Memorandum on behalf of the Respondent

In the Honourable

Supreme Court of India

In the matter of

Andhra Steel Corporation

Vs.

Commissioner of Commercial Taxes

Counsel on behalf of Respondent

Ekta Chandrakar

Semester IV, Section C

Roll No. 62

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 Memorandum on behalf of the Respondent

TABLE OF CONTENTS

1. List of Abbreviations (iii)

2. Index of Authority ` (iv)

3. Statement of Facts 5

4. Issues Raised 6

5. Summary of Pleadings 7

6. Written Submission 8

7. Prayer for Relief 10

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 Memorandum on behalf of the Respondent

LIST OF ABBREVIATIONS

1. STC..................................................................Sales Tax Cases

2. Ors...................................................................Others

3. &.....................................................................And

4. Vs...................................................................Versus

5. Honble..........................................................Honourable

6. S.C.................................................................Supreme Court

7. Art.................................................................Article

8. Viz.................................................................That Is

9. Corp..............................................................Corporation

10. Ltd............................................................Limited

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INDEX OF AUTHORITY

Constitution:

1. The Constitution of India,1950

Books referred:

1. M.P. Jain, Indian Constitutional law, (6th ed.,2012)

2. V.N. Shukla, Constitution of India, (11th ed.,2008)

List of Cases:
1 Mangalore Metal House v. State of Karnataka & Ors.1
2 Associated Tanners v. Commercial Tax Officer2

1 1986 63 STC 482 Kar

2 1986 62 STC 1 SC

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STATEMENT OF FACTS

1. The Appellant is a registered dealer under the Karnataka Sales Tax Act, 1957, and
purchases iron scrap from dealers inside and outside the State of Karnataka, for the
purpose of manufacturing steel goods, which are sold mostly within the State.

2. In respect of the Assessment Years 1972-1973 to 1974-1975, the Commercial Tax

Officer exempted tax on the sales turnover of the manufactured goods, accepting the
contention of the assessee (Appellant), that the goods sold were manufactured out of
already taxed iron scrap.

3. The Deputy Commissioner of Commercial Taxes restricted the exemptions, exercising

his powers as per Section 21 of the Act, but otherwise confirmed the assessment order.

4. The Respondent Commissioner of Commercial Taxes, Bangalore, initiated

proceedings under section 22-A of the Act, for revising the order of the Deputy
Commissioner, on the ground that the assessee had been allowed exemption in respect
of the turnover of manufactured goods, without verifying as to whether the raw
material suffered taxes, and whether Explanation II to Schedule IV of the Act was
applicable or not.

5. The Appellant filed the writ petition praying for the issue of a writ of certiorari, to
quash the show cause notice issued by the Respondent under section 22-A of the Act,
challenging the constitutional validity of Section 5(4) of the Act, in so far as it
pertains to Item 2 of Schedule IV to the Act read with Explanation II thereof, in
respect of its application for the period prior to 01.04.1978, as violative of Article
304(a) of the Indian Constitution.

ISSUES RAISED
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1. Whether Section 5(4) of the Karnataka Sales Tax Act, 1957 is violative of
Article 304(a) of the Indian Constitution or not?

SUMMARY OF PLEADINGS

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1. Whether Section 5(4) of the Karnataka Sales Tax Act, 1957 is violative of
Article 304(a) of the Indian Constitution or not?

It is most humbly submitted that Section 5(4) of the Act does not violate Article 304(a) of the
Indian Constitution. The aforementioned section merely draws a nexus between taxation on
finished goods and on raw material used to make those finished goods. It exempts
manufactured goods from taxation only if it is proved that the raw material used to
manufacture those goods has already been taxed. As per Section 5(4), a dealer who brings
items of iron and steel from outside the State and manufactures other items locally was taxed
on the amount of sale for such finished goods whereas the locally purchased iron and steel
items used for manufacturing of other items were taxed on the amount of purchase of raw
material. It is not the case that locally made goods are not taxed. Moreover, rate of taxation is
also the same. Hence, Section 5(4) is not of discriminatory nature and does not violate Article
304(a) of the Indian Constitution.

