i In the case of hides or skins which have been tanned outside the State the tax under section 31 shall be levied from the dealer who in the State is the first dealer in such hides or skins not exempt from taxation under section 33 on the amount for which they are sold by him
ii In the case of tanned hides or skins which have been tanned within the State the tax under section 31 shall be levied from a person who is the first dealer in such hides or skins not exempt from taxation under section 33 on the amount for which they are sold by him Provided that if he proves that the tax has already 260 been levied under sub rule 1 on the untanned hides and skins out of which the tanned hides and skins had been produced he shall not be so liable
3 The burden of proving that a transaction is not liable to taxation under this rule shall be on the dealer
 It was contended for the petitioner in that case that the effect of this rule was that tanned hides or skins imported from outside the State and sold within the State are subject to a higher rate of tax than the tax imposed on hides or skins tanned and sold within the State inasmuch as sales tax on the imported hides or skins tanned outside the State is on their sale price while the tax on hides or skins tanned within the State though ostensibly on their sale price is in view of the proviso to Clause ii of sub rule 2 of rule 16 really on the sale price of these hides or skins when they are purchased in the raw condition and which is substantially less than the sale price of tanned hides or skins
It was further contended for similar reasons hides or skins imported from outside the State after purchase in their raw condition and then tanned inside the State are also subject to higher taxation that hides or skins pur chased in the raw condition in the State and tanned within the State as the tax on the former is on the sale price of the tanned hides or skins and on the latter is on the sale price of the raw hides or skins
Such a discriminatory taxation was said to offend the provisions of Article 304a of the Constitution
This Court pointed out that if the dealer has purchased the raw hide or skin in the State he does not pay tax on the sale price of the tanned hides or skins
He pays on the purchase price of untanned hides or skins only
If on the other hand dealer purchases raw hides or skins from outside the State and tans them within the State he will be liable to pay sales tax on the sale price of the tanned hides or skins
He will have to pay more for tax even though the hides and skins are tanned within the State merely on account of his having imported the hides and skins from outside and having not paid any tax under subrule 1
This is one of the reasons on which this Court held that rule 162 discriminated against the imported hides or skins which had been purchased or tanned outside the State and that therefore they contravene the provisions of Article 304a of he Constitution
The next ground on which this Court invalidated the Rule was that mere circumstance Of a tax having been paid on the sale of such hides or skins in the raw condition did not justify their forming goods of a different kind from the tanned hides or skins which had been imported 261 from outside
At the time of sale of those hides or skins in the tanned state there was no difference between them as goods and the hides or skins tanned outside the State as goods
The similarity contemplated by Article 304a is in the nature of the quality and kind of the good and not with respect to whether they were subject of a tax already or not
On the ground that the decision of this Court in ATB Mehtab s case supra will result in claims for refund of tax being preferred by dealers in hides and skins already assessed under the impugned Rule thereby resulting in huge loss of revenue and will also result in administrative complications the Madras General Sales Tax Special Provi sions Act 1963 was made
That Act provides that 1 Notwithstanding anything contained in Madras General Sales Tax Act 1939 Madras Act IX of 1939 hereinafter referred to as the said Act or in the rules made thereun der hereinafter referred to as the said rules during the period commencing on the 1st April 1955 and ending on the 31st March 1959 in respect of sale of dressed hides and skins which were not subjected to tax under the said Act as raw hides and skins the tax under the said Act shall be levied from the dealer who in the State is the first seller in such hides and skins not exempt from taxation under sub section 3 of section 3 of the said Act at the rate of two per cent of the amount for which such hides and skins were last purchased in the untanned condition
 This was challenged in this Court by way of petition under Article 32 of the Constitution in A Majee Abdul Shakoor and Company vs State of Madras 17 on the ground that the persons who had purchased raw hides and skins in the State of Madras in the relevant period paid sales tax at 3 pies per rupee and paid no further tax with those hides after being tanned were not sold whereas the petitioners having purchased raw hides and skins from out side the State did not at the time paid tax at that rate on the purchase price of the raw hides and skins but were not now liable under the impugned provision to pay tax at the rate of 2 per cent of the amount for which such hides and skins were last purchased in untanned condition
