IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated: 22.03.2007
Coram:
The Honourable Mr.A.P.SHAH, CHIEF JUSTICE
and
The Honourable Mr.Justice K.CHANDRU
Writ Petition Nos. 12553 to 12555/2002, 13457/02, 14246/02,
14247/02, 14578 to 14580/02, 14581/02, 14593/02, 15340/02,
15667 to 15669/02, 15809 to 15810/02, 15830/02, 15833/02,
15862/02, 15896/02, 15898/02, 15902/02, 15908/02, 16430 to
16432/02, 16433/02, 16434/02, 16959 to 16962/02, 16469 to
16472/02, 18225/02, 18871 to 18874/02, 18894/02 to 18898/02,
18899 to 18901/02, 18902 to 18905/02, 19003/02, 19284 to
19286/02, 19326/02, 19356/02, 19570/02, 19958 & 19959/02,
20054 to 20058/02, 20332/02, 20466/02, 20738/02, 20790/02,
20791 to 20793/02, 21268/02, 21566/02, 21655/02, 21815/02,
21816 & 21817/02, 21818/02 & 21819/02, 21823/02, 22016/02,
22023 to 22027/02, 22039 to 22043/02, 22072 to 22075/02,
22260/02, 22285/02 to 22287/02, 22288 to 22291/02, 22302 to
22306/02, 22408/02, 22458/02, 22519 & 22521/02, 22541 to
22544/02, 22545/02, 22597/02, 22679 to 22685/02, 22738/02,
22956 to 22958/02, 23103/02, 23140/02, 23175/02, 23176/02,
23263 to 23266/02, 23443/02, 23553/02 & 23554/02, 23738 to
23742/02, 23941 to 23943/02, 24143/02, 24181 to 24184/02,
24385/02, 24419 to 24420/02, 24525 & 24526/02, 25021/02,
25346/02, 25373/02, 29937/02, 29963/02, 30035/02, 30532/02,
30668 to 30673/02, 30906/02, 31195/02, 31198/02, 31241/02,
31535 to 31540/02, 31541 to 31544/02, 31612 & 31613/02,
31633/02, 31690/02, 32425/02, 32460 & 32461/02, 32463 &
32464/02, 32734 & 32735/02, 33099/02, 33100/02, 33101/02,
33102/02, 33103/02, 33104/02, 33105/02, 33106/02, 33107/02,
33108/02, 33583/02, 34203/02, 34266/02, 34283/02& 34284/02,
34313/02, 34342/02, 34343/02, 22961/02, 23177/02, 24352/02,
25068/02, 29058 & 29059/02, 29649/02, 29890/02, 32412/02,
32977/02, 33875/02, 34873/02, 35776/02, 36273/02, 36519 to
36521/02, 37078/02, 37465/02, 37480/02, 37660/02, 37718/02,
37778/02, 38430/02, 38855 to 38858/02, 39382 to 39384/02,
40280/02, 29825/02, 33194 to 33197/02, 34130/02, 34132/02,
34145/02, 34156/02, 34159/02, 34162/02, 34173/02, 34186/02,
34402/02, 34406 to 34407/02, 35554/02, 35555/02, 35691/02,
35834/02, 36498/02, 36503/02, 36707/02, 37129 to 37132/02,
37281 & 37282/02, 37297/02, 37298/02, 38030/02, 38214/02,
38270/02, 39051/02, 39275/02, 39276/02 to 39279/02,
39392/02, 39424/02, 39428 to 39431/02, 39656/02, 39791/02,
40099/02, 40534/02, 40895/02, 18875/02, 19603/02, 19907/02,
19920/02, 19931/02, 19932/02, 19955 to 19957/02, 20229/02,
23642/02, 23908 to 23919/02, 31808&31809/02, 31887/02,
34304/02, 34788/02, 35388/02, 35847/02, 35866/02, 35891/02,
35896/02, 38183/02, 38261/02, 38668 & 38669/02, 39319
&39320/02, 41364/02, 41543/02, 41712/02, 41784 & 41785/02,
42261/02, 42487/02, 42749/02, 43800/02, 44412/02, 44436/02,
44470/02, 44473/02, 44486/02, 44487/02, 44510 to 44512/02,
44697/02, 44997/02, 45066/02, 45191 & 45192/02, 45312/02,
45332/02, 45408/02, 45943/02, 46010/02, 46445/02, 46651/02,
46689 to 46691/02, 47051/02,37934/02, 27/2003, 59/03, 61/03,
392/03, 565/03, 695/03, 790/03, 813/03, 816/03, 817/03,
818/03, 824/03, 827/03, 979/03, 1031/03, 1155/03, 1259,
2201, 2293, 2313, 2740, 3353, 3779, 3765, 4113, 3513, 4513,
5458, 5459, 6184, 8608, 8631, 7148, 7587, 7623, 7942, 8124,
8220, 8221, 9134, 9244, 9571, 9627, 9743, 9908, 9909, 10429,
10601, 11326, 11327, 11450, 11615, 11616, 11620 to 11625,
11820 to 11824, 12968, 12969, 12970, 13279, 13407, 13450,
13567, 13960, 14049, 14050, 14057, 15575 to 15578, 16659,
16757, 16816, 16926, 17633, 18068, 18213, 18871, 19842,
20767, 21315, 21723 to 21726, 22039, 22040, 22041, 23309,
23390, 24069, 24119, 25150 to 25153, 24536, 24540, 24745,
26710, 27000, 27049, 27479, 27803, 28289, 28618, 28619,
28708, 28709, 28938, 29085, 29252, 29277, 29476, 29497,
29657, 29847, 29913, 30144, 30337, 30886, 32767,32777,
32823, 32824, 32826, 32846, 32850, 32851, 33271, 33319,
34502, 35490, 29266, 35899, 35971, 35972, 35973, 35994,
36078, 36115, 36152, 36493, 36522, 36758, 36990 to 36992,
37026, 38543, 38544, 38653, 38654, 38690, 38802/2003,
158/2004, 223, 484, 510, 675, 955, 977, 989, 1175, 1204,
1713, 2515, 2691, 2692, 2693, 2839, 2960, 3091, 3153 to
3158, 3161 to 3163, 3574, 3716, 3721, 24153 to 24168, 37208,
37807, 37752, 37768, 37798, 37989, 38057, 38058, 38093,
38442, 2014, 15461, 15634, 15707, 15711, 15912, 7340, 7341,
15110, 15227, 15453, 15487, 15492, 20305, 20306, 21026/2004,
21162, 21192, 21193, 21196/04, 21246/04, 26042to 26044/04,
27017/04, 28718/04, 29915/04, 29919/04, 30678/04, 35055/04,
36909/04, 22292/04, 30636/03, 39534/04, 37582/04, 37626/04,
38024/04, 38033/04, 24199/04, 11412/04, 11740/04, 12769/04,
12770/04, 3929 to 3931/04, 20764, 20765/05, 18864/05, 18873
& 18874/05, 26122&26123/05, 26147 to 26149/05, 26949/05,
30564/05, 32662/05, 100/05, 595 to 597/05, 1144&1145/05,
1458/05, 1495/05, 1799 & 1800/05, 1527/05, 2153 & 2154/04,
3824/04, 4676/04, 4676/04, 4679/04, 4730/04, 5926 to
5928/04, 5604&5605/04, 5785*04, 5880/04, 6192/04, 6440/04,
6548 to 6551/04. 6915/04, 7418/04, 7421/04, 7453/04,
7472/04, 8719/04, 8964/04, 9078/04, 9156/04, 9393/04,
9620/04, 9806/04, 9980/04, 10362/04, 10655/04, 11223/04,
11224/04, 11239/04, 11494/04, 12573/04, 13278/04, 13279/04,
13630/04, 13631/04, 13561 &13562/04, 27149/04, 27175/04,
27485/04, 27575/04, 27709/04, 27733/04, 27827/04, 27829/04,
27835/04, 27993&27994/04, 28028/04, 28029/04, 28048/04,
28361/04, 29469/04, 29617/04, 29679/04, 29789/04, 29870/04,
5143 & 5144/04, 5644/04, 17096/04, 17163/04, 19095/04,
22114/04, 22437/04, 22614/04, 22791/04, 22793&22794/04,
22948/04, 24178/04, 24635/04, 25291/04, 25650/04, 25658/04,
25743/04, 26667&26668/04, 29057/04, 29920/04,
30282&30283/04, 30496/04, 31084/04, 31210/04,37668/04,
37669/04, 38420/04, 39628/04, 21581/05, 1317/04,1372/04,
1380/04, 1513/04, 1976/04, 2336 & 2337/04, 14522/04,
14644/04, 23099/05, 6247/04, 6315/04, 7091 &7092/04, 204/05,
239/05, 905/05, 1116/05, 24699/05, 13325/04, 13913/04,
14316&14317/04, 14328/04,14372/04, 14420&14421/04, 16599/04,
18736/04, 19561/04, 22325/04, 22660/04, 23333/04, 23841/04,
23988 to 23990/04, 25029/04, 28720/04, 28971 to 28973/04,
21903/05, 21922/05, 22031&22032/05, 22638/05, 22795/05,
23881&23882/05, 23923/05, 5566/05, 5627/05, 5656/05,
5675&5676/05, 7353/05, 9369/05, 10410/05, 10437/05,
10804/05,13335/05, 15999/05, 16082/05, 25387/04, 8406/05,
8644/05, 8848/05, 10171/05, 10413&10414/05, 5840/04,
19677&19678/05, 12938/05, 11800/05, 19680/05, 33105/04,
33106/04, 34410 & 34411/04, 35479/04, 35776/04, 37139 to
37141/04, 10075/05, 12027/05, 20790/05, 20956/05, 24190/05,
24547/05, 24652/05, 24997/05, 39301&39032/05,
39647&39648/05, 39841&39842/05, 40150/05, 320/06, 8075/04,
489/06, 1030&1031/06, 1351/06, 1474/06, 1642 to 1644/06,
4186/06, 4655/06, 4945/06, 12451 to 12454/04, 22359
&22360/04, 39422&39423/05, 7804/04, 12674 & 12675/04,
15960/04, 15963/04, 26440 to 26444/04, 2150&2151/05,
1912/04, 2443/04, 16083&16084/05, 15045/04, 36484/04,
16250/05, 13335/04, 29684/05, 3385/06, 8948/06,
9000/06,40118/06, 4105/05, 15864& 15865/05, 15135/04,
19131/04, 19845/04, 20756/04 & 20757/04, 33410/04, 1935/05,
6236/05, 6240/05, 6241/05, 33965/05, 35909/05, 9240/06, 9865
& 9866/06, 42549/06, 42963/06, 4168/05, 4277/05, 1415/06,
518/06, 18073/05 & W.A.Nos. 1320 & 1321/06.
