TMI Blog2018 (5) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... ocal area vis-a-vis the taxable event and merely because the tax is collected as general revenue and credited to a central fund would not result in altering the taxable event nor would be fatal to the vires of the Act. Thus, the first question framed for consideration by the Supreme Court, does not directly arise in the context of the provisions of the impugned Act. The contention that the entry tax is a local levy, the power of a local body to impose such tax and the State Government was not competent to realise entry tax as general revenue or to direct the same being credited to a central fund or its appropriation for facilitating 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. 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RIT - C No. - 28924 of 2017 WRIT - C No. - 28922 of 2017 WRIT - C No. - 28932 of 2017 WRIT - C No. - 28929 of 2017 WRIT - C No. - 29010 of 2017 WRIT - C No. - 28992 of 2017 WRIT - C No. - 29227 of 2017 WRIT - C No. - 29249 of 2017 WRIT - C No. - 29285 of 2017 WRIT - C No. - 29286 of 2017 WRIT - C No. - 29306 of 2017 WRIT - C No. - 29642 of 2017 WRIT - C No. - 29574 of 2017 WRIT - C No. - 29572 of 2017 WRIT - C No. - 29589 of 2017 WRIT - C No. - 29588 of 2017 WRIT - C No. - 29606 of 2017 WRIT - C No. - 29586 of 2017 WRIT - C No. - 29621 of 2017 WRIT - C No. - 29620 of 2017 WRIT - C No. - 29768 of 2017 WRIT - C No. - 29770 of 2017 WRIT - C No. - 29773 of 2017 WRIT - C No. - 29758 of 2017 WRIT - C No. - 30124 of 2017 WRIT - C No. - 30833 of 2017 WRIT - C No. - 31735 of 2017 WRIT - C No. - 35451 of 2017 WRIT - C No. - 35606 of 2017 WRIT - C No. - 35672 of 2017 WRIT - C No. - 39097 of 2017 WRIT - C No. - 50769 of 2017 2017 M/s Apl Apollo Tubes Limited , M/s Ginni Filaments Limited , M/s Good Luck Traders, Proprietor , M/s Goodluck Steel Tubes Ltd. Ghaziabad , M/s Apollo Metalex (P) Limited, Bulandshahar , M/s Prism Cement Ltd. Trhu Its Asstt. G.M. , M/s Ambuja Cement Ltd. Trhu Its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 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 been filed on basis of liberty granted by the Supreme Court by order dated 21 March 2017, while disposing of a batch of Civil Appeals and other connected matters, the leading case being Civil Appeal Nos.997-998 of 2004 by State of U.P. and others against M/s. Indian Oil Corporation Ltd. The judgement opens by noticing that the theory of compensatory tax propounded in Seven Judges' Bench judgement in Automobile Transport (Rajasthan) Ltd. etc. vs. State of Rajasthan and others, 1963(1) SCR 491, being doubted by a Bench of two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 factual foundation and there is no discussion in the impugned judgments as well. It is also agreed by counsel for both the sides that in the absence thereof, it may not be possible for this Court to decide these issues. According to us, in the aforesaid scenario, appropriate course of action would be to permit the appellants to file fresh petitions by May 31, 2017, raising the aforesaid issues with necessary factual background or any other constitutional/ statutory issue which arises for consideration. (emphasis s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 Court, vide judgment and order dated 27 January 2004 allowed the aforesaid writ petitions filed by the Indian Corporation Ltd and M/s Moser Baer India Ltd. Insofar as the writ petition filed by the Company is concerned, that also came to be disposed of in terms of judgment dated 27 January 2004, vide order dated 8 January 2007. The said judgment dated 27 January 2004 was carried to the Supreme Court by the State by way of special leave petitions being Special Leave Petition (Civil) Nos 2757-2758 of 2004, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled 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 industry. The State, it was further observed, also established that the entire amount of entry tax by way of reimbursement/recompense to the trade, commerce and industry in the local areas of the State of Uttar Pradesh, provides quantifiable/ measurable benefits to its payers. The argument that the Act was discriminatory, unreasonable, against public interest, violates the freedom of trade, commerce and intercourse guaranteed under Article 301 of the Constitution of India was repelled. Section 17 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect 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 together with interest; (vi) Issue a suitable writ order or direction in the nature of mandamus commanding the respondents to release and discharge the bank Guarantee furnished by the Petitioner No.1 pursuant to the order passed by this Hon'ble Court and the Hon'ble Supreme Court of India; Writ Petition No 25730 of 2017 : M/s. Indian Oil Corporation Ltd. vs. State of U.P. others :- 4. This petition by M/s Indian Oil Corporation Ltd (for short, 'IOC') ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 impugned legislation had levied taxes on certain goods carried by road and inland waterways in the State of Assam. The levy under the legislation was challenged primarily on the ground that the same was ultra vires of the Constitution, inter aila, because of its repugnance with the provision of Article 301 of the Constitution. The Supreme Court by a majority struck down the constitutional validity of the enactment holding that the impugned levy operated directly a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 rupee collected on account of tax should be shown to be spent in providing the trading facilities, there has yet to be a broad correlation between revenue generated by the tax realised and the expenditure on the facilities provided for facilitating trade and commerce. Justice Mathew in G.K. Krishnan vs. State of Tamil Nadu, (1975) 1 SCC 375, while deciding a challenge to a tax on motor vehicles under the Motor Vehicles Taxation Act, 1931 observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 legislation on the subject in the State of Bihar, the vires whereof had been upheld by the Supreme Court. Accordingly, U.P. Tax on Entry of Goods into Local Area Ordinance (U.P. Ordinance No.35 of 2007) was promulgated with retrospective effect from 11.1.1999. The statement of objects and reasons which necessitated the promulgation of Ordinance states as under:- (a) Indian Oil Corporation was demanding for remand of ₹ 3022.58 Cro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erely 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 (standstill) after the movement of the goods ceases in the local area ? (6) Whether the entry tax can be termed a tax on the movement of goods when there is no bar to the entry of goods at the State border or when it passes through a local area within which they are not sold, used or consumed? (7) Whether interpretation of Articles 301 to 304 in the context of tax on vehicles (commonly known as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 satisfy this test is left to be determined by the regular benches hearing the matters. 