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X X X X Extracts X X X X X X X X Extracts X X X X ..... Industries Limited, Saharanpur , M/s Shri Ram Constitution Company, Gorakhpur , Vodafone Mobile Services Limited, Mumbai , M/s Jaiswal Coal Suppliers And 2 Others , M/s Mahesh Cement Agency , M/s Sanjay And Sons And Another , M/s Rahul Enterprises And Another , M/s The Indure Private Ltd. , M/s Shri Rathi Limited , M/s Abhinav Steels Pvt. Ltd. , M/s Abhinav Steels Pvt. Ltd. , M/s Trinayani Cement Pvt. Ltd. , M/s Chunar Churk Cement Limited , M/s Eco Cement India Limited , M/s Chota Bhai Munnu Bhai , M/s Eastern Spinning And Textiles Mills Pvt. Ltd. , United Spirits Limited , M/s Sony India Pvt. Ltd., G.B. Nagar , Bharti Airtel Ltd. (Erstwhile Bharti Celluar Ltd.) , M/s Rohan Motors Limited, Ghaziabad , M/s Mirza International Limited , M/s P & J. Aromatics (A Unit Of Jeet India Ltd.) , M/s Ual U.P. Prop. M/s Ual Industries Ltd. Dilip B Bhosale, CJ And M K Gupta, JJ. For the Petitioner : Shubham Agrawal, Bharat Ji Agrawal For the Respondent : C.S.C. JUDGMENT ( Per Manoj Kumar Gupta, J. ) 1. These petitions filed under Article 226 of the Constitution call into question the vires of the Uttar Pradesh Tax on Entry of Goods into Local Areas Act, 20071. The petitions have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel for the parties, the entire batch of petitions was taken up for final disposal and learned counsel for the parties were heard at length. Since the entire batch arises out of the common factual matrix involving same or similar questions, we dispose of the same by this common judgement. It would be advantageous to reproduce the following observations made by the Supreme Court so as to understand the exact scope of hearing of these petitions: "During the hearing of arguments, counsel for both sides submitted that since the main challenge in the writ petitions, which were filed by the writ petitioners before the High Court, was predicated on the law laid down by the Constitution Bench in 'Atiabari Tea Co. Ltd. (supra), the High Court essentially confined its discussion only on "compensatory tax theory", as propounded in the aforesaid judgment so the High Courts looked at the issue by only keeping in mind the principle propounded in the aforesaid judgment and decided as to whether the tax imposed by a particular statute is compensatory in nature or not. Thus, when other issues are to be dealt with, as indicated above, we find that in many cases there is no adequate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pradesh Tax on Entry of Goods Ordinance, 1999, which was, later on, enacted as Uttar Pradesh Tax on Entry of Goods Act, 2000 (for short, "Act, 2000") with a view to augmenting the revenue of the State and decided to make law to provide for levy of tax on entry of goods. The State, in exercise of its powers under the proviso to sub-section (1) of Section 4 of the Act, 2000, issued a notification on 9 May 2003, amending the Schedule to the Act and inserting therein various entries including 'cement'. Another notification was issued on the very same date under the said provision prescribing the rate of entry tax on cement at the rate of 2 percent of the value of goods. 3C. The validity of levy of entry tax under the Act, 2000, on bringing cement within the local area of Uttar Pradesh, was challenged by the Company in a writ petition bearing Writ Petition No 1374 of 2003. Several writ petitions were filed raising the same challenge including Civil Misc Writ Petition No 251 of 2003 (Tax) by M/s Indian Oil Corporation & Ors Vs State of Uttar Pradesh and & Ors, and Civil Misc Writ Petition No 486 of 2001 (Tax) by M/s Moser Baer India Ltd Vs State of Uttar Pradesh & Ors. This Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made from the Company, provided they furnish security other than cash or bank guarantee, for the entire tax in respect of the transaction during this period. The interim order further provided that the entry tax for the future period, i.e. after 24 September 2007, which is the date of promulgation of Ordinance, would not be realised from the Company in respect of the transaction, subsequent to the promulgation, provided the Company furnishes bank guarantee for the entire dues. The writ petition filed by the Company (Writ Petition No 1515 of 2007) was dismissed by the judgment and order passed by this Court on 23 December 2011, holding that the State legislature did not lack legislative competence in enacting the Act, imposing entry tax on the entry of scheduled goods into local areas for consumption, use or sale therein. This Court also observed that the provisions of the Act patently and facially indicate that there are sufficient guidelines and guarantees under the Act for ensuring that the entire amount of entry tax collected and credited to the Uttar Pradesh State Development Fund is utilized only for the purposes of its reimbursement to facilitate the trade, commerce and indus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x on Entry of Goods into Local Areas Act, 2007 as invalid, void and unconstitutional being beyond the legislative competence of the State Legislature and ultra vires Articles 245, 246, 304 (a) read with Entry 52 of List-II of the Seventh Schedule to the Constitution, as the same do not fall within the scope of Entry 52 of List-II of the Seventh Schedule to the Constitution. (ii) Issue a suitable writ, order or direction in the nature of mandamus commanding the respondents not to give effect to the provisions of Uttar Pradesh Tax on Entry of Goods into Local Areas Act, 2007. (iii) Issue a suitable writ, order or direction in the nature of certiorari be issued calling for the records and quashing the impugned notice dated 25th September, 2007; and 21.3.2017. (iv) Issue a suitable writ, order or direction in the nature of Prohibition be issued restraining the Respondents, their servants, agents or representatives from in any manner collecting any entry tax from petitioners pursuant to the Act No. 30 of 2007. (v) Issue a suitable writ order or direction in the nature of mandamus commanding the respondents to refund the amounts paid by the Petitioner No.1 towards the entry tax t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax on entry of goods into a local area for consumption, use and sale therein. The said Act was declared ultra vires by this Court in Civil Misc Writ Petition No 251 of 2003 (M/s Indian Oil Corporation Limited Vs State of Uttar Pradesh & Ors), by its judgment dated 27 January 2004. That judgment was carried to the Supreme Court by the State Government in Special Leave Petition (Civil) No 2757-2758 of 2004. The Supreme Court in that SLP, had stayed the operation of the judgment of the High Court vide order dated 9 February 2004, subject to condition that the amount realized as entry tax shall be deposited in a separate interest bearing account. 5A. When this Court declared the provisions of previous Act 2000 as ultravirus, its vires was tested on the yardstick of compensatory theory propounded by the Supreme Court in two Constitution Bench judgments, in Atiabari Tea Company Ltd. Vs. State of Assam, AIR 1961 SC 232, and Automobile Transport (Rajasthan) Ltd vs. The State of Rajasthan, AIR 1962 SC 1406. 6. In Atiabari, the constitutional validity of Assam Taxation (on Goods Carried by Roads or Inland Waterways) Act, (Assam Act XIII of 1954) was questioned before the High Court. The i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc. are out of the purview of Article 301 and need not comply with the requirements of the proviso to Article 304 (b). The net effect of the decision in Automobile was that taxes, if compensatory in character, would not offend the guarantee of free trade, commerce and intercourse under Article 301 of the Constitution. 8. The above two Constitution Bench judgments of the Supreme Court thus laid down that if a tax is imposed for raising revenue and which is utilized for facilitating trade and commerce, instead of hampering it, it would be compensatory tax, beyond the reach of Article 301. However, if the tax is imposed solely because goods are transported into a certain region, without having any nexus, direct or indirect, with the facilities provided in upliftment of trade and commerce, it would come within the ambit of Article 301. Such a legislation, being a restriction on freedom of trade envisaged by Article 301, for being constitutionally valid, has to fall within one of the exception laid down under Article 302 to Article 304 of Chapter XIII. For adjudging whether the tax is compensatory tax or not it was laid down that though it is not necessary to establish that every rupe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... like taxes whose basis is the concept of "burden" based on the principle of ability to pay. At this stage, we may clarify that in the above case of Automobile Transport [(1963) 1 SCR 491 : AIR 1962 SC 1406], this Court has equated regulatory charges with compensatory taxes and since it is the view expressed by a Bench of seven Judges, we have to proceed on that basis. The fallout is that compensatory tax becomes a sub-class of fees". 11. After the reference was answered, the regular Division Bench, remitted to the High Court the issue as to whether entry tax imposed by the State of U.P. is of a compensatory nature or not. In pursuance thereof, the matter was again heard by this Court in the light of the law laid down by the Supreme Court in Jindal Stainless-I. This Court returned a finding on 8.1.2007 to the effect that the State failed to prove that the entry tax was compensatory in nature. 12. The State, having realised difficulty in its way in persuading the Court to uphold the validity of the earlier legislation on the subject rather chose to bring a new legislation, removing the short-comings pointed out by the Supreme Court and this Court, on the model of the prevailing leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cle 301 of the Constitution? If the answer is in the affirmative whether such levy can be protected if entry tax is compensatory in character and if the answer to the aforesaid question is in the affirmative what are the yardsticks to be applied to determine the compensatory character of the entry tax? (3) Whether Entry 52 List II, Schedule VII of the Constitution like other taxing entries in the Schedule, merely provides a taxing field for exercising the power to levy and whether collection of entry tax which ordinarily would be credited to the Consolidated Fund of the State being a revenue received by the Government of the State and would have to be appropriated in accordance with law and for the purposes and in the manner provided in the Constitution as per Article 266 and there is nothing express or explicit in Entry 52 List II, Schedule VII which would compel the State to spend the tax collected within the local area in which it was collected? (4) Will the principles of quid pro quo relevant to a fee apply in the matter of taxes imposed under Part XIII? (5) Whether the entry tax may be levied at all where the goods meant for being sold, used or consumed come to rest (sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore rejected. 6. Decisions of this Court in Atiabari, Automobile Transport and Jindal cases (supra) and all other judgments that follow these pronouncements are to the extent of such reliance over ruled. 7. 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. 8. Article 304 (a) frowns upon discrimination (of a hostile nature in the protectionist sense) and not on mere differentiation. 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). The question whether the levies in the present case indeed satisfy this test is left to be determined by the regular benches hearing the matters. 9. 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. The question whether the levies in the present case indeed sat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & Company Ltd, (2009) 10 SCC 755, stated that the "tax", "duty", "cess" or "fee" constituting a class denotes various kinds of imposts by State in its sovereign power of taxation to raise revenue for the State. The Supreme Court further observed, "within the expression of each specie, each expression denotes different kind of impost depending on the purpose for which they are levied." This power can be exercised in any of its manifestation, as observed by the Nine Judges' Bench, only under any law authorising levy and collection of tax as envisaged under Article 265 which uses only the expression that no tax "shall be levied and collected except by authorized of law. It coveys that to support a tax, legislative action is essential, it cannot be levied and collected in the absence of any legislative sanction by exercise of executive power of State under Article 73 by the Union or Article 162 by the State". 16C. In Kunnathat Thathunni Moopil Nair Vs The State of Kerala & Anr, AIR 1961 SC 552, wherein the question whether Article 265 of the Constitution was a complete answer to the attack against the constitutionality of a taxing statute was considered. The Supreme Court, while d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to as the "Union List"). (2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the "Concurrent List"). (3) Subject to clauses (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the 'State List'). (4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List. 17A. The Supreme Court in Hoechst Pharmaceuticals Ltd. & Anr Vs State of Bihar & Ors, (1983) 4 SCC 45, held on a review of the available decisions, that the Constitution effects a complete separation of taxing power of the Union and of the States under Article 246 and that there is no overlapping anywhere in the exercise of that power. It was further observed that there is a distinction be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the division of powers between the Centre and the States and also subject to the fundamental rights guaranteed under the Constitution. The Indian State, between the Centre and the States, has sovereign power. The sovereign power is plenary and inherent in every sovereign State to do all things which promote the health, peace, morals, education and good order of the people. Sovereignty is difficult to define. This power of sovereignty is, however, subject to Constitutional limitations. This power, according to some constitutional authorities, is to the public what necessity is to the individual. Right to tax or levy imposts must be in accordance with the provisions of the Constitution." 