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2016 (10) TMI 84 - PATNA HIGH COURT

2016 (10) TMI 84 - PATNA HIGH COURT - TMI - Levy and collection of Entry tax - transaction using E-commerce portal - business of providing logistics and delivery services to various individual buyers - goods purchased meant for personal use and not for re-sale - CST - Bihar Tax on Entry of Goods into Local Areas for consumption, Use or Sale Therein Act, 1993 - Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein (Amendment) Act, 2001 - conduct of trade, commerce and .....

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tion, Use or Sale Therein Act, 1993 and the Rules made thereunder and Notifications S.O. 176 & 18 both, dated 20.01.2016, are declared as ultra vires to the Constitution and are accordingly quashed. - The impugned provisions as contained in Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1993 held to be discriminatory and violative of Article 304(a) of the Constitution of India read with Article 303 of Constitution of India. - Petition allowed - decided in favo .....

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ons have been filed challenging the levy and collection of entry tax on goods brought by the petitioners to the State of Bihar for individual consumers, who reside in the State of Bihar, and which are transacted using electronic commerce portal (E-commerce). 2. The petitioners are Private Limited Company and are engaged in the business of providing logistics and delivery services to various individual buyers, who undertake purchase transactions through technology platform of M/s Flipkart Interne .....

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site of Flipkart Internet Pvt Ltd, viz, www.flipkart.com. Business model, adopted by the petitioner for Flipkart Internet, is that the online portal, www.flipkart.com, works as an online market place, whereby goods of various sellers, who are registered in the respective States, under the VAT/ Central Sales Tax Act laws, are displayed. 4. As per the specific terms of use of the said portal, the goods, which are purchased by the purchaser- customers, are meant for personal use or consumption only .....

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#8223; taking delivery for providing logistics support and the appropriate CST is paid on such goods by the concerned seller. Package, along with invoice, is handed over to the petitioners for delivery directly to the customers at the destination addressed. 5. The State legislature of Bihar, enacted the Bihar Tax on Entry of Goods into Local Areas for consumption, Use or Sale Therein Act, 1993, (hereinafter referred to as the 1993 Act ), with a view to levy tax on entry of goods into local areas .....

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Chamber of Commerce, reported in (1996) 9 SCC 136, wherein it was held, by applying the decision, in Bhagatram vs. CST, reported in 1995 Supp (1) SCC 673, that the levy, under the 1993 Act, was compensatory in nature and, hence, did not violate Article 301 of the Constitution. 6. The said decision of the Supreme Court, in Bihar Chamber of Commerce (supra), was, later on, overruled by the decision of the Constitution Bench of the Supreme Court, in Jindal Stainless Ltd. vs. State of Haryana, repo .....

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the State for consumption, use or sale therein. 8. Amendment was also made in Section 3 by inserting second Proviso to Section 3(2), which read as under: Provided further that where an importer of scheduled goods liable to pay tax under the Act, incurs tax liability, at the rate specified under Section 13 of the Bihar Value Added Tax Act, 2005 (Act 27 of 2005), by virtue of sale of imported scheduled goods or sale of goods manufactured by consuming such imported scheduled goods, his tax liabili .....

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this amendment, the maximum rate of entry tax was revised from 5% to 20% and a number of other goods were added to the Schedule of the 1993 Act. Further, by another amending Act, namely, Bihar Tax on Entry of Goods Into Local Areas for Consumption, Use or Sale Therein (Amendment and Validation) Act, 2003, an explanation has been added. This Explanation to the definition of entry of goods , goods, coming from outside the territory of India, were also brought within the purview of the Act. Both th .....

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5.02.1993. The proviso, as inserted by the Bihar Finance Act, 2006, reads, as under: Provided also that if the sale of such scheduled goods is exempted from tax under any notification issued under sub-section (3) of Section 7 of the Bihar Finance Act, 1981, reduction of his liability under the Bihar Finance Act, 1981 as provided in this section or any notification thereunder, issued shall not be made. 12. In the same year, i.e., in 2006, pursuant to the decision of the Supreme Court, in Jindal S .....

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oration Limited vs. State of Bihar, [2007] 10 VST 140 (Patna), and this Court, upon considering the changes made to the 1993 Act by way of the aforesaid amendments, held that the parent 1993 Act, before its amendment, was not compensatory in character and was, therefore, violative of Article 301 of the Constitution. The Court, however, held that the Act was nevertheless saved by virtue of Article 304(b) of the Constitution and the decision, in Bihar Chamber of Commerce (supra), to that extent, r .....

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ndment, the levy, under the 1993 Act, acquired the nature of a compensatory tax and the 1993 Act, therefore, is a valid piece of legislation. However, on the question as to whether amendments, made in the 1993 Act, were discriminatory or not, this Court upheld the validity only on the basis that there was a provision of set-off in terms of the second Proviso to Section 3(1) of the 1993 Act. 14. Fresh amendments to the 1993 Act were made by the Bihar Finance Act, 2015, to ensure levy of entry tax .....

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or deferred payment or for commission, remuneration or other valuable consideration and it includes- (A) A local authority; (B) A Hindu undivided family; (C) A company, or any society (including a co-operative society), club, firm, association of persons or body of individuals, whether incorporated or not, which carries on such business; (D) A society (including a cooperative society), club, firm or association which buys goods from, or sells, supplies or distributes goods to its members; (E) An .....

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Bihar and buys sells, supplies or distributes goods in the State or acts on behalf of such dealer as - (a) A commission agent, broker, factor, a del-credere agent, an auctioneer or any other mercantile agent, by whatever name called; or (b) An agent for handling goods or documents of title to goods ; or (c) An agent for the collection or the payment of the sale price of goods or as a guarantor for such collection or payment; or (d) A local branch of a firm or company situated outside the State, .....

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e through any System of electronic commerce or otherwise shall be deemed to be a dealer for the purpose of this Act 15. Section 3AA has been inserted, in the 1993 Act, empowering the respondents to collect tax from importers in certain cases, which reads as under: 3AA. Collection of tax from importers in certain cases.- (1) Notwithstanding anything contained in the Act, every person or dealer engaged in the business of delivering or supplying goods to any buyer or importer within the State who a .....