WRITTEN SUBMISSION

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I. Section 5(4) of the Karnataka Sales Tax Act, 1957 is not

violative of Article 304(a) of the Indian Constitution

It is most humbly submitted that Section 5(4) of the aforementioned Act, does not violate
Article 304(a)3 of the Indian Constitution. Article 304(a) essentially says that a State
Legislature shall not impose any tax on goods imported on other States, unless the goods
produced in that State are subject to the same State. The object of this Article is to prevent
discrimination between goods manufactured in that State, and goods imported from other
States.

In this case, a dealer who brings items of iron and steel from outside the State and
manufactures other items locally was taxed on the amount of sale for such finished goods
whereas the locally purchased iron and steel items used for manufacturing of other items
were taxed on the amount of purchase of raw material. The explanation of the Fourth
Schedule on the taxing entry says that if tax had been paid on the items of iron and steel used
as raw material on its sale or purchase, no tax shall be payable on the sale of goods
manufactured out of these items. Tax is leviable on items of iron and steel if the raw material
was not subjected to tax.

A provision providing for not levying tax, if at an earlier stage tax has been paid, is only in
the nature of an exemption. This exemption will be granted only on sufficient proof that tax
had been paid at an earlier stage, on the goods out of which the goods in question were
manufactured, i.e. the raw material. The scheme or method of taxation under this Act, is that
there is a nexus between the finished goods and the raw material used for manufacturing the
same. If at an earlier stage, tax had been paid on the raw material, it need not be paid on the
finished goods. It is not the case that the goods manufactured in the State out of local raw
material do not suffer any tax at all, for the tax would have been paid on the raw material,
when purchased locally. Hence, to contend the tax is not payable at all on the finished goods
of iron and steel manufactured out of local raw material, is devoid of merit.

3 Article 304 reads: Notwithstanding anything in article 301 or article 303, the 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

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In a decision of the Hon'ble High Court of Karnataka, in the case of Mangalore Metal House
v. State of Karnataka & Ors.,4 where the same section of the same Act was challenged, it was
held that it is not violative of Article 304(a) of the Indian Constitution. In that case, the facts
were similar. The question was related to taxation of goods made with raw material imported
from other States and taxation of goods made with local raw material. The Hon'ble High
Court held that there was no violation of Article 304(a).

Further, in another case before, Associated Tanners v. Commercial Tax Officer,5 this Hon'ble
Supreme Court of India held that so long as the rate of tax on declared goods manufactured
within a State, whether by purchase of raw material from outside the State or within the State
is the same, there was no violation of article 304(a) of the Constitution and that the fact that
its effect works differently on dealers who buy raw material from outside the State and those
who buy raw material within the State, was no basis to say that the provision is violative of
article 304(a) of the Constitution.

It is most humbly submitted that in this present case, there is no discrimination in the rate of
tax between the imported items and the local items of finished goods of iron and steel as
such. If goods are manufactured out of goods locally purchased and if the same had not
suffered tax (as in case of the same having been purchased from a small dealer not liable to
tax) the levy on the finished goods is attracted just as in case of goods manufactured out of
imported goods. Therefore, there is no discrimination in rate at all. The variation in the
quantum or amount of tax is on account of the scheme of taxation working differently on
different dealers those who import raw material and manufacture and those who locally
purchase and manufacture and hence, such an effect is only an indirect result and not having
direct or immediate impact.

PRAYER FOR RELIEF

4 1986 63 STC 482 Kar
5 1986 62 STC 1 SC

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Wherefore in the light of facts stated, issues raised, arguments advanced and authorities cited,
this Honourable Supreme Court of India may be pleased to pass a decision and declare that:

1. Section 5(4) of the Karnataka Sales Tax Act, 1957 is not violative of Article 304(a) of
the Indian Constitution.

2. The appeal should be dismissed.

Or pass any other order which can be deemed fit in the spirit of justice, equity and good
conscience.

All of which is humbly submitted before the Honourable Supreme Court of India.

Date: 6th April 2017 Counsel for Respondents

Place: New Delhi Ekta Chandrakar

Section C Semester IV

Roll No. 62

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