20. The Supreme Court in Jindal Stainless-II, while dealing with the constitutional limitations on the power of the State legislatures to levy taxes, observed that the first and the foremost of these limitations appear in Article 13 of the Constitution of India, which declares that all laws in force in the territory of India immediately before the commencement of the Constitution are void to the extent they are inconsistent with the provisions of Part III dealing with the fundamental rights guara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scourse of more than five decades, the debate on the true meaning of its provisions continues to bedevil academics, lawyers and judges who have had occasion to visit its provisions. The ambit of Part XIII is trade, commerce and intercourse within the territory of India. Article 301 of the Constitution reads thus: "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." 23A. A plain reading of the above Article would show that freedom of trade, commerce and intercourse is by no means absolute, the same being subject to the other provisions of Part XIII of the Constitution. Amongst those provisions are Articles 302, 303 and 304 which have a direct bearing on the nature and the extent of restrictions subject to which only is the right to freedom of trade, commerce and intercourse referred to in Article 301. 24. Article 302 reads thus: "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power vested in Parliament in terms of clause (1) of Article 303 shall not extend to Parliament from making any law with a view to 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 out of scarcity. 26. A joint reading of clauses (1) and (2) of Article 303 would, thus, make it clear that while Parliament/Legislature of a State shall have no power to make a law imposing restriction on trade, commerce and intercourse, by giving or authorizing the giving of any preference to one State over the other, such limitation on the legislative power of Parliament shall not extend to giving of any preference or making or authorizing any discrimination if it is declared by law that a situation has arisen out of scarcity of goods that makes it necessary to do so, as observed in paragraph 68 of Jindal Stainless-II. In short, while Parliament may impose restrictions in public interest under Article 302, the restrictions so imposed shall not be in the nature of giving preference or discrimination between one State or the other e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her States or Union Territories is clearly recognised by Article 304 (a). The expression ''may by law impose' is certainly not a restriction on the power to tax. That does not, however, mean that the power to tax goods imported from other States or Union Territories is unqualified or unrestricted. There are, in our opinion, two restrictions on that power. The words "to which similar goods manufactured or produced in that State are subject" impose the first restriction on the power of the State legislature to levy any such tax. These words would imply that a tax on import of goods from other States will be justified only if similar goods manufactured or produced in the State are also taxed. The second restriction comes from the expression "so, however, as not to discriminate between goods so imported and goods so manufactured or produced". The State legislature cannot in the matter of levying taxes discriminate between goods imported from other States and those manufactured or produced within the State levying such a tax. The net effect of Article 304 (a) therefore is that while levy of taxes on goods imported from others State and Union territories is clearly recognised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n cases where the same are discriminatory in nature. Once Article 304 (a) is understood in that fashion, Clause (b) dealing with reasonable restrictions must necessarily apply to restrictions other than those by way of taxes. It follows that for levy of taxes prior Presidential sanction in terms of the proviso under Article 304(b) will be wholly unnecessary. This view is reinforced on the plain language of proviso to Article 304(b), which is limited to law relating to reasonable restrictions referred to in clause (b)." (emphasis supplied) 28. The Supreme Court after dealing with Articles 301 to 304 extensively, in Jindal Stainless-II, summarized these Articles, a sum total of these Articles, which is relevant for our purpose, reads thus: "1. Freedom of trade, commerce and intercourse in terms of Article 301 is not absolute but is subject to the Provisions of Part XIII. 2. Article 302 which appears in Part XIII empowers the Parliament to impose restrictions on trade, commerce and intercourse in public interest. 3. The restrictions which Parliament may impose in terms of Article 302 cannot however give any preference to one State over another by virtue of any entry relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 91. Suffice it to say that the use of the non-obstante clause in Article 304 has had its share of criticism from the very inception which criticism has to an extent been prophetic for the interpretation of Part XIII has indeed been a lawyer's paradise over the past fifty years or so. Seervai has in his treatise adverted to this anomaly arising from the use of the non-obstante clause and said that the same covers both the clauses (a) and (b) of Article 304. He argues with considerable forensic force that reference to Article 301 in the non-obstante clause is meaningless having regard to the fact that the freedom granted thereunder is itself subject to other provisions of Part XIII including Article 304. This would necessarily imply that Article 304 (a) and (b) do not subtract anything from Article 301. That appears to us to be the correct view on the subject. While it is true that legislature does not waste words and that no part of a legislation can be rendered a surplusage, the only rational meaning that can be attributed to the non-obstante clause appearing in Article 304 is that the same was used only as a manner of abundant caution and a possible reassurance that Article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A law which is made by a competent legislature and which is not otherwise invalid, is not open to attack under Article 31 (1). Ramjilal's case and Laxmanappa's case. (4) A law which is ultra vires either because the legislature has no competence over it or it contravenes, some constitutional inhibition, has no legal existence, and any action taken thereunder will be an infringement of Article 19 (1) (g) Himmatlal's case and Laxmanappa's case. The result will be the same when the law is a colourable piece of legislation. (5) Where assessment proceedings are taken without the authority of law, or where the proceedings are repugnant to rules of natural justice, there is an infringement of the right guaranteed under Article 19(1)(f) and Article 19(1)(g); Tata Iron & Steel Co. Ltd; Moopil Nair's case and Shri Madan Lal Arora's case." 30. The Supreme Court in Jindal Stainless-II answered the first question in the negative and declared that a non-discriminatory tax does not per se constitute a restriction on the right to free trade, commerce and intercourse guaranteed under Article 301. Accordingly, the decision taking a contrary view in Atiabari, including va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle 304 (a) of the Constitution. The contention that grant of exemptions and incentives in favour of locally manufactured goods is also a form of discrimination was repelled by reiterating the law laid down in Video Electronics Pvt. Ltd. and another Vs. State of Punjab, (1990) 3 SCC 87, that "all legislative differentiation is not discrimination." It was held that use of word 'discrimination' in Article 304 (a) would mean 'intentional and unfavourable bias'. So long as such bias is not evident from the measures adopted, it would not constitute discrimination. The relevant observations made in this regard, while dealing with question no.4, are as under:- "130. ... While we have at some length heard learned counsel for the parties on that aspect, we do not propose to deal with all the dimensions of that challenge based on Article 304(a) except two of them that were argued at great length by learned counsel for the parties. The first of these two dimensions touches upon the State's power to promote industrial development by granting incentives including those in the nature of exemptions or reduced rates of levy on goods locally produced or manufactured. On behal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iders. Adverting to the decision in Video Electronics (supra) this Court in Mahavir (supra) held the same to be distinguishable on the ground that the Punjab and U.P. notifications were qualitatively different from the one issued by the Government of Jammu and Kashmir in as much as while the former benefitted only specified units and limited the benefit to a specified period, the latter was not subject to any such limitations. This declared the Court resulted in discrimination vis-a-vis. outside goods. What is important is that in Video Electronics (supra) this Court recognized the difference between differentiation and discrimination and held that every differentiation is not discrimination. This Court noted that the word discrimination was not used in Article 14 as it has been used in Article 16, Article 303 and Article 304 (a). The use of the word in 304 (a) observed this Court involved an element of "intentional and unfavorable bias". So long as there was no such bias evident from the measure adopted by the state, mere grant of exemption or incentives aimed at supporting local industries in their growth, development and progress did not constitute discrimination. 132. We re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent sets of circumstances. The main objection to the West Bengal Act was that it permitted discrimination "without reason" or without any rational basis." Any challenge to a fiscal enactment on the touchstone of Article 304 (a) must in our opinion be tested by the same standard as in Kathi's case (supra). The Court ought to examine whether the differentiation made is intended or inspired by an element of unfavourable bias in favour of the goods produced or manufactured in the State as against those imported from outside. If the answer be in the affirmative, the differentiation would fall foul of Article 304(a) and may tantamount to discrimination. Conversely, if the Court were to find that there is no such element of intentional bias favouring the locally produced goods as against those from outside, it may have to go further and see whether the differentiation would be supported by valid reasons. In the words of Fazl Ali, J. discrimination without reason would be unconstitutional whereas discrimination with reason may be legally acceptable. In Video Electronic's case, this Court noted that the differentiation made was supported by reasons. This Court held that if economi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e exempt totally and unconditionally while other manufacturers from outside the State were not so exempt. Whether or not the impugned enactments in the present batch of cases satisfy the tests referred to above and elaborated in Video Electronics case is a matter on which we do not propose to express any opinion for that aspect is best left open to be considered by the regular benches hearing these matters after the reference is disposed off." 33. The Supreme Court also considered its judgments in Mafatlal Vs Union of India, 1997(5) SCC 536, Khandige Sham Bhat Vs Agrl ITO, AIR 1963 SC 591, V Guruviah Naidu and Sons & Ors Vs State of Tamil Nadu & Ors, (1977) 1 SCC 234, and Malwa Bus Service (Private) Ltd Vs State of Punjab & Ors, (1983) 3 SCC 237 and in concluding paragraphs, observed thus: "141. Seen in the context of the above, we are inclined to accept the submission made on behalf of the State that so long as the intention behind the grant of exemption/adjustment/credit is to equalize the fall of the fiscal burden on the goods from within the State and those from outside the State such exemption or set off will not amount to hostile discrimination offensive to Article 304(a). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le there is no doubt that this Article recognizes the power to legislate on a State, it equally qualifies that power with the condition that such a law must comply with. That condition is that the law which imposes a tax on imported goods cannot "discriminate" between goods so imported and the goods so manufactured or produced. It also postulates that the tax on import is a "tax to which similar goods manufactured or produced in that State are subject." The Article thus imposes two conditions: firstly, that a law may impose a tax on goods imported from other States, ''any tax' to which "similar goods manufactured or produced' in that State are subject. This clearly implies that the goods imported from other States may be subjected to a tax where similar goods are in fact, manufactured or produced in the importing State and are subjected to tax. In other words, (a) the goods imported from other States must be similar to (b) the goods manufactured or produced in the importing State and (c) the goods so locally manufactured or produced must be subject to tax. The second condition is the tax that is imposed on imported goods should not discriminate between the imported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitions preferred by traders, manufacturers and importers bringing scheduled goods into the local areas in the State of Uttar Pradesh for consumption, use or sale therein, challenging the validity of the Act on the ground of lack of the legislative competence of the State. It was contended that the Act was violative of freedom of trade, commerce and intercourse guaranteed under Article 301 and not saved by Article 304 (b) of the Constitution of India. The petitioners had also challenged the retrospectivity of the Act, with effect from 1 November 1999, when the U P Tax on Entry of Goods Ordinance, 1999, was replaced by U P Tax on Entry of Goods Act, 2000 which was promulgated and was struck down by this Court in Indian Oil Corporation Limited Vs State of U P, AIR 2004 Alld 277. It is not in dispute that in ITC Limited the validity of the Act was challenged on the aforestated ground and all the grounds were dealt with in depth. A categorical finding had been recorded that the tax has to be non-discriminatory, reasonable and levied in public interest even if such legislation was moved with the assent of the President. After dealing with the challenge raised in those petitions and dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 38. The judgment of this Court in ITC Limited was then carried to the Supreme Court and all those petitions were also before the Nine Judges' Bench, which dealt with the five questions to which we have already made reference in this judgment. 39. It is not in dispute and also apparent from the judgment of Nine Judges' Bench in Jindal Stainless-II and the judgement of the Two Judges Bench that the judgment of the Division Bench in ITC Limited was not set aside, but at the same time, the challenge to the validity of the Act was left open on limited grounds. What is left open to be considered by this Court now is whether the entire State can be treated as local area for the purpose of entry tax; whether entry tax can be levied on the goods which are directly imported from other countries and brought in a particular State; and in some statutes enacted by certain States, there was a provision for giving adjustment of other taxes like VAT, incentives etc paid by the indigenous manufacturers, and whether the benefits given to certain categories of manufacturers would amount to discrimination under Article 304 of the Constitution of India. While leaving these questions open, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by Cantonments Act, 1994 within the purview of the Act is beyond the legislative competence of the State Government. A strong reliance has been placed on Section 66 of the Cantonments Act 2006 in contending that the Union, while enacting the Cantonments Act 2006, has conferred the power to levy taxes on the Cantonment Boards, in the manner provided thereunder. The impugned legislation thus encroaches upon a field, which is not only exclusive domain of the Union, but in regard whereof, there is already a Central legislation. 43. The next submission was that the impugned legislation wrongly treats the entire State as one local area. It is urged that the impugned legislation has its source of power from Entry 52, List II, whereunder the State Government is competent to levy taxes on entry of goods into a local area for consumption, use or sale therein. Under the said entry, the State Government is empowered to enact a law for the benefit of the local area wherein the goods are to be consumed, used or sold. The word 'local area' has to be understood as an area administered by a local body, like a municipality, a panchayat or like. The use of the word 'a' before ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as it empowers the State to collect taxes on entry of goods in a local area itself, and to credit it not to the 'local fund', but to a separate Fund envisaged by Section 14, is beyond it's legislative competence. Likewise, the utilisation of the tax so collected for development of trade, commerce and industry in the entire State and not exclusively for the local area from which it is collected makes it a State level levy and not a local levy. It was submitted that the State has no power to impose such a levy for augmenting the income of the State as a whole. Such a levy could only be imposed (i) by or on behalf of a 'local body'; (ii) for its benefit; (iii) to be appropriated by it in carrying out its responsibilities of governance of the territories falling within its jurisdiction. Various provisions of the impugned legislation which are contrary to the said constitutional scheme are beyond the legislative competence. Bereft of these provisions, the Act could not survive, and is thus liable to be struck down as a whole. 45. It was further urged that a taxing statute is to be construed strictly as laid down by the Supreme Court in State of West Bengal Vs. K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enjoy the rebate to the extent of the liability under the U.P. Vat Act. In support of the said submission, he has placed reliance on Firm A.T.B. Mehtab Majid and Co. Vs. State of Madras and another, 1963 Supp. (2) 435, H. Anraj Vs. Government of Tamil Nadu, 1986 (1) SCC 414, West Bengal Hosiery Association and others Vs. State of Bihar and another, 1988 (4) SCC 134, Shree Mahavir Oil Mills and another Vs. State of J&K and others, 1996 (11) SCC 39, and Kunnathat Thathunni Moopil Nair Vs. State of Kerala and another, 1961 (3) SCR 77. 49. It was further submitted that Section 12 of the Act, in so far as it permits the manufacturer to realise entry tax at the time of taking delivery of goods from the manufacturer without the taxing event viz the entry of goods into a local area for sale, purchase or consumption having taken place is ultravires the provisions of the Act and the Constitution. 50. Sri Dhruv Agarwal, learned Senior Counsel, made a submission which is confined to Writ Petition No.25750 of 2017 by Indian Oil Corporation Ltd. It was contended that the tax on entry of crude oil into local area where the Mathura Refinery is located is wholly illegal. According to him, the cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific reference to the provisions which are of relevance to answer the questions raised before us. 53. The Act as noticed earlier, was enacted to provide for levy and collection of tax on entry of goods into a local area for consumption, use and sale therein and for matters connected therewith or incidental thereto. We have also narrated the backdrop, as reflected in the Statement of Objects and Reasons, against which the Act was enacted and brought into force. The Act was amended by the Amendment Act No 8 of 2009 with a view to simplifying tax system and removing certain anomalies. The Statement of Objects and Reasons of the Amendment Act No 8 of 2009 reads thus: "The Uttar Pradesh Tax on Entry of Goods into Local Areas Act, 2007 (U.P. Act no. 30 of 2007) has been enacted to provide for levy and collection of tax on entry of goods into a local area for consumption, use or sale therein. With a view to simplifying tax system and removing certain anomalies it has been decided to amend the said Act mainly to provide that, - (a) no tax shall be levied on or collected from a dealer or subsequent dealer on entry of goods into a local area if the tax on such goods has been paid in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide such area; (ii) into a local area from any place outside the State; (iii) into a local area from any place outside the Territory of India for consumption, use or sale therein; (d) "local area" means the territorial area of,- (i) a Municipal Corporation under the Uttar Pradesh Municipal Corporations Act, 1959; (ii) a Municipality under the Uttar Pradesh Municipalities Act, 1916; (iii) a Zila Panchayat or a Kshettra Panchayat under the Uttar Pradesh Kshettra Panchayats and Zila Panchayats Adhiniyam, 1961; (iv) a Gram Panchayat under the United Provinces Panchayat Raj Act, 1947; (v) a Cantonment under the Cantonments Act, 1924; (vi) any Industrial Development Area under the Uttar Pradesh Industrial Area Development Act, 1976; (vii) an Industrial Township by whatever name called; (viii) any other local authority by whatever name called under an Act of the Parliament or the State Legislature;" 57. From bare perusal of the definition of "entry of goods" and "local area", it appears to us that the Act does not treat the entire State as 'local area' for the purposes of entry of goods. It was, however, submitted on behalf of the petitioners that a conjoint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the notification. EXPLANATION-Where the goods are taken delivery of on its entry into a local area or brought into a local area by a person other than a dealer, the dealer who takes delivery of the goods from such person shall be deemed to have brought or caused to have brought the goods into the local area. (3A) Notwithstanding anything to the contrary contained in sub-section (1) or sub-section (3), no tax shall be levied on or collected from a dealer or subsequent dealer who brings or cause to be brought into a local area any goods in respect of which tax has been paid in any other local area under any of the said sub-sections and such dealer furnishes before the concerned Assessing Authority the prescribed declaration in regard thereto within such time as may be prescribed: PROVIDED that the amount of tax deposited under this section shall be deemed to have been deposited for and on behalf of such dealer or any subsequent dealer to whom above prescribed declaration has been issued. (4) The State Government may by notification remit the amount of tax to the extent necessary to ensure that effective rates of tax on entry of goods into a local area, from any place out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of entry of any goods into a local area, is payable and has been so paid by the principal, the agent shall not be liable for payment of tax. (9) Where in respect of any - (i) purchased scheduled goods,- (a) value of such goods is not ascertainable or value of such goods, as declared by the dealer or the person in-charge of the goods, as the case may be, is not verifiable on account of non-availability or non production of any document; or (b) any document produced in support of purchase price or transport charges and other charges, is not worthy of credence; or (ii) scheduled goods, acquired or obtained otherwise than by way of purchase, value of such goods disclosed by the person in-charge of the goods or the dealer, as the case may be, does not appear to be reasonable and worthy of credence then the whole-sale price, in the open market in a local area in which such goods are being brought, reasonably determined by the Assessing Authority, after affording reasonable opportunity of being heard to the person incharge of the goods or the dealer, as the case may be, shall be deemed to be, the value of goods, and for this purpose in reference to Clause (i), the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from levy of tax, or class of dealers from the payment of the Tax. 8. Registration.- (1) Subject to the provisions of sub-section (2) every dealer liable to pay tax shall apply to the Assessing Authority for grant of registration certificate in the prescribed manner along with proof of deposit of Registration fee within thirty days from the date on which he becomes liable to pay tax under this Act: PROVIDED that a dealer who holds a registration certificate granted under the provisions of the Uttar Pradesh Value Added Tax Act, 2008, if, furnishes required information in the prescribed form of application within the aforesaid time, shall not be liable to obtain separate registration certificate under this Act and for all purposes of this Act, such dealer shall be deemed to be a registered dealer: PROVIDED FURTHER that a Government shall not be required to obtain registration certificate under this Act if such Government Department is not engaged in regular business. (2) Where a dealer has no fixed place of business within the State of Uttar Pradesh, he shall not be liable for obtaining registration under this Act. (3) In respect of grant of registration certificate under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Accounts and the manner in which the proceeds of the levy shall be utilized exclusively for the development of trade and commerce in the State of Uttar Pradesh. 65. Section 15 provides for power to remove difficulties. Section 16 confers power on the State Government to make rules for carrying out the purposes of the Act, 2007. Section 17 talks about validation, Section 18 repeals the Uttar Pradesh Tax on Entry of Goods Act, 2000. However, it also saves anything done or any action taken in exercise of the powers under the said Act with the deeming fiction. Section 19 repeals U P Ordinance No 35 of 2007, whereas Section 19A repeals the Uttar Pradesh Tax on Entry of Goods into Local Area (Amendment) Ordinance, 2008 (U P Ordinance No 1 of 2008). The Schedule appended to the Act, 2007, as provided for under Section 4(1) of the Act, gives the list of items with the rate of tax to be levied under the Act. Legislative Competence:- 66. Having taken a bird eye view of the Scheme of the Act, we now proceed to examine the challenge based on legislative competence of the State Legislature to enact a law for collection of taxes by the State and not by local bodies, on the entry of goods in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State, it was observed that various entries in List I and II are fields of legislation which have to be given a widest possible amplitude. The nomenclature or form of a tax, it is held, is not decisive, to find out the nature of tax. The judgement proceeds by making a specific reference to Article 366 (28) and by holding that the provision thereof does not, in any manner, support the contention that tax under Entry 52 is only a local tax which is to be collected through local bodies. Whether a tax is collected as a general tax or as local tax, is held to be a matter of legislative policy. The challenge was repelled in paragraphs 132 to 135 in the following words:- "132. It is well settled that the nomenclature or form of a tax is not a decisive factor to find out the nature of the tax. It is the matter of legislative policy as to how the tax is to be collected. The definition of taxation as given in Article 266 (28) [sic Article 366 (28)] that tax includes general or local tax does not in any manner support the contention of the petitioner that tax under Entry 52 is only a local tax which ought to be collected through local bodies. It is the matter of legislative policy that whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te under Entry 52 List II. 135. We thus do not find any substance in the submission of the learned counsel for the petitioner that entry tax legislation is not covered by Entry 52 List II." (emphasis supplied) 69. In view of the authoritative pronouncement directly on the issue by the Supreme Court, with which we are bound, we do not consider it necessary to refer to the detailed submissions made by learned counsel for the parties in support of the said contention or the judgements cited by them. Whether provisions of the Act contrary to mandate of Article 266:- 70. The above discussion now takes us to another limb of the argument in regard to the Constitutional mandate of Article 266 of the Constitution, which requires all revenue received by the Government of a State to be credited to the consolidated fund of that State. It was urged that Section 14 (2) of the Act which mandates that the entry tax levied and collected under the Act would be credited to the Uttar Pradesh Trade Development Fund and would exclusively be utilized for facilitating trade, commerce and industries, violates the Constitutional mandate of Article 266. 