W.P.Nos.12553 to 12555 of 2002
ITC Limited
having its Registered Office
at Virginia House,
37, J.L.Nehru Road, Kolkata-700 071.
And one of its Marketing Office at ITC Centre,
4th Floor, 760, Anna Salai, Chennai - 600 002.
Rep. by its Constituted Attorney,
Mr.Subhatosh Banerjee . Petitioner in
the above petitions
vs.
1. The State of Tamil Nadu
rep. by the Chief Secretary to
Government of Tamil Nadu,
Secretariat,
Chennai.
2. The Commercial Tax Officer,
Thiruvottiyur Assessment Circle,
Thiruvottiyur,
Chennai. ..Respondents in the
above petitions.
Petitions filed under Article 226 of the
Constitution of India praying for the issue of a Writ of
Declaration for the reasons stated therein.
For Petitioners in ::: Mr.Anil B.Divan, SC
W.P.Nos.12553,12554&12555/02 Mr.A.L.Somayaji, SC
15667, 15668 & 15669/02 & Mr.S.Ganesh, SC
36503/2002 Assisted by
Mr.Krishna Srinivas
Mr.AR.Ramanathan for
M/s.Ramasubramaniam&
Associates
For Petitioners in
W.P.Nos.24058, 24059&24060/06 Mr.Arvind P.Datar, SC
For M/s.S.Ramasubramaniam &
Associates.
For Petitioners in Mr.C.Natarajan, SC for
W.P.Nos.13457,14246,14578 Mr.Inbarajan
14581, 14593, 18871, 18894, 18899,
to 18901, 18902, 19958, 21268,
21655, 21816, 21818, 22016, 22023,
22039 to 22043, 22072 to 22075,
22260, 22285, 22288, 22519, 22541,
22545, 22679 to 22685, 22738,
23140, 23553, 23941 to 23943,
24143, 29937, 34266, 22961, 24352,
32412, 39275, 19955, 34788,
42261 of 2002, 4113/2003, 5458/03,
9743/03, 24069/03, 29847/03,
510/04, 595/05, 27709/04,
28048/04, 28200/04, 26667/04,
30282/04, 38420/04, 905/05,
28971/04, 23881/05 & 23923/05.
For Petitioners in
W.P.Nos.7091/04 & 18073/05 Mr.S.Sivanandam
For Petitioner in
W.P.No.40118/06 Mr.D.Venkatesh for
Mr.V.P.Raman
For Petitioners in W.P.Nos. Mr. R.Venkatraman, SC
29963/02, 42749/02, 9244/03, assisted by
Mr.T.Ramesh Kutty,
13407/03, 13450/03, 16659/03,
28708/03, 29085/03, 29913/03 Mr.K.Venkatasubramaniam
30886/03, 2014/04, 20305/04, for M/s.R.V.Chitra Associates
20306/04, 30636/04, 23333/04,
& 23988/04,
For Petitioners in Mr.M.N.Rao, SC for
15830/02, 15833/02, 15862/02, M/s.R.Hemalatha
15896/02, 15898/02, 15902/02,
15908/02, 16430/02, 16433/02,
16434/02, 16959 to 16962/02,
16469/02 to 16472/02, 18225/02,
19284/02, 20332/02, 20790/02,
20791/02, 31341/02, 37078/02,
37480/02, 38855/02, 37297/02,
37298/02, 38270/02, 39276 to
39279/02, 39428 to 39431/02,
18875/02, 19907/02, 19920/02,
19931/02, 19932/02, 35891/02,
41712/02, 41784/02, 44412/02,
44436/02, 44470/02, 565/02,
8631/03, 7623/03, 9571/03,
9627/03, 11326/03, 22039/03,
22040/03, 22041/03, 35971/03,
35972/03, 35973/03, 35994/03,
36078/03, 36115/03, 36153/03,
36493/03, 36758/03, 38653/03,
38654/03, 675/04, 1175/04,
1204/04, 1713/04, 2693/04,
2839/04, 2960/04, 3091/04,
37208/03, 37752/03, 37768/03,
38093/03, 15461/04, 15634/04,
15707/04, 15711/04, 15912/05,
7340/04, 7341/04, 15110/04,
21162/04, 21192/04, 21193/04,
21196/04, 27017/04, 3929/05,
to 3931/05, 20764/05, 18864/05,
18873/05 & 18874/05, 20765/05,
26147 to 26149/05, 26949/05,
30564/05, 32662/05, 1144/05,
1458/05, 1495/05, 2153/04 ,
2154/04, 3824/04, 4679/04,
4730/04, 5296/04 to 5298/04,
5604 & 5605/04, 7453/04,
8719/04, 11223/04, 11224/04,
11239/04, 13279/04, 13630/04,
13631/04, 27575/04, 27733/04,
27993/04 & 27994/04, 19095/04,
22437/04, 22791/04, 22793/04,
24178/04, 25291/04, 37668/04,
37669/04, 1317/04, 1513/04,
2336/04, 23099/05, 239/05,
14316/04, 14420/04, 19561/04,
22638/05, 5675/05, 10437/05,
9717/05, 9582/05, 10595/05,
9611/05, 9767/05, 10804/05,
10171/05, 10413 & 10414/05,
19677/05, 19678/05, 12938/05,
19680/05, 33105/04, 33106/04,
35479/04, 37139 to 37141/04,
10075/05, 20790/05, 39301/05,
39647 & 39648/05, 39841 & 39842/
2005, 8075/04, 489/06, 1030/06,
1031/06, 1351/06, 1642 to 1644/
2006, 4186/06, 4655/06, 22359 to
22360/04, 15960/04, 15963/04,
2150 & 2151/05, 36484/04,
3385/06, 42549/06 & 42963/06.
For Respondents Mr.R.Viduthalai, Advocate General
Assisted by
Mr.Haja Naziurudeen,
Spl.Govt.Pleader (Taxes)
O R D E R
THE HON’BLE CHIEF JUSTICE
Constitutional validity of the Tamil Nadu Tax on Entry
of Goods into Local Areas Act, 2001(“Act” for short), and
various notifications issued by the State Government in
exercise of the powers conferred by Section 15 of the Act is
questioned in these writ petitions and connected writ
appeals.
2. Tamil Nadu State enacted the Act to provide for the
levy of tax on entry of goods into local areas for
consumption, use or sale therein, being Tamil Nadu Act 20 of
2001. Section – 3 empowers the State Government to levy and
collect tax on entry of scheduled goods into any local area
for consumption, use or sale therein at such rate not
exceeding 30% ad valerom, as may be specified by the State
Government. Goods liable for levy of tax under the Act on
entry in the specified local areas at the specified rates
are those set out in the schedule annexed to the Act.
Section 15 of the Act contains power of the State Government
to amend the schedule and armed with that power the State
Government issued various notifications inserting several
goods/classes of goods into the schedule annexed to the Act.
The Act was brought into force on 01.12.2001.
3. Numerous petitions have been filed under Article
226 of the Constitution contending that the Act and the
notifications issued thereunder are unconstitutional on
diverse grounds. The main ground of attack is that the tax
sought to be levied under the Act is neither regulatory in
nature nor does it satisfy the tests laid down for a
compensatory tax. The tax being discriminatory in nature and
being levied on the entry of goods into a local area is a
direct and immediate impediment to the freedom of trade
guaranteed under Article 301 of the Constitution. No
Presidential assent has been obtained under Article 304(b)
of the Constitution for the levy of the entry tax under the
Act. The demand and collection of entry tax under the
impugned Act is therefore illegal, unauthorised and
violative of Articles 301 and 304 of the Constitution.
