Entry tax on imported coal and compensatory tax test failed, with the levy held unconstitutional and quashed.

Entry tax could not be levied on coal imported from outside India and brought into the State for use in a factory, because the levy was treated as extending beyond the statutory basis and the notifications implementing it were quashed. The Court also held that the Jharkhand entry tax provision failed the compensatory tax test after Jindal Stainless, as no quantifiable, measurable benefits or equivalence-based nexus with trading facilities was shown. In the absence of the constitutional safeguards required by Article 304(b), the levy was held ultra vires Articles 301 and 304(b), and the entry tax provisions and consequential demand instruments were set aside.

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Issues: (i) Whether entry tax could be levied on coal imported from outside India and brought into the State for use in the factory, including the validity of the notification describing the goods as imported coal; (ii) Whether section 3 of the entry tax enactment, as adopted and amended in Jharkhand, satisfied the requirements of Articles 301 and 304(b) of the Constitution of India and could be sustained as a compensatory tax.

Issue (i): Whether entry tax could be levied on coal imported from outside India and brought into the State for use in the factory, including the validity of the notification describing the goods as imported coal.

Analysis: The charging provision was read in the context of the statutory scheme and the nature of the transaction. The coal was brought from abroad, customs duty was paid for clearance, and the goods were not purchased from another State within India. The Court relied on the distinction between import from abroad and entry from outside the State, and treated the foreign-origin goods as outside the intended reach of the levy. The challenge to the altered description in the notification was also accepted in substance because the levy could not be extended beyond the statutory basis.

Conclusion: The levy could not be sustained on imported coal brought from outside India, and the impugned notifications/order implementing such levy were liable to be quashed in favour of the assessee.

Issue (ii): Whether section 3 of the entry tax enactment, as adopted and amended in Jharkhand, satisfied the requirements of Articles 301 and 304(b) of the Constitution of India and could be sustained as a compensatory tax.

Analysis: The Court applied the post-Jindal Stainless position that a compensatory levy must disclose quantifiable and measurable benefits and must rest on the principle of equivalence. On the material before it, no such quantifiable benefit, reimbursement basis, or proportional nexus with trading facilities was shown. The record also did not establish the necessary factual basis to treat the levy as a reasonable restriction saved by Article 304(b), and the amended scheme lacked the required constitutional support.

Conclusion: Section 3 was held ultra vires Articles 301 and 304(b) and not saved as a compensatory or constitutionally protected levy, in favour of the assessee.

Final Conclusion: The entry tax provisions, as adopted and amended in Jharkhand, were struck down, and the consequential levy and demand instruments were set aside.

Ratio Decidendi: A State entry tax that does not disclose quantifiable, measurable benefits and does not satisfy the principle of equivalence cannot be justified as compensatory, and in the absence of constitutional safeguards under Article 304(b), such a levy is invalid under Article 301.

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