B.P. Katakey, J.
1. The State Legislature of Assam, on obtaining previous Presidential sanction under proviso to Article 304(b) of the Constitution, enacted the Assam Entry Tax Act, 2001 (Assam Act 4 of 2001)(in short, 'the principal Act') with a view to levy tax on entry of goods, into any local area of Assam for consumption, use or sale therein, which came into force on October 1, 2001, on publication of a notification dated September 28, 2001 in the Assam Gazette (Extraordinary) specifying the said date, in terms of the provisions contained in Section 1(3) of the said Act. Clause (b) of Section 2(1) defines 'entry of goods into a local area' as entry of goods as specified in the schedule into a local area from any place outside the State for consumption, use or sale therein. Section 2(1)(d) defines 'importer' as a person who brings specified goods into the local area from any place outside the State for consumption, use or sale including for consumption or use of such goods in works contract. 'Local area' and 'purchase value' are defined in Section 2(1)(e) and (h), respectively. Sub-section (1) of Section 3 of the principal Act provides for levy of tax on goods specified in the schedule, containing of 7 (seven) items, on entry into any local area for consumption, use or sale therein at the rates shown against each item of goods in the said schedule. Sub-section (2) stipulates that such tax shall be paid by every importer on the purchase value of the goods, provided that no such tax shall be payable on the entry of goods, which are meant for the exclusive use or consumption of, the Defence Department of the Government of India, of the Union of India and also on the goods brought for the purpose of sale or use under the Assam Public Distribution of Articles Order, 1982. Sub-section (3) confers power on the State Government to grant exemption and Sub-section (4) of Section 3 authorises the State Government to add to, amend or otherwise modify the schedule to the Act including the power to vary rates of tax, by issuing notification in the official gazette. Section 4(1) of the principal Act provides for imposition of tax on entry of any motor vehicle into a local area for use or sale therein by an importer, which is liable for registration or assignment of a new registration mark in the State under the Motor Vehicles Act, 1988. Section 4(2) provides the time period within which such tax is to be paid. Sub-sections (3) and (4) stipulate the circumstances under which payment of such tax is exempted. Section 5 provides the reduction in tax liability by an importer under the State sales tax law, to the extent of payment of entry tax. Section 9 provides the rule-making power. Sub-section (2) of Section 9 stipulates that all rules framed under the Act shall be laid before the State Legislature.
2. The principal Act was first amended by the Assam Entry Tax (Amendment) Act, 2001 (in short, 'the First Amendment Act'), which was published in the Assam Gazette (Extraordinary) on October 19, 2001 and came into effect on that date. By the said First Amendment Act, the definition of 'entry of goods into a local area' under Section 2(1)(b) and 'importer' under Section 2(1)(d) have been amended by inserting the words 'that local area including a place outside', in both the clauses. Further, another proviso has been added to Section 3(2) of the Act. The said Act was further amended by the Assam Entry Tax (Amendment) Act, 2002, which came into effect from May 9, 2002, amending the definition of 'motor vehicle' under Section 2(1)(f), 'purchase value' under Section 2(1)(h), inserting Sub-section (5) in Section 3, empowering State Government to exempt an importer from payment of tax in public interest and also inserting Sub-section (5A) in Section 5, providing for deduction of tax.
3. The said Act was again amended by the Assam Entry Tax (Amendment) Ordinance Act, 2005, which came into effect on May 12, 2005, on publication in the official gazette, which, however, was replaced by the Assam Entry Tax (Second Amendment) Act (in short, 'the Second Amendment Act') giving the effect from May 12, 2005, i.e., the date on which the ordinance was made effective. By the said amendment the definition 'importer' under Section 2(1)(d) has further been amended incorporating that in case of crude oil transported through pipelines or otherwise into a local area from outside the State for consumption, use or sale therein, the ultimate recipient or the refinery, as the case may be, of such crude oil shall be deemed to be importer. Sub-section (1) of Section 3, which is the charging section, has also been substituted by a new Sub-section (1), which provides that there shall be levied and collected an entry tax on the entry of goods specified in the schedule into any local area for consumption, use or sale therein at such rate, not exceeding 20 per centum, as the State Government may by notification, fix in this behalf and different rates may be fixed for different class or classes of specified goods and such tax shall be paid by every importer of such goods, whether he imports such goods on his own account or on account of his principal or any other person or takes delivery or is entitled to take delivery of such goods on such entry. By the said second amendment Sub-section (4) of Section 3 has been omitted and the schedule to the said Act stands substituted by a new schedule, as per Section 7 of the said Second Amendment Act. Two new sections being Section 8A and Section 8B have also been inserted in the principal Act. Section 8A confers a discretion on the State Government to determine such sum of the proceeds of the tax levied by the Act for spending for the purpose of development of trading facilities, roads and other infrastructure in the local area subject to such conditions as may be prescribed. Section 8B provides for filing application for refund of tax by an importer to the prescribed authority subject to the conditions laid down therein. Section 9 of the Act empowers the State Government to make rules. Sub-section (2) of Section 9, which has substituted the earlier Sub-section by the Second Amendment Act, requires placing of all rules and the notifications issued by the State Government under the Act after its publication before the State Legislature. Though the Assam Entry Tax Rules, 2001 has been framed, no rule specifying the conditions, as required under Section 8A of the Act has been framed.
4. The State Government in exercise of the powers vested in it by Sub-section (4) of Section 3 published various notifications in the official gazette subjecting biscuits, all varieties of textiles namely, cotton, woollen, silken including rayon, artificial silk, nylon textile, crude oil, tobacco including cigarettes, cigar, biri, khaini, sada, smoking mixture, marble tiles, marble, decorative slabs, etc., to tax under the impugned Act by adding those goods as specified goods in the schedule of the said Act. It is an admitted position of fact that except the principal Act, there is no Presidential sanction/assent to the amendments made.
5. A number of petitions, by various writ petitioners, came to be filed challenging the legality and validity of various notifications issued by the Government of Assam, Finance (Taxation) Department, in exercise of powers conferred under Sub-section (4) of Section 3 of the impugned Act by way of addition to schedule to the Act, certain goods as 'specified goods' including cigarette, churat, khaini, gudka, smoking mixture, etc., on the ground of having direct impediment on freedom of movement of goods guaranteed under Article 301 of the Constitution of India and the absence of any Presidential sanction as required by Article 304(b) of the Constitution of India as well as on the ground that the impugned Act is neither regulatory nor compensatory in nature. The petitioners have also challenged the provision of Sub-section (4) of Section 3 of the Act, as it stood prior to its omission, on the ground of excessive delegation of legislative functions. Imposition of entry tax on specified goods has also been challenged in those writ petitions on the ground of violation of Sections 14 and 15 of the Central Sales Tax Act, 1956 and also being contrary to the provisions of Additional Duties of Excise (Goods of Special Importance) Act, 1957 apart from on the ground of violation of Article 14 of the Constitution of India. Necessary amendments were carried out in writ petitions filed prior to the Second Amendment Act of 2005, after such amendments.
6. The said writ petitions were resisted by the respondent-State by contending that as the State Legislature has enacted the impugned Act in exercise of the powers under Article 246(3) read with entry 52 of List II of the Seventh Schedule to the Constitution with Presidential sanction prior to the enactment of the principal Act and as the impugned notifications have been issued by way of delegated legislation in exercise of the power conferred under Sub-section (4) of Section 3 of the said Act, which is not violative of Article 301 of the Constitution of India and there being no discrimination between the goods imported and the similar goods manufactured or produced in the State in the matter of imposition of such entry tax, the Presidential sanction, as envisaged in Article 304(b) is not required to be obtained in respect of the subsequent amendment to the principal Act. The writ petitions have further been resisted on the ground that the levy of entry tax is not violative of Article 301, inasmuch as, it is compensatory in nature and, therefore, the requirements of Article 304(b) need not, in any case, be complied with.
7. The said batch of writ petitions were allowed by the learned single judge vide judgment and order dated November 17, 2006 reported as ITC Limited v. State of Assam [2007] 9 VST 250 (Gauhati) by setting aside the notifications dated January 8, 2002, August 21, 2003, August 26, 2003, September 29, 2004 and February 28, 2005 issued under Sub-section (4) of Section 3 and by declaring the said notifications as well as the 2005 Ordinance, and the Second Amendment Act, 2005 as ultra vires, unconstitutional and null and void, to the extent the same impose entry tax on the specified goods, which formed subject-matter of the writ petitions, by upholding contention that the provisions of Sub-section (4) of Section 3 of the 2001 Act having suffered from the vice of excessive delegation, same having empowered the State Government to add by issuing notification, new items in the schedule for the purpose of levying entry tax on such items, is wholly impermissible in law and cannot survive, and also by holding that the imposition of entry tax on the goods which forms subject-matter of the writ petition is violative of Article 301 read with Article 304(b) of the Constitution of India, as it amounts to restriction, directly and ultimately on the movement of trade or commerce, having not saved the same as required under Article 304(b) of the Constitution by obtaining Presidential sanction.
8. The learned single judge, on the basis of pleadings as well as arguments put forward by the learned Counsel for the parties formulated the following four points for determination:
(i) Whether imposition of entry tax prior to May 12, 2005 suffered from vice of excessive delegation?
(ii) Whether the imposition of entry tax on the specified goods, namely, tobacco including cigarette, cheroots, cigar, biri, zarda, khaini, etc., is in violation of Sections 14 and 15 of the Central Sales Tax Act, 1956 and/or of the provisions of the Additional Duties of Excise (Goods of Special Importance) Act, 1957?
(iii) Whether the entry tax imposed on the goods, which forms the subject-matter of the present set of writ petitions, is violative of Article 301 read with Article 304(b)?
(iv) Whether the Assam Entry Tax Act, 2001, is in violation of Articles 14 and 304(a) of the Constitution of India?
9. The learned single judge answered the first and third points for determination formulated, against the State and the second and fourth points against the writ petitioners. Hence, the present appeals.
10. After conclusion of hearing of argument as well as after disposal of the writ petitions by the aforesaid judgment reported as ITC Limited v. State of Assam [2007] 9 VST 250 (Gauhati) and order passed by the learned single judge, a number of writ petitions have also been filed by various petitioners challenging the vires of the notifications issued by the State Government from time to time in exercise of powers conferred under Sub-section (4) of Section 3 as well as the provisions of the impugned Act, both principal as well as the amendments Acts, on the various grounds, including the grounds on which it was challenged in the earlier batch of writ petitions.
11. Since the issues raised and involved in the appeals as well as the subsequent writ petitions are identical, concerning the legality and validity of the notifications issued under Sub-section (4) of Section 3 as well as the constitutional validity of the impugned Act, all the writ appeals as well as the writ petitions are taken up for hearing and disposal together, as agreed to by the learned Counsel for the parties, which in turn necessitated hearing of the cases, both appeals and subsequent writ petitions filed, on all points raised. None of the learned Counsel appearing for the parties has pointed out any dissimilarity, in the questions involved, in any of the writ appeals or writ petitions.
12. Heard Mr. K.N. Choudhury, the learned Additional Advocate-General, (in short, 'AAG') Assam, appearing on behalf of the appellants as well as on behalf of the respondents in the subsequent writ petitions and Mr. S. Ganesh, Dr. A.K. Saraf, Mr. N. Dutta, Mr. G.K. Joshi, Mr. D.K. Mishra and Mr. G.N. Sahewalla, learned Senior Counsel and other learned Counsel appearing for the respective parties in the appeals as well as in the subsequent writ petitions. The learned Counsel for the parties advanced their arguments on the following issues:
(i) Whether impugned levy is discriminatory and violative of Article 304(a) of the Constitution?
(ii) Whether entry tax on the goods imposes restriction on its movement and hence violative of Article 301 and whether requirements of Article 304(b) have, therefore, to be complied with?
(iii) Whether impugned levy is compensatory in nature?
(iv) Whether subsequent amendments to the principal Act require Presidential sanction under Article 304(b), although the Presidential sanction was granted prior to enactment of the principal Act?
(v) Whether Section 3(4) of the impugned Act, as it stood till May 12, 2005, suffers from vice of excessive delegation of legislative functions?
(vi) Whether omission of Section 3(4) in the impugned Act, by the Second Amendment Act, with effect from May 12, 2005, saves the actions taken under the said provisions of law, prior to May 12, 2005?
(vii) Whether the judgment passed would have prospective effect?
(viii) Whether refund of tax paid is permissible?
A. Issue-Wise Submissions of Learned Counsel for the Parties.
(i) Whether the impugned levy is discriminatory and violative of Article 304(a) of the Constitution?
13. The learned AAG relating to the contention of the writ petitioners that the impugned levy is discriminatory because of the exemption granted to the goods specified in the schedule and taxable under the Assam Value Added Tax Act, 2003, which are produced and manufactured within the State of Assam, by virtue of Section 5 of the 2001 Act, has submitted that the goods in respect of which the discrimination is alleged do not suffer from any discrimination. It has further been contended that the impugned Act makes no discrimination between the goods imported from outside the State and the locally manufactured goods. According to the learned AAG exemption under Section 5 of the 2001 Act has been granted only with a view to avoid double taxation. The learned AAG further contends that levy of entry tax on the specified goods and the sales tax levied on subsequent sale or purchase thereof inside the State are two distinct levies, independent of each other and when the Legislature in its wisdom has chosen to exempt the goods, which are subject to the local sales tax, from payment of entry tax, it cannot be regarded as discriminatory, when both the importers as well as the manufacturer of the specified goods within the State are equally liable to the entry tax at the rate specified.
14. The learned AAG referring to the decisions of the apex court in V. Guruviah Naidu and Sons v. State of Tamil Nadu : [1977]1SCR1065 and in Rattanlal and Co. Ltd. v. Assessing Authority, Patiala : [1969]2SCR544 has contended that when the rate of tax payable in respect of the goods locally manufactured or produced and imported from outside the State is same, nothing more is required to be shown to dispel the argument of discrimination under Article 304(a) of the Constitution, even though the resultant tax levied on imported goods may be different from one manufactured or produced inside the State. Placing reliance on the decision of the apex court in Widia (India) Ltd. v. State of Karnataka : AIR2003SC3095 , the learned Senior Counsel has further submitted that the so long levy of tax on goods imported from other States and such levy remains same for the goods which are manufactured or produced in the State, the levy cannot be termed as discriminatory. It is argued that even if the impugned enactment is discriminatory in nature, prior Presidential sanction having been obtained as required under Article 304(b) of the Constitution, the impugned levy cannot be held to be violative of either Article 301 or Article 303 of the Constitution, as the Presidential assent saves such enactment. The learned AAG in support of his contention has also placed reliance on the decision of the apex court in Andhra Sugars Ltd. v. State of Andhra Pradesh : [1968]1SCR705 and in Shree Digvijay Cement Co. Ltd. v. State of Rajasthan [2000] 117 STC 395 : [2001] 1 SCC 688.
15. Challenging the finding recorded by the learned single judge that the impugned levy is non-discriminatory and, therefore, is not violative of Article 304(a) of the Constitution, Mr. Ganesh has submitted that the discrimination writ large on the provision of Section 5 of the impugned Act itself, as by the said provision exemption from the payment of the tax has been granted in respect of the specified goods, which are also subject to levy of tax under the provisions of the Assam Value Added Tax Act, provisions of which are applicable only to the goods manufactured or produced in the State. The effect of such provision, according to the learned Senior Counsel, is that such goods produced or manufactured in the State shall not be liable to tax under the impugned legislation and on the other hand, the goods imported from other States or Union Territories into the State, to which the provisions of the Assam Value Added Tax Act are not applicable, are subjected to tax, thereby discriminating against the goods imported from outside, thereby violating the provision of Article 304(a). According to the learned Senior Counsel, the learned single judge in holding that the impugned legislation is non-discriminatory did not consider this aspect of the matter, though argued. Mr. Ganesh relying on the Constitution Bench decision of the apex court in Firm A.T.B. Mehtab Majid & Co. v. State of Madras reported in : AIR1963SC928 has submitted that even Article 304(a) of the Constitution prohibits the State to consider whether the goods imported from outside the State or whether the goods manufactured or produced in the State were subjected to other tax and what is required to be seen is whether the impugned levy is discriminatory in nature and once it is found that the same is discriminatory, the legislation has to be declared as void. Mr. Ganesh in support of his contention has also placed reliance on the decision of the apex court in Shree Mahavir Oil Mills v. State of Jammu and Kashmir : (1996)11SCC39 as well as in State of Uttar Pradesh v. Laxmi Paper Mart : AIR1997SC950 (in short, 'Laxmi Paper Mart').
16. Dr. Saraf has further contended that the impugned Act is discriminatory in nature and therefore, violative of Article 304(a) of the Constitution, as in respect of certain goods they are subjected to less tax under the Assam Value Added Tax Act if these are used, sold or consumed and on the other hand the same goods if imported from outside the State of Assam, the person using such goods has to pay higher rate of tax under the impugned Act and hence it is discriminatory in nature.
17. Mr. Dutta, the learned Senior Counsel appearing for the petitioner in W.P. (C) No. 4685 of 2006 (Bharati Airtel Ltd. v. State of Assam) has submitted that on the face of the provision contained in the principal Act as it stood prior to its amendments, the same is discriminatory and hence violative of Article 304(a) of the Constitution. Referring to the definition of 'entry of goods into a local area', 'entry tax' as well as 'importer' as defined in Section 2(1)(b), (c) and (d), respectively, as well as in Section 3 of the principal Act, it has been submitted that as no similar goods manufactured or produced in the State has been subjected to tax, imposition of entry tax on the goods brought from outside the State is ex-facie discriminatory and hence illegal. Mr. Dutta has further submitted that even assuming that the levy under the impugned Act, after amendment is non-discriminatory, there being no similar goods produced or manufactured in the State of Assam as has been imported by the petitioners, there cannot be any imposition of tax in respect of goods involved in the writ petition. According to the learned Senior Counsel Article 304(a) empowers the State to impose entry tax on the goods imported from other States or Union Territories similar to those manufactured or produced in the State. Referring to the statements made in the writ petition as well as in the affidavit-in-opposition filed by the State and also the affidavit-in-reply (rejoinder) it has been submitted that the State has not denied the statement of the writ petitioner that the goods imported by them and subjected to tax under the impugned Act are not produced or manufactured in the State. Mr. Dutta in support of his contention has placed reliance on the decision of this Court in Kalyani Stores v. State of Orissa reported in : [1966]1SCR865 . Mr. Dutta further contends that certain goods, which the petitioner imports from out of the country, have also been subjected to tax by the impugned Act, though it is beyond the legislative power of the State.
18. Mr. Sahewalla, the learned Senior Counsel appearing in some of the writ petitions referring to the various provisions of the impugned Act, has contended that the impugned Act is discriminatory as the goods produced in one local area in the State, if used, consumed or sold in that local area has not been subjected to tax, whereas similar goods imported from outside into that local area is subjected to such tax. Similarly, the goods manufactured in a local area in the State when used, consumed or sold in that local area while not subjected to tax, the similar goods brought into that local is subjected to tax under the impugned Act. The learned counsel, therefore, submits that the impugned legislation is unconstitutional. The learned Senior Counsel relating to the other issues has adopted the arguments of the other learned Senior Counsel for the writ petitioners/ respondents in the writ appeals.
19. The learned AAG countering the arguments of Mr. Dutta submits that under Article 304(a) what is required is to impose tax on both the locally manufactured and imported goods brought from outside and not that such goods, on which the tax is imposed and brought from outside must necessarily be manufactured or produced in the State. It has further been argued that if the interpretation sought to be given by Mr. Dutta, is accepted then a State, which does not produce or manufacture any goods would be denuded of the power even to impose sales tax on such goods on its sale within that State. According to the learned AAG, the decision in Kalyani Stores case : [1966]1SCR865 having been held to be the law limited to the facts of that case and having no universal application, in State of Kerala v. A.B. Abdul Kadir reported in : [1970]1SCR700 and in State of Karnataka v. Hansa Corporation (in short, 'Hansa Corporation'), reported in : [1981]1SCR823 the said decision in Kalyani Stores : [1966]1SCR865 cannot be pressed into service in support of the contention of Mr. Dutta.