4. It is necessary at this stage to notice the broad
features of the Act. The long title and the preamble of the
Act demonstrates the purpose for which the Act was enacted,
it being to provide for the levy of tax on the entry of
scheduled goods into local areas for consumption, use or
sale thereunder. Section 3 of the Act, which is the
charging section, reads as under: –
“3. Levy and Collection of tax –
(1) Subject to the provisions of this Act,
there shall be levied and collected a tax on the
entry of any scheduled goods into any local area
for consumption, use or sale therein. The rate of
tax of shall be at such rate not exceeding thirty
percent on the value of the scheduled goods as
may be fixed by the Government, by notification
and different rates may be fixed for different
scheduled goods.(2) The tax shall be payable by an importer in
accordance with the provisions of the Act.”
5. The expression “entry of goods into local
area” has been defined under the Act vide Section 2(c)
and it reads as follows:
“Section – 2(c): Entry of goods into a local
area – with all its grammatical variations and
cognate expressions, means entry of scheduled
goods into a local area from any place outside
the State for consumption, use or sale therein;”
6. It can be seen from a plain reading of
Section 2(c) and Section 3 that levy of entry tax
under the Act is only on goods which are imported from
any place outside the State of Tamil Nadu for
consumption, use or sale within the Sate. The term
local area is defined in Section 2(h) and it reads as
follows: –
“Section – 2(h) Local Area means the area
within the limits of –(i) the City of Chennai as defined in the
Chennai City Municipal Corporation Act, 1919
(Tamil Nadu Act No.IV of 1919), or(ii) the City of Madurai as defined in the
Madurai City Municipal Corporation Act, 1971
(Tamil Nadu Act No.15 of 1971), or(iii) the City of Coimbatore as defined in
the Coimbatore City Municipal Corporation Act,
1981 (Tamil Nadu Act No.25 of 1981), or(iv) the City of Tiruchirappalli as defined
in the Tiruchirappali City Municipal Corporation
Act, 1994 (Tamil Nadu Act No.27 of 1994), or(v) the City of Tirunelveli as defined in
the Tirunelveli City Municipal Corporation Act,
1974 (Tamil Nadu Act No.28 of 1974), or(vi) the City of Salem as defined in the
Salem City Municipal Corporation Act, 1994 (Tamil
Nadu Act No.29 of 1994), or(vii) any other Municipal Corporation that
may be constituted under any law for the time
being in force, or(viii) a Municipality under the Tamil Nadu
District Municipalities Act, 1920 (Tamil Nadu Act
No.V of 1920), or(ix) a Panchayat under the Tamil Nadu Panchayats
Act, 1994 (Tamil Nadu Act No.21 of 1994)”.7. Further, Section 2(c) which defines ‘entry of
goods into a local area’ has to be read with the
definion of ‘importer’ in Section 2(g) because under
Section 3(2) the tax is payable only by the ‘importer’
as defined by Section 2(g), which reads as follows: –
“Section 2(g): importer means a person who
brings or causes to be brought any scheduled
goods whether on his own account or on account of
a principal or any other person, into a local
area, from any place outside the State for
consumption use or sale therein or who owns the
scheduled goods at the time of entry into the
local area”.
8. Section 4 provides for reduction in tax
liability in certain cases and reads as follows:-
“Section – 4 Reduction in tax liability –
(1) Where an importer of any scheduled goods
liable to pay tax under this Act, being a dealer
in scheduled goods becomes liable to pay tax
under the General Sales Tax Act and additional
sales tax under the Tamil Nadu Additional Sales
Tax Act, 1970 (Tamil Nadu Act No.14 of 1970), by
virtue of the sale of such scheduled goods, then
his liability under those Acts shall be reduced
to the extent of tax paid under this Act.(2) Where an importer who, not being a
dealer in scheduled goods, had purchased the
scheduled goods for his own use or consumption in
any Union Territory, or any other State, then his
liability under this Act, shall, subject to such
conditions as may be prescribed be reduced to the
extent of the amount of tax paid, if any, under
the law relating to General Sales Tax as may be
in force in that Union Territory or State.”9. Chapter III of the Act provides for offences and
penalties and cognizance of offences, Chapter IV deals with
appeals and revisions and Chapter V contains provisions for
returns, assessments, payments, recoveries and refunds of
tax and reviews.
10. Learned counsel appearing on behalf of the
petitioners submitted that the right of the State to impose
entry tax has to be decided in the light of the decision of
the Constitution Bench of the Supreme Court in Jindal
Stainless Ltd. vs. State of Harayana, 2006 (7) SCC 241. It
was submitted that in Jindal’s case, it has been
specifically held that the burden is on the State placing
material before the Court to prove that the payment of
compensatory tax is reimbursement/re-compensate for the
quantifiable/measurable services provided or to be provided
to the payers. It was submitted that the essence of
compensatory tax is that the services rendered or facilities
provided should be more or less commensurate with the tax
levied and tax should not be patently more than what was
required to provide trading facilities. It was submitted
that the tax imposed for augmenting general revenue of the
State is not compensatory; that any tax law, which does not
or which has the effect of disrupting the trade movement in
inter-State trade and commerce between States is contrary to
the concept of freedom of trade embodied in Article 301 of
the Constitution. According to learned counsel, mere
declaration in law that the levy is compensatory in nature
is not enough. Whether the tax is compensatory or not cannot
depend upon the preamble of the statute imposing it, and the
burden would lie heavily on the State administration to
prove that the tax proposed to be levied and collected under
the impugned enactment is for the use of trade facilities
and only then that such levy would come within the purview
of compensatory tax as laid down in the judgment of the
Supreme Court in Jindal’s case. It was submitted that Entry
52 List II indicates that the levy contemplated therein is
on the entry of goods into the local area for consumption,
use or sell therein. Therefore, if levy of entry tax is
claimed to be compensatory in nature such levy would have to
be, in the first instance, confined to a local area, and
secondly, the trade facilities sought to be provided also
should be confined to such local area. Further, the expenses
for such facilities and the levy by which such expenses are
to be met must bear reasonable and rationale relationship.
It was urged that entry tax levied under the impugned Act
lacks basic ingredients for a valid compensatory tax as
neither under the impugned Act nor in connection with it,
any specific facility, convenience or services is provided
to the assessees who are required to pay impugned tax nor is
there any co-relationship between the quantum of tax
recovered from the assessees and the value of
convenience/facility or services provided. It was submitted
that the Act has not received the assent of the President as
required under Article 255 of the Constitution nor the Bill
was moved on the floor of the Assembly with the previous
sanction of the President as required under the proviso to
Section 304(b) of the Constitution, and thus, the Act is not
saved by Article 304(b) of the Constitution. Learned counsel
further submitted that there is an element of discrimination
between the goods entering the local areas from outside the
State and goods entering the local areas from within the
State i.e., from one local area to another local area. The
latter class of goods is not subjected to levy though all
the facilities, if at all provided, are there in course of
inter-State movement and entry of goods in local areas.
Learned counsel, therefore, submitted that this
discrimination per se militates against the impugned levy
being termed as compensatory. The levy thus violates the non-
discrimination clause in Article 304(a) of the Constitution.
11. In reply, on behalf of the State, it was submitted
by the learned Advocate General that Tamil Nadu Act 20 of
2001, does not suffer from want of legislative competence.
He submitted that the State legislature has the competence
under Entry 52 List II to enact the impugned law and the
State legislature is competent to levy such tax because the
incidence of tax is on the entry of goods into the local
area for consumption, use or sale therein. He submitted that
the entry tax is compensatory in character, and therefore,
the impugned levy, which is compensatory in nature, as can
be seen from the preamble of the Act, does not attract
Articles 301 and 304 of the Constitution. He urged that the
preamble of the Act clearly shows that the tax levied and
collected shall be utilized for facilitating free flow of
trade and commerce and it is sufficiently demonstrated from
the statistical data furnished by the State in relation to
the expenditure involved for the maintenance of roads,
construction of bridges, etc. and thus, the test laid down
by the Constitution Bench in Jindal’s case stands fully
satisfied. He submitted that if the statute fixes a charge
for convenience or services provided by the State and
imposes a tax upon those who avail themselves of such
services or convenience, freedom of trade and commerce would
not be impaired. He submitted that it would be permissible
to consider in the context of entry tax that the whole of
State is divided into local areas, and therefore, it is
necessary to consider various facilities provided by the
State in all local areas, and it is enough, if the traders
are provided substantial facilities as a class. Learned
Advocate General submitted that the plea that there is
discrimination is untenable as the levy of entry tax is on
all scheduled goods that enter the State. He pointed out
that Section 4(2) of the Act provides for set-off when the
importer sells goods in the situation contemplated under
Section 3(3) of the T.N.General Sales Tax Act or
T.N.Additional Sales Tax Act. According to him, the issue of
discrimination cannot be worked out by merely referring to
an isolated taxing statute like the present one, but the sum
total of the taxes levied by the State including under the
T.N. General Sales Tax Act and the Additional Sales Tax Act
will have to be taken into account. He, therefore, submitted
that there is no violation of Article 304(a) of the
Constitution.
12. In view of the rival contentions raised at the Bar,
two questions arise for our consideration, namely,
a)Whether the levy of entry tax under Tamil Nadu Act
20 of 2001 can be justified as a compensatory tax?
b)Whether the impugned levy of entry tax is violative
of Article 304(a) of the Constitution?
