Supreme Court of India
JAIPRAKASH ASSOCIATES LTD.versusSTATE OF M.P. AND ORS.
- Citation
- 2008 INSC 1487
- Decided
- 18 December 2008
- Disposal
- Appeal(s) allowed
- Bench
- ARIJIT PASAYAT
Holding
The Court referred the constitutional questions concerning the validity and nature of entry tax to a larger Bench for determination.
Summary
The Supreme Court entertained a batch of Special Leave Petitions challenging the constitutional validity of entry tax levied by various State statutes under Entry 52 of List II, Seventh Schedule. The petitioners argued that entry tax is not a tax in the classical sense but a fee, and that the State statutes should be examined under both clauses of Article 304 and Article 301 of the Constitution. The Court noted that earlier decisions on transport taxes and compensatory taxes may not be directly applicable to entry tax, and that the concept of compensatory tax requires a clear nexus between the tax and a quantifiable benefit. After analysing the jurisprudence, the Court found that the issues raised were of seminal importance and could not be resolved without a larger Bench. Consequently, the Court referred ten specific constitutional questions to a larger Bench for consideration and allowed the appeals.
Issues considered
- Whether State enactments relating to levy of Entry Tax must be tested with reference to both clauses (a) and (b) of Article 304 of the Constitution and whether clause (a) is conjunctive with clause (b).
- Whether the imposition of Entry Tax under Entry 52, List II, Seventh Schedule violates Article 301, and if so, whether it can be saved as a compensatory tax and what yardsticks determine its compensatory character.
- Whether Entry 52, List II, merely provides a taxing field and whether the revenue collected must be spent within the local area as per Article 266.
- Whether the principles of quid pro quo applicable to fees are relevant to taxes imposed under Part XIII.
- Whether Entry Tax may be levied when goods intended for sale, use or consumption come to rest after movement ceases in the local area.
- Whether Entry Tax can be termed a tax on the movement of goods when there is no barrier to entry at the State border or when goods merely pass through a local area.
- Whether the interpretation of Articles 301 to 304 in transport cases (Atiabari, Automobile Transport) applies to Entry Tax cases and to what extent.
- Whether a non‑discriminatory indirect State tax that is passed on to consumers infringes Article 301.
- Whether a tax on goods that directly impedes trade and violates Article 301 can be saved solely by reference to Article 304 or by any other provision.
- Whether a levy under Entry 52, even if compensatory, must demonstrate equivalence between the quantifiable benefit and the cost of the facility/service, and what constitutes the ‘local area’ for this purpose.
Legislation cited
- Constitution of Indias. Article 266, s. Article 301, s. Article 304(a), s. Article 304(b), s. Entry 52, List II, Seventh Schedule, s. Part XIII
Subjects
Entry TaxConstitutional LawArticle 301Article 304Compensatory TaxInter‑State TradeFederalismLarger Bench ReferralTaxation PowerFreedom of Trade
Judgment
[2008) 17 S.C.R. 1282
JAIPRAKASH ASSOCIATES LTD.
A
v.
STATE OF M.P. AND ORS. \.
(Special Leave Petition (c) No.14828 of 2008 Etc.)
B DECEMBER 18, 2008
[DR. ARIJIT PASA YAT AND S.H. KAPADIA, JJ.]
Constitution of India, 1950: Articles 301 and 304, Seventh
Schedule, List II, Entry 52- Entry Tax - Levy of, by concerned t-
c statute of State - Nature and legality of - Considering the
importance of issues relating to entry tax, Articles 301, 304 and
Part XIII, questions referred to larger Bench.
Jindal Stainless Ltd. (2) and Anr. v. State of Haryana and
Ors. (2006) 7 SCC 241; Atiabari Tea Co. Ltd. v. State of Assam
D (1961 )1 SCR 809; Automobile Transport (Rajasthan) Ltd. v.
State of Rajasthan (1963) 1 SCR 491; Khyerberi Tea Co. Ltd.
v. State of Assam (1964) 5 SCR 975; Meenakshi v. State of
Karnataka (1984) Supp SCC 326; Boiani Ores Ltd. v. State of .,.. 'f'
Orissa (1974) 2 SCC 777 and Kamaljeet Singh and Ors. v.
E Municipal Board, Pilkhwa and Ors. (1986) 4SCC174, referred
to.