71. Again the contention advanced in this regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jaora Sugar Mills (P) Ltd. v. State of Madhya Pradesh and Ors., 1996 (1) SCR 523 while considering Article 266 of the Constitution of India has already held that it is difficult to understand how the Act can be said to be invalid because the cesses recovered under it are not dealt with in the manner provided by the Constitution. Following observations were made by the Court: "It is doubtful whether a plea can be raised by a citizen in support of his case that the Central Act is invalid because the moneys raised by it are not dealt with in accordance with the provisions of Part XII generally or particularly the provisions of Article 266. We will, however, assume that such a plea can be raised by a citizen for the purpose of this appeal. Even so, it is difficult to understand how the Act can be said to be invalid because the cesses recovered under it are not dealt with in the manner provided by the the Constitution. The validity of the Act must be judged in the light of the legislative competence of the Legislature which passes the Act and may have to be examined in certain cases by reference to the question as to whether fundamental rights of citizens have been improperly contrav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udes a 'cantonment' within its ambit is beyond the legislative competence of the State legislature. Elaborating his submission, he urged that while enacting a law in exercise of power under Entry 52 List II, the State legislature could include only those areas within its ambit to which its legislative field extends by virtue of Entry 5 of List II to the Seventh Schedule. The provisions of the Act cannot be made applicable to cantonment areas, which are essentially territories reserved for the Union legislature by virtue of Entry 3 List I and are administered by a central legislation viz. the Cantonments Act, 1924 or the Cantonments Act, 2006. In support of the said contention, reliance was placed on Section 66 of the Cantonments Act, 2006, which empowers Cantonment Board to impose taxes with the previous sanction of the Central Government. 75. In Fr. Williams, the Supreme Court, after referring to Constitution Bench judgment in Godfrey Phillips (I) Ltd. and another Vs. State of U.P. and others, (2005) 2 SCC 515, observed that entries in the Seventh Schedule are not powers but fields of legislation. In deciding whether any particular enactment is within the purview of one l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd taxes on trades, professions, callings and employments. In addition, it also has the power to impose any tax which under any enactment, for the time being in force, may be imposed in any Municipality in the State in which the cantonment is situated. A law framed by the Union under Entry 3 List I is for providing local self-government in a cantonment area which is not covered by the Municipal laws of the State Government. The Cantonment Board, as noted above, has been invested with the power to impose taxes to augment its income. However, the Cantonment Board in exercise of this power is not competent to impose tax on entry of goods into a cantonment area. In fact, the argument is based on wrong notion that since it is Union which has been conferred with the power to provide for local self-government in cantonment area, invested with power to impose tax, therefore, no tax could be imposed on entry of goods into such areas being a central territory. 78. Under Article 1 (3) of the Constitution of India, the territory of India comprises of (a) the territories of the States; (b) the Union territories specified in the First Schedule; and (c) such other territories as may be acquired. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or more of the three contingencies mentioned in the entry namely consumption, use or sale therein. In the garb of exercising legislative power under Entry 52 List II of the Seventh Schedule to the Constitution of India, the State legislature cannot arrogate to itself the general taxing power under the above entry by treating the entire geographical area of the State as "a local area". Entry 52 List II only carves out a legislative field in respect of which State can make law relating to tax, but power to legislate in respect of Entry 52 List II is derived from Article 243-H, 243-X read with Article 246 (3) of the Constitution of India. In support of the said contention, they have placed reliance on the judgements of the Supreme Court in Diamond Sugar Mills Ltd. Vs. State of U.P., AIR 1961 SC 652, Burmah-Shell Oil Storage & Distributing Co. India Ltd. Vs. Belgaum Borough Municipality, AIR 1963 SC 906, Union of India Vs. Shri R.C. Jain, (1981) 2 SCC 308, Jothi Timber Mart & others Vs. Corporation of Calicut & another, 1969 (2) SCC 348, Shaktikumar M. Sancheti & another Vs. State of Maharashtra & others, (1995) 1 SCC 351, State of Kerala & others Vs. Mar Appraem Kuri Company Ltd. & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can bring title doubt therefore that in using the words "tax on the entry of goods into a local area for consumption, use or sale therein", they wanted to express by the words "local area" primarily area in respect of which an octroi was leviable under Item 7 of the Schedule Tax Rules, 1920, that is, the area administered by a local authority such as a municipality, a district Board, a local Board or a Union Board, a Panchayat or some body constituted under the law for the governance of the local affairs of any part of the State." 80B. After holding that a local area would mean an area administered by a local authority, it was held that the premises of a factory cannot be a local area by observing thus:- "28. We are of opinion that the proper meaning to be attached to the words "local area" in Entry 52 of the Constitution, (when the area is a part of the State imposing the law) is an area administered by a local body like a municipality, a district board, a local board, a union board, a Panchayat or the like. The premises of a factory is therefore not a "local area"." 80C. Consequently, the imposition of a cess on entry of sugarcane into the premises of a factory was held to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (in Nagpur District of Maharashtra), which was the border area, taxable event was not the entry in Nagpur District but entry in area of Amravati Municipal Corporation. The levy, therefore, is not, as urged by the learned counsel for appellant, on entry of vehicle in any part of the State but in any local area in the State. It cannot, therefore, be struck down on this ground." (emphasis supplied) 82. These judgements, it is clear, are not an authority on the proposition as to whether the entire State could be treated to be one local area or not. Reliance placed by learned counsel for the petitioners on the said judgments in support of the aforesaid contention is thus wholly misplaced. 83. At this stage, we would like to refer to the observations made in para 691 by Hon'ble Dr. D.Y. Chandrachud in Jindal Stainless-II on which much emphasis was placed by learned counsel for the petitioners:- "691 (232). In the judgment in Diamond Sugar Mills, the Constitution Bench emphasized that in using the expression local area, the framers of the Constitution were aware of the previous legislative history and meant an area administered by a body (such as Municipalities, Panchayats or loca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate as one local area. It is urged that under Section 14 of the Act, the proceeds of the levy are appropriated to the Uttar Pradesh Trade Development Fund and is utilised for development of the entire State. In other words, since the revenue generated from the levy is being used for development of the entire State and not passed on to the local body, which controls and manages the local fund, therefore it is bad. In support of the said contention reliance has been placed on Article 243-X. 87. The submission, in our opinion, is devoid of any force. The argument has its genesis in the assumption that entry tax is a local levy for the benefit of the local body namely a municipal corporation or a municipality or a zila panchayat or a kshetra panchayat or a gram panchayat or a cantonment or any industrial development area or a industrial township, from where it is realised. We have already repelled the contention that the impugned levy is a local tax, the power of the local body to impose tax, and not the general power of taxation of the State Government. While considering the challenge to the competence of the State legislature to enact a law providing for imposition of a general lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he requirement of Entry 52 is satisfied. The character of the tax so levied is that of entry tax - by whatever name it is called........From the point of view of the entry tax, one may say that the State is a compendium of local areas. Spending for the purposes of the State is thus spending for the purposes of local areas. Situation may perhaps be different where the local areas are confined to a few cities or towns in the State. But where the local areas span the entire State, it cannot be argued that money spent for welfare schemes for improvement of roads, rivers and other means of transport and communication is not spent on or for the purposes of local areas. The purposes and needs of local areas are no different from the purposes and needs of the State - not at any rate to any appreciable degree....." (emphasis supplied) 88. Hon'ble R. Banumathi, J, after referring to the passages from Bihar Chamber of Commerce, concluded thus :- "The Entry tax is a State level levy and the entry tax revenue is treated as the State Revenue. As held in Bihar Chamber of Commerce, "the State is a compendium of local areas.... the purposes and needs of local areas are no different from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) constitution of a fund; (b) crediting all moneys received, respectively, by or on behalf of the municipalities in the said fund and (c) for the withdrawal of moneys therefrom as may be provided. 90A. Assuming that the entry tax is an adjunct of the power of the municipality to impose taxes and the money so recovered constitutes a local fund, the legislature of the State by virtue of clause (d) of Article 243-X was competent to constitute a fund and also for crediting all moneys received as entry tax in the said fund. The power conferred on the State legislature to provide for 'withdrawal of such moneys from the fund', invests the State legislature, as a necessary corollary, with the power to provide for the manner in which the money withdrawn from the fund would be utilised. Under Rule 4 of the Uttar Pradesh Tax on Entry of Goods into Local Areas (Fund) Rules, 2007 the money from the fund is allocated to different departments and local bodies on the recommendation of Uttar Pradesh Development Fund Management Committee. The Principal Secretary, Nagar Vikas Department and Principal Secretary, Panchayati Raj Department are members of the said Committee. The money is to be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goes to a centralised fund, we do not find any force in the contention that the provisions of sub-section (3A) of Section 4 has the effect of treating the entire State as one local area. 94. The provisions in reference to which a similar contention has been raised are Section 2(c), Section 4(6), Section 6 and Section 12 which could, by no stretch of reasoning, lead to the conclusion that thereunder the entire State is being treated as one local area. Section 2(c) defines 'entry of goods' to mean entry into a local area from any place outside such area; or from any place outside the State; or from any place outside the territory of India for consumption, use or sale therein. The taxable event being entry of goods into a local area whether the entry is from any place outside such area; or from outside the State; or from outside the territory of India, it would not have any relevance. The definition is only clarificatory in nature and does not, in any manner, contemplate the entire State as one local area. Section 4(6) envisages that where a dealer who brings or causes to be brought any goods into a local area but which are consigned without using them in the local area to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where tax is payable in respect of sale or purchase of such goods under the U.P. VAT Act and (ii) Section 7 which empowers the State Government to issue notification exempting any good or class of goods from levy of tax or class of dealers from the payment of tax. 96. The law in regard to excessive delegation of legislative power is no more res-integra. A Constitution Bench of the Supreme Court in M/s Devi Das Gopal Krishnan, etc. V. State of Punjab and others, AIR 1967 SC 1895, while examining the validity of Section 5 of the East Punjab General Sales Tax Act, 1948 conferring upon the Provincial Government the power to prescribe rate of tax at which levy would be imposed on dealers on their taxable turnover, placed reliance on a passage from an earlier judgement in Vasantlal Maganbhai Sanjanwala Vs. State of Bombay, AIR 1961 SC 4, which succinctly lays down the principles of excessive delegation of power in the following words:- "The Constitution confers a power and imposes a duty on the legislature to make laws. The essential legislative function is the determination of the legislative policy and its formulation as a rule of conduct. Obviously it cannot abdicate its functions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... originally stood, an uncontrolled power was conferred on the provincial Government to levy every year on the taxable turnover of a dealer a tax at such rates as the said Government might direct. Under that section the Legislature practically effaced itself in the matter of fixation of rates and it did not give any guidance either under that section or under any other provisions of the Act ........ no other provision was brought to our notice. The argument of the learned counsel that such a policy could be gathered from the constitutional provisions cannot be accepted, for, if accepted, it would destroy the doctrine of excessive delegation. It would also sanction conferment of power by Legislature on the executive Government without laying down any guidelines in the Act. The minimum we expect of the Legislature is to lay down in the Act conferring such a power of fixation of rates clear legislative policy or guidelines in that regard. As the Act did not prescribe any such policy, it must be held that Section 5 of the said Act, is it stood before the amendment, was void". "(23) Even so it was contended that Section 5, as amended, only gave the maximum rate and did not disclose any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onable rate of taxation for the local area concerned. So long as the legislature has made provision to achieve that reasonable rates of taxation are fixed by local bodies, whatever may be the method employed for this purpose-provided it is effective, it may be said that there is guidance for the purpose of fixation of rates of taxation." (Emphasis supplied) 98. The principles enunciated above lays down that the guidance may take the form of providing (i) maximum rate of tax which the delegate can levy or (ii) it may take the form of subjecting the rate fixed to the approval of the Government, which may act as a watch dog, or that of the legislature itself, or (iii) it could also take the shape of consultation with the local people by inviting objections against the proposed rate of tax and the same being taken into consideration by an independent body before the final rates being notified. 99. A number of decisions were cited by learned counsel for the petitioners on the point, but we do not consider it necessary to refer to all the judgements cited, as the above principles alone have been reiterated in all those cases. It is noteworthy that under Section 4, the maximum rate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed senior counsel submitted that the Supreme Court in Avinder Singh and others Vs. State of Punjab and others, (1979) 1 SCC 137, did not approve the principle laid down in paragraph 22 in M.K. Papiah Vs. Excise Commissioner, AIR 1975 SC 1007, that the legislature could exercise control over its delegate by reserving with it the power to repeal the subordinate legislation. It was thus sought to be urged that merely because under Section 4 (10) the legislature has reserved with it the power to repeal, it cannot be said that the provision does not suffer from the vice of excessive delegation. 101A. In para 22 of the judgement in M.K. Papiah, Mathew J., after discussing a number of English case laws, observed as under:- "The Legislature may also retain its control over its delegate by exercising its power of repeal. This was the basis on which the Privy Council in Cobb & Co. v. Kropp. (1967) 1 AC 141 (PC) upheld the validity of delegation of the power to fix rates to the Commissioner of Transport in that case. " 101B. In Avinder Singh, the Supreme Court, after extracting paragraph 22 from M.K. Papiah, made the following observations in paragraph 45:- "The learned Judge quoted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (5) also is subject to a similar circumscription because the Government cannot issue an order to impose a tax outside the limitation of sub- section (1) or sub-section (2). Thus, the impugned provision contains a severe restriction that the taxation leviable by the corporation, or by the Government acting for the corporation, shall be geared wholly to the goals of the Act. The fiscal policy of Section 90 is manifest. No tax under guise of Section 90(2)(b) can be charged if the purposes of the Act do not require or sanction it. The expression "purposes of this Act" is pregnant with meaning. It sets a ceiling on the total quantum that may be collected. It canalises the objects for which the fiscal levies may be spent. It brings into focus the functions, obligatory or optional, of the municipal bodies and the raising of resources necessary for discharging those functions-nothing more, nothing else". 101D. Thereafter, His Lordship reproduced para 22 from the judgement of Papiah's case, and in para 47 of the judgement observed that:- "47. The proposition so stated is very wide and sweeping. By that standard, there is nothing unconstitutional about Section 90(5) of the Act." 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be. When such a safety valve is provided it cannot be said that the exercise of delegated legislative power by Central Government in the first instance under Section 9 (3) would suffer from any excessive delegation of legislative power or effacement of legislative power of the Parliament. 16. In our view the High Court correctly held that Section 9 (3) does not suffer from any excessive delegation of legislative power. Before parting with this discussion we may deal with one more submission of Shri Sanghi. He submitted that earlier the legislation had itself provided in Section 9 (3) a ceiling for enhancement of rates of royalty and to that extent there was a safety valve or guideline by Parliament. But after amendment this ceiling is given a go bye and hence the Section has become arbitrary. It is not possible to agree with this contention for the obvious reason that whatever enhanced rate of royalty is fixed by Notification by the Central Government under Section 9 (3), it has got to be filtered through the process of Section 28 (1) and if the Parliament finds the proposed hike to be uncalled for it may veto it out. There are sufficient guidelines as to for what purpose th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not strike down the law out of hand only because no Classification appears on its face or because a discretion is given to the Government to make the selection or classification but will go on to examine and ascertain if the statute has laid down any principle or policy for the guidance of the exercise of discretion by the Government in the matter of the selection or classification. After such scrutiny the court will strike down the statute if it does not lay down any principle or policy for guiding the exercise of discretion by the Government in the matter of selection or classification, on the ground that the statute provides for the delegation of arbitrary and uncontrolled power to the Government so as to enable it to discriminate between persons or things similarly situate and that, therefore, the discrimination is inherent in the statute itself." 105. In K. T. Moopil Nair vs. State of Kerala, AIR 1961 SC 552, the Supreme Court while examining the constitutionality of the Travancore Cochin Land Tax Act, 1957, reiterated the above principles. It was a case where the statutory provisions provided for a uniform rate of tax on forest land, without making any provision for departu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not inconsistent with the provisions of this Act as appear to it to be necessary or expedient for removing the difficulty : PROVIDED that no such order shall be made after the expiry of a period of two years from the date this Act is notified. (2) The provisions made by any order under sub-section (1) shall have effect as if enacted in this Act and any such order may be made so as to be retrospective to any date not earlier than the date of commencement of this Act. (3) Every order made under sub-section (1) shall, as soon as may be after it is made, be laid before both the Houses of the State Legislature and the provisions of sub-section (1) of Section 23-A of the Uttar Pradesh General Clauses Act, 1904 shall apply as they apply in respect of rules made by the State Government under any Uttar Pradesh Act". 110. It is urged that Section 15 arms the State Government to issue orders in the name of removing difficulties in implementation of the provisions of the Act, but without providing any guidelines in regard to the manner in which said power is to be exercised. The power conferred is unfettered and uncanalised and the State Government could exercise the power discriminate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies in implementation of the provisions of the Act. It provided thus:- "If any difficulty arises in giving effect to the provisions of any Act, rule or order extended by section 3 to the merged States, the Central Government may, by order, make, such provisions or give such directions as appear to it to be necessary for removal of the difficulty." 112A. In exercise of the said power, the Central Government issued an order called the Taxation Laws (Merged States) (Removal of Difficulties) Amendment Order 1962 (for short 'the Order, 1962') and provided for the meaning of the expression "all depreciation actually allowed under any laws or rules of a Merged State". It was subjected to challenge on the ground that in fact, there had been in existence no difficulty in giving effect to the provisions of the Act and the Rules, rather the provision brought about more confusion and innumerable difficulties by providing a new definition to the expression. The contention was repelled by the High Court by observing that the existence of the difficulty was a matter of subjective satisfaction of the Central Government incapable of being determined by anyone else. The view taken by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ises in giving effect to the provisions of this Act, the State Government may take such action or pass such order as appears to it necessary for the purposes of removing the difficulty." 113A. The circulars and notifications issued from time to time under Section 8 of the Act were challenged on the ground that despite passage of number of years since the enforcement of the Act, no statutory rules had been framed despite an express power conferred for such purpose under Section 7 of the Act. On the other hand, from time to time, circulars and notifications had been issued in purported exercise of power under Section 8. The main ground of attack was that the exercise of power under Section 8 was not bonafide but had been used as a camouflage to avoid following the procedure prescribed for framing the rules. 113B. The Full Bench quoted a passage from the judgment of the Supreme Court in Mahadeva Upendra Sinai Vs. Union of India and others, AIR 1975 SC 797, which authoritatively and exquisitely deals with the nature and purpose of Removal of Difficulty Clause as under:- "To keep pace with the rapidly increasing responsibilities of a welfare democratic State, the legislature has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower under Section 7 thereof." (emphasis supplied) 113D. Here again the Full Bench, while noticing that once frowned upon and nick-named as Henry VIII Clause, the Removal of Difficulty Clause, now finds acceptance as a practical necessity. However, what the Full Bench held is that power thereunder cannot be used as a substitute to the rule making power, for which a different procedure is prescribed. The Full Bench further observed that if power under the said clause is permitted to be used as a cloak for subordinate Legislation, it will render the said provision akin to Henry VIII Clause. In our considered opinion, none of these judgements are an authority on the point that removal of difficulty clause investing power in the appropriate Government to issue orders to remove difficulty in implementation of the Act amounts to conferment of arbitrary and uncanalised powers in favour of such Government, rather approves the need for having such a clause on the statute book. The test for adjudging its validity qua attack on ground of excessive delegation remains the same, as discussed above. We, therefore, proceed to examine the challenge to Section 15 in the light of the principles no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced on the exercise of that power. These restrictions are two folds; (I) the levy will be justified only if similar goods manufactured or produced in the State are also taxed; and (ii) the State Legislature cannot in the matter of levying taxes discriminate between the goods imported from other States and those manufactured or produced within the State while levying such tax. Concededly, Section 4, which is charging provision, does not make any distinction between the goods imported from other States or those produced locally within the State in the matter of levying entry tax. The taxable event, as noted above, is the entry of specified goods into a local area for consumption, use or sale therein from any place outside that local area, irrespective of whether that good is manufactured within the State or is being brought from outside the State. However, the contention of the petitioners is that grant of exemptions and rebate under the Act is resulting in a marked difference in the ultimate liability of the amount of tax payable on a particular good which is impermissible. It is urged that a blanket rebate on entry tax under Section 6 for goods in respect of which a dealer regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tent of the amount of tax payable by a dealer on sale or purchase of clinker under the U.P. Value Added Tax Act from the tax payable under the Act. A combined reading of the above Notifications would mean that clinker attracted an entry tax of 0.5%; it was enhanced to 5% w.e.f. 30.9.2008 and it remained the same till 31.5.2009 when it was omitted from the Schedule; a rebate to the extent of amount of tax paid as VAT from the tax payable under the Act was allowed by Notification dated 4.3.2008 w.e.f. 1.1.2008. The cement was taxable to entry tax at the rate of 2% of the value of goods w.e.f. 16.5.2003 and the position remained the same till 19.2.2010 when it was omitted from the Schedule. 