Re. Question(a): –
13.Articles 301, 302, 303 & 304 are relevant for the
purpose of deciding the controversy:
“301. Freedom of trade, commerce and
intercourse – Subject to the other provisions of
this Part, trade, commerce and intercourse
throughout the territory of India shall be free.302. Power of Parliament to impose
restrictions on trade, commerce and intercourse –
Parliament may by law impose such restrictions on
the freedom of trade, commerce or intercourse
between one State and another or within any part
of the territory of India as may be required in
the public interest.303. Restrictions on the legislative powers
of the Union and of the States with regard to
trade and commerce – (1) Notwithstanding anything
in Article 302, neither Parliament nor the
legislature of a State shall have power to make
any law giving, or authorising the giving of, any
preference to one State over another, or making,
or authorising the making of, any discrimination
between one State and another, by virtue of any
entry relating to trade and commerce in any of
the Lists in the Seventh Schedule.(2) Nothing in clause (1) shall prevent
Parliament from making any law giving, or
authorising the giving of, any preference or
making, or authorising the making of, any
discrimination if it is declared by such law that
it is necessary to do so for the purpose of
dealing with a situation arising from scarcity of
goods in any part of the territory of India.304. Restrictions on trade, commerce and
intercourse among States – 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; and(b) impose such reasonable restrictions on
the freedom of trade, commerce or intercourse
with or within that State as may be required in
the public interest:Provided that no Bill or amendment for the
purposes of clause (b) shall be introduced or
moved in the legislature of a State without the
previous sanction of the President.14. In G.K.Krishnan Vs. State of Tamil Nadu, (1975) 1
SCC 375 K.K.Mathew, J. succintly summarised the scope of
Articles 301 to 304 and stated that Article 301 imposes a
general limitation on all legislative power in order to
secure that trade, commerce and intercourse throughout the
territory of India shall be free. Article 302 gave power to
Parliament to impose general restrictions upon that freedom.
But a restriction is put on this relaxation by Article
303(1) which prohibits Parliament from giving preference to
one State over another or discriminating between one State
and another by virtue of the entries relating to trade and
commerce in Lists I and III of Seventh Schedule and a
similar restriction is placed on the States, though the
reference to the States is inappropriate. Each of the
clauses of Article 304 operates as a proviso to Articles 301
and 303. Article 304(a) places goods imported from sister-
States on a par with similar goods manufactured or produced
inside the State in regard to State taxation within the
allocated field. Article 304(b) is the State analogue to
Article 302, for it makes the State’s power contained in
Article 304(b) expressly free from the prohibition contained
in Article 303(1) by reason of the opening words of Article
304. Whereas in Article 302 the restrictions are not subject
to such requirement of reasonableness, the restrictions
under Article 304(b) are so subject.
15. In Atiabari Tea Co. Vs. State of Assam, AIR 1961
SC 232 the constitutionality of Assam Taxation (On Goods
Carried by Roads and Inland Waterways) Act, 1954 enacted by
the Legislature of Assam providing for levy of tax on
certain goods carried by road or inland waterways in the
State of Assam, was questioned by a number of tea companies
who sold most of their products outside the State of Assam
after transporting them by road or waterways to West Bengal
and other States. The majority opinion (Gajendragadkar,
Wanchoo and Das Gupta, JJ.) stated their conclusion in the
following words:
52)”… Our conclusion, therefore, is that when
Article 301 provides that trade shall be free
throughout the territory of India it means that
the flow of trade shall run smooth and unhampered
by any restriction either at the boundaries of the
States or at any other points inside the States
themselves. It is the free movement or the
transport of goods from one part of the country to
the other that is intended to be saved, and if any
Act imposes any direct restrictions on the very
movement of such goods it attracts the provisions
of Article 301, and its validity can be sustained
only if it satisfies the requirements of Article
302 or Article 304 of Part XIII. At this stage we
think it is necessary to repeat that when it is
said that the freedom of the movement of trade
cannot be subject to any restrictions in the form
of taxes imposed on the carriage of goods or their
movement all that is meant is that the said
restrictions can be imposed by the State
Legislatures only after satisfying the
requirements of Article 304(b). It is not as if no
restrictions at all can be imposed on the free
movement of trade.” (AIR p.254, para.52)It was also held:-
“…. Thus considered we think it would be
reasonable and proper to hold that restrictions,
freedom from which is guaranteed by Article 301,
would be such restrictions as directly and
immediately restrict or impede the free flow or
movement of trade. Taxes may and do amount to
restrictions; but it is only such taxes as
directly and immediately restrict trade that would
fall within the purview of Article 301. … …… We are, therefore, satisfied that in
determining the limits of the width and amplitude
of the freedom guaranteed by Article 301 a
rational and workable test to apply would be: Does
the impugned restriction operate directly or
immediately on trade or its movement?” (AIR p.254
para.51)16. In Automobile Transport (Rajasthan) Ltd. Vs. State
of Rajasthan, AIR 1962 SC 1406 validity of Section 4(1) of
the Rajasthan Motor Vehicles Taxation Act, 1951 was
challenged. The section levied a tax on all motor vehicles
used in any public place or kept for use at the rates
specified in the Schedules. Violation of the provision
invited penalties provided under Section 11. Certain
operators challenged the Act as violative of Articles 301
and 304(b). Since serious doubts were expressed with
respect to the propositions enunciated by the majority and
by Shah, J. in Atiabari Tea Co. (supra) the matters were
referred to a larger Constitution Bench of seven Judges. By
a majority 4:3 (S.K.Das, Kapur and Sarkaria, JJ. Joined by
Subba Rao, J.), the Supreme Court upheld the
constitutionality of the Act on the ground that the taxes
levied by it are compensatory in nature and, therefore,
outside the purview of Article 301. Once outside the
purview of Article 301, it was held, Article 304 was also
not attracted. The Court observed in paragraph – 19 that:
“The taxes are compensatory taxes which
instead of hindering trade, commerce and
intercourse facilitate them by providing roads
and maintaining the roads…….” (AIR page 1425)Vide para. 21 of the Report, it was observed
that:“If a statue fixes a charge for a convenience or
service provided by the State or an agency of the
State, and imposes it upon those who choose to
avail themselves of the service or convenience,
the freedom of trade and commerce may well be
considered unimpaired.” (AIR page.1425)Thus, the concept of “compensatory tax” was propounded.
Therefore, taxes which would otherwise interfere with the
unfettered freedom under Article 301 will be protected from
the vice of unconstitutionality if they are compensatory.
17. In Automobile Transport it was said, vide (AIR
page.1425, para 19), that
“a working test for deciding whether a tax
is compensatory or not is to enquire whether the
trade is having the use of certain facilities for
the better conduct of its business and paying not
patently much more than what is required for
providing the facilities.”18. In Jindal Stripe Ltd. (1) Vs. State of Haryana,
(2003) 8 SCC 60 a two-Judge Bench referred the matters to a
larger Bench as the Bench hearing the matters doubted the
correctness of the views expressed inBhagatram Rajeevkumar
Vs. CST, 1995 Supp. (1) SCC 73 which was relied on in a
subsequent decision in State of Bihar Vs. Bihar Chamber of
Commerce, (1996) 9 SCC 136. The matters were dealt with by
a Constitution Bench to decide with certitude the parameters
of the judicially evolved concept of “compensatory tax” vis-
a-vis Article 301 of the Constitution of India.
19. The Constitution Bench in Jindal Stainless Steel
Ltd. Vs. State of Haryana (supra) concluded as follows: (SCC
p.270, paras 52 & 53)
“52. In our opinion, the doubt
expressed by the referring Bench about the
correctness of the decision in Bhagatram
case followed by the judgment in Bihar
chamber of Commerce was well founded.53. We reiterate that the doctrine of
“direct and immediate effect” of the
impugned law on trade and commerce under
Article 301 as propounded in Atiabari Tea
Co. Ltd. Vs. State of Assam and the working
test enunciated in Automobile Transport
(Rajasthan) Ltd. Vs. State of Rajasthan for
deciding whether a tax is compensatory or
not vide para 19 of the report (AIR), will
continue to apply and the test of “some
connection” indicated in para 8 (of SCC) of
the judgment in Bhagatram Rajeevkumar Vs.
CST and followed in State of Bihar Vs. Bihar
Chamber of Commerce is, in our opinion, not
good law. Accordingly, the constitutional
validity of various local enactments which
are the subject matters of pending appeals,
special leave petitions and writ petitions
will now be listed for being disposed of in
the light of this judgment.”20. It is thus, seen that the Constitution Bench
decision in Jindal’s case has re-affirmed the working test
laid down in Automobile Transport that for any tax to be
compensatory, it is necessary to examine whether the trades
people are having the use of certain facilities for the
better conduct of business and paying not patently much
more than what is required for providing the facilities.
