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IN THE SUPREME COURT OF INDIA  

CIVIL APPELLATE JURISDICTION  

CIVIL APPEAL NO. 3453/2002  

JINDAL STAINLESS LTD.& ANR.    …Appellants  

VS.  

STATE OF HARYANA & ORS.    …Respondents  

WITH  

C.A. NO. 6383-6421/1997, C.A. NO. 6422-6435/1997, C.A. NO. 6436/1997, C.A.  

NO. 6437-6440/1997 , C.A. NO. 3381-3400/1998, C.A. NO. 4651/1998, C.A.  

NO. 918/1999, C.A. NO. 2769/2000, C.A. NO. 4471/2000, C.A. NO. 3314/2001,  

C.A. NO. 3454/2002, C.A. NO. 3455/2002, C.A. NO. 3456-3459/2002, C.A. NO.  

3460/2002, C.A. NO. 3461/2002, C.A. NO. 3462-3463/2002, C.A. NO.  

3464/2002, C.A. NO. 3465/2002, C.A. NO. 3466/2002, C.A. NO. 3467/2002,  

C.A. NO. 3468/2002, C.A. NO. 3469/2002, C.A. NO. 3470/2002, C.A. NO.  

3471/2002, C.A. NO. 4008/2002, C.A. NO. 5385/2002, C.A. NO. 5740/2002,  

C.A. NO. 5858/2002, W.P.(C) NO. 512/2003, W.P.(C) NO. 574/2003, C.A. NO.  

2608/2003, C.A. NO. 2633/2003, C.A. NO. 2637/2003, C.A. NO. 2638/2003,  

C.A. NO. 3720-3722/2003, C.A. NO. 6331/2003, C.A. NO. 8241/2003, C.A. NO.  

8242/2003, C.A. NO. 8243/2003, C.A. NO. 8244/2003, C.A. NO. 8245/2003,  

C.A. NO. 8246/2003, C.A. NO. 8247/2003, C.A. NO. 8248/2003, C.A. NO.  

8249/2003, C.A. NO. 8250/2003, C.A. NO. 8251/2003, C.A. NO. 8252/2003,  

T.C.(C) NO. 13/2004, W.P.(C) NO. 66/2004, W.P.(C) NO. 221/2004, C.A. NO.  

997-998/2004, C.A. NO. 3144/2004, C.A. NO. 3145/2004, C.A. NO. 3146/2004,  

C.A. NO. 4953/2004, C.A. NO. 4954/2004, C.A. NO. 5139/2004, C.A. NO.  

5141/2004, C.A. NO. 5142/2004, C.A. NO. 5143/2004, C.A. NO. 5144/2004,  

C.A. NO. 5145/2004, C.A. NO. 5147/2004, C.A. NO. 5148/2004, C.A. NO.  

5149/2004, C.A. NO. 5150/2004, C.A. NO. 5151/2004, C.A. NO. 5152/2004,  

C.A. NO. 5153/2004, C.A. NO. 5154/2004, C.A. NO. 5155/2004, C.A. NO.  

5156/2004, C.A. NO. 5157/2004, C.A. NO. 5158/2004, C.A. NO. 5159/2004,  

C.A. NO. 5160/2004, C.A. NO. 5162/2004, C.A. NO. 5163/2004, C.A. NO.  

5164/2004, C.A. NO. 5165/2004, C.A. NO. 5166/2004, C.A. NO. 5167/2004,

Page 2

2  

C.A. NO. 5168/2004, C.A. NO. 5169/2004, C.A. NO. 5170/2004, C.A. NO.  

7658/2004, SLP(C) NO. 9479/2004, SLP(C) NO. 9496/2004, SLP(C). 9569/2004,  

SLP(C) NO. 9832/2004, SLP(C) NO. 9883/2004, SLP(C) NO. 9885/2004, SLP(C)  

NO. 9891/2004, SLP(C) NO. 9893/2004, SLP(C) NO. 9898/2004, SLP(C) NO.  

9899/2004, SLP(C) NO. 9901/2004, SLP(C) NO. 9904/2004, SLP(C) NO.  

9910/2004, SLP(C) NO. 9911/2004, SLP(C) NO. 9912/2004, SLP(C) NO.  

9950/2004, SLP(C) NO. 9964/2004, SLP(C) NO. 9976/2004, SLP(C) NO.  

9989/2004, SLP(C) NO. 9991/2004, SLP(C) NO. 9993/2004, SLP(C) NO.  

9998/2004, SLP(C) NO. 9999/2004, SLP(C) NO. 10003/2004, SLP(C) NO.  

10007/2004, SLP(C) NO. 10129/2004, SLP(C) NO. 10133/2004, SLP(C) NO.  

10134/2004, SLP(C) NO. 10153/2004, SLP(C) NO. 10154/2004, SLP(C) NO.  

10156/2004, SLP(C) NO. 10161/2004, SLP(C) NO. 10164/2004, SLP(C) NO.  

10167/2004, SLP(C) NO. 10206/2004, SLP(C) NO. 10207/2004, SLP(C) NO.  

10232/2004, SLP(C) NO. 10366/2004, SLP(C) NO. 10381/2004, SLP(C) NO.  

10382/2004, SLP(C) NO. 10384/2004, SLP(C) NO. 10385/2004, SLP(C) NO.  

10391/2004, SLP(C) NO. 10402/2004, SLP(C) NO. 10403/2004, SLP(C) NO.  

10404/2004, SLP(C) NO. 10407/2004, SLP(C) NO. 10417/2004, SLP(C) NO.  

10449/2004, SLP(C) NO. 10493/2004, SLP(C) NO. 10495/2004, SLP(C) NO.  

10497/2004, SLP(C) NO. 10501/2004, SLP(C) NO. 10505/2004, SLP(C) NO.  

10539/2004, SLP(C) NO. 10557/2004, SLP(C) NO. 10563/2004, SLP(C) NO.  

10566/2004, SLP(C) NO. 10567/2004, SLP(C) NO. 10568/2004, SLP(C) NO.  

10569/2004, SLP(C) NO. 10571/2004, SLP(C) NO. 10704/2004, SLP(C) NO.  

10706/2004, SLP(C) NO. 10708/2004, SLP(C) NO. 10736/2004, SLP(C) NO.  

10906/2004, SLP(C) NO. 10907/2004, SLP(C) NO. 10908/2004, SLP(C) NO.  

10909/2004, SLP(C) NO. 10910/2004, SLP(C) NO. 10923/2004, SLP(C) NO.  

10929/2004, SLP(C) NO. 10977/2004, SLP(C) NO. 11012/2004, SLP(C) NO.  

11266/2004, SLP(C) NO. 11271/2004, SLP(C) NO. 11274/2004, SLP(C) NO.  

11281/2004, SLP(C) NO. 11320/2004, SLP(C) NO. 11326/2004, SLP(C) NO.  

11328/2004, SLP(C) NO. 11329/2004, SLP(C) NO. 11370/2004, SLP(C) NO.  

14380/2005, SLP(C) NO. 1101/2007, SLP(C) NO. 1288/2007, SLP(C) NO.  

6914/2007, SLP(C) NO. 9054/2007, SLP(C) NO. 10694/2007, SLP(C) NO.  

12959/2007, SLP(C) NO. 13806/2007, SLP(C) NO. 14070/2007, SLP(C) NO.  

14819/2007, SLP(C) NO. 14820/2007, SLP(C) NO. 14821/2007, SLP(C) NO.  

14823/2007, SLP(C) NO. 14824/2007, SLP(C) NO. 14826/2007, SLP(C) NO.  

14828/2007, SLP(C) NO. 14829/2007, SLP(C) NO. 14830/2007, SLP(C) NO.  

14832/2007, SLP(C) NO. 14833/2007, SLP(C) NO. 14835/2007, SLP(C) NO.  

14837/2007, SLP(C) NO. 14838/2007, SLP(C) NO. 14839/2007, SLP(C) NO.  

14841/2007, SLP(C) NO. 14842/2007, SLP(C) NO. 14845/2007, SLP(C) NO.  

14846/2007, SLP(C) NO. 14847/2007, SLP(C) NO. 15082-15085/2007, SLP(C)  

NO. 15807/2007, SLP(C) NO. 16351/2007, SLP(C) NO. 17589/2007, SLP(C) NO.  

17590/2007, SLP(C) NO. 17905/2007, SLP(C) NO. 17906/2007, SLP(C) NO.  

17907/2007, SLP(C) NO. 17908/2007, SLP(C) NO. 17909/2007, SLP(C) NO.  

17910/2007, SLP(C) NO. 17911/2007, SLP(C) NO. 17913/2007, SLP(C) NO.

Page 3

3  

17914/2007, SLP(C) NO. 17915/2007, SLP(C) NO. 17916/2007, SLP(C) NO.  

17917/2007, SLP(C) NO. 17918/2007, SLP(C) NO. 17919/2007, SLP(C) NO.  

17920/2007, SLP(C) NO. 17921/2007, SLP(C) NO. 17922/2007, SLP(C) NO.  

17923/2007, SLP(C) NO. 17924/2007, SLP(C) NO. 17925/2007, SLP(C) NO.  

17926/2007, SLP(C) NO. 17929/2007, SLP(C) NO. 17930/2007, SLP(C) NO.  

17933/2007, SLP(C) NO. 17934/2007, SLP(C) NO. 17936/2007, SLP(C) NO.  

17937/2007, SLP(C) NO. 17938/2007, SLP(C) NO. 17939/2007, SLP(C) NO.  

17941/2007, SLP(C) NO. 17942/2007, SLP(C) NO. 17943/2007, SLP(C) NO.  

17944/2007, SLP(C) NO. 17957/2007, SLP(C) NO. 17959/2007, SLP(C) NO.  

17960/2007, SLP(C) NO. 17961/2007, SLP(C) NO. 17962/2007, SLP(C) NO.  

17963/2007, SLP(C) NO. 17964/2007, SLP(C) NO. 17965/2007, SLP(C) NO.  

17972/2007, SLP(C) NO. 17973/2007, SLP(C) NO. 17974/2007, SLP(C) NO.  

17975/2007, SLP(C) NO. 17976/2007, SLP(C) NO. 17977/2007, SLP(C) NO.  

17978/2007, SLP(C) NO. 17979/2007, SLP(C) NO. 17980/2007, SLP(C) NO.  

17981/2007, SLP(C) NO. 17983/2007, SLP(C) NO. 17984/2007, SLP(C) NO.  

18036/2007, SLP(C) NO. 18037/2007, SLP(C) NO. 18038/2007, SLP(C) NO.  

18039/2007, SLP(C) NO. 18040/2007, SLP(C) NO. 18041/2007, SLP(C) NO.  

18042/2007, SLP(C) NO. 18043/2007, SLP(C) NO. 18044/2007, SLP(C) NO.  

18045/2007, SLP(C) NO. 18046/2007, SLP(C) NO. 18047/2007, SLP(C) NO.  

18048/2007, SLP(C) NO. 18049/2007, SLP(C) NO. 18050/2007, SLP(C) NO.  

18051/2007, SLP(C) NO. 18053/2007, SLP(C) NO. 18054/2007, SLP(C) NO.  

18055/2007, SLP(C) NO. 18056/2007, SLP(C) NO. 18057/2007, SLP(C) NO.  

18058/2007, SLP(C) NO. 18059/2007, SLP(C) NO. 18061/2007, SLP(C) NO.  

18062/2007, SLP(C) NO. 18063/2007, SLP(C) NO. 18064/2007, SLP(C) NO.  

18065/2007, SLP(C) NO. 18066/2007, SLP(C) NO. 18067/2007, SLP(C) NO.  

18068/2007, SLP(C) NO. 18069/2007, SLP(C) NO. 18073/2007, SLP(C) NO.  

18074/2007, SLP(C) NO. 18075/2007, SLP(C) NO. 18076/2007, SLP(C) NO.  

18077/2007, SLP(C) NO. 18078/2007, SLP(C) NO. 18079/2007, SLP(C) NO.  

18080/2007, SLP(C) NO. 18081/2007, SLP(C) NO. 18082/2007, SLP(C) NO.  

18083/2007, SLP(C) NO. 18084/2007, SLP(C) NO. 18085/2007, SLP(C) NO.  

18086/2007, SLP(C) NO. 18087/2007, SLP(C) NO. 18088/2007, SLP(C) NO.  

18089/2007, SLP(C) NO. 18090/2007, SLP(C) NO. 18091/2007, SLP(C) NO.  

18092/2007, SLP(C) NO. 19049/2007, SLP(C) NO. 19050/2007, SLP(C) NO.  

19051/2007, SLP(C) NO. 19052/2007, SLP(C) NO. 19053/2007, SLP(C) NO.  

19055/2007, SLP(C) NO. 19057/2007, SLP(C) NO. 19059/2007, SLP(C) NO.  

19060/2007, SLP(C) NO. 19062/2007, SLP(C) NO. 19064/2007, SLP(C) NO.  

19066/2007, SLP(C) NO. 19068/2007, SLP(C) NO. 19070/2007, SLP(C) NO.  

19071/2007, SLP(C) NO. 19072/2007, SLP(C) NO. 19073/2007, SLP(C) NO.  

19074/2007, SLP(C) NO. 19076/2007, SLP(C) NO. 19077/2007, SLP(C) NO.  

19094/2007, SLP(C) NO. 19095/2007, SLP(C) NO. 19096/2007, SLP(C) NO.  

19099/2007, SLP(C) NO. 19100/2007, SLP(C) NO. 19101/2007, SLP(C) NO.  

