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(C)...CC 15937-15943, 15937-15943, 13563, 13782, 15558-15567 of 2008
Hon'ble Judges/Coram:
Dr. Arijit Pasayat and S.H. Kapadia, JJ.
Case Note:
Sales Tax-Vat - Levy of Entry Tax - Writ Petitions filed challenging the legality
of levy of Entry Tax in the State by concerned Statute of the State - Order
passed by High Court holding that Clauses (a) and (b) of Article 304 of the
Constitution of India, 1950 are independent of each other and if law is saved
under Article 304(a) then it need not be tested with reference to Clause (b) of
Article 304 for determining its validity - Held, concept of compensatory tax is
judicially evolved and in a way provides a balancing factor between federal
control and State Taxing Board - Concept had its matrix in transportation
cases and did not apply to general notion of Entry Tax - Considering the
importance of the issues relating to Articles 301 and 304 and Part XIII of the
Constitution of India, matter referred to a larger Bench in terms of Article 145
(3) of the Constitution.
JUDGMENT
Arijit Pasayat, J.
1. In these cases various issues of seminal importance are involved. Pursuant to the
directions given by this Court in Jindal Stainless Ltd. (2) and Anr. v. State of Haryana
and Ors. MANU/SC/2085/2006 : [2006]283ITR1(SC) various High Courts have heard
the Writ Petitions filed challenging the legality of levy of Entry Tax in the State by
concerned Statute of the State. In most of the cases, Entry Tax has been introduced
after abolition of Octroi. A series of judgments of this Court, for example, Atiabari Tea
Co. Ltd. v. State of Assam MANU/SC/0030/1960 : [1961]1SCR809 , Automobile
Transport (Rajasthan) Ltd. v. State of Rajasthan MANU/SC/0065/1962 : [1963]
1SCR491 , Khyerberi Tea Co. Ltd. v. State of Assam MANU/SC/0048/1963 : [1964]
5SCR975 , Meenakshi v. State of Karnataka MANU/SC/0275/1983 : AIR1983SC1283 ,
Bolani Ores Ltd. v. State of Orissa MANU/SC/0313/1974 : [1975]2SCR138 and
Kamaljeet Singh and Ors. v. Municipal Board, Pilkhwa and Ors. MANU/SC/0360/1986 :
AIR1987SC56 apart from Jindal's case (supra) have been pressed into service by the
parties. Stand of the appellants in the present cases essentially is that true nature of
the levy of Entry Tax has to be seen and that has not been done. With reference to
paragraphs 31 and 42 of Jindal's case (supra) it has been submitted by assessees-
appellants that Entry Tax is really in essence not a tax in the classical sense, but a sub
class of fee. Some High Courts by the impugned judgment have held that Clauses (a)
and (b) of Article 304 of the Constitution of India, 1950 (in short the `Constitution')
are independent of each other and if law is saved under Article 304(a) then it need not
be tested with reference to Clause (b) of Article 304 for determining its validity.
2. It is to be noted that almost all the cases on which the parties have placed reliance
did not relate to Entry Tax and related to levy in the context of tax on vehicles brought
inside the local area. These are commonly known as transport cases. Those cases like
Meenakshi's case (supra) were decided because of Presidential permission in terms of
Article 304 was there. The applicability of Part XIII is also in issue. It is not contended
and in our view rightly that compensatory tax is not levied on trade. Though some of
the important factors have been addressed to by the Constitution Bench in Jindal's
xxx
(1) Whether the State enactments relating to levy of Entry Tax have to be
tested with reference to both Clauses (a) and (b) of Article 304 of the
Constitution for determining their validity and whether Clause (a) of Article
304 is conjunctive with or separate from Clause (b) of Article 304?
(2) Whether imposition of Entry Tax levied in terms of Entry 52 List II of 7th
Schedule is violative of Article 301 of the Constitution? If the answer is in
the affirmative whether such levy can be protected if Entry Tax is
compensatory in character and if the answer to the aforesaid question is in
the affirmative what are the yardsticks to be applied to determine the
compensatory character of the Entry Tax.
(3) Whether Entry 52, List II, 7th Schedule of the Constitution like other
taxing entries in the Schedule, merely provides a taxing field for exercising
the power to levy and whether collection of Entry tax which ordinarily would
be credited to the Consolidated Fund of the State being a revenue received
by the Government of the State and would have to be appropriated in
accordance with law and for the purposes and in the manner provided in the
Constitution as per Article 266 and there is nothing express or explicit in
Entry 52, List II, 7th Schedule which would compel the State to spend the
tax collected within the local area in which it was collected?
(4) Will the principles of quid pro quo relevant to a fee apply in the matter
of taxes imposed under Part XIII?
(5) Whether the Entry Tax may be levied at all where the goods meant for
being sold, used or consumed come to rest (standstill) after the movement
of the goods ceases in the `local area'?
(6) Whether the Entry Tax can be termed a tax on the movement of goods
when there is no bar to the entry of goods at the State border or when it
passes through a local area within which they are not sold, used or
consumed?
(8) Whether the non discriminatory indirect State Tax which is capable of
being passed on and has been passed on by traders to the consumers
infringes Article 301 of the Constitution?
(9) Whether a tax on goods within the State which directly impedes the
trade and thus violates Article 301 of the Constitution can be saved by
reference to Article 304 of the Constitution alone or can be saved by any
other Article? (10) Whether a levy under Entry 52, List II, even if held to be
in the nature of a compensatory levy, it must, on the principle of
6. The records be placed before the Hon'ble Chief Justice of India for necessary orders.
It is open to the parties to move the Hon'ble Chief Justice of India for early hearing of
the cases.