21. At this juncture, it is necessary to take note of
what has been stated about the scope of Articles 301, 302 &
304 vis–vis compensatory tax by the Constitution Bench in
Jindal’s case which read as follows: (SCC pp.268 & 269)
“45. To sum up, the basis of
every levy is the controlling factor.In the case of “a tax”, the levy is a
part of common burden based on the
principle of ability or capacity to
pay. In the case of “a fee”, the basis
is the special benefit to the payer
(individual as such) based on the
principle of equivalence. When the
tax is imposed as a part of regulation
or as a part of regulatory measure,
its basis shifts from the concept of
“burden” to the concept of
measurable/quantifiable benefit and
then it becomes “a compensatory tax”and its payment is then not for revenue but as reimbursement/recompense to theservice/facility provider. It is then
a tax on recompense. Compensatory tax
is by nature hybrid but it is more
closer to fees than to tax as both
fees and compensatory taxes are based
on the principle of equivalence and on
the basis of reimbursement/recompense.
If the impugned law chooses an
activity like trade and commerce as
the criterion of its operation and if
the effect of the operation of the
enactment is to impede trade and
commerce then Article 301 is violated.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 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 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 freedom of trade it is
necessary to enquire whether the State
has provided 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. Vs. State of
Assam].47. As stated above, taxing laws
are not excluded from the operation of
Article 301, which means that tax laws
can and do amount to restrictions on
the freedom guaranteed to trade under
Part XIII of the Constitution. This
principle is well settled in Atiabari
Tea Co. It is equally important to
note that in Atiabari Tea Co. the
Supreme Court propounded the doctrine
of “direct and immediate effect”.Therefore, whenever a law is
challenged on the ground of violation
of Article 301, the Court has not only
to examine the pith and substance of
the levy but in addition thereto, the
Court has to see the effect and the
operation of the impugned law on inter-
State trade and commerce as well as
intra-State trade and commerce.48. When any legislation, whether
it would be a taxation law or a non-taxation law, is challenged before the
Court as violating Article 301, the
first question to be asked is: what is
the scope of the operation of the law?Whether it has chosen an activity like
movement of trade, commerce and
intercourse throughout India, as the
criterion of its operation? If yes,
the next question is: what is the
effect of operation of the law on the
freedom guaranteed under Article 301?
If the effect is to facilitate free
flow of trade and commerce then it is
regulation and if it is to impede or
burden the activity, then the law is a
restraint. After finding the law to be
a restraint/restriction one has to see
whether the impugned law is enacted by
Parliament or the State Legislature.Clause (b) of Article 304 confers a
power upon the State Legislature
similar to that conferred upon
Parliament by Article 302 subject to
the following differences:(a) While the power of Parliament
under Article 302 is subject to the
prohibition of preference and
discrimination decreed by Article
303(1) unless Parliament makes the
declaration under Article 303(2), the
State power contained in Article
304(b) is made expressly free from the
prohibition contained in Article
303(1) because the opening words of
Article 304 contain a non obstante
clause both to Article 301 and Article303.
(b) While Parliament’s power to
impose restriction under Article 302
is not subject to the requirement of
reasonableness, the power of the State
to impose restrictions under Article
304 is subject to the condition that
they are reasonable.(c) An additional requisite for
the exercise of the power under
Article 304(b) by the State
Legislature is that previous
Presidential sanction is required for
such legislation.”22. In the light of the principles laid down in
Jindal’s case we shall now proceed to examine whether the
tax levied under the impugned Act is compensatory or not?
The preamble of the Act undoubtedly states that “Act is
necessary to augment the revenue of the State to compensate
the expenditure to provide trading facilities including
laying and maintenance of roads and provision of markets
and welfare measures”. But merely calling a particular tax
compensatory does not have the effect or consequence of
making the levy a compensatory one. A levy can in law be
considered to be of a compensatory nature only if the levy
is charged for the use of certain trading facilities, and
the charge that is so made is not disproportionate to the
value of the use of such trading facilities. The mere
declaration in the preamble or statement of objects and
reasons of an enactment that it is compensatory is of no
consequence at all. As observed in Automobile Transport’s
case (supra) ” Whether the tax is compensatory or not
cannot be made to depend on the preamble of the statute
imposing it… It is obvious that if the preamble decided
the matter, then the mercantile community would be helpless
and it would be the easiest thing for the legislature to
defeat the freedom assured by Article 301 by stating in the
preamble that it is meant to provide facilities to the
tradesmen. It seems to us that a working test for deciding
whether the tax is compensatory or not is to enquire
whether the trades people are having the use of certain
facilities for the better conduct of their business and
paying not patently much more than what is required for
providing the facilities.” In Jindal Stripe Limited v.
State of Harayana (supra) , the Supreme Court observed in
paragraph-16 at pp.65 & 66 thereof that the following
propositions are deducible from the cases noticed therein:
"..... ...... ...... ....... ....... ....... ...... ....... ........4. Tax imposed for augmenting general revenue of
the State such as sales-tax is not compensatory
……..”23. In the counter filed by the State, the test of
some connection or the existence of an even indirect link
as propounded by the decisions in Bhagatram Rajeevkumar Vs.
CST, State of Bihar Vs. Bihar Chamber of Commerce (supra)
was pressed into service. Both the decisions have been
overruled and hence, the reliance placed by the State on
the aforesaid decisions is rather misplaced. In the wake of
decision of the Constitution Bench in Jindal’s case the
State has filed an additional counter whereby the State has
sought to project certain figures of expenditure incurred
from the year 2002 – 03 to 2005 – 06 in the matter of
laying roads, construction of bridges, etc., which
according to the State is said to be a quantifiable data to
satisfy the parameters laid down in Jindal’s case. The
following are those two charts: –
EXPENDITURE INCURRED BY THE STATE
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Year Entry Tax Expenditure Expenditure Total
collected on road on Construction on goods maintenance of bridges
(Rupees in Crores)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
2002-03 228.77 189.57 107.84 297.41
2003-04 249.02 322.02 880.89 1202.91
2004-05 288.56 442.65 488.41 931.06
2005-06 360.23 478.13 1388.30 1866.43
Total 1126.58 1432.44 2865.44 4297.81
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~EXPENDITURE INCURRED BY THE HIGHWAYS DEPARTMENT
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Year Roads Expenditure No. of Expenditure Total
(Length in (Rs. in Bridges (Rs. in Expenditure
Km.) Lakhs) Lakhs)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
2002-03 1541.41 33767.81 185 9392.48 43160.29
2003-04 3425.66 48173.29 164 10398.38 58571.67
2004-05 3550.63 95343.17 177 13948.72 109291.89
2005-06 13577.65 161266.74 227 11589.16 172855.90
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~24. It is, further, stated in the counter affidavit: –
” It is most respectfully submitted
that as per the preamble to the
impugned enactment the quantifiable
data on the basis of which the
compensatory tax is sought to be levied
has been facially and patently
indicated in the manner. That is
necessary to augment the revenue of the
State to compensate the expenditure to
provide trading facilities including
layingand maintenance of roads and
provision of markets and welfare
measures and further that for the
said purposes it is considered
necessary to levy and collect tax on
the goods entering into the local areas
of the State for consumption, use or
sale therein, the compensatory nature
of the levy stands demonstrated and
made patent from the statistical data
furnished above in relating to the
expenditure involved for the purposes
and objects mentioned in the impugned
enactment corresponding to the actual
amount collected by way of tax.Therefore, it is most respectfully
submitted that the principles laid down
by the Constitutional Bench in the case
of Jindal Stainless Steel Ltd., v.
State of Harayana reported in 2006 (7)
SCC 241 stands satisfied and the burden
of the State to establish the
reimbursement/recompense made by way of
quantifiable benefit to the trading
public from and out of the tax proceeds
also stands discharged. Inasmuch as the
impugned levy being a compensatory tax,
there is no violation of Article 301 as
such and consequently the requirement
of presidential sanction contemplated
under Article 304(b) does not arise.”25. We are afraid the materials produced by the State
are hardly relevant to establish that the levy is
compensatory. In the first place, the above data is rather
ambiguous, as it does not provide details or even examples
of the specific areas where the alleged roads have been laid
and does not even name the few bridges that have been
constructed with the amount collected as entry tax. In
Jindal’s case, the Court has categorically ruled that for a
law to be compensatory, there has to be a rational nexus
between the levy and the services provided. The decision
proceeds to make a clear-cut distinction between the general
taxing power of the State and the levy of compensatory tax.
The essence of compensatory tax is that the services
rendered or facilities provided should be more or less
commensurate with the tax levied. Services provided will
have a direct co-relation with the trade. The main basis of
compensatory tax is the quantifiable and measurable benefit
represented by the cost incurred in procuring the
facilities/services. The cost in turn becomes the basis of
reimbursement/recompense for provider of
services/facilities. As held in Jindal’s case, the
compensatory tax is a charge for offering trade facilities
and they are based on the principles of equivalence.
Applying the above test, it cannot be said that maintaining
of roads, providing bridges etc., is compensatory in nature
so as to constitute special advantage to trade, commerce and
intercourse. Even otherwise, a welfare State is bestowed
with the responsibilities of providing good roads and
bridges for the benefit of the tax paying citizens and hence
to contend that the impugned levy is being raised only for
the said purpose is not justified. Maintenance of roads,
bridges etc., are generally met from the general funds or
revenue. Whether goods are transported into the State or
outside State or abroad, the State has got a duty to provide
facilities like roads, bridges, etc., which are being
enjoyed not only by the persons who bring the goods notified
for levy of entry tax, but also by others.
26. It is necessary to bear in mind that the roads,
bridges expenditure test was applied in Automobile
Transport’ case (supra) as the tax impugned therein was the
tax on motor vehicles which use the roads/bridges.
