Jindal Stainless LTD. vs State Of Haryana

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2006 Supreme(SC) 619

2006(6) Supreme 189
SUPREME COURT OF INDIA
(From Punjab and Haryana High Court)
Arijit Pasayat and S.H. Kapadia, JJ.
M/s Jindal Stainless Ltd. & Anr. — Appellants
versus
State of Haryana & Ors. — Respondents
Civil Appeal No. 3453 of 2002
With
SLP (C) No. 10003/2004, SLP (C) No. 10007/2004, SLP (C) No. 10156/2004, SLP (C) No. 10164/2004, SLP (C) No. 10167/2004, SLP (C) No. 10206/2004, SLP (C) No. 10381/2004, SLP (C) No. 10391/2004, SLP (C) No. 10404/2004, SLP (C) No. 10417/2004, SLP (C) No. 10501/2004, SLP (C) No. 10563/2004, SLP (C) No. 10568/2004, SLP (C) No. 10571/2004, SLP (C) No. 11012/2004, SLP (C) No. 11271/2004, SLP (C) No. 11326/2004, T.C. (C) No. 13/2004, SLP (C) No. 14380/2005, Civil Appeal Nos. 2608/2003, 2637/2003, 2769/2000, 3144/2004, 3145/2004, 3146/2004, 3314/2001, 3381-3400/1998, 3454/2002, 3455/2002, 3456-3459/2002, 3460/2002, 3461/2002, 3462-3463/2002, 3464/2002, 3465/2002, 3466/2002, 3467/2002, 3468/2002, 3469/2002, 3470/2002, 3592/1998, 4471/2000, 4476/2000, 4651/1998, 4954/2004, Writ Petition No. 512/2003, Civil Appeal Nos. 5141/2004, 5143/2004, 5144/2004, 5145/2004, 5147/2004, 5148/2004, 5149/2004, 5150/2004, 5151/2004, 5152/2004, 5153/2004, 5156/2004, 5157/2004, 5158/2004, 5159/2004, 5160/2004, 5162/2004, 5163/2004, 5164/2004, 5165/2004, 5166/2004, 5167/2004, 5168/2004, 5169/2004, 5170/2004, Writ Petition (C) No. 574/2003, C.A. Nos. 5740/2002, 5858/2002, 6331/2003, 6383-6421/1997, 6422-6435/1997, 6436/1997, 6437-6440/1997, 7658/2004, 8241/2003, 8242/2003, 8243/2003, 8244/2003, 8245/2003, 8246/2003, 8247/2003, 8248/2003, 8249/2003, 8250/2003, 8251/2003, 8252/2003, 918/1999, SLP (C) No. 9496/2004, SLP (C) No. 9569/2004, SLP (C) No. 9883/2004, SLP (C) No. 9891/2004, SLP (C) No. 9898/2004, SLP (C) No. 9904/2004, SLP (C) No. 9910/2004, SLP (C) No. 9911/2004, C.A. Nos. 997-998/2004, SLP (C) No. 9976/2004, SLP (C) No. 9993/2004, SLP (C) No. 9998/2004, SLP (C) No. 9999/2004, C.A. Nos. 1956/2003, 2633/2003, 2638/2003, 3720-
3722/2003, SLP (C) No. 10153/2004
Decided on 14-7-2006
Counsel for the Parties :
For the Appearing Parties : Ajay Siwach, AAG, Aruneshwar Gupta, Addl. Advocate Genl. (Rajasthan), Shanti Bhushan, R.F. Nariman, Dr. J.N. Dubey, Dr. A.M. Singhvi, Dinesh Dwivedi, T.L. Vishwanath Iyer, A.K. Ganguli, S. Ganesh, A.S. Garg, Sr. Advocates, Jayant Bhushan, Ejaz Maqbool, Vikas Singh, Ms. Taruna Singh, Abhijit Sinha, Anurag Dubey, K.B. Upadhayay, Meenesh Dubey, Manish Kumar, S.R. Setia, Dhruv Agarwal, Praveen Kumar, P.K. Bansal, Rajeev Agnihotri, K. Mishra, Rajeev Dubey, S.W.A. Qadri, Ms. Rashmi Singh, Gaurav Bhatia, S. Prasad, Gopalkrishnan, R.K. Virmani, Ms. Rashmi Virmani, L.R. Singh, Ankit Singhal, Nikhil Nayyar, M/s. Ravinder Narain, S. Sharma, Meghalee Barthakur, A. Aggarwal, Kanika Gomber, Rajan Narain, V.N. Koura, Ms. Paramjeet Banepal, A. Mariarputham, Ms. Mini N. Nair, Gopal Singh, Nishakant Pandey, P.V. Dinesh, U.A. Rana, Prashant Thakur (for M/s. Gagrat & Co.), Kuldeep Kumar Singh, Amit Mahajan, D.N. Ray, Mrs. Sumita Ray, Kavin Gulati, Rana Mukherjee, Ms. Rashmi Singh, T. Mahipal, B.V. Desai, Rahul Gupta, Ms. N. Kanungo, R.K. Khanna, Ms. R. Khanna, Jhanvi Warah, S. Kant, V.N. Koura, Paramjit Benipal, Ms. Aruna Mathur (for M/s. Arputham, Aruna & Co.), Pradeep Dahiya, Sandeep Sharma, T.V. George, Ms. Kamakshi S. Mehlwal, Naveen Kumar Singh, Praveen Kumar, Roy Abraham, Mrs. Seema Jain, H. Lal, M.P. Vinod, Ajay K. Jain, P.K. Bansal, Pankaj Kumar Singh, Vinod K. Tiwari, K.L. Janjani, H.K. Puri, Ujjawal Banerjee, S.K. Puri, Priya Puri, V.M. Chauhan, Devashish Bharukha, Ramesh Chander Agarwal, Hans Bharukha, R.C. Kohli, Pramit Saxena, Ms. Anuradha Rustagi, Sandeep, Ms. Kaadambari, Vikas Tomar, Gaurav Agrawal, Prashant Kumar, Rajiv Tyagi, Himanshu Mehta, Balender, L.K. Bhushan, Ms. Jasleen Oberoi, Rahul Prasanna Dave, Devajyoti Bhattacharya, Ms. Indra Sawhney, Ms. Indu Malhotra, P.N. Puri, R.K. Maheshwari, Vinoo Bhagat, Ms. B. Vijayalakshmi Menon, K.R. Sasiprabhu, K.V. Mohan, Rajesh Kumar, Tarun Johri, Vishwajit Singh, Nikhil Nayyar, Romy Chacko, Abhisth Kumar, C.N. Sree Kumar, Guntur Prabhakar, Sushil Kumar Jain, S.B. Upadhayay, Shrish Kumar Misra, Mrs. Kirti Renu Mishra, Shakil Ahmed Syed, K.S. Rana, B.K. Satija, Sanjay R. Hegde, Sanjay Kapur, Subramonium Prasad, Vinay Kumar Garg, Abhijit Sengupta, Ms. Kavita Wadia, R. Sathish, K.R. Nambiar, Ms. Baby Krishnan, B.V. Deepak and M.T. George, Advocates.