Thus the contention was that the petitioners would pay a higher tax than what was paid by the seller of dressed hide and skins purchased in the State in raw condition and then tanned and sold and that therefore the impugned provisions set out above discriminate against imported untanned hides 262 and skins
Accepting this contention after referring to the decision in ATB Mehtab s case supra this Court ob served In the earlier case discrimination was brought about on account of sale price of the tanned hides and skins to be higher than the sale price of untanned hides and skins though the rate of tax was the same while in the present case the discrimination does not arise on account of dif ference of the price on which the tax is levied as the tax on the tanned hides and  skins is levied on the amount for which those hides and skins were last purchased in the untanned condition but on account of the fact that the rate of tax on the sale of tanned hides and skins is higher than that on the sale of untamed hides and skins
The rate of tax on the sale of tanned hides and skins is 2 per cent on the purchase price of those hides and skins in the untanned condition while the rate of tax on the sale of raw hides and skins in the State during 1955 to 1957 is 3 pies per rupee
The difference in tax works out to 716 paise of a rupee ie a little less than 12 naye paise per rupee
Such a discrimination would affect the taxation upto the 1st of August 1957 when the rate of tax on the sale of raw hides and skins was raised to 2 per cent of the sale price
 Prima facie the ratio of these two decisions applies to the facts of the present case
However it was contended by the learned counsel for the Revenue before the High Court that this Court has struck a new or different note in the cases of State of Madras vs NK Nataraja Mudaliar   Rattan
Lal  Co vs Assessing Authority  and Associated Tanners vs Commercial Tax Officer Vizianagaram and Others 19861 62 STC 1 and this argument was accepted and the impugned provisions were held valid by the High Court in the decision under appeal
The point that was raised in the State of Madras vs NK Nataraja Mudaliar supra was that Section 822A and 5 of the Central Sales Tax which permitted levy of tax on inter State sale at varying rates in different States were invalid
In order to understand the exact ratio of the judgment which was noticed in the judgment itself we have to note the development of the law relating to imposition of tax on interState sale
In exercise of the powers conferred under Entry 58 List 11 of the Seventh Schedule in Government of India Act and the corresponding Entry 54 of List 2 of the Seventh Schedule to the Constitution 263 which enable the State to legislature on taxes on the sale or purchase of goods other than newspaper various States enacted sales tax laws for the respective States acting on the principle of territorial nexus and picked out one or more ingredients constituting a sale and made it or them the basis of imposing liability for sales tax
This led to the imposition of multiple taxation on a single inter State transaction by different States each State relying upon some territorial nexus between the State and the sale
The constitutional validity of these provisions were questioned on the basis of the restriction placed on the legislative power under the Constitution
In the State of Bombay vs United Motors India Ltd  this Court held that importing State is competent to levy tax on transac tions of sale in the course of inter State sale or commerce on persons who are resident outside the territory provided that the goods were delivered in the importing State for the purpose of consumption therein
Thus the delivery for con sumption within the State was considered to be a point at which the tax can be levied on inter State sale
But this decision made the dealer carrying on business in the export ing State amenable to the sales tax law of the importing State
The question was again considered by this Court in Bengal Immunity Company Ltd vs State of Bihar This Court held in that case that a sale or purchase in the course of inter State sale trade or commerce could not be taxed by any State until by law it was provided otherwise by Parliament
This led to the amendment of the Constitution by the Constitution Sixth Amendment Act 1956
By that amendment Article 286 was amended
Entry 92A was added to the Union List and Entry 54 was also suitably amended
The Parliament then enacted the 
In respect of the certain transactions which were held by the assessing authorities as inter State sales the assessee moved the High Court of Madras under Article 226 seeking a writ of certiorari quashing the order of assessment on the ground that the provisions of the which permitted levy of tax at varying rates in different States on similar inter State transactions and thereby resulting in inequality in burden of tax affected and impeded inter State trade commerce and intercourse which are prohibited under Article 301 and 3031 of the Constitu tion