Therefore, there was a clear nexus between the purpose of
the levy and the purpose for which the tax was spent. As
observed in Jindal Stripe Ltd., Vs. State of Haryana (supra)
(SCC para.14, pp.64 & 65): –
“Right from 1962 upto 1995 this
working test was applied by this Court only
in relation to motor vehicle taxes for
deciding whether it was compensatory or
not. The decisions proceeded on the
principle adumbrated in Automobile
Transport, which was paraphrased by Mathew,
J. speaking for the Bench of three Judges
in G.K.Krishnan Vs. State of T.N. That the
very idea of a compensatory tax is service
more or less commensurate with the tax
levied. As the operation of motor vehicles
has direct relation the use of
roads/bridges, the statistics relating to
receipts and expenditure for construction
roads and bridge for some years was
considered in each case in order to judge
whether the tax was not patently more than
what was required provide facility, and
therefore, compensatory. [Please see
Sk.Madarsaheb Vs. State of A.P., Bolani
Ores Ltd. Vs. State of Orissa,
G.K.Krishnan Vs. State of T.N.,
International Tourist Corporation Vs. State
of Haryana, Malwa Bus Service (P) Ltd. Vs.
State of Punjab, Meenakshi Vs. State of
Karnataka, B.A.Jayaram Vs. Union of India
and State of Maharashtra Vs. Madhukar
Balkrishna Badiya.”(emphasis supplied)
27. If an entry tax levied under Entry 52 is at all to
be substantiated as a compensatory tax, then it has to be
done with reference to the nature of such tax i.e., a tax
payable by a special class of dealers in a local area who
import only the specified goods from outside the State and
the special benefits/facilities provided to such payers of
the tax within the local area concerned. As to what could
satisfy such a test in the context of an entry tax could be
gathered from Para 28 in Hansa Corporation. (AIR 1981 SC
463 at para.28 p.473) which is extracted below:
“The State did not attempt in the High
court to sustain the validity of the
impugned tax law on the submission that it
was compensatory in character. No attempt
was made to establish that the dealers in
scheduled goods in a local area would be
availing of municipal services and
municipal services can be efficiently
rendered if the municipality charged with a
duty to render services has enough and
adequate funds and that the impugned tax
was a measure for compensating the
municipalities for the loss of revenue or
for augmenting its finances. As such a
stand was not taken, it is not necessary
for us to examine whether the tax is
compensatory in character. “
(emphasis supplied)
28. As per the statement of objects appended to the
impugned legislation, the State is also bound to provide for
trading facilities and the welfare of the markets
established, but both the counters filed by the State are
silent on this aspect. The additional counter of the State
merely gives the statistics with regard to total cost of
building of roads and bridges and on the maintenance of
roads that is incurred from year to year by the State. This
expenditure merely represents the expenditure incurred by
the State from its general total taxes revenue and other
receipts including the World Bank grants and loans. The said
roads and bridges which are constructed or maintained by
incurring this expenditure cannot possibly be considered to
be a facility or convenience of services, which is provided
to a particular importer who imports the goods into a
particular local area. Further, the State has conveniently
omitted to state that apart from the levy made under the
impugned legislation, taxes for the purpose of maintenance
of roads are also being levied on the owners of motor
vehicles under Tamil Nadu Motor Vehicles Taxation Act, 1974
wherein the parameters of levy are based on the laden weight
of the motor vehicle. Different yardsticks of levy are
contemplated under the said Act such as stage carriers,
contract carriers, private vehicles, etc., which also add to
the coffers of the exchequer. The figures of revenue earned
by the levy under the Motor Vehicles Taxation Act or the
money spent out of the said levy have not been disclosed.
We, therefore, find substance in the contention of the
petitioners that the legislation has been enacted only with
an eye of raising or augmenting general revenue and not as
reimbursement or recompense as held in Jindal’s case.
29. In Indian Oil Corporation Ltd., v. State of U.P,
2004 Vol137 STC 399 (All.), the validity of U.P.Tax on Entry
of Goods Act, 2000 was challenged as violative of Articles
301 & 304 of the Constitution. The Division Bench of the
Allahabad High Court allowing the petitions has held: –
“(i) that the term `local area’
defined in Section 2(c) of the Act
includes a municipality and
municipal corporation. Hence, the
crude oil had certainly been
brought into a local area as
Mathura was a municipality. It was
wholly immaterial from where the
goods had been brought into the
local area.
(ii) that the respondents had not
established any broad correlation
between the entry tax being
realized and the expenditure on the
facilities for facilitating trade
and commerce. The petitioner had
already paid more than Rs.758
crores as entry tax. In none of the
affidavits filed by the respondents
had it been stated how much was the
amount of the total entry tax
collected under the Act and how
much was the expenditure on
facilities for facilitating trade
and commerce. The burden was on the
respondents to establish this broad
correlation but they had failed to
do so. There was nothing to show
that the amount realized as entry
tax could not be used or had not
been used for setting up schools,
housing, payment of salary to
Government employees, payment of
salaries to ministers, M.L.As.,
constructing Government buildings,
acquiring land, etc. No facility
had been provided by the
U.P.Government, directly or
indirectly, for transportation of
the crude oil. The underground
pipes for transporting the oil were
built by the petitioner and not by
the respondents.
(iii) that the fact that the State
Government provides funds to local
self-Governments to enable them to
function as institutions of self-
Government with respect to
preparation of plans for economic
development and social justice and
to implement the scheme for
economic development and social
justice as may be entrusted to them
including those in relation to the
matters listed in the Eleventh
Schedule to the Constitution of
India had no correlation with the
amounts realized as entry tax under
the Act. There was nothing in the
Act which stated that the revenue
realized by the entry tax would be
utilize d for facilitating trade
and commerce, directly or
indirectly. The amount realized as
entry tax could be used for any
purpose and not merely for
facilitating trade and commerce.”
30. It may be mentioned that a Division Bench of the
Kerala High Court in its recent decision rendered on
18.12.2006 in O.P.No.434 of 1996 (Thressiammal L.Chirayil
v. State of Kerala, rep. by the Deputy Commissioner of
Agricultural Income Tax and Sales Tax, Kottayam & Another)
has held that applying the principles of equivalence, as
set forth by the Supreme Court in Jindal’s case, it cannot
be said that maintaining of roads, providing bridges, etc.,
is compensatory in nature so as to meet the outlay incurred
for some special advantage to trade, commerce and
intercourse. Providing the above facilities and its use may
incidentally bring in net revenue to the Government, but
that circumstance is not an essential ingredient of
compensatory tax. It was held that there is absolutely no
connection or nexus with the collection of entry tax and
its utilization for the benefit of traders/manufacturers
from whom such tax is collected and consequently, the levy
of entry tax is unauthorized and violative of Article 301
of the Constitution.
31. In yet another recent decision rendered in the
aftermath of the Jindal’s case, a Division Bench of the
Jharkhand High Court in W.P (T) No.5354 of 2004 (The Tata
Iron & Steel Company Ltd., Jamshedpur v. The State of
Jharkhand and Others) by judgment and order dated
14.08.2006 held that the State of Jharkhand was not in a
position to furnish any relevant data of facilities
provided or to be provided to the assessees, and hence the
levy on entry tax under Bihar Tax on Entry of Goods into
Local Areas for Consumption, Use or Sale thereof Act, 1993
was not compensatory in nature and hit by Article 301 of
the Constitution.
32. In Eurotex Industries & Exports Lts., v. State of
Maharashtra, 2004 Vol.135 STC 25 (Bom.), a Division Bench
of the Bombay High Court has held that for an Act to be
compensatory in nature, there must be a clear nexus between
the tax collected and benefits conferred upon the persons
from whom such tax is collected. In the absence of any link
between the entry tax on imported goods, and the facilities
extended to the importers directly or indirectly, the levy
of entry tax which is discriminatory cannot be said to be
compensatory in nature. In these circumstances, subjecting
the goods imported from outside the State to entry tax
becomes unauthorized, arbitrary, discriminatory and
violative of Article 301 of the Constitution. It was held
that Entry 13 of the Schedule to the Maharashtra Tax on the
Entry of Goods into Local Areas Act, 2002 insofar as it
purports to levy entry tax on furnace oil and low sulphur
waxy residue oil is unauthorized and unconstitutional.
33. In view of the foregoing discussion, we hold
that the impugned Act does not satisfy the test laid down
for compensatory tax and as no Presidential assent has been
obtained under Article 304(b) of the Constitution the
provisions of the impugned Act are ultra vires Article 301
of the Constitution.
Re. Question (b): –
34. The validity of the Act is also challenged on the
ground that the tax sought to be levied under the Act is
patently discriminatory since entry tax is being levied on
import of specified goods from outside the State and not on
the specified goods if produced/ manufactured within the
State even though they are brought into local area of the
State for consumption, use or sale therein. According to the
petitioner the discrimination which is made between goods
imported into the State of Tamil Nadu and goods which are
indigenously produced/obtained within the State is violative
of Articles 304(a) of the Constitution.