(ii) Whether entry tax on the goods imposes restriction on its movement and hence, violative of Article 301 and whether requirements of Article 304(b) have, therefore, to be complied with?
20. Referring to the provisions in Part XIII of the Constitution it has been submitted by the learned AAG that the freedom envisaged by Article 301 is not an absolute freedom from the incidence of taxation in respect of trade, commerce and intercourse permitted by the Legislative Lists, more particularly entry 52 of the Seventh Schedule. The opening words of Article 301 'subject to the provisions of this Part', according to the learned AAG, require that all Articles of Part XIII have to be read together and as the entry tax imposed by the impugned Act is not a discriminatory tax, it cannot be considered as a restriction on the freedom guaranteed under Article 301. It has further been submitted that the taxation laws can be a restriction on trade, commerce and intercourse only when the levy is discriminatory. Article 301 read with Article 304, according to the learned AAG, does not treat a tax simpliciter as restriction, but a discriminatory tax or a tax, which creates a tariff barrier as a restriction. Article 304(a) has been inserted in Part XIII not because it was necessary to give a power to tax goods as that power has been given by the legislative entries, but because it was necessary to limit that power so as to prevent discrimination against imported goods and since the discriminatory tax against outside goods operate as a fiscal barrier to trade, commerce and intercourse, Article 304 prohibits them. The learned AAG, in support of such contention has placed reliance on the decisions of the apex court in G.K. Krishnan v. State of Tamil Nadu : [1975]2SCR715 , Indian Cement v. State of Andhra Pradesh : [1988]2SCR574 and V. Guruviah Naidu : [1977]1SCR1065 . Referring to the decision in Jindal Stainless Ltd. v. State of Haryana : [2006]283ITR1(SC) , [in short, 'Jindal Stainless (2)'] it has been submitted that the apex court in the said Constitution Bench judgment has held that Article 304(a) authorises a State Legislature to impose a non-discriminatory tax on goods imported from sister State(s) even though it interferes the freedom of trade, commerce and intercourse guaranteed under Article 301. It has further been submitted that Article 304 lifts the ban imposed by Articles 301 and 303 when the levy is non-discriminatory. According to the learned AAG, the apex court in the said case has also held that a discriminatory tax shall not be violative of Article 301, if the three requirements of Article 304(b) are complied with. Placing reliance on the decision of the apex court in State of Bombay v. United Motors (India) Ltd. : [1953]4SCR1069 , (in short, 'United Motors') it has been submitted that principle of freedom of trade, commerce and intercourse declared in Article 301 is expressly subordinate to the State power of taxing goods imported from sister States provided only that no discretion is made in favour of similar goods of local origin, although such taxation is undoubtedly calculated to fetter trade, commerce and intercourse. It has further been submitted that though the decision in United Motors : [1953]4SCR1069 was subsequently overruled in Bengal Immunity Co. Limited v. State of Bihar : [1955]2SCR603 , but the conclusion with regard to the interpretation of Article 301 vis-a-vis Article 304(a) has not been overruled. According to the learned AAG, the decision in Atiabari Tea Co. Ltd. v. State of Assam : [1961]1SCR809 , having not been preceded by any discussion as to what would constitute restriction within the meaning of Article 304, the observation made by the apex court in the said judgment cannot be applied in the present case to hold that any impediment or restriction in movement of goods is a restriction within the meaning of Article 304. It has further been submitted that in fact the decision in Atiabari Tea Co. : [1961]1SCR809 has virtually been overruled by a seven-judge Constitution Bench of the apex court in Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan : [1963]1SCR491 , while dealing with the scope of Article 301 read with Article 304. In Automobile Transport case : [1963]1SCR491 , according to the learned AAG, the majority view is that regulatory measures or measures imposing compensatory taxes for the use of trading facilities do not come within the purview of the restrictions contemplated by Article 301 and such measures need not comply with the requirements of the proviso to Article 304(b). It has further been contended that the concept of freedom of trade, commerce and intercourse envisaged by Article 301 must be understood in the context of an orderly society and as a part of a Constitution which envisaged a distribution of power between the State and the Union and if so understood, the concept must recognise the need and the legitimacy of some degree of regulatory control, whether by the Union or by the State, irrespective of the restrictions imposed by other Articles of Part XIII of the Constitution. According to the learned AAG, the entry tax being a levy permitted by entry 52 of List II of the Seventh Schedule and such levy having to conform to Article 304(a), the contention of the assessees that the notifications issued under Section 3(4) of the principal Act, Ordinance of 2005 and the Second Amendment Act of 2005 are not sustainable for not conforming with the proviso to Article 304(b) is wholly untenable.
21. Referring to the decision in Automobile Transport : [1963]1SCR491 it has been contended that as in the said case it has been held that non-obstante Clause vis-a-vis Article 304(a) enables the State Legislature to impose an impediment on the free movement of trade in spite of the freedom declared under Article 301, the contention of the assessee that the impugned levy is unsustainable because of non-compliance of Article 304(b) is not correct. The learned AAG, in support of his contention that Article 304(a) enables the State Legislature to make laws affecting trade, commerce and intercourse and that the said article enables imposition of tax on goods from other States if similar goods in the State are subjected to similar taxes, has placed reliance on the decisions of the apex court in Firm A.T.B. Mehtab Majid & Co. v. State of Madras : AIR1963SC928 as well as on the minority view of Hidayatullah, J. expressed in Kalyani Stores : [1966]1SCR865 , as well as on V. Guruviah Naidu : [1977]1SCR1065 , Widia (India) Ltd. : AIR2003SC3095 and Jindal Stainless : [2006]283ITR1(SC) .
22. According to the learned AAG, the apex court in Rattanlal and Co. : [1969]2SCR544 has also held that when the taxing State is not imposing rates of tax on imported goods different from rates of tax on goods manufactured and produced in the State, Article 304 has no application. Referring to the decision in Video Electronics Pvt. Ltd. v. State of Punjab : AIR1990SC820 , it has further been contended that Article 304 is an exception to Article 301 of the Constitution and the need of taking resort to exception will arise only if the impugned tax is hit by Article 301 and Article 303 of the Constitution, i.e., if the impugned tax is a discriminatory tax. Referring to the decision in Widia (India) Ltd. : AIR2003SC3095 it has been submitted that where the general sales tax is applicable to the goods locally made and those imported from other States as the same, nothing more normally and generally is to be shown by the State to dispel the argument of discrimination under Article 304(a) and therefore, a tax simpliciter as distinguished from a discriminatory tax does not operate as a restriction or a tariff wall or fiscal barrier to attract the vice of Article 301 and hence, a non-discriminatory tax will not amount to restriction so as to comply with the requirement of Article 304(b).
23. It has further been submitted that the conjunction 'and' appearing between Article 304(a) and (b), though literally is to be read conjunctively, however, in the context in which conjunction 'and' has been used in Article 304, it has to be read disjunctively, having regard to the legislative intent, as proviso to Article 304(b) cannot be made applicable to a nondiscriminatory tax imposed within the constraint of Article 304(a). It has further been contended that Article 304(b) does not speak about imposition of tax but it speaks about imposing reasonable restriction in public interest and therefore, the proviso to Article 304(b) would be attracted to a legislation by State Legislature, only when reasonable restrictions are sought to be imposed as distinguished from tax simpliciter or non-discriminatory tax, otherwise the proviso which is limited to Article 304(b) only, if applied to Article 304(a), the same would be contrary to the express provisions of the Constitution. The learned AAG in support of his contention that the conjunction 'and' is to be read disjunctively has placed reliance on the decision of the apex court in Vidyacharan Shukla v. Khubchand Baghel : [1964]6SCR129 Ishwar Singh Bindra v. State of U.P. : 1969CriLJ19 and Joint Director of Mines Safety v. Tandur and Nayandgi Stone Quarries (P.) Ltd. : [1987]2SCR800 . The learned AAG in support of his contention has also placed reliance on the passages at paragraph 24.39, 24.41, 24.43, 24.45 and 24.47 (pages 2604 to 2611) from the 'Constitutional law of India by H.M. Seervai' (4th Edition).
24. Referring to the decision in Andhra Sugars Ltd. : [1968]1SCR705 it has been submitted that in the said case the apex court has held that Section 21 of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1961 does not impede the free movement of transport of goods and as such, the levy, as in the case in hand, is not violative of Article 301. It has further been submitted that the contention of the writ petitioner/respondent in the writ appeals that despite nondiscriminatory nature of the levy, the imposition of entry tax in the present case is bad for not complying with the proviso to Article 304(b) and that there is distinction between the sales tax and entry tax for the purpose of appreciating whether it imposes any restriction in the movement of goods, is wholly misconceived because the expression used in Article 304(a) is 'any tax'. It is further contended that the observation in Andhra Sugars Ltd. : [1968]1SCR705 to the effect that a nondiscriminatory tax on goods does not offend Article 301 unless it directly impedes the free movement of transport is inappropriate, in view of the decision in Jindal Stainless : [2006]283ITR1(SC) in which case it has been held that non-discriminatory tax even though it impedes the movement part of the trade, cannot be construed as violative of Article 301. According to the learned AAG, the fetters imposed by Articles 301 and 303(1) upon the State Legislature to enact a taxation law or non-taxation law can be lifted-
(i) by a non-discriminatory tax within the constraints of Article 304(a) even though it interferes with the movement part of the trade and (ii) even if the discriminatory tax is imposed, by following the three conditions enumerated in Article 304(b) or when the levy is compensatory/regulatory.
25. Referring to the decision in Hansa Corporation : [1981]1SCR823 on which strong reliance has been placed by the petitioners/respondents in the writ appeals, it has been contended by the learned AAG that the said decision cannot be construed as an authority for the proposition that a non-discriminatory tax in order to pass the test of Article 301 must also for its validity satisfy the requirements of Article 304(b). It has further been contended that as in Hansa Corporation : [1981]1SCR823 the apex court did not examine whether the levy is compensatory in character or not, the said decision is not applicable in the case in hand as unlike in Hansa Corporation : [1981]1SCR823 the State in the present, has contended that the tax imposed is compensatory in character. That apart, the issue as to whether a non-discriminatory tax levied within the constraints of Article 304(a) must for its validity also satisfy the requirements of Article 304(b) did not fall for consideration in the said case, in the absence of the plea that levy is compensatory in character. According to the learned AAG, the meaning of the conjunction 'and' and appearing between Article 304(a) and (b) also did not fall for consideration in the said case. Such decision, according to the learned AAG, cannot at all be applied in the case in hand, as a decision is an authority for what it actually decides and a decision passes sub silentio, when the particular point of law involved in the decision is not perceived by the court or present in the mind. The learned AAG has further submitted that even assuming that the apex court in Hansa Corporation's case : [1981]1SCR823 , has recorded the finding, as suggested by the learned Counsel for the writ petitioners/respondents in the writ appeals, the same is inconsistent with the view of the Constitution Bench judgment in Rattanlal and Co. : [1969]2SCR544 as well as in Jindal Stainless : [2006]283ITR1(SC) . Therefore, the decisions in Hansa Corporation : [1981]1SCR823 and Andhra Sugars Ltd. : [1968]1SCR705 cannot be made applicable as those decisions cannot be said to have laid down any law of universal application.
26. Relying on the decision in Khyerbari Tea Co. Ltd. v. State of Assam : [1964]5SCR975 it has been submitted by the learned AAG that power conferred on the courts to strike down a taxing statute, if it contravenes the provisions of Articles 14, 19 and 310, has to be exercised with circumspection as such power has been conferred on the State to levy taxes for the purpose of governance and to carry out its welfare activities and it is of paramount character. According to the learned AAG, it is only in respect of taxing statute, which is purely confiscatory in character, the power of the court to strike down such a law can be legitimately invoked and exercised. It has further been contended that when a legislation is challenged on the ground of it being in violation of Article 301, the burden is on the persons who challenge such legislation and in the present batch of cases, the petitioners as well as the respondents in the appeals failed to discharge such burden.
27. Learned AAG has further contended that the decision in Kaiser-I-Hind (P.) Ltd. v. National Textile Corporation Ltd. : [2002]SUPP2SCR555 being relating to the question regarding repugnancy between a Parliamentary legislation and a State legislation, is not relevant for the purpose of adjudication of the present issue, as the same was not the question in that case. The said decision, therefore, cannot be pressed into service to invalidate the levy on the ground of violation of Article 304(b) of the Constitution.
28. Referring to the provision of Article 301 of the Constitution of India, it has been submitted by Mr. Ganesh, the learned Senior Counsel that the levy of entry tax by the impugned Act amounts to restriction directly and immediately on the movement of goods, which is forbidden by Article 301. Relying on the decision of the apex court in Atiabari Tea Co. : [1961]1SCR809 , it has been submitted that as by the impugned levy, by way of notification and subsequent amendment, the restriction has been placed on free movement of goods into the State it can be done so only by satisfying the requirements of Article 304(b) and in the instant case, the Presidential assent to the Second Amendment Act of 2005 having admittedly not been obtained as prescribed by Article 304(b), the impugned legislation is void. Mr. Ganesh placing reliance on the decision of the apex court in Hansa Corporation : [1981]1SCR823 has submitted that even if a legislation is non-discriminatory as envisaged by Article 304(a), but, the same, if it imposes restriction on free movement of goods, like the entry tax, the Presidential assent as required under Article 304(b) is a must. In support of his contention, Mr. Ganesh has also placed reliance on the Constitution bench decision of the apex court in Andhra Sugars Ltd. : [1968]1SCR705 .
29. Dr. Saraf, the learned Senior Counsel appearing on behalf of the respondents in Writ Appeal No. 462 of 2006 as well as for the petitioners in some of the subsequent writ petitions, supporting the finding recorded in the judgment impugned in the appeal, has submitted that the contention of the learned AAG that the word 'and' appearing between Article 304(a) and 304(b) is to be read as 'or' and also the submission that once an impugned legislation is found to be nondiscriminatory in nature and not violative of Article 304(a), there is absolutely no scope for scrutiny of such legislation as to whether the same is violative of Article 304(b), cannot at all be accepted as the word 'and' cannot be read as 'or', as in that case it will be against the legislative intent and the scheme of Chapter XIII of the Constitution. Relying on the single bench judgment in Karnataka High Court in Bharat Earth Movers Ltd. v. State of Karnataka reported in [2007] 8 VST 69, it has further been contended by the learned Senior Counsel that the word 'and' occurring between Article 304(a) and 304(b) cannot be read as 'or'. Relating to the restriction put by the impugned levy, Dr. Saraf, has also argued on the same line as argued by Mr. Ganesh and has placed reliance on the decisions of the apex court in Automobile Transport : [1963]1SCR491 , Laxmi Paper Mart : AIR1997SC950 , Hansa Corporation : [1981]1SCR823 and Andhra Sugars Ltd. : [1968]1SCR705 .
30. The learned Senior Counsel referring to the decisions of the apex court cited by the learned AAG in Video Electronics : AIR1990SC820 , Rattanlal and Co. : [1969]2SCR544 , V. Guruviah Naidu : [1977]1SCR1065 , G.K. Krishnan : [1975]2SCR715 , Widia (India) Ltd. : AIR2003SC3095 , Shree Mahavir Oil Mills : (1996)11SCC39 , Indian Cement : [1988]2SCR574 and in Jindal Stainless : [2006]283ITR1(SC) has submitted that the said decisions instead of supporting the contention of the appellant supports the contention of the respondent as the apex court has observed that any hindrance on the free movement of the goods is a restriction. It has further been submitted that the said cases being related to the sales tax, which does not put any hindrance on the free movement of the goods, are not at all applicable to the facts of this case and the question whether nondiscriminatory tax still needs to comply with the requirements of Article 304(b) having not been raised or decided, the said decisions are not applicable in the present batch of cases. Dr. Saraf has further submitted that the decision in Shree Mahavir Oil Mills' case : (1996)11SCC39 in fact supports the plea of the writ petitioners as the apex court has observed that Clause (a) of Article 304 is not really an exception to Article 301, notwithstanding the non obstante Clause under Article 304 and it is but a restatement of a facet of total freedom guaranteed by Article 301. Referring to the decision in United Motors : [1953]4SCR1069 on which the learned AAG has placed reliance, it has been contended that the issue involved in the said case being, as to which State shall levy the sales tax prior to the enactment of the Central Sales Tax Act, 1956 the observations made relating to Part XIII of the Constitution of India cannot be applied in the present case, more so when the said decision of the apex court was overruled by a larger Bench in Bengal Immunity : [1955]2SCR603 . Dr. Saraf, the learned Senior counsel, has further submitted that the observation of Mr. Seervai in 'Constitutional Law of India', on which the learned AAG has placed reliance, cannot have any persuasive value as, such submission of Mr. Seervai has been rejected by the apex court in Automobile Transport : [1963]1SCR491 .
31. Mr. Misra the learned Senior Counsel appearing for the petitioners in some of the writ petitions, has contended that it is not correct to say that even in the case of compensatory nature of tax imposed by the State, the requirement of Article 304(b) need not be complied with. Referring to the decision of the apex court in Atiabari Tea Co.'s case : [1961]1SCR809 , it has been contended by the learned Senior Counsel that even when a levy is found to be non-discriminatory it has to satisfy Article 304(b) to make the same a valid piece of legislation, which view has also been taken by the apex court in Automobile Transport's case : [1963]1SCR491 and has been reiterated in Khyerbari Tea Co. case : [1964]5SCR975 , according to the learned Senior Counsel. It has been contended by Mr. Misra, that the proviso to Article 304(b) itself provides that such Presidential sanction is necessary in case of the amendment also and the words 'bill' as well as 'amendment' occurring in the said provision is to be read in relation to the words 'introduced' and 'moved', respectively. It has been contended that the learned single judge in the judgment impugned in the appeal, for the reasons recorded therein, has rightly rejected the contention of the State in that regard. In support of his contention Mr. Misra has placed reliance on the decision of the apex court in Koteswar Vittal Kamath v. K. Rangappa Baliga and Co. reported in : [1969]3SCR40 .
32. Mr. Dutta, referring to the provisions in Part XIII of the Constitution, has submitted that while Article 301 of the Constitution provides for freedom of trade, commerce and intercourse throughout the territory of India, which means there shall not be any restriction on the movement of goods and such ban is imposed on making any law which impedes the movements of goods throughout the territory of India, which, however, is relaxed by Article 302 of the Constitution empowering the Parliament to impose restriction on such freedom in public interest. It has been submitted that Article 303(1) further emphasises that the Parliament even though has the power to make law imposing restriction in public interest under Article 302 but it is debarred from making discriminatory law, which restriction, however, has been relaxed by Clause (2) of Article 303 by empowering the Parliament to make discriminatory law to deal with situation arising from scarcity of goods in any part of the territory of India. It has further been submitted that the ban imposed by Article 303(1) on the State Legislature to make discriminatory law has not been lifted by Clause (2) of Article 303, which, has been emphasised in Article 304(a) by providing that the State shall not make discriminatory law imposing any tax on the goods manufactured or produced in the State and the goods imported from other States or Union Territories. According to the learned Senior Counsel, the scheme of Part XIII of the Constitution does not permit State Legislature to make discriminatory law, which has been permitted by the Constitution to the Parliament that too only in the event of scarcity of goods in any part of the territory of India.
