The Additional Duties of Excise (Goods of Special Importance) Act, 1957, which imposed an additional excise duty on certain goods, including woollen fabrics, did not amount to a tax on the sale or purchase of goods and, therefore, did not violate Article 301 of the Constitution.

Inder Dev Dua, J.

1. This petition under Articles 226 and 227 of the Constitution was admitted by the Motion Bench to a Division Bench because it was urged that levy of six percent, by way of sales tax by the Punjab Government on lubricants and chemicals used for the manufacture of blankets is a hindrance in the free right of inter-State trade or commerce and is, therefore, violative of the constitutional mandate in Article 301 of the Constitution that commerce and intercourse throughout the territory of India shall be free. The argument as put, though ingenious, was prima facie attractive and apparently, it was for this reason that it was admitted to a Division Bench.

2. The facts pleaded in the writ petition are that the petitioner Messrs Everest Woollen Mills, Ludhiana, a registered dealer both tinder the Punjab General Sales Tax Act and the Central Sales Tax Act, deals in the manufacture and sale of woollen blankets and also sometimes manufactures and sells yarn. The petitioner has, therefore, to make purchases of ra materials for the purpose of manufacturing such blankets and also lubricants and other chemicals which are essential for running the machinery for their manufacture. In the year 1963-64, the petitioner was assessed under the Punjab General Sales Tax Act to a sum of Rs. 2,800.64 out of which a sum of Rs. 2,200 had already been paid and the balance was paid thereafter. The petitioner had purchased lubricants of the value of Rs. 31,656.78. Lubricants of the value of Rs. 7,396.95 out of the total quantity had been purchased from outside the State of Punjab. The quantity purchased from outside the State of Punjab was subjected to an inter- State tax of two per cent, under the Central Sales Tax Act, as these lubricants were purchased for using them for manufacturing purposes. Deducting the purchase price of lubricants purchased from outside the State from the gross purchase price of the entire quantity, the Assessing Authority came to the conclusion that the petitioner was liable to purchase tax at Rs. 24,259.83. Out of this amount, a sum of Rs. 3,465.69 was also deducted by the Assessing Authority as the amount spent on the purchase of lubricants used in the manufacture of yarn which is included in "taxable goods". Deducting this amount from Rs. 24,259.83, the balance came to Rs. 20,794.14. To this was added a sum of Rs. 6,000 spent in purchasing chemicals used in the manufacture of tax-free goods etc., bringing the total value of goods purchased to Rs. 26,794.14 which was subjected to tax under the Punjab General Sales Tax Act. On this amount, the purchase tax levied came to Rs. 1,736.05 computed according to the rates fixed at different periods of the period of assessment during the year in question. It is this amount which is the subject-matter of challenge in the present proceedings and the principal argument urged is that blankets which are manufactured by the petitioner-firm are not tax- free on their sale as has been wrongly held by the Assessing Authority. It is argued that on the manufacture of blankets, the petitioner is liable to pay five per cent, excise duty and an additional excise duty has since been levied by the Central Government in lieu of sales tax. This additional excise duty in lieu of sales tax has been imposed upon the manufacture of blankets with the consent of the Punjab Government, with the result that this must be construed to be in the nature of either sales tax or purchase tax which was actually been handed over by the Central Government to the Punjab Government. It has been averred that this position is also clear from the budget of the Central Government as laid before the Parliament and reference has also been made to the Explanatory Memorandum on the budget of the Central Government for 1965-66 as laid before the Parliament.

3. Our attention has in support of this contention been drawn to the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (Act 58 of 195