The tax under the Central Sales Tax is payable by the seller
The State from which the movement of goods commences in the course of inter State sale collects the tax as agent of the Central Government but section 94 provides that the tax collected under the Act in any State on behalf of the Government of India are to be assigned to that State
The scheme of the has been neatly summa rised if we 264 may say so with respect in State of Madras vs
NK Nataraja Mudaliar supra and no apology is needed to quote that passage in extenso which reads as follows The scheme of the Act was first to devise definitions of inter State sales  and sales outside the State  and then to declare inter State sales subject to tax and to set up machinery for levying and collecting tax on those sales
Transactions in goods which were made subject to tax in the course of inter State trade or commerce were classified into three broad categories 1 transactions falling within section 81 ie all sales to Government and sales to a registered dealer other than the Government of goods referred to in sub s 3 of section 82 transactions falling within section 82a ie sales in respect of declared goods and 3 transac tions falling within section 82b ie sales not falling within 1 in respect of goods other than declared goods
Sales of goods in category 1 were declared liable at the relevant time to pay a tax of two per cent on the turnover
On sales of declared goods tax was to be calculated at the rate applicable to the sale or purchase of such goods inside the appropriate State
But by section 15 the tax payable under a State law in respect of any sale or purchase of declared goods inside the State was not to exceed two per cent of the sale or purchase price thereof and was not leviable at more than one stage
On turnover from sale of goods not falling within categories 1  2 the rate was seven per cent or the rate applicable to the sale or purchase of such goods inside the appropriate State whichever was higher
But by sub section
2A of section 2 it was provided that notwithstanding anything contained in sub section
1 or sub section
2 if under the sales tax law of the appropriate State the sale or purchase as the case may be of any goods by a dealer is exempt from tax generally or is subject to tax generally at a rate which is lower than two per cent
the tax payable under the Act on the turnover insofar as the turnover or any part therefore relates to the sale of such goods shall be nil or as the case may be shall be calculated at the lower rate
There is a slight inconsistency between section 82 and section 82A
if the rate of tax under the State law is less than two per cent by virtue of section 82A even in respect of turnover falling within section 82b the rate of tax will not exceed the State rate if the State rate exceeds two per cent tax at the rate of seven 265 per cent or of the State whichever is higher shall pre vail
But that has no beating on the question under discus sion
 The main contention in Nataraja Mudaliar s case was that the liability to pay tax on inter State transaction depend ing upon the rate of tax prevailing in the exporting State hampers trade and commerce by giving or authorising the giving of preference to one State over another or by making or authorising the making of discrimination between one State and another violating the provisions of Articles 30 1 and 3031 of the Constitution
After noting the decisions that every imposition of tax does not amount to restriction or impediment of the free flow of trade or commence but that levy which directly and immediately impede or hampering the free flow of trade or commerce only will fail within the provisions imposed by Articles 301 this Court considered the question whether tax imposed under sub sections 22A and 5 of section 8 of the on inter State sales do no amount to law giving or authorising the giving of any preference to one State over the other on the ground of varying rates of tax prevailing in different States
It was argued in that case that the rates of tax on the sale of the same or similar commodity by different States by itself was discriminatory since it authorised the placing of unequal burden on inter State trade or commerce affecting its free flow between the States
It was further contended that since the rates of tax prevailing in differ ent States on transactions of sale were not uniform the impugned provisions affected the free movement or flow of goods in inter State trade
Rejecting this contention this Court held that The flow of trade does not necessarily depend upon the rates of sales tax it depends upon a variety of factors such as the source of supply place of consumption
exist ence of trade channels the rates of freight trading facil ities availability of efficient transport and other facil ities for carrying on trade
Instances can easily be imag ined of cases in which notwithstanding the lower rate of tax in a particular part of the country goods may be purchased from another part where a higher rate of tax prevails