Case Law Reference:
(2006) 1 sec241 referred to Para 1
(1961 )1 SCR 809 referred to Para 1
F Para 1
(1963) 1 SCR 491 referred to ""'.\
(1964) 5 SCR 975 referred to Para 1 f .....
(1984) Supp sec 326 referred to Para 1
(1974) 2 sec111 referred to Para 1
G (1986) 4 sec174 referred to Para 1
CIVIL APPELLATE JURISDICTION: Special Leave Petition
(C) No.14828 of 2008 Etc.
V'v1TH \
SLP(C)Nos. 14829, 14875, 15273, 15274, 15286-15287, 15288-15289 ·
H 1282
JAIPRAKASH ASSOCIATES LTD. v. STATE OF M.P. AND 1283
ORS.
&15325, 15090, 15047, 15324, 15326, 15327, 15328, 15253of2008, 15330. A
15329, 15331, 15335, 15337, 22342, 25378, 25498, 9227, 26571, 26572 of2008,
SLP(C) No ...... (CC:13563/2008) and SLP(C) ...... (CC:13782/2008), 27606,
I 26543, 26813, 26972of2008, SLP(C) ... CC 15558-15567of2008, 27927of2008.
VVITH
SLP(C)No.15078, 15605, 15742, 15819, 16837of2008.
\l\/ITR Es
S.L.P.(C)No.16841, 18034, 18035&11187of2008.
VVITH
S.L.P.(C) Nos. 17408, 18066-18067, 18001, 18030 & 18582 of2008.
\l\/ITH
SLP(C)Nos. 18850, 18870, 18871, 19019, 19026, 19120, 19372, 19421,
19425, 19460, 19470, 19714, 19722, 19731, 19737, 19802,20068, 19873, c
19876, 21127/2008 &21117-21125, 21506, 21509 & 21510 of2008.
VVITH
C.A.No. 3453of2002, CAN. 8242of2003, 3455of2002, 3460of2002,
3456-3459of2002, 3469 of2002, 3461of2002,3467 of2002, 3468 of2002,
3465 of2002, 3466 of2002, 3462-3463of2002, 3454 of2002, 3470of2002,
8241 of 2003, 8243 of 2003, 8244 of 2003, 8245 of 2003, 8246 of2003, 8247 of D
2003, 8248 of2003, 8249 of2003, 82.50 of2003, 8251of2003,5858 of2002,
8252of2003, 3464of2002, 3381-3400of 1998, 4651of1998, 3592of1998,
918of1999, 4476 of 2000, W.P.(C) No. 574 of 2003, T.C.(C)No.13/2004,
C.A.Nos.2608/2003, 4471/2000, 3314/2001, C.A.No.5740/2002, 6331/2003,
W.P(C)No.512/2003, C.ANos.2637/2003, C.A.No.6383-6421/1997, 6436/1997,
6437-6440/1997, 6422-6435/1997, 276912000, 997-998/2004, SLP(C)No.10003/ E
2004, 10007/2004, 10156/2004, 10164/2004, 10167/2004, 10206/2004, 10381/
. 2004, 10391/2004, 10404/2004, 10417/2004, 10501/2004, 10563/2004, 10568/
2004, 10571/2004, 11012/2004, 11271/2004, 11326/2004, 3144/2004, 3145/
2004, 3146/2004, 4954/2004, 5141/2004, 5143/2004, 5144/2004, 5145/2004,
5147/2004, 5148/2004, 5149i2Q04, 5150/2004, 5151/2004, 5152/2004, 5153/ I
2004, 5156/2004, 5157/2004, 5158/2004, 5159/2004, 5160/2004, 516212004, F
5163/2004, 5164/2004, 5165/2004, 5166/2004, 5167/2004, 5168/2004, 5169/
2004, 5170/2004, 7658/2004, SLP(C)No.9496/2004, 9569/2004, 9883/2004,
9891/2004, 9898/2004, 9904/2004, 9910/2004.