35. Article 304(a) categorically prohibits the
legislature of a State from making any discrimination
between itself and another State, and subjecting goods
imported from other States to any tax to which similar goods
manufactured or produced in that State are not subjected. In
Shree Mahavir Oil Mills Vs. State of J & K, (1996) 11 SCC
39, the Supreme Court explained the implications of Article
304(a) in the following terms: – (SCC pp.45 & 46 paragraph
– 8)
“Article 304 contains two
clauses. Clause (a) states that “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'(emphasis supplied). The wording
of this clause is of crucial significance.
The first half of the clause would make it
appear at the first blush that it merely
states the obvious: one may indeed say that
the power to levy tax on goods imported
from other States or Union Territories
flows from Article 246 read with Lists II
and III in the Seventh Schedule and not
from this clause. That is of course so, but
then there is a meaning and a very
significant principle underlying the
clause, if one reads it in its entirety.
The idea was not really to empower the
State Legislatures to levy tax on goods
imported from other States and Union
Territories – but to declare that that
power shall not be so exercised as to
discriminate against the imported goods viz-
a-vis locally manufactured goods. The
clause, though worded in positive language
has a negative aspect. It is, in truth, a
provision prohibiting discrimination
against the imported goods. In the matter
of levy of tax – and this is important to
bear in mind – the clause tells the State
Legislatures – `tax you may the goods
imported from other States/Union
Territories but do not, in that process,
discriminate against them vis–vis goods
manufactured locally’. In short, the clause
says: levy of tax on both ought to be at
the same rate. This was and is a ringing
declaration against the States creating
what may be called `tax barriers’ – or
`fiscal barriers’ as they may be called –
at or along their boundaries in the
interest of freedom of trade, commerce and
intercourse throughout the territory of
India, guaranteed by Article 301. As we
shall presently point out, this clause does
not prevent in any manner the States from
encouraging or promoting the local
industries in such manner as they think fit
so long as they do not use the weapon of
taxation to discriminate against the
imported goods viz-a-vis the locally
manufactured goods. To repeat, the clause
bars the States from creating tax barriers
– or fiscal barriers as they can be called
– around themselves and/or insulate
themselves from the remaining territories
of India by erecting such `tariff walls’.
Part XIII is premised of other States
uniformly, there is no infringement of the
freedom guaranteed by Article 301; no State
would tax its people at a higher level
merely with a view to tax the people of
other States at that level. .. … … As
a matter of fact, it can well be said that
clause (a) of Article 304 is not really an
exception to Article 301, notwithstanding
the non obstante clause in Article 304 and
that it is but a restatement of a facet of
the very freedom guaranteed by Article 301,
viz., power of taxation by the States.”
36. In A.T.B.Mehtab Majid & Co. Vs. State of
Madras, AIR 1963 SC 928 the Supreme Court considered the
effect of Section 3 of the Madras General Sates Tax Act,
1939 read with Rule 16 whereby tanned hides and skins
imported from outside the State of Madras and sold within
the State were subjected to a higher rate of tax than the
tax imposed on hides or skins tanned and sold within the
State. Similarly, hides or skins imported from outside the
State after purchase in their raw condition and then tanned
inside the State were also subjected to higher rate of tax
than hides or skins purchased in raw condition in the State
and tanned within the State. This distinction was attacked
as violative of Articles 301 and 304(a) of the Constitution.
Following the law laid down in Atiabari Tea Co. Ltd. and
Automobile
Transport (supra) the Constitution Bench held:
“It is therefore now well
settled that taxing laws can be
restrictions on trade, commerce and
intercourse, if they are not what can be
termed to be compensatory taxes or
regulatory measures. Sales tax, of the kind
under consideration here, cannot be said to
be a measure regulating any trade or a
compensatory tax levied for the use of
trading facilities. Sales tax, which has
the effect of discriminating between goods
of one State and goods of another, may
affect the free flow of trade and it will
then offend against Article 301 and will be
valid only if it comes within the terms of
Article 304(a).
Article 304(a) enables the
legislature of a State to make laws
affecting trade, commerce or intercourse.
It enables the imposition of taxes on goods
from other States if similar goods in the
State are subjected to similar taxes, so as
not to discriminate between the goods
manufactured or produced in that State and
the goods which are imported from other
States. This means that if the effect of
the sales tax on tanned hides or skins
imported from outside is that the latter
becomes subject to a higher tax by the
application of the proviso to sub-rule of
Rule 16 of the Rules, then the tax is
discriminatory and unconstitutional and
must be struck down.”
37. In H.Anraj Vs. Govt. of T.N., (1986) 1 SCC
414 the Government of Tamil Nadu exempted the lottery
tickets issued by it totally while levying tax on lottery
tickets issued by other Governments and sold in Tamil Nadu.
The Court held that laws imposing taxes can amount to
restriction on trade, commerce and intercourse if they
hampered the free flow of trade unless they are compensatory
in nature and that the sales tax which had the effect of
discriminating between goods of one State and another may
affect free flow of trade and would be offensive to Article
301 unless saved by Article 304(a). It was held that the
direct and immediate result of the notification was to
impose an unfavourable and discriminatory tax.
38. In India Cement Vs. State of A.P., (1988) 1
SCC 743 the Government of Andhra Pradesh has issued two
notifications, one under Section 9(1) of the A.P.General
State Sales Tax Act, 1957 and the other under Section 8(5)
of the Central Sales Tax Act. Under the first notification,
sales tax on sale of cement manufactured by cement factories
situated in the State and sold to the manufacturing units
situated within the State was reduced from 13.5% to 4%.
Under the second notification, the central sales tax was
reduced to two per cent. The Government of Karnataka also
issued a similar notification reducing in similar situation
central sales tax from 15 % to 2%. These were challenged as
violative of Articles 301 and 304 and the challenge was
upheld. The first ground upheld was that the `reasonable
restrictions’ contemplated by Article 304(b) can be imposed
by a law made by the legislature of the State and not by the
orders of the Government, i.e., by executive action. The
second ground given by the Bench is that (SCC p.759, para
14) “variation of the rate of inter-State sales tax does
affect free trade and commerce and creates a local
preference which is contrary to the scheme of Part XIII of
the Constitution and hence bad.” In the course of
discussion, the Bench observed: (SCC pp.755-56, para – 12)
“There can be no dispute that
taxation is a deterrent against free flow.
As a result of favourable or unfavourable
treatment by way of taxation, the course of
flow of trade gets regulated either
adversely or favourably. If the scheme
which Part XIII guarantees has to be
preserved in national interest, it is
necessary that the provisions in the
article must be strictly complied with. One
has to recall the farsighted observations
of Gajendragadkar, J. in Atiabari Tea Co.
case and the observations then made
obviously apply to cases to the type which
is now before us.”
39. In the case of Andhra Steel Corporation Vs.
Commr. of Commercial Taxes, 1990 Suppl. SCC 617, a provision
in Section 5(4) of the Karnataka Sales Tax Act which granted
exemption to sale of finished goods manufactured out of
locally produced raw material while denying it to the sale
of finished goods manufactured out of imported raw material
was held to be unconstitutional and contrary to Article
304(a) of the Constitution. The Court distinguished its
earlier decisions in State of Madras Vs. N.K.Nataraja
Mudaliar, AIR 1969 SC 147 and Rattanlal & Co. Vs. Assessing
Authority, AIR 1970 SC 1742 and reaffirmed its decision in
A.T.B.Mahtab Majid & Co. case (supra).
40. The question was once again examined in the
case of Shree Mahavir Oil Mills Vs. State of J & K (supra).
In that case, with a view to protect local edible oil
industry, Government of J & K issued an order exempting the
goods manufactured by small-scale dealers within the State
from payment of sales-tax for a specified period. The rate
of sales-tax payable for other industry including
manufactures of adjoining States was 4%. A subsequent
notification was issued on 10.12.1993 as a result of it the
general rate of sale -tax payable on edible oil became 8%.
The manufactures of edible oil from adjoining States claimed
that the exemption granted from payment of tax to the local
industries was discriminatory. The exemption given by the
Government of J & K to the manufacturers of edible oil was
total and the period of exemption was 5 years and which was
later extended by another 5 years period. It was held that
the unconditional exemption granted to the edible oil
industry within the State for a period of 10 years and at
the same time subjecting edible oil industry from other
States to sales-tax at 8% was discriminatory and violative
of Article 304(a) of the Constitution. It was observed in
paragraph – 25 (SCC p.53) as follows:
“25. Now, what is the ratio of the
decisions of this Court so far as clause
(a) of Article 304 is concerned? In our
opinion, it is this: the States are
certainly free to exercise the power to
levy taxes on goods imported from other
States/Union Territories but this freedom,
or power, shall not be so exercised as to
bring about a discrimination between the
imported goods and the similar goods
manufactured or produced in that State. The
clause deals only with discrimination by
means of taxation; it prohibits it. The
prohibition cannot be extended beyond the
power of taxation. It means in the
immediate context that States are free to
encourage and promote the establishment and
growth of industries within their States by
all such means as they think proper but
they cannot, in that process, subject the
goods imported from other States to a
discriminatory rate of taxation, i.e., a
higher rate of sales – tax vis- a- vis
similar goods manufactured/produced within
the State and sold within that State.
Prohibition is against discriminatory
taxation by the States. It matters not how
this discrimination is brought about. A
limited exception has no doubt been carved
out in Video Electronics but, as indicated
hereinbefore, that exception cannot be
enlarged lest it eat up the main provision.