Supposing in a particular State in respect of a particular commodity the rate of tax is 2 but if the benefit of that low rate is offset by the freight which a merchant in anoth er State may have to pay for carrying that commodity over a long distance the merchant would be willing to purchase the goods from a nearer State even though the rate of tax in that State may be higher
Existence of long standing busi ness 266 relations availability of communications credit facilities and a host of other factors natural and business enter into the maintenance of trade relations and the free flow of trade cannot necessarily be deemed to have been obstructed merely because in a particular State the rate of tax on sales is higher than the rates prevailing in other States and that by authorising the State from which the movement of goods commences to levy on transactions of sale Central Sales Tax at rates prevailing in the State subject to the limitations already set out in our judgment no discrimination can be deemed to be practiced
 As may be seen from the above discussion the decision in Nataraja Mudaliar s case supra related to a levy of sales tax on interState sale under the by a State in which the movement of goods commenced subject to certain exceptions and limitations
If the rate of tax on inter State sale was the same as that for inter State sale no discrimination can be said to arise
After referring to the decisions in Nataraja Mudaliar s case supra and Hajee Abdul Shakoor s case supra and distinguishing the same this Court further observed In the two cases the differential treatment violated article 304a of the Constitution which authorises the Legislature of a State notwithstanding anything in articles 30 1 and 303 by law to impose on goods imported from other States or the Union territories any tax to which similar goods manufac tured or produced in that State are subject so however as not to discriminate between goods so imported and goods so manufactured or produced
Imposition of differential rates of tax by the same State on goods manufactured or produced in the State and similar goods imported in the State is prohibited by that clause
But where the taxing State is not imposing rates of tax on imported goods different from rates of tax on goods manufactured or produced article 304a has no application
Article 303 prohibits the making of law which gives or authorises the giving of any preference to one State over another or makes or authorises the making of and dis 267 crimination between one State and another
Prevalence of different rates of sales tax in the State which have been adopted by the for the purpose of levy of tax under that Act is as already mentioned not deter minative of the giving of preference or making a discrimina tion
 What is relevant is that ATB Mehtab s case supra and Hajee Abdul Shakoor s case supra are concerned with hides and skins tanned inside the State but by reason of the raw material having suffered the tax the goods tanned out such raw material was exempted from tax which in effect means not taxable goods or the tax is nil
That is how the discrimination arose in those two cases
We may also mention that Nataraja Mudaliar s case supra did not dissent from the ratio of the judgment in Mehtab Majid  Co s case supra or Hajee Adbul Shakoor s case supra
In Rattan Lal  Co  Anr
vs The Assessing Authority  Anr
supra the discrimination pleaded was that in fixing the stage of tax for declared goods section 53 of the Act made a discrimination between imported goods and local goods
That provision reads as follows 3 Notwithstanding anything contained in this Act a in respect of declared goods tax shall be levied at one stage and that stage shall be i in the case of goods liable to sales tax the stage of sale of such goods by the last dealer liable to pay tax under this Act ii in the case of goods liable to purchase tax the stage of purchase of such goods by the last dealer liable to pay tax under this Act The argument was that there is a discrimination between the first purchase in the case of imported goods and last sale in the case of local goods
Since the imported goods might be more expensive by reason of freight etc
or inter mediary sales having taken place it was said that the burden of tax will be heavier and therefore this will offend against the equality clause under Article 304 of the Constitution
Overruling this objection this Court held 268 The rate of tax is same in every case
In State of Madras vs NK Nataraja Mudaliar 1969 1 SCR this Court stated that the essence of articles 30 1 and 303 is to enable the State by a law to impose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in the State and subject so however as not to discriminate between goods so imported and goods so manufactured or produced
 It was pointed out by this Court that imposition of differential rates of tax by the same State on goods manufactured or produced in the State and similar goods imported in the State is prohibited by that clause
But where the taxing State is not imposing rates of tax on imported goods different from rates of tax on goods manufactured or produced article 304 has no application
Here also the tax is at the same rate and there fore the tax cannot be said to be higher in the case of imported goods