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mode of recovery. (4) Any person or dealer collecting any amount under sub-section(1) shall, within the prescribed time, deposit the amount so collected into Government Treasury in the manner prescribed for deposit of tax under the Act; (5) The provisions of sub-section (3), sub- Section (4), sub-Section (50 and sub-Section (6) of Section 40 of the Bihar Value Added Tax Act, 2005 ( Act 27 of 2005) relating to collection, deposit and liability of the person or dealer collecting such tax, discharg .....

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or dealer collecting tax under the provisions of this section shall prepare within the prescribed time after the end of each month, quarter and year and deliver or cause to be delivered to the prescribed authority such returns in such form and verified in such manner and setting forth such particulars and within such time as may be prescribed. (8) Every person or dealer, under sub- section (1), shall maintain true and complete accounts, registers and documents, as may be prescribed, in respect o .....

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actions above ₹ 25,000/- has been changed making the Act applicable to transactions with value above ₹ 1,000/-. To give effect to the amendments made in the 1993 Act, changes were made, in exercise of powers under Section 9(1) of the 1993 Act, to the 1993 Rules by S.O. No. 169, dated 21.07.2015. Again, vide Notifications S.O. No. 16 and 18, dated 20.01.2016, issued, in exercise of powers under Section 3(1) of the 1993 Act, various new items were added to the existing Schedule of 1993 .....

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icles 14, 301 and 304(a) of the Constitution. 19. We have heard Dr. Ashok Saraf, learned Senior Counsel assisted by Mr. T. Gulati and Mr. S. Chetia on behalf of the petitioners, and Mr. Lalit Kishore, learned Principal Additional Advocate General, appearing on behalf of the respondents. 20. Contending that the impugned provisions of the 1993 Act, as amended by the Amendment Act of 2015, are discriminatory against goods, which are brought in by the petitioners for personal use or consumption of i .....

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transactions. It is submitted by Dr. Saraf that the impugned levy, in pith and substance, being sales tax/VAT, in the garb of levy of entry tax, violates Article 286 of the Constitution. 21. Referring to the definition of entry of goods given under Section 2(c) of the 1993 Act and the charging provisions of Section 3 of the said Act, Dr. Saraf submits that where goods are exigible to tax in terms of sales tax law in the State of Bihar, i.e., the Bihar VAT Act, 2005, entry for the purpose of lev .....

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vied on goods, which are exempted from payment of VAT in terms of the third Proviso to Section 3(2) of the 1993 Act. 22. Coupled with the above, Dr. Saraf submits that the impugned levy of entry tax, in pith and substance, is a tax on goods, which are brought into the State of Bihar on account of inter-State sale transactions on which the State of Bihar cannot levy VAT inasmuch as wherever VAT is leviable, there is set off against the VAT so payable. The State of Bihar, submits Dr. Saraf, realiz .....

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sale or purchase takes place outside the State; whereas, the impugned proviso, in pith and substance, seeks to levy tax on the sale transactions, which stand already concluded outside the State, and the movement of goods, in the State of Bihar, is only for personal use or consumption for individual consumers. 24. In support of his above submissions, Dr. Saraf, places reliance on the decision of the Gauhati High Court, in ITC Ltd vs. State of Assam, (2007) 9 VST 250. It is further submitted by D .....

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ticle 304 (a) of the Constitution of India. In so far as other goods, which are brought into the State of Bihar, and which are for further resale or for consumption in the manufacture of goods, a set off/reduction of VAT is provided against the payment of entry tax to ensure that there is only a single incidence of tax. The effect thereof, submits Dr. Saraf, is that if the CST paid goods are not sold, but are used for personal consumption, the cumulative tax burden on such goods is much higher. .....

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t of a Stock Transfer or on the basis of C-form or a direct inter-State sale, in terms of the second proviso to Section 3 (2), the payment of Entry tax under the Act will stand reduced from the VAT to be paid on the goods as under:- Bihar Dealer, doing resale of Mobile Phone, to end customers in Bihar Price of Mobile (A) CST [2%] (B) ET [5% on A+B] (C) BVAT [5% on A+B+C] (D) BVAT after reduction of ET as per proviso to Section 3 (2) (E=D-C) Cost to the Customer (A+B+C) 10000 200 510 535.50 25.50 .....

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purpose of manufacturing goods which are to be sold in the State of Bihar, in terms of the second proviso to Section 3 (2), the payment of Entry tax under the Act will stand reduced from the VAT to be paid on the manufactured goods as under:- (ii) Bihar Dealer manufacturing Mobile Phones using raw material brought in from outside Bihar Total Cost of material CST [2%] (B) ET [5% on A+B] (C) Price Mobile Phone manufactur ed in Bihar BVAT [5% on D] (E) BVAT after reduction of ET as per proviso to .....

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rs for personal use or consumption of individual consumers: Where the same mobile phone is brought in by the Petitioner for the personal use or consumption of the consumers in the State of Bihar, CST will be charged at full rate i.e. 5.5% in the State of Karnataka. Further, the set off/ reduction of Entry tax under the second proviso to Section 3 (2) is not available as there is no sale in the State of Bihar and there is a higher burden of tax as under:- Price of Mobile (A) CST [5.5%] (B) ET [5% .....

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bring goods in Bihar though Stock Transfer 10025 Scenario 2 (i): Bihar Dealer manufacturing Mobile Phones using raw material brought in from outside Bihar 10092 Scenario 2 (ii): Bihar Dealer doing resale of Mobile Phone using bring goods in Bihar though Stock Transfer 10100 Scenario 3: Tax burden on Goods brought in by the Petitioner for personal use or consumption of individual consumers 10527.50 28. Based on the above illustrations, Dr. Saraf submits that on account of non-availability of set .....

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o discriminatory against such goods. It has been further submitted that on account of levy, introduced by impugned amendment made in the 1993 Act, goods, purchased by an individual consumer, when bought from any seller outside the State of Bihar using an e-commerce portal, will be liable to suffer a higher rate of tax and thereby become costlier for the consumer as compared to the same goods, when purchased from a local dealer in the State of Bihar. 29. With regard to the above, Dr. Saraf submit .....