19102/2007, SLP(C) NO. 19103/2007, SLP(C) NO. 19104/2007, SLP(C) NO.  

19105/2007, SLP(C) NO. 19106/2007, SLP(C) NO. 19107/2007, SLP(C) NO.

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4  

19108/2007, SLP(C) NO. 19110/2007, SLP(C) NO. 19111/2007, SLP(C) NO.  

19113/2007, SLP(C) NO. 19114/2007, SLP(C) NO. 19505/2007, SLP(C) NO.  

19506/2007, SLP(C) NO. 19507/2007, SLP(C) NO. 19508/2007, SLP(C) NO.  

19510/2007, SLP(C) NO. 19511/2007, SLP(C) NO. 19512/2007, SLP(C) NO.  

19513/2007, SLP(C) NO. 19514/2007, SLP(C) NO. 19515/2007, SLP(C) NO.  

19516/2007, SLP(C) NO. 19518/2007, SLP(C) NO. 19521/2007, SLP(C) NO.  

19522/2007, SLP(C) NO. 19523-19528/2007, SLP(C) NO. 19529/2007, SLP(C)  

NO. 19530/2007, SLP(C) NO. 19531/2007, SLP(C) NO. 19543-19547/2007,  

SLP(C) NO. 20527/2007, SLP(C) NO. 20529/2007, SLP(C) NO. 20559/2007,  

SLP(C) NO. 21841/2007, SLP(C) NO. 21843/2007, SLP(C) NO. 21844/2007,  

SLP(C) NO. 21845/2007, SLP(C) NO. 21846/2007, SLP(C) NO. 21847/2007,  

SLP(C) NO. 21848/2007, SLP(C) NO. 21849/2007, SLP(C) NO. 21851/2007,  

SLP(C) NO. 21855/2007, SLP(C) NO. 21864/2007, SLP(C) NO. 21866/2007,  

SLP(C) NO. 21867/2007, SLP(C) NO. 21871-21904/2007, SLP(C) NO.  

21905/2007, SLP(C) NO. 21907/2007, SLP(C) NO. 21908/2007, SLP(C) NO.  

21909/2007, SLP(C) NO. 21910/2007, SLP(C) NO. 22947/2007, SLP(C) NO.  

22958/2007, SLP(C) NO. 24934-25066/2007, SLP(C) NO. 742/2008, SLP(C) NO.  

746/2008, SLP(C) NO. 747/2008, SLP(C) NO. 3230/2008, SLP(C) NO. 3231/2008,  

SLP(C) NO. 3233/2008, SLP(C) NO. 3234/2008, SLP(C) NO. 3236/2008, SLP(C)  

NO. 3237/2008, SLP(C) NO. 3238-3262/2008, C.A. NO. 4715/2008, C.A. NO.  

5041-5042/2008, SLP(C) NO. 5407/2008, SLP(C) NO. 5408/2008, SLP(C) NO.  

6148-6152/2008, SLP(C) NO. 6831/2008, SLP(C) NO. 7914/2008, SLP(C) NO.  

8053-8077/2008, SLP(C) NO. 8199/2008, SLP(C) NO. 9227/2008, SLP(C) NO.  

12424-12425/2008, SLP(C) NO. 13327/2008, SLP(C) NO. 13889/2008, SLP(C)  

NO. 14232-14252/2008, SLP(C) NO. 14454-14778/2008, SLP(C) NO.  

14828/2008, SLP(C) NO. 14829/2008, SLP(C) NO. 14875/2008, SLP(C) NO.  

15047/2008, SLP(C) NO. 15078/2008, SLP(C) NO. 15090/2008, SLP(C) NO.  

15161/2008, SLP(C) NO. 15164/2008, SLP(C) NO. 15179/2008, SLP(C) NO.  

15253/2008, SLP(C) NO. 15273/2008, SLP(C) NO. 15274/2008, SLP(C) NO.  

15286-15287/2008, SLP(C) NO. 15288-15289/2008, S.L.P.(C)... /2008 CC NO.  

15314 , SLP(C) NO. 15324/2008, SLP(C) NO. 15325/2008, SLP(C) NO.  

15326/2008, SLP(C) NO. 15327/2008, SLP(C) NO. 15328/2008, SLP(C) NO.  

15329/2008, SLP(C) NO. 15330/2008, SLP(C) NO. 15331/2008, SLP(C) NO.  

15335/2008, SLP(C) NO. 15337/2008, SLP(C) NO. 15356/2008, SLP(C) NO.  

15357/2008, SLP(C) NO. 15369/2008, SLP(C) NO. 15405/2008, SLP(C) NO.  

15491/2008, SLP(C) NO. 15492/2008, SLP(C) NO. 15493/2008, SLP(C) NO.  

15495/2008, SLP(C) NO. 15496/2008, SLP(C) NO. 15498/2008, SLP(C) NO.  

15540/2008, SLP(C) NO. 15551/2008, SLP(C) NO. 15579/2008, SLP(C) NO.  

15605/2008, SLP(C) NO. 15618/2008, SLP(C) NO. 15623/2008, SLP(C) NO.  

15628/2008, SLP(C) NO. 15629/2008, SLP(C) NO. 15630/2008, SLP(C) NO.  

15631/2008, SLP(C) NO. 15632/2008, SLP(C) NO. 15633/2008, SLP(C) NO.  

15636/2008, SLP(C) NO. 15643/2008, SLP(C) NO. 15647/2008, SLP(C) NO.  

15652/2008, SLP(C) NO. 15653/2008, SLP(C) NO. 15655/2008, SLP(C) NO.

Page 5

5  

15656/2008, SLP(C) NO. 15657/2008, SLP(C) NO. 15659/2008, SLP(C) NO.  

15660/2008, SLP(C) NO. 15666/2008, SLP(C) NO. 15684/2008, SLP(C) NO.  

15700/2008, SLP(C) NO. 15711/2008, SLP(C) NO. 15819/2008, SLP(C) NO.  

15845/2008, SLP(C) NO. 15934/2008, SLP(C) NO. 16664/2008, SLP(C) NO.  

16667/2008, SLP(C) NO. 16689/2008, SLP(C) NO. 16733/2008, SLP(C) NO.  

16754/2008, SLP(C) NO. 16832/2008, SLP(C) NO. 16837/2008, SLP(C) NO.  

16841/2008, SLP(C) NO. 16865/2008, SLP(C) NO. 16885/2008, SLP(C) NO.  

16926/2008, SLP(C) NO. 16930/2008, SLP(C) NO. 17187/2008, SLP(C) NO.  

17192/2008, SLP(C) NO. 17193/2008, SLP(C) NO. 17203/2008, SLP(C) NO.  

17204/2008, SLP(C) NO. 17233/2008, SLP(C) NO. 17267/2008, SLP(C) NO.  

17269/2008, SLP(C) NO. 17271/2008, SLP(C) NO. 17272/2008, SLP(C) NO.  

17274/2008, SLP(C) NO. 17276/2008, SLP(C) NO. 17277/2008, SLP(C) NO.  

17279/2008, SLP(C) NO. 17280/2008, SLP(C) NO. 17282/2008, SLP(C) NO.  

17367/2008, SLP(C) NO. 17368/2008, SLP(C) NO. 17369/2008, SLP(C) NO.  

17370/2008, SLP(C) NO. 17372/2008, SLP(C) NO. 17373/2008, SLP(C) NO.  

17374/2008, SLP(C) NO. 17375/2008, SLP(C) NO. 17376/2008, SLP(C) NO.  

17377/2008, SLP(C) NO. 17408/2008, SLP(C) NO. 17865/2008, SLP(C) NO.  

17892/2008, SLP(C) NO. 18001/2008, SLP(C) NO. 18030/2008, SLP(C) NO.  

18034/2008, SLP(C) NO. 18035/2008, SLP(C) NO. 18040/2008, SLP(C) NO.  

18066-18067/2008, SLP(C) NO. 18344/2008, SLP(C) NO. 18346/2008, SLP(C)  

NO. 18354/2008, SLP(C) NO. 18360-18364/2008, SLP(C) NO. 18379/2008,  

SLP(C) NO. 18405/2008, SLP(C) NO. 18532/2008, SLP(C) NO. 18533/2008,  

SLP(C) NO. 18582/2008, SLP(C) NO. 18684-18714/2008, SLP(C) NO.  

18850/2008, SLP(C) NO. 18857/2008, SLP(C) NO. 18865/2008, SLP(C) NO.  

18870/2008, SLP(C) NO. 18871/2008, SLP(C) NO. 19019/2008, SLP(C) NO.  

19026/2008, SLP(C) NO. 19030/2008, SLP(C) NO. 19049/2008, SLP(C) NO.  

19120/2008, SLP(C) NO. 19141/2008, SLP(C) NO. 19372/2008, SLP(C) NO.  

19421/2008, SLP(C) NO. 19425/2008, SLP(C) NO. 19460/2008, SLP(C) NO.  

19470/2008, SLP(C) NO. 19714/2008, SLP(C) NO. 19722/2008, SLP(C) NO.  

19731/2008, SLP(C) NO. 19737/2008, SLP(C) NO. 19802/2008, SLP(C) NO.  

19847/2008, SLP(C) NO. 19849/2008, SLP(C) NO. 19867/2008, SLP(C) NO.  

19873/2008, SLP(C) NO. 19876/2008, SLP(C) NO. 19986/2008, SLP(C) NO.  

20068/2008, SLP(C) NO. 20089/2008, SLP(C) NO. 20165/2008, SLP(C) NO.  

20766/2008, SLP(C) NO. 20795/2008, SLP(C) NO. 21107/2008, SLP(C) NO.  

21117-21125/2008, SLP(C) NO. 21127/2008, SLP(C) NO. 21506/2008, SLP(C)  

NO. 21509/2008, SLP(C) NO. 21510/2008, SLP(C) NO. 21819/2008, SLP(C) NO.  

22081/2008, SLP(C) NO. 22083/2008, SLP(C) NO. 22084/2008, SLP(C) NO.  

22086/2008, SLP(C) NO. 22100-22101/2008, SLP(C) NO. 22195/2008, SLP(C)  

NO. 22707/2008, SLP(C) NO. 22735/2008, SLP(C) NO. 22931/2008, SLP(C) NO.  

23075/2008, SLP(C) NO. 23077/2008, SLP(C) NO. 23270/2008, SLP(C) NO.  

23277/2008, SLP(C) NO. 23383/2008, SLP(C) NO. 23609/2008, SLP(C) NO.  

23623/2008, SLP(C) NO. 25378/2008, SLP(C) NO. 25498/2008, SLP(C) NO.  

26377/2008, SLP(C) NO. 26543/2008, SLP(C) NO. 26571/2008, SLP(C) NO.

Page 6

6  

26572/2008, SLP(C) NO. 26593/2008, SLP(C) NO. 26750/2008, SLP(C) NO.  

26813/2008, SLP(C) NO. 26972/2008, SLP(C) NO. 27442-27444/2008, SLP(C)  

NO. 27606/2008, SLP(C) NO. 27927/2008, SLP(C) NO. 29194/2008, SLP(C) NO.  

29196/2008, SLP(C) NO. 29561-29570/2008, SLP(C) NO. 29763/2008, SLP(C)  

NO. 29764/2008, SLP(C) NO. 30276/2008, SLP(C) NO. 30533/2008, SLP(C) NO.  

30534-30540/2008, SLP(C) NO. 30542/2008, S.L.P.(C)... /2009 CC NO. 2867,  

SLP(C) NO. 3276/2009, SLP(C) NO. 4720/2009, S.L.P.(C)... /2009 CC NO. 5143,  

S.L.P.(C)... /2009 CC NO. 5311, SLP(C) NO. 5371/2009, SLP(C) NO. 5376/2009,  

SLP(C) NO. 5381/2009, SLP(C) NO. 5383/2009, SLP(C) NO. 5384/2009, SLP(C)  

NO. 5393/2009, SLP(C) NO. 5395/2009, SLP(C) NO. 5396/2009, SLP(C) NO.  

5399/2009, SLP(C) NO. 5401/2009, SLP(C) NO. 5403/2009, SLP(C) NO.  

5405/2009, SLP(C) NO. 5406/2009, SLP(C) NO. 5408/2009, SLP(C) NO.  

5409/2009, SLP(C) NO. 5410/2009, SLP(C) NO. 5411/2009, SLP(C) NO.  

5412/2009, SLP(C) NO. 5413/2009, SLP(C) NO. 5414/2009, SLP(C) NO.  

5420/2009, SLP(C) NO. 5421/2009, SLP(C) NO. 5422/2009, SLP(C) NO.  

5424/2009, SLP(C) NO. 5426/2009, SLP(C) NO. 5493-5494/2009, SLP(C) NO.  

5495/2009, S.L.P.(C)... /2009 CC NO. 5803, SLP(C) NO. 5883/2009, SLP(C) NO.  

6254/2009, SLP(C) NO. 6669/2009, SLP(C) NO. 6670/2009, SLP(C) NO.  

6675/2009, SLP(C) NO. 6676/2009, SLP(C) NO. 6682/2009, SLP(C) NO.  

6683/2009, SLP(C) NO. 6684/2009, SLP(C) NO. 6685/2009, SLP(C) NO.  

6686/2009, SLP(C) NO. 6687/2009, SLP(C) NO. 6688/2009, SLP(C) NO.  

6689/2009, SLP(C) NO. 6690/2009, SLP(C) NO. 6692/2009, SLP(C) NO.  