So far as the present case is concerned, it
does not fall within the limited exception
aforesaid; it falls within the ratio of
A.T.B. Mehtab Majid and the other cases
following it. It must be held that by
exempting unconditionally the edible oil
produced within the State of Jammu and
Kashmir altogether from sales tax, even if
it is for a period of ten years, while
subjecting the edible oil produced in other
States to sales tax at eight per cent, the
State of Jammu and Kashmir has brought
about discrimination by taxation prohibited
by Article 304(a) of the Constitution.”
41. In State of U.P. Vs. Laxmi Paper Mart,
(1997) 2 SCC 697 the Court held that exempting the exercise
books produced in the State and subjecting the exercise
books produced outside the State, but sold in U.P. to sales
tax at the rate of 5% is discriminatory and therefore,
offends clause (a) of Article 304 of the Constitution.
Following the decision in A.T.B.Mehtab Majid’s case (supra)
the Court held that (SCC p.699, para 3) “once the
discrimination is made out, the enquiry by court ends. The
price structure of the imported goods vis–vis the locally
manufactured goods or the economics of the importer need not
be gone into”. (emphasis supplied)
42. In Anand Commercial Agencies Vs. The
Commercial Tax Officer VI Circle, Hyderabad, (1998) 1 SCC
101 the case of the appellant was that the oil had been
extracted out of groundnuts which had borne tax under the
Karanataka Sales Tax Act. The levy of tax on the oil
imported from Karnataka into Andhra pradesh at a rate higher
than the rate at which the oil manufactured in Andhra
Pradesh is taxed is discriminatory and violative of the
appellant’s right to freedom of trade and commerce
throughout India. Accepting the challenge the Court held as
follows:-
“What has been
done by Entry 24 of the First Schedule is
to impose a lower rate of duty on groundnut
oil or refined oil obtained from groundnuts
that have been taxed under the A.P.Act.The
contention that groundnut oil manufactured
in Andhra Pradesh has not generally been
charged at a lower rate of tax has not been
substantiated by any fact or figure. It is
not the case of the State that only a small
portion of the oil manufactured by local
manufacturers is produced from groundnuts
purchased in Andhra Pradesh. Unless that
can be established, it cannot be held that
groundnut oil or refined oil within the
State is generally charged at the same rate
as the imported oil. The only justification
that has been made out for this
discrimination is that groundnut out of
which the oil is manufactured locally has
already borne tax. The appellant’s
contention, which has not been denied by
the State, is that the oil manufactured in
Karnataka which was imported into Andhra
Pradesh was manufactured out of groundnuts
which had also borne tax under the
Karnataka Sales Tax Act. Therefore, it
cannot be said that oil manufacturers in
Andhra Pradesh were in a disadvantageous
position and had to be compensated by a
lower rate of tax. The State of Andhra
Pradesh has not been able to make out any
special case for imposing a lower rate of
tax on groundnut oil produced within the
State. … .. ..
Therefore, Entry 24(a) of
Schedule I to A.P. General Sales Tax Act is
violative of Articles 301 and 304 insofar
as it imposes a higher rate of tax on
groundnut oil or refined oil which has been
obtained from groundnut that has not been
taxed under the Andhra Pradesh Act. The
groundnut oil imported by the appellant
from Karnataka for sale in Andhra Pradesh
cannot be taxed at a rate higher than the
rate prescribed in Entry 24(b).”
43. Similar is the view taken in Weston
Electroniks Vs. State of Gujarat, (1998) 2 SCC 568;
W.B.Hoisery Assn. Vs. State of Bihar, (1983) 4 SCC 134;
Lohara Steel Industries Ltd. Vs. State of A.P., (1997) 2 SCC
37.
44. In the present case, the impugned
legislation levy entry tax only on goods which are imported
into the State of Tamil Nadu from any place outside the
State, for consumption, use or sale within the State. In
other words, the goods which are produced or obtained within
the State of Tamil Nadu do not attract any entry tax at all
on their entry into a local area within the State. According
to the petitioners this has led to monopolizing the local
manufacturers who procure materials locally as against
manufacturers who import from outside the State. For
example, before the impugned enactment the manufacturer who
imported from outside the State could procure the materials
simplicitor as against C- Declarations paying 4% central
sales tax. But after the enactment the same manufacturer
apart from 4% central sales tax is required to pay entry tax
even when the material is being used in further processing
or manufacturing inside the State and further sold inside
the State itself. This clearly offends clause (a) of Article
304. As observed in G.K.Krishan Vs. State of Tamil Nadu
(supra) “a discriminatory tax imposed on outside goods is
not a tax simplicitor but is a barrier to trade and
commerce”. (AIR page.385 para.27)
45. Learned Advocate General sought to argue
that the question of discrimination cannot be worked out by
merely referring only to entry tax levied under the impugned
legislation. His submission is that the sum total of taxes
levied on the goods will have to be taken into consideration
especially keeping in view the provisions of Section 4 of
the Act which contemplate reduction in tax liability. This
very argument was rejected by a Division Bench of the
Karnataka High Court in Avinyl Polymers Pvt. Ltd. Vs. State
of Karnataka, 109 STC 27 Kar). The relevant portion of the
judgment has been extracted below: –
“The
next facet is as to how the discrimination pertaining to levy of any tax vis–vis
similar goods needs to be worked out. The contention of the petitioners is that for
working out the discrimination one is required to only see the rate of tax applied to
imported goods as compared to locally manufactured or produced goods and whether it is
the same or different and nothing more.
But the contention of the
State is that the discrimination envisaged
under Article 304(a) should be viewed by
taking at the forefront the constitutional
scheme under Articles 301 to 303 which
intends to ensure trade, commerce and
intercourse throughout the territory of
India to be free and the economic unity of
India may not be broken up by internal
barriers by creating the total tax burden
created by the taxing legislations of the
State concerned as comparatively higher on
goods imported from outside the State.
According to Mr.D’Sa, the discrimination in
question cannot be worked out by merely
referring to an isolated taxing statute
like the present one. His submission is
that if the sum total of tax levied on the
goods produced in the State by taking into
account the levy of sales tax and the entry
tax is found to be higher than the entry
tax levied on imported goods, then no
discrimination can be alleged in terms of
article 304(a).
19. In our
opinion, the argument advanced on behalf of
the State of Karnataka cannot be accepted
as valid and sustainable. This issue has
also been repeatedly attended to by the
Supreme Court by clearly pronouncing that
it is the rate of tax under a particular
taxing statute which should be taken as the
determining factor for ascertaining the
discrimination contemplated under Article
304(a). In the case of Rattan Lal and Co.
Vs. Assessing Authority, (1970) 25 STC 136
(SC) at p.147; AIR 1970 SC 1742 (para 15),
it has been declared by the Supreme Court
`so long as the rate is the same Article
304 is satisfied’. The Supreme Court
refused to adjudicate the discrimination
aspect by taking into account any other
factor.”
46. In Laxmi Paper Mart (supra), the Supreme Court
has emphatically said that once the discrimination is made
out, the enquiry by court ends. The price structure of the
imported goods vis–vis the locally manufactured goods or
the economics of the importer need not be gone into (supra).
Even otherwise, the submission of the learned Advocate
General is not factually correct. For example, there is no
local sales tax levied on cigarettes and other tobacco
products. Therefore, Section 4(2) does not have any
application to cigarette and other tobacco products and it
cannot be contended that there is no discrimination. As
regards, any other scheduled goods, which a dealer imports
by way of purchase from another State, such importer suffers
central sales tax of 4% in the exporting State and in
addition thereto suffers the impugned entry tax. Thus, over
and above the entry tax, the purchaser has suffered central
sales tax in the exporting State. Learned counsel appearing
for the petitioners filed charts showing entry tax and sales
tax structure and the effect of Section 4 of the Act on
entry of goods into local areas. It is seen from the charts
that the importer of goods from outside State is clearly put
to disadvantage as compared to a local manufacturer or
producer. It may also be noted that the set off under
Section 4 of the Act is not available for entry tax paid on
the goods used as input raw materials. We have therefore no
hesitation in holding that the levy of entry tax under the
impugned Act is violative of clause (a) of Art.304 of the
Constitution.
47. We may mention that the petitioners also
raised the issue of legislative competence of the State
Government to levy entry tax under Entry 52 of List II on
goods imported from outside the State. But in view of our
foregoing conclusion that the levy is violative of Article
301 of the Constitution, it is not necessary for us to
express our opinion on this issue.
48. In the result, we hold that the levy of
entry tax on goods imported from other States to the State
of Tamil Nadu and from abroad is not compensatory in nature,
since the State Government could not discharge its burden by
placing materials before the Court that payment of levy of
entry tax is reimbursement/recompense for the
quantifiable/measurable benefit provided or to be provided
to the tax payers. The impugned levy imposing entry tax
being discriminatory is also violative of Article 304(a) of
the Constitution. We, therefore, hold that the demand and
collection of entry tax under Tamil Nadu Tax on Entry of
Goods into Local Areas Act, 2001 is illegal, unauthorized
and violative of Article 301 of the Constitution. The writ
petitions are allowed as above and the levy and demand
notices issued would stand quashed. Consequently, writ
appeals are disposed of. Connected miscellaneous petitions
are closed.
sm/pv