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ted in (2008) 2 PLJR 69. 30. It is submitted by Dr. Saraf that in Indian Oil Corporation Limited (supra), this Court held that the Act was saved from being held discriminatory against goods, which are brought in on account of an inter-State transactions only on account of the proviso to Section 3 (2), which ensured that the goods from other States are given similar tax treatment as that of locally manufactured/ sold goods. 31. However, in the present case, submits Dr. Saraf, the said second Prov .....

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his Court held the amendment to the 1993 Act as discriminatory in the case of a petitioner, when the set off was not made applicable. Similarly, in Food Corporation of India (supra), the Court struck down the notification, whereby entry tax was imposed at a rate higher than the rate of sales tax on those goods. Reliance was also placed by Dr. Saraf on the decision of the Supreme Court in State of U.P. Vs. Jaiprakash Associates Ltd, reported in (2014) 4 SCC 17, wherein the notifications, under th .....

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he Supreme Court in Jaiprakash Associates (supra), it is submitted by Dr. Saraf that granting of set off of entry tax against VAT, payable under the Bihar VAT Act, 2005, is only applicable, when the goods are imported from outside the State for the purpose of resale within the State. No such set off is available, when goods are imported from outside the State for the purpose of personal use or consumption and, as such, the grant of set off, which is in the nature of rebate or exemption, discrimi .....

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consumption, has to bear higher burden of tax. 34. It is, therefore, submitted by Dr. Saraf that when a dealer, who makes a sale of goods from outside the State to a consumer in the State of Bihar, the total burden of tax on him is much higher than a dealer, who makes a sale, within the State, to a consumer. This clearly violates Article 304 (a) of the Constitution of India; so contends Dr. Saraf. 35. It is also submitted that the impugned levy of entry tax is also discriminatory and unreasonabl .....

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consumption by the individual consumers and, therefore, the same is, according to Dr. Saraf, violative of Article 14 and 19(1)(g) of the Constitution of India. 36. Mr. Lalit Kishore, learned Principal Additional Advocate General, appearing on behalf of the respondents, submits that the 1993 Act has already been held to be compensatory and, consequently, the issue, as regards the validity of the 1993 Act, according to learned Principal Additional Advocate General, must be taken to have already b .....

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ion (supra). It is submitted that the levy of entry tax is irrespective of the fact whether the goods are brought into the State directly by the consumer/individual buyer thereof or has been imported into the State for subsequent sale and, therefore, contends Mr. Lalit Kishore, the levy cannot be treated as discriminatory on this count. 37. The learned Principal Additional Advocate General submits that the petitioners are also part of the same trade, commerce and industry for which infrastructur .....

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(a) of the Constitution of India. Permitting set off is not a condition precedent for upholding the validity of the levy of entry tax, contends learned Principal Additional Advocate General, because entry tax can be levied even if VAT/sales tax is not payable. The learned Principal Additional Advocate General, therefore, contends that the writ petition has got no merit and the same is liable to be dismissed. 38. Reacting to the submissions made on behalf of the respondents, Dr. Ashok Saraf, lear .....

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(supra) as the period involved, in the aforesaid case, was prior to the year 2006. 39. It is also submitted by Dr. saraf that the question of entry tax, on transactions undertaken through e-commerce, and, further, colourable exercise of powers to impose sales tax, under the garb of entry tax, were not in issue in Indian Oil Corporation (supra). Dr. Saraf, learned Senior Counsel, submits that it is incorrect to say that only machinery provisions have been brought in by the impugned amendments in .....

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y tax on e-commerce transactions. Dr. Saraf further submits that the goods, brought into the State of Bihar for personal use or consumption, were, otherwise, not subjected to entry tax inasmuch as there was no machinery provision to collect entry tax and by creating a specific machinery for collection of entry tax, when the goods are sold for personal use or consumption through the medium of e- commerce, the provisions seek to create a blatant discrimination against such goods and seek to put a .....

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hereby a preferential treatment has been accorded by the State of Bihar to the dealers in Bihar, which directly contravenes Article 304(a) of the Constitution. Further, it is submitted that a gross discrimination has been created by selectively creating a machinery for taxing and collecting tax only on e-commerce transactions, whereas there was no machinery to collect tax on goods brought in for personal use or consumption through normal means. 42. Having regard to the rival submissions made bef .....

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f 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 h .....

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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 1 [or the Union territories] any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to d .....

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at the territory of India shall compromise of the territories of the States, the Union territories and such other territories as may be acquired. It is in the backdrop of the fact that Article 1 conceives India as a Union of States that the constitutional scheme for the conduct of trade, commerce and intercourse, contained in Part XIII, needs to be analysed. 44. What becomes glaringly noticeable to the eyes are the two expressions used in Article 301, namely, throughout the territory of India an .....

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very little quantity of goods moved from one area to another, because goods were, ordinarily, produced for consumption by the producers themselves, such as, land- owners and their tenants. Petty artisans, normally, produced very little commodities for sale. With the industrial revolution, expansion of industries took place, which gave rise to larger production of goods and this resulted in to faster movement of goods to distant places. The trade-barriers were, therefore, required to be minimized .....

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d, be, at least, reduced as much as possible. 47. It was in an age of struggle that India's struggle for independence achieved success, for, with the end of the Second World War, countries were struggling to overcome the disastrous consequences, which the war had brought. It was an age, when the people, all over the world, were struggling for space and everyone wanted to have greater say in the governance of their respective countries. British empire had fragmented and struggle to occupy he .....

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mainly agriculture based, there were small principalities and very little quantity of goods moved from one area to another, because gods were, ordinarily, produced for consumption by the producers themselves, such as, land-owners and their tenants. Petty artisans, normally, produced very little commodities for sale. With the industrial revolution, industries grew and this resulted into faster movement of goods, which forms an integral and inseparable part of commerce. The situation in India was .....

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ted into small principalities having toll-barriers imposing toll taxes and these toll-barriers caused obstructions to the movement of goods. Such obstructions to the free flow of goods from one principality to another caused hindrance to the growth of industries and commerce in those countries. Gradually, therefore, these trade barriers were started being removed. Having witnessed the history of development of industries all over the world, and in order to give India strong economic base, the ma .....