6693/2009, SLP(C) NO. 6694/2009, SLP(C) NO. 6696/2009, SLP(C) NO.  

6698/2009, SLP(C) NO. 6699/2009, SLP(C) NO. 6700/2009, SLP(C) NO.  

6701/2009, SLP(C) NO. 6702/2009, SLP(C) NO. 6703/2009, SLP(C) NO.  

6704/2009, SLP(C) NO. 6705/2009, SLP(C) NO. 6708/2009, SLP(C) NO.  

6709/2009, SLP(C) NO. 6710/2009, SLP(C) NO. 6711/2009, SLP(C) NO.  

6712/2009, SLP(C) NO. 6713/2009, SLP(C) NO. 6714-6715/2009, SLP(C) NO.  

6953/2009, SLP(C) NO. 7345/2009, SLP(C) NO. 8244/2009, SLP(C) NO.  

9548/2009, SLP(C) NO. 9699/2009, SLP(C) NO. 10040/2009, SLP(C) NO.  

10041/2009, SLP(C) NO. 10042/2009, SLP(C) NO. 10045/2009, SLP(C) NO.  

10047/2009, SLP(C) NO. 10048/2009, SLP(C) NO. 10049/2009, SLP(C) NO.  

10050/2009, SLP(C) NO. 10051/2009, SLP(C) NO. 10053-10054/2009, SLP(C)  

NO. 10192/2009, SLP(C) NO. 10279/2009, SLP(C) NO. 10952/2009, SLP(C) NO.  

10954-10956/2009, SLP(C) NO. 11042/2009, SLP(C) NO. 11122/2009, SLP(C)  

NO. 11603-11611/2009, SLP(C) NO. 11646/2009, SLP(C) NO. 12948/2009,  

SLP(C) NO. 13270-13274/2009, SLP(C) NO. 13483/2009, SLP(C) NO.  

13496/2009, SLP(C) NO. 13517/2009, SLP(C) NO. 13611-13612/2009, SLP(C)  

NO. 14429/2009, SLP(C) NO. 14484/2009, SLP(C) NO. 14488/2009, SLP(C) NO.  

14623/2009, SLP(C) NO. 14856/2009, SLP(C) NO. 14949/2009, SLP(C) NO.  

15723/2009, SLP(C) NO. 16253/2009, SLP(C) NO. 16757-16760/2009, SLP(C)  

NO. 16784/2009, SLP(C) NO. 16789/2009, SLP(C) NO. 16888-16898/2009,  

SLP(C) NO. 17332-17333/2009, SLP(C) NO. 17394-17396/2009, SLP(C) NO.

Page 7

7  

17488/2009, SLP(C) NO. 17490/2009, SLP(C) NO. 17491/2009, SLP(C) NO.  

17492-17498/2009, SLP(C) NO. 17722/2009, SLP(C) NO. 17731/2009, SLP(C)  

NO. 17744/2009, SLP(C) NO. 19695/2009, SLP(C) NO. 22293/2009, SLP(C) NO.  

22295/2009, SLP(C) NO. 22302/2009, SLP(C) NO. 22303/2009, SLP(C) NO.  

22304/2009, SLP(C) NO. 22306/2009, SLP(C) NO. 22307/2009, SLP(C) NO.  

22308/2009, SLP(C) NO. 22309/2009, SLP(C) NO. 22310/2009, SLP(C) NO.  

22311/2009, SLP(C) NO. 22312/2009, SLP(C) NO. 22313/2009, SLP(C) NO.  

22316/2009, SLP(C) NO. 22317/2009, SLP(C) NO. 22318/2009, SLP(C) NO.  

22320/2009, SLP(C) NO. 22321/2009, SLP(C) NO. 22322/2009, SLP(C) NO.  

22323/2009, SLP(C) NO. 22324/2009, SLP(C) NO. 22325/2009, SLP(C) NO.  

22408/2009, SLP(C) NO. 22425/2009, SLP(C) NO. 22428/2009, SLP(C) NO.  

23990/2009, SLP(C) NO. 24149/2009, SLP(C) NO. 24430/2009, SLP(C) NO.  

24822/2009, SLP(C) NO. 25157/2009, SLP(C) NO. 25390/2009, SLP(C) NO.  

25399-25400/2009, SLP(C) NO. 25467/2009, SLP(C) NO. 25470/2009, SLP(C)  

NO. 25474/2009, SLP(C) NO. 25753/2009, SLP(C) NO. 25797/2009, SLP(C) NO.  

26116/2009, SLP(C) NO. 26236/2009, SLP(C) NO. 26509/2009, SLP(C) NO.  

27883/2009, SLP(C) NO. 28509/2009, SLP(C) NO. 28583/2009, SLP(C) NO.  

28696/2009, SLP(C) NO. 28775/2009, SLP(C) NO. 29597/2009, SLP(C) NO.  

29868/2009, SLP(C) NO. 30383/2009, SLP(C) NO. 30746-30845/2009, SLP(C)  

NO. 30847/2009, SLP(C) NO. 31410/2009, SLP(C) NO. 31411/2009, SLP(C) NO.  

31412/2009, SLP(C) NO. 33176/2009, SLP(C) NO. 33663-33665/2009, SLP(C)  

NO. 33672/2009, SLP(C) NO. 34253/2009, SLP(C) NO. 34859/2009, SLP(C) NO.  

35038/2009, SLP(C) NO. 35585/2009, SLP(C) NO. 35587/2009, SLP(C) NO.  

35740/2009, SLP(C) NO. 35742/2009, SLP(C) NO. 35743-35746/2009, SLP(C)  

NO. 35747/2009, SLP(C) NO. 35749/2009, SLP(C) NO. 35750/2009, SLP(C) NO.  

35751/2009, SLP(C) NO. 35752/2009, SLP(C) NO. 35753/2009, SLP(C) NO.  

35754/2009, SLP(C) NO. 35755/2009, SLP(C) NO. 35756/2009, SLP(C) NO.  

35757/2009, SLP(C) NO. 36193/2009, SLP(C) NO. 36196/2009, SLP(C) NO.  

36219/2009, SLP(C) NO. 36271/2009, W.P.(C) NO. 11/2010, W.P.(C) NO.  

42/2010, W.P.(C) NO. 43/2010, W.P.(C) NO. 44/2010, W.P.(C) NO. 46/2010,  

W.P.(C) NO. 48/2010, W.P.(C) NO. 63/2010, W.P.(C) NO. 71/2010, SLP(C) NO.  

104/2010, SLP(C) NO. 245/2010, SLP(C) NO. 247/2010, SLP(C) NO. 248/2010,  

S.L.P.(C)... /2010 CC NO. 886, S.L.P.(C)... /2010 CC NO. 1082, SLP(C) NO.  

1820/2010, SLP(C) NO. 1876/2010, SLP(C) NO. 2459/2010, SLP(C) NO.  

3387/2010, SLP(C) NO. 4102/2010, SLP(C) NO. 4362/2010, SLP(C) NO.  

4388/2010, SLP(C) NO. 4389/2010, SLP(C) NO. 4390/2010, SLP(C) NO.  

4511/2010, SLP(C) NO. 4572/2010, SLP(C) NO. 4720/2010, SLP(C) NO.  

5151/2010, SLP(C) NO. 5308/2010, SLP(C) NO. 5309/2010, C.A. NO. 5343-

5344/2010, SLP(C) NO. 6037/2010, SLP(C) NO. 6723/2010, SLP(C) NO.  

6762/2010, SLP(C) NO. 6763/2010, SLP(C) NO. 6765/2010, SLP(C) NO.  

6770/2010, SLP(C) NO. 6811/2010, SLP(C) NO. 7356/2010, SLP(C) NO.  

7426/2010, SLP(C) NO. 7776/2010, SLP(C) NO. 7929/2010, SLP(C) NO.  

9022/2010, SLP(C) NO. 9077/2010, SLP(C) NO. 9702/2010, SLP(C) NO.

Page 8

8  

9723/2010, SLP(C) NO. 10361/2010, SLP(C) NO. 11419/2010, SLP(C) NO.  

11423/2010, SLP(C) NO. 12690/2010, SLP(C) NO. 14845/2010, SLP(C) NO.  

14886/2010, SLP(C) NO. 15015/2010, SLP(C) NO. 15903/2010, SLP(C) NO.  

16694/2010, SLP(C) NO. 16720/2010, SLP(C) NO. 18318/2010, SLP(C) NO.  

18834/2010, SLP(C) NO. 19194/2010, SLP(C) NO. 19199/2010, SLP(C) NO.  

19217/2010, SLP(C) NO. 22327/2010, SLP(C) NO. 22520/2010, SLP(C) NO.  

23836/2010, SLP(C) NO. 29578/2010, SLP(C) NO. 36486/2010, W.P.(C) NO.  

31/2011, W.P.(C) NO. 497/2011, C.A. NO. 905/2011, SLP(C) NO. 1308/2011,  

C.A. NO. 2041/2011, C.A. NO. 2042/2011, S.L.P.(C)... /2011 CC NO. 2103,  

SLP(C) NO. 3433/2011, SLP(C) NO. 4730/2011, SLP(C) NO. 4743/2011, SLP(C)  

NO. 4747/2011, SLP(C) NO. 4750/2011, SLP(C) NO. 5094/2011, SLP(C) NO.  

5105/2011, SLP(C) NO. 5106/2011, SLP(C) NO. 5110/2011, SLP(C) NO.  

5112/2011, SLP(C) NO. 6351/2011, SLP(C) NO. 6492/2011, SLP(C) NO.  

8571/2011, SLP(C) NO. 9758/2011, C.A. NO. 9900-9903/2011, SLP(C) NO.  

12605/2011, SLP(C) NO. 13451/2011, SLP(C) NO. 13525/2011, SLP(C) NO.  

13526/2011, SLP(C) NO. 14144/2011, SLP(C) NO. 14269/2011, SLP(C) NO.  

14342/2011, SLP(C) NO. 18858/2011, SLP(C) NO. 18859/2011, SLP(C) NO.  

18862/2011, SLP(C) NO. 18863/2011, SLP(C) NO. 18864/2011, SLP(C) NO.  

33344/2011, W.P.(C) NO. 278/2012, W.P.(C) NO. 290/2012, C.A. NO.  

4210/2012, C.A. NO. 5860/2012, C.A. NO. 5861/2012, C.A. NO. 8275/2012,  

C.A. NO. 8278/2012, C.A. NO. 8280/2012, C.A. NO. 8283/2012, C.A. NO.  

8284/2012, C.A. NO. 8286/2012, C.A. NO. 8290/2012, C.A. NO. 8292/2012,  

C.A. NO. 8294/2012, C.A. NO. 8295/2012, C.A. NO. 8296/2012, C.A. NO.  

8297/2012, C.A. NO. 8298/2012, C.A. NO. 8299/2012, C.A. NO. 8300/2012,  

C.A. NO. 8301/2012, C.A. NO. 8302/2012, C.A. NO. 8303/2012, C.A. NO.  

8304/2012, C.A. NO. 8305/2012, C.A. NO. 8306/2012, C.A. NO. 8307/2012,  

C.A. NO. 8308/2012, C.A. NO. 8309/2012, C.A. NO. 8311/2012, C.A. NO.  

8312/2012, C.A. NO. 8313/2012, C.A. NO. 8314/2012, C.A. NO. 8315/2012,  

C.A. NO. 8316/2012, SLP(C) NO. 8333/2012, C.A. NO. 8734/2012, C.A. NO.  

8735/2012, C.A. NO. 8736/2012, C.A. NO. 8737/2012, C.A. NO. 8738/2012,  

C.A. NO. 8739/2012, C.A. NO. 8740/2012, C.A. NO. 8741/2012, C.A. NO.  

8744/2012, C.A. NO. 8745/2012, C.A. NO. 8832/2012, C.A. NO. 8833/2012,  

C.A. NO. 8834/2012, C.A. NO. 8836/2012, C.A. NO. 8837/2012, C.A. NO.  

8839/2012, C.A. NO. 8840/2012, C.A. NO. 8841/2012, C.A. NO. 8842/2012,  

C.A. NO. 8843/2012, C.A. NO. 8844/2012, C.A. NO. 8845/2012, C.A. NO.  

8846/2012, C.A. NO. 9148/2012, C.A. NO. 9149/2012, C.A. NO. 9150/2012,  

C.A. NO. 9151/2012, C.A. NO. 9152/2012, C.A. NO. 9153/2012, C.A. NO.  

9154/2012, C.A. NO. 9155/2012, C.A. NO. 9156/2012, C.A. NO. 9157/2012,  

C.A. NO. 9158/2012, C.A. NO. 9159/2012, C.A. NO. 9160/2012, C.A. NO.  

9161/2012, C.A. NO. 9162/2012, C.A. NO. 9163/2012, C.A. NO. 9164/2012,  

C.A. NO. 9165/2012, C.A. NO. 9166/2012, C.A. NO. 9167/2012, C.A. NO.  

9168/2012, C.A. NO. 9169/2012, C.A. NO. 9170/2012, C.A. NO. 9292/2012,  

C.A. NO. 9293/2012, SLP(C) NO. 16535-16536/2012, SLP(C) NO. 16538/2012,

Page 9

9  

SLP(C) NO. 18602/2012, SLP(C) NO. 28173/2012, SLP(C) NO. 33954/2012,  

SLP(C) NO. 36187/2012, SLP(C) NO. 37455/2012, SLP(C) NO. 37680/2012,  

SLP(C) NO. 37708-37709/2012, SLP(C) NO. 37712/2012, SLP(C) NO.  