VVITH
SLP(C)No.9911/2004, SLP(C)No.9976/2004, SLP(C) No.9993/2004,
Sl,.P(C)No.9998/2004, SLP(C)No.9999/2004, SLP(C)No.14380/2005, G
SLP(C)No.10153/2004, C.A.No.5385/2002, SLP(C)No.691412007, 14819/2007,
14820/2007, 14821/2007, 14823/2007, 14824/2007, 14826/2007, 14828/2007,
14829/2007, 14832/2007, 14833/2007, 14835/2007, 14837/2007, 1483812007,
;
14839/2007, 14841/2007, 14842/2007, 14845/2007, 14846/2007, 14847/2007,
14830/2007, 10910/2004, 11266/2004SLP(C)No.9054/2007, 1758912007, 17590/
2007, 17905/2007, 17906/2007, 17907/2007, 1790812007, 17909/2007, 17910/ H
1284 SUPREME COURT REPORTS [2008] 17 S.C.R.
A 2007, 17911/2007, 17913/2007, 17914/2007, 1791512007.17916/2007, 17917/
2007, 17918/2007, 1791912007, 17920/2007, 17921/2007, 1792212007, 17923/
2007, 17924/2007, 17925/2007, 17926/2007, 17929/2007, 17930/2007, 17933/
2007, 17934/2007, 17936/2007, 17937/2007, 17938/2007, 17939/2007, 17941/
2007, 1794212007, 1794312007, 17944/2007.17957/2007, 17959/2007, 17960/
2007, 17961/2007, 1796212007, 17963/2007, 17964/2007, 17965/2007, 179721
B 2007, 17973/2007, 17974/2007, 17975/2007, 17976/2007, 17977/2007, 17978/
2007, 17979/2007, 17980/2007, 17981/2007, 1798212007, 17983/2007, 17984/
2007, 18036/2007, 18037/2007, 18038/2007, 18039/2007, 18040/2007, 18041/
2007, 1804212007, 18043/2007, 18044/2007, 18045/2007, 18046/2007, 18047/
2007, 18048/2007, 18049/2007, 18050/2007, 18051/2007, 18053/2007, 18054/
2007, 18055/2007, 18056/2007, 18057/2007, 18058/2007, 18059/2007, 18061/
c 2007, 18062/2007, 18063/2007, 18064/2007, 18065/2007, 18066/2007, 18067/
2007, 18068/2007, 18069/2007, 18075/2007, SLP(C)No.18073/2007, 18074/
2007, 18076/2007, 18077/2007, 18078/2007, 18079/2007, 18080/2007, 180821
2007, 18087/2007, 1808812007, 18086/2007, 18085/2007, 18084/2007, 18083/
2007, 18081/2007, 18090/2007, 18089/2007, 1809212007, 18091/2007, 19049/
2007, 19050/2007, 19051/2007, 19052/2007.19053/2007, 19055/2007, 19057/
D 2007, 19059/2007, 19060/2007, 1906212007, 19064/2007.19066/2007, 19068/
2007, 19070/2007, 19071/2007, 1907212007, 19073/2007, 19074/200719076/
2007, 19077/2007, 19113/2007, 19114/2007, 1909412007, 19095/2007, 19096/
2007, 19099/2007, 19100/2007, 19101/2007, 1910212007, 19103/2007, 19104/
2007, 19105/2007, 1910612007, 1910712007, 19110/2007,1910812007, 19111/
2007, 16351/2007, 19505/2007, 19506/2007, 19507/2007.19508/2007, 19510/
E 2007, 1951112007, 1951212007, 19513/2007, 1951412007, 19515/2007, 19516/
2007, 1951812007, 19543-19547/2007, 1952112007, 19522/2007, 19523-19528/
2007, 19529/2007, 19530/2007, 1953112007, 2052712007, 2052912007, 20559/
2007, 21841/2007, 21843/2007, 21844/2007, 21845/2007, 21846/2007, 21847/
2007, 21848/2007, 21849/2007, 21851/2007, 21864/2007, 21866/2007, 21867/
2007, 21871-21904/2007, 21905/2007, 2190712007, 2190812007, 21909/2007,
F 2191012007, 15082-1508512007, 2295812007, 2294712007, 74212008, 74612008,
747/2008, 24934-25066/2007, 3230/2008, 3231/2008, 3233/2008, 3234/2008,
3236/2008, 3237/2008, 3238-3262/2008, 4008/2002, 5407/2008, 5408/2008,
14070/2007, 6148-6152/2008, 13889/2008, 14232-1425212008, 13327/2008,
15628/2008, 15629/2008, 15630/2008, 15631/2008, 1563212008, 15633/2008,
15655/2008, 15653/2008, 15656/2008, 15657/2008, 15659/2008, 15660/2008,
G 1565212008, 13806/2007, 17367/2008, 1736812008, 1736912008, 1737012008,
1737212008, 17373/2008, 17374/2008, 1737512008, 1737612008, 1737712008,
17267/08,17269/2008, 17271/2008, 17272/2008, 17274/2008, 17276/2008,
17279/2008, 17277/2008, 17280/2008, 17282/2008, 19049/2008, 4715/
2008, 18684-18714/2006.18684-18714/2008, 18040/2008, 20089/2008, 185321
2008, 5041-5042/2008, 3471/2002, 10129/2004, 10133/2004, 10134/2004,
H 10154/2004, 10161/2004.