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needs some regulations and regulatory measures, the freedom of trade, commerce and intercourse, too, could not have been left absolutely free or completely without any regulation. It is in this light that the words "Subject to the other provisions of this part", occurring in Article 301, need to be read. Some of these aspects of our Constitutional scheme succinctly surface from the decision of the Constitution Bench, in Atiabari Tea Company Limited v. State of Assam (AIR 1961 SC 232), .....

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economic unity. It was realised that in course of time different political parties believing in different economic theories or ideologies may come in power in the several constituent units of the Union, and that may conceivably give rise to local and regional pulls and pressures in economic matters. Local or regional fears or apprehensions raised by local or regional problems may persuade the State Legislature to adopt remedial measures intended solely for the protection of regional interests wi .....

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aratory character ; it is not also a mere statement of direction principle of State policy ; it embodies and enshrines a principle of paramount importance that the economic unity of the country will provide the main sustaining force for the stability and progress of the political and cultural unity of the country. In appreciating the significance of these general considerations were may profitably refer to the observations made by Cardozo, J. , "was framed under the dominion of a political .....

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ning and improving the living standard of our countrymen. 52. Pointing out that by granting freedom of trade throughout India, Article 301, aims at, primarily, removing the barriers in the movement or transportation part of the goods, the Supreme Court, in Atiabari Tea Company Limited (supra), observed as follows: 49. Let us now revert to article 301 and ascertain the width and amplitude of its scope. On a careful examination of the relevant provisions of Part XIII as a whole as well as the prin .....

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hat the goods are thus carried or transported that, in our opinion, directly affects the freedom of trade as contemplated by article 301. If the movement, transport or the carrying of goods is allowed to be impeded, obstructed or hampered by taxation without satisfying the requirements of Part XIII the freedom of trade on which so much emphasis is laid by article 301 would turn to be illusory. When art. 301 provides that trade shall be free throughout the territory of India primarily is the move .....

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osed on movement of goods solely for the reason that the goods are carried to or transported through a given State, for, if such restrictions are not avoided, the freedom of trade cannot be achieved. 54. Addressing, therefore, the question as to whether tax laws are excluded from the provisions of Part XIII and whether tax laws are immune from the freedom guaranteed under article 301, the Supreme Court, in Atiabari Tea Company Limited (supra), observed: 50. Thus the intrinsic evidence furnished .....

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ite that the problem of construing them and determining their exact width and scope becomes complex and difficult. However ; in interpreting the provisions of the Constitution we must always bear in mind that the relevant provision has to be read not in vacuo but as occurring in a single complex instrument in which one part may throw light on another . (Vide.. James v. Commonwealth of Australia (1936) A.C. 578, 613). In construing article 301 we must, therefore, have regard to the general scheme .....

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elevant to remember in this connection that the article we are construing imposes a constitutional limitation on the power of the Parliament and State Legislatures to levy taxes, and generally, but for such limitation, the power of taxation would be presumed to be for public good and would not be subject to judicial review or scrutiny. 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 .....

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, for instance, that even a legislative enactment prescribing the minimum wages to industrial employees may fall under Part XIII because in an economic sense an additional wage bill may indirectly affect trade or commerce. 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? It is in the .....

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tution Bench, in Atiabari Tea Company Limited (supra), clarified that it is not all taxes, which will hit Article 301, but only such taxes, which, directly and immediately, restrict trade, for, it is only direct restrictions causing impediments to the movement of goods that Article 301 seeks to avoid and nullify. It is in this light that the following further observations, made in Atiabari Tea Company Limited (supra), need to be read. 51. We do not think it necessary or expedient to consider wha .....

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he 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 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 .....

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ces from the above discussion, is that Article 301 guarantees freedom of trade, commerce and intercourse throughout the territory of India. It is, however, not freedom from all laws that Article 301 aims at protecting; rather, it guarantees freedom only from such laws, which restrict or impede the movement or transportation of goods or adversely affect the activities of trade and commerce amongst the States. 57. In effect, Article 301 casts an obligation on the legislative power of the Parliamen .....

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e and the State Legislatures from enacting laws including tax laws, which create hindrance to the freedom of trade, commerce and intercourse throughout India, Article 302 permits the Union Legislature to impose, by law, such restrictions on these freedoms as may be required in public interest. Article 303, however, clarifies that neither Parliament nor the Legislature of States shall have the power to make any law giving or authorizing the making of any discrimination between one State and anoth .....

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purpose of dealing with a situation arising from scarcity of goods in any part of the territory of India. 59. Thus, a State Legislature, apart from the limitation imposed by Article 301, has the limitation of not making laws to give preference or make discrimination between one State and another, while making laws, in exercise of its powers, relating to trade, commerce and intercourse. However, this limitation, on the State Legislature, is lifted in two cases, namely, that the State may, under A .....

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ban imposed, under Article 303(1), stands lifted even when discriminatory restrictions are imposed by the State Legislature if the legislation fulfils three conditions, which Article 304(b)embodies, namely, that such restrictions shall be reasonable, the same shall be in public interest and, above all, no Bill or amendment for the purpose of Clause (b) or for making amendment thereto shall be introduced or moved in the Legislature of any State without previous sanction of the President. To be mo .....

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completely free from regulations. 61. Regulatory measures, therefore, cannot be regarded as impediments in the freedom of trade and commerce. It is for this reason that the Constitution Bench, in Atiabari Tea Co. Ltd. (supra), makes it clear that though tax laws are not immune from Article 301, all tax laws do not infringe Article 301. 62. The question, which, naturally, arises is this: what can be these laws, which may hit Article 301 or be treated as infringement of the guarantee given by Arti .....

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It may also be noted that in Atiabari Tea Company Ltd. (supra), the three appellants before the Supreme Court were tea companies, two of whom carried on the trade of growing tea in Assam and the third one carried on its trade at Jalpaiguri. They carried their tea to Calcutta in order that it might be sold, in Calcutta, for consumption and sale outside India. Tea, produced in Jalpaiguri, had to move through a few miles of the territory of the State of Assam. Besides the tea, which was carried by .....

