Bihar Entry Tax Act Amendments Invalid: Discrimination, Lack of Sanction; 2006 Amendment Validates Compensatory Levy.

The court held that the Bihar Entry Tax Act, 1993, was initially non-compensatory and violated Article 301. However, it was valid under Article 304(b) before its amendments. Amendments in 2001 and 2003 were invalid due to discrimination and lack of Presidential sanction. The amendment including imported goods was also invalid for being retrospective and lacking sanction. The 2006 amendment made the levy compensatory, validating the Act and negating the need for Article 304(b) compliance. The cases are allowed for the period 2001-2006, but no order is issued as the matter is pending before the SC.

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Issues Involved:

1. Constitutional validity of the Bihar Entry Tax Act, 1993.
2. Discrimination against goods imported from other States under the amended Act.
3. Validity of amendments made without the President's previous sanction.
4. Validity of the amendment including goods imported from other countries.
5. Compensatory nature of the levy after the 2006 amendment.
6. Requirement of compliance with Article 304(b) post-2006 amendment.

Issue-wise Detailed Analysis:

Issue No. 1(a):

The Bihar Entry Tax Act, 1993, was initially held to be compensatory by the Supreme Court in Bihar Chamber of Commerce [1996] 103 STC 1. However, the Supreme Court in Jindal Stainless Ltd. [2006] 145 STC 544 overruled this, stating that the test of "some connection" used to determine compensatory tax was incorrect. The compensatory nature should be judged based on the "direct and immediate effect" on trade and commerce as per Atiabari Tea Co. Ltd. AIR 1961 SC 232 and Automobile Transport (Rajasthan) Ltd. AIR 1962 SC 1406. The State failed to provide data showing the levy as reimbursement for quantifiable benefits, leading to the conclusion that the levy was not compensatory till the 2006 amendment.

Issue No. 1(b):

Despite the levy being non-compensatory, Bihar Chamber of Commerce [1996] 103 STC 1 upheld the Act under Article 304(b) of the Constitution. This part of the decision remains undisturbed by Jindal Stainless Ltd. [2006] 145 STC 544. The Act was deemed a reasonable restriction in public interest, satisfying Article 304(b) requirements. Therefore, the Act before its amendments was valid under Article 304(b).

Issue No. 2:

The 2001 amendment to the definition of "entry of goods" excluded goods brought from within the State, discriminating against goods from other States, violating Articles 301 and 304(a). The Advocate-General argued that the provision of set-off against sales tax mitigated discrimination. However, this applied only to goods for resale, not those for consumption or use. Thus, the amendment introduced discrimination against goods imported for consumption or use.

Issue No. 3:

Amendments in 2001 and 2003, changing the definition of "entry of goods," expanding the Schedule, and increasing the tax rate, were made without the President's previous sanction, violating Article 304(b). The amendments substantively transformed the Act, necessitating Presidential sanction, as supported by decisions in Kaiser-I-Hind Pvt. Ltd. [2002] 8 SCC 182 and Jyothi Home Industries [1987] 64 STC 208.

Issue No. 4:

The amendment including goods imported from other countries was invalid for being retrospective and lacking Presidential sanction. The amendment created a new liability, not merely removing a lacuna, making it unfair and beyond legislative powers, as supported by D. Cawasji & Co. [1985] 58 STC 1 (SC).

Issue No. 5:

The 2006 amendment created the Bihar Trade Development Fund, declaring that entry tax proceeds would be used for trade, commerce, and industry development. This amendment aimed to make the levy compensatory. The Supreme Court's direction in Jindal Stainless Ltd. [2006] 7 SCC 271 required relevant data showing the levy as reimbursement for measurable benefits. The amendment's declarations and fund creation aligned with this requirement, making the levy compensatory post-2006.

Issue No. 6:

As per Automobile Transport (Rajasthan) Ltd. AIR 1962 SC 1406, compensatory taxes do not require compliance with Article 304(b). Post-2006 amendment, the levy being compensatory, Article 304(b) compliance is unnecessary.

Conclusion:

(i) The levy under the Parent Act of 1993 was not compensatory and violated Article 301.
(ii) The Parent Act was valid under Article 304(b) as per Bihar Chamber of Commerce [1996] 103 STC 1.
(iii) Amendments in 2001 and 2003 were invalid for violating Article 304(a) and lacking Presidential sanction.
(iv) The amendment including imported goods was invalid for being retrospective and lacking Presidential sanction.
(v) Post-2006 amendment, the levy became compensatory, making the Act valid.
(vi) Post-2006 amendment, Article 304(b) compliance is unnecessary.

The cases are allowed for the period 2001-2006, but no order is made since the matter is pending before the Supreme Court.

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