37728/2012, SLP(C) NO. 38304/2012, SLP(C) NO. 38919/2012, SLP(C) NO.  

39998/2012, SLP(C) NO. 40146/2012, SLP(C) NO. 40147/2012, T.C.(C) NO.  

149/2013, SLP(C) NO. 449/2013, C.A. NO. 539/2013, C.A. NO. 540/2013, C.A.  

NO. 541/2013, C.A. NO. 542/2013, C.A. NO. 543/2013, C.A. NO. 544/2013,  

C.A. NO. 545/2013, C.A. NO. 546/2013, C.A. NO. 547/2013, C.A. NO.  

548/2013, SLP(C) NO. 1426/2013, SLP(C) NO. 8939/2013, SLP(C) NO.  

9844/2013, SLP(C) NO. 10466/2013, SLP(C) NO. 10516/2013, SLP(C) NO.  

10879/2013, SLP(C) NO. 11060/2013, SLP(C) NO. 16744-16746/2013, SLP(C)  

NO. 16867/2013, SLP(C) NO. 16869/2013, SLP(C) NO. 16870/2013, SLP(C) NO.  

27001-27002/2013, SLP(C) NO. 30986/2013, SLP(C) NO. 32256/2013, SLP(C)  

NO. 33600/2013, C.A. NO. 1838/2014, C.A. NO. 9216/2014, C.A. NO.  

9214/2014, SLP(C) NO. 29119/2014, SLP(C) NO. 208/2015, SLP(C) NO.  

212/2015, SLP(C) NO. 315-317/2015, SLP(C) NO. 320/2015, SLP(C) NO.  

336/2015, SLP(C) NO. 352/2015, SLP(C) NO. 376/2015, SLP(C) NO. 411-

421/2015, SLP(C) NO. 380/2015, SLP(C) NO. 437/2015, SLP(C) NO. 445/2015,  

SLP(C) NO. 457/2015, SLP(C) NO. 508/2015, SLP(C) NO. 510/2015, SLP(C) NO.  

567/2015, SLP(C) NO. 561-562/2015, SLP(C) NO. 585/2015, SLP(C) NO.  

621/2015, SLP(C) NO. 638/2015, SLP(C) NO. 641/2015, SLP(C) NO. 661/2015,  

SLP(C) NO. 664/2015, SLP(C) NO. 662/2015, SLP(C) NO. 669/2015, SLP(C) NO.  

668/2015, SLP(C) NO. 671/2015, SLP(C) NO. 672/2015, SLP(C) NO. 675/2015,  

SLP(C) NO. 674/2015, SLP(C) NO. 683/2015, SLP(C) NO. 690-691/2015, SLP(C)  

NO. 684-686/2015, SLP(C) NO. 693-694/2015, SLP(C) NO. 712/2015, SLP(C) NO.  

1270/2015, SLP(C) NO. 1424/2015, SLP(C) NO. 1596/2015, SLP(C) NO.  

1631/2015, SLP(C) NO. 1714/2015, SLP(C) NO. 1851-1852/2015, SLP(C) NO.  

1943-2001/2015, SLP(C) NO. 2038/2015, SLP(C) NO. 2054/2015, SLP(C) NO.  

2063-2065/2015, SLP(C) NO. 2081/2015, SLP(C) NO. 91/2015, SLP(C) NO.  

4557/2015, SLP(C) NO. 4581/2015, SLP(C) NO. 4657/2015, SLP(C) NO.  

5046/2015, SLP(C) NO. 5107/2015, SLP(C) NO. 5131/2015, SLP(C) NO.  

5143/2015, SLP(C) NO. 5375/2015, SLP(C) NO. 5447/2015, SLP(C) NO.  

5610/2015, SLP(C) NO. 5966/2015, SLP(C) NO. 6086/2015, SLP(C) NO.  

6143/2015, SLP(C) NO. 6158/2015, SLP(C) NO. 6240-6243/2015, SLP(C) NO.  

6565/2015, SLP(C) NO. 6575/2015, SLP(C) NO. 6631/2015, SLP(C) NO.  

4600/2015, SLP(C) NO. 5007/2015, SLP(C) NO. 6728/2015, SLP(C) NO. 6754-

6755/2015, SLP(C) NO. 6823/2015, SLP(C) NO. 6907/2015, SLP(C) NO. 6909-

6910/2015, SLP(C) NO. 6939/2015, SLP(C) NO. 6956/2015, SLP(C) NO.  

4386/2015, SLP(C) NO. 7319/2015, SLP(C) NO. 7957-7958/2015, SLP(C) NO.  

8089/2015, SLP(C) NO. 2483/2015, SLP(C) NO. 8248/2015, SLP(C) NO.  

8325/2015, SLP(C) NO. 8350-8351/2015, SLP(C) NO. 8527/2015, SLP(C) NO.  

9585/2015, SLP(C) NO. 11830/2015, SLP(C) NO. 8798/2015, SLP(C) NO.  

9584/2015, SLP(C) NO. 5311-5329/2015, SLP(C) NO. 11204-11205/2015, SLP(C)

Page 10

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NO. 9164/2015, SLP(C) NO. 9167/2015, SLP(C) NO. 9176/2015, SLP(C) NO.  

9181/2015, SLP(C) NO. 11832/2015, SLP(C) NO. 9188/2015, SLP(C) NO.  

9348/2015, SLP(C) NO. 5908/2015, SLP(C) NO. 9386/2015, SLP(C) NO.  

9484/2015, SLP(C) NO. 9582/2015, SLP(C) NO. 7874/2015, SLP(C) NO. 11080-

11086/2015, SLP(C) NO. 12839/2015, SLP(C) NO. 11156/2015, SLP(C) NO.  

11170/2015, SLP(C) NO. 12844/2015, SLP(C) NO. 8162/2015, SLP(C) NO.  

11484/2015, SLP(C) NO. 12847/2015, SLP(C) NO. 11582/2015, SLP(C) NO.  

11592/2015, SLP(C) NO. 13200/2015, SLP(C) NO. 13201/2015, SLP(C) NO. 4219-

4227/2015, SLP(C) NO. 2966-2999/2015, SLP(C) NO. 11888/2015, SLP(C) NO.  

11203/2015, SLP(C) NO. 14828/2015, SLP(C) NO. 14854/2015, SLP(C) NO.  

15856/2015, SLP(C) NO. 15857/2015, SLP(C) NO. 15858/2015, SLP(C) NO.  

11458-11465/2015, SLP(C) NO. 18213/2015, SLP(C) NO. 18333/2015, SLP(C)  

NO. 16312/2015, SLP(C) NO. 18334/2015, SLP(C) NO. 18335/2015, SLP(C) NO.  

15855/2015, SLP(C) NO. 18338/2015, SLP(C) NO. 18184/2015, SLP(C) NO.  

18179/2015, C.A. NO. 1956/2003, SLP(C) NO. 8775-8777/2015, SLP(C) NO.  

5303/2015, SLP(C) NO. 16853/2015, SLP(C) NO. 21720/2015, SLP(C) NO. 23673-

23674/2015, SLP(C) NO. 23764/2015, SLP(C) NO. 23765/2015, SLP(C) NO.  

15353/2015, SLP(C) NO. 22349/2015, SLP(C) NO. 21718/2015, SLP(C) NO.  

24547/2015, SLP(C) NO. 23757/2015, C.A. NO. 8240/2015, SLP(C) NO.  

26751/2015, SLP(C) NO. 9117/2015, SLP(C) NO. 2214/2015, SLP(C) NO.  

2531/2015, SLP(C) NO. 2289/2015, SLP(C) NO. 2530/2015, SLP(C) NO.  

2392/2015, SLP(C) NO. 2499/2015, SLP(C) NO. 2502/2015, SLP(C) NO. 2538-

2543/2015, SLP(C) NO. 2426/2015, SLP(C) NO. 2358/2015, SLP(C) NO.  

2401/2015, SLP(C) NO. 2389/2015, SLP(C) NO. 2485/2015, SLP(C) NO.  

2495/2015, SLP(C) NO. 3163-3164/2015, SLP(C) NO. 3666/2015, SLP(C) NO.  

3679/2015, SLP(C) NO. 3723/2015, SLP(C) NO. 3321/2015, SLP(C) NO. 4198-

4199/2015, SLP(C) NO. 3325/2015, SLP(C) NO. 3466/2015, SLP(C) NO.  

3635/2015, SLP(C) NO. 3318/2015, SLP(C) NO. 30396/2015, C.A. NO. 110/2016,  

C.A. NO. 109/2016, C.A. NO. 583/2016, SLP(C) NO. 4945/2016, SLP(C) NO.  

8253/2016, SLP(C) NO. 8204/2008, C.A. NO. 3925/2016, SLP(C) NO. 2057/2016,  

SLP(C) NO. 86/2016, SLP(C) NO. 72/2016, C.A. NO. 5534/2016, C.A. NO.  

5536/2016, C.A. NO. 5137/2016, SLP(C) NO. 33923/2012, C.A. NO. 5537/2016,  

SLP(C) NO. 16116/2009, SLP(C) NO. 30594/2009, SLP(C) NO. 2636/2015, SLP(C)  

NO. 2680/2015, SLP(C) NO. 2952/2015, SLP(C) NO. 2641/2015, SLP(C) NO.  

2588/2015, SLP(C) NO. 2928/2015, SLP(C) NO. 2737/2015, SLP(C) NO.  

2682/2015, SLP(C) NO. 8197-8198/2015, SLP(C) NO. 4197/2015, C.A. NO.  

5538/2016, C.A. NO. 5533/2016, SLP(C) NO. 14539-14541/2016, SLP(C) NO.  

16820/2016, C.A. NO. 4642-4643/2016  

ORDER  

By majority the Court answers the reference in the following terms:

Page 11

11  

1. Taxes simpliciter are not within the contemplation of Part XIII of the  

Constitution of India. The word ‘Free’ used in Article 301 does not mean  

“free from taxation”.  

2. Only such taxes as are discriminatory in nature are prohibited by  

Article 304(a).  It follows that levy of a non-discriminatory tax would not  

constitute an infraction of Article 301.  

3. Clauses (a) and (b) of Article 304 have to be read disjunctively.  

4. A levy that violates 304(a) cannot be saved even if the procedure  

under Article 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 the 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. Article 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 Article 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 Article 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.

Page 12

12  

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 be determined in  

appropriate proceedings.  

.……………..………….…..…CJI.        (T.S. THAKUR)  

…………………………….…..…J.          (A.K. SIKRI)  

…………………………….…..…J.          (S.A. BOBDE)  

…………………………….…..…J.          (SHIVA KIRTI SINGH)  

…………………………….…..…J.          (N.V. RAMANA)  

…………………………….…..…J.          (R. BANUMATHI)  

…………………………….…..…J.          (A.M. KHANWILKAR)  

New Delhi;  

November 11, 2016  

Page 13

13  

     R E P O R T A B L E    

IN THE SUPREME COURT OF INDIA  

CIVIL APPELLATE JURISDICTION  

CIVIL APPEAL NO.3453 OF 2002    

Jindal Stainless Ltd. & Anr.     …Appellant(s)         

Versus  State of Haryana & Ors.    …Respondent(s)  

WITH  

C.A. NO. 6383-6421/1997, C.A. NO. 6422-6435/1997, C.A. NO. 6436/1997,  

C.A. NO. 6437-6440/1997 , C.A. NO. 3381-3400/1998, C.A. NO.  

4651/1998, C.A. NO. 918/1999, C.A. NO. 2769/2000, C.A. NO. 4471/2000,  

C.A. NO. 3314/2001, C.A. NO. 3454/2002, C.A. NO. 3455/2002, C.A. NO.  

3456-3459/2002, C.A. NO. 3460/2002, C.A. NO. 3461/2002, C.A. NO.  

3462-3463/2002, C.A. NO. 3464/2002, C.A. NO. 3465/2002, C.A. NO.  

3466/2002, C.A. NO. 3467/2002, C.A. NO. 3468/2002, C.A. NO.  

3469/2002, C.A. NO. 3470/2002, C.A. NO. 3471/2002, C.A. NO.  

4008/2002, C.A. NO. 5385/2002, C.A. NO. 5740/2002, C.A. NO.  

5858/2002, W.P.(C) NO. 512/2003, W.P.(C) NO. 574/2003, C.A. NO.  

2608/2003, C.A. NO. 2633/2003, C.A. NO. 2637/2003, C.A. NO.  

2638/2003, C.A. NO. 3720-3722/2003, C.A. NO. 6331/2003, C.A. NO.  

8241/2003, C.A. NO. 8242/2003, C.A. NO. 8243/2003, C.A. NO.  

8244/2003, C.A. NO. 8245/2003, C.A. NO. 8246/2003, C.A. NO.  

8247/2003, C.A. NO. 8248/2003, C.A. NO. 8249/2003, C.A. NO.  

8250/2003, C.A. NO. 8251/2003, C.A. NO. 8252/2003, T.C.(C) NO.  

13/2004, W.P.(C) NO. 66/2004, W.P.(C) NO. 221/2004, C.A. NO. 997-

998/2004, C.A. NO. 3144/2004, C.A. NO. 3145/2004, C.A. NO. 3146/2004,  

C.A. NO. 4953/2004, C.A. NO. 4954/2004, C.A. NO. 5139/2004, C.A. NO.  

