- (1.) In these cases various issues of seminal importance are involved. Pursuant to the directions given by this Court in Jindal Stainless Ltd. (2) and Anr. v. State of Haryana and Ors. (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 of the cases, Entry Tax has been introduced after abolition of Octroi. A series of judgments of this Court, for example, Atiabari Tea Co. Ltd. v. State of Assam (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), Bolani 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) have been pressed into service by the parties. Stand of the appellants in the present cases essentially is that true nature of the levy of Entry Tax has to be seen and that has not been done. With reference to paragraphs 31 and 42 of Jindal's case (supra) it has been submitted by assessees-appellants that Entry Tax is really in essence not a tax in the classical sense, but a sub class of fee. Some High Courts by the impugned judgment have held that Clauses (a) and (b) of Article 304 of the Constitution of India, 1950 (in short the Constitution') are independent of each other and if law is saved under Article 304 (a) then it need not be tested with reference to Clause (b) of Article 304 for determining its validity.
(2.) It is to be noted that almost all the cases on which the parties have placed reliance did not relate to Entry Tax and related to levy in the context of tax on vehicles brought inside the local area. These are commonly known as transport cases. Those cases like Meenakshi's case (supra) were decided because of Presidential permission in terms of Article 304 was there. The applicability of Part XIII is also in issue. It is not contended and in our view rightly that compensatory tax is not levied on trade. Though some of the important factors have been addressed to by the Constitution Bench in Jindal's case (supra) certain other important constitutional issues are involved because the approach so far as the levy on transport cases indicated above are concerned is conceptually and contextually different from Entry Tax cases. In that sense, the foreign decisions, more particularly, the Australian cases decided in the background of Section 95 of the Australian Constitution may not have much relevance so far as cases relating to Entry Tax are concerned.
(3.) In Jindal's case (supra) in paras 16 and 46 it was noted as follows: "16. To sum up: the pre-1995 decisions held that an exaction to reimburse/recompense the State the cost of an existing facility made available to the traders or the cost of a specific facility planned to be provided to the traders is 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, 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 of Bihar v. Bihar Chamber of Commerce (1996 (9) SCC 136) now say that even if the purpose of 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 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. 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 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)";