10. The questions whether the entire State can be notified as a local area and whether entry tax can be levied on goods entering the landmass of India from another country are left open to be determined in appropriate proceedings. Supreme Court's interpretation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 dealing with the challenge, held that in order that a taxing law may be valid, the tax proposed to be levied must be within the legislative competence of the legislature imposing the tax and authorizing the collection thereof, and that the tax must be subject to the condition laid down under Article 13 of the Constitution. One of such conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 between general subjects of legislation and taxation, for the former are dealt with within one group while the later are dealt in a separate group. The result is that the power to tax cannot be deduced from a general legislative entry. This view was approved by the Constitution Bench of the Supreme Court in State of West B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 guaranteed to the citizens. Then, the Supreme Court considered Articles 248 to 253 of the Constitution and noticed the limitations on the power of the State legislatures. Since, in the present case, we are not concerned with these Articles, we avoid further/detailed reference thereto. Article 286, however, is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 part of the territory of India as may be required in the public interest. 24A. While dealing with this Article, the Nine Judges' Bench in Jindal Stainless-II observed that the contents of this Article leaves no manner of doubt that Parliament is empowered to impose such restrictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 except when the law declares that scarcity of goods in any part of India necessitates such preference or discrimination. 27. That takes us to consider Article 304 of the Constitution, which reads thus: 304. Restrictions on trade, commerce and intercourse among States. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 as Constitutionally permissible, the exercise of such power is subject to the two restrictive conditions referred to above. That does not however detract from the proposition that levy of taxes on goods imported from other States is constitutionally permis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 to trade and commerce in any of the lists in the Seventh Schedule. 4. The restriction that the Parliament may impose in terms of Article 302 may extend to giving of preference or permitting discrimination between one State over an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 301 is indeed subordinate to Article 304 which it was even otherwise without the use of that clause. The net effect of the discussion therefore is that the expression ''subject to other provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 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 various other judgements following it, including the decisions in Automobile Transport and Jindal Stainless-I stood overruled. After answering the first question, the Supreme Court obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eiterating 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 behalf of the assesses it was contended that grant of exemptions and incentives in favour of locally manufactured/ produced goods is also one form of insidious discrimination which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tifications 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 respectfully agree with the line of reasoning adopted in Video Electronics (supra). The expression discrimination has not been defined in the Constitution though the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 economic unity of India is one of the Constitutional aspirations and if attaining and maintaining such unity is a Constitutional goal, such unity and objectives ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent 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). Having said that, we leave open for examination by the regular benches hearing the matters whether the impugned enactment achieve the object of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 goods and goods manufactured or produced in the importing State. 150(7). The intention of the Article thus, clearly is that where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttar 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 dealing with the provisions of the Act in the backdrop of the provisions of the Constitution, in particular Chapter XIII and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Supreme Court also allowed the petitioners to raise any other constitutional/statutory issue which arises for co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 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 'local area' is of immense significance. The taxable event is not the entry of goods in any area of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. Keshav Ram Industries Ltd. and others, 2004 (10) SCC 201. Where there is any ambiguity in a taxing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid 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 crude oil, which is imported by the Oil Companies, reach the custom barrier of the country ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 any other local area; (b) the State Government is being empowered to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 reading of Section 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment of tax and likewise where tax, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s may be specified in the notification, any goods or class of goods 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 registrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) The State Government shall, by notification, specify the manner of deposit of tax under appropriate Heads of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocal area for consumption, use or sale. After making an elaborate discussion on distribution of legislative power between Union and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or sale. No capital can be made on the submission that since tax is not being collected by local authorities it is beyond the power of the State 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 uti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dge Constitution Bench of this Court in Jindal Stainless (supra), the inquiry as to whether tax is compensatory or not is not relevant. Secondly, this Court in 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urged by Sri Dhruv Agrawal, learned senior counsel was that the provisions of the Act, particularly the definition of 'local area' in Section 2 (d) in so far as it includes 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, (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 66 of the Cantonments Act, 2006 relates to general power of taxation of the Board. The Board, with the previous sanction of Central