33. Mr. Dutta has further submitted that the word 'and' occurring between Clauses (a) and (b) of Article 304 cannot be read as 'or', as suggested by the learned AAG, as a non-discriminatory tax may amount to imposing restriction on the freedom of trade, commerce or intercourse and in this case as entry tax impedes free movement of goods, it is a restriction within the meaning of Article 304(b). According to the learned Senior Counsel the scheme of Part XIII of the Constitution does not permit the interpretation of 'and' as 'or' as Part XIII permits only the Parliament to make discriminatory law that too in case of scarcity of goods. Referring to the decision in Atiabari Tea Co. : [1961]1SCR809 and Hansa Corporation : [1981]1SCR823 , Mr. Dutta has submitted that the non-discriminatory law can be restriction and therefore, even assuming that the impugned levy is non-discriminatory, imposition of entry tax being a restriction on the free movement of goods amounts to restriction and hence the conditions stipulated in Clause (b) of Article 304 must be complied with. Mr. Dutta has further submitted that when the petitioner has challenged the validity of the impugned Act on the ground of being violative of Article 301 of the Constitution, the burden is on the State to establish, firstly, that such tax is non-discriminatory, secondly, it imposes reasonable restriction, thirdly, in public interest and either the previous or subsequent sanction/assent of the President has been obtained, when the State has asserted that the impugned levy is non-discriminatory and is a reasonable restriction in public interest. According to the learned Senior Counsel there is absolutely no material placed before the court to demonstrate that the impugned levy is reasonable restriction imposed in public interest.
(iii) Whether impugned levy is compensatory in nature?
34. Relying on the decision of the apex court in Automobile Transport case : [1963]1SCR491 , it has been submitted by Mr. Choudhury, the learned AAG, that, in any case, regulatory measures imposing compensatory tax for the use of trading facilities do not come within the purview of restrictions emphasised by Article 304(b) and such measures need not comply with the requirement of proviso to Article 304(b) of the Constitution. It has been submitted that the decision of the apex court in Atiabari Tea Co. : [1961]1SCR809 in so far as it held that if the State Legislature wanted to impose tax to raise resources necessary to maintain roads, that can only be done after obtaining sanction of the President as provided in Article 304(b) has practically been overruled in Automobile Transport : [1963]1SCR491 . Relying also on the decision of the apex court in G.K. Krishnan : [1975]2SCR715 and referring to the pleadings in the affidavit filed by the State, it has been submitted by the learned AAG that impugned levy is compensatory in nature and the revenue generated by the operation of the impugned Act is utilised by the State in the establishment of roads, markets and maintenance of roads, waterways and other facilities in the local areas. It has been contended that the State has been transferring sufficient fund collected out of the levy of the tax to the local bodies for the development of infrastructure, to facilitate trade and commerce in the local areas and the quantum of such transfer is commensurate to the amount of entry tax collected by the State. The learned AAG has, in support of his contention, placed reliance on the affidavits filed by the State including the chart appended thereto, to establish that the State has in fact spent more than the amount collected as entry tax in providing trading facilities. Relying on the decision of the apex court in International Tourist Corporation v. State of Haryana reported in : [1981]2SCR364 , it has been submitted by the learned AAG that what is necessary to uphold the regulatory and compensatory tax is the extent of specific identifiable object behind the levy and 'some connection' between the subject and object of the levy, which in the present case being for development of the local areas and to facilitate the trade, the impugned levy is compensatory in nature. Placing reliance on another decision of the apex court in State of Bihar v. Bihar Chamber of Commerce reported in : [1996]2SCR184 (in short, 'Bihar Chamber of Commerce'), it is further submitted by Mr. Choudhury that in the instant case, local areas contemplated by the Act having been in all parts of the State of Assam, the distinction between the State and the local areas practically disappears and the facilities provided by the State out of the fund collected by such levy amounts to facilities provided in the local areas as well. According to the learned AAG to show the compensatory character of tax, it is not necessary to establish that every rupee collected on account of entry tax is spent or to be spent in providing trade facilities. If, according to the learned Senior Counsel, there is substantial or even some relation between the tax collected and amount spent directly or indirectly, the levy cannot be held to be invalid Bhagatram Rajeev Kumar v. Commissioner of Sales Tax, Madhya Pradesh reported in : 1994(4)SCALE1103 . Mr. Choudhury, therefore, submits that the impugned legislation cannot be termed as violative of Article 304(b) of the Constitution. Referring to the decisions cited by the learned Counsel for the petitioners, the learned AAG has submitted that it is evident from those decisions that the element of quid pro quo may not be possible or even necessary, and not required to be established with arithmetical precision but if broadly and reasonably established, with some amount of certainty and reasonableness that a substantial portion of the amount collected is spent for special benefit for its payer, it would be sufficient. It has been contended that the particulars furnished by the State in the consolidated affidavit-in-opposition dated March 3, 2006 and the additional affidavit dated March 23, 2007 fulfil the requirements laid down by the apex court in Jindal Stainless : [2006]283ITR1(SC) and demonstrate the compensatory nature of the impugned levy.
35. Mr. Ganesh, the learned Senior Counsel has submitted that the Presidential sanction, as mandated by Article 304(b) of the Constitution, before imposing any reasonable restriction on the freedom of trade, commerce and intercourse by State Legislature, in public interest, is not required, provided the State could show to the satisfaction of the court that such levy is compensatory in nature. According to the learned Senior Counsel, whether a tax is of compensatory nature or not, which is a judicially evolved concept, what is required to be seen is whether imposition of such tax is to facilitate trade and commerce or operates as hindrance. According to the learned Senior Counsel, whether tax is compensatory or not, though cannot be made to depend on the preamble of the statute imposing it, the working test for deciding the same is to--whether the State has spent or is to spend the proportionate amount of tax collected to provide trading facilities to facilitate the trade and the State is not realizing much more as tax than what is required for providing such facilities. It has further been submitted that the facilities provided must be related to the trading facilities and for the benefit of the class of trading community on which such levy is imposed and for determining whether the tax is compensatory or not, the general facilities made available in discharge of the Governmental duties by the State for development of the local area, i.e., non-trading facility, cannot be taken into account.
36. Referring to the decision cited by the learned Additional Advocate-General in Bhagatram Rajeev Kumar : 1994(4)SCALE1103 and Bihar Chamber of Commerce : [1996]2SCR184 wherein it has been held by the apex court that if there is substantial or even some connection between the tax and the facilities extended to the dealers, directly or indirectly, the levy cannot be impugned as invalid, the learned Senior Counsel has submitted that such view of the apex court was doubted in Jindal Stripe Ltd. v. State of Haryana [ : (2003)8SCC60 and hence the matter was referred and accordingly a Constitution Bench of the apex court in Jindal Stainless Ltd. : [2006]283ITR1(SC) reiterating the test, as to whether a tax is compensatory or not, laid down in Automobile Transport case : [1963]1SCR491 has held that as the compensatory tax is based, on the 'principles of equivalence', the State in order to show that the impugned levy is not violative of Article 301 of the Constitution, being a compensatory tax, must prove that it is imposed to provide special benefits to defray the costs or to meet the outlay incurred for some special advantage, to trade, commerce and intercourse. It has further been contended that the burden is on the State to show by placing materials before the court that the payment of compensatory tax is reimbursement/recompense for the quantifiable and measurable benefit provided or to be provided to its payers. Referring to the preamble and the object and reason of the Act as well as the affidavit-in-opposition filed by the State before the learned single judge and also the additional affidavit filed in the writ appeal by the State, it has been submitted by Mr. Ganesh that the purpose of the enactment is not to provide some special facilities to the trading communities, i.e., to the payers under the Act, but augmentation of general revenue. It has further been contended that it appears from paragraphs 7 and 9 of the affidavit-in-opposition filed by the State before the writ court that the tax collected by the impugned levy has not been spent or to be spent to facilitate the trade, i.e., for providing some trading facilities to the trading community but for maintaining the roads, etc., which is not trading specific.
37. Mr. Ganesh, referring to Section 8A of the impugned legislation as inserted by Second Amendment Act with effect from May 12, 2005, has further contended that the said provision though has stated about utilisation of the proceeds of the tax, it neither lay down the guidelines nor provide that the tax, collected shall be spent for providing trading facilities. That apart, the Government has also failed to produce any material before the court relating to the utilisation of such proceeds of tax for development of any trading facilities or other infrastructures in the local areas for the payers of the tax under the Act. Mr. Ganesh, therefore, submits that the impugned legislation cannot be termed as compensatory in nature so as to exempt the State Legislature from complying with the requirement of having the Presidential sanction mandated by the proviso to Article 304(b) of the Constitution.
38. Dr. Saraf, the learned Senior Counsel supporting the arguments of Mr. Ganesh, has further submitted that the majority view in the Atiabari Tea Co. : [1961]1SCR809 that if a tax is imposed on the basis that the goods are thus carried or transported, it affects the movement of goods resulting in affecting the freedom of trade as contemplated by Article 301, has been accepted in Automobile Transport : [1963]1SCR491 subject to the clarification that the regulatory measure/measures imposing compensatory tax for the purpose of trading facilities cannot come within the purview of restriction as contemplated by Article 301 of the Constitution and therefore, such measures need not comply with requirement of the proviso of Article 304(b) of the Constitution. It has further been submitted that in Jindal Stainless case : [2006]283ITR1(SC) , it has been held by the apex court that the proper test is as laid down in the Automobile Transport's case : [1963]1SCR491 by overruling the decision in Bhagatram Rajeev Kumar case : 1994(4)SCALE1103 as well as Bihar Chamber of Commerce case : [1996]2SCR184 . It has further been submitted by Dr. Saraf that the concept of compensatory nature of tax is based on the principle of 'pay for the value' and the tax collected must be proportionate for extending the benefit to the payers of such tax, i.e., for trading facility and when the Act is ambiguous in that respect the burden heavily lies on the State to prove that the tax collected by way of entry tax, which is more or less in the nature of fee, has been or is to be spent for extending the trading facility only. It has further been submitted that to term the taxing statute as compensatory in nature, the Act must indicate facially the benefit which is quantifiable or measurable, broadly indicating the proportionality of quantifiable benefit and in the event there is ambiguity in the provisions of the Act, such burden is discharged only if the State can show by placing the materials before the court that the payment of compensatory tax is a reimbursement/recompense for the quantifiable and measurable benefit provided or to be provided to its payers which, according to the learned Senior Counsel, the State has failed to do.
39. Referring to the pleadings of the State in the affidavit-in-opposition filed in W.P. (C) No. 8445 of 2003 (Britannia Industries Ltd. v. State of Assam reported as ITC Limited v. State of Assam [2007] 9 VST 250 (Gauhati)) in W.P. (C) No. 5827 of 2002 Fish Traders & Packers Association v. State of Assam and in the consolidated affidavit-in-opposition filed in W.A. No. 462 of 2006 State of Assam v. Chhotabhai fethabhai Patel Tobacco and in W.A. No. 465 of 2006 State of Assam v. Indian Tobacco Co. Ltd. it is submitted by the learned Senior Counsel that the State has in that respect taken a contradictory stand. According to the learned Senior Counsel the stand of the State being that the revenue raised due to the implementation of the Act or other taxation Act are utilised by the State in laying and maintenance of roads, waterways, warehouses, cold storage, establishment of markets, etc., and to find alternative source of revenue to keep various programmes and other Governmental function going on, in view of declaration of the levy on luxurious goods ultra vires by the apex court in Godfrey Phillips India Ltd. v. State of U.P. reported in [2005] 139 STC 537 : [2005] 4 RC 186, the impugned levy cannot be termed as compensatory and such stand is also contrary to the decision of the apex court in Jindal Stainless : [2006]283ITR1(SC) .
40. According to the learned Senior Counsel, from the objects and reasons together with the preamble and the pleadings of the State, it is, therefore, evident that the entry tax has been levied only to mobilise additional revenue and not for providing trading facility so as to constitute compensatory tax. Referring to Section 8A of the 2001 Act, inserted by the second amendment, which came into effect on May 12, 2005, it has further been contended by Dr. Saraf that the said provision is also contrary to the law laid down by the apex court in Jindal Stainless case : [2006]283ITR1(SC) and also against the compensatory nature of tax as it is evident from the said provision that the tax collected under the Act is not to be spent for the purpose of providing trading facility, because the said provision gives the discretion to the State Government to prescribe such sum of the proceeds for the purpose of development of trading facilities, maintenance of roads and other infrastructure in the local area and that too subject to such condition as may be prescribed. According to Dr. Saraf no rule has been framed till date prescribing the condition as stipulated by Section 8A of the Act. Therefore, it has been submitted that the impugned levy cannot be termed as compensatory in nature and hence the requirements of Article 304(b) of the Constitution must be fulfilled by the State, otherwise it is to be declared as invalid. Dr. Saraf, in support of his contention, has also placed reliance on the decision of the Madras High Court in ITC Limited v. State of Tamil Nadu reported in [2007] 7 VST 367, of the Kerala High Court in Thressiamma L. Chirayil v. State of Kerala reported in [2007] 7 VST 293, of the Jharkhand High Court in Tata Iron & Steel Co. Ltd. v. State of Jharkhand reported in [2007] 6 VST 587, of the Patna High Court in Indian Oil Corporation v. State of Bihar reported in [2007] 10 VST 140 : [2007] 1 PLJR 502 and also of the Kamataka High Court in Bharat Earth Movers Ltd. v. State of Kamataka reported in [2007] 8 VST 69.
41. Mr. Misra submits that in any case, the concept of the compensatory nature of tax being more or less in the nature of fee, the tax collected by imposing entry tax is to be spent for the benefit of the taxpayers, i.e., to facilitate the trading facilities to the trading community and the apex court in Kewal Krishan Puri v. State of Punjab reported in : [1979]3SCR1217 has observed the circumstances in which a tax can be classified as compensatory in nature, which was followed by the apex court in Ram Chandra Kailash Kumar & Co. v. State of U.P. reported in [1980] Suppl. SCC 27. According to the learned Senior Counsel such view of the Constitution Bench of the apex court was somewhat diluted in Southern Pharmaceuticals and Chemicals v. State of Kerala reported in : [1982]1SCR519 , in Municipal Corporation of Delhi v. Mohd. Yasin reported in : [1983]142ITR737(SC) (in short, 'Mohammad Yasin') and in Sreenivasa General Traders v. State of Andhra Pradesh reported in : [1983]3SCR843 by evolving the 'some connection' theory. It is further submitted that the view expressed by the Constitution Bench of the apex court in Atiabari Tea Co. case : [1961]1SCR809 as well as in Automobile Transport : [1963]1SCR491 and in Khyerbari Tea Co. case : [1964]5SCR975 has, however, been upheld in Jindal Stainless case : [2006]283ITR1(SC) . Mr. Misra has further submitted that to classify a levy as compensatory in nature, the amount collected by way of tax must be spent or to be spent directly for the benefit of the trading community and that must be quantifiable and measurable. According to the learned Senior Counsel, Section 8A as has been brought by the Second Amendment Act of 2005 does not fulfil the required conditions.
42. Regarding the compensatory nature of tax it has been argued by Mr. Dutta that it is evident from the Statement of Objects and Reasons of the impugned Act that the said enactment was made to generate revenue and not to compensate or to provide special facilities to the payers to compensate the tax paid by them and to facilitate the trade and commerce. It has further been submitted that there is nothing in the Act expressing any indication of quantifiable and measurable data and no material has been placed by the State even after the pronouncement of the apex court in Jindal Stainless : [2006]283ITR1(SC) and Jindal Stainless Ltd. v. State of Haryana : (2006)7SCC271 to demonstrate that the amount realised as tax has been spent or is to be spent for providing special benefits to the taxpayers and to facilitate trade and commerce. Mr. Dutta in this respect has also adopted the arguments of Mr. Ganesh and Dr. Saraf learned Senior Counsel.
(iv) Whether subsequent amendments to the principal Act require Presidential sanction under Article 304(b), although the Presidential sanction was granted prior to enactment of the principal Act?
43. The learned AAG has submitted that as the Principal Act, which imposes entry tax, received the President's previous sanction, subsequent amendments made and the notifications issued in exercise of the power conferred under Section 3(4) of the impugned Act, do not require any further Presidential sanction, as the Principal Act, which received the Presidential sanction contains the provision of Section 3(4), which empowers the State to add any item to the schedule appended to the Act. The learned AAG has further contended that the sanction of the President is not a sine qua non for every amendment. In support of his contention, the learned AAG has placed reliance on the decision of the apex court in Syed Ahmed Aga v. State of Mysore : AIR1975SC1443 , Subodhaya Chit Fund (P) Ltd. v. Director of Chits, Madras [1991] Supp 2 SCC 131 and Widia (India) Ltd. : AIR2003SC3095 . It has been submitted that the question of Presidential sanction under proviso to Article 304(b) would arise only when additional restrictions are sought to be imposed by the amendment, which is not in the case in hand. The learned AAG has further submitted that the decisions cited by the learned Senior Counsel for the appellants/writ petitioners in support of their contention, in that regard, do not lay down the law that the subsequent amendments made to the Principal Act, which received the previous Presidential sanction, can only be saved by obtaining fresh Presidential sanction. According to the learned AAG, as by the impugned notifications no additional restrictions have been imposed, the Act cannot be held to be bad for not complying with the requirements of Article 304(b).
44. Relating to the stand of the State that the presidential sanction having been obtained in the year 2000, before promulgation of the Principal Act in the year 2001, no further Presidential sanction is required to be obtained as envisaged under Article 304(b) of the Constitution, Mr. Ganesh, the learned Senior Counsel, has submitted that such argument is not tenable in law, as the requirement of obtaining the Presidential sanction is not a mere formality. According to the learned Senior Counsel, prior to the enactment of the Principal Act, the State sent the Assam Entry Tax Bill, 1998 to the President for his sanction as required under Article 304(b) of the Constitution, to impose entry tax on 10 items including the goods relating to Prasar Bharati and all kinds of textiles and fabrics. The President, however, did not accord sanction in respect of the goods relating to Prasar Bharati and all kinds of textile and fabrics, which was made known by the Government of India to the Government of Assam vide communication dated September 1, 2000 and accordingly the Principal Act was enacted for levy of entry tax on the seven specified goods only, at the rate prescribed in the schedule appended thereto. It has been submitted by the learned Senior Counsel that as the goods relating to the Prasar Bharati and all kinds of textiles and fabrics are Articles of special importance under Section 14 of the Central Sales Tax Act, the President did not give sanction to the proposed levy on those goods and, therefore, the inclusion of tobacco, which is also an Article of special importance, in the schedule, by issuing notification under Section 3(4) of the Act and subsequently by Second Amendment Act, is violative of Article 304(b) of the Constitution, the same having not been sanctioned by the President. Mr. Ganesh has further submitted that by no stretch of imagination it can be argued that once Presidential sanction for imposition of entry tax in respect of certain goods is obtained, for inclusion of other goods by way of amendment of the Act by the State Legislature it does not require Presidential sanction, as the said argument on the face of Article 304(b) is fallacious. It has been contended that as by such notifications and amendments additional restriction has been imposed on the goods included in the schedule, thereby impeding free movement of goods, prior Presidential sanction or subsequent assent is a must to validate such restrictions, which admittedly not been obtained.
45. Referring to the decisions cited by the learned AAG in Syed Ahmed Aga : AIR1975SC1443 , Widia (India) Ltd. : AIR2003SC3095 and Subodhaya Chit Fund [1991] Supp 2 SCC 131, it has been submitted by Mr. Ganesh that the said decisions of the apex court do not support the contention of the learned AAG that subsequent Presidential sanction is not required in respect of the subsequent amendments of the Act. Referring to the Constitution Bench decision of the apex court in Kaiser-I-Hind : [2002]SUPP2SCR555 it has been contended that the Presidential sanction having been obtained in respect of seven items only, originally included in the schedule to the Act, the subsequent amendment requires further sanction of the President to save the same from violation of Article 301, which, admittedly has not been done in the present case.
46. Regarding the requirement of the Presidential sanction to the Amendment Acts amending the provision of principal Act, supporting the argument of Mr. Ganesh, it has further been submitted by Dr. Saraf, that by the First as well as Second Amendment Acts amending the provisions of Section 2(b) and Section 2(d) as well as Section 2(4) and also Section 3(1), the object for which the sanction was granted has been completely changed and therefore, it cannot be said that the Presidential sanction granted to the 1998 Bill will even cover the subsequent amendments whereby the new goods have been added to the schedule, thereby imposing restriction on movement of such goods. Referring to the proviso of Clause (b) of Article 304 of the Constitution, Dr. Saraf has submitted that it is evident from the said proviso that the Presidential sanction even in case of amendment to the Act, is required under Article 304(b) of the Constitution. Dr. Saraf in support of his contention has also placed reliance on the decision of Kaiser-I-Hind : [2002]SUPP2SCR555 .