118. It is also evident from perusal of these notifications that rebate on clinker is allowed to a dealer on its sale or purchase. If clinker is purchased by a manufacturer of cement from a dealer within the State he would be allowed a rebate but if a manufacturer of cement in the State purchases clinker from outside State or brings cement within State by way of stock transfer or consignment he would not be allowed the rebate because no VAT would be payable on such import or transfer of clinker. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons already stated." 120. A close examination of the plea would reveal that Article 304 (a) is not at all attracted. As noted above, Article 304 (a) frowns upon discrimination between goods imported from other States with similar goods manufactured or produced in the State. Concededly, clinker is not produced in the State at all. Consequently, there does not arise any question of discrimination between goods imported with goods manufactured or produced in the State. In fact, according to the illustration cited, in both the situations, the clinker has been brought from outside the State. Under the first situation, it is brought by the petitioner by stock transfer while in the other situation, it is purchased by the petitioner from a dealer situated in the State who had also brought the same from outside the State. Consequently, the alleged difference in tax liability was on account of two different modes of acquisition of the same goods from outside the State, which, in our considered opinion, would not be covered by Article 304 (a). 121. We would still like to examine the challenge from the angle of Article 14 and other constitutional provisions to find out if by issuing rebate n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween persons governed by different conditions and different sets of circumstances. The main objection to the West Bengal Act was that it permitted discrimination "without reason" or without any rational basis." 122. Another judgment on which reliance was placed was in Video Electronics Private Ltd. and another Vs. State of Punjab and another, (1990) 3 SCC 87, in which notifications issued by the States of U.P. and Punjab providing for exemptions of new units established in certain areas for a period of three to seven years were assailed as discriminatory. The challenge was turned down by providing that the exemption was available to a specified class of industrial units and for a limited period of time only. In the said judgment, it was held that every differentiation in the tax rebate, exemption or tax concession granted to indigenous goods which may result in differentiation in the rate of tax on goods imported into the State would not amount to discrimination. It was held that so long as there was no intentional and unfavourable bias evident from the measure adopted by the State, mere grant of exemption or incentives aimed at supporting local industries in their growth, devel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for a certain period of time as desired by the competent legislature, the same would be permissible and would fall outside the scope of Article 304 (a). Such State enactment is not inherently discriminatory, but rather aims to ensure economic equality which is a facet of economic unity." 125. Hon'ble Banumathi, J. again placing reliance upon Video Electronics and host of other judgments on the point held that:- "States are free to equalise the burden of entry tax on the goods imported from other States by giving them set-off against the sales tax paid by them in the exporting State. In such a manner, equivalence can be brought about in the tax burden borne by the goods imported from other States and the locally manufactured/produced goods. The contention of the assessees that the term ''any tax' used in Art. 304(a) refers to every tax distinctly, thereby prohibiting imposition of entry tax on imported goods unless, entry tax is imposed on locally manufactured/ produced goods, does not lead to just and reasonable interpretation of Art. 304(a). The wholesome effect of the taxes levied under distinct heads needs to be taken into account. The tax burden borne by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imported goods. It is the specific case of the State respondents that the entry tax on clinker whether imported or purchased from within State is one and the same. 128. The petitioner while bringing clinker from Satna Plant on stock transfer has admittedly suffered entry tax of 5% but since the goods have been brought for use and consumption and not for sale and, therefore, no VAT was payable. However, in case of a registered dealer who brings clinker on his own account, pays entry tax. When he sells the same product to the petitioner, he becomes liable to pay VAT at the rate of 4%. However, as a result of the rebate being granted to the extent of VAT, the price would come at par with the clinker brought on stock transfer. We find considerable force in the contention of the State respondents that the rebate granted on clinker, in fact, equalises the tax liability and brings the price of clinker brought from outside the State by stock transfer at par with that purchased from a trader dealer. 129. The facts and figures mentioned in the chart based on a hypothetical case without any supporting material in the shape of sale vouchers or invoices does not inspire much confidence. Conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the State respondents on the ground that there is no discrimination in the rate of tax between locally manufactured/produced goods and those imported from outside the State. The rate of tax was with reference to the value of goods and not with respect to the import or local manufacture/production of goods. The object of the rebate notification dated 4.3.2008 is to bring at par a dealer who pays both entry tax and VAT on petroleum product with a dealer who only pays VAT having manufactured the good locally. It is also asserted in the counter affidavit that in fact there is "no comparison between the cost price of the HSD which is produced in the State or HSD which is imported and sold within the State unless it is specified that there is no entry tax on crude oil in the State from where HSD is purchased." It is further asserted in the counter affidavit that the chart filed by the petitioner alongwith supplementary affidavit to show discrimination, does not disclose the correct state of affairs. The respondents have given specific reasons to show how the figures given in the chart are incorrect. The IOC has not brought on record any documentary evidence to establish that the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les tax paid by them in the exporting State. In such a manner, equivalence can be brought about in the tax burden borne by the goods imported from other States and the locally manufactured/produced goods. The contention of the assessees that the term ''any tax' used in Art. 304(a) refers to every tax distinctly, thereby prohibiting imposition of entry tax on imported goods unless, entry tax is imposed on locally manufactured/produced goods, does not lead to just and reasonable interpretation of Art. 304(a). The wholesome effect of the taxes levied under distinct heads needs to be taken into account. The tax burden borne by the goods form a part of the price of the goods and if both, locally manufactured/produced goods and imported goods are subjected to similar tax burdens, irrespective of the heads under which the taxes are levied, say entry tax or sales tax etc., then no discrimination can be said to have been caused." 133A. It is submitted that the fiscal burden on cement sold against Form C, brought from outside the State of U.P. and sold in Varanasi, is higher than the cement manufactured at Chunar, within the State, and sold in Varanasi. 134. The Supreme Court w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As far as the State of Rajasthan is concerned, it had the opposite effect. Merely because local rate of tax in the State of Gujarat on the sale of cement was higher than the inter-State sales tax on the cement sold from Rajasthan cannot lead to the conclusion that the impugned notification prevented or hindered the free movement of goods from one State to another. In fact the impugned notification had the opposite effect, namely, it increased the movement of cement from Rajasthan to other States. It is not as if the impugned notification created a barrier which may have had the effect of hindering free movement of goods but on the other hand, the sales tax barrier was lowered resulting in increased volume of inter-state trade." (emphasis supplied) 135. Concededly, the entry tax on cement, whether it is produced within the State or brought from outside, was at a uniform rate of 5%. In both the situations, at the time of sale, it was liable to VAT. It is not the case of the petitioner that there is any disparity in tax burden on account of the imposition of entry tax, or any exemption or set off notification issued under the Act. The difference in fiscal burden, according to him, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o not. This is in view of inherent complexity of fiscal adjustment of diverse elements which the Legislature has to make while laying down a fiscal policy. There is no fixed formula or scientific principle of exclusion or inclusion which could be applied with exactitude. Willis, in his "Constitutional Law", page 587, observed :- "A State does not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably..... 138A. Applying the above principle, the Supreme Court in East India Tobacco Co. vs. State of A.P., AIR 1962 SC 1733, held that "If a State can validly pick and choose one commodity for taxation and that is not open to attack under Article 14, the same result must follow when the State picks out one category of goods and subjects it to taxation.". This indicates a wide range of selection and freedom in appraisal not only in the objects of taxation and the manner of taxation, but also in the determination of the rate or rates applicable...." 138B. The Constitution Bench of the Supreme Court in In Re: Special Courts Bill, 1978 [1979] 1 SCC 380 held that constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not include several other goods. As already noted, it was the wisdom of the State Government as to which good or classes of goods were to be subjected to tax. The State was not required to tax every good, to tax some of the goods. It was conferred with ample discretion, having regard to the very nature of power, to decide which of the goods were required to be brought under the tax net. Nothing concrete has been pointed out as to how the notification violated the mandate of Article 14 or any other provision of the Constitution. The challenge therefore does not merit acceptance. 