Headnote:Constitution of India — Article 301 — Concept of “Compensatory Tax” — High Courts decided the issue relying on judgments in Bhagat Ram’s case and Bihar Chamber of Commerce’s case — Correctness of two judgments was doubted and matter was dealt with by Constitution Bench in Jindal Stainless Ltd. case — Basic issue before High Courts would be whether impugned levy was compensatory in nature — Relevant data appeared not to have been placed before High Courts — Parties to place them in concerned writ petitions and High Courts to decide the issue.(Paras 3 to 5)

JUDGMENT

Arijit Pasayat, J. — These appeals and certain connected matters were initially heard by a two-Judge Bench of this Court. The matters were referred to a larger Bench by order dated 26.9.2003 as the Bench hearing the matters doubted the correctness of the views expressed in M/s. Bhagatram Rajeevkumar v. Commissioner of Sales Tax, M.P. and Others [1995 (Suppl.) 1 SCC 673] which was relied on in a subsequent decision in State of Bihar and Others v. Bihar Chamber of Commerce and Others [1996(9) SCC 136]. The matters were dealt with by a Constitution Bench to decide with certitude the parameters of the judicially evolved concept of “Compensatory Tax” viz-a-viz. Article 301 of the Constitution of India, 1950 (in short the `Constitution’).

2. The Constitution Bench in Jindal Stainless Ltd. & Anr. v. State of Haryana & Ors. [2006(4) SCALE 300] speaking through one of us (Kapadia, J) concluded as follows :

49. In our opinion, the doubt expressed by the referring Bench about the correctness of the decision in Bhagatram’s case 1995 Supp. (1) SCC 673 followed by the judgment in the case of Bihar Chamber of Commerce (1996) 9 SCC 136 was well-founded.

50. We reiterate that the doctrine of “direct and immediate effect” of the impugned law on trade and commerce under Article 301 as propounded in Atiabari Tea Co. Ltd. v. State of Assam AIR 1961 SC 232 and the working test enunciated in Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan AIR 1962 SC 1406 for deciding whether a tax is compensatory or not vide para 19 of the report, will continue to apply and the test of “some connection” indicated in para 8 of the judgment in Bhagatram Rajeevkumar v. Commissioner of Sales Tax, M.P. 1995 Supp. (1) SCC 673 and followed in the case of State of Bihar v. Bihar Chamber of Commerce (1996) 9 SCC 136, is, in our opinion, not good law. Accordingly, the constitutional validity of various local enactments which are the subject matters of pending appeals, special leave petitions and writ petitions will now be listed for being disposed of in the light of this judgment.

3. In all these appeals and connected matters the basic issue revolves round the concept of “Compensatory Tax”. In all these matters the concerned High Courts do not appear to have examined the issue in the proper perspective, as they were bound by the judgments in Bhagatram’s case (supra) and Bihar Chambers of Commerce’s case (supra).

4. At this juncture, it is necessary to take note of what has been stated in paragraphs 42 to 45 of the judgment rendered by the Constitution Bench, which read as follows :

42. To sum up, the basis of every levy is the controlling factor. In the case of “a tax”, the levy is a part of common burden based on the principle of ability or capacity to pay. In the case “a fee”, the basis is the special benefit to the payer (individual as such) based on the principle of equivalence. When the tax is imposed as a part of regulation or as a part of regulatory measure, its basis shifts from the concept of “burden” to the concept of measurable/quantifiable benefit and then it becomes “a compensatory tax” and its payment is then not for revenue but as reimbursement/recompense to the service/facility provider. It is then a tax on recompense. Compensatory tax is by nature hybrid but it is more closer to fees than to tax as both fees and compensatory taxes are based on the principle of equivalence and on the basis of reimbursement/recompense. If the impugned law chooses an activity like trade and commerce as the criterion of its operation and if the effect of the operation of the enactment is to impede trade and commerce then Article 301 is violated.

BURDEN OF THE STATE :

43. Applying the above tests/parameters, whenever a law is impugned as 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. The Act must facia

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2006 Supreme(SC) 619

Cases Referred (3)