47. Referring to the decision in Subodhaya Chit Fund [1991] Supp 2 SCC 131, in Syed Ahmed Aga : AIR1975SC1443 and Widia (India) Ltd. : AIR2003SC3095 on which the learned AAG has placed reliance in support of his contention in that regard, Dr. Saraf has submitted that those decisions are distinguishable and in fact the principles laid down therein support his contention.
48. Mr. Dutta, relating to the question as to whether the amendments to the principal Act require either previous Presidential sanction or subsequent Presidential assent, adopting the arguments of Mr. Ganesh as well as Dr. Saraf, has further submitted that the question is whether such amendment imposes additional restrictions in public interest or not. According to the learned Senior Counsel since the additional items have been put in the schedule thereby impeding the movements of the goods, it puts an additional restriction and hence the requirements of Article 304(b) have to be fulfilled. It has further been submitted that by the amendment of Section 2(1)(b), (d) and Section 3 additional goods are covered under the Act by widening the tax base and therefore, it amounts to additional restrictions which require Presidential sanction/assent.
49. Mr. Dutta has further submitted that the impugned Act is also bad in law as by the said enactment even goods directly imported from abroad are subjected to entry tax which cannot be done by a State, imposition of tax on such import being the Union subject under List I to the Seventh Schedule and hence the State Legislature has no legislative competence to enact any law imposing entry tax on the goods directly imported from abroad. Mr. Dutta, however, in view of the submissions of the learned AAG that the provision of Section 3 of the Act, i.e., the charging Section may be read down to the extent that the goods which are directly imported by an importer are not within the purview of Section 3, has not pressed this issue. Mr. Dutta, however, referring to the single-bench decision of this Court in Primus Imaging Pvt. Ltd. v. State of Assam reported in [2007] 9 VST 528 : [2007] 1 GLR 757 has submitted that the imposition of entry tax on the goods directly imported from abroad was held to be illegal against which no appeal has been preferred by the State. Mr. Choudhury, the learned AAG has submitted that the State, in so far as the said question is concerned, has accepted the decision of the learned single judge in the said case.
(v) Whether Section 3(4) of the impugned Act, as it stood till May 12, 2005, suffers from vice of excessive delegation of legislative functions?
50. The learned AAG has submitted that the legislative power could be delegated as long as the Legislature does not divest itself of its essential legislative functions, but what is prohibited is the conferment of arbitrary power upon another body without the Legislature reserving to itself control over that body. Referring to the decision in M.K. Papiah & Sons v. Excise Commissioner : [1975]3SCR607 , it has been submitted by the learned AAG that the apex court in the said case held that the Legislature entrusting important regulation to an agent does not efface itself or abdicate its legislative power, as in the case in hand. According to the learned AAG, when the Legislature retains its power intact and can undo what its delegate has done, it would not suffer from the vice of excessive delegation. The learned AAG has further submitted that if the Legislature lays down the policy and retains to itself the control over the executive, the legislative power can be delegated. Referring to the decision in Municipal Corporation of Delhi v. Birla Cotton, Spinning and Weaving Mills, Delhi : [1968]3SCR251 (in short, 'Birla Cotton') the learned AAG has further submitted that what is prohibited is the abdication of the essential legislative function. It has been submitted that when a piece of legislation is challenged on the ground of excessive delegation, the question which always to be considered is whether the legislative will has been expressed or not and once it is established that the Legislature itself has willed that a particular thing be done and has merely left the execution of it to a chosen instrumentality without parting with its control, there is no question of such piece of legislation suffering from the vice of excessive delegation, as by retaining the control over the delegate the Legislature can undo what the delegate has done. Relying on the decision in Hira Lal Rattan Lal v. Sales Tax Officer, Section III, Kanpur : [1973]2SCR502 , it has further been submitted that the Legislature can delegate the power to an authority to select the person on whom the tax is to be levied or the goods or transactions on which tax is to be levied and in the instant case, the preamble, the Statement of Objects and Reasons and also the provisions of the impugned Act reveal that the Legislature has expressed its will to levy tax on specified goods on their entry into a local area for consumption, use or sale therein, laying down sufficient guidelines what to tax, whom to tax and at what rate. Relying on the decision in Pandit Banarsi Das Bhanot v. State of Madhya Pradesh : [1959]1SCR427 it has been submitted that it is not unconstitutional for the Legislature to leave it to the executive to determine the details relating to the working of the taxation laws, such as selection of persons on whom the tax is to be levied, rates at which it is to be charged in respect of different classes of goods and the like. Referring to the decision in Consumer Action Group v. State of Tamil Nadu : AIR2000SC3060 , the learned AAG submitted that the guidelines for the delegate to choose the person who is to be taxed and the rate at which it is to be taxed can be gathered from the Preamble and the Statement of Objects and Reasons as well as other provisions of the impugned Act, as the Preamble clearly lays down the policy/guidelines towards the levy of the tax on the entry of the schedule goods into any local area in Assam for consumption, use or sale therein and for matters connected therewith. Therefore, according to the learned AAG, Section 3(4) as it stood prior to May 12, 2005 and thereafter, Section 3(1) as amended, cannot be said to have conferred any unbridled or uncanalised power on the executive, bereft of any guideline or policy. The learned AAG, therefore submits that the provision in Section 3(4) of the impugned Act does not suffer from the vice of excessive delegation of legislative functions by the State Legislature.
51. Mr. Ganesh supporting the finding recorded by the learned single judge, on the question of excessive delegation, has contended that it is apparent from the provision of Section 3(4) of the Act that the State Legislature has abdicated its essential legislative function by delegating the power to fix the rate of tax, the items to be taxed and, therefore, the provision of Section 3(4) suffers from the doctrine of excessive delegation and hence the notifications issued by the executive fixing the rate of tax, the items to be taxed, i.e., the identification of the items, are illegal. Mr. Ganesh, placing reliance on the Constitution Bench judgment of the apex court in Devi Dass Gopal Krishnan v. State of Punjab : [1967]3SCR557 , has submitted that similar provision in East Punjab General Sales Tax Act, 1948, as that of the impugned enactment, was declared to be void on the ground of excessive delegation of power. Mr. Ganesh has also placed reliance on another Constitutional Bench decision of the apex court in Corporation of Calcutta v. Liberty Cinema : [1965]2SCR477 (in short, 'Liberty Cinema'). Therefore, according to the learned Senior Counsel the levy of tax prior to May 12, 2005 by issuing notifications under Section 3(4) of the Act is illegal being hit by the doctrine of excessive delegation of power.
52. Dr. Saraf has contended that Section 3(4) of the 2001 Act suffers from excessive delegation of the legislative function as in the said provision no guideline has been issued to the executive, whom to tax, what to tax and at what rate. According to the learned Senior Counsel even to fix the rate of tax by the executive there must be some guidelines by the Legislature in the Act, which is lacking in the present case, prior to Second Amendment Act of 2005. It has been submitted that the Legislature in the present case has abdicated its essential legislative function. In support of his contention the learned Senior Counsel has also placed reliance on the decision of the apex court in Devi Dass Gopal Krishnan case : [1967]3SCR557 , in Liberty Cinema case : [1965]2SCR477 as well as in Avinder Singh v. State of Punjab reported in : [1979]1SCR845 , in Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. v. Assistant Commissioner of Sales Tax reported in : [1974]94ITR204(SC) , in Kerala State Electricity Board v. Indian Aluminium Corporation Ltd. reported in : [1976]1SCR552 and in Agricultural Market Committee v. Shalimar Chemical Works Ltd. reported in : AIR1997SC2502 .
(vi) Whether omission of Section 3(4) in the impugned Act, by Second Amendment Act, with effect from May 12, 2005, saves the actions taken under the said provision of law prior to May 12, 2005?
53. The learned AAG further submits that though by the Second Amendment Act, Sub-section (4) of Section 3 has been omitted, but in substance, it is not omission but substitution of the said provision by new Section 3 and therefore, Section 6 of the Assam General Clauses Act is applicable and all actions taken under Section 3(4) of the said Act, prior to the Second Amendment Act, stood saved. The learned AAG, in support of his contention, has placed reliance on the apex court judgment in Kolhapur Canesugar Works Ltd. v. Union of India reported in : 2000(119)ELT257(SC) .
54. It has been contended by Mr. Ganesh, the learned Senior Counsel that as Section 3(4) of the impugned legislation has been omitted by the Second Amendment Act, which came into effect from May 12, 2005, without there being any Clause saving the actions already taken under the said provision of law, the entire proceeding including the notifications issued and actions taken, in exercise of the power conferred by Section 3(4) of the Act, became non-existent, because the effect of such omission is--as if such provision was not in existence at any point of time. Referring to Section 6 of the General Clauses Act as well as that of the Assam General Clauses Act, it has been submitted by the learned Senior Counsel that the said provision is applicable only in case of repeal of an Act or the deletion and not in case of omission of a provision of law, as in the case in hand. Therefore, according to the learned Senior Counsel, the stand of the State that the action taken under the omitted provision of Section 3(4) of the Act is saved by Section 6 of the Assam General Clauses Act, 1915 is not tenable in law. Referring to the decision of the apex court in Kolhapur Canesugar Works Ltd. : 2000(119)ELT257(SC) , it has been contended by Mr. Ganesh that the effect of repealing a statute or deleting a provision is to obliterate it from the statute book as completely as if it had never been passed and the statute must be considered as a law that never existed, which, however, is subject to the exception engrafted by the provision of Section 6(1) of the General Clauses Act. Referring to the Constitution Bench decision of the apex court in Rayala Corporation (P) Ltd. v. Director of Enforcement : 1970CriLJ588 , it has been submitted by the learned Senior Counsel that the apex court has held that Section 6 of the General Clauses Act cannot be applied in case of omission of the provision, which applies in case of the repeal only.
(vii) Whether the judgment passed would have prospective effect?
55. It has further been submitted by the learned AAG that in case the judgment of the learned single judge is held to be valid and the impugned notifications and the Act are held to be violative of the Constitution, it should, in overriding public interest, apply the doctrine of prospective overruling as held by the apex court in Raymond Ltd. v. Madhya Pradesh Electricity Board reported in [2001] 1 SCC 534. It has further been contended that the decisions of the apex court cited by the learned Senior Counsel for the petitioners/respondents in writ appeals, in view of the decision in Raymond Ltd. [2001] 1 SCC 534 have no application.
56. Countering the stand of the State relating to the applicability of the doctrine of prospective overruling, Mr. Ganesh has submitted that the High Court cannot apply the doctrine of prospective overruling and it is only the Supreme Court, which can overrule the constitutional provision prospectively. In support of his contention Mr. Ganesh has placed reliance on the decision of the apex court in L.C. Golak Nath v. State of Punjab : [1967]2SCR762 and State of Himachal Pradesh v. Nurpur Private Bus Operators Union : AIR1999SC3880 (in short, 'Nurpur Pvt. Bus Operators Union').
57. Dr. Saraf, in reply to the submission made by the learned AAG in respect of the prospective overruling, while supporting the argument of Mr. Ganesh, referring to the decision of the apex court in Gupta Modern Breweries v. State of Jammu and Kashmir [2007] 8 RC 688 has submitted that the State cannot be allowed to retain the tax already collected in the interregnum, in the event the levy is held to be ultra vires and in view of the provision contained in Section 50 of the Assam Value Added Tax Act, which is made applicable by Section 8 of the 2001 Act, there being a requirement of refund of the tax, the authority has no alternative but to refund the amount paid. It has further been contended by Dr. Saraf that even the bank guarantee furnished in respect of the period prior to May 12, 2005 has been encashed by the Government and that has not been refunded despite the fact that such tax was not passed on to the consumer.
(viii) Whether refund of tax paid is permissible?
58. The learned AAG further submits that even if the impugned legislation is found to be violative of the provisions of Constitution, there cannot be, in the present case, any refund of the tax paid, the same having been passed on to the consumer. Referring to Section 8B of the Act, it has further been contended that there being presumption in favour of passing on the burden of tax to the consumers, the importers, who are taxed, have to prove otherwise, so as to get the refund, which they have failed to do. Mr. Choudhury, in support of his contention has placed reliance on the decisions of the apex court in Indian Oil Corporation v. Municipal Corporation, Jullundhar reported in : AIR1993SC844 (in short, 'Municipal Corporation, Jullundhar'), in Entry Tax Officer, Bangalore v. Chandanmal Champalal & Co. reported in : [1994]3SCR545 , in Mafatlal Industries Ltd. v. Union of India reported in : 1997(89)ELT247(SC) and in B.P.L. Ltd. v. R. Sudhakar reported in : (2004)IILLJ834SC . Referring to the decision in Director of Entry Tax v. Mahindra & Mahindra reported in : (2003)11SCC749 , it has further been contended that the asses-sees having used, consumed or sold the goods, on which tax has been levied, they are not entitled to the refund.
59. It has been submitted by the learned AAG that even assuming Section 8B of the impugned Act has no application in the facts and circumstances of the case, still the burden is on the assessees to establish that the tax paid has not been passed on to the consumer, as otherwise it would amount to undue enrichment. The learned AAG further submits that the interim order in which the undertaking has been recorded lost its force when the final order was passed wherein the question of refund of the tax was directed to be decided in accordance with law. Relying on the decision in Mafatlal Industries : 1997(89)ELT247(SC) , the learned AAG, therefore, submits that the law laid down by the apex court in the said case has to be followed in case of claim for refund of the tax paid. According to the learned AAG, the assessees having failed to discharge their burden to establish that the tax collected has not been passed on to the consumers, are not entitled to refund.
60. On the question of refund, Mr. Ganesh has submitted that though the learned single judge initially passed an interim order the same was modified by the appellate court only on the basis of the undertaking given by the learned AAG. According to the learned Senior Counsel, the stand of the State in that respect is not acceptable at all and the decisions cited by the learned AAG also do not support the contention that AAG having no authority to give any undertaking on behalf of the Government, such undertaking would not bind the Government. Mr. Ganesh has submitted that the order having been passed by the writ court on the basis of the undertaking given by the counsel appearing on behalf of the State, such undertaking has to be honoured and the amount of tax paid has to be refunded. The concept of undue enrichment, according to the learned Senior Counsel, is not applicable in the instant case, as the State nowhere has pleaded that the tax imposed by virtue of the impugned legislation has been passed on to the consumer. According to the learned Senior Counsel, in fact, because of the provision contained in Standard of Weights and Measures (Package Commodities) Rules, 1977 framed under the Standard of Weights and Measures Act, it is not possible on the part of the respondent/writ petitioner to alter the price printed in each packet of cigarette, which is the price throughout India and such price cannot include the entry tax levied on the respondent/writ petitioner and, therefore, there is no question of passing on the burden of tax to the consumer and consequently there would not be any undue enrichment in case of refund of the tax.
61. Referring to the stand of the State that there being provision of Section 8B of the Act relating to the refund of the tax, the burden lies on the respondent/writ petitioner to prove that the tax imposed has not been passed on to the buyer of the goods, for claiming refund, it has been submitted by Mr. Ganesh that the provision of Section 8B cannot be applied as the said provision is applicable to the tax paid and refund claimed under the Act, but in the instant case, the tax has been paid under the order of the court and not by accepting the provision of the Act and that too by way of bank guarantee, which has been encashed by the State on March 30, 2006 in respect of the tax paid prior to May 12, 2005. According to the learned Senior Counsel, because of the omission of Section 3(4) from the Act, the bank guarantee given for payment of tax in respect of the period when such provision was in force, cannot be encashed. Mr. Ganesh in support of his contention has placed reliance on the decision of the apex court in Tata Refractories Ltd. v. Sales Tax Officer [2003] 129 STC 506 : [2003] 1 SCC 65, Mafatlal Industries Ltd. : 1997(89)ELT247(SC) , Mahavir Aluminium Ltd. v. Collector of Central Excise : 1999(114)ELT371(SC) , Commissioner of Central Excise, Hyderabad v. I.T.C. Ltd. [2005] 179 ELT 15 (SC), Suvidhe Ltd. v. Union of India : 1996(82)ELT177(Bom) and Gujarat Insecticides Ltd. v. Union of India : 2005(183)ELT9(Guj) . Relying on the decision of the apex court in B. Shama Rao v. Union Territory of Pondicherry : [1967]2SCR650 , Mr. Ganesh has submitted that when the charging Section is no longer in existence and void, all other actions taken under the said provision also automatically go and hence Section 8B of the Act in any case cannot be applied.
62. It has been submitted by Dr. Saraf that there being no provision in the Act for passing on the tax liability to the consumer and such liability being on the importer, there cannot be any passing over of the tax liability to the consumer. It has further been submitted that entry tax having been levied on the sale, use and consumption of the specified goods and the taxable goods sold in the State of Assam and chargeable under the Assam Value Added Tax Act having been exempted from the payment of entry tax, the two eventualities left for levy of the entry tax, i.e., use or consumption. If the specified goods is consumed by the importer by itself there is no question of passing on the tax liability to the consumer. When such specified goods is used by the importer for, e.g., the raw material for production of finished product, then also the tax is not passed on to the consumer as has been levied as entry tax. Therefore, there is no question of passing on the tax to the consumer. Moreover, according to the learned Senior Counsel in case of crude oil the price is fixed on all-India basis which cannot be changed and hence the levy of entry tax is to be borne by the importer and cannot be passed on to the consumer. Referring to Section 8B of the Act, it has further been contended that there being no provision in the Act for passing over the tax liability to the consumer, there cannot be any question of presuming that the tax has been passed over to the consumer. Dr. Saraf in support of his contention has placed reliance on the single bench decision of this Court in Goalpara Roller Flour Mill Ltd. v. State of Assam reported in [2008] 12 VST 478 : [2007] 2 GLT 952 and of the apex court in Delhi Cloth and General Mills Co. Ltd. v. Commissioner of Sales Tax, Indore reported in [1971] 28 STC 331.
63. The learned Senior Counsel Mr. Joshi as well as other learned Counsel appearing for the petitioners and also for the respondents in writ appeals have adopted the arguments of the learned Senior Counsel, noted above, on all the issues.
Decision and Reasons thereof
64. Article 301 of the Constitution provides that subject to other provisions of Part XIII, trade, commerce and intercourse throughout the territory of India shall be free. Article 301 though is positively worded, in effect it is negative as freedom correspondingly creates general limitations on all legislative powers to ensure that trade, commerce and intercourse throughout the territory of India shall be free. Article 302 is an exception of Article 301, which confers power on the Parliament to impose restrictions on trade, commerce and intercourse between one State and another or within any part of the territory of India in public interest. Article 303, which is also an exception or a proviso to Article 302, which opens out with a non-obstante clause, provides that neither the Parliament nor the Legislature of a State is empowered to make any discriminatory law making discrimination between one State and another by virtue of any entry relating to trade and commerce in any of the Lists in the Seventh Schedule. Clause (2) of Article 303 lifts the ban imposed on the Parliament under Clause (1) of Article 303, empowering the Parliament to make any law imposing such discriminatory restrictions as is necessary for the purpose of dealing with a situation arising out of scarcity of goods in any part of the territory of India. Clause (2) of Article 303, therefore, does not lift the ban imposed on the State Legislature in making discriminatory law as imposed by Clause (1) of Article 303. Article 304 also opens out with a non-obstante clause, namely, 'notwithstanding anything in Articles 301 and 303'. Article 304(a) of the Constitution provides that the Legislature of a State may, by law, impose on goods imported from other States or the Union Territories any tax to which similar goods manufactured and produced in the State are subject so, however, as not to discriminate between the goods so imported and goods so manufactured and produced. Article 304(a) does not prevent levy of tax on goods but it prohibits such levy of tax on goods as would result in discrimination between the goods imported from other States and similar goods manufactured or produced within the State. Article 304(b) enables the State Legislature to enact law imposing such reasonable restrictions on the freedom of trade, commerce and intercourse with or within that State, in the public interest. The power of the State Legislature to impose reasonable restrictions in public interest, as envisaged in Article 304(b), is subject to the condition of having prior Presidential sanction or subsequent Presidential assent.