Government, is competent to impose property tax and 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 In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the word therein in Entry 52 List II restricts the scope of taxing power under the above entry in List II to local bodies administering a particular local area on the happening of any 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved thus:- 22. It was with the knowledge of the previous history of the legislation that the Constitution-makers set about their task in preparing the lists in the seventh schedule. There 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 boar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle in any area of the State but in a local area. The High Court explained it by giving an illustration that if a motor vehicle was brought from Jabalpur (Madhya Pradesh) for being used or sold at Amravati (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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al area. However, it was contended that there are certain provisions of the Act, particularly Section 2 (c), Section 4(6), Section 4(3A), Section 6, Section 12 and Section 14 which have the effect of treating the entire State 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities cannot themselves levy this tax. The power is that of the State Legislature and of none else. So long as the tax is levied upon the entry of goods into a local area for the purpose of consumption, use or sale therein, the 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 E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such funds for crediting all moneys received, respectively, by or on behalf of the municipalities and also for withdrawal of such moneys therefrom as may be specified in the law. Under the last mode, the State legislature by law is competent to provide for (a) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le and once the good has been subjected to the levy on occurrence of the taxable event, the good would not be subjected to the same levy irrespective of the fact that it changes hands between dealers situated in different local areas. The levy being a State levy and which 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 onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided powers which were likely to be used in a discriminatory and arbitrary manner. Similar contention has been raised in respect of (i) Section 6 which confers power upon the State Government to provide by notification a rebate upto the full amount of tax leviable under the Act 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n fixation of the rates. However, in respect of the amended provision which prescribes the maximum rate, it was held that sufficient guidelines have been provided and it was found to be valid. It was observed thus:- (16) Under section 5 of the Punjab General Sales Tax Act, 1948, as it 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 legislativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the approval of Government which acts as a watch-dog on the actions of the local body in this matter on behalf of the legislature. There may be other ways in which guidance may be provided. But the purpose of guidance, whatsoever may be the manner thereof, is to see that the local body fixes a reasonable 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 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imits, but in case, where it does, the legislature would step in by annulling the notification or modifying it in such manner as it may consider proper. There is no scope for the State Government to act as per its whims and fancies, as contended by learned counsel for the petitioners. 101. Sri Ravi Kant, learned 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation 'for the purposes of this Act' and that limiting factor governs sub-sections (3), (4) and (5). Sub-section (3) vests nothing new beyond sub-sections (1) and (2). Sub-section (4) does not authorise the government to direct the corporation to impose any tax falling outside sub-section (1) or sub-section (2). Sub-section (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Government be placed before each House of Parliament for a total period of 30 days in one session or two more successive session and if both Houses agree in making any modification in the rule or Notification should not be made, the rule or Notification shall thereafter have effect only in such modified form or be of no effect, as the case 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 cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court held that : A statute may not make any classification of the persons or things for the purpose of applying its provisions but may -leave it to the discretion of the Government to select and classify persons or things to whom its provisions are to apply. In determining the question of the validity or otherwise of such a statute the court will 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld abuse its power under Section 7, while granting exemptions. 109. We now proceed to examine the challenge to Section 15 of the Act which provides as under :- 15. Power to remove difficulties-- (1) If any difficulty arises in giving effect to the provisions of this Act, the State Government may, by order published in the official gazette, make such provisions, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Acts, the Indian Income Tax Act, 1922 and all the orders and rules issued thereunder were extended to the merged States and by Clause 7 the corresponding laws in force in the merged States were repealed. Act No.67 of 1949 replaced the Ordinance w.e.f. 1st April, 1949. Section 6 of the said Act conferred power upon the Government to issue orders or directions for removal of difficulties 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 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atna High Court in Krishnadeo Misra Vs. State of Bihar, AIR 1988 Patna 9, which also takes a similar view and strikes down the notification issued under the Removal of Difficulty Clause was also vehemently relied upon. In that case, Rule 8 of the Bihar Non-Government Elementary Schools (Taking Over of Control) Act, 1976, which was under consideration, was to the following effect:- If any difficulty arises 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 pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appear to me as creating further and virtually insoluble difficulties of their own creation. To conclude, the answer to the question posed at the very outset is rendered in the negative and it is held that Section 8 of the Act empowering the State Government to remove difficulties in giving effect to its provisions cannot be used as a cloak for subordinate legislation and as a substitute for the express rule making power 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 iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dious discrimination between dealers similarly situated. It was urged that various provisions of the Act treat dealers similarly circumstanced in different manner. These provisions, it was urged, are violative of Articles 14, 301 and 304 (a) of the Constitution. 