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that in Atiabari Tea Company Ltd. (supra), three views were expressed. The views, expressed in Atiabari Tea Company Ltd. (supra), by the learned Chief Justice BP Sinha, which the Supreme Court, in its subsequent judgment in Automobile Transport (Rajasthan) Ltd. (supra), described as the narrow view, was that taxation simpliciter was not within the ambit of Article 301 and a tax, on the movement of goods or passengers, did not necessarily connote impediment or restraint in the matter of trade and .....

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mbit of Article 301. The learned Chief Justice concluded these views in the following words: Thus, on a fair construction of the provisions of Part XIII, the following propositions emerge : (1) trade, commerce, and intercourse throughout the territory of India are not absolutely free, but are subject to certain powers of legislation by Parliament or the Legislature of a State; (2) the freedom declared by Article 301 does not mean freedom from taxation simpliciter, but does mean freedom from taxa .....

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(6) non-discriminatory taxes may be imposed by the Legislature of a State on goods imported from another State of other States, if similar taxes are imposed on goods produced of manufactured in that State (Article 304(a); and lastly (7) restrictions imposed by existing laws have been continued, except in so far as the President may by order otherwise direct (article 305). (pp. 831-832). 64. The other view, which may be called the third view as expressed by Shah, J, and described, in Automobile T .....

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sed to tariffs, licensing, marketing regulations, price-control, nationalization, economic or social planning, discriminatory tariffs, compulsory appropriation of goods, freezing or stand-still orders and similar other impediments operating directly and immediately on the freedom of commercial intercourse as well. Every sequence in the series of operations which constitutes trade or commerce is an act of trade or commerce and burdens or impediments imposed on any such step are restrictions on th .....

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by Shah, J. Hence, speaking for the majority, in Atiabari Tea Company Ltd. (supra), Gajendragadkar, J, observed as follows: It is a federal constitution which we are interpreting, and so the impact of Article 301 must be judged accordingly Besides, it is not irrelevant to remember in this connection that the Article we are construing imposes a constitutional limitation on the power of the Parliament and the State Legislatures to levy taxes, and generally ; but for such limitation, the power of .....

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Article 301. The argument that all taxes should be governed by Article 301 whether or not their impact on trade is immediate or mediate, direct or remote, adopts, in our opinion, an extreme approach which cannot be upheld. 66. In short, thus, in Atiabari Tea Company Ltd. (supra), while the narrow view was to the effect that unless a tax law is enacted for the purpose of making discrimination or giving preferential treatment, such a law would not fall within the purview of Article 301, the majori .....

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activities, shall be free. 67. In Automobile Transport (Rajasthan) Ltd. (supra), which is a decision of 7 Judges Bench, the correctness of the majority view, expressed in Atiabari Tea Company Ltd. (supra), came to be questioned. Having examined all the three views, as indicated hereinabove, the majority, in Automobile Transport (Rajasthan) Ltd. (supra), held that the widest view, expressed by Shah, J, being based on purely taxtual interpretation of Part XIII of the Constitution of India, was not .....

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b) and that no such Bill can be introduced or moved in the Legislature of the States without the previous sanction of the President. In other words, the views of Shah, J, if acceded to, would mean that even when a Bill seeks to impose restrictions in order to facilitate trading or commercial activities, such a Bill has to receive sanction of the President under Article 304(b). Such an interpretation, according to the majority, in Automobile Transport (Rajasthan) Ltd. (supra), would, if accepted, .....

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st be understood in the context of the working of an orderly society. The widest view proceeds on the footing that Article 301 imposes a general restriction on legislative power and grants a freedom of trade, commerce and intercourse in all its series of operations, from all barriers, from all restrictions, from all regulation, and the only qualification that is to be found in the Article is the opening clause, namely, subject to the other provisions of Part XIII. This in actual practice will me .....

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cessary to introduce urgently legislation stopping trade in goods which are deleterious to health, like the trade in diseased potatoes in Australia. If the State Legislature wishes to introduce such a bill, it must have the sanction of the President. Even such legislation as imposes traffic regulations would require the sanction of the President. Such an interpretation would, in our opinion, seriously affect the legislative power of the State Legislatures which power has been held to be plenary .....

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ed by our Constitution. An examination of the entries in the lists of the Seventh Schedule to the Constitution would show that there are a large number of entries in the State list (List II) and the Concurrent list (List III) under which a State Legislature has power to make laws. Under some of these entries the State Legislature may impose different kinds of taxes and duties, such as property tax, sales tax, excise duty, etc., and legislation in respect of anyone of these items may have an indi .....

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llocated to them would be meaningless. In our view the concept of freedom of trade, commerce and intercourse postulated by Article 301 must be understood in the context of an orderly society and as part of a Constitution which envisages a distribution of powers between the States and the Union, and if so understood, the concept must recognize the need and the legitimacy of some degree of regulatory control, whether by the Union or the States. this is irrespective of the restrictions imposed by t .....

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ne of the provisions of Part XIII, except Article 304(a), extended to taxing laws, it may be pointed out that the majority, in Automobile Transport (Rajasthan) Ltd. (supra), did not accept this view ; rather, accepting the majority views expressed in Atiabari Tea Company Ltd. (supra), the majority, in Automobile Transport (Rajasthan) Ltd. (supra), held thus, "It would appear from what we have stated above that this interpretation consists of two main parts: one part is that taxation simplic .....

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. Case (1961) 1 S.C.R. 809, deals, with the arguments advanced in support of the interpretation in detail and as we are substantially in agreement with the reason given in that judgment, we do not think that any useful purpose would be served by repeating them. It is enough to point out that though the power of levying tax is essentially for the very existence of government, its exercise may be controlled by constitutional provisions made in that behalf. It cannot be laid down as a general propo .....

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. Article 245 which deals with the extent of laws made by Parliament and by the Legislatures of States expressly states that the power of Parliament and of the State Legislatures to make laws is, 'subject to the provisions of this Constitution'. The expression subject to the provisions of this Constitution" is surely wide enough to take in the provisions of both Part XII and Part XIII. In view of the provisions of Article, 245, we find it difficult to accept the argument that the re .....