Issue No. I
65. I Having noticed the different provisions of Part XIII of the Constitution, we shall now first deal with the contention of the petitioner in W.P. (C) No. 4685 of 2006 Bharati Airtel Limited v. State of Assam wherein, the imposition of entry tax on sound transmitting equipment including telephone, mobile phone, pager and components and parts thereof have been challenged on the ground, apart from others, that the similar goods produced or manufactured in the State are not subjected to tax. By the impugned Act as it stood prior to amendments, i.e., the principal Act, which received prior Presidential sanction, Section 3, which is the charging section, provides for levy of tax on the goods specified in the schedule, on its entry into any local area for its consumption, use or sale on the rates shown against each of the items in the said schedule. The 'entry of goods into a local area' was defined in Section 2(1)(b) as entry of goods as specified in the schedule into a local area from any place outside the State (emphasis laid) for consumption, use or sale therein. 'Entry tax' has been defined in Section 2(1)(c) as tax on entry of goods into a local area. Section 2(1)(d) defines 'importer' as a person who brings the goods as specified in the schedule into a local area from any place outside the State (emphasis laid), for consumption, use or sale therein including for consumption or use of such goods in works contract. 'Local area' is defined in Section 2(1)(e). It is, therefore, evident that by the charging Section what have been subjected to tax are the goods brought from a place outside the State on its entry into a local area. The principal Act did not subject the similar goods specified in the schedule to tax, which are manufactured or produced in the State when brought into a local area for consumption, use or sale thereof. Article 304(a) of the Constitution prohibits the State Legislature from imposing any tax on goods imported from other States to which similar goods manufactured or produced in that State are not subjected to. Therefore, if the goods brought from outside are subjected to tax without so subjecting similar goods produced or manufactured in the State, such tax would be violative of Article 304(a) as well as Article 301 of the Constitution, which provides for free trade, commerce and intercourse throughout the territory of India. In such eventuality, it would amount to impeding the free movement of goods into a State which imposes such discriminatory tax. The learned AAG also, during the course of arguments, has admitted that the imposition of tax on the specified goods mentioned in the Schedule in the principal Act, prior to any of its amendments, appears to be discriminatory, as similar goods manufactured or produced in the State have not been subjected to such tax. The learned AAG, however, has submitted that as such discrimination has been removed by the First Amendment Act of 2001 and the prior Presidential sanction for enactment of the Principal Act containing such discrimination has been obtained, such defect has been cured, as according to the learned AAG a discriminatory tax can be imposed by the State Legislature subject to Presidential sanction. We shall discuss such submission of the learned AAG, while discussing the issue No. II, in this judgment.
66. It is, therefore, evident that, subject to decision on the aforesaid point urged by the learned AAG, imposition of entry tax on the goods specified in the schedule by the said Act, prior to any of its amendments is discriminatory and hence violative of Article 304(a) and Article 301 of the Constitution.
67. The next question which requires our consideration is whether the imposition of tax on the sound transmitting equipment including telephones, mobile phones, pager and components and parts thereof under the impugned Act or after its amendment is violative of Article 304(a) as those Articles are not manufactured or produced in the State. It is an admitted position of fact that such goods specified in the schedule are not manufactured in the State. Article 304(a) allows the State Legislature to make law imposing any tax on goods imported from other States or Union Territories to which similar goods manufactured or produced in that State are subjected, so as not to discriminate between the goods so imported or goods so manufactured or produced. Article 304(a), therefore, requires imposition of a non-discriminatory tax so that no differentiation is made between the goods imported from other States and the goods locally manufactured or produced. It does not provide that the goods imported from other States or Union Territories cannot be subjected to tax unless such goods are manufactured or produced in the State. Such an interpretation sought to be given by Mr. Dutta, learned Senior Counsel, cannot at all be accepted, as in that case the States would be denuded of its power to impose tax on goods imported from other States or Union Territories if such goods are not manufactured or produced in the States. The requirement of Article 304(a) is satisfied, when the State has subjected both locally manufactured or produced goods and goods imported from other States or Union Territories to tax without discriminating between them. However, there may be exception in respect of certain taxes or duties, for example in case of countervailing duty. In Kalyani Stores : [1966]1SCR865 the issue was whether the State has power to impose or increase the countervailing duty on foreign liquor. The apex court, upon noticing that the countervailing duty is meant to equalise the burden on alcoholic liquor imported from outside the State and the burden placed by excise duties on alcoholic liquors manufactured or produced in the State, has held that alcoholic liquors imported from other State(s) cannot be subjected to countervailing duty, if similar alcoholic liquors are not produced in the State. It is in this context the apex court in our considered opinion, has observed that Article 304(a) can only be effective if the tax or duty imposed on similar goods manufactured or produced in that State are such that there is no discrimination against imported goods and as no liquor was produced or manufactured in the State, the protection of Article 304 was not available. The apex court in A.B. Abdul Kadir : [1970]1SCR700 has observed that in Kalyani Stores : [1966]1SCR865 the court did not intend to lay down the proposition that the imposition of a duty or tax in every case would tantamount per se to an infringement of Article 301. In Hansa Corporation : [1981]1SCR823 the apex court has also observed that the decision in Kalyani Stores : [1966]1SCR865 is limited to that case only and has not laid down any proposition of universal applicability.
68. The next controversy which requires our consideration is whether the impugned levy is discriminatory in view of the provision contained in Section 5 of the impugned Act relating to the exemption from payment of entry tax under the Act and the difference of rate of tax. The contention of the respondent in the writ appeal as well as the petitioners in some of the writ petitions is that such exemption of payment of entry tax in respect of specified goods which are subjected to tax under the State Sales Tax Act (Assam Value Added Tax Act) amounts to discrimination as importer of such goods imported from outside the State does not get the benefit of such exemption from payment of tax under Section 5 of the Act thereby imposing the tax on the goods imported from outside the State or Union Territories or imposing a higher rate of tax on such goods imported from outside. The levy of entry tax on the specified goods, on entry into the local area of the State and the tax levied on subsequent sale or purchase thereof under the local State Sales Tax Law are two different levies, independent of each other. Section 5 of the impugned Act as it stood after the amendment is reproduced below for better appreciation:
5. Exemption from tax.--Notwithstanding anything contained in Section 3 and Section 4 and subject to production of documentary proof, no tax under this Act shall be levied in respect of the specified goods which are also subject to levy of taxes under the provisions of the Assam Value Added Tax Act, 2003 (Assam Act VIII of 2005).
(i) if the sale of such specified goods inside the State, made by an importer are sales within the meaning of [Clause (43) of Section 2] of the said Act, excepting sales falling under Sub-clauses (ii), (iii) and (iv) of the said Clause and if he is liable to pay tax on such sales as a registered dealer under the Assam Value Added Tax Act, 2003 (Assam Act VIII of 2005);
(ii) if the sale of such specified goods are made by the importer in the course of inter-State trade or commerce or in the course of export out of the territory of India or such goods are otherwise dispatched outside the State by way of stock transfer and if he is a registered dealer under the Central Sales Tax Act, 1956 (Central Act 74 of 1956).
69. Section 5 of the impugned Act, as quoted above, confers power of exemption from payment of tax on the State, in the event of fulfilling certain conditions laid down therein. The free flow of trade cannot necessarily be deemed to have been obstructed merely because in a particular State the rate of tax is higher than the rate prevailing in other States.
70. The apex court in Video Electronics Pvt. Ltd. : AIR1990SC820 , has observed that it would be wrong to denude the people of the State of the right to grant exemptions, which flows from the plenary powers of legislative heads in List II of the Seventh Schedule of the Constitution. It is further observed that in a federal polity all the States have powers to grant exemption to specified class for limited period, such granting of exemption cannot be held to be contrary to the concept of economic unity and the concept of economic unity by the people of India would necessarily include the power to grant exemption or to reduce the rate of tax in special cases for achieving industrial development or to attain economic equality in growth and development. The apex court has further observed that it is open to the State to realise tax and thereafter remit the same or pay back to the local manufacturers in the shape of subsidies and that would neither discriminate nor be hit by Article 304(a) of the Constitution. In N.K. Nataraja Mudaliar [1968] 22 STC 376, the apex court has held that the free flow of trade may not necessarily be deemed to have been obstructed merely because in a particular State the rate of tax is higher than the rate prevailing in other States and on principle there is no distinction between a tax on inter-State and a tax on intra-State sales.
71. In Shree Digvijay Cement Co. Ltd. [2000] 117 STC 395 : [2001] 1 SCC 688, a Constitution Bench of the apex court referring to various earlier decisions has held that the notification issued by the State of Rajasthan which had the effect of reducing tax on the inter-State sale effected by the dealers from the State of Rajasthan to seven per cent even though in respect of local sales the tax was 16 per cent do not have the effect of hindrance on the free movement of goods from one place to another.
72. A Constitution Bench of the apex court in Andhra Sugars Ltd. : [1968]1SCR705 , referring to the decision in Firm A.T.B. Mehtab Majid : AIR1963SC928 has observed that if in the charging Section there is no discrimination between goods locally manufactured and produced and goods imported from outside and the same rate of tax is levied in respect of both goods it cannot be said that the provisions of Article 304(a) are violated. The decision in Mahavir Oil Mills : (1996)11SCC39 cited by Mr. Ganesh, the learned Senior Counsel, is distinguishable as in the said case the exemption granted by the State of Jammu and Kashmir has the effect that the edible oil manufacturer in other States are required to pay sales tax on sale effected in Jammu and Kashmir, while the local manufacturers were totally exempted therefrom. In Laxmi Paper Mart : AIR1997SC950 discrimination was found as the exercise books made from paper purchased within the State of U. P. were exempted from the sales tax whereas all other kinds of exercise books were liable to tax. There is no discrimination on the levy of tax on the specified goods by the impugned Act and the rate of tax in respect of each goods being same whether manufactured or produced in the State or brought from outside it cannot be held to be violative to Article 304(a) of the Constitution merely because the Government has been given the power to grant exemption under Section 5 of the impugned Act subject to fulfilment of certain conditions.
73. The contention of Mr. Sahewalla, the learned Senior Counsel, that the goods manufactured or produced in the local area, when it is used, consumed or sold in that local area is not subjected to tax though the same goods brought into that local area is subjected to tax, so also the goods imported from outside the State into that local area, the levy of tax is discriminatory and hence violative of Article 304(a) of the Constitution, also cannot be accepted as Article 304(a) has no relevance to such differential treatment as there is no discrimination in the impugned enactment between the goods imported from outside the State and the goods locally manufactured or produced in the State, in the matter of levy of tax. Such microscopic distinction relied upon by the learned Counsel for the respondents that there is differential treatment accorded to goods produced within a local area and those imported from outside the local area is hardly relevant for the purpose of Article 304(a). Hansa Corporation : [1981]1SCR823 .
74. In view of the aforesaid discussions, we are of the view that the impugned levy is not discriminatory and therefore not violative of Article 304(a) of the Constitution, except the discrimination as held above in respect of the principal Act as it stood prior to its amendment. The finding of the learned single judge in that regard is, therefore, upheld.
Issue No. II
75. Having held in Issue No. I that the impugned levy is non-discriminatory, the questions, which require decision by this Court is (i) whether the non-discriminatory entry tax imposes 'restriction' within the meaning of Clause (b) of Article 304; and (ii) whether the levy even if discriminatory in nature can be saved from being declared unconstitutional being violative of the free movement of goods, by obtaining the Presidential sanction as required under Clause (b) of the Article 304.
76. We shall now first discuss the decisions cited by the learned Counsel for the parties in support of their respective contentions. In Atiabari Tea Co. : [1961]1SCR809 , which has also been noticed by the apex court in all its subsequent decisions relating to Part XIII of the Constitution including in Jindal Stainless : [2006]283ITR1(SC) , a Constitution Bench of the apex court has observed that the intrinsic evidence furnished by some of the Articles of Part XIII shows that taxing laws are not excluded from the operation of Article 301, which means that tax can and do amount to restriction on freedom, which is guaranteed to trade under Part XIII. It has further been observed that if any Act imposes any direct restriction on the very movement of such goods, it attracts the provisions of Article 301 and its validity can be sustained only if it satisfies the requirement of Articles 302 and 304 of the Constitution. The majority view in Atiabari Tea Co. : [1961]1SCR809 was re-examined and affirmed by a seven-judge Constitution Bench of the apex court in Automobile Transport : [1963]1SCR491 where, it has been observed that regulatory and compensatory measures do not impede the freedom of trade, commerce and intercourse as, such measures are to facilitate trade and do not hamper trade, commerce and intercourse. It has further been held that any tax, which in reality facilitates trade and commerce, is not a restriction within the meaning of Articles 302 and 304. It is the reality or substance of the matter that has to be determined to scrutinise whether a tax is a restriction or not. In the said case, the apex court while interpreting the provisions of Articles 301, 302, 303 and 304 of the Constitution, has observed that non-obstante Clause of Article 303 has no relevance so far the State Legislature is concerned, as Article 302 does not deal with the Legislature of the State and hence, non obstante Clause can only be made applicable to the Parliament. It has further been held that non-obstante Clause vis-a-vis Article 304(a) may have some relevance in so far as the Article 301 is concerned which enables the State Legislature to impose impediment on the free movement of trade, in spite of freedom declared under Article 301, but it has no relevance to Article 303 which only prohibits the State Legislature from making discriminatory law. It has also been observed that with reference to Article 304(b), non-obstante Clause has no significant meaning in regard to Article 303, as Clause (b) of Article 304 lifts the ban imposed by Article 303, subject to limitations mentioned therein. Therefore, the non-obstante Clause must be meant to apply only to the appropriate Clause of Article 304.
77. It is evident from the aforesaid discussion that the apex court in Automobile Transport : [1963]1SCR491 while affirming the views expressed in Atiabari Tea Co. : [1961]1SCR809 has, however, held that if the levy is compensatory in nature, the requirement of Article 304(b) is not required to be complied with as, such compensatory nature of tax instead of impeding freedom of trade, facilitates the trade.
78. In Hansa Corporation : [1981]1SCR823 , the apex court has held that Article 304 lifts the embargo on the legislative power of the State to enact law, which may infringe upon the freedom of trade and commerce subject to the requirement of enacting a non-discriminatory law under Article 304(a) and compliance with the requirements of Article 304(b), if such tax impedes the movement of goods. The apex court, in the said case, however, has held that as the levy imposed therein was non-discriminatory in character, although it imposes restriction, the same is reasonable and in public interest and as, such taxing statute has received the Presidential assent, it does not offend the provisions of Part XIII of the Constitution.
79. The contention of the learned AAG that the decision of the apex court in Hansa Corporation : [1981]1SCR823 cannot be relied upon in support of the proposition that a non-discriminatory tax in order to pass the test of Article 301 must also for its validity satisfy the requirement of Article 304(b), as the apex court did not examine whether the levy is of compensatory character or not and that the issue as to whether the conjunction 'and' appearing between Article 304(a) and Article 304(b) is to be read as 'or', was not considered and as such it is a decision passed sub silentio, as the said question was either not perceived by the court or present in the mind, cannot at all be accepted in view of the authoritative pronouncement of the apex court in Atiabari Tea Co. : [1961]1SCR809 , in Automobile Transport : [1963]1SCR491 and in Hansa Corporation : [1981]1SCR823 . The binding precedence, which is authoritative in nature and is meant to be applied cannot be ignored on application of the doctrine of sub-silentio.
80. In Laxmi Paper Mart : AIR1997SC950 , the apex court has observed that where a tax is non-discriminatory but it imposes restriction, the same has to comply with the reasonableness, public interest and also must obtain the sanction of the President as required under Clause (b) of the Article 304 of the Constitution. In Andhra Sugars Ltd. : [1968]1SCR705 , the Constitution Bench of the apex court has also held that a non-discriminatory tax on goods does not offend Article 301 unless it directly impedes the freedom of movement of transport of goods.
81. In Guruviah Naidu : [1977]1SCR1065 , the apex court has held that Article 304(a) does not prevent levy of tax on goods, what it prohibits is such levy of tax on goods as would result in discrimination between the goods imported from other States and similar goods manufactured within the State.
82. In G.K. Krishnan : [1975]2SCR715 the notification issued by the Government of Tamil Nadu enhancing the motor vehicle tax on omnibuses under the Madras Motor Vehicles Taxation Act, 1931 was challenged. One of the grounds on which the said enhancement was challenged was that it imposes restriction on the freedom of trade, commerce and intercourse guaranteed by Article 301 of the Constitution of India and as the same was not passed after obtaining the previous sanction of the President of India, it is unconstitutional. The three-judge Bench of the apex court while considering the nature of levy in question as well as the different provisions of Part XIII of the Constitution and taking note of the decision in Atiabari Tea Co. case : [1961]1SCR809 , Automobile Transport case : [1963]1SCR491 and Khyerbari Tea Co. case : [1964]5SCR975 has observed that the majority view in Atiabari Tea Co. case : [1961]1SCR809 that the restrictions, freedom from which is guaranteed by Article 301, would be such restrictions as directly or immediately restrict or impede the free flow or movement of trade and that the taxes may and do amount to restrictions, but it is only such taxes as directly and immediately restrict the trade that would fall within the purview of Article 301, was practically overruled in Automobile Transport case : [1963]1SCR491 , in so far as it held that if a State Legislature wanted to impose tax to raise moneys necessary in order to maintain the roads, that could only be done after obtaining the sanction of the President as provided under Article 304(b). The apex court in G.K. Krishnan case : [1975]2SCR715 has further observed that the decision in Atiabari Tea Co. case : [1961]1SCR809 was affirmed in Automobile Transport case : [1963]1SCR491 with a clarification that regulatory measures or measures imposing compensatory tax do not come within the purview of restrictions contemplated in Article 301 and that such measures need not comply with the requirement of the provisions of Article 304(b). The apex court referring to the said earlier decisions has finally observed that the effect of the majority decision in the Automobile Transport case : [1963]1SCR491 is that a compensatory tax is not a restriction upon the movement part of trade and commerce.
83. In paragraph 15 of See : [1975]2SCR715 of the said judgment the apex court further opined that the collection of toll or tax for the use of roads, bridges or aerodromes, etc., though do not operate as barriers or hindrance to trade, a tax which has the effect of hindering the movement part of the trade does operate as barrier or hindrance. If a tax is compensatory or regulatory, it cannot operate as a restriction on the freedom of trade or commerce.
84. In paragraph 27 of See : [1975]2SCR715 the apex court while observing that whether the restrictions visualised by Article 304(b) would include the levy of a nondiscriminatory tax is a matter on which there is scope for difference of opinion. A tax on sale of goods might encumbers sale and purchase and, to that extent, restricts the freedom of trade and commerce. That apart, if a tax on inter-State sales is in essence a tax, which encumbers movement of trade and commerce, a tax on intra State sale, if it involves movement from one part of the State to another part of the same State, would encumber the movement part of it and is a restriction on the freedom of trade and commerce. It has further been observed by the apex court that generally speaking, selling and buying involves delivery of goods sold and bought and imposition of sales tax by a State on intra State sale, at any rate, when the sale involves movement of goods will be restriction of trade and commerce and unless the law imposing it has received the previous sanction of the President, it would be bad, if such imposition of tax is neither regulatory nor compensatory. The apex court, however, did not pursue the said matter further after observing that in case the President refused his consent, the State will be bereft of the source of revenue, which the Constitution has expressly given to the State as the notification impugned in the said case was found to be compensatory in character and, therefore, could not restrict the freedom of trade and commerce.
85. From the discussion of the judgment of the apex court in G.K. Krishnan : [1975]2SCR715 , it is, therefore, evident that a tax may amount to restriction within the meaning of Article 304(b) of the Constitution, if it restricts the free movement of goods as provided under Article 301 of the Constitution. The apex court in the said decision has also not propounded the 'some connection' theory while scrutinising whether the impugned levy is compensatory or not, but has held the levy impugned therein to be compensatory by taking note of the pleadings that the amount collected by way of tax has not only been spent for construction and maintenance of roads, but also to defray the cost incurred for erection and maintenance of traffic control devices, safety measures, improvements to old layouts which are necessarily to facilitate the trade and not to put hindrance.