·""
JAIPRAKASH ASSOCIATES LTD. v. STATE OF M.P. AND 1285 ·
ORS.
WTH A
1020712004, 10232/2004, 10366/2004, 1038212004, 10384/2004, 10385/
, / 2004, 1040212004, 10403/2004, 10407/2004, 10449/2004,10493/2004, 10495/
2004,10497/2004, 10505/2004, 10539/2004, 10557/2004, 10566/2004, 10567/
2004, 10569/2004, 10704/2004, 10706/2004, 10708/2004, 10736/2004, 10906/
2004, 10907/2004, 10908/2004, 10909/2004, 10923/2004, 10929/2004, 10977/
2004, 10274/2004,1028112004, 10320/2004, 11328/2004, 11329/2004, 11370/ 8
2004, 4953/2004, 5139/2004, 5142/2004,5154/2004, 5155/2004, 9479/2004,
9832/2004, 9885/2004, 9893/2004, 9899/2004, 9901/2004, 9912/2004,9950/
2004, 9964/2004, 9989/2004, 999112004, W.P(C)No.66/2004,221/2004, 1101/
.._ ~ 2007, 1288/2007, 15807/2007, 21404/2007, 21635/2007, 21855/2007, 15164/
2008, 8053-8077/2008, 12959/2007, 14454-14778/2008, 15643/2008.
WTH c
15647/2008, 10694/2007, 1274/2004.11320/2004, 27442-27444/2008,
18360-18364/2008, 23075/2008
WTH
1956/2003
WTH D
2633/2003, 2638/2003, 3720-3722/2003 ,SLP(C)... cc 15937-15943/
2008(CC 15937-159436831of2008,7914of2008,8199of2008,8204 of2008,
,. ~
26377 of 2008, 26593 of 2008, 17892/2008, 1540512008, 15540/2008, 18344/
2008, 18346/2008, 18354/2008, 18379/2008, 1885712008, 18865/2008, 19030/
2008, 19867/2008, 126813/2008, 26543/2008, 29763/2008, 29764/2008.
lndu Malhotra, Rajesh Kumar, Ranjit Kumar, Ravindra E
Shrivastava, Harish N. Salve, AK. Ganguli, H.N. Salve, Harish
N. Salve, Dr. Debi Pal, Ravindra Shrivastava, Soli J. Sorabjee,
Jayant Bhushan, Ravinder Narain, Meenakshi Grover, Sonu
Bhatnagar, Ajay Aggarwal, Kanika Gamber, Mallika Joshi,
Sudha Malla, Kamal Deep Dayal, Gayatri Goswami, Rajan F
Narain, Sharmila Upadhyay, Kavin Gulati, Mahesh Agarwal,
"'· 't Rishi Agrawala, Gaurav Goel, E.C. Agrawala, Dayan Krishnan,
Gautam Narayan, Mahfooz Nazki, Nikhil Nayyar, TVS.
Raghavendra Sreyas, Ambuj Agrawal, Akshat Shrivastava, P.P.
Singh, lnderjeet Yadav, R.K. Sanghi, N.M. Sharma, Dhiksha
Prasad, Rajesh Prasad Singh, P.P. Singh, Kunal Verma, Rajul G
Shrivastav, Akshat Shrivastava, Supriya Jain, K. Krishna Kumar,
Anup Jain, Nisha Bagchi, B. Sunita Rao, Sujeeta Srivastava,
Sanjay Grover, Abhishek Jaju, V. Madhukar, Sumit Ghosh,
' Jayendra Sarada, Rajeev Sharmna, Rudreshwar Singh, Kumar
Ranjan, Kaushik Poddar, Gopal Jha, Tapesh Kumar Singh,
H
1286 SUPREME COURT REPORTS [2008] 17 S.C.R.
A Satish Kumar, Guunam Venkateswara Rao, Sunita Ojha, Vikas
Mehta, Sunil Kumar Jain, B.V. Bairam Das, Manik Karanjawala,
U.A. Rana, Abhishek K. Rao for Mis. Gagrat & Co., S.S. Ray,
Rakhi Ray, S.K. Verma, Kumud Lata Das, Kavin Gulati, Rashmi
Singh, T. Mahipal, Subramonium Prasad, P.P. Singh, Kunal
Verma, Rajul Shrivastav, Akshat Shrivastava, Supriya Jain, K.