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n exception to the general terms of Article 301. It would be against the ordinary canons of construction to treat an exception or proviso as having such a repercussion on the interpretation of the main enactment so as to exclude from it by implication what clearly falls within its express terms. 69. Having, thus, agreed with the views expressed by the majority, in Atiabari Tea Company Ltd. (supra), the 7 Judges Bench, in Automobile Transport (Rajasthan) Ltd. (supra), further held that regulatory .....

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compensatory taxes, which are imposed for providing trading facilities to the traders, as a class, be said to be violative of Article 301. The majority view so expressed, in Automobile Transport (Rajasthan) Ltd. (supra), run as under: 14. After carefully considering the arguments advanced before us we have come to the conclusion that the narrow interpretation canvassed for on behalf of the majority of the State cannot be accepted, namely ; that the relevant articles in Part XIII apply only to le .....

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ution for the simple reason that they do not hamper trade, commerce and intercourse but rather facilitate them. We have, therefore, come to the conclusion that neither the widest interpretation nor the narrow interpretation canvassed before us are acceptable. The interpretation which was accepted by the majority in the Atiabari Tea Co. case (1961) 1. S.C.R. 809, is correct, but subject to this clarification. Regulatory measures or measures imposing compensatory taxes for the use of trading facil .....

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it upheld the enactment. This aspect can be discerned from the observations made in paragraph Nos. 19 and 20, which run as follows: 19. The taxes are compensatory taxes which instead of hindering trade, commerce and intercourse facilitate them by providing roads and maintaining the roads in a good state of repairs. Whether a tax is compensatory or nor cannot be made to depend on the preamble of the statute imposing it. Nor do we think that it would be right to say that a tax is not compensatory .....

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rs not so. It seems to us that a working test for deciding whether a 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. It would be impossible to judge the compensatory nature of a tax by a meticulous test, and in the nature of things that cannot be done. 20. Nor do we think that it will make any difference that th .....

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r loading capacity, the Legislature has merely evolved a method and measure of compensation demanded by the State, but the taxes are still compensation and charge for regulation. 71. The scope of Article 301, 302, 303 and 304 was again explained by the Supreme Court, in Jindal Stainless Ltd vs State of Haryana, (2006) 7 SCC 241, at para 32, 33, 34 and 35 as under: 32. Article 301 states that subject to the other provisions of Part XIII, trade, commerce and intercourse throughout India shall be f .....

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ment between States and also within the State. Since freedom correspondingly imposes limitation , we have the doctrine of direct and immediate effect of the operation of the impugned law on the freedom of trade and commerce in Article 301 as enunciated in Atiabari Tea Co. 33. Article 301 is, therefore, not only an authorisation to enact laws for the protection and encouragement of trade and commerce amongst the States but by its own force creates an area of trade free from interference by the St .....

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made by the State Legislature in compliance with the conditions imposed by Article 304 shall not be hit by Article 301. Article 301 thus provides for freedom of inter-State as well as intra- State trade and commerce subject to other provisions of Part XIII and correspondingly it imposes a general limitation on the legislative powers, which limitation is relaxed under the following circumstances: (a) Limitation is relaxed in favour of Parliament under Article 302, in which case Parliament can im .....

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n favour of Parliament, where discrimination or preference is admissible to Parliament in making of laws in case of scarcity. This is provided in clause (2) of Article 303. (b) As regards the State Legislatures, apart from the limitation imposed by Article 301, clause (1) of Article 303 imposes additional limitation, namely, that it must not give preference or make discrimination between one State or another in exercise of its powers relating to trade and commerce under Entry 26 of List II or Li .....

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m sister State(s), even though it interferes with the freedom of trade and commerce guaranteed by Article 301. Secondly, the ban under Article 303(1) shall stand lifted even if discriminatory restrictions are imposed by the State Legislature provided they fulfil the following three conditions, namely, that such restrictions shall be in public interest; they shall be reasonable; and lastly, they shall be subject to the procurement of prior sanction of the President before introduction of the Bill .....

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ect and immediate effect which is mentioned in Atiabari Tea Co. emerges from the concept of limitation embodied in Article 301. It is this doctrine of direct and immediate effect which constitutes the basis of the working test propounded vide para 19 (of AIR) in Automobile Transport. Therefore, whenever the law is impugned as violative of Article 301, the courts will have to examine the effect of the operation of the impugned law on the inter-State and the intra-State movement of goods, which mo .....

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However, this limitation on, the State Legislatures, is lifted in two cases, namely, it may impose on goods imported from sister State(s) or Union Territories any tax to which similar goods, manufactured in its own State, are subject to, but not so as to discriminate between the imported goods and the goods manufactured in the State. In other words, clause (a) of Article 304 authorises a State Legislature to impose a non- discriminatory tax on goods imported from sister State(s), even though it .....

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the Bill. 73. If we analyse the scheme of Article 301 to 304 of Constitution of India, it will become transparent that Article 301 provides that the trade, commerce and intercourse, throughout India, shall be free. Article 302 empowers the Parliament to impose restrictions on trade, commerce and intercourse between one State and another or within any part of the territory of India as may be required in public interest. As such, Article 302 deals with imposition of restrictions on freedom of trad .....

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between one State and another by virtue of any entry relating to trade and commerce in any of the lists in the Seventh Schedule. However, clause (2) of Article 303 empowers the Parliament to make any law, giving or authorizing the giving of any preference, or making, or authorizing 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. As such, .....

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cle 304 has two parts. Whereas Article 304(a) deals with discrimination, 304(b) deals with restrictions. Since Article 303 (1) totally prohibits the State from making any discrimination between two States or giving preference to one State over another, Article 304(a) gives some relaxation to the State legislature by declaring that notwithstanding anything in Article 301 or 303, the State legislature may, by law, impose on goods imported from other States or Union territories any tax to which sim .....

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nation as contemplated in Article 303(1) of the Constitution of India. 76. However, if the State imposes any tax on the goods imported from other States or Union Territories to which similar goods manufactured or produced in the State are not subject to, then, the same will not be permissible inasmuch as the same would amount to discrimination and/or giving preference to one State over another, which, now Article 303(1) of the Constitution, totally stands prohibited as far as State legislatures .....