142. Again it was contended that by another notification dated 15.1.2009, also issued under Section 4 of the Act, certain items of the category of Iron and Steel were excluded from the ambit of the scheduled goods, but not H.R. Coil, which belong to the same genes. It was urged that the State realising the omission on its part, by notification dated 31.3.2011, also excluded H.R. Coil from the levy of entry tax. Thus, it was argued, in Writ Petition No.24953 of 2017 filed by M/s. Bhushan Steel Ltd. and certain other petitions, where the petitioners are manufacturers and dealers of H.R. Coil that they are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, flat, octagons and hexagons, plain and ribbed or twisted, in coil form as well as straight lengths; (v) steel structurals (angles, joists, channels, tees, sheet piling sections, Z sections or any other rolled sections); (vi) sheets, hoops, strips and skelps, both black and galvanised, hot and cold rolled plain and corrugated, in all qualities, in straight lengths and in coil form, as rolled and in rivetted condition; (vii) Plates both plain and chequered in all qualities; (viii) discs, rings, forgings and steel castings; (ix) tools, alloy and special steels of any of the above categories; (x) steel melting scrap in all forms including steel skull, turnings and borings; (xi) steel tubes, both welded and seamless, of all diameters and lengths including tube fittings; (xii) tin-plates, both hot dipped and electrolytic and tinfree plates; (xiii) fish plate bars, bearing plate bars, crossing sleeper bars, fish plates, bearing plates, crossing sleepers and pressed steel sleepers, rails--heavy and light crane rails; (xiv) wheels, tyres, axles and wheels sets; (xv) wire rods and wires--rolled, drawn, galvanised, aluminised, tinned or coated such as by copper; (x ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry material. The stand taken by the authorities was challenged before the High Court which extended the benefit of the notification to the appellant holding that vests and underwears would be covered by the notification. On 26 March, 1962 another notification was issued, which again exempted garments of value not exceeding Rs. 4/- per piece excluding "hosiery products and hats of all kinds." The notification was again challenged, but the notification was upheld. The principal attack was based on Article 14 of the Constitution. The Supreme Court repelled the challenge and upheld the notification, observing that: "It is for the State to decide which granting the exemption by means of a notification as to the class of goods which should be exempted in public interest. As rightly pointed out by the High Court the notification makes a classification between garments in general the value of which does not exceed Rs. 4/- in a single piece and hosiery products including hosiery garments. Hosiery products generally are knitted articles. They are different from woven articles. It is not for the court to decide whether the policy of exempting articles made from woven cloth was justified or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchases crude oil from Gulf countries and transports the imported crude oil from Vadinar Port in Gujarat to Mathura Refinery through underground pipelines laid by it, known as Salya-Mathura Pipeline. According to the petitioner, the crude oil is first unloaded from the bulk tanker ships into the single buoy mooring (for short 'SBM'), a crude oil unloading facility, located in the high sea. The crude oil is thereafter pumped on shore through under water pipelines laid on the seabed, which in turn, are linked to Mathura Refinery. The crude oil, during its journey from Salya in Gujarat to Mathura, crosses the State of Gujarat, Rajasthan and then enters Uttar Pradesh into Mathura Refinery. The supplies of crude oil at Vadinar Port are received in VLCC (very large crude carrier). The crude oil is taken out from VLCC at the port and stored in storage tanks located at the port. These storage tanks are bonded warehouses where crude oil is stored without payment of custom duty. According to the petitioner Corporation, prior to 15.2.2005, the petitioner Corporation was availing the facility of inland warehouse at the Mathura Refinery. The crude oil from the bonded warehouse at Vadi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he course of inter-State trade and commerce will equally apply to movement in course of import. (b) The import of crude oil continues till it reaches the factory premises of the petitioner. The State legislature has no power to impose tax at any point of time before it reaches the factory premises. (c) The doctrine of unbroken package prohibits the State from levying any tax till the crude oil is used or consumed at the Refinery. Since both these events take place at Mathura Refinery and in between there is no movement of crude oil into any local area, but within the factory premises, consequently, there is no taxable event taking place nor any question of any entry tax being levied. 150. Entry 83 of List I is as follows: "duties of customs including export duties". The issue as to whether there is any overlapping of the field reserved for the Central legislation under Entry 83 which relates to "duties of customs including export duties" with Entry 52 of List II was considered by Hon'ble Banumathi, J. in Jindal Stainless-II. After considering the provisions of the Customs Act, it was held that there is no overlapping between the two entries and the field reserved under eac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the following terms:- "ii. Whether Entry Tax Legislations in question intrude into exclusive legislative domain of Parliament as reserved under Entry 41 and Entry 83 List I. iii. Whether levy of entry tax on goods imported from outside territory of India is legislation trenching the field of "import and export", "duties of custom" reserved to Parliament. " 152A. Their Lordships, after considering the Constitution Bench judgement of the Supreme Court in Godfrey Phillips India Ltd. and another Vs. State of U.P. and others, (2005) 2 SCC 515, State of A.P. and others Vs. Mcdowell and Company and others, (1996) 3 SCC 709, the judgement of the Federal Court in AIR 1942 FC 33, the Province of Madras Vs. Messrs Boddu Paidanna and sons, (1942 FCR 90), and host of other judgments as well as the judgements of Justice R. Banumathi and Justice Dr. D.Y. Chandrachud in Jindal Stainless-II repelled the contention that there is any overlapping between the field reserved for the State legislature under Entry 52 List II with that reserved for the Union legislature under Entry 83 List I by holding thus:- "83. As noted above, although, Nine Judges Constitution Bench had left the question op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opounded by Chief Justice Marshell in Brown Vs. State of Maryland has been disapproved not only by the Indian Courts but even by the Courts of America where it has its genesis. 156. In Fr. Williams, the regular Division Bench also considered the theory of original/unbroken package and after referring to the trend of the judgments which followed after Brown Vs. State of Maryland, the Supreme Court arrived at the following conclusion:- "118. From the above, it is clear that the U.S. Supreme Court itself has abandoned the Original Package theory and it has been held that imported goods are not immuned from non-discriminatory ad valorem taxes imposed by the State." 157. The Division Bench of the Supreme Court eloquently quoted several passages from subsequent judgments of the United States Supreme Court which dealt with Brown Vs. State of Maryland. Some of the passages from the subsequent judgement of the United States Supreme Court in Michelin Tire Corporation Vs. W.L. Wages, Tax Commissioner, 46 L.Ed. 2D 495, would be advantageous for understanding the line of reasoning for giving up the doctrine of unbroken package and the same are reproduced below:- "The Court stated that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the phrase are "import" and "in the course of". The term "import" signifies etymologically "to bring in". To import goods into the territory of India therefore means to bring into the territory of India goods from abroad. The words "course" means "progress from point to point". The course of import, therefore, starts from one point and ends at another. It starts when the goods cross the customs barrier in foreign country and ends when they cross the customs barrier in the importing country. These words were subject of judicial scrutiny by this Court in State of Travancore Cochin v. Shanmugha Vilas Cashew Nut Factory1. Construing these words, Patanjali Sastri, C.J., observed at p. 62: "The word ''course' etymologically denotes movement from one point to another, and the expression ''in the course of' not only implies a period of time during which the movement is in progress but postulates also a connected relation." As regards the limits of the course, the learned Chief Justice observed at p. 68: "It would seem, therefore, logical to hold that the course of the export out of, or of the import into the territory of India does not commence or terminate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no inhibition on the Parliament in exercising its legislative power under Entry 41 List I to define customs frontiers and further legislate with regard to duties of customs. Even if we do not confine to the definition of imported goods as given in the Customs Act, 1962, the generally accepted meaning and definition of import as has been laid down in cases as noted above is that import commences when the goods leave the customs frontiers of the country from where the goods are imported and continue when the goods enters into the customs frontiers of imported country and ends when goods are released for home consumption. Till the event of import is over, Parliamentary Legislation, the control of Union continues for ensuring the realisation of the customs duties. 105. In view of the foregoing discussions, we are of the clear opinion that taxing event with regard to levy of customs duty by Parliament and levy of entry tax by States under Entry 52 List II are entirely different and separate. The taxing event pertaining to levy of entry tax occurs only after the taxing event of levy of customs duty is over. Thus, the State Legislation imposing entry tax in no manner encroaches upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the contention in respect of leviability of entry tax on crude oil after the issuance of the notification of the Government of India dated 14.2.2005 when the facility of transfer of crude oil from the warehouse located at the port to the inland warehouse at the Mathura Refinery was discontinued. 162. We now proceed to examine the position which would emerge before the disbandment of the bonded warehouse facility available to the petitioner Corporation at Mathura Refinery itself. In this regard, it would be useful to refer to the notification itself which reads thus:- "Petroleum Products - Discontinuation of removal from one warehouse to another without payment of duty Circular No.8/2005-Cus., dated 14.2.2005 F.No.473/09/2004-LC Government of India Ministry of Finance (Department of Revenue) Central Board of Excise & Customs, New Delhi Subject: Discontinuation of removal of petroleum products from one warehous to another - Reg. A present, oil companies who import petroleum and petroleum products deposit the same in the warehouse (bonded tanks) at shore of refinery and thereafter they pay duty. Sometimes they transfer the warehoused goods from one warehouse to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to defer payment of custom duty until the crude oil is cleared for home consumption at the factory premises. 164. Under the scheme of the Customs Act, 1962, an importer of any goods other than those intended for transit or trans-shipment is obliged by Section 46 to make entry of the goods by presenting to the proper officer a Bill of Entry. The Bill of Entry could be for home consumption, in which event, the proper officer under Section 47, upon being satisfied that the goods are not prohibited goods and import duty has been duly paid, shall make an order permitting clearance of the goods for home consumption. It is open to the importer to defer payment of custom duty as well as clearance of the goods for home consumption, by depositing the goods in a bonded warehouse. Under Section 17, an importer entering any imported goods under Section 46 shall, save as otherwise provided in Section 85, self-assess the duty, if any, leviable on such goods. The proper officer has been conferred with power to verify the correctness of the self-assessment or to carry out re-assessment by passing a speaking order. Under Section 59, the importer of any good in respect of which a Bill of Entry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of entry 52, List II." 435(175). A comparison of Sections 58 and 57 shows that a licensed private warehouse is different from a public warehouse. Section 58 deploys the expression "dutiable goods imported by or on behalf of the licensee, or any other imported goods". Similar expression is not used in Section 57 with respect to public warehouses wherein dutiable goods may be deposited. It is clear that the goods deposited in private warehouses are considered to be goods which have already been imported. Further, ''warehousing bond' is dealt with in Section 59 which is issued where the goods have been entered for warehousing and after assessment of the duty, the bond is executed for a sum twice the amount of the duty assessed. When the requirements in Section 59 are complied with then permission to deposit the goods in warehouse is granted. This indicates that both in public warehouses and private warehouses the deposits are permitted only for goods which are already imported. Stringent provision is made in Section 59(2) to pay all duties or interest on or before the date of demand. Under Section 62, the proper custom officer exercises control over all the warehoused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1962 has made a beneficial provision for allowing goods to be deposited in public or private warehouses and for the clearance of goods for home consumption. These provisions cannot and do not detract from the power of the state legislatures under Entry 52 nor do they denude the states from levying an entry tax once the taxable event under state law has occurred." (emphasis supplied) 167. While referring to the observations made by the learned Judges in their separate judgment in Jindal Stainless-II, we are conscious of the fact that the said issue was not decided finally as per the majority opinion and has been left for consideration by the regular Division Benches, and thereafter by this Court, in pursuance of the order of the regular Division Bench, but at the same time, there is also no contrary opinion expressed by the other learned Judges constituting the Bench. We are, therefore, of the opinion that the observations made by their Lordships, definitely have a persuasive value for this Court. 