Jindal Stainless Ltd. vs State of Haryana - Supreme Court Judgment

Jindal Stainless Ltd. & Anr. vs State of Haryana - Supreme Court Important Judgment 2016 - 

 

On 11th November, 2016, in the case of Jindal Stainless Ltd. & Anr. vs State of Haryana & Ors. [Civil Appeal No.3453 of 2002 Etc. Etc.], while examining the powers of the State Legislature under Entry 52 of List II of the Seventh Schedule to the Constitution to levy taxes on the “entry of goods into local areas comprising the States”, a nine Judge Bench inter alia interpreted Articles 301 to 304 comprising Part XIII of the Constitution and dealt with various issues such as whether these levies were violative of the constitutionally recognised right to free trade commerce and intercourse guaranteed under Article 301 of the Constitution; whether such levies were discriminatory and, therefore, violative of Article 304(a) of the Constitution; and whether absence of Presidential sanction in terms of Article 304(b) of the Constitution is also a ground of challenge to such levies imposed by the State legislatures.

 By majority, the Constitution Bench, answered the reference, inter alia, in the following terms:-

(i) “Taxes simpliciter are not within the contemplation of Part XIII of the Constitution” and “the word ‘Free’ used in Article 301 does not mean “free from taxation”.”

(ii) “Only such taxes as are discriminatory in nature are prohibited by Article 304(a)” and “levy of a non-discriminatory tax would not constitute an infraction of Article 301.” 

(iii) “Clauses (a) and (b) of Article 304 have to be read disjunctively” and “a levy that violates 304(a) cannot be saved even if the procedure under Article 304(b) or the proviso there under is satisfied.” 

(iv) The compensatory tax theory “has no juristic basis” and “a tax on entry of goods into a local area for use, sale or consumption therein is permissible” although similar goods are not produced within the taxing State.

(v)“Article 304(a) frowns upon discrimination (of a hostile nature in the protectionist sense) and not on mere differentiation”, and therefore, “incentives, set-offs etc. granted to a specified class of dealers for a limited period of time in a non-hostile fashion with a view to developing economically backward areas would not violate Article 304(a).”

(vi) The “States are well within their right to design their fiscal legislations to ensure that the tax burden on goods imported from other States and goods produced within the State fall equally. Such measures if taken would not contravene Article 304(a) of the Constitution”.

(vii) The questions whether the entire State can be notified as a local area and whether entry tax can be levied on goods entering the landmass of India from another country were however left open by the Bench to be determined in appropriate proceedings.

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