116. It is now well settled that levy of taxes on goods imported from other States is constitutionally permissible so long as the State Legislature abides by the limitations placed 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, irrespecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f goods w.e.f. 30.9.2008. On 29.5.2009, by another Notification, clinker was deleted from the list of Scheduled Goods w.e.f. 1.6.2009. The cement was added to the schedule w.e.f. 16.5.2003 by Notification dated 9.5.2003 and it was made taxable at the rate of 2% of the value of goods w.e.f. 16.5.2003. By a Notification dated 19.2.2010, cement was omitted from the schedule. By Notification dated 4.3.2008, the Government allowed a rebate to the extent 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 notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the rate of tax on clinker is concerned there is no discrimination with respect to entry tax on imported clinker or locally purchased clinker. As far as annexure 1 to the supplementary affidavit is concerned which is stated to be based on actual data for the year 08-09, but for the assessment year 08-09 no such date had been furnished before the assessing authority during assessment proceedings or thereafter and so is not liable to be accepted, for the reasons 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 petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect to its policies... .. .. 19. I think that a distinction should be drawn between discrimination without reason and discrimination with reason . The whole doctrine of classification is based on this distinction and on the well-known fact that the circumstances which govern one set of persons or objects may not necessarily be the same as those governing another set of persons or objects, so that the question of unequal treatment does not really arise as between 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd objects so that the question of unequal treatment does not arise as between the provisions covered by different sets of circumstances'. 124A. Thereafter, His Lordship in paragraph 248 of the law report laid down as under:- Thus stated, the principle laid down in Video Electronics is that, if a backward area in a State needs impetus for the development, and in such circumstances incentives are given for the industry to develop whether by way of subsidies or tax exemptions 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 oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has held that burden of establishing that there is a discrimination against goods which are imported from other States lies on the person who sets up a plea and in answering the same, it is open to the State to establish that the legislative provision which it has enacted maintains the principle of non-discrimination between goods produced and manufactured within the State and goods imported from other States, while at the same time, bringing about parity in terms of tax burden between domestic and 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 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Act. It was contended that when a dealer is importing a petroleum product and selling the same, he gets the benefit of set off of entry tax in respect of VAT. On the other hand, in case of manufacturer importer like IOC, there is no provision of set off. Thus, the incidence of VAT and entry tax has to be borne by the IOC while dealer bringing petroleum product from outside the State of U.P. gets the benefit of the rebate notification. The said contention has been refuted in the counter affidavit filed 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 impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) is generic in nature and covers all taxes on goods which a State is competent to impose by virtue of Articles 245 and 246 read with List II of Seventh Schedule. A Scheme adopted by a State Legislature whereby several taxes are levied on the goods (either locally produced or imported from other States) under different heads, cannot be faulted with if it conforms to the principle of equivalence and nondiscrimination. For e.g., both sales tax levied under entry 54, List II and entry tax levied under entry 52, List II are taxes on goods. It is the burden of the tax which can discriminate and not the form. 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs in the aforesaid petition was that as a consequence of such reduction of sales tax, cement from Rajasthan became much cheaper in the neighbouring States like Gujarat and that adversely affected the local sale of cement manufactured by the petitioners in Gujarat by reason of higher rate of sales tax on the local sales within that State. Such reduction of the rate of tax, it was contended, was contrary to the scheme contained in Part XIII of the Constitution and was liable to be struck down. The challenge was repelled holding thus:- We are unable to agree with the contention of the learned counsel for the petitioners that the impugned notification had the effect of preventing or hindering the free movement of goods from one State to another. 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 incre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the goods on which entry tax would be levied, was challenged on the ground that it is arbitrary, discriminatory and violative of Article 14 of the Constitution. The contention was that the State had selectively excluded other goods from the preview of the entry tax legislation, thus making hostile discrimination. 138. Before we deal with the contention, we would like to advert to certain well established principles which govern a constitutional challenge on the ground of violation of Article 14. It is now well established that taxing laws are not outside the purview of Article 14. However, in matter pertaining to a fiscal legislation, much greater latitude is enjoyed by the Legislature in selection of goods or people who are to be subjected to tax and who 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to levy. The Supreme Court in State of U.P. vs. Renu Sagar Power Co., AIR 1988 SC 1737, has held that exercise of such power is a quasi legislative function by the delegate. The same view has been taken in Narinder Chand Hem Raj vs. Lt. Governor, Administrator, UT Himanchal Pradesh, (1972) 1 SCR 940. 