Judgment

PATHAK, CJI.:- 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.

2. S. 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 80A(a) of Part A of Sch. II specifies the rate of tax applicable to the turnover of television sets. The rate was 15% originally up to 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.

3. Sub-s. (2) of S.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 if locally manufactured goods was reduced to 6% by Notification No. (GHN-51) GST 1081 (S. 49) (109) TH issued under sub-s. (2) of S. 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 the sales tax was reduced to 1% by Notification No. (GHN 22) GST 1086/(S. 49) (173)-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 Rs. 250/- to 300/- less for a black and white model and Rs. 750/- to Rs. 1,000/- 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.

4. Art. 301 of the Constitution declares that subject to the provisions of Part XIII "trade, commerce and intercourse throughout the territory of India shall be free. Clause (1) of Art.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 Scheudle". The terms of the, prohibition are subject to Art. 304, which provides: "Notwithstanding anything in Art. 301 or Art. 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 A.T.B. Mehtab Majid & Co. v. State of Madras, 1963 Suppl. (2) SCR 435 this court was ca