Entry tax validity upheld where the levy avoided hostile discrimination and remained within State competence under constitutional entry tax powers.

Maharashtra's entry tax regime was analysed against Article 304(a) and Entry 52 of List II. The Court treated Article 304(a) as prohibiting only hostile discriminatory taxation, not mere differentiation, and held that the scheme's entry tax, GST-related reduction, and VAT set-off framework aimed to place imported goods on par with local goods; the absence of further CST adjustment did not make the levy unconstitutional. It also held that Entry 52 permits a State levy on entry of goods into local areas, and rejected the argument that tax collection or retention must be confined to each local body. The challenge based on double taxation therefore failed.

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Issues: (i) Whether the Maharashtra Tax on the Entry of Goods into Local Areas Act, 2002 is unconstitutional for allegedly creating hostile discrimination against imported goods under Article 304(a) of the Constitution of India and for denying or limiting reduction, set-off, or credit of taxes paid outside the State; (ii) Whether the Act is beyond the legislative competence of the State on the footing that Entry 52 of List II of the Seventh Schedule to the Constitution of India requires levy, collection, retention, and utilisation of the tax only by the concerned local area and not by the State, and whether the levy amounts to impermissible double taxation.

Issue (i): Whether the Act is unconstitutional for hostile discrimination under Article 304(a) and for denial of set-off or reduction of outside-State taxes?

Analysis: The governing principle applied was that Article 304(a) prohibits only discriminatory taxes of a hostile protectionist character and not mere differentiation. A State may design its fiscal legislation so that imported goods and locally produced goods bear equal tax burdens. The Court also relied on the settled position that freedom under Article 301 is not freedom from taxation, that clauses (a) and (b) of Article 304 operate disjunctively, and that set-off is not an enforceable right. On the statutory scheme, the entry tax provisions, the proviso reducing tax by GST paid in the place of purchase, and the set-off mechanism under the VAT law were treated as part of a non-discriminatory framework intended to place imported goods at par with local goods. The absence of a further adjustment for Central Sales Tax did not render the levy hostile or unconstitutional.

Conclusion: The challenge under Article 304(a) failed, and the Act was held not to be discriminatory or unconstitutional on that ground.

Issue (ii): Whether the Act is beyond the competence of the State under Entry 52 of List II and amounts to double taxation?

Analysis: The Court held that Entry 52 empowers the State Legislature to levy tax on the entry of goods into a local area for consumption, use, or sale therein, and that the State may validly enact a levy over multiple local areas within the State. It rejected the contention that the tax must be collected, retained, and spent only by each individual local body as a constitutional limitation on Entry 52. The Court further held that the legislative history and earlier octroi-based practice did not control the modern constitutional text in the manner suggested by the petitioners. On double taxation, the Court treated entry tax and octroi or other local imposts as different levies by different authorities for different purposes, and therefore not double taxation in the strict constitutional sense.

Conclusion: The challenge based on legislative competence and double taxation failed, and the Act was upheld as within the State's power under Entry 52.

Final Conclusion: The constitutional and statutory challenges to the Maharashtra entry tax regime were rejected in full, and the levy was upheld as valid.

Ratio Decidendi: A State entry tax that applies equally to imported and locally produced goods, and that is structured to avoid hostile discrimination, is constitutionally valid under Entry 52 and Article 304(a), even if the tax is credited to the State and not earmarked to a particular local area.

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