141. Now, by notification dated 29.9.2008, the State Government in exercise of power under Section 4 of the Act, specified the goods which would come under the net of entry tax. Iron Steel as defined in Section 14 of the Central Sale Tax Act, 1956 was enlisted at Sl. No.14 of the notification. It was made liable to entry tax @ 1% of the value of goods. The notification, in our considered opinion, could not be challenged on the ground that it is discriminatory, in as much as it did 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 concret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was that from 31.3.2011, when the rate of tax was enhanced to 5%, H R Coil like other goods falling under the category of Iron and steel, also stood excluded. Thus, HR Coil was subject to levy from 31.10.1999 to 31.3.2011 at the rate of 1% of the value of goods and whereafter it stood excluded from the levy of entry tax. 143B. The relevant part of Section 14 of the Central Sales Tax Act, 1956 which was adopted wholly or partially in the above notifications reads thus :- (iv) iron and steel, that is to say,-- (i) pig iron, [sponge iron] and cast iron including [ingot moulds, bottom plates], iron scrap, cast iron scrap, runner scrap and iron skull scrap; (ii) steel semis (ingots, slabs, blooms and billets of all qualities, shapes and sizes); (iii) skelp bars, tin bars, sheet bar, hoe-bar and sleeper bars; (iv) steel bars (rounds, rods, squares, 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 pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atters' is not based on any precise scientific principle but on societal exigencies, empiricism and experimentation. The Court is not ready to accept that it was a case of casus omissus, nor is the Court inclined to supply the alleged omission, by issuing a writ of mandamus, overriding the wisdom of the State. 144. The Supreme Court in Jaipur Hosiery Mills (P) Ltd. vs. The State of Rajasthan, (1970) 2 SCC 26, dealt with a similar challenge, while considering an exemption notification issued by the State Government under the Rajasthan Sales Tax Act, 1950. On January 31, 1958 a notification was issued exempting garments of the value not exceeding ₹ 4/- in single piece from sale tax. The Authorities did not grant the benefit of the said notification to the appellant, which was engaged in manufacture and sale of vests and underwears as the notification was interpreted to exclude garments made of hosiery 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provision of the Act providing for grant of exemptions, set offs or rebate are not, ipso facto arbitrary or discriminatory, albeit a notification issued in exercise of such power may, in a given case, result in discrimination. But for that, the validity of notification has to be specifically challenged. In most of the other writ petitions, there is absolutely no pleading regarding any discrimination under Article 14 or Article 304 (a) except for the plea being raised as a legal submission. We, therefore, are unable to uphold the contention that the provisions of the Act relating to rebate, exemption and set off were discriminatory or violative of Article 14 or Article 304 (a). Challenges peculiar to the case of IOC:- 147. In the writ petition filed by Indian Oil Corporation Ltd., certain challenges peculiar to the facts of that case were raised. The petitioner Corporation has a Refinery situated at Mathura for which it 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 unlo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... past. It is an admitted fact that since thereafter the custom duty is being paid at Vadinar Port upon removal of the goods from the custom bonded warehouse situated at the port. 149. In the backdrop of the above facts, the following submissions were raised by learned senior counsel Sri Dhruv Agrawal appearing on behalf of the petitioner Corporation:- (a) The petitioner Corporation, which is paying custom duty on the import of crude oil, which is a subject covered by Union List, cannot be subjected to entry tax or any other tax imposed by the State legislation. Conversely, if any tax is levied on crude oil by the State legislature, it will be intrusion into the field reserved for the Union legislature vide Entry 41, read with Entry 83 of List I. Movement in the course of inter-State trade and commerce or in the course of import constitutes a series of events in an integrated and inextricable contract. Principles of movement in the 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 poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Entry 83 of List I and to a duty of import. It is only where a Bill of entry for home consumption is filed that the goods cease to be imported goods. Until then, it is urged, no entry tax would be leviable. 151A. Thereafter, His Lordship, after considering in great detail the provisions of the Customs Act, 1962, concluded by holding that Entry 83 of List I and Entry 52 of List II have separate and distinct fields of operation. Entry 41 of List I deals with trade and commerce with foreign countries; import and export across customs frontiers; and definition of customs frontiers. The distribution of powers with reference to the taxing entries in List I and II is mutually exclusive. 152. The Division Bench of the Supreme Court in Fr. Williams, while considering the challenge to the entry tax legislation in the State of Orissa, Patna, Kerala and Jharkhand, has specifically dealt with the above question under issues no. (ii) and (iii), which are 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 import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lines cannot be subjected to entry tax, as the entire transaction is a part of one single integrated transaction and that the import ends at Mathura Refinery. The contention is based on the doctrine of unbroken package, which postulates that import of goods continues even after crossing customs barrier until the package imported is broken up and the goods are taken out. The contention is that crude oil in same form in which it is imported is transported to Mathura Refinery through underground pipelines. The package in which it is carried through underground pipelines while it crosses the local area remains undisturbed. It becomes part of the common land mass when it is removed at Mathura Refinery for consumption and use and not before that, consequently, no entry tax could be levied upon the same. 155. Hon'ble Banumathi, J. in Jindal Stainless-II has in great detail dwelt on the doctrine of unbroken package and thereafter observed that the said doctrine, which was propounded 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 regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject to the taxing power of the State, did not mean that in the absence of such action, no exaction could be imposed on the goods. Rather, the Court clearly implied that the prohibition would not apply to a state tax that treated imported goods in their original packages no differently from the common mass of property in the country ; that is, treated it in a manner that did not depend on the foreign origins of the goods. 158. In Fr. Williams, the regular Division Bench also specifically considered the issue as to when import of goods come to end. While considering the said issue, reliance was placed on the judgement of the Supreme in J.V. Gokal Co. (Private) Ltd. Vs. Assistant Collector or Sales Tax (Inspection) others, AIR 1960 SC 595, wherein the Court explained the phrase in the course of the import of goods into the territory of India as follows:- 9. What does the phrase in the course of the import of the goods into the territory of India convey? The crucial words of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 different and separate from the levy of a customs duty, which is on import. 