The distinction between discriminatory and non-discriminatory taxes under Article 304 is clarified, impacting the legality of entry taxes.

1. Leave granted in the special leave petitions.

2. Having regard to the fact that the correctness of the ratio of the judgment of the Seven Judges' Bench of this Court in ' Automobile Transport (Rajasthan) Ltd. Etc. v. State of Rajasthan and Ors.' [ 1963 (1) SCR 491 ] and the theory of compensatory tax was questioned, the matter was referred to Nine Judges' Bench. The Nine Judges' Bench of this Court heard the matters and answered the reference in those cases, leading case being ' Jindal Stainless Ltd. and Anr. v. State of Haryana and Ors. ' [ 2016 (11) SCALE 1 ].

3. The Court, by majority, answered the reference in the following terms:
" 1. Taxes simpliciter are not within the contemplation of Part XIII of the Constitution of India . The word 'Free' used in Art.301 does not mean "free from taxation".
2. Only such taxes as are discriminatory in nature are prohibited by Art.304(a). It follows that levy of a non - discriminatory tax would not constitute an infraction of Art.301.
3. Clauses (a) and (b) of Art.304 have to be read disjunctively.
4. A levy that violates 304(a) cannot be saved even if the procedure under Art.304(b) or the proviso there under is satisfied.
5. The compensatory tax theory evolved in Automobile Transport case and subsequently modified in Jindal's case has no juristic basis and is therefore rejected.
6. Decisions of this Court in Atiabari, Automobile Transport and Jindal cases (supra ) and all other judgments that follow these pronouncements are to be extent of such reliance over ruled.
7. A tax on entry of goods into a local area for use, sale or consumption therein is permissible although similar goods are not produced within the taxing state.
8. Art.304(a) frowns upon discrimination (of a hostile nature in the protectionist sense) and not on mere differentiation. Therefore, incentives, set - offs etc. granted to a specified class of dealers for a limited period of time in a non - hostile fashion with a view to developing economically backward areas would not violate Art.304(a). The question whether the levies in the present case indeed satisfy this test is left to be determined by the regular benches hearing the matters.
9. States are well within their right to design their fiscal legislations to ensure that the tax burden on goods imported from other States and goods produced within the State fall equally. Such measures if taken would not contravene Art.304(a) of the Constitution. The question whether the levies in the present case indeed satisfy this test is left to be determined by the regular benches hearing the matters.
10. The questions whether the entire State can be notified as a local area and whether entry tax can be levied on goods entering the landmass of India from another country are left open to the determined in appropriate proceedings."

4. It may be recapitulated at this stage that insofar as the instant appeals are concerned, which were also part of the aforesaid reference, the levy of entry tax was challenged by the assessees by filing writ petitions in the High Courts primarily on the ground that the levy was not in the nature of compensatory tax. The aforesaid challenge was because of the law laid down in Automobile Transport case (supra) which held the field at that time.

5. Similar challenges were made by the assessees in other States challenging various provisions of the similar enactments made by the said States. Some of the High Courts upheld the legislation holding the tax to be compensatory tax whereas some other High Courts found the legislation not to be compensatory in nature an