86. The contention of the learned AAG that as in G.K. Krishnan case : [1975]2SCR715 the apex court lays down the law that the tax simpliciter or a non-discriminatory tax is not a restriction within the meaning of Article 304(b), its requirement are not required to be fulfilled, cannot be accepted. The contention of the learned AAG in so far as it relates to the 'some connection' theory has also not been propounded by the apex court in G.K. Krishnan case : [1975]2SCR715 . On the other hand, it has been observed by the apex court in the said case that a tax if it encumbers the movement from one State to another or from one part of the State to another part, is a restriction on the freedom of trade and commerce.
87. A Constitution Bench of the apex court in Jindal Stainless : [2006]283ITR1(SC) on which also the learned AAG has placed strong reliance in support of his contention, has in paragraph 34 of SCC (paragraph 31 of STC) observed that Article 301 provides for freedom of inter-State as well as intra-State trade and commerce subject to other provisions of Part XIII and correspondingly it imposes a general limitation on the legislative powers and such limitation is relaxed, as regards State Legislatures, imposed by Article 301, Article 303(1), in two cases, i.e., when a non-discriminatory tax is imposed by a State Legislature as envisaged in Article 304(a) even though it interferes with the freedom of trade and commerce guaranteed under Article 301 and the ban under Article 303(1) stands lifted, even if discriminatory restrictions are imposed by the State Legislature provided they fulfil the conditions, that it must be reasonable, it must be in public interest and subject to procurement of prior sanction of the President before introduction of the Bill. In paragraph 48 of SCC (in paragraph 45 of STC) it is also observed by the apex court that when any legislation, whether it would be taxation legislation or a non-taxation legislation, is challenged before the court as violative of Article 301, it is to be seen whether it has chosen the activity like the movement of trade, commerce and intercourse throughout India, as the criteria of its operation and if yes, the next question to be seen is what would be the effect of operation of law on the freedom guaranteed under Article 301. It has further been observed that if the effect is to facilitate free flow of trade and commerce then it is regulation and if it is to impede or burden the activity, then the law is a restraint. After finding the law to be a restraint/restriction, it is to be seen whether the impugned law is enacted by Parliament or by State Legislature as the Parliament as well as the State Legislatures are conferred with the power under Articles 302 and 304(b) subject to the requirements contained therein.
88. Therefore, in our considered view, in Jindal Stainless : [2006]283ITR1(SC) the opinion of the apex court is not that (i) a discriminatory tax can be saved only by obtaining the Presidential sanction, without establishing that such discriminatory tax is reasonable and in public interest and (ii) all non-discriminatory taxes do not require fulfilment of the conditions laid down in Article 304(b). The apex court, in our view, has also held that the taxes which have direct impact on the free flow of trade and commerce constitute a violation of Article 301 unless the legislation is brought within the scope of Articles 302, 304 and 305. Reading both paragraphs 34 and 48 of SCC (paragraphs 31 and 45 of STC) together, in our considered view, the apex court has opined that a non-discriminatory tax, if it imposes restriction on free movement of goods, has to comply with the requirements of Article 304(b), but the levy of such a tax, if it does not impede free movement of goods, need not comply with the requirements of Article 304(b).
89. In Jindal Stainless : [2006]283ITR1(SC) the Constitution bench has clearly laid down the law that discriminatory restrictions, can be imposed by a State provided the three conditions of Article 304(b) are complied with. Since the restriction includes the restrictions imposed by imposition of tax, the discriminatory tax, therefore, can be imposed by the State subject to fulfilment of the three conditions contained in Article 304(b).
90. From the decisions in Atiabari Tea Co. : [1961]1SCR809 , Automobile Transport : [1963]1SCR491 , Hansa Corporation : [1981]1SCR823 , Laxmi Paper Mart : AIR1997SC950 , Andhra Sugars Ltd. : [1968]1SCR705 , G. K. Krishnan : [1975]2SCR715 and Jindal Stainless : [2006]283ITR1(SC) , it is evident that any tax, whether discriminatory or nondiscriminatory, which impedes the free movement of goods amounts to restriction within the meaning of Article 304(b) of the Constitution and in that case it would be violative of Article 301 of the Constitution, which can be saved subject to fulfilment of the three requirements laid down in Article 304(b), i.e., it must be reasonable, it must be in public interest and prior Presidential sanction or subsequent Presidential assent is obtained.
91. The learned AAG has also placed reliance on Indian Cement : [1988]2SCR574 wherein the notification issued under the Andhra Pradesh General Sales Tax Act, 1957 was under challenge. In the said case, the question, which is being presently dealt with, did not arise for consideration. The question that arose for decision by the apex court in the said case was whether the law was violative of Article 304(b) of the Constitution and not whether a non-discriminatory tax still requires to satisfy the conditions contained in Article 304(b) of the Constitution. The decision in United Motors (India) : [1953]4SCR1069 cannot also be applied in the present case as the same relates to the question--which State has the power to levy sales tax, prior to the enactment of Central Sales Tax Act, 1956 which decision was also overruled by the apex court in Bengal Immunity : [1955]2SCR603 .
92. The decision in A.T.B. Mehtab Majid : AIR1963SC928 of the apex court does not help the State as the apex court in the said decision has observed that taxing laws can be restrictions on trade and intercourse, if they hamper the flow of trade. Considering the provisions of Articles 301 and 304(b) of the Constitution in so far as the impugned tax under the State sales tax law, it has been observed that a non-discriminatory tax is not violative of Article 301. In A.B. Abdul Kadir : [1970]1SCR700 , the apex court has also held that a tax may in certain case directly or indirectly restrict/hamper the free flow of trade, but every imposition of tax does not do so and every case must be judged on its own fact and in its setting of time and circumstances. The effect of such observation of the apex court is that the tax may in certain cases, though non-discriminatory, may directly or immediately hamper or restrict the free movement of goods and hence, the free flow of trade.
93. In Video Electronics : AIR1990SC820 , the question before the apex court being whether the Act impugned therein is discriminatory or not, the question which is being presently dealt with did not arise for consideration and hence the said decision is not applicable to the present case. In Widia (India) Ltd. : AIR2003SC3095 in which the Karnataka Tax on Entry of Goods Act, 1979 was challenged, there was no dispute that the impugned levy of tax is nondiscriminatory and it was also conceded that the imposition of such tax was regulatory or compensatory in nature. The apex court on such factual background has held that when the tax levied by the State Government is compensatory in nature, no Presidential sanction under Article 304(b) is required to be taken. There is no dispute to the said proposition.
94. In Rattanlal and Co. : [1969]2SCR544 , the question that arose for consideration by the apex court was whether levy of tax under the State Sales Tax Act is discriminatory or not. The question before the apex court was therefore relating to Article 304(a) of the Constitution and the question whether a non-discriminatory tax is still required to comply with the requirements of Article 304(b) did not arise for consideration and hence, no such finding was recorded in that regard. Therefore, the said decision is also not applicable to the present case. The decision in Kalyani Stores : [1966]1SCR865 for the same reason cannot also be applied to the present case.
95. It has further been contended by the learned AAG that the conjunction 'and' appearing between Article 304(a) and Article 304(b) of the Constitution should be understood as 'or', cannot also be accepted as Clause (a) of Article 304 of the Constitution deals with levy of tax on goods imported from outside the State and contains discriminatory levy and Clause (b) of the Article 304 of the Constitution provides for relaxation in respect of regulatory restrictions on the freedom of trade, commerce and intercourse, so long as it is a reasonable restriction, in public interest and it received the previous Presidential sanction. Both the provisions operate in different areas and therefore the question has to be independent under each provision and in the context of impugned legislation. A statute imposing tax though may be non-discriminatory, if the effect of such levy is on the free movement of goods, i.e., the freedom of trade, commerce and intercourse, it does attract Clause (b) of Article 304. The movement in context of trade can only be on the movement of goods and the effect of levy of tax is one to discourage or curb such movement and it is necessarily one, which impedes free movement of goods. In Vidyacharan Shukla : [1964]6SCR129 , the apex court has held that a construction, which lead to an anomalous situation, cannot be accepted. In Ishwar Singh Bindra : 1969CriLJ19 , it has been observed by the apex court that though the dictionary meaning of 'and' has generally a cumulative sense requiring the fulfillment of all the conditions that it joins together, sometimes, however, it is to be read as 'or' to carry out the intention of the Legislature. In the present batch of cases, as discussed above, it is evident from the provisions of Article 304 of the Constitution that as the non-discriminatory tax may amount to restriction in certain cases, like the entry tax, as it impedes the freedom of trade and, therefore, the requirements of Article 304(b) have to be complied with and hence 'and' appearing between the Clauses (a) and (b) of Article 304 cannot be read as 'or'.
96. It is evident from the discussion of the various pronouncements of the apex court made above, that a taxing statute though may be nondiscriminatory, such levy if it impedes or obstructs free movement of trade, does attract Clause (b) of Article 304. The imposition of tax by the impugned Act on goods on its entry into a local area, directly impedes or obstruct the free movement of goods as mandated in Article 301. Such imposition of tax can only, therefore, be saved provided the requirements of Article 304(b) are complied with. The decisions of the apex court, as discussed above, indicate that while all taxing statutes may not be one impeding or obstructing the movement, like for example levy of property tax, luxury tax or tax on mining activities, levy of entry tax being directly on the very movement of goods, i.e., the taxing event occurring when the goods enters into the local area and if there is no such movement, there being no tax, the imposition of entry tax by the impugned enactment, by issuing impugned notifications and by subsequent amendment, has definitely impeded or obstructed the free movement of goods thereby imposing restriction on the free movement of trade, commerce and intercourse. Hence, the requirements of Article 304(b) have to be complied with.
97. The learned AAG in support of his contention though has placed reliance on observation of H.M. Seervai in 'Constitutional Law of India', such comment, in view of the aforesaid decisions, cannot be accepted having any persuasive value as, such submission has already been rejected by the apex court in Automobile Transport case : [1963]1SCR491 .
98. In Khyerbari Tea Co. : [1964]5SCR975 , a Constitution Bench of the apex court has observed that while examining the constitutionality of a statute it must be assumed that the Legislature understands and appreciates the needs of the people and the laws it enacted are directed to problems which are made manifest by experience and that the elected representatives assembled in a Legislature enacts laws which they considered to be reasonable for the purpose they are enacted. Presumption is, therefore, in favour of constitutionality of an enactment. It has further been observed that the position with regard to the onus to demonstrate that an enactment is unconstitutional, being in contravention of Article 304(b), would be same as that under Article 19(1) of the Constitution. Hence, once it has been proved that there is restriction on the free movement of goods, the onus shifts to the State. The apex court in the said case has also observed that the very fact that a law is passed under Article 304(b) means clearly that it purports to restrict the freedom of trade and that being so, as soon as its shown that the Act invades the right of freedom of trade it is necessary to enquire whether the State has proved that the restrictions imposed by it by way of tax are reasonable and in the public interest within the meaning of Article 304(b) of the Constitution, even when the Presidential sanction has been obtained. The said decision in Khyerbari Tea Co. case : [1964]5SCR975 in fact supports the contention of the writ petitioners as well as the respondents in the writ appeals to the proposition that the taxation statute may amount to restriction within the meaning of Article 304(b) of the Constitution. In the instant case, as discussed above, the writ petitioners and respondents in the writ appeals by necessary pleading of facts could prove that imposition of entry tax restricts the free movement of goods thereby impeding the freedom of trade and commerce. Hence, the burden is on the State now to prove that such restrictions were reasonable and in the public interest. The State has failed to demonstrate that restrictions imposed are reasonable and in public interest.
99. In the case of Bharari Airtel Ltd. W.P. (C) No. 4685 of 2006 and other similar writ petitions, it has already been held that a tax imposed by the principal Act, i.e., prior to any amendment, having been levied on the goods imported from outside only, is discriminatory in nature. The writ petitioners, therefore, discharged their burden to prove that it is violative of Article 301 as it is a restriction on the freedom of trade, commerce and intercourse. The burden, therefore, shifts to the State to prove that such discriminatory restrictions were reasonable and in public interest. Admittedly before enactment of the principal Act the Presidential sanction was obtained. The State, however, has not even attempted by making necessary pleadings to prove that such discriminatory tax is reasonable and in public interest. On the contrary, the stand of the State is that once the Presidential sanction is obtained in case of a discriminatory tax the requirements of Article 304(b), i.e., its reasonableness and in public interest, need not be proved. The contention of the learned AAG that tax is always imposed in public interest cannot also be accepted unless it is proved by the State that the tax impugned was in fact levied in public interest. Hence we are of the view that the levy impugned in W.P. (C) No. 4685 of 2006 and in other similar cases, by the principal Act, are unconstitutional being violative of Article 301 of the Constitution.
100. In view of the aforesaid discussion, we are of the view that the learned single judge has rightly decided the aforesaid question against the State.
Issue No. III
101. This issue assumes importance in view of the decision in issue No. II, as the compensatory tax being regulatory in nature is not a restriction within the meaning of Article 304(b) and hence does not offend Article 301 of the Constitution. The concept of compensatory tax though not provided in the Constitution, has been judicially evolved, as a part of regulatory charge. In Atiabari Tea Co.'s case : [1961]1SCR809 the Supreme Court propounded the doctrine of 'direct and immediate effect' of the operation of the law impugned, on the freedom of trade and commerce under Article 301 of the Constitution. In Automobile Transport case : [1963]1SCR491 the apex court evolved the concept of compensatory tax as an exception to Article 301, though the basis for that concept was not discussed. A Constitution Bench of the apex court in Jindal Stainless : [2006]283ITR1(SC) having discussed the basis of that concept has held that the basis of special assessments, betterment charges, fees, regulatory charges is 'recompense/reimbursement' of the cost or expenses incurred or incurrable for providing service and facilities based on the principles of equivalence unlike tax, whose basis is the concept of 'burden' based on the principle of ability to pay. It has further been observed that the compensatory taxes like fees are always proportionate to the benefit.
102. Relating to the question whether the levy impugned therein is of compensatory tax or not the apex court in G.K. Krishnan : [1975]2SCR715 has observed that as the State in the affidavit reflected the total expenditure on maintenance and construction of roads and the amount showed to have been spent did not include the grants made to local bodies like municipalities and Panchayat Unions for the repair and maintenance of roads within their jurisdiction and such amount not only includes the cost of construction and maintenance of roads, but also the costs relating to the erection and maintenance of traffic control devices, safety measures, improvements to old layouts and the increased establishment of enforcement staff, the impugned levy is compensatory in nature.
103. In Kewal Krishan Puri : [1979]3SCR1217 a Constitution Bench of the apex court while considering the principles for satisfying the test for valid levy of market fee on the agricultural produce has observed that the amount of fee realised must be earmarked for rendering services to the licensees in the notified market area and a substantial portion of it must be shown to be spent for those purposes and such service rendered to the licensees must be in relation to the transaction of purchase or sale of the agricultural produce conferring some special benefits on them which have a direct, close and reasonable co-relation between the licensees and the transaction, though the element of quid pro quo may not be possible or even necessary, to be established with arithmetical exactitude but even partly must be established by the authorities who charge the fees that the amount is being spent for rendering services to those on whom falls the burden of the cost. Such view of the apex court was, however, somewhat diluted in Southern Pharmaceuticals : [1982]1SCR519 , in Mohd. Yasin : [1983]142ITR737(SC) and Sreenivasa General Traders : [1983]3SCR843 by evolving 'some connection' theory. The nature of compensatory tax being like fee the principles laid down in respect of the fee is applicable in ascertaining whether an impugned levy is of a compensatory nature or not.
104. The working test for determining whether a tax is compensatory or not laid down in Automobile Transport's case : [1963]1SCR491 , i.e., to enquire whether the trade is having the use of certain facilities for the better conduct of its business and not paying patently much more than what is required for providing the facilities, has been deviated from in Bhagatram's case : 1994(4)SCALE1103 as well as in Bihar Chamber of Commerce's case : [1996]2SCR184 by propounding the 'some connection' theory, which necessitated the apex court in Jindal Stripe Ltd. : (2003)8SCC60 , in referring the matter to the Constitution Bench for interpretation of Article 301 vis-a-vis compensatory tax. The apex court in Jindal Stainless Ltd. : [2006]283ITR1(SC) accordingly, having considered earlier decisions including Atiabari Tea Co.'s case : [1961]1SCR809 , Automobile Transport's case : [1963]1SCR491 , Bhagatram's case : 1994(4)SCALE1103 and Bihar Chamber of Commerce's case : [1996]2SCR184 has laid down the working test for ascertaining whether a levy imposed is compensatory or not. The apex court in the said case has held that the working test propounded in Automobile Transport case : [1963]1SCR491 while continuing to apply in determining whether a tax is compensatory or not, the test of 'some connection' indicated in the judgments in Bhagatram's case : 1994(4)SCALE1103 , and Bihar Chamber of Commerce's case : [1996]2SCR184 is not applicable to the concept of compensatory tax and accordingly judgments in those cases were overruled. The apex court has further held that the compensatory tax by nature is hybrid but it is more close to fees as both fees and compensatory tax are based on the principle of equivalence and on the basis of recompense/reimbursement. It has further been held that compensatory tax being a compulsory contribution levied broadly in proportion to the special benefits derived to defray the cost of regulation or to meet the outlay incurred for some special advantage to trade, commerce and intercourse which may, however, incidentally bring in net revenue to the Government but that circumstance is not an essential ingredient of compensatory tax. It has further been observed that to determine whether an impugned law is violative of Article 301 of the Constitution, the court has to see whether the impugned enactment facially or patently indicates quantifiable data on the basis of which the compensatory tax is sought to be levied and such Act must indicate the benefit which is quantifiable or measurable. In case the provisions of the Act are ambiguous or even if the Act does not indicate facially the quantifiable benefit, the burden will be on the State, as a service facility provider, to show by placing the material before the court that the payment of compensatory tax is a reimbursement/ recompense for the quantifiable/measurable benefit provided or to be provided to its payers.
105. Having laid down the working test, the apex court in Jindal Stainless : (2006)7SCC271 has permitted the parties to place the relevant data in the writ petitions concerned before the High Court to deal with the basic issue whether the impugned levy was compensatory in nature. In view of the authoritative pronouncement in Jindal Stainless : [2006]283ITR1(SC) wherein the concept of 'some connection' theory enunciated in Bhagatram's case : 1994(4)SCALE1103 as well as in Bihar Chamber of Commerce's case : [1996]2SCR184 were held to be not a good law, we need not burden this judgment by discussing the decisions cited by the learned AAG in details in International Tourist's case : [1981]2SCR364 , Bhagatram's case : 1994(4)SCALE1103 as well as Bihar Chamber of Commerce's case : [1996]2SCR184 .
106. The question, therefore, whether the impugned levy is compensatory or not largely depends upon the provisions contained in the Act and/or also whether the State is providing the quantifiable/measurable benefit to the payers of the tax for reimbursement/recompense.
107. The preamble and the Statement of Objects and Reasons for which the Act has been enacted is quoted below:
Preamble.--Whereas it is expedient to provide for the imposition of a tax on the entry of goods into any local area in Assam for consumption, use or sale therein and for matters connected therewith.
Statement of Objects and Reasons
It has come to the notice of the Government that many bulk consumers such as tea companies, oil companies, etc., take recourse to inter-State purchase of several items required for their own consumption with a view to availing benefit of lower rate of tax under the Central Sales Tax Act. This practice deprives the State of a substantial amount of revenue.
2. Further it is also observed that due to disparity in the rate of tax in different States, motor vehicles are purchased outside the State and then brought into the State for use.
3. In order to curb such losses of revenue and thereby mobilise additional resources, the Government have decided to levy tax on entry of selected items, including motor vehicles, which are imported into Assam from other States for own use and consumption.