104. There cannot be any dispute to the proposition as laid down by this Court in the above case that the scope and ambit of the Constitutional entries have to be given a wide meaning and scope. There 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Mathura Refinery is situated as part of the land mass. As soon as the crude oil enters the local area, the taxable event takes place and liability to pay entry tax comes into existence. 161. It is noteworthy that in order to overcome the aforesaid difficulty, it was sought to be contended on behalf of the petitioner Corporation that the factory premises of the Mathura Refinery is situated beyond the local area and therefore, even otherwise, no entry tax would be leviable on the crude oil. The said stand has been emphatically refuted by the respondents in their affidavit dated 8th September 2017 in which it is categorically stated that Mathura Refinery is situated in Mathura Gram Panchyat Dhanateja, Dhana Shamsabad, Chargawn. A copy of the letter dated 4.8.2017 from Block Development Officer, Block Farah, Mathura certifying the same has also been brought on record. We have no hesitation in accepting the stand taken in this regard by the State respondents. Having regard to these facts, we have no difficulty in rejecting 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 fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are requested to ensure that there is no hold-up of clearance of petroleum products or any disruption caused in the movement of petroleum products as a result of the withdrawal of warehousing provisions. No precipitate action should be taken. In case of any difficulty in determining the assessable value or on any other account, refineries/ warehouses may be advised to resort to provisional assessment. Difficulties/ problems, if any, that are noticed in the implementation of switch over may be examined on an urgent basis by the Chief Commissioners and the same may be brought to the notice of Board immediately along with views and suggestions. 6. These instructions would come into force w.e.f. the midnight of 15.2.2005. 7. Hindi version will follow. 163. A perusal of the circular would reveal that until the issuance thereof, the petitioner Corporation was given the facility of transporting crude oil from bonded warehouse tanks situated at the port to the bonded tanks located within its factory premises at Mathura. This enabled the petitioner Corporation to defer payment of custom duty until the crude oil is cleared for home consumption at the factory premises. 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rance is granted after the proper officer satisfies himself that import duty, interest, fine and penalties payable in respect of such goods have been paid. 165. Hon'ble Banumathi, J. in Jindal Stainless-II, after considering these provisions of the Customs Act, especially the facilities relating to warehousing and deferred payment of custom duty observed in paragraphs and 431 and 435 as under:- 431(171). Chapter VIII of Customs Act deals with goods in Transit. Section 54 deals with trans-shipment of goods without payment of duty upon presentation of bill of trans-shipment. The inland container depot and land custom station are creatures of Statute. They are not determinative of the taxable event for imposition of custom duty on imports. Many of the provisions are facilitative and/or intended for purposes of valuation and fixation of rates. The crucial aspect is that according to entry 83, List I as well as the Customs Act, 1962 the taxable event is ''import' or ''bringing of the goods into India' and it is distinct from the taxable event of entry 52, List II. 435(175). A comparison of Sections 58 and 57 shows that a licensed private warehou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sales tax where the taxable event is the act of sale. Dealing with customs duties, the Bench of nine Judges speaking through Sinha, CJ held as follows : Similarly in the case of duties of customs including export duties though they are levied with reference to goods; the taxable event is either the import of goods within the customs barriers or their export outside the customs barriers. They are also indirect taxes like excise and cannot in our opinion be equated with direct taxes on goods themselves. Now, what is the true nature of an import of an import duty? Truly speaking, the imposition of an import duty, by and large, results in a condition which must be fulfilled before the goods can be brought inside the customs barriers, i.e. before they form part of the mass of goods within the country. (Id. at. p. 543) Entry of goods into a local area for consumption, use or sale therein attracts the charging provision of entry tax legislation. The levy which is referable to Entry 52 of List II is attracted the moment the goods enter a local area for consumption, use or sale. The Customs Act, 1962 has made a beneficial provision for allowing goods to be deposited in public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he arrangement, as noted, was purely facilitative in character. Now if the contention of the petitioner Corporation that since it was paying custom duty on release of good for home consumption at the Mathura Refinery, therefore, it was not liable to pay entry tax as the import had not concluded at the time of its entry into local area is accepted, it would result in the entry tax assuming the shape of a discriminatory impost. An importer of crude oil, who was not given the facility of inland warehousing but had paid custom duty at the port itself, undoubtedly had to pay entry tax resulting in discrimination between him and the petitioner Corporation. 170. In Fr. Williams, their Lordships cautioned against making an interpretation which would insulate the imported goods from being subjected to any State tax, as any such insulation would be a protectionist measure which would render the impost discriminatory and invalid. The observations made in this regard by their Lordships are extracted for convenience of reference:- The taxing event for entry tax under Entry 52 List II is entirely different and has nothing to do with the customs duty. The State by imposing entry tax in an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he importer on his imported goods would so mingle them with the common property within the State as to lose their distinctive character as imports and render them subject to the taxing power of the State, did not mean that in the absence of such action, no exaction could be imposed on the goods. Rather, the Court clearly implied that the prohibition would not apply to a state tax that treated imported goods in their original packages no differently from the common mass of property in the country ; that is, treated it in a manner that did not depend on the foreign origins of the goods. (emphasis supplied) 172. Concededly, the re-warehousing facility stood withdrawn in the year 2005. The specific stand of the State respondents in the counter affidavit filed by it is that the petitioner Corporation had not raised any such plea before the assessing authority at the time of assessment and assessment proceedings for the period upto 2005 have already attained finality. The petitioner has not brought on record any documentary evidence nor orders passed in course of assessment proceedings to show that any such plea was raised by it. Consequently, even otherwise, we are of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he third is the rate at which the tax is imposed, and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If these components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness in the legislative scheme defining any of those components of the levy will be fatal to its validity. 