5141/2004, C.A. NO. 5142/2004, C.A. NO. 5143/2004, C.A. NO.  

5144/2004, C.A. NO. 5145/2004, C.A. NO. 5147/2004, C.A. NO.  

5148/2004, C.A. NO. 5149/2004, C.A. NO. 5150/2004, C.A. NO.  

5151/2004, C.A. NO. 5152/2004, C.A. NO. 5153/2004, C.A. NO.  

5154/2004, C.A. NO. 5155/2004, C.A. NO. 5156/2004, C.A. NO.  

5157/2004, C.A. NO. 5158/2004, C.A. NO. 5159/2004, C.A. NO.  

5160/2004, C.A. NO. 5162/2004, C.A. NO. 5163/2004, C.A. NO.

Page 14

14  

5164/2004, C.A. NO. 5165/2004, C.A. NO. 5166/2004, C.A. NO.  

5167/2004, C.A. NO. 5168/2004, C.A. NO. 5169/2004, C.A. NO.  

5170/2004, C.A. NO. 7658/2004, SLP(C) NO. 9479/2004, SLP(C) NO.  

9496/2004, SLP(C) NO. 9569/2004, SLP(C) NO. 9832/2004, SLP(C) NO.  

9883/2004, SLP(C) NO. 9885/2004, SLP(C) NO. 9891/2004, SLP(C) NO.  

9893/2004, SLP(C) NO. 9898/2004, SLP(C) NO. 9899/2004, SLP(C) NO.  

9901/2004, SLP(C) NO. 9904/2004, SLP(C) NO. 9910/2004, SLP(C) NO.  

9911/2004, SLP(C) NO. 9912/2004, SLP(C) NO. 9950/2004, SLP(C) NO.  

9964/2004, SLP(C) NO. 9976/2004, SLP(C) NO. 9989/2004, SLP(C) NO.  

9991/2004, SLP(C) NO. 9993/2004, SLP(C) NO. 9998/2004, SLP(C) NO.  

9999/2004, SLP(C) NO. 10003/2004, SLP(C) NO. 10007/2004, SLP(C) NO.  

10129/2004, SLP(C) NO. 10133/2004, SLP(CCJI) NO. 10134/2004, SLP(C)  

NO. 10153/2004, SLP(C) NO. 10154/2004, SLP(C) NO. 10156/2004, SLP(C)  

NO. 10161/2004, SLP(C) NO. 10164/2004, SLP(C) NO. 10167/2004, SLP(C)  

NO. 10206/2004, SLP(C) NO. 10207/2004, SLP(C) NO. 10232/2004, SLP(C)  

NO. 10366/2004, SLP(C) NO. 10381/2004, SLP(C) NO. 10382/2004, SLP(C)  

NO. 10384/2004, SLP(C) NO. 10385/2004, SLP(C) NO. 10391/2004, SLP(C)  

NO. 10402/2004, SLP(C) NO. 10403/2004, SLP(C) NO. 10404/2004, SLP(C)  

NO. 10407/2004, SLP(C) NO. 10417/2004, SLP(C) NO. 10449/2004, SLP(C)  

NO. 10493/2004, SLP(C) NO. 10495/2004, SLP(C) NO. 10497/2004, SLP(C)  

NO. 10501/2004, SLP(C) NO. 10505/2004, SLP(C) NO. 10539/2004, SLP(C)  

NO. 10557/2004, SLP(C) NO. 10563/2004, SLP(C) NO. 10566/2004, SLP(C)  

NO. 10567/2004, SLP(C) NO. 10568/2004, SLP(C) NO. 10569/2004, SLP(C)  

NO. 10571/2004, SLP(C) NO. 10704/2004, SLP(C) NO. 10706/2004, SLP(C)  

NO. 10708/2004, SLP(C) NO. 10736/2004, SLP(C) NO. 10906/2004, SLP(C)  

NO. 10907/2004, SLP(C) NO. 10908/2004, SLP(C) NO. 10909/2004, SLP(C)  

NO. 10910/2004, SLP(C) NO. 10923/2004, SLP(C) NO. 10929/2004, SLP(C)  

NO. 10977/2004, SLP(C) NO. 11012/2004, SLP(C) NO. 11266/2004, SLP(C)  

NO. 11271/2004, SLP(C) NO. 11274/2004, SLP(C) NO. 11281/2004, SLP(C)  

NO. 11320/2004, SLP(C) NO. 11326/2004, SLP(C) NO. 11328/2004, SLP(C)  

NO. 11329/2004, SLP(C) NO. 11370/2004, SLP(C) NO. 14380/2005, SLP(C)  

NO. 1101/2007, SLP(C) NO. 1288/2007, SLP(C) NO. 6914/2007, SLP(C) NO.  

9054/2007, SLP(C) NO. 10694/2007, SLP(C) NO. 12959/2007, SLP(C) NO.  

13806/2007, SLP(C) NO. 14070/2007, SLP(C) NO. 14819/2007, SLP(C) NO.  

14820/2007, SLP(C) NO. 14821/2007, SLP(C) NO. 14823/2007, SLP(C) NO.  

14824/2007, SLP(C) NO. 14826/2007, SLP(C) NO. 14828/2007, SLP(C) NO.  

14829/2007, SLP(C) NO. 14830/2007, SLP(C) NO. 14832/2007, SLP(C) NO.  

14833/2007, SLP(C) NO. 14835/2007, SLP(C) NO. 14837/2007, SLP(C) NO.  

14838/2007, SLP(C) NO. 14839/2007, SLP(C) NO. 14841/2007, SLP(C) NO.  

14842/2007, SLP(C) NO. 14845/2007, SLP(C) NO. 14846/2007, SLP(C) NO.

Page 15

15  

14847/2007, SLP(C) NO. 15082-15085/2007, SLP(C) NO. 15807/2007,  

SLP(C) NO. 16351/2007, SLP(C) NO. 17589/2007, SLP(C) NO. 17590/2007,  

SLP(C) NO. 17905/2007, SLP(C) NO. 17906/2007, SLP(C) NO. 17907/2007,  

SLP(C) NO. 17908/2007, SLP(C) NO. 17909/2007, SLP(C) NO. 17910/2007,  

SLP(C) NO. 17911/2007, SLP(C) NO. 17913/2007, SLP(C) NO. 17914/2007,  

SLP(C) NO. 17915/2007, SLP(C) NO. 17916/2007, SLP(C) NO. 17917/2007,  

SLP(C) NO. 17918/2007, SLP(C) NO. 17919/2007, SLP(C) NO. 17920/2007,  

SLP(C) NO. 17921/2007, SLP(C) NO. 17922/2007, SLP(C) NO. 17923/2007,  

SLP(C) NO. 17924/2007, SLP(C) NO. 17925/2007, SLP(C) NO. 17926/2007,  

SLP(C) NO. 17929/2007, SLP(C) NO. 17930/2007, SLP(C) NO. 17933/2007,  

SLP(C) NO. 17934/2007, SLP(C) NO. 17936/2007, SLP(C) NO. 17937/2007,  

SLP(C) NO. 17938/2007, SLP(C) NO. 17939/2007, SLP(C) NO. 17941/2007,  

SLP(C) NO. 17942/2007, SLP(C) NO. 17943/2007, SLP(C) NO. 17944/2007,  

SLP(C) NO. 17957/2007, SLP(C) NO. 17959/2007, SLP(C) NO. 17960/2007,  

SLP(C) NO. 17961/2007, SLP(C) NO. 17962/2007, SLP(C) NO. 17963/2007,  

SLP(C) NO. 17964/2007, SLP(C) NO. 17965/2007, SLP(C) NO. 17972/2007,  

SLP(C) NO. 17973/2007, SLP(C) NO. 17974/2007, SLP(C) NO. 17975/2007,  

SLP(C) NO. 17976/2007, SLP(C) NO. 17977/2007, SLP(C) NO. 17978/2007,  

SLP(C) NO. 17979/2007, SLP(C) NO. 17980/2007, SLP(C) NO. 17981/2007,  

SLP(C) NO. 17983/2007, SLP(C) NO. 17984/2007, SLP(C) NO. 18036/2007,  

SLP(C) NO. 18037/2007, SLP(C) NO. 18038/2007, SLP(C) NO. 18039/2007,  

SLP(C) NO. 18040/2007, SLP(C) NO. 18041/2007, SLP(C) NO. 18042/2007,  

SLP(C) NO. 18043/2007, SLP(C) NO. 18044/2007, SLP(C) NO. 18045/2007,  

SLP(C) NO. 18046/2007, SLP(C) NO. 18047/2007, SLP(C) NO. 18048/2007,  

SLP(C) NO. 18049/2007, SLP(C) NO. 18050/2007, SLP(C) NO. 18051/2007,  

SLP(C) NO. 18053/2007, SLP(C) NO. 18054/2007, SLP(C) NO. 18055/2007,  

SLP(C) NO. 18056/2007, SLP(C) NO. 18057/2007, SLP(C) NO. 18058/2007,  

SLP(C) NO. 18059/2007, SLP(C) NO. 18061/2007, SLP(C) NO. 18062/2007,  

SLP(C) NO. 18063/2007, SLP(C) NO. 18064/2007, SLP(C) NO. 18065/2007,  

SLP(C) NO. 18066/2007, SLP(C) NO. 18067/2007, SLP(C) NO. 18068/2007,  

SLP(C) NO. 18069/2007, SLP(C) NO. 18073/2007, SLP(C) NO. 18074/2007,  

SLP(C) NO. 18075/2007, SLP(C) NO. 18076/2007, SLP(C) NO. 18077/2007,  

SLP(C) NO. 18078/2007, SLP(C) NO. 18079/2007, SLP(C) NO. 18080/2007,  

SLP(C) NO. 18081/2007, SLP(C) NO. 18082/2007, SLP(C) NO. 18083/2007,  

SLP(C) NO. 18084/2007, SLP(C) NO. 18085/2007, SLP(C) NO. 18086/2007,  

SLP(C) NO. 18087/2007, SLP(C) NO. 18088/2007, SLP(C) NO. 18089/2007,  

SLP(C) NO. 18090/2007, SLP(C) NO. 18091/2007, SLP(C) NO. 18092/2007,  

SLP(C) NO. 19049/2007, SLP(C) NO. 19050/2007, SLP(C) NO. 19051/2007,  

SLP(C) NO. 19052/2007, SLP(C) NO. 19053/2007, SLP(C) NO. 19055/2007,  

SLP(C) NO. 19057/2007, SLP(C) NO. 19059/2007, SLP(C) NO. 19060/2007,

Page 16

16  

SLP(C) NO. 19062/2007, SLP(C) NO. 19064/2007, SLP(C) NO. 19066/2007,  

SLP(C) NO. 19068/2007, SLP(C) NO. 19070/2007, SLP(C) NO. 19071/2007,  

SLP(C) NO. 19072/2007, SLP(C) NO. 19073/2007, SLP(C) NO. 19074/2007,  

SLP(C) NO. 19076/2007, SLP(C) NO. 19077/2007, SLP(C) NO. 19094/2007,  

SLP(C) NO. 19095/2007, SLP(C) NO. 19096/2007, SLP(C) NO. 19099/2007,  

SLP(C) NO. 19100/2007, SLP(C) NO. 19101/2007, SLP(C) NO. 19102/2007,  

SLP(C) NO. 19103/2007, SLP(C) NO. 19104/2007, SLP(C) NO. 19105/2007,  

SLP(C) NO. 19106/2007, SLP(C) NO. 19107/2007, SLP(C) NO. 19108/2007,  

SLP(C) NO. 19110/2007, SLP(C) NO. 19111/2007, SLP(C) NO. 19113/2007,  

SLP(C) NO. 19114/2007, SLP(C) NO. 19505/2007, SLP(C) NO. 19506/2007,  

SLP(C) NO. 19507/2007, SLP(C) NO. 19508/2007, SLP(C) NO. 19510/2007,  

SLP(C) NO. 19511/2007, SLP(C) NO. 19512/2007, SLP(C) NO. 19513/2007,  

SLP(C) NO. 19514/2007, SLP(C) NO. 19515/2007, SLP(C) NO. 19516/2007,  

SLP(C) NO. 19518/2007, SLP(C) NO. 19521/2007, SLP(C) NO. 19522/2007,  

SLP(C) NO. 19523-19528/2007, SLP(C) NO. 19529/2007, SLP(C) NO.  

19530/2007, SLP(C) NO. 19531/2007, SLP(C) NO. 19543-19547/2007,  

SLP(C) NO. 20527/2007, SLP(C) NO. 20529/2007, SLP(C) NO. 20559/2007,  

SLP(C) NO. 21841/2007, SLP(C) NO. 21843/2007, SLP(C) NO. 21844/2007,  

SLP(C) NO. 21845/2007, SLP(C) NO. 21846/2007, SLP(C) NO. 21847/2007,  

SLP(C) NO. 21848/2007, SLP(C) NO. 21849/2007, SLP(C) NO. 21851/2007,  

SLP(C) NO. 21855/2007, SLP(C) NO. 21864/2007, SLP(C) NO. 21866/2007,  

SLP(C) NO. 21867/2007, SLP(C) NO. 21871-21904/2007, SLP(C) NO.  

21905/2007, SLP(C) NO. 21907/2007, SLP(C) NO. 21908/2007, SLP(C) NO.  

21909/2007, SLP(C) NO. 21910/2007, SLP(C) NO. 22947/2007, SLP(C) NO.  