It may be that when the rate is applied the resulting tax is somewhat higher but that does not offend against the equality contemplated by article 304
That is the consequence of ad valorem tax being levied at a particular rate
So long as the rate is the same article 304 is satisfied
Even in the case of local manufactures if their cost of production varies the net tax collected will be more or less in some cases but that does not create any inequality because inequality is not the result of the tax but results from the cost of production of the goods or the cost of their importation
This ground therefore has also no substance
In Associated Tannerse vs Commercial Tax Officer Vizi anagaram  Ors
supra the facts were these
The assessee was a tanner who had a tannery at Vizianagaram and was at the material time a dealer under the Andhra Pradesh General Sales Tax Act 1957 hereinafter called the State Act  as well as the hereinafter called the Central Act 
The assessee purchased raw hides and skins in the State of Andhra Pradesh and tanned the same
He was selling mostly the tanned hides and skins in the course of inter State trade
The assessing officer assessed the assessee s interState sales under the Central Act
The assessee filed a writ petition in the High Court questioning the constitutional validity of item 9b of Schedule III of the Andhra Pradesh General Sales Tax Act as unconstitutional and void and for a further declaration that no tax could be 269 levied or was leviable under the on inter State sales of tanned hides which had already suffered tax at the untanned stage
Thus the question for considera tion was whether tanned hides and skins which has already suffered tax at the untanned stage when sold in inter State sale was liable for levy of tax under the Central Act
This was raised in this form because tanned hides and skins which were not subjected to tax as untanned hides and skins alone was liable for the levy under items 9b of Schedule III of the State Act
The High Court dismissed the writ petition relying on the Nataraja Mudaliar case supra and Rattan Lal  Co case supra
The assessee preferred an appeal by special leave
This Court was of the view that the point involved in the case was no longer res integra and it is covered by the decision in Nataraja Mudaliar case and held since the rate of tax was the same both for the goods brought from outside as well as local goods and it cannot be said that the taxation did directly and immediately restrict or hamper the free flow of trade commerce or intercourse and it offended Article 304 a
 But it is pertinent to point out the further passages appearing in the judgment which actually show the ratio of the judgment
The learned Judges observed It further appears to us that there is another aspect
The levy by the State Act is in consonance with the scheme of the Central Act
By sub section 2 of section 8 of the Central Act the tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of goods in the course of inter State trade or commerce not falling under sub section 1 shall be at the rate specified in sub section 2 of section 8 and this Court further observed The effect of an imposition of tax might work differently upon different dealers namely those who use imported tanned goods and those who purchase these locally and tan these locally and then sell in the course of inter State sales
But that effect cannot be said to be arising direct ly or as an immediate effect of the imposition of the tax
Therefore there cannot be any question of violation of article 304a of the Constitution
There is another aspect of the matter
The imposition in this case was in implementation of the Central Act and it was submitted on behalf of the respondent that there was 270 no prohibition under article 304 of the Constitution on the Parliament for imposition of any law
The embargo that was placed by article 304 of the Constitution was on the Legis lature of a State
Sub article a of article 304 of the Constitution reads as follows 304
Restrictions on trade commerce and intercourse among States
Notwithstanding anything in article 30 1 or article 303 the 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 was subject so however as not to discriminate between goods so imported and goods so manufac tured or produced
 Therefore the prohibition was not on the Parlia ment
But in the view we have taken on the first aspect of the matter and in view of the decisions of this Court in the cases of State of Madras vs
NK Nataraja Mudaliar 1968 22 STC 376 SC  and Rattan Lal  Co vs Assessing Authority 1970 25 STC 136 SC   it is not necessary for us to discuss this aspect any further   It may be seen from these passages cited that the ratio of the decision as in the case of Nataraja Mudaliar case supra was that in the case of inter State sale the levy of tax is under the Central Sales Tax only though for the purposes of rates of tax that rate which is applicable to local sales is adopted subject to the maximum mentioned in section 82 of the Central Act and these decisions have no application to a case where the discrimination pleaded with reference to a provision in State law imposing taxes with reference to local as well as in respect of the imported goods
