STATE OF MADRAS vs N. K. NATARAJA MUDALIAR

The Supreme Court held that the provisions of sub-sections (2), (2A), and (5) of Section 8 of the Central Sales Tax Act, 1956, which impose varying rates of tax on inter-State transactions, violate Articles 301 and 303(1) of the Constitution by hampering free trade and commerce. The Court clarified that while taxes can impede trade, not every tax does so, and the specific tax in question was deemed to encumber trade. The appeal by the State against the High Court's ruling was dismissed, affirming the High Court's decision that the differential tax rates were unconstitutional.