22958/2007, SLP(C) NO. 24934-25066/2007, SLP(C) NO. 742/2008, SLP(C)  

NO. 746/2008, SLP(C) NO. 747/2008, SLP(C) NO. 3230/2008, SLP(C) NO.  

3231/2008, SLP(C) NO. 3233/2008, SLP(C) NO. 3234/2008, SLP(C) NO.  

3236/2008, SLP(C) NO. 3237/2008, SLP(C) NO. 3238-3262/2008, C.A. NO.  

4715/2008, C.A. NO. 5041-5042/2008, SLP(C) NO. 5407/2008, SLP(C) NO.  

5408/2008, SLP(C) NO. 6148-6152/2008, SLP(C) NO. 6831/2008, SLP(C)  

NO. 7914/2008, SLP(C) NO. 8053-8077/2008, SLP(C) NO. 8199/2008,  

SLP(C) NO. 9227/2008, SLP(C) NO. 12424-12425/2008, SLP(C) NO.  

13327/2008, SLP(C) NO. 13889/2008, SLP(C) NO. 14232-14252/2008,  

SLP(C) NO. 14454-14778/2008, SLP(C) NO. 14828/2008, SLP(C) NO.  

14829/2008, SLP(C) NO. 14875/2008, SLP(C) NO. 15047/2008, SLP(C) NO.  

15078/2008, SLP(C) NO. 15090/2008, SLP(C) NO. 15161/2008, SLP(C) NO.  

15164/2008, SLP(C) NO. 15179/2008, SLP(C) NO. 15253/2008, SLP(C) NO.  

15273/2008, SLP(C) NO. 15274/2008, SLP(C) NO. 15286-15287/2008,  

SLP(C) NO. 15288-15289/2008, S.L.P.(C)... /2008 CC NO. 15314 , SLP(C)  

NO. 15324/2008, SLP(C) NO. 15325/2008, SLP(C) NO. 15326/2008, SLP(C)

Page 17

17  

NO. 15327/2008, SLP(C) NO. 15328/2008, SLP(C) NO. 15329/2008, SLP(C)  

NO. 15330/2008, SLP(C) NO. 15331/2008, SLP(C) NO. 15335/2008, SLP(C)  

NO. 15337/2008, SLP(C) NO. 15356/2008, SLP(C) NO. 15357/2008, SLP(C)  

NO. 15369/2008, SLP(C) NO. 15405/2008, SLP(C) NO. 15491/2008, SLP(C)  

NO. 15492/2008, SLP(C) NO. 15493/2008, SLP(C) NO. 15495/2008, SLP(C)  

NO. 15496/2008, SLP(C) NO. 15498/2008, SLP(C) NO. 15540/2008, SLP(C)  

NO. 15551/2008, SLP(C) NO. 15579/2008, SLP(C) NO. 15605/2008, SLP(C)  

NO. 15618/2008, SLP(C) NO. 15623/2008, SLP(C) NO. 15628/2008, SLP(C)  

NO. 15629/2008, SLP(C) NO. 15630/2008, SLP(C) NO. 15631/2008, SLP(C)  

NO. 15632/2008, SLP(C) NO. 15633/2008, SLP(C) NO. 15636/2008, SLP(C)  

NO. 15643/2008, SLP(C) NO. 15647/2008, SLP(C) NO. 15652/2008, SLP(C)  

NO. 15653/2008, SLP(C) NO. 15655/2008, SLP(C) NO. 15656/2008, SLP(C)  

NO. 15657/2008, SLP(C) NO. 15659/2008, SLP(C) NO. 15660/2008, SLP(C)  

NO. 15666/2008, SLP(C) NO. 15684/2008, SLP(C) NO. 15700/2008, SLP(C)  

NO. 15711/2008, SLP(C) NO. 15819/2008, SLP(C) NO. 15845/2008, SLP(C)  

NO. 15934/2008, SLP(C) NO. 16664/2008, SLP(C) NO. 16667/2008, SLP(C)  

NO. 16689/2008, SLP(C) NO. 16733/2008, SLP(C) NO. 16754/2008, SLP(C)  

NO. 16832/2008, SLP(C) NO. 16837/2008, SLP(C) NO. 16841/2008, SLP(C)  

NO. 16865/2008, SLP(C) NO. 16885/2008, SLP(C) NO. 16926/2008, SLP(C)  

NO. 16930/2008, SLP(C) NO. 17187/2008, SLP(C) NO. 17192/2008, SLP(C)  

NO. 17193/2008, SLP(C) NO. 17203/2008, SLP(C) NO. 17204/2008, SLP(C)  

NO. 17233/2008, SLP(C) NO. 17267/2008, SLP(C) NO. 17269/2008, SLP(C)  

NO. 17271/2008, SLP(C) NO. 17272/2008, SLP(C) NO. 17274/2008, SLP(C)  

NO. 17276/2008, SLP(C) NO. 17277/2008, SLP(C) NO. 17279/2008, SLP(C)  

NO. 17280/2008, SLP(C) NO. 17282/2008, SLP(C) NO. 17367/2008, SLP(C)  

NO. 17368/2008, SLP(C) NO. 17369/2008, SLP(C) NO. 17370/2008, SLP(C)  

NO. 17372/2008, SLP(C) NO. 17373/2008, SLP(C) NO. 17374/2008, SLP(C)  

NO. 17375/2008, SLP(C) NO. 17376/2008, SLP(C) NO. 17377/2008, SLP(C)  

NO. 17408/2008, SLP(C) NO. 17865/2008, SLP(C) NO. 17892/2008, SLP(C)  

NO. 18001/2008, SLP(C) NO. 18030/2008, SLP(C) NO. 18034/2008, SLP(C)  

NO. 18035/2008, SLP(C) NO. 18040/2008, SLP(C) NO. 18066-18067/2008,  

SLP(C) NO. 18344/2008, SLP(C) NO. 18346/2008, SLP(C) NO. 18354/2008,  

SLP(C) NO. 18360-18364/2008, SLP(C) NO. 18379/2008, SLP(C) NO.  

18405/2008, SLP(C) NO. 18532/2008, SLP(C) NO. 18533/2008, SLP(C) NO.  

18582/2008, SLP(C) NO. 18684-18714/2008, SLP(C) NO. 18850/2008,  

SLP(C) NO. 18857/2008, SLP(C) NO. 18865/2008, SLP(C) NO. 18870/2008,  

SLP(C) NO. 18871/2008, SLP(C) NO. 19019/2008, SLP(C) NO. 19026/2008,  

SLP(C) NO. 19030/2008, SLP(C) NO. 19049/2008, SLP(C) NO. 19120/2008,  

SLP(C) NO. 19141/2008, SLP(C) NO. 19372/2008, SLP(C) NO. 19421/2008,  

SLP(C) NO. 19425/2008, SLP(C) NO. 19460/2008, SLP(C) NO. 19470/2008,

Page 18

18  

SLP(C) NO. 19714/2008, SLP(C) NO. 19722/2008, SLP(C) NO. 19731/2008,  

SLP(C) NO. 19737/2008, SLP(C) NO. 19802/2008, SLP(C) NO. 19847/2008,  

SLP(C) NO. 19849/2008, SLP(C) NO. 19867/2008, SLP(C) NO. 19873/2008,  

SLP(C) NO. 19876/2008, SLP(C) NO. 19986/2008, SLP(C) NO. 20068/2008,  

SLP(C) NO. 20089/2008, SLP(C) NO. 20165/2008, SLP(C) NO. 20766/2008,  

SLP(C) NO. 20795/2008, SLP(C) NO. 21107/2008, SLP(C) NO. 21117-

21125/2008, SLP(C) NO. 21127/2008, SLP(C) NO. 21506/2008, SLP(C) NO.  

21509/2008, SLP(C) NO. 21510/2008, SLP(C) NO. 21819/2008, SLP(C) NO.  

22081/2008, SLP(C) NO. 22083/2008, SLP(C) NO. 22084/2008, SLP(C) NO.  

22086/2008, SLP(C) NO. 22100-22101/2008, SLP(C) NO. 22195/2008,  

SLP(C) NO. 22707/2008, SLP(C) NO. 22735/2008, SLP(C) NO. 22931/2008,  

SLP(C) NO. 23075/2008, SLP(C) NO. 23077/2008, SLP(C) NO. 23270/2008,  

SLP(C) NO. 23277/2008, SLP(C) NO. 23383/2008, SLP(C) NO. 23609/2008,  

SLP(C) NO. 23623/2008, SLP(C) NO. 25378/2008, SLP(C) NO. 25498/2008,  

SLP(C) NO. 26377/2008, SLP(C) NO. 26543/2008, SLP(C) NO. 26571/2008,  

SLP(C) NO. 26572/2008, SLP(C) NO. 26593/2008, SLP(C) NO. 26750/2008,  

SLP(C) NO. 26813/2008, SLP(C) NO. 26972/2008, SLP(C) NO. 27442-

27444/2008, SLP(C) NO. 27606/2008, SLP(C) NO. 27927/2008, SLP(C) NO.  

29194/2008, SLP(C) NO. 29196/2008, SLP(C) NO. 29561-29570/2008,  

SLP(C) NO. 29763/2008, SLP(C) NO. 29764/2008, SLP(C) NO. 30276/2008,  

SLP(C) NO. 30533/2008, SLP(C) NO. 30534-30540/2008, SLP(C) NO.  

30542/2008, S.L.P.(C)... /2009 CC NO. 2867, SLP(C) NO. 3276/2009, SLP(C)  

NO. 4720/2009, S.L.P.(C)... /2009 CC NO. 5143, S.L.P.(C)... /2009 CC NO.  

5311, SLP(C) NO. 5371/2009, SLP(C) NO. 5376/2009, SLP(C) NO.  

5381/2009, SLP(C) NO. 5383/2009, SLP(C) NO. 5384/2009, SLP(C) NO.  

5393/2009, SLP(C) NO. 5395/2009, SLP(C) NO. 5396/2009, SLP(C) NO.  

5399/2009, SLP(C) NO. 5401/2009, SLP(C) NO. 5403/2009, SLP(C) NO.  

5405/2009, SLP(C) NO. 5406/2009, SLP(C) NO. 5408/2009, SLP(C) NO.  

5409/2009, SLP(C) NO. 5410/2009, SLP(C) NO. 5411/2009, SLP(C) NO.  

5412/2009, SLP(C) NO. 5413/2009, SLP(C) NO. 5414/2009, SLP(C) NO.  

5420/2009, SLP(C) NO. 5421/2009, SLP(C) NO. 5422/2009, SLP(C) NO.  

5424/2009, SLP(C) NO. 5426/2009, SLP(C) NO. 5493-5494/2009, SLP(C)  

NO. 5495/2009, S.L.P.(C)... /2009 CC NO. 5803, SLP(C) NO. 5883/2009,  

SLP(C) NO. 6254/2009, SLP(C) NO. 6669/2009, SLP(C) NO. 6670/2009,  

SLP(C) NO. 6675/2009, SLP(C) NO. 6676/2009, SLP(C) NO. 6682/2009,  

SLP(C) NO. 6683/2009, SLP(C) NO. 6684/2009, SLP(C) NO. 6685/2009,  

SLP(C) NO. 6686/2009, SLP(C) NO. 6687/2009, SLP(C) NO. 6688/2009,  

SLP(C) NO. 6689/2009, SLP(C) NO. 6690/2009, SLP(C) NO. 6692/2009,  

SLP(C) NO. 6693/2009, SLP(C) NO. 6694/2009, SLP(C) NO. 6696/2009,  

SLP(C) NO. 6698/2009, SLP(C) NO. 6699/2009, SLP(C) NO. 6700/2009,

Page 19

19  

SLP(C) NO. 6701/2009, SLP(C) NO. 6702/2009, SLP(C) NO. 6703/2009,  

SLP(C) NO. 6704/2009, SLP(C) NO. 6705/2009, SLP(C) NO. 6708/2009,  

SLP(C) NO. 6709/2009, SLP(C) NO. 6710/2009, SLP(C) NO. 6711/2009,  

SLP(C) NO. 6712/2009, SLP(C) NO. 6713/2009, SLP(C) NO. 6714-

6715/2009, SLP(C) NO. 6953/2009, SLP(C) NO. 7345/2009, SLP(C) NO.  

8244/2009, SLP(C) NO. 9548/2009, SLP(C) NO. 9699/2009, SLP(C) NO.  

10040/2009, SLP(C) NO. 10041/2009, SLP(C) NO. 10042/2009, SLP(C) NO.  

10045/2009, SLP(C) NO. 10047/2009, SLP(C) NO. 10048/2009, SLP(C) NO.  

10049/2009, SLP(C) NO. 10050/2009, SLP(C) NO. 10051/2009, SLP(C) NO.  

10053-10054/2009, SLP(C) NO. 10192/2009, SLP(C) NO. 10279/2009,  

SLP(C) NO. 10952/2009, SLP(C) NO. 10954-10956/2009, SLP(C) NO.  

11042/2009, SLP(C) NO. 11122/2009, SLP(C) NO. 11603-11611/2009,  

SLP(C) NO. 11646/2009, SLP(C) NO. 12948/2009, SLP(C) NO. 13270-

13274/2009, SLP(C) NO. 13483/2009, SLP(C) NO. 13496/2009, SLP(C) NO.  

13517/2009, SLP(C) NO. 13611-13612/2009, SLP(C) NO. 14429/2009,  

SLP(C) NO. 14484/2009, SLP(C) NO. 14488/2009, SLP(C) NO. 14623/2009,  

SLP(C) NO. 14856/2009, SLP(C) NO. 14949/2009, SLP(C) NO. 15723/2009,  

SLP(C) NO. 16253/2009, SLP(C) NO. 16757-16760/2009, SLP(C) NO.  