As we have already noticed the States have no legis lative power to tax inter State sales and it is only the Parliament that could make law
The Central Act is the law relating to tax on inter State sales made by Parliament
The State from which the movement of goods commences in the course of inter State sale collects the tax as agent of the Central Government
On sale of declared goods tax was to be levied and collected at the rate applicable to the sale or purchase of such goods inside the appropriate State subject to the maximum prescribed under section 15 and the restric tion relating to 271 taxing it at single point
This is also further subjected to the rates prevailing for local sales
It is with respect to these provisions in the three decisions in Nataraja Mudali ar case Rattan Lal  Co case and Associated Tanner case this Court held that so long the rates applicable are in accordance with section 8 no discrimination would arise and none of the provisions of part XIII of the Constitution could be said to have been offended
But the case on hand is not one arising out of Central Act
The tax was levied under the State Act in respect of steel semis
The State Act exempted steel semis which have been manufactured out of iron scrap which have suffered tax but not the other catego ries where the scrap had not suffered tax at that stage
This is directly covered by the decision in ATB Mehtab s case supra and that decision has not been dissented in Nataraja Mudaliar case supra or Rattan Lal  Co s case supra
The decision in ATB Mehtab s case supra is by a Constitution Bench and had not been dissented so far in any case
The ratio of the judgment being fully applicable the judgment of the High Court under appeal is not accept able
We accordingly hold that the provision which is impugned in this case is ultra vires and accordingly set aside the judgment of the High Court and allow the writ petition filed by the assessee in the High Court
There will be no order as to costs
TNA Appeals allowed


Summary:
The first appellant made an order under Rule 131 of the AP Civil Service CCA Rules 1963 keeping the re spondent a Police Inspector under suspension pending prosecution against him in the case of death of a person in lock up in the Police Station to which the respondent was attached
The respondent challenged the order before the State Administrative Tribunal
The Tribunal set aside the suspension order holding that the order became invalid after six months since the Government had not made a fresh order extending the period of suspension and that the first appellant had no power to suspend the respondent pending prosecution against him
Hence the appeal by Special Leave
Allowing the appeal this Court HELD 11 Rule 131 of the AP Civil Service CCA Rules 1963 provides power tO keep an officer under suspen sion from service pending investigation or enquiry into grave charges where such suspension is necessary in the public interest
Proviso thereunder requires the authority who made the order of suspension to report to the Government where the investigation into the charges and the action proposed to be taken against the officer has not been com pleted within the period of six months from the date of suspension
Upon receipt of the report the Government may make such orders as they deem fit having regard to the circumstances or development in the case
Proviso thus imposes only an obligation on the authority to report to the Government but it does not limit the period of suspension
It does not state that the suspension order comes to an end by the end of six months
The suspension order is not an interim suspension
Nor Rule 131 limits its operation only for six months
The order of suspension once made will continue 234 till it is revoked by an appropriate order under Rule 135
236B D Government of APv
Sivaraman Civil Appeal No 1064 of 1990 decided on January 12 1990 referred to
12 It is a well accepted principle that a wrong wording in the order does not take away the power if it is otherwise available
238E Rule 131 empowers the authority to keep the respondent under suspension pending investigation or enquiry into the criminal charges
When the First Information Report was issued registering the offence of murder names of the accused could not be mentioned since there was no authentic information as to how the death occurred and who were responsible for it
However after the Commission of Inquiry submitted its report indicting certain police officials including the respondent the State Government decided to initiate prosecution against the officers and asked the first appellant to take immediate action in that regard
Thus the first appellant made the order keeping the re spondent under suspension pending prosecution against him
Merely because the word prosecution  has been used instead of investigation  the order of suspension cannot be said to be beyond the scope of Rule 131
The investigation commenced when the First Information Report was issued and indeed it has commenced when the respondent was kept under suspension
237G H 238B C D