B Krishna Kumar, Anup Jain, A.S. Bhasme, Manali Singhal,
Kshatrshal Raj,. Santosh Sachin, Abhijat P. Medh, Arvind
Minocha, V. Madhukar, Sumit Ghosh, Jayendra Sarada, Rajeev
Sharmna, Neeraj Kumar Jain, Sanjay Singh, Sandeep
Chaturvedi, Umang Shankar, T.V. George, Ejaz Maqbool, Rajesh
c Jain, Taruna Singh, Wasif Gilani, Amit S.Chauhan, Udita Singh,
L.R. Singh, Vivek Singh, K.K. Mani, C.K.R.Lenin Sekar,
R.K.Pandey, Ashok Kumar Gupta, Farrukh Rasheed,
Manoranjan Paikaray, P.P. Rao, P.S.Patwalia, Shyam Diwan,
Krishnan Venugopal, T.R. Andhyarujina, K.K.Venugopal, Sunil
Gupta, Krishnan Venugbpal, Dhruv Agrawal, Rakesh Dwivedi,
D Su nil Kumar, Sudhir Chandra, Gopal Subramanian, ASG Shail
Kr. Dwivedi, AAG.,C.D. Singh, Sunny Chowdhary, Vairagya
Vardhan Dueby, Aditya Singh, Upasana Nath, Puneet Bali,
Hitten Nahra, Gourav Kejariwal, R. Nedumaran, Dewrat, Soumik
Ghosal, Rajiv Tyagi, Udit Kumar, Chanchal Biswal, Partha Sil,
E K.Chatterjee, Ghanshyam Joshi, Aarohi Bhalla, Manoj Kr.
Dwivedi, Vandana Mishra, G.V. Rao, Praveen Kumar, Gopal
Singh, Manish Kumar, Mohit Shah, Kaushik Poddar, Shamshad,
Sanjay Jain, Tapesh Kumar Singh, C. Mukund, Shashank ·
Sharma,Avneesh Garg, Vandana Anand, Bijoy Kr. Jain, Parijit
Singh, Reshmi Rea Sinha, S.C. Ghosh, U.A. Rana, A.K. Rao,
F for M/s Gagrat & Co.,Advs. Kirti Renu Mishra, Rajiv Agnihotri,
Rajesh Kumar, Indra Sawhney, K.L. Janjani, Kamakshi S.
Mehlwal, Sanjeev Kr. Singh, Bhargava V.Desai,. Rahul Gupta,
Reema Sharma, Nikhil Nayyar, H.K. Puri, L.N.Rao, Roy
Abraham, Seema Jain, Himinder Lal, P.N. Puri, Tarun Johri,
G Shirin Khajuria, Surya Kant, B. Vijayalakshmi Menon, Vishwajit
Singh, K.R. Sasiprabhu, M.P. Vinod, Ajay K.Jain, Dillep Pillai,
C.N. Sree Kumar, Sanjay R. Hegde, Romy Chacko,. A.
Mariarputham, Aruna Mathur, Adv.for Arputham Aruna & A.K.
Ganguli, Harish N.Salve, K.K.Venugopal, T.L.V.lyer, S. Ganesh,
Gopal Singh, Abhisth Kumar,.Ravindra Narain, Sonu Bhatnagar,
H Ms. Sudha Malla, Rajan Narain, Aruneshwar Gupta, Sushil
JAIPRAKASH ASSOCIATES LTD. v. STATE OF M.P. AND 1287
ORS. [DR. ARIJIT PASAYAT, J. ]
Kumar Jain, G.C. Bharuka, Ramesh Kumar Agarwal, Devashish A
Bharuka, Jaya Bharuka, Anjani Kumar Singh, Vinoo Bhagat,
~ ~ ATM Sampath, S. prasad,. K.V. Mohan, Rajeev K. Virmani,
- Kamlendra Mishra,. T. Mahipal, B.V. desai, Rajiv Tyagi, Abhijit
Sengupta, S.R. Setia, Dr. Vijay Pratap Singh, K.S. Rana, L.K.
