Restriction On Levy Of Differential Rates Under Article 304 Of Constitution Doesn't Apply To Goods Imported From Outside India: Madras HC

The Madras High Court stated that Article 304 of the Constitution applies only to goods imported from other states or union territories and not to goods imported from outside India.

The Division Bench consists of Chief Justice K.R. Shriram and Justice Mohammed Shaffiq looked into the case of State of Kerala and others v. Fr. William Fernandez and other, (2021) 11 SCC 705 and observed that the goods imported after having been released from customs barriers are not immune from any kind of State taxation. The States are free to levy taxes on goods imported into the State.

Article 304 of the Constitution empowers states to impose taxes on goods imported from other states, provided similar goods within the state are also taxed. 

The assessee/appellant was importing food products like Sherbet from the Kingdom of Bhutan. As per the assessee he would fall under Section 3(2-C) of the Tamil Nadu General Sales Tax (Seventh Amendment) Act, 2002. His goods are covered by the Eleventh Schedule.

According to the assessee his products falls under Part B, Item 4(vi) of the First Schedule and do not fall under Parts D and E of the First Schedule, along with other goods such as mixed fruit juice, orange juice, etc.

Counsel for the assessee submitted that assessee imports goods into Calcutta and from there the goods are moved to be sold in Tamil Nadu. The goods are imported free of duty as per the agreement on Trade and Commerce between the Government of Kingdom of Bhutan and the Government of India.

It was further submitted that Article-I read with Article-V of the Trade agreement, for goods imported by assessee, tax cannot be levied at a differential rate.

The bench observed that Article-V applies only to those goods which come from outside India or leave Indian territories and would not apply to those goods which are consumed within India.

The assessee relied upon Article 304 of the Constitution of India to suggest that this kind of differential rates cannot be levied.

The bench opined that Article 304 of the Constitution of India is of no help because that applies only to goods imported from other States or Union Territories and not to goods imported from outside India.

In view of the above, the bench dismissed the appeal.

Case Title: Tai Industries Ltd. v. The State of Tamilnadu

Citation: 2025 LiveLaw (Mad) 155

Case Number: W.A.No.474 of 2021

Counsel for Appellant/ Assessee: V. Sundareswaran

Counsel for Respondent/ Department: Haja Nazurudeen Addl. Advocate-General assisted by TNC Kaushik Addl. Government Pleader for respondent Nos.1 and 2, G. Babu Sr. Panel Counsel for respondent No.3

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