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Entry Tax not Violative of Freedom of Trade and Commerce, says Supreme Court

In a setback to business entities, the Supreme Court on Friday upheld the entry tax on goods coming into a state

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Income tax (Representational Image), Pixabay

New Delhi, November 11, 2016: In a setback to business entities, the Supreme Court on Friday upheld the entry tax on goods coming into a state, holding that it was not in violation of the freedom of trade and commerce guaranteed under Article 301 of the Constitution and free trade does not mean “free from tax”.

By a majority verdict of 7:2, the Supreme Court held that “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.”

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“Only such taxes as (which) are discriminatory in nature are prohibited by Article 304(a). It follows that levy of a non-discriminatory tax would not constitute an infraction of Article 301”, the judgment said.

While majority verdict was by Chief Justice T.S. Thakur, Justice A.K. Sikri, Justice S.A. Bobde, Justice Shiva Kirti Singh, Justice N.V. Ramana, Justice R. Banumathi, Justice A.M. Khanwilkar; Justice D.Y. Chandrachud and Justice Ashok Bhushan in separate judgments dissented from the majority view.

The majority judgment said that “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).”

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Having said this, the majority judgment said that even though goods on which entry tax is being imposed are not being produced in the taxing State, yet a “tax on entry of goods into a local area for use, sale or consumption therein is permissible although similar goods are not produced within the taxing state.”

However, the court left open the question to be decided at a later stage 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 …”

The case is rooted in the challenge to the constitutional validity of the laws enacted by the 14 States providing for levy of a tax on the “entry of goods into local areas comprising the States”.

The challenge to these laws was on the grounds of their being violative of the constitutionally recognised right to free trade and commerce guaranteed under Article 301 of the Constitution.

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Haryana law – Haryana Local Development Act, 2000 – providing for the entry tax was assailed by the Jindal Stainless Ltd.

The High Courts of Assam, Arunachal Pradesh, Jharkhand, Kerala and Tamil Nadu struck down the levies imposed by their respective States on the ground that they were discriminatory in nature hence violative of Article 304(a) of the Constitution.

When these States approached the apex court challenging the decision of the High courts, the two judges’ bench referred the same to a Constitution Bench for an authoritative pronouncement on as many as ten questions framed by them. (IANS)

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Supreme Court Signals Out Automobiles Cause Much More Pollution Than Burning Firecrackers

Making it clear that it does not want to generate "unemployment", the court said those who would lose their livelihood can't be compensated in terms of alternate jobs, financial or other support if the firecracker industry was shut down.

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air pollution
Linking the plea for a ban on the manufacture, sale and bursting of firecrackers across the country with Article 19 (1)(g) guaranteeing the right to occupation, trade or business, a bench headed by Justice S.A. Bobde flagged the issue of loss of jobs if there was a clampdown on the firecracker manufacturing industry. Pixabay

The Supreme Court on Tuesday asked why firecrackers were being singled out for rising pollution levels when automobiles caused much more pollution. It asked the Centre to apprise it with a comparative study of the two.

Linking the plea for a ban on the manufacture, sale and bursting of firecrackers across the country with Article 19 (1)(g) guaranteeing the right to occupation, trade or business, a bench headed by Justice S.A. Bobde flagged the issue of loss of jobs if there was a clampdown on the firecracker manufacturing industry.

Article 19 (1)(g) of the Constitution guarantees the right “to practice any profession, or to carry on any occupation, trade or business”.

crackers
Observing how there can be a ban on the firecracker industry whose operations were legal and licensed, Justice Bobde said the way out was not cancelling the license but there could be a change in the licensing conditions.
Pixabay

Sitting along with Justice Sanjay Kishan Kaul and Justice S. Abdul Nazeer, Justice Bobde said the issue had not been examined on the touchstone of Article 19 (1)(g) of the Constitution.

Making it clear that it does not want to generate “unemployment”, the court said those who would lose their livelihood can’t be compensated in terms of alternate jobs, financial or other support if the firecracker industry was shut down.

Observing how there can be a ban on the firecracker industry whose operations were legal and licensed, Justice Bobde said the way out was not cancelling the license but there could be a change in the licensing conditions.

crackers
The Supreme Court on Tuesday asked why firecrackers were being singled out for rising pollution levels when automobiles caused much more pollution. Pixabay

The top court’s observations came in the course of hearing a PIL by a toddler — Arjun Gopal — seeking ban on the manufacture, sale and bursting of firecrackers across the country.

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Noting the work being done by the National Environmental Engineering Research Institute (NEERI) and the Petroleum and Explosives Safety Organisation (PESO) to produce green firecrackers, the top court had in its last order asked NEERI and PESO to stick the timeline culminating in the bulk production of firecrackers based on the new formulations by May 10, 2019.

The top court had in October 2018 permitted the use of only green firecrackers with reduced emission and decibel levels during all religious festivals. (IANS)