16784/2009, SLP(C) NO. 16789/2009, SLP(C) NO. 16888-16898/2009,  

SLP(C) NO. 17332-17333/2009, SLP(C) NO. 17394-17396/2009, SLP(C) NO.  

17488/2009, SLP(C) NO. 17490/2009, SLP(C) NO. 17491/2009, SLP(C) NO.  

17492-17498/2009, SLP(C) NO. 17722/2009, SLP(C) NO. 17731/2009,  

SLP(C) NO. 17744/2009, SLP(C) NO. 19695/2009, SLP(C) NO. 22293/2009,  

SLP(C) NO. 22295/2009, SLP(C) NO. 22302/2009, SLP(C) NO. 22303/2009,  

SLP(C) NO. 22304/2009, SLP(C) NO. 22306/2009, SLP(C) NO. 22307/2009,  

SLP(C) NO. 22308/2009, SLP(C) NO. 22309/2009, SLP(C) NO. 22310/2009,  

SLP(C) NO. 22311/2009, SLP(C) NO. 22312/2009, SLP(C) NO. 22313/2009,  

SLP(C) NO. 22316/2009, SLP(C) NO. 22317/2009, SLP(C) NO. 22318/2009,  

SLP(C) NO. 22320/2009, SLP(C) NO. 22321/2009, SLP(C) NO. 22322/2009,  

SLP(C) NO. 22323/2009, SLP(C) NO. 22324/2009, SLP(C) NO. 22325/2009,  

SLP(C) NO. 22408/2009, SLP(C) NO. 22425/2009, SLP(C) NO. 22428/2009,  

SLP(C) NO. 23990/2009, SLP(C) NO. 24149/2009, SLP(C) NO. 24430/2009,  

SLP(C) NO. 24822/2009, SLP(C) NO. 25157/2009, SLP(C) NO. 25390/2009,  

SLP(C) NO. 25399-25400/2009, SLP(C) NO. 25467/2009, SLP(C) NO.  

25470/2009, SLP(C) NO. 25474/2009, SLP(C) NO. 25753/2009, SLP(C) NO.  

25797/2009, SLP(C) NO. 26116/2009, SLP(C) NO. 26236/2009, SLP(C) NO.  

26509/2009, SLP(C) NO. 27883/2009, SLP(C) NO. 28509/2009, SLP(C) NO.  

28583/2009, SLP(C) NO. 28696/2009, SLP(C) NO. 28775/2009, SLP(C) NO.  

29597/2009, SLP(C) NO. 29868/2009, SLP(C) NO. 30383/2009, SLP(C) NO.  

30746-30845/2009, SLP(C) NO. 30847/2009, SLP(C) NO. 31410/2009,

Page 20

20  

SLP(C) NO. 31411/2009, SLP(C) NO. 31412/2009, SLP(C) NO. 33176/2009,  

SLP(C) NO. 33663-33665/2009, SLP(C) NO. 33672/2009, SLP(C) NO.  

34253/2009, SLP(C) NO. 34859/2009, SLP(C) NO. 35038/2009, SLP(C) NO.  

35585/2009, SLP(C) NO. 35587/2009, SLP(C) NO. 35740/2009, SLP(C) NO.  

35742/2009, SLP(C) NO. 35743-35746/2009, SLP(C) NO. 35747/2009,  

SLP(C) NO. 35749/2009, SLP(C) NO. 35750/2009, SLP(C) NO. 35751/2009,  

SLP(C) NO. 35752/2009, SLP(C) NO. 35753/2009, SLP(C) NO. 35754/2009,  

SLP(C) NO. 35755/2009, SLP(C) NO. 35756/2009, SLP(C) NO. 35757/2009,  

SLP(C) NO. 36193/2009, SLP(C) NO. 36196/2009, SLP(C) NO. 36219/2009,  

SLP(C) NO. 36271/2009, W.P.(C) NO. 11/2010, W.P.(C) NO. 42/2010,  

W.P.(C) NO. 43/2010, W.P.(C) NO. 44/2010, W.P.(C) NO. 46/2010, W.P.(C)  

NO. 48/2010, W.P.(C) NO. 63/2010, W.P.(C) NO. 71/2010, SLP(C) NO.  

104/2010, SLP(C) NO. 245/2010, SLP(C) NO. 247/2010, SLP(C) NO.  

248/2010, S.L.P.(C)... /2010 CC NO. 886, S.L.P.(C)... /2010 CC NO. 1082,  

SLP(C) NO. 1820/2010, SLP(C) NO. 1876/2010, SLP(C) NO. 2459/2010,  

SLP(C) NO. 3387/2010, SLP(C) NO. 4102/2010, SLP(C) NO. 4362/2010,  

SLP(C) NO. 4388/2010, SLP(C) NO. 4389/2010, SLP(C) NO. 4390/2010,  

SLP(C) NO. 4511/2010, SLP(C) NO. 4572/2010, SLP(C) NO. 4720/2010,  

SLP(C) NO. 5151/2010, SLP(C) NO. 5308/2010, SLP(C) NO. 5309/2010, C.A.  

NO. 5343-5344/2010, SLP(C) NO. 6037/2010, SLP(C) NO. 6723/2010,  

SLP(C) NO. 6762/2010, SLP(C) NO. 6763/2010, SLP(C) NO. 6765/2010,  

SLP(C) NO. 6770/2010, SLP(C) NO. 6811/2010, SLP(C) NO. 7356/2010,  

SLP(C) NO. 7426/2010, SLP(C) NO. 7776/2010, SLP(C) NO. 7929/2010,  

SLP(C) NO. 9022/2010, SLP(C) NO. 9077/2010, SLP(C) NO. 9702/2010,  

SLP(C) NO. 9723/2010, SLP(C) NO. 10361/2010, SLP(C) NO. 11419/2010,  

SLP(C) NO. 11423/2010, SLP(C) NO. 12690/2010, SLP(C) NO. 14845/2010,  

SLP(C) NO. 14886/2010, SLP(C) NO. 15015/2010, SLP(C) NO. 15903/2010,  

SLP(C) NO. 16694/2010, SLP(C) NO. 16720/2010, SLP(C) NO. 18318/2010,  

SLP(C) NO. 18834/2010, SLP(C) NO. 19194/2010, SLP(C) NO. 19199/2010,  

SLP(C) NO. 19217/2010, SLP(C) NO. 22327/2010, SLP(C) NO. 22520/2010,  

SLP(C) NO. 23836/2010, SLP(C) NO. 29578/2010, SLP(C) NO. 36486/2010,  

W.P.(C) NO. 31/2011, W.P.(C) NO. 497/2011, C.A. NO. 905/2011, SLP(C)  

NO. 1308/2011, C.A. NO. 2041/2011, C.A. NO. 2042/2011, S.L.P.(C)...  

/2011 CC NO. 2103, SLP(C) NO. 3433/2011, SLP(C) NO. 4730/2011, SLP(C)  

NO. 4743/2011, SLP(C) NO. 4747/2011, SLP(C) NO. 4750/2011, SLP(C) NO.  

5094/2011, SLP(C) NO. 5105/2011, SLP(C) NO. 5106/2011, SLP(C) NO.  

5110/2011, SLP(C) NO. 5112/2011, SLP(C) NO. 6351/2011, SLP(C) NO.  

6492/2011, SLP(C) NO. 8571/2011, SLP(C) NO. 9758/2011, C.A. NO. 9900-

9903/2011, SLP(C) NO. 12605/2011, SLP(C) NO. 13451/2011, SLP(C) NO.  

13525/2011, SLP(C) NO. 13526/2011, SLP(C) NO. 14144/2011, SLP(C) NO.

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14269/2011, SLP(C) NO. 14342/2011, SLP(C) NO. 18858/2011, SLP(C) NO.  

18859/2011, SLP(C) NO. 18862/2011, SLP(C) NO. 18863/2011, SLP(C) NO.  

18864/2011, SLP(C) NO. 33344/2011, W.P.(C) NO. 278/2012, W.P.(C) NO.  

290/2012, C.A. NO. 4210/2012, C.A. NO. 5860/2012, C.A. NO. 5861/2012,  

C.A. NO. 8275/2012, C.A. NO. 8278/2012, C.A. NO. 8280/2012, C.A. NO.  

8283/2012, C.A. NO. 8284/2012, C.A. NO. 8286/2012, C.A. NO.  

8290/2012, C.A. NO. 8292/2012, C.A. NO. 8294/2012, C.A. NO.  

8295/2012, C.A. NO. 8296/2012, C.A. NO. 8297/2012, C.A. NO.  

8298/2012, C.A. NO. 8299/2012, C.A. NO. 8300/2012, C.A. NO.  

8301/2012, C.A. NO. 8302/2012, C.A. NO. 8303/2012, C.A. NO.  

8304/2012, C.A. NO. 8305/2012, C.A. NO. 8306/2012, C.A. NO.  

8307/2012, C.A. NO. 8308/2012, C.A. NO. 8309/2012, C.A. NO.  

8311/2012, C.A. NO. 8312/2012, C.A. NO. 8313/2012, C.A. NO.  

8314/2012, C.A. NO. 8315/2012, C.A. NO. 8316/2012, SLP(C) NO.  

8333/2012, C.A. NO. 8734/2012, C.A. NO. 8735/2012, C.A. NO.  

8736/2012, C.A. NO. 8737/2012, C.A. NO. 8738/2012, C.A. NO.  

8739/2012, C.A. NO. 8740/2012, C.A. NO. 8741/2012, C.A. NO.  

8744/2012, C.A. NO. 8745/2012, C.A. NO. 8832/2012, C.A. NO.  

8833/2012, C.A. NO. 8834/2012, C.A. NO. 8836/2012, C.A. NO.  

8837/2012, C.A. NO. 8839/2012, C.A. NO. 8840/2012, C.A. NO.  

8841/2012, C.A. NO. 8842/2012, C.A. NO. 8843/2012, C.A. NO.  

8844/2012, C.A. NO. 8845/2012, C.A. NO. 8846/2012, C.A. NO.  

9148/2012, C.A. NO. 9149/2012, C.A. NO. 9150/2012, C.A. NO.  

9151/2012, C.A. NO. 9152/2012, C.A. NO. 9153/2012, C.A. NO.  

9154/2012, C.A. NO. 9155/2012, C.A. NO. 9156/2012, C.A. NO.  

9157/2012, C.A. NO. 9158/2012, C.A. NO. 9159/2012, C.A. NO.  

9160/2012, C.A. NO. 9161/2012, C.A. NO. 9162/2012, C.A. NO.  

9163/2012, C.A. NO. 9164/2012, C.A. NO. 9165/2012, C.A. NO.  

9166/2012, C.A. NO. 9167/2012, C.A. NO. 9168/2012, C.A. NO.  

9169/2012, C.A. NO. 9170/2012, C.A. NO. 9292/2012, C.A. NO.  

9293/2012, SLP(C) NO. 16535-16536/2012, SLP(C) NO. 16538/2012, SLP(C)  

NO. 18602/2012, SLP(C) NO. 28173/2012, SLP(C) NO. 33954/2012, SLP(C)  

NO. 36187/2012, SLP(C) NO. 37455/2012, SLP(C) NO. 37680/2012, SLP(C)  

NO. 37708-37709/2012, SLP(C) NO. 37712/2012, SLP(C) NO. 37728/2012,  

SLP(C) NO. 38304/2012, SLP(C) NO. 38919/2012, SLP(C) NO. 39998/2012,  

SLP(C) NO. 40146/2012, SLP(C) NO. 40147/2012, T.C.(C) NO. 149/2013,  

SLP(C) NO. 449/2013, C.A. NO. 539/2013, C.A. NO. 540/2013, C.A. NO.  

541/2013, C.A. NO. 542/2013, C.A. NO. 543/2013, C.A. NO. 544/2013,  

C.A. NO. 545/2013, C.A. NO. 546/2013, C.A. NO. 547/2013, C.A. NO.  

548/2013, SLP(C) NO. 1426/2013, SLP(C) NO. 8939/2013, SLP(C) NO.

Page 22

22  

9844/2013, SLP(C) NO. 10466/2013, SLP(C) NO. 10516/2013, SLP(C) NO.  

10879/2013, SLP(C) NO. 11060/2013, SLP(C) NO. 16744-16746/2013,  

SLP(C) NO. 16867/2013, SLP(C) NO. 16869/2013, SLP(C) NO. 16870/2013,  

SLP(C) NO. 27001-27002/2013, SLP(C) NO. 30986/2013, SLP(C) NO.  

32256/2013, SLP(C) NO. 33600/2013, C.A. NO. 1838/2014, C.A. NO.  

9216/2014, C.A. NO. 9214/2014, SLP(C) NO. 29119/2014, SLP(C) NO.  

208/2015, SLP(C) NO. 212/2015, SLP(C) NO. 315-317/2015, SLP(C) NO.  

320/2015, SLP(C) NO. 336/2015, SLP(C) NO. 352/2015, SLP(C) NO.  

376/2015, SLP(C) NO. 411-421/2015, SLP(C) NO. 380/2015, SLP(C) NO.  

437/2015, SLP(C) NO. 445/2015, SLP(C) NO. 457/2015, SLP(C) NO.  