Bhushan, Swaty Malik, RP. Dave, Shakil Ahmed Syed, Sanjay
Kapur, Sunil Kumar Jain, Bibek Mohanti, Ajay Kr. Bhatia, B
Sharmila Upadhyay, B.K. Satija, Shrish Kumar Misra, Ashok
Mahur, P.V. Dinesh, E.C. Agrawala, M.K. Michael, A. Raghunath,
K. Rajeev, Radha Shyam Jena, Prashant Kumar, TGN. Nair, S
·- ' Sukumaran, Anand Sukumar, V.K. Sidharthan, Gurukrishna
Kumar, Srikala Gurukrishna Kumar, Manik Karanjawala, C.K. c
Sasi, S. Janani, Malini Poduval, Ramesh Babu M.R., B.V.
,
Deepak, Adv. for Mis T.T.K. Deepak & Jagdeep Dhankar Co.,
Janaranjan Das, Vijay Kumar, EMS. Anam, S. Sukumaran,
Anand Sukumar, Meera Mathur, Jogy Scaria, Senthil
Jagadeesan, Sharat Kapoor, Hrishikesh Baruah, Arjun Bobde,
Raka Phookan, Shailesh Madiyal, Jagjit Singh Chhabra, Bijoy D
Kumar Jain, Rupesh Kumar, Kanchan Kaur Dhodhi, R.
... ,.....
Nedumaran, Ng. J.R. Luwang, Riku Sarma, M/s Corporate Law
Group, Dr. A.M.Singhvi, Kamini Jaiswal, Vijay Kumar Garg, Sibo
Sankar Mishra, M.P. Devanath, Prem Sunder Jha, Jatinder
Kumar Bhatia, S. Balaji, Amlan Kumar Ghosh, B.B. Singh, M.K. E
Dua, Sanjay Jain, Tapesh Kumar Singh, Samir Ali Khan, Shiv
Kumar Suri, Prem Prakash, Sunil Roy, Hrishikesh Baruah, Raka
Phookan, Shailesh Madiyal, Manish Bisrioy, Rahul Gupta, Pinaki
Addy and Chitaranjan Addy for the appearing parties.
The Judgment of the Court was delivered by
1.-
DR. ARIJIT PASAYAT, J. 1. In these cases various issues F
_.. ~
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. (2006 (7) SCC 241) 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 G
' of the cases, Entry Tax has been introduced after abolition of
Octroi. A series of judgments of this Court, for example, Atiabari
:J Tea Co. Ltd. v. State of Assam (1961 (1) SCR 809), Automobile
Transport (Rajasthan) Ltd. v. State of Rajasthan (1963 (1) SCR
- 491 ), Khyerberi Tea Co. Ltd. v. State of Assam (1964 (5) SCR
H
1288. SUPREME COURT REPORTS [2008] 17 S.C.R.
I-
A 975), Meenakshi v. State of Karnataka (1984 Supp SCC 326),
Boiani Ores Ltd. v. State of Orissa ( 1974 (2) SCC 777) and
Kamaljeet Singh and Ors. v. Municipal Board, Pilkhwa and \. "'
Ors. (1986 (4) SCC 174) apart from Jindal's case (supra).nave
been pressed into service by the parties. Stand of the appellants
in the present cases essentially is that true nature of the levy of l·
B 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 .
offee. Some High Courts by the impugned judgment have held f --' '
c that Clauses (a) and (b) of Article 304 of the Constitution of India,
1950 (in short the 'Constitution') are independent of each other k
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
D parties have placed reliance did not relate to Entry Tax and
related to levy in the context of tax on vehicles brought inside the
E
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
JI>'
-
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 case (supra)
certain other important constitutional issues are involved
because the approach so far as the levy on transport cases
F indicated above are concerned is conceptually and contextually
different from Entry Tax cases. In that sense, the foreign t ->r .
decisions, more particularly, the Australian cases decided in the
background of Section 95 of the Australian Constitution may not
t
have much relevance so far as cases relating to Entry Tax are
G concerned.
f_
3. In Jindal's case (supra) in paras 16 and 46 it was noted
as follows: '
"16. To SU(TI up: the pre-1995 decisions held that an t
\
exaction to reimburse/recompense the State the cost of an
;.,.
existing facility made available to the traders or the cost of
H ..,,..
