Supreme Court upholds Entry Tax in 7:2 decision [Read judgment]

A nine-judge bench of the Supreme Court of India today upheld the constitutional validity of entry tax in a 7:2 majority decision. Justices DY Chandrachud and Bhushan provided dissenting opinions, in a verdict that contains seven separate judgments..A nine-judge constitution bench led by CJI TS Thakur and comprising Justices AK Sikri, SA Bobde, Shiva Kirti Singh, NV Ramana, R Banumathi, AM Khanwilkar, DY Chandrachud and Ashok Bhushan had heard arguments for over two months, and finally reserved their verdict in September..Among other things, the majority view was that the freedom of trade under Article 301 of the Constitution of India was not free from tax, and that a non-discriminatory levy of tax is not violative of Article 304(a)..The Bench, did however, do away the imposition of a Compensatory Tax. In doing this, it overruled previous apex court decisions in Atiabari and The Automobile Transport (Rajasthan) Ltd. The assessees had relied upon these cases for assailing entry taxes while the states have sought for overruling the two decisions..On the question regarding the validity of each state legislation imposing entry tax, the Bench decided to let the issue be determined by the smaller benches..By way of background, the plea was moved by Jindal Stainless Steel Ltd in 2002, challenging the entry tax law imposed by Haryana. The matter consisted of several other petitions filed close on the heels of the first one, mostly by private companies..Subsequently, the apex court on September 26, 2003 referred the matter to a five-judge bench which in 2006, examined the petitions challenging the constitutional validity of the various state laws on entry tax on goods travelling from one state to another..Later in 2010, it would be referred to a 9-judge Bench by a Constitution Bench led by Justice SH Kapadia. After a six-year hiatus, in May this year, CJI Thakur took the decision to finally hear the lingering matters..The Bench dealt with difficulties such as the balancing of freedom of trade and commerce in Article 301 vis-a-vis the states’ authority to levy taxes under article 245 and Article 246 of the Constitution. In addition to this, the bench dwelt on the issue as to whether taxation was justifiable and also on the inter-relationship between Article 19(1)(g) and Article 301..It also turned down Attorney General Mukul Rohatgi’s suggestion that entry tax imposed by states no longer needs a debate as the Goods and Services Tax (GST) Bill will subsume it. Despite that, Rohatgi went on to defend the levy and said that the imposition of the tax was a sovereign legislative function..On the other hand, Senior Advocate Harish Salve lead the battle for the oil companies which challenged the tax. He had argued that though entry 52 of List II – which defines the executive and law-making powers of states – permitted such a tax, it was for goods entering a local area for consumption, use or sale, and therefore did not apply to his clients.