108. It appears from the preamble of the impugned Act that it has been enacted for imposition of tax on entry of goods into any local area in Assam for consumption, use or sale therein. The Statement of Objects and Reasons of the Act reveals that the impugned Act has been enacted to curb the losses of revenue as many bulk consumers such as tea companies, oil companies take recourse to inter-State purchase of several items required for their own consumption with a view to avail benefit of lower rate of tax under the Central Sales Tax Act and also as the motor vehicles are purchased outside the State and then brought into the State due to disparity in the rate of taxes in different States and to mobilise additional resources.
109. Thus the Preamble and Statement of Objects and Reasons of the impugned Act do not indicate that the entry tax is sought to be levied to provide facilities to the payers to facilitate the trade. In the affidavit-in-opposition filed in W.P. (C) No. 8445 of 2003 (Britannia Industries Ltd. v. State of Assam reported as ITC Limited v. State of Assam [2007] 9 VST 250 (Gauhati)) the State has taken the stand that the 'prime intendment behind the enactment is broadening the tax basis and seeking additional resource to increase the taxing'. In another affidavit filed by the Commissioner of Taxes on behalf of all the respondents including the State in W.P. (C) No. 5827 of 2002 Fish Traders Association v. State of Assam a stand has been taken that the entry tax is levied to check the evasion of taxes. In the consolidated affidavit-in-opposition filed in W.P. (C) No. 2650 of 2005, which gave rise to W.A. No. 462 of 2006, the State has taken the stand that the 'impugned Act was enacted inter alia to expand the tax net basis by imposing tax on items, namely, textile, sugar and tobacco'. However in the said affidavit, it has been stated that the revenue generated by the operation of the tax and other taxation laws are utilised by the State for establishment and maintenance of markets, laying down and maintenance of roads and waterways. In the said additional affidavit the State has also taken the stand that sufficient fund collected by the impugned levy has been transferred to the local bodies for development of the infrastructures to facilitate trade and commerce in the local areas commensurate with the amount of entry tax collected by the State. A table illustrating the amount of entry tax collected by the State beginning from 2001-02 to 2004-05 and the amount so transferred to various local bodies of the State for developmental activities has also been furnished, which reads as follows:
-------------------------------------------------
Year Amount of Amount released to local
entry tax bodies Rs. in crores
-------------------------------------------------
2001-02 7.84 67.48
2002-03 28.34 90.29
2003-04 28.81 97.48
2004-05 106.50 176.56
-------------------------------------------------
110. In the said affidavit it has also been contended that the substantial amount of fund for maintenance of roads within the territory of local bodies has been spent. The stand of the State in the said affidavit is that to establish the compensatory character of the tax it is not necessary to establish that every rupee collected on account of entry tax should be shown to have been spent for providing trade facilities, it is enough if some connection is established between the tax and the trade facilities provided, though the 'some connection' theory has been rejected by the apex court in Jindal Stainless : [2006]283ITR1(SC) .
111. An additional affidavit in the appellate stage was also filed by the State in W.A. No. 465 of 2006 State of Assam v. Indian Tobacco Co. Ltd. indicating the amounts spent during the period from 2001-02 to 2007-08 stated to be for infrastructure developments in local areas, without, however, disclosing the nature of the facilities made available to the taxpayers as well as some detailed break-up. The additional affidavit filed by the State merely gives the statistics with regard to the total cost towards the assistance of development of urban and rural local areas and local areas under the GMC without specifying the details in respect of which such cost has been incurred. For better appreciation the said chart is reproduced below:
Annexures
Statement showing the amount spent under non-plan for infrastructure development
in local areas
Grant No.
Head of a/c.
Purpose for which given
Actual 2001-02
Actual 2002-03
Actual 2003-04
Actual 2004-05
Actual 2005-06
R.E. 2006-07
B. E. 2007- 08
Particulars
1
2
3
4
5
6
7
8
9
10
11
31. T & C.P.
2217
Assistance for development of urban & rural local
areas
2.67
7.06
6.37
16.95
28.01
19.37
7.52
34. MAD
2215
Assistance for development of urban local areas
0.89
3.71
14.78
50.00
73. G.D.D.
2217
Assistance for development of local areas under CMC
3.00
18.51
11.15
Total fund spent for development of local areas is exclusive
of salary expenditure.
56 P& R.D.
2518
Assistance for development of rural local areas
35.09
20.22
11.88
22.10
27.68
71.33
93.14
57. Rural Dev. State's share
2501
do.
59.15
114.78
85.14
143.67
176.00
289.92
267.00
85. Compensation and assignment of the local bodies, Panchayati
Raj Institutions
3604
do.
3.89
7.54
12.35
13.11
10.89
18.00
138.31
Total
101.69
149.60
115.74
195.83
249.29
431.91
567.12
112. Though the impugned Act initially does not provide any stipulation for providing the facilities to the taxpayers to facilitate the trade, Section 8A has been inserted by the Second Amendment Act of 2005 with effect from May 12, 2005, which is reproduced below:8A. Utilisation of the proceeds of the tax.--Subject to such condition as may be prescribed, such amount of the proceeds of the tax, as may be determined by the State Government shall be spent by the State Government for the purpose of development of trading facilities, maintenance of roads and other infrastructures in the local area.
113. From the provision of Section 8A as inserted by the Second Amendment Act of 2005, it is evident that the amount collected by way of tax is proposed to be spent for maintenance of roads, for the purpose of development of trade facilities and other infrastructures. The provision of Section 8A does not indicate facially the quantifiable/measurable benefit provided or to be provided to its payers. This would, however, not prevent the State to show by placing materials before the court that the amount collected by way of such entry tax is spent or to be spent for providing quantifiable/ measurable benefit to its payers. The affidavits filed by the State, as discussed above, reveal that except for contending that a large portion of the amount so collected by way of entry tax has been spent for facilitating the trade by providing the infrastructure facilities and in maintaining the roads, etc., no detailed particulars have been furnished to the court to substantiate the plea that the impugned levy is compensatory in nature. The laying of roads and its maintenance is sovereign function of the Government, which it is bound to do, irrespective of whether any entry tax is levied or not. Such laying and maintenance of roads in the local areas also is in discharge of its Governmental duties and such laying and maintenance of roads cannot be termed as providing special benefits to the payers of such entry tax, which the Government is otherwise duty bound to do. From the chart filed along with the additional affidavit filed in W.A. No. 465 of 2006, which has been reproduced above, it also appears that the amount spent includes the State's share in respect of rural development, compensation and assignment of the local bodies, Panchayati Raj institutions. Apart from giving figures towards assistance for development of urban and rural and local areas under GMC no details have been provided to show that the amount collected by way of entry tax, has in fact been spent or is to be spent for the benefit of the payers and to facilitate the trade. It is also evident from Section 8A of the impugned Act, which has been inserted by the Second Amendment Act of 2005, that the State Government has been empowered to spend such amount of tax collected under the said Act for the purpose of development of trading facilities, maintenance of roads and other infrastructures in the local areas, subject to such conditions as may be prescribed, leaving it to the State Government to determine the sum to be spent. But such conditions for determination of the sum to be spent have not been laid down, as no rule has been framed specifying the conditions under which such sum is to be spent.
114. In view of the aforesaid discussions, we are of the view that the State has miserably failed to substantiate that the substantial portion of the entry tax collected under the impugned enactment has been spent or is to be spent for providing the facilities to its payers so as to facilitate the trade, by producing materials before the court. The contention of the learned AAG supporting the 'some connection' theory cannot be accepted.
115. In view of the working test laid down by the apex court in Jindal Stainless Ltd. : [2006]283ITR1(SC) in determining the compensatory nature of tax, and also in view of our aforesaid discussion, we do not consider it necessary to discuss the judgments of various High Courts relied upon by the learned Counsel for the assessees on this issue.
116. In view of the aforesaid discussion, we hold that the impugned enactment does not satisfy the test laid down for compensatory tax and hence cannot be held to be compensatory in nature. The judgment and order of the learned single judge, is affirmed, on this point.
Issue No. IV
117. Article 304(b) of the Constitution provides that notwithstanding anything contained in Article 301 or Article 303, the Legislature of a State may by law impose such reasonable restrictions on the freedom of trade, commerce and intercourse with or within that State as may be required in public interest provided prior Presidential sanction is obtained for such enactment or the amendment. The requirement of having Presidential sanction is fulfilled even where the subsequent assent on such Act is given by the President, in view of the provisions contained in Article 255 of the Constitution.
118. The requirement of having Presidential assent under Article 254(2) of the Constitution is held to be neither an idle or an empty formality. Before grant of assent by the President, consideration of the reasons for having such law is necessary and the consideration would mean consideration of the proposal made by the State for the law to be enacted. If the proposal made by the State has limited qua the repugnancy to the State law and laws specified in the said proposal then it cannot be said that the assent was granted qua the repugnancy between the State law and other laws for which no assent was sought for Kaiser-I-Hind case : [2002]SUPP2SCR555 . In the said case the apex court has agreed to the proposition of law enunciated in P.N. Krishna Lal v. State of Kerala [1995] Suppl 2 SCC 187 with regard to interpretation of Article 254(2) of the Constitution to the effect that the assent of the President under Article 254(2) of the Constitution is not a matter of idle formality and the President has at least to be appraised of the reasons why his assent is sought, if there is any special reason for doing so.
119. The power exercised by the President under Articles 31A, 31C, 254(2) and 304(b) are a special constituent power vested with the head of the Union as the protector and defender of the Constitution and safety valve to safeguard the fundamental rights of the citizens and federal structure of the country as adopted in the Constitution honourable Justice Doraiswamy Raju in Kaiser-I-Hind case : [2002]SUPP2SCR555 . Therefore, the same principle as is applicable in case of Presidential assent under Article 254 would also be applicable to the Presidential sanction required under Article 304(b) of the Constitution.
120. The apex court in Syed Ahmed Aga : AIR1975SC1443 , while observing that an 'additional restriction' from the special point of view of Article 304(b) requires Presidential sanction, has held in that case that mere change in the form, from statutory rules to statutory provisions, could hardly constitute even an additional regulation. The apex court, therefore, has refused to accept the plea from the point of view of Article 304(b), which requires Presidential sanction, in case of additional restriction, as the amendments were found to have not gone beyond a regulation, which was fully authorised by the language of the provisions of the Act involved in that case.
121. In Subodhaya (P) Ltd. [1991] Supp 2 SCC 131, the Presidential sanction under Article 304(b) was held to be not required, as the amendments impugned therein were found to have no restrictiveness at all in the matter.
122. In Widia (India) Ltd. : AIR2003SC3095 the levy impugned was held to be compensatory in nature and therefore, the apex court has held that the imposition of compensatory or regulatory tax does not attract the requirement of Presidential assent under Article 304(b) of the Constitution.
123. From the discussions of the aforesaid decisions of the apex court, as cited by the learned Counsel for the parties, it, therefore, appears that if the amendment made to the Principal Act, imposes additional restrictions on the freedom of trade, commerce and intercourse, such amendments must have the Presidential sanction as required under Article 304(b), despite having Presidential sanction prior to the enactment of the Principal Act.
124. In the instant case, it is evident from the communication produced before the learned single judge by the State that the Government of India vide communication dated September 1, 2000 informed the Government of Assam about granting Presidential sanction, under Article 304(b) of the Constitution, to the 1998 Bill, however, except for goods relating to Prasar Bharati and all kinds of textiles and fabrics. Consequently, 2001 Act (Principal Act) was enacted, which came into effect on March 29, 2001. By first amendment, the definition of 'entry of goods into a local area' and by 2002 amendment, the definition of 'importer' were amended. The definition of 'purchase value' was also amended by the 2002 amendment. The Act was further amended by the Second Amendment Act, 2005 by substituting the earlier charging Section 3(1) by a new Section as Section 3(1), with effect from May 12, 2005 and also by omitting Sub-section (4) of Section 3 and substituting the original schedule in the principal Act, which contained 7 (seven) items, by the new schedule containing 58 (fifty eight) items, which even includes all varieties of textiles, in respect of which Presidential sanction prior to enactment of principal Act was refused.
125. As observed by the apex court, in Kaiser-I-Hind : [2002]SUPP2SCR555 the Presidential assent is not a mere formality and while granting sanction, the President is first to scrutinise the items mentioned in the schedule so as to satisfy himself as to whether the sanction as requested under Article 304(b) can be granted. We have already held that imposition of entry tax impedes the free movement of goods from one place to another. The principal Act, which was enacted after Presidential sanction, contained only seven items and by way of amendment new items were introduced into the schedule. The Presidential sanction as required under Article 304(b) would, therefore, be limited to those initial seven items and cannot be in respect of the items subsequently included in the Schedule by way of amendments. There being impediment on the movement of such additional goods included in the Schedule by way of amendment thereby obstructing the free movement throughout the territory of India as mandated by Article 301 of the Constitution the amendments to the Principal Act for its validation must either have prior Presidential sanction as required under Article 304(b) or the Presidential assent subsequent to such enactment. There being no dispute to the fact that no Presidential sanction/assent has been obtained for such amendments either prior to or after introduction of such amendments, the same are unconstitutional, as the previous Presidential sanction obtained prior to enactment of the Principal Act, cannot save the subsequent amendments. The said position, in fact, was known to the State as it has obtained Presidential sanction in respect of 7 items prior to the enactment of the Principal Act. The judgment and order of the learned single judge, in so far as it relates to this question, is, therefore affirmed.
Issue No. V
126. The Constitution of India has created three great instrumentalities and entrusted them with certain basic powers legislative, judicative and executive. Abdication of these powers by the concerned instrumentalities, it is axiomatic, amounts to betrayal of the Constitution itself and it is intolerable in law. The Legislature cannot self-efface its personality and make over, in terms plenary, the essential legislative functions. The Legislature is responsible and responsive to the people and its representatives, the delegate may not be and that is why excessive delegation and legislative hara kiri have been frowned upon by the Constitutional law. This is a trite proposition but the complexities of modern administration are so bafflingly intricate and bristle with details, urgencies, difficulties and need for flexibility that our Legislatures may not get off to a start if they must directly and comprehensively handle legislative business in all its plenitude, proliferation and particularisation. Delegation of some part of legislative power becomes a compulsive necessity for viability. The essentials of legislative functions shall not be delegated but the inessentials, however, numerous and significant they be may, be made over to appropriate agencies. Avinder Singh : [1979]1SCR845 .
127. The Legislatures in India have been held to possess wide power of legislation subject, however, to certain limitations such as the Legislature cannot delegate essential legislative functions which consist in the determination or choosing of the legislative policy and of formally enacting that policy into a binding rule of conduct. The Legislature cannot delegate uncanalised and uncontrolled power and must set the limits of the power delegated by declaring the policy of the law and by laying down standards for guidance of those on whom the power to execute the law is conferred. Thus the delegation is valid only when the legislative policy and guidelines to implement it are adequately laid down and the delegate is only empowered to carry out the policy within the guidelines laid down by the Legislature. The Legislature may, after laying down the legislative policy, confer discretion on an administrative agency as to the execution of the policy and leave it to the agency to work out the details within the framework of the policy. When the Constitution entrusts the duty of law-making to Parliament and the Legislatures of States, it impliedly prohibits them to throw away that responsibility on the shoulders of some other authority. However, as the Legislature cannot work in detail the various requirements of giving effect to the enactment and, therefore, that area will be left to be filled in by the delegate. To ascertain as to whether any particular legislation suffers from excessive delegation, the scheme, the provisions of the statute including its preamble and the facts and circumstances of the background of which the statute is enacted, the history of the legislation, the complexity of the problems which a modern State has to face, will have to be taken note of and if, on a liberal construction given to a statute, a legislative policy and guidelines for its execution are brought out, the statutes, even if skeletal, will be upheld to be valid, but this rule of liberal construction should not be carried on by 'the court to the extent of always trying to discover a dormant or latent legislative policy to sustain an arbitrary power conferred on the executive'. Kishan Prakash Sharma v. Union of India : AIR2001SC1493 .
128. A Constitution Bench of the apex court in Gwalior Rayon Mills : [1974]94ITR204(SC) referring to the earlier decisions on the subject of delegated legislation including the decision in Banarsi Das : [1959]1SCR427 , Liberty Cinema : [1965]2SCR477 , B. Shama Rao : [1967]2SCR650 , Devi Dass Gopal Krishnan : [1967]3SCR557 , Birla Cotton : [1968]3SCR251 and Sitaram Bishambar Dayal : [1972]2SCR141 while considering the question whether the Parliament in not fixing the rate itself and in adopting the rate applicable to the sale or purchase of goods inside the appropriate State has not laid down any legislative policy and abdicated its essential legislative function, has held that as in the Central Sales Tax Act, 1956 the Parliament by providing the guidelines for fixing the Central sales tax laid down definite legislative policy, it cannot be said that the Parliament has abdicated its essential legislative function. Though on the core issue there was no difference of opinion, however, the majority view in the said judgment did not accept the proposition that ~s because the Legislature can repeal an enactment, it retains enough control over the authority making the subordinate legislation and, as such, it is not necessary for the Legislature to lay down legislative policy, standard or guidelines in the statute. The minority view expressed by Mathew, J., has accepted such proposition observing that if the Parliament can repeal the provision, there can be no objection on the score that the Parliament has abdicated its legislative function, as in that case the Parliament retained the control over the fixation of rate of tax.
129. The minority view in Gwalior Rayon Mills : [1974]94ITR204(SC) in that regard was reiterated in M.K. Papiah : [1975]3SCR607 by observing that the Legislature may also retain its control over its delegate by exercising its power of repeal. The apex court in Avinder Singh : [1979]1SCR845 has also accepted such view.
130. The apex court in V. Nagappa has also held that the enactment impugned on the ground of excessive delegation if furnishes definite guidelines for the Government to exercise the power to fix the rate of tax as well as the policy of Act has been clearly stated and the purpose for which the tax collected should be expended, such enactment cannot be held to be void on the ground of excessive delegation as it is only possible for the delegate to calculate the amount necessary to meet the requirement. The apex court in Sitaram Bishatnbar Dayal [1972] 29 STC 206 has observed that though the power to fix the rate of tax is legislative power, if the impugned enactment provides the necessary guidelines, that power can be delegated to the executive. In Banarsi Das : [1959]1SCR427 it has also been held by the apex court that the fixing of rates may be left to the non-legislative body but the Legislature must provide guidelines for such fixation. In the Liberty Cinema : [1965]2SCR477 the same view has been taken by the apex court. In Birla Cotton : [1968]3SCR251 the apex court has held that the essential legislative functions though cannot be delegated by the Legislature and the Legislature must retain on its own those legislative functions, it can delegate the necessary power for implementing the purpose and objects of the Act. Where the legislative policy is enunciated with sufficient clearness or a standard is laid down, the courts should not interfere.
131. In Agricultural Market Committee : AIR1997SC2502 the apex court has observed that the essential legislative function consists of the determination of the legislative policy and the Legislature cannot abdicate essential legislative function in favour of another/ however, power to make subsidiary legislation may be entrusted by the Legislature to another body of its choice but the Legislature should, before delegating, enunciate either expressly or by implication, the policy and the principles or the guidance to the delegatee.
132. In Consumer Action Group : AIR2000SC3060 the apex court has observed that in testing the validity of a provision in an enactment, when it is challenged on the ground of excessive delegation of legislative function, the courts have to discover, whether there is any legislative policy, purpose of the statute or indication of any clear will through its various provisions. If there be any, then this by itself would be a guiding factor to be exercised by the delegatee. The apex court has further observed that the delegatee cannot, however, be given unbridled or uncanalised power. It has further been observed that the fast changing scenario of economic, social order with scientific development spawns innumerable situations which the Legislature possibly could not foresee, so the delegatee is entrusted with power to meet such exigencies within the inbuilt check or guidance and within the declared policy. So the delegatee has to exercise its powers within this controlled path to subserve the policy and to achieve the objectives of the Act.
