Judgment

SABYASACHI MUKHARJI, CJI. :- In these several writ petitions, we are concerned with the question of harmonising the power different States in the Union of India to legislate and/or give appropriate directions within the parameters of the subjects in List II of the 7th Schedule of the Constitution with the principle of economic unity envisaged in Part XIII of the Constitution of India. We are also concerned with the provisions of exemption, encouragement/ incentives given by different States to boost up or help economic growth and development in those States, and in so doing the attempt of the States to give preferential treatment to the goods manufactured or produced in those States. The question essentially is the same in all the matters but the question has to be appreciated in the context of the provisions and the fact situation of the different States involved in these writ petitions. It would, therefore, be appropriate to first deal with Writ Petition No. 803/88 (Niksin Marketing Associate & Ors. v. Union of India & Anr.) which is under Article 32 of the Constitution by four petitioners.

2. Petitioner No. 1 in W.P. No. 803/88 is a partnership firm carrying on business in New Delhi. Petitioner No. 2 is its partner and petitioner No. 3 is another partnership business carrying on business at Kanpur in U. P. consisting of petitioner No. 4 and other partners. The petition challenges the constitutional validity of notification No. ST-117558/X-9(208)-1981 U.P. Act XV-48 Order 85, dated 26th December, 1985 issued by Uttar Pradesh Govt. u/s. 4A of the Uttar Pradesh Sales Tax Act, 1948. A prior notification No. ST-II/604-X-9(208)-1981 U.P. Act XV-48-Order 85, dt. 29th January, 1985 was superseded by the aforesaid notification dt. 26th December, 1985. It also challenges the constitutional validity of notification No. ST-11/8202/X-9(208)-1981 issued by Uttar Pradesh Govt. u/s. 8(5) of the Central Sales Tax Act, 1956 which superseded a previous notification. It also challenges the constitutional validity of S. 4A of the Uttar Pradesh Sales Tax Act, 1948 as substituted by U.P. Act 22 of 1984 and also S. 8(5) of the Central Sales Tax Act, 1956 and consequentially all actions and proceedings taken by the respondent u/ s. 5A of the said Act. The respondents to this application are the State of Uttar Pradesh, the Union of India, and the Commissioner of Sales Tax, Uttar Pradesh.

3. It is stated that the petitioners carry 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 in Delhi. The petitioners sell the goods upon receiving these from the manufacturers from outside the State of U.P. They are dealers on behalf of those manufacturers. The petitioners are dealers of Hindustan Photo Films Mfg. Co. Ltd., a Government of India undertaking. In U.P. there is a single point levy of sales tax. The State of U.P. had issued two notifications u/s. 4A of the U.P. Sales Tax Act and u/s. 8(5) of the 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 as the case may be, from payment of any sales tax. These notifications are annexed and terms thereof are set out in Annexures A-1 and, B- 1 to the writ petition.

4. The notification dated 26th December, 1985 stated, inter alia:

"The Governor is pleased to direct that in respect of any goods manufactured in an industrial unit, which is a new unit as defined in the aforesaid Act of 1948 established in the areas mentioned in column 2 of the Table given below, the date of starting production whereof falls on or after the first day of October, 1982 but not later than 31 st March, 1990, no tax under the aforesaid Act of 1956 shall be payable by the manufacturer thereof on the turnover of sales on such goods for the period specified i