168. Under the Customs Act, the taxable event is the import of goods within the custom barriers. Sections 17 of the Act postulates that an importer, after entering the goods on i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nothing to do with the customs duty. The State by imposing entry tax in any manner is not entrenching in the power of the Parliament to impose customs duty. The goods are released for home consumption only after payment of the customs duty due to the Central Government. The goods which are imported cannot be held to be insulated so as to not subject to any State tax, any such insulation of the imported goods shall be a protectionist measure which will be discriminatory and invalid. When all normal goods are subjected to State tax no exemption can be claimed by goods, which have been imported from payment of entry tax. To take a common example, all goods, which pass through a toll bridge are liable to pay toll tax, can it be said that the imported goods which after having been released from customs barriers and are passing through a toll bridge, are not liable to pay the toll tax, the answer has to be in No. Thus, the event for levy of customs duty, which is in the domain of the Parliament, is entirely different from that of event of entry tax. The liability to pay State entry tax arises only when goods enter into a local area for consumption, use and sale, which event is entirely d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by it. Consequently, even otherwise, we are of the opinion that the challenge to the imposition of entry tax on crude oil for the period anterior to 2005 deserves rejection. Challenge to Vires of Section 2 (h) proviso (iv):- 173. The next contention was that proviso (iv) to Section 2 (h) which treats wholesale price of goods in a local area as value of goods for purpose of imposition of tax is dehors the provisions of Section 4. It was urged that value of goods for purpose of imposition of tax should be the price at the time of entry of goods into the local area of the State and not the price post the taxable event i.e. the wholesale price prevailing in the local area. This results in tax being imposed on a higher amount, as the wholesale price in the local area also includes the profit of the whole seller whereas in case of stock transfer of the goods, there is no element of profit. The contention was sought to be illustrated by giving the following example:- "Assuming that the cost of manufacturing, packaging and taxes at a manufacturing unit in the State of M.P. is Rs. 100/- per bag of cement and insurance, transport and other charges upto the point of entry into the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the price at which manufacturer or whole seller had sold the goods to retailer should be chargeable to tax and not the turnover calculated on basis of MRP at which the goods are sold by retailer to a customer. In the above context, it was observed thus:- "42. The pivotal question, therefore, which needs to be considered is whether the measure to which rate of tax is to be applied on single point transaction of sale of any formulation by the wholesaler to the retailer can be something notional which is not related to subject of tax or to say in other words, whether MRP to be chargeable subsequent to taxing event by a retailer when he sells the same goods to consumer can provide a basis which has a nexus with taxable event to provide a valid measure to which rate of tax can be applied. 45. Accepting the contention of the Revenue that the retail sale price likely to be received when such transaction takes place is taken only as a basis to provide measure of levying tax on a completed transaction between wholesalers and the retailer would make it suffer from basic fallacy of importing the composition (sic component) of sale which has not come into existence to determine tax which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r not verifiable on account of non availability or non production of documents or the documents produced are not found to be worthy of credence or where in fact no actual sale takes place as in case of stock transfer, the value of goods for purposes of imposition of entry tax is ascertained on the whole sale price of the said good in the open market in the concerned local area. It cannot be doubted that in a taxing statute it is open to the legislature to device ways to ascertain the measure or value to which the specified rate of tax has to be applied for computing the tax liability, provided it has reasonable correlation with the taxable event. The legislature considered it proper and appropriate that in the contingencies stated in the proviso, the wholesale price in the local area concerned would provide the yardstick for determining the value of goods. It is true that the whole sale price would include the profit of the whole seller but it is equally possible that in a given case the good is produced in the same local area and thus, its whole sale price at which the manufacturer is selling the same, is available. It may include his profit but since the good is available in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the one representing the price of the good at the time of its entry into a local area. It is only where the price is not ascertainable or where no actual sale takes place that the tax is to be realised on the whole sale price of the same good prevailing in the open market in the local area in which the goods are being brought or received for consumption, use or sale. During the course of entry of such goods into a local area, the whole sale price prevailing for the same goods in that local area, in the wisdom of the legislature, would be the only objectively available data for qualification of tax liability. Consequently, in our view, the law laid down in Rajasthan Chemist Association would not apply. 179. The Supreme Court in Union of India and another Vs. A. Sanyasi Rao and others, (1996) 3 SCC 465, was called upon to adjudge the constitutionality of Sections 44-AC and Section 206-C of the Income Tax Act. These provisions enabled the Revenue to estimate the profits on a "presumptive basis". The provisions were introduced as the Government wanted to get over the problems in assessing income and recovering tax in the case of persons dealing in country liquor, timber, forest prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier. The plea in this regard does not seem to be raised even when earlier batch of writ petitions were filed before this Court, when the vires of the impugned Act was upheld. The challenge to the statutory provision on this ground, in our opinion, would not be covered by the window left open by the regular Bench while remitting the matter. Consequently, the plea raised in this regard, even otherwise, does not merit consideration. Challenge to Vires of Section 12:- 181. The next provision, which is subjected to challenge is Section 12 of the Act, which reads thus:- 12. Realization of tax through manufacturer.- (1) Notwithstanding anything contained in any other provision of this Act, any person who intends to bring into a local area from any manufacturer within the State, such goods specified in the Schedule as may be notified by the State Government, shall, at the time of taking delivery of the goods from the manufacturer, pay to the manufacturer the tax payable on entry of such goods into the local area and the manufacturer shall receive the tax so paid. The manufacturer shall not deliver such goods to the purchaser unless the amount of such tax has been paid by the purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flowing from several pronouncements of this Court has settled these principles: (i) in interpreting a taxing statute, equitable considerations are entirely out of place. Taxing statutes cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency; (ii) before taxing any person it must be shown that he falls within the ambit of the charging section by clear words used in the section; and (iii) if the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject. There is nothing unjust in the taxpayer escaping if the letter of the law fails to catch him on account of Legislature's failure to express itself clearly. " 183. Reliance has also been placed on the judgment of the Supreme Court in Mathuram Agrawal Vs. State of Madhya Pradesh, (1999) 8 SCC 667, wherein it is held that an interpretation which does not follow from the plain, unambiguous language of the statute is to be eschewed. The Statute should clearly and unambiguously convey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standing the context in which the aforesaid observations came to be made deserves a mention. The powers conferred on the authorities relating to search, seizure and confiscation of goods under the Madras General Sales Tax Act was under consideration. Under Section 3 of the Act which was the main charging section, every dealer whose total turn over is less than Rs. 10,000/- was liable to pay a tax for each year at the rate of 2% of his taxable turn over. The point at which tax was to be paid on single point taxable goods was indicated in the Schedule of the Act and whereunder in a large majority of cases the tax was payable at the point of first sale in the State, though in some cases, it was paid at the point of first purchase or last purchase in the State. Section 41 of the Act empowered the Government to authorise officers to carry out search and seizure. Sub-section (4) thereof conferred power on the officer carrying out search to seize and confiscate any goods which are found in any office, shop, godown, vessel, vehicle, or any other place of business or any building or place of the dealer, but not accounted for by dealer in his accounts registers, records and other documents m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of this Act, any person who intends to bring to a local area from any manufacturer within the State, such goods specified in the Schedule as may be notified by the State Government, shall, at the time of taking delivery of the goods from the manufacturer, pay to the manufacturer the tax payable on entry of such goods into the local area and the manufacturer shall receive the tax so paid. (2) The manufacturer receiving the tax under sub-section (1) shall submit to the Assessing Authority a return in respect of the goods supplied, and the tax received, by him under sub- section (1) and deposit the tax so received, in such manner and within such time as may be prescribed. (3) Where any manufacturer refuses to receive, or fails to deposit, the tax under this section he shall be liable to pay the tax alongwith the interest and penalty, if any, payable thereon which shall be recoverable as arrears of land revenue. (4) Where the Assessing Authority is satisfied that any goods referred to in sub-section (1) is lost or destroyed after its delivery by the manufacturer and before its entry into the local area, it shall direct that the tax paid in respect of such goods shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven to the Legislature and the authorities with regard to Tax measures, as these are often complicated. The validity of Section 8-D of the U.P. Trade Tax Act has been upheld by this Court in V.K. Singhal and others v. State of U.P. and others, 1995 UPTC 337. It is settled law that the mode of recovery cannot alter the character of the levy nor can it determine the competence of the State Legislature vide Venkateshware Theatre v. State of Andhra Pradesh, AIR 1993 (3) SCC 677; Buza Dooras Tea Company v. Stare of West Bengal, AIR 1989 SC 2015; Govind Saran Ganga v. Commissioner of Sales Tax1985 UPTC 1164 : AIR 1986 SC 1041 and Kheer Bori Tea Company v. State of Assam, AIR 1964 SC 925; M.D. Century Co-operative Bank v. IIIrd Income Tax Officer, AIR 1975 SC 2016. The Supreme Court held that the power to collect a tax means the power to collect it properly and effectively and the same view was taken in Orient Paper Mills v. State of Orrissa, 12 STC 357 and Chhote Bhai Jetha Bhai Patel v. State of M.P., 30 S.T.C. 1. In V.K. Singhal v. State of U.P., 1995 UPTC 337, this Court upheld the validity of Section 8-D and observed that the power to impose tax also include the power of collection b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ictly, the machinery provisions have to be construed so as to effectuate the purpose of the levy. Concededly, Section 12 is not the charging section, but a machinery provision for collection and recovery of tax. The legislature was entitled to provide for advance deduction of tax in certain specified situations and there is no force in the challenge to the validity of the provision. 188. We wish to emphasise another aspect which completely makes the issue an academic one only, with no practical significance. The Act was repealed on 1.7.2017 with the enforcement of the Goods and Service Tax Act, 2017. The provision, as noted above, did not shift the liability on the manufactures, nor the taxable event. The advance tax under the Act would have been collected only till the Act was in force. The amount already collected must have been deposited or would be deposited in due course, for which due credit is admissible to the person paying the tax. The advance collection of tax under this provision, by the manufacturer, is no more in vogue, the Act itself having been repealed. Therefore, challenge to the provision is only academic in nature and does not deserve any further consideration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itating trade, commerce and industry in the entire State, rather than passing it to the local body from where the tax had been collected, is based on a wrong premise that the entry tax is a local levy and not the power of the State Government to impose tax. (f) None of the provisions of the Act suffer from the vice of excessive delegation of power as sought to be contended on behalf of the petitioners. (g) The provisions of the Act relating to reversal of levy of tax (Section 5), rebate (Section 6) and exemption (Section 7) are neither violative of Article 14 nor Article 304 (a). The rebate and exemption notifications, which have been challenged, also pass muster of Article 14 and Article 304 (a). The third question framed by the Supreme Court is thus answered in favour of the Revenue and against the petitioners. (h) The crude oil imported by IOC from Gulf countries becomes part of the land mass of the country and was liable to entry tax upon its entry into a local area within the State. Entries 41 and 83 of List I operate in separate and distinct fields as compared to Entry 52 of List II and there is no conflict between the Customs Act, 1962 and the impugned Act. (i) The d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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