175. Again emphasis was placed on State of Rajasthan Vs. Rajasthan Chemist Association, 2006 (6) SCC 773, For short, hereinafter referred to as 'Rajasthan Chemist Association where the validity of Section 4-A of the Rajasthan Sales Tax Act, 1994 was called into question. Section 4-A envisaged levy of sales tax on any transaction of sale of notified goods not on the actual price which is paid or becomes payable by the buyer to the seller on such sales as have taken place, but on MRP of the goods declared on the package i.e. the retail price as per the provisions of the Standards of Weight Measures Act, 1976. The challenge was on the ground that the taxable event was the first sale or purchase, irrespective of series of sales by successive dealers, consequently, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of goods' shall mean the value or the price at which the goods of the like kind or like quality is sold or is capable of being sold at wholesale price in the open market in the local area in which goods are being brought or received for consumption, use or sale. EXPLANATION - For the purpose of ascertaining whole sale price of any goods under this clause the whole sale price shall include any amount paid or payable by the purchaser as excise duty or any other duty but shall not include any amount charged for anything done to the goods after entry of goods into the local area or any amount of fee or tax including lax under this Act payable in respect of sale of the goods of the like kind or like quality. 177. Under the Act, the entry tax is levied on the value of goods. A plain reading of Section 2 (h) reveals that value of goods is the actual purchase price, ascertainable from the original purchase invoice or bill, and includes certain other charges like transportation cost etc. It thus represents the value of goods at the time of entry into a local area, which is the taxable event. The proviso is an exception to the main provision. Where the value of goods purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one and thus, in our opinion, it is not safe to place reliance on the said illustration to adjudge the correctness of the submission made. 178. In Rajasthan Chemist Association, the legislation impugned namely the Rajasthan Sales Tax Act, 1994 was enacted in exercise of power under Entry 54 of List II. The taxable event under the Statute was the first point of sale in the State of Rajasthan, irrespective of series of subsequent sales by successive dealers. However, with insertion of Section 4-A by Finance Act, 2004, the tax was sought to be imposed on the successive sale and not the first sale. By providing for charging tax on MRP, the transaction which was subjected to tax was sale by retailer to the customer, a transaction subsequent to the first sale under which the good is procured by retailer from manufacturer or distributor. It is in context thereof that it was held that the transaction on which tax was sought to be realised was having no nexus to the taxable event i.e. the first sale. However, in the instant case, as observed above, the taxable event has not undergone a change. It continues to be the entry of goods into local area for consumption, use or sale. The value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC 1133 and East India Tobacco Co. Vs. State of A.P., AIR 1962 SC 1733, in laying down the principles which are to be applied while adjudging validity of a taxing statute on the touchstone of Article 14 of the Constitution and thereafter held that there was nothing illegal in the legislature devising ways and means to facilitate collection of tax on a presumptive basis, by observing as under:- Considered in the light of the practical difficulties envisaged by the Revenue to locate the persons and to collect the tax due in certain trades, if the legislature in its wisdom thought that it will facilitate, the collection of the tax due from such specified traders on a presumptive basis , there is nothing in the said legislative measure to offend Article 14 of the Constitution. In the light of the legal principles stated above, we are unable to hold that Section 44-AC read with Section 206-C is wholly hit by Article 14 of the Constitution of India. 180. Irrespective of what has been observed above, it is noteworthy that the petitioners had been paying entry tax on stock transfer since the enforcement of the Act without the vires of the provision being challenged despite rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded Tax Act, 2008 and provision regarding payability of interest under sub-section (2) of section 33 of the said Act shall mutatis mutandis apply to amounts collected by manufacturers from purchasers under this section. (6) The amount of tax deposited under this section shall be deemed to have been deposited for and on behalf of the dealer from whom such tax has been received. The manufacturer shall mention the amount of such tax in the tax invoice or sale invoice, as the case may be, issued to the purchasing dealer. It shall be deemed to be the proof for deposit of tax unless the tax invoice or sale invoice, as the case may be, is found forged or bogus or fake or not validly issued or obtained fraudulently. 