IMPORTANT POINT
Sales tax which has the effect of discriminating between goods of one state and goods of another will offend against Article 301 and will be valid only if it comes within the terms of Article 304(a) of the Constitution of India.

JUDGMENT

Mrs. Sujata V. Manohar, J.-Leave granted in S.L.P. (C) No. 14547 of 1992.

2. Appellant No. 1 is a registered dealer under the Andhra Pradesh General Sales Tax Act, 1957. The appellant is a dealer in iron and steel. It purchases iron and steel scrap and ingots in the State of Andhra Pradesh. Iron and steel scrap and ingots are sent by the first appellant to the its re-rolling mill which is situated in the State of Karnataka. The raw material is re-rolled into rounds and flats in the re-rolling mills of the appellant. The re-rolled products are brought back to Andhra Pradesh and are sold in Andhra Pradesh.

3. The iron and steel scrap and ingots which are purchased by the appellants are subject to tax in the State of Andhra Pradesh under the Andhra Pradesh General Sales Tax Act, 1957. Under an exemption notification issued under the Andhra Pradesh General Sales Tax Act, 1957 bearing G.O.Ms. No. 88 Revenue, dated 28.1.1977 which came into effect from 1st of April, 1976 re-rolled finished products of steel sold in Andhra Pradesh were made exempt from tax payable under the Andhra Pradesh General sales Tax Act provided tax had already been levied under the said Act on the sale or purchase of any of the materials specified in Item 2 of Schedule III to the said Act which included the raw material purchased by the assessee. The relevant text of the exemption notification as amended by G.O.Ms. No. 2458 Revenue, dated 3.6.1980 and in force retrospectively from 1st of April, 1976 is as follows:-

"In exercise of the powers conferred by sub-section (1) of 9 of A.P. G.S.T. Act, 1957 (Act VI of 1957) the Governor of Andhra Pradesh hereby makes an exemption with effect from 1st of April, 1976, the re-rolled finished products of steel re-rollers from the tax payable under the said Act, subject to the condition that the tax has been levied under the said Act on the sale or purchase of any of the material specified in Item 2 of Schedule III to the said Act."

4. By G.O.Ms. No. 1373 Revenue, dated 28.8.1981 the above G.O.Ms. No. 88 was amended. By the amendment, after the words re-rolled finished products of the steel re-rollers the following words were added to G.O.Ms. No. 88:-

"Situated within the Andhra Pradesh State".

The result was that exemption under G.O.Ms. No. 88 became available only to those re-rolled finished products of steel re-roller which were situated in the State of Andhra Pradesh. Since the appellants re-roller mills were situated outside Andhra Pradesh the re-rolled products of the appellants became ineligible for this exemption which was made available to local products.

5. The amended G.O.Ms. No. 88 was cancelled with effect from 4.2.1982. Thereafter, another notification bearing G.O.Ms. No. 498 Revenue, dated 20.3.1984 has been issued under which once again exemption from tax leviable under Section 6 of the Andhra Pradesh General Sales Tax Act, 1957, on ingots or billets or re-rolled finished products manufactured from iron and steel scrap on which tax has been paid under the said Act is granted only to those re-rolled finished products which are manufactured from steel plants-cum-re-rollers situated within the State of Andhra Pradesh and sold inside the State. The appellants have challenged both these notifications as being violative of Article 304(a) of the Constitution of India.

6. The appellants contend that in the impugned notifications there is a clear discrimination between the goods which have been manufactured in the State and goods which have been manufactured outside the State in levying tax under the Andhra Pradesh General Sales Tax Act of 1957. Article 304 of the Constitution is as follows:-

"304. Restrictions on trade, commerce and intercourse among State-Notwithstanding anything in Article 301 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