508/2015, SLP(C) NO. 510/2015, SLP(C) NO. 567/2015, SLP(C) NO. 561-

562/2015, SLP(C) NO. 585/2015, SLP(C) NO. 621/2015, SLP(C) NO.  

638/2015, SLP(C) NO. 641/2015, SLP(C) NO. 661/2015, SLP(C) NO.  

664/2015, SLP(C) NO. 662/2015, SLP(C) NO. 669/2015, SLP(C) NO.  

668/2015, SLP(C) NO. 671/2015, SLP(C) NO. 672/2015, SLP(C) NO.  

675/2015, SLP(C) NO. 674/2015, SLP(C) NO. 683/2015, SLP(C) NO. 690-

691/2015, SLP(C) NO. 684-686/2015, SLP(C) NO. 693-694/2015, SLP(C)  

NO. 712/2015, SLP(C) NO. 1270/2015, SLP(C) NO. 1424/2015, SLP(C) NO.  

1596/2015, SLP(C) NO. 1631/2015, SLP(C) NO. 1714/2015, SLP(C) NO.  

1851-1852/2015, SLP(C) NO. 1943-2001/2015, SLP(C) NO. 2038/2015,  

SLP(C) NO. 2054/2015, SLP(C) NO. 2063-2065/2015, SLP(C) NO.  

2081/2015, SLP(C) NO. 91/2015, SLP(C) NO. 4557/2015, SLP(C) NO.  

4581/2015, SLP(C) NO. 4657/2015, SLP(C) NO. 5046/2015, SLP(C) NO.  

5107/2015, SLP(C) NO. 5131/2015, SLP(C) NO. 5143/2015, SLP(C) NO.  

5375/2015, SLP(C) NO. 5447/2015, SLP(C) NO. 5610/2015, SLP(C) NO.  

5966/2015, SLP(C) NO. 6086/2015, SLP(C) NO. 6143/2015, SLP(C) NO.  

6158/2015, SLP(C) NO. 6240-6243/2015, SLP(C) NO. 6565/2015, SLP(C)  

NO. 6575/2015, SLP(C) NO. 6631/2015, SLP(C) NO. 4600/2015, SLP(C) NO.  

5007/2015, SLP(C) NO. 6728/2015, SLP(C) NO. 6754-6755/2015, SLP(C)  

NO. 6823/2015, SLP(C) NO. 6907/2015, SLP(C) NO. 6909-6910/2015,  

SLP(C) NO. 6939/2015, SLP(C) NO. 6956/2015, SLP(C) NO. 4386/2015,  

SLP(C) NO. 7319/2015, SLP(C) NO. 7957-7958/2015, SLP(C) NO.  

8089/2015, SLP(C) NO. 2483/2015, SLP(C) NO. 8248/2015, SLP(C) NO.  

8325/2015, SLP(C) NO. 8350-8351/2015, SLP(C) NO. 8527/2015, SLP(C)  

NO. 9585/2015, SLP(C) NO. 11830/2015, SLP(C) NO. 8798/2015, SLP(C)  

NO. 9584/2015, SLP(C) NO. 5311-5329/2015, SLP(C) NO. 11204-

11205/2015, SLP(C) NO. 9164/2015, SLP(C) NO. 9167/2015, SLP(C) NO.  

9176/2015, SLP(C) NO. 9181/2015, SLP(C) NO. 11832/2015, SLP(C) NO.  

9188/2015, SLP(C) NO. 9348/2015, SLP(C) NO. 5908/2015, SLP(C) NO.  

9386/2015, SLP(C) NO. 9484/2015, SLP(C) NO. 9582/2015, SLP(C) NO.

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7874/2015, SLP(C) NO. 11080-11086/2015, SLP(C) NO. 12839/2015, SLP(C)  

NO. 11156/2015, SLP(C) NO. 11170/2015, SLP(C) NO. 12844/2015, SLP(C)  

NO. 8162/2015, SLP(C) NO. 11484/2015, SLP(C) NO. 12847/2015, SLP(C)  

NO. 11582/2015, SLP(C) NO. 11592/2015, SLP(C) NO. 13200/2015, SLP(C)  

NO. 13201/2015, SLP(C) NO. 4219-4227/2015, SLP(C) NO. 2966-

2999/2015, SLP(C) NO. 11888/2015, SLP(C) NO. 11203/2015, SLP(C) NO.  

14828/2015, SLP(C) NO. 14854/2015, SLP(C) NO. 15856/2015, SLP(C) NO.  

15857/2015, SLP(C) NO. 15858/2015, SLP(C) NO. 11458-11465/2015,  

SLP(C) NO. 18213/2015, SLP(C) NO. 18333/2015, SLP(C) NO. 16312/2015,  

SLP(C) NO. 18334/2015, SLP(C) NO. 18335/2015, SLP(C) NO. 15855/2015,  

SLP(C) NO. 18338/2015, SLP(C) NO. 18184/2015, SLP(C) NO. 18179/2015,  

C.A. NO. 1956/2003, SLP(C) NO. 8775-8777/2015, SLP(C) NO. 5303/2015,  

SLP(C) NO. 16853/2015, SLP(C) NO. 21720/2015, SLP(C) NO. 23673-

23674/2015, SLP(C) NO. 23764/2015, SLP(C) NO. 23765/2015, SLP(C) NO.  

15353/2015, SLP(C) NO. 22349/2015, SLP(C) NO. 21718/2015, SLP(C) NO.  

24547/2015, SLP(C) NO. 23757/2015, C.A. NO. 8240/2015, SLP(C) NO.  

26751/2015, SLP(C) NO. 9117/2015, SLP(C) NO. 2214/2015, SLP(C) NO.  

2531/2015, SLP(C) NO. 2289/2015, SLP(C) NO. 2530/2015, SLP(C) NO.  

2392/2015, SLP(C) NO. 2499/2015, SLP(C) NO. 2502/2015, SLP(C) NO.  

2538-2543/2015, SLP(C) NO. 2426/2015, SLP(C) NO. 2358/2015, SLP(C)  

NO. 2401/2015, SLP(C) NO. 2389/2015, SLP(C) NO. 2485/2015, SLP(C) NO.  

2495/2015, SLP(C) NO. 3163-3164/2015, SLP(C) NO. 3666/2015, SLP(C)  

NO. 3679/2015, SLP(C) NO. 3723/2015, SLP(C) NO. 3321/2015, SLP(C) NO.  

4198-4199/2015, SLP(C) NO. 3325/2015, SLP(C) NO. 3466/2015, SLP(C)  

NO. 3635/2015, SLP(C) NO. 3318/2015, SLP(C) NO. 30396/2015, C.A. NO.  

110/2016, C.A. NO. 109/2016, C.A. NO. 583/2016, SLP(C) NO. 4945/2016,  

SLP(C) NO. 8253/2016, SLP(C) NO. 8204/2008, C.A. NO. 3925/2016, SLP(C)  

NO. 2057/2016, SLP(C) NO. 86/2016, SLP(C) NO. 72/2016, C.A. NO.  

5534/2016, C.A. NO. 5536/2016, C.A. NO. 5137/2016, SLP(C) NO.  

33923/2012, C.A. NO. 5537/2016, SLP(C) NO. 16116/2009, SLP(C) NO.  

30594/2009, SLP(C) NO. 2636/2015, SLP(C) NO. 2680/2015, SLP(C) NO.  

2952/2015, SLP(C) NO. 2641/2015, SLP(C) NO. 2588/2015, SLP(C) NO.  

2928/2015, SLP(C) NO. 2737/2015, SLP(C) NO. 2682/2015, SLP(C) NO.  

8197-8198/2015, SLP(C) NO. 4197/2015, C.A. NO. 5538/2016, C.A. NO.  

5533/2016, SLP(C) NO. 14539-14541/2016, SLP(C) NO. 16820/2016, C.A.  

NO. 4642-4643/2016  

 J U D G M E N T  

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T.S. THAKUR, CJI (for himself and A.K. Sikri and A.M. Khanwilkar, JJ.)    1. These appeals bring to fore for our determination vexed questions touching  

the interpretation of Articles 301 to 307 comprising Part XIII of the Constitution which  

have been the subject matter of several Constitution Bench decisions of this Court,  

all but one, decided by majority.  The questions assume in a great measure  

considerable public importance not only because the same deal with the powers of  

the State legislatures to levy taxes but also because any pronouncement of this  

Court is bound to impact the federal character of our polity and the Centre-State  

relationship in legislative and fiscal matters.  There is no gainsaying that it is the  

importance of the questions that lies at the bottom of the present reference to a  

larger Bench made in the following circumstances.   

 2. In exercise of their legislative powers under Entry 52 of List II of the Seventh  

Schedule to the Constitution several States in the country, at least 14 of whom are  

parties to these proceedings, have enacted laws that provide for levy of a tax on  

the “entry of goods into local areas comprising the States”.  The constitutional   

validity of these levies was questioned in different High Courts by assesses/dealers  

aggrieved of the same, inter alia, on the ground that the same were violative of the  

constitutionally recognised right to free trade commerce and intercourse  

guaranteed under Article 301 of the Constitution of India.  The levies were also  

assailed on the ground that the same were discriminatory and, therefore, violative  

of Article 304(a) of the Constitution of India.  Absence of Presidential sanction in  

terms of Article 304(b) of the Constitution of India was also set-up as a ground of  

challenge to the levies imposed by the respective State legislatures. Writ Petition

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(Civil) No. 8700 of 2000 filed before the High Court of Punjab and Haryana was one  

such petition that assailed the constitutional validity of the Haryana Local  

Development Act, 2000.  Relying upon the decisions of this Court in Atiabari Tea Co.  

Ltd.  v.  State of Assam & Ors. (AIR 1961 SC 232); Automobile Transport (Rajasthan)  

Ltd. etc.  v. State of Rajasthan & Ors. (AIR 1962 SC 1406); M/s. Bhagatram Rajeev  

Kumar  v.  Commissioner of Sales Tax, M.P. and Ors. (1995 Supp [1] SCC 673 ); and  

State of Bihar and Ors.  v. Bihar Chamber of Commerce and Ors. (1996) 9 SCC 136, a  

Division Bench of the High Court of Punjab and Haryana dismissed the said petition  

and connected matters on the ground that the levy was compensatory in  

character hence outside the purview of Article 301.  

 3. The correctness of the said order was assailed before this Court in Jindal Stripe  

Ltd. and Anr.  v.  State of Haryana and Ors. (2003) 8 SCC 60. A two-Judge Bench of  

this Court, however, referred the matter to a larger Bench as it noticed an apparent  

conflict between the pronouncements of this Court in Atiabari (supra) and  

Automobile Transport (supra) cases on the one hand and Bhagatram (supra) and  

Bihar Chamber of Commerce (supra) on the other.  The Court after noticing the  

development of law on the subject observed:  

“25. To sum up: the pre-1995 decisions held that an  exaction to reimburse/recompense the State the cost of  an existing facility made available to the traders or the cost  of a specific facility planned to be provided to the traders  is compensatory tax and that it is implicit in such a levy that  it must, more or less, be commensurate with the cost of the  service or facility.  The decisions emphasized that the  imposition of tax must be with the definite purpose of  meeting the expenses on account of providing or adding  to the trading facilities either immediately or in future  provided the quantum of tax sought to be generated is

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based on a reasonable relation to the actual or projected  expenditure on the cost of the service or facility.  

 26. The decisions in Bhagatram and Bihar Chamber of  Commerce now say that even if the purpose of imposition  

of the tax is not merely to confer a special advantage on  the traders but to benefit the public in general including  the traders, that levy can still be considered to be  compensatory.  According to this view, an indirect or  incidental benefit to traders by reason of stepping up the  developmental activities in various local areas of the State  can be legitimately brought within the concept of  compensatory tax, the nexus between the tax known as  compensatory tax and the trading facilities not being  necessarily either direct or specific.  

  27. Since the concept of compensatory tax has been  judicially evolved as an exception to the provisions of  Article 301 and as the parameters of this judicial concept  are blurred, particularly by reason of the decisions in  Bhagatram and Bihar Chamber of Commerce we are of  

the view that the interpretation of Article 301 vis-à-vis  compensatory tax should be authoritatively laid down with  certitude by the Constitution Bench under Article 145(3).  

 28. In the circumstances let all these matters be placed  before the Hon’ble the Chief Justice for appropriate  directions.”      

4. The matters were, pursuant to the above, placed before a Constitution Bench  

of this Court in Jindal Stainless Ltd. (2) and Anr.  v.  State of Haryana and Ors., (2006)  

7 SCC 241 which resolved the conflict noticed in the reference order by holding that  

the working test propounded by seven Judges in Automobile Transport case (supra)  

was incompatible with the test of ‘some connection’  enunciated by the three  

Judge Bench in Bhagatram’s case (supra). The Court held that the test of ‘some  

connection’ as propounded in Bhagatram’s case (supra) had no application to the

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concept of compensatory tax.  The Court, accordingly, overruled the decisions  

rendered in Bhagatram and Bihar Chamber of Commerce cases and held that the  

doctrine of ‘direct and immediate effect’ of the impugned law on trade and  

commerce under Article 301 as propounded in Atiabari (supra) and the working test  

enunciated in Automobile Transport (supra) cases for deciding whether a tax is  

compensatory or not will continue to apply. The Court observed:  

  “53. We reiterate that the doctrine of “direct and  

immediate effect” of the impugned law on trade and  commerce under Article 301 as propounded in Atiabari  Tea Co. Ltd.  v.  State of Assam and the working test  enunciated in Automobile