I
JAIPRAKASH ASSOCIATES LTD. v. STATE OF M.P. AND 1289
ORS. [DR. ARIJIT PASAYAT, J.]
a specific facility planned to be provided to the traders is A
compensatory tax and that it is implicit in such a levy that it
~ must, more or less, be commensurate with the cost of the
service or facility. Those decisions emphasised that the
imposition of tax must be with the definite purpose of
meeting the expenses on account of providing or adding
to the trading facilities either immediately or in future, B
provided the quantum of tax is based on a reasonable
relation to the actual or projected expenditure on the cost
of the service or facility. However, the post-1995 decisions
~ ~
in Bhagatram Rajeevkumar v. CST ( 1995 Supp ( 1) SCC
673) and in State ofBiharv. BiharChamberofCommerce
(1996 (9) sec 136) now say that even if the purpose of
c
imposition of the tax is not merely to confer a special
advantage on the traders but to benefit the public in general
including the traders, that levy can still be considered to be
compensatory. According to this view, an indirect or
incidental benefit to traders by reason of stepping up the D
developmental activities in various local areas of the State
can be brought within the concept of compensatory tax, the
nexus between the tax known as compensatory tax and the
trading facilities not being necessarily either direct or
specific.
E
xx xx xx
46. Applying the above tests/parameters, whenever
a law is impugned as violative of Article 301 of the
Constitution, the Court has to see whether the impugned
enactment facially or patently indicates quantifiable data on
the basis of which the compensatory tax is sought to be F
>< 1 levied. The Act must facially indicate the benefit which is
quantifiable or measurable. It must broadly indicate
proportionality to the quantifiable benefit. If the provisions
are ambiguous or even if the Act does not indicate facially
the quantifiable benefit, the burden will be on the State as G
a service/facility provider to show by placing the material
before the Court, that the payment of compensatory tax is
a reimbursement/recompense for the quantifiable/
measurable benefit provided or to be provided to its
payer(s). As soon as it is shown that the Act invades
H
'
1290 SUPREME COURT REPORTS [2008] 17 S.C.R. ).
I-
r
A freedom of trade it is necessary to enquire whether the
State has proved that the restrictions imposed by it by way
of taxation are reasonable and in public interest within the ., ~
meaning of Article 304(b) [see para 35 (of AIR) of the
decision in Khyerbari Tea Co. Ltd. v. State of Assam AIR
1964 SC 925)"
B
4. The concept of compensatory tax is judicially evolved and
in a way provides a balancing factor between federal control and
State Taxing Board. The concept really had its matrix in
transportation cases and does not apply to general notion of
J ~
Entry Tax.
c 5. Therefore, considering the importance of the issues
relating to Articles 301 and 304 and Part XIII of the Constitution,
we consider it necessary to refer the matter to a larger Bench in
terms of Article 145(3) of the Constitution. The following questions
are referred for the aforesaid purpose:
D (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
E 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
F determine the compensatory character of the Entry Tax.
(3) Whether Entry 52, List II, 7th Schedule of the Constitution
t -->< ,,
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
G 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
H
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
'
JAIPRAKASH ASSOCIATES LTD. v. STATE OF M.P. AND 1291
ORS. [DR. ARIJIT PASAYAT, J.]
was collected? A
(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'? B
(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?
(7) Whether interpretation of Articles 301 to 304 in the c
context of Tax on vehicles (commonly known as 'transport')
cases in Atiabari's case (supra) and Automobile
Transport's case (supra) apply to Entry Tax cases and if so,
to what extent.
(8) Whether the non discriminatory indirect State Tax which D
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 E
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 equivalence demonstrate that the value of the quantifiable
benefit is represented by the costs incurred in procuring the F
.. i facility/services (which costs in turn become the basis of re-
imbursement/recompense for the provider of the services/
facilities) to be provided in the concerned 'local area' and
whether the entire State or a part thereof can be
comprehended as local area for the purpose of Entry Tax?
G
... 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.
D.G. Appeal allowed.
H
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "Entry Tax"Sign in to search