133. The law laid down by the apex court, as it appears from the aforesaid decisions of the apex court, in the matter of delegated legislation, is, therefore, clear, i.e., though the Legislature cannot abdicate its essential legislative function, it can definitely delegate the inessential and ancillary functions and even the power to fix the rate of tax, provided the definite policy has been laid down in the Act and also the necessary guidelines for exercising such delegated power have been given, which can be gathered from such enactment.
134. The question, therefore, is whether the impugned Act has laid down the definite legislative policy and the necessary guidelines for exercise of the power by the delegate, which is discernable from the preamble, objects and reasons and the various provisions of the impugned enactment. It has been contended by the learned Counsel appearing on behalf of the assessees that the preamble, objects and reasons as well as various provisions of the Act, which provide for imposition of entry tax on the goods do not lay down the legislative policy and also the guidelines to the executive to exercise their power under delegated legislation, as from the preamble as well as the objects and reasons and the provisions of the Act, it is evident that the same are not compensatory in nature, which is the basic requirement for an enactment imposing entry tax. The counter argument of the learned AAG is that the preamble, objects and reasons and the different provisions of the Act clearly lay down the legislative policy as well as the guidelines to the executive.
135. As discussed above, when a particular enactment is tested on the ground of excessive delegation of legislative function, what is required to be seen is, whether such particular enactment has laid down any definite legislative policy and also the guideline, from the point of view of that enactment and not from the perspective of whether such enactment is compensatory in nature within the meaning of Article 304(b) of the Constitution, as the question of excessive delegation of power by an enactment is one thing and whether it is compensatory in nature, another.
136. The preamble of the impugned Act, reproduced above, reflects the clear legislative policy laid down by the Legislature by providing that the Act has been enacted for imposition of a tax on the entry of goods into any local area in Assam for consumption, use or sale therein. The objects and reasons for which the Act has been enacted, as quoted above, reflect the purpose and also the reason for such enactment. It states that the Act has been enacted to curb losses of revenue and thereby to mobilise additional resources by levying tax on entry of goods on selected items including motor vehicles, as many bulk customers such as tea companies, oil companies, etc., by taking recourse to inter-State purchase of several items, required for their own consumption, for availing lower rate of tax under the Central Sales Tax Act, deprive the State of a substantial amount of revenue. Another reason for such enactment, as reflected in the Statement of Objects and Reasons, is that the State is losing revenue as motor vehicles are purchased outside the State and then brought into the State for use, due to disparity in the rate of tax in different States. Section 3 of the Principal Act provides for levy of tax, without, however, any stipulation relating to the upper limit of the tax to be levied. Sub-section (4) of Section 3, prior to the Second Amendment Act, 2005, authorises the State Government to add to, delete, amend or otherwise modify the Schedule of the Act and also to vary the rate of tax (which is under challenge in the present batch of writ petitions on the ground of excessive delegation of legislative function). Section 4(1) additionally provides for imposition of tax on motor vehicles brought into a local area by any importer, which are liable for registration or assignment of a new registration mark in the State under the provisions of the Motor Vehicles Act, 1988.
137. The preamble, objects and reasons as well as the different provisions of the impugned Act, as stood prior to its amendment, by the Second Amendment Act of 2005, as discussed above, clearly lay down the legislative policy as well as indicate whom are to be taxed, what are to be taxed. It has also, in the objects and reasons, given the guidelines to the delegatee the rate at which such tax is to be levied, by indicating the difference of rate of tax between the Central Sales Tax Act, neighbouring States and the State of Assam. Therefore, it cannot be said that the Legislature by delegating the power to the authority to add to, amend, etc., and by allowing to fix the rate of tax has abdicated its essential legislative functions, without laying down the legislative policy and indicating the guidelines. The objects and reasons of the Act clearly provide the guidelines as to what to tax, whom to tax and at what rate.
138. It is one thing that the Legislature by delegating the power has abdicated its essential legislative function and another thing to say that the delegatee has acted beyond the authority delegated to it. The petitioners have not challenged the action of the delegatee on the ground that it has acted beyond its delegated power or arbitrarily. The petitioners have challenged the provision of Section 3(4) of the Act, as it stood till May 12, 2005, only on the ground of excessive delegation of legislative function.
139. In view of the aforesaid discussion, we are of the opinion that the provision of Section 3(4) of the Act, as stood prior to May 12, 2005, does not suffer from the vice of excessive delegation of legislative function and hence the finding of the learned single judge, in that regard, is set aside.
Issue No. VI
140. Section 3(4) of the impugned Act, as discussed above, was omitted by the Second Amendment Act with effect from May 12, 2005. Section 3 of the Second Amendment Act, reads as follows:
3. In the principal Act, in Section 3-
(i) for the existing Sub-section (1), the following Sub-section shall be substituted, namely:
(1) There shall be levied and collected an entry tax on the entry of goods specified in the Schedule into any local area for consumption, use or sale therein at such rate, not exceeding twenty per centum, as the State Government may, by notification, fix in this behalf and different rates may be fixed for different class or classes of specified goods and such tax shall be paid by every importer of such goods, whether he imports such goods on his own account or on account of his principal or any other person or takes delivery or is entitled to take delivery of such goods on such entry.
(ii) in Sub-section (2), for the words 'as shown in the said Schedule', the words, 'as may be fixed by the State Government by notification in the Official Gazette' shall be substituted;
(iii) Sub-section (4) shall be omitted.
141. Section 3(4), prior to its omission, reads as follows:
(4) The State Government may, by notification in the Official Gazette, add to, delete, amend or otherwise modify the said Schedule and also may vary the rates of tax of the goods specified in the Schedule and thereupon the said Schedule shall be deemed to have been amended accordingly.
142. The contention of the learned AAG is that by virtue of Section 6 of the Assam General Clauses Act, the action taken pursuant to the provisions contained in Section 3(4) prior to the Second Amendment Act, stood saved as it is in fact a substitution of the provision of Section 3 of the Principal Act. On the other hand, the submission of the learned Counsel for the respondents in the appeal and the writ petitioners is that the said provision having been omitted and there being no saving Clause in the Second Amendment Act saving all the actions already taken under the omitted provision of law, all actions taken have become non-existent as if these actions were never taken at all and the said provision having been omitted, Section 6 of the Assam General Clauses Act is of no avail.
143. Section 6 of the Assam General Clauses Act which is in pari materia to Section 6 of the General Clauses Act provides that unless a different intention appears, the repeal shall not (a) revive anything not in force or existing at the time at which the repeal takes effect, or (b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or (c) affect any right, privilege, obligation, or liability acquired, accrued or incurred under any enactment so repealed; or (d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or (e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture, or punishment as aforesaid and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act had not been passed. It is apparent from the provision of Section 6 of the Assam General Clauses Act that the said provision applies to the repeal of any enactment. In the instant case admittedly the provision of Section 3(4) of the 2001 Act was not repealed but was omitted from the statute. There is also no provision made in the Second Amendment Act, by which such provision was omitted, saving the actions already taken under the said omitted provisions. The apex court in Rayala Corporation : 1970CriLJ588 has observed that Section 6 of the General Clauses Act only applies to the repeal and not to the omission and in that event, in the Amendment Act, by which such omission was made, the Legislature did not make any provision to the effect that the action taken will continue to remain in operation, such action taken under the omitted provisions cannot further proceed after its omission. A Constitution Bench of the apex court in Kolhapur Canesugar Works Ltd. : 2000(119)ELT257(SC) , while considering Section 6(1) of the General Clauses Act and its effect on the repeal and deletion of the provision of the Act has held that the normal effect of repealing a statute or deleting is to obliterate it from the statute as if it never existed subject to the exception engrafted in Section 6(1) of the General Clauses Act. The apex court has further held that if a provision of a statute is unconditionally omitted without a saving Clause in favour of the pending proceedings, all actions must stop where the omission finds them and if relief has not been granted before the omission goes into effect, it cannot be granted afterwards and thus the operation of the repeal or deletion as to the future or the past largely depends on the saving Clause as applicable.
144. The question, therefore, is what would be the effect of such omission on the fait accompli, i.e., on the tax already realised before Section 3(4) of the impugned Act was omitted by the Second Amendment Act with effect from May 12, 2005 or whether such omission would affect the proceedings in which the realisation of tax has not been finalised. The apex court in Rayala Corporation : 1970CriLJ588 as well as in Kolhapur Canesugar Works Ltd. : 2000(119)ELT257(SC) , as discussed above, has observed that such unconditional omission without a saving Clause would affect the pending proceedings. A provision of a statute when omitted without the saving Clause naturally would not affect the action already finalised, i.e., on the fait accompli but would definitely affect the pending proceeding. Therefore, the tax already realised and where no further proceeding is pending relating to such realisation of tax, the omission of Section 3(4) of the impugned Act, without a saving clause, would have no effect, but the proceedings pending on May 12, 2005, from which date Section 3(4) has been omitted, cannot be allowed to continue as the actions initiated under the said provision of law have not been saved and Section 3(4) of the Act has been unconditionally omitted. Hence all the proceedings pending on May 12, 2005 relating to realisation of tax by virtue of the power conferred by Section 3(4) of the impugned Act, have to be declared as null and void, without, however, affecting the proceedings, which have already been finalised prior to May 12, 2005. In that view of the matter, the judgment and order of the learned single judge is set aside to the extent indicated above.
Issue Nos. VII and VIII
145. Having held that imposition of entry tax under the impugned Act is ille1 gal being unconstitutional, in so far as the issues involved in this batch of cases, the next question, which requires determination is whether the appellants/writ petitioners are entitled to the refund of the tax paid. The 9 (nine) judges Bench of the apex court in Mafatlal Industries Ltd. : 1997(89)ELT247(SC) , upon consideration of all the earlier pronouncements on the subject of refund, has summarised the propositions in paragraph 99 (pages 546-548 of STC) : paragraph 108 (pages 631 to 635 of SCC). The proposition Nos. II, III, V and VII, which are relevant for the purpose of the present batch of appeals/writ petitions, are reproduced below:
(ii) Where, however, a refund is claimed on the ground that the provision of the Act under which it was levied is or has been held to be unconstitutional, such a claim, being a claim outside the purview of the enactment, can be made either by way of a suit or by way of a writ petition. This principle is, however, subject to an exception : where a person approaches the High Court or the Supreme Court challenging the constitutional validity of a provision but fails, he cannot take advantage of the declaration of unconstitutionality obtained by another person on another ground; this is for the reason that so far as he is concerned, the decision has become final and cannot be reopened on the basis of a decision on another person's case; this is the ratio of the opinion of Hidayatullah, C.J. in Tilokchand Motichand case : [1969]2SCR824 and we respectfully agree with it.
Such a claim is maintainable both by virtue of the declaration contained in Article 265 of the Constitution of India and also by virtue of Section 72 of the Contract Act. In such cases, period of limitation would naturally be calculated taking into account the principle underlying Clause (c) of Sub-section (1) of Section 17 of the Limitation Act, 1963. A refund claim in such a situation cannot be governed by the provisions of the Central Excises and Salt Act or the Customs Act, as the case may be, since the enactments do not contemplate any of their provisions being struck down and a refund claim arising on that account. In other words, a claim of this nature is not contemplated by the said enactments and is outside their purview.
(iii) A claim for refund, whether made under the provisions of the Act as contemplated in proposition (i) above or in a suit or writ petition in the situations contemplated by proposition (ii) above, can succeed only if the petitioner/plaintiff alleges and establishes that he has not passed on the burden of duty to another person/other persons. His refund claim shall be allowed/decreed only when he establishes that he has not passed on the burden of the duty or to the extent he has not so passed on, as the case may be. Whether the claim for restitution is treated as a constitutional imperative or as a statutory requirement, it is neither an absolute right nor an unconditional obligation but is subject to the above requirement, as explained in the body of the judgment. Where the burden of the duty has been passed on, the claimant cannot say that he has suffered any real loss or prejudice. The real loss or prejudice is suffered in such a case by the person who has ultimately borne the burden and it is only that person who can legitimately claim its refund. But where such person does not come forward or where it is not possible to refund the amount to him for one or the other reasons, it is just and appropriate that that amount is retained by the State, i.e., by the people. There is no immorality or impropriety involved in such a proposition. The doctrine of unjust enrichment is a just and salutary doctrine. No person can seek to collect the duty from both ends. In other words, he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The power of the court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly enriched.
(iv) ...
(v) Article 265 of the Constitution has to be construed in the light of the goal and the ideals set out in the Preamble to the Constitution and in Articles 38 and 39 thereof. The concept of economic justice demands that in the case of indirect taxes like Central excises duties and custom duties, the tax collected without the authority of law shall not be refunded to the petitioner-plaintiff unless he alleges and establishes that he has not passed on the burden of duty to a third party and that he has himself borne the burden of the said duty.
(vi) ...
(vii) While examining the claims for refund, the financial chaos which would result in the administration of the State by allowing such claims is not an irrelevant consideration. Where the petitioner-plaintiff has suffered no real loss or prejudice, having passed on the burden of tax or duty to another person, it would be unjust to allow or decree his claim since it is bound to prejudicially affect the public exchequer. In case of large claims, it may well result in financial chaos in the administration of the affairs of the State.
146. It is, therefore, evident from the said pronouncement of the apex court that the refund of the tax paid upon declaring the charging Section unconstitutional is not automatic. Though the provision of the Act, under which the tax has been realised, on being declared unconstitutional, the provision relating to the refund of the tax may not be applicable, the core of a taxing statute being in the charging Section and when that core disappears the remaining provision has no efficacy B. Shama Rao : [1967]2SCR650 , as held by the apex court in Mafatlal Industries : 1997(89)ELT247(SC) the burden is on the payers of the tax to establish that the tax burden has not been passed on to another/other persons, when they claim refund.
147. In the present batch of appeals/writ petitions though the learned Counsel for the parties have advanced their arguments on the question of refund by placing various provisions of law, none of the learned Counsel except in W.P. (C) No. 4685 of 2006, which has been filed after conclusion of hearing by the learned single judge, brought to the notice of the court any statement either in the writ petition or in any subsequent affidavit to the effect that the tax realised by the State from them has not been passed on to other persons. The writ petitioner in W.P. (C) No. 4685 of 2006 except by making a self-serving statement that the tax burden has not been passed on to others, i.e., its consumers, have not produced any materials to substantiate such plea, which the claimant for refund is bound to substantiate in view of the decision of the apex court in Mafatlal Industries case : 1997(89)ELT247(SC) . In the absence any such plea/materials no finding can be recorded by this Court in that regard in the present proceeding.
148. The contention of Mr. Ganesh as well as Mr. Saraf, the learned Senior Counsel, that since the earlier interim order passed by the learned single judge staying recovery of the entry tax subject to furnishing bank guarantees for the full amount of tax, has been stayed by the Writ Appellate Court in Writ Appeal No. 412 of 2005, preferred against such interim orders, on the basis of the assurance given by the learned AAG that the entire amount of entry tax collected would be refunded along with interest and such bank guarantee having been executed in terms of the interim order passed by the learned single judge, the claimants claiming refund are not required to establish that the burden of the tax has not passed on to other persons, as, such deposits were made pursuant to the court's order, cannot be accepted in view of the fact that the writ appeal being W.A. No. 412 of 2005 filed against such interim order was disposed of vide order dated January 5, 2006 with the observation that if the ITC's writ petition is allowed then all consequences in accordance with law including the refund of the entry tax stated to have been collected by the State from the writ petitioners shall follow including interest in accordance with law (emphasis laid). The said order signifies that the question of refund has to be decided in accordance with law. The interim order passed in the appeal upon passing the final order has lost its force. B.P.L. Ltd. : (2004)IILLJ834SC . The pronouncements of the apex court being the law under Article 141 of the Constitution, the question of refund, therefore, has to be decided keeping in view the pronouncements of the apex court as the law declared by the Supreme Court is binding on all courts.
149. Therefore, even if the provision of Section 8B of the impugned Act is not applicable in case of the refund, in the present batch of writ appeals/writ petitions, the payers of the tax have to allege and establish that the tax burden has not been passed on to other persons as laid down by the apex court in Mafatlal Industries case : 1997(89)ELT247(SC) . The decision in Tata Refractories Ltd. : JT2002(9)SC580 , on the aforesaid facts and circumstances, is not applicable in the instant case, so also the decision in Mahavir Aluminium Ltd. : 1999(114)ELT371(SC) . The order of refund as directed by the apex court in Commissioner of Central Excise [2005] 179 ELT 15 being on the basis of a draft proposed circular in connection with the payments of interest on the amount deposited as a precondition for hearing of the appeal under the Central Excise Tarrif Act, 1985 cannot also be applied in the present case. The order of the Bombay High Court directing refund in Suvidhe Ltd. : 1996(82)ELT177(Bom) being relating to the statutory deposit required to be made under Section 35(F) of the Central Excises and Salt Act, 1944, for preferring appeal, is not also applicable in the present case. Similarly the decision of the Gujarat High Court in Gujarat Insecticides Ltd. : 2005(183)ELT9(Guj) cannot also be applied in view of the aforesaid discussions. For the same reason, the decisions of the apex court cited by Dr. Saraf in Gupta Modern Breweries [2007] 8 RC 688, Delhi Cloth and General Mills Co. Ltd. [1971] 28 STC 331 and of this Court in Goalpara Roller Flour Mill Ltd. [2007] 12 VST 478 : [2007] 2 GLT 952, cannot be applied in the facts and circumstances of the present case and in view of the aforesaid discussion, more particularly, in view of the 9 (nine) judges bench decision of the apex court in Mafatlal Industries case : 1997(89)ELT247(SC) . It appears from the impugned judgment, that the learned single judge has directed the refund of the entry tax paid by the assessees solely on the basis of the interim direction passed in the writ petition as well as the interim order dated June 22, 2005 passed in W.A. No. 412 of 2005, which was filed challenging the interim direction issued by the learned single judge, as well as the final order dated January 5, 2006 passed in the said writ appeal, without considering the propositions of law laid down by the apex court in Mafatlal Industries case : 1997(89)ELT247(SC) relating to the refund, as the same appears to have not been brought to the notice of the said court.
150. In view of the above, no direction for refund of the tax paid can be issued by this court. Hence, the direction issued for such refund by the learned single judge is set aside. However, it is left open to the payers of the tax, concerning the present writ appeals and writ petitions, to approach the authority for refund of the tax paid and in the event of such approach being made by the payers of the tax, the authority shall within 4 (four) months, thereafter, pass necessary order relating to refund, keeping in view the decision of the apex court in Mafatlal Industries case : 1997(89)ELT247(SC) as well as the contention of the learned Counsel for the assessees that the entry tax imposed cannot at all be passed on to the consumer in view of the different statutory provisions and also fixation of uniform selling price by the Government of India, in respect of certain specified goods.
151. The issue relating to the High Court's power to apply the principle of prospective overruling, in view of the aforesaid decision on the question of refund, and in view of the judgment of the apex court in Mafatlal Industries : 1997(89)ELT247(SC) that the authority is bound to refund the tax realised from the assessees subject to successfully demonstrating that such burden of tax has not been passed on to other persons, need not be dealt with. It is, however, suffice to mention that in view of the pronouncement of the apex court in Raymond Ltd. [2001] 1 SCC 534, on the question of High Court's power to apply the principle of prospective overruling, after referring to the decisions in L.C. Golak Nath's case : [1967]2SCR762 as well as Nurpur Private Bus Operators Union's case : AIR1999SC3880 , the said issue no longer remains res integra.
152. We, in view of our aforesaid discussion, pass the following orders declaring:
(i) the Principal Act, prior to its amendments;
(ii) the impugned ordinance and the Act, after the amendments including the Second Amendment Act, 2005; and
(iii) the impugned notifications issued by the Government of Assam under the provisions of the said Act and the Ordinance;
as unconstitutional, being violative of the provision of Article 301 of the Constitution of India, however, without issuing any direction for refund of the tax paid, which is kept open for decision by the authority.
153. Consequently the writ appeals stand dismissed and writ petitions stand allowed to the extent indicated in the judgment. The impugned judgment and order passed by the learned single judge is affirmed to the extent indicated. Keeping in view, the facts and circumstances of this batch of cases, we leave the parties to bear their own cost.
.