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or the purpose of imposing restrictions on the freedom of trade, commerce and intercourse shall be introduced or moved in the State legislature without the previous sanction of the President. 78. Article 304(b) does not, thus, deal with discrimination between two States or giving preference to one State over another, which is totally prohibited by Article 303(1) of the Constitution subject to relaxation provided in Article 304(a) of the Constitution. Hence, to save any law from being violative o .....

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nd also not to put restrictions on the movement of goods except when such restrictions are reasonable or in public interest subject to the condition that previous assent of the President is taken before any amendment or Bill is introduced. 79. Although a compensatory tax may not amount to restriction on freedom of trade, commerce and intercourse, yet the same may be discriminatory if the State imposes any tax on the goods imported from other States, while not imposing tax on goods manufactured a .....

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discriminatory tax. If that is made permissible, then, the State can impose taxes on goods imported from other States and Union territories, while not imposing such tax on the goods manufactured and produced within the State on the ground that such tax is for the purpose of providing trading facility and the same is compensatory in nature. If that is permitted, Article 303 (1) and 304(a) of the Constitution shall become nugatory. 81. It needs to be further noted that Article 304 clearly provides .....

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3(1) of the Constitution. Consequently, such a discriminatory compensatory tax cannot be saved from being declared ultra vires simply on the ground that the same is compensatory in nature. It is only non- discriminatory tax, which imposes reasonable restrictions on the freedom of trade, commerce and intercourse and which is in public interest and while imposing such tax, the Bill or amendment introduced in the State legislature has received the previous assent of the President, then, the same ca .....

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ference to one State over another only on the ground that the said taxes are compensatory in nature. 84. This Court, in Indian Oil Corporation (supra), has not decided the issue as to whether the State can impose discriminatory taxes only on the ground that the same is compensatory in nature. This Court, in Indian Oil Corporation (supra), held that after the 2006 Amendment, the levy, under the 1993 Act, acquired the nature of compensatory tax. Though it was held that amendments introduced in the .....

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(a) of the Constitution of India for being discriminatory. Hence, the decision of this Court, in Indian Oil Corporation (supra), shall not come in the way of deciding the issue raised in the present writ application. 85. While examining the provisions of the 1993 Act and the amendment introduced by the Finance Act of 2015, what appears from the statement, object and reasons of 2015 is that the Amendment of 2015 was introduced as a measure of augmenting the revenue of the State. Though the 1993 A .....

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s apparent from the provisions of Section 7(iii) of the 1993 Act, which makes provision for set off of Entry tax against the VAT payable on the said goods in the State. 86. It is of immense importance to note that the amount of entry tax paid by an importer, while importing goods from the outside the State to the State of Bihar, is liable to be set off against the VAT payable in the State. Viewed from this angle, we find considerable force, in the submission made by Dr. Saraf, learned Senior Cou .....

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rred to, wherein it was held as under: It is clear from the operation of Section 4 that once the item brought in respect of which entry tax is paid is sold in Kerala, the dealer who is liable to pay sales tax need pay so much of the sales tax after reducing the entry tax paid on the very same item. In other words, the payment of entry tax goes to reduce the petitioner's sales tax liability to the extent of the amount of entry tax paid. The payment of sales tax is essentially governed by fina .....

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sion of the Kerala High Court in Sri Krishna Marbles and Granites v. State of Kerala (supra). The same view has been taken by the Gauhati High Court in ITC Limited (supra) decided by one of us {Chief Justice}. We respectfully agree with the observations made, conclusions arrived at and the decision rendered in ITC Limited (supra). 89. While examining the contention of the petitioner that the levy of the entry tax on goods brought into the State of Bihar, on account of e-commerce transaction, is .....

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the State to the State of Bihar for the purpose of personal use or consumption. 90. On account of non-availability of set off in terms of the second Proviso to Section 3(2) of the 1993 Act, the imposition of entry tax, by way of the impugned provisions, leads to a higher burden of tax on such goods, which are brought into the State of Bihar by the petitioners for personal use or consumption of individual consumer, which are transacted using e-commerce portal. The goods, purchased by an individua .....

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er, who is liable to pay VAT under the Bihar VAT Act. 92. It is crystal clear that the second Proviso to Section 3(2) is not applicable to a transaction undertaken by e- commerce portal inasmuch as the goods, brought in by the petitioners, are only for personal use or consumption and not for being sold, when the individual consumers are not dealer and do not have liability under the Bihar VAT Act, the payment of Entry tax, on such transaction will be an additional cost on such goods. Similar sit .....

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may be in two days. The goods brought into a local area may be used as raw material for producing a new commodity for sale or they may be consumed as they are, as in the case of his client, the petitioner in C.W.J.C. No. 6540 of 2002. In these two cases, the provision of set-off in the sales tax liability would not apply and in these two cases, therefore, the Act was quite discriminatory with regard to the goods imported from other States. The submission of Mr. Jain cannot be said to be without .....

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n against goods imported from other States that were brought to the local area for consumption or use. 93. Again, this Court, in Food Corporation of India (supra), held that in the event the imported goods are found to be taxed at a higher rate than the local goods, the same will be discriminatory. The relevant observations, appearing, in this regard, in Food Corporation of India (supra), read as follows: 8. It is to be noted that only six goods were listed under the schedule to the Parent Act, .....

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g a notification. In exercise of the power under Section 3A of the Act, the State Government issued notification No. SO 34, dated 1.4.2006 by which paddy, rice, wheat, pulses, flour, atta, maida, suji and besan were added at Serial No. 25 of the Schedule. On the same date, the State Government issued another notification bearing No. SO 32 in exercise of the power under Section 3(1) of the Act fixing the rate of entry tax on paddy, rice, wheat etc. at 4% of their value. It is an admitted position .....

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ide the State. The Advocate General rebutted the contention submitting that the charge of discrimination overlooked the fact that simultaneously with the amendment in the definition of 'Entry of Goods', a provision was introduced (vide second proviso to Sub-section 2 of Section 3) for giving credit for entry tax levied and collected towards the sales tax payable on the sale of those goods. He submitted that the Act was provided with an internal balancing mechanism that saved it from bein .....

