2010 (4) TMI 849 - SC - VAT and Sales Tax

Reconsideration of Constitutional Articles 304(a) and 304(b) balance trade freedom and state taxation powers

Jindal Stainless Ltd. and another Versus State of Haryana and others

The court concluded that the complex issues regarding the interplay of Article 304(a) and Article 304(b) of the Constitution of India require ... Supreme court - revision of earlier decision – Held that:- number of aspects a larger Bench of the Supreme Court needed to revise the interplay/inter-relationship between article 304(a) and article 304(b). A larger Bench had to be constituted for reconsidering the judgments in Atiabari Tea Co. and Automobile Transport (Rajasthan) Ltd. Issues Involved:1. Interplay and interrelationship between Article 304(a) and Article 304(b) of the Constitution of India.2. The significance of the word 'and' between Article 304(a) and 304(b).3. The significance of the non-obstante clause in Article 304.4. Balancing freedom of trade and commerce under Article 301 vis-a-vis the States' authority to levy taxes under Articles 245 and 246.5. Whether Article 304(a) and Article 304(b) deal with different subjects.6. Whether the impugned taxation law to be valid under Article 304(a) must also fulfill the conditions mentioned in Article 304(b), including Presidential assent.7. Whether the word 'restrictions' in Article 302 and in Article 304(b) includes tax laws.8. Whether the validity of a law impugned as violative of Article 301 should be judged only in the light of the test of non-discrimination.9. Whether Article 303 circumscribes Article 301.10. Whether 'internal goods' would come under Article 304(b) and 'external goods' under Article 304(a).11. Whether the 'per se test' propounded in Atiabari's case should or should not be rejected.12. Whether tax simpliciter constitutes a restriction under Part XIII of the Constitution.13. Whether the word 'restriction' in Article 304(b) includes tax laws.14. Is taxation justiciable.15. Whether the 'working test' laid down in Atiabari makes a tax law per se violative of Article 301.16. Inter-relationship between Article 19(1)(g) and Article 301 of the Constitution.Detailed Analysis:1. Interplay and Interrelationship between Article 304(a) and Article 304(b):The court examined whether Article 304(a) and Article 304(b) are independent of each other or conjunctive. It was questioned if the validity of state enactments relating to entry tax should be tested with reference to both articles or if compliance with Article 304(a) alone suffices.2. Significance of the Word 'and' between Article 304(a) and 304(b):The court needed to interpret the conjunction 'and' between these two articles to determine if fulfilling the conditions of one article necessitates compliance with the other.3. Significance of the Non-Obstante Clause in Article 304:The non-obstante clause in Article 304 was scrutinized to understand its implications for the relationship between Article 304(a) and Article 304(b).4. Balancing Freedom of Trade and Commerce under Article 301 vis-a-vis States' Authority to Levy Taxes:The court considered the balance between the freedom of trade and commerce as guaranteed under Article 301 and the states' authority to levy taxes under Articles 245 and 246, read with the appropriate legislative entries in the Seventh Schedule.5. Different Subjects under Article 304(a) and Article 304(b):It was questioned whether these articles address different subjects and if they should be treated distinctly in the context of state taxation laws.6. Conditions for Validity under Article 304(a) and Article 304(b):The court examined if a taxation law valid under Article 304(a) must also meet the conditions of Article 304(b), including obtaining Presidential assent.7. Inclusion of Tax Laws under the Term 'Restrictions' in Article 302 and Article 304(b):The court needed to determine if the term 'restrictions' in these articles encompasses tax laws, thereby affecting their validity and application.8. Validity Judged by Non-Discrimination Test:The court explored whether the validity of laws impugned under Article 301 should be judged solely on the basis of non-discrimination.9. Article 303's Circumscription of Article 301:The relationship between Article 303 and Article 301 was analyzed to understand if Article 303 limits the scope of Article 301.10. Classification of Goods under Article 304:The court considered whether 'internal goods' fall under Article 304(b) and 'external goods' under Article 304(a).11. Rejection of 'Per Se Test' from Atiabari's Case:The court deliberated on whether the 'per se test' from Atiabari Tea Co. Ltd. should be rejected or upheld.12. Tax Simpliciter as a Restriction under Part XIII:The court examined if a tax simpliciter constitutes a restriction under Part XIII of the Constitution, impacting the freedom of trade and commerce.13. Inclusion of Tax Laws under 'Restriction' in Article 304(b):The interpretation of 'restriction' in Article 304(b) was scrutinized to decide if it includes tax laws.14. Justiciability of Taxation:The court considered whether taxation matters are justiciable under the constitutional framework.15. 'Working Test' from Atiabari:The court evaluated whether the 'working test' from Atiabari makes a tax law inherently violative of Article 301.16. Inter-relationship between Article 19(1)(g) and Article 301:The court analyzed the inter-relationship between the right to practice any profession or to carry on any occupation, trade, or business under Article 19(1)(g) and the freedom of trade and commerce under Article 301.Conclusion:The court concluded that these complex issues necessitate reconsideration by a larger bench. The judgment emphasized the need to revisit the tests propounded in Atiabari Tea Co. Ltd. and Automobile Transport (Rajasthan) Ltd., considering the balance between trade freedom and state taxation powers. The matter was referred to the Chief Justice of India for the constitution of a suitable larger bench to address these significant constitutional questions.