182. It is contended that Section 12 mandates collection of entry tax even before the taxable event takes place and is thus beyond legislative competence of the State legislature. In support of the said contention, reliance has been placed on paragraph 106 of the judgment of a Constitution Bench of the Supreme Court in State of West Bengal Vs. Kesoram Industries Ltd. and others, (2004) 10 SCC 201, where judicial opinion flowing from various previous pronouncements was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cases covered by the Act the tax is payable at the point of first sale in the State. But under clause (a) of the second proviso the tax is ordered to be recovered even before the sale, in addition to the penalty not exceeding ₹ 1,000 or double the amount of tax recoverable whichever is greater. Therefore clause (a) of the second proviso is clearly repugnant to the general scheme of the Act which in the majority of the cases provides for recovery of tax at the point of first sale in the State. In view of this repugnancy one or other of these two provisions must fall. Clearly it is clause (a) in the proviso which under the circumstances must fall, for we cannot hold that the entire Act must fall because of this inconsistency with respect to recovery of tax under clause (a) of the second proviso even before the taxable event occurs in the large majority of cases which would be covered by the Act. We are, therefore of opinion that clause (a) of the second proviso being repugnant to the entire scheme of the Act, in so far as it provides for recovery of tax even before the first sale in the State which is the point of time in a large majority of cases for recovery of tax, must, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing authority disclosing the goods supplied and the tax received by him. He has to deposit the tax received from such persons in such manner and within such time as has been prescribed. Where the manufacturer fails to deposit the tax received, it is recoverable from him as arrears of land revenue. Where the assessing authority is satisfied that the goods, after delivery, have been lost or destroyed, before its entry into the local area, it shall direct the tax paid in respect of such goods to be refunded to the person who had paid the tax. The provisions regarding imposition of penalty and payment of interest under Section 34 of the U.P. VAT Act, 2008 have been made applicable to the amounts collected by the manufacturers from purchasers under this Section. The tax deposited is deemed to have been deposited for and on behalf of dealer from whom such tax has been received. The manufacturer has to mention the amount of such tax in the tax invoice or sale invoice, as the case may be, issued to the purchasing dealer to enable the dealer to claim benefit thereof. 186. Under the earlier legislation on the subject i.e., Act, 2000, there was a similar provision - Section 4-A as fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te collection of tax in a manner considered convenient by the legislature. A Division Bench of this Court which decided the challenge, upheld the vires of the provision by observing thus :- 14. A perusal of Section 4-A shows that the stand of the Government appears to be correct. Section 4-A appears to be only a convenient device for the collecting the Entry Tax which continues to be imposed on the dealer and not on the manufacturer. What Section 4-A has done is to provide for payment of the Entry Tax by the dealer to the manufacturer. The Legislature in its wisdom may have thought that this could facilitate the collection of the Entry Tax regarding which the authorities may be having some difficulties. It is settled law that the motive of legislation cannot be seen. The doctrine of colourable legislation only relates to legislative competence and not to the motive of the law. Moreover, merely because of some hardship which the sugar manufacturer has to face, this does not mean that the Act is beyond legislative competence. There are similar provisions in various Taxing Institutes, which have been held to be valid by the Court e.g. Section 8-D of U.P. Trade Tax Act, provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... islature in such matters relating to fiscal statutes. It is well known that the Legislature and the Government had the thing of various contingencies in taxing measures, and this Court can only interfere if there is any constitutional violation or violation of any Statute. However, we find no Constitutional invalidity in Section 4-A in the impugned Notification . (emphasis supplied) 187. In our opinion, the above judgment is a complete answer to the contention raised against the validity of the provision. Section 12 of the Act did not shift the taxable event to the purchase of goods by a retailer from manufacturer but it continued to be entry of such goods into a local area for consumption, use or sale. Where taxable event is not to take place, as would be in a case where the manufactured goods are sold within the same local area, no entry tax would be payable, as held in M/s. Mawana Sugar Ltd. vs. Deputy Commissioner, Commercial Tax and others, 2013 (6) All. L.J. 19 (DB). Likewise, where the goods are lost even before entry into a local area, sub-section (4) takes care of the eventuality and provides for refund of the tax to the person who had paid it. Section 12 was a ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d legislation seeks to encroach upon the field reserved for the Parliament under Entry 3 List I and is contrary to the Cantonment Act, 1924/Cantonment Act, 2006, is devoid of any merit as the field under Entry 3 List I under which Cantonment Act, 1924/Cantonment Act, 2006 had been enacted is separate and distinct from the legislative field under Entry 52 List II and there is no overlapping nor any conflict. (d) The contention that the entire State cannot be treated as one local area, is devoid of any merit, as the definition clause of local area under Section 2 (d) did not treat the entire State as one local area. The other provisions of the Act also do not amount to treating the entire State as one local area vis-a-vis the taxable event and merely because the tax is collected as general revenue and credited to a central fund would not result in altering the taxable event nor would be fatal to the vires of the Act. Thus, the first question framed for consideration by the Supreme Court, does not directly arise in the context of the provisions of the impugned Act. (e) The contention that the entry tax is a local levy, the power of a local body to impose such tax and the State G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be reopened in these proceedings. (k) Proviso (iv) to Section 2 (h) which provides for calculation of value of goods in certain contingencies at wholesale price of such good in the open market in the local area in which goods are being brought or received for consumption, use or sale is neither dehors the provisions of Section 4 nor beyond legislative competence. It is only a legislative device for quantification of tax liability in cases where the price of the good is not ascertainable or not verifiable or not worthy of credence or where no actual sale takes place, as in case of stock transfer. Further, the said plea is also not covered by the window left open by the regular Bench while remitting the matter and, therefore, does not merit any further consideration. (l) Section 12 of the Act was only a machinery provision to facilitate collection of tax and prevent its evasion. It was neither illegal nor arbitrary nor resulted in shifting the liability of the person who in fact was liable under the Act nor the taxable event. Further, the contention in this regard is now of academic importance only, the Act itself having been repealed since 1.7.2017. 190. In consequence an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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