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H.L.DATTU, SUDHANSU JYOTI MUKHOPADHAYA
STATE OF U. P – Appellant
Versus
JAIPRAKASH ASSOCIATES LTD – Respondent
The Court determined that when a state grants exemptions or rebates exclusively to local manufacturers while imposing taxes on similar goods from outside the state, it results in discriminatory treatment. This form of discrimination is considered hostile because it creates a barrier to free trade and commerce between states. Such discriminatory measures violate the principles enshrined in Article 304(a) of the Constitution, which aims to ensure that the rates of tax on similar goods are equal, whether they are imported or produced domestically. The overall effect of providing benefits solely to local entities, while taxing outsiders at higher rates, undermines the constitutional guarantee of non-discrimination in trade and commerce across states.
JUDGMENT
H.L. Dattu, J.
1. Leave granted.
2. The substantial question of law that requires to be considered and decided in these appeals is, whether grant of rebate of tax by the State Government by issuing a notification in exercise of its powers under Section 5 of Uttar Pradesh Trade Tax Act, 1948 (“the Act”, for short) discriminates between the goods imported from neighbouring States and goods manufactured and produced in the State of Uttar Pradesh and therefore contravenes the Constitutional Provisions viz.; articles 301 and 304(a) of the Constitution of India.
3. The lead case is Civil Appeal No. 3026 of 2004. The appellants are public limited companies, manufacturing cement in their manufacturing units in Rewa district situate in the State of Madhya Pradesh after procuring fly-ash from the thermal power stations in the State of Uttar Pradesh and thereafter selling the manufactured product viz. Cement in the districts of State of Uttar Pradesh.
4. The fly-ash is produced from coal combustion and normally dispersed into the atmosphere which contains toxic chemicals that can caus
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