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n the rate of sales tax then that might be a ground to challenge the notification fixing the rate of entry tax under Sub-section (i) of Section 3 of the Entry tax Act but on that basis, it could not be argued that the Act was itself discriminatory or violative of Article 304(a) of the Constitution. It thus becomes plain and clear that in order to save the Act from the vice of discrimination against paddy, wheat and rice imported from outside the State, the notification No. SO 32, dated 1.4.2006 .....

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r personal use or consumption of individual consumer as per the second Proviso to Section 3(2) of the 1993 Act. Consequently, such goods will face a higher burden of tax and, accordingly, it will be discriminatory against the goods brought from other States to the State of Bihar. Such discrimination will directly contravene Article 304(a) read with Article 303 of the Constitution of India. 95. The creation of tax barrier and imposition of higher rate of tax on the goods from other States, as com .....

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e provisions embodied in Article 301 and Article 304(a), held as under: Article 301 declares that "subject to the other provisions of this part, trade, commerce and intercourse throughout the territory of India shall be free". An exception is, however, provided in favour of Parliament by Article 302 which says that "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 In .....

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tate or another, by virtue of any entry relating to trade and commerce in any of the Lists in the Seventh Schedule".* Clause (2) of Article 303, is in the It is not very clear why clause (1) of Article 303 uses the words "nor the legislature of a State" when Article 302 does not refer to the legislature of a State at all. Probably, the idea was to declare affirmatively in the interest of removing any doubt - that even a legislature of a State shall not have the power to make any l .....

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of controversy, which we shall refer to later, to the extent relevant nature of a classification. It says that "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". Article 304 deals with .....

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ion 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". The wording of this clause is of crucial significance. The first half of the clause would make it appear at first flush 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 Lis .....

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s vis-a- vis locally manufactured goods. The clauses though worded in positive language has 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-a- vis goods manufactured locally'. In short, the clause say .....

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ies in such manner as they think fit so long as they do not use the weapon of taxation to discriminate against the imported goods vis-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 upon the assumption that so long as a State taxes its residents and t .....

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equired in the public interest; provided that no Dill 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". (This proviso has, of course, to be read along with Article 255 which says that if the Act receives the assent of the Presidents the non-compliance with the requirement of obtaining the previous sanction to the introduction of the Bill is cured.) Though in appearance this clause reads lik .....

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s probably our history which impelled the founding fathers to lay store by the Central Government in the matter of imposing restrictions, or reasonable restrictions, as the case may be on the freedom guaranteed, it is worthy of notice, is "throughout the territory of India" and not merely between the States as such; the emphasis is upon the oneness of the territory of India. Part-XIII starts with this concept of oneness but then it provides exceptions to that rule, as stated above, to .....

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he Uttar Pradesh Trade Tax Act, 1948, granting rebate of tax to goods manufactured, in the State of Uttar Pradesh, were challenged on the ground of being discriminatory against goods imported from neighbouring States and violating Article 301 and 304(a), the Supreme Court had this to say: 38. Article 304(a) ensures only equal rate of tax for incoming goods. So if such goods are taxed at a higher rate or where they are taxed at any rate when indigenous goods enjoy concessional rate of tax, articl .....

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the judgment. …. 46. Article 304(a) is a provision that deals with taxation. It places goods imported from sister States on a par with similar goods manufactured or produced within the State in regard to State taxation in the allocated field. The object of article 304(a) was to limit the power of taxation by States so as to prevent discrimination against imported goods by imposing taxes on such goods as a higher rate than is borne by indigenous goods. The tax referred to in article 304(a .....

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either within the same industry or in other competing industries. ….. 54. Therefore, the test to be applied to determine whether rebate is within the realm of tax defined in article 304(a) of the Constitution of India so as to say that it discriminates between the two class of goods: locally manufactured goods and the imported goods when both the class of dealers meet the conditions required to qualify for the grant of rebate i.e. the use of fly-ash, is the overall effect or impact of suc .....

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iery manufacturers and dealers in the State of West Bengal in their prayer in the writ petition asked for a direction asking the respondents to forbear from levying or imposing or collecting any sales tax on the sale of hosiery goods imported into Bihar from other States. The State Government by a notification exempted dealers from sales tax of hosiery goods manufactured and produced in the State of Bihar whereas levied sales tax on the dealers outside the State. This Court opined that from the .....

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l amount of tax levied, then for the dealers manufacturing cement using fly-ash outside the State of Uttar Pradesh but selling it in Uttar Pradesh, though the State Government contends that the rate of tax is same for the dealers inside Uttar Pradesh and outside Uttar Pradesh, but the overall effect is that there is no tax levied on the net turnover after deductions being made from the gross turnover but, on the other hand, the dealers manufacturing or producing cement using fly-ash outside Utta .....

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mported goods being discriminated by imposing a higher tax thereon than on local goods. It has been held that what Article 304(a) demands is that the rate of taxation on local goods as well as imported goods must be the same. This is designed to discourage the State from creating the State barriers or fiscal barriers at its boundaries. 98. The Supreme Court has, in no uncertain words clarified, in Jaiprakash Associates (supra), that the principle of non-discriminatory tax , as provided in Articl .....

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o function within limitations stipulated under Article 304(a) of the Constitution of India. 100. When Article 304(a) ensures only equal rate for incoming goods, if such goods are taxed at a higher rate or where they are taxed at any rate, when indigenous goods enjoy concessional rate of tax, Article 304(a) gets attracted. These are simple cases of hostile discrimination. However, one has to determine whether a particular tax is discriminatory or not within the meaning of Article 304(a), the effe .....

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te of tax by repaying or by allowing set off to one class of local dealers of the entry tax paid against the VAT payable and not allowing the benefit of set off to outside dealers. Such a situation squarely falls within the ambit of Article 304(a) of the Constitution of India. 101. By giving set off under second Proviso to Section 3(2) of the 1993 Act, a favourable treatment is given to one class of dealers within the State, barring the dealers, similarly placed outside the State, supplying good .....

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within the State. This is what is known as fiscal barrier and such fiscal barrier has a direct and immediate effect of ensuring that goods are brought in from outside the State of Bihar for personal use or consumption on payment of CST and thereby making a discrimination between the dealers of one State and another, which is clearly violative of Article 304(a) of the Constitution. 102. In the present case, respondents have not disputed that there is a higher burden of tax on goods brought in by .....

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