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Informist, Thursday, Sept. 25, 2025

 

NEW DELHI - The Supreme Court has quashed a 2007 notification by Rajasthan government that exempted companies from paying value added tax on sale of asbestos cement sheets and bricks, having fly ash content of 25% or more, manufactured in the state. The verdict came as a relief for petitioners UP Asbestos Ltd. and Everest Industries Ltd., who do not have their manufacturing units in Rajasthan, but have sales depots in the state.

 

The apex court held that there cannot be tax or fiscal barriers in the interest of free trade, commerce and intercourse throughout the territory of India guaranteed by Article 301 of the Constitution. The weapon of taxation "cannot be used to discriminate against the imported goods vis--vis the locally manufactured goods", said the top court.

 

The bench of Justices B.V. Nagarathna and K.V. Viswanathan said that Rajasthan government's notification was violative of Article 304(a) of the Constitution. Article 304(a) allows a state legislature to impose a tax on goods imported from other states or union territories, provided that the tax rate is the same as the tax on similar goods manufactured within the state, ensuring there is no discrimination against the imported goods. 

 

The top court noted that it was necessary to ascertain whether the differential value added tax amounts deposited by the petitioners with the court through its order in 2008 was collected from their customers. If not, the petitioners would be entitled for refund of the amount deposited with interest at the rate of 6% per annum from the date of deposit till realisation, said the court. In order to ascertain this aspect, the apex court posted the appeals for a later date.

 

The petitioners contested that the state government's notification was violative of Article 304(a) of the Constitution "being discriminatory vis-vis goods" imported from outside Rajasthan. They said the notification did not provide any reason for the blanket exemption from payment of tax provided to locally manufactured goods in Rajasthan as compared to goods imported from outside the state. The differentiation made through the notification was intended or inspired by an element of unfavourable bias in favour of the goods produced or manufactured in Rajasthan as against those that came from outside, said the petitioners.

 

At 1240 IST, the shares of Everest Industries Ltd. were down 1.4% at INR 710.55 on the National Stock Exchange.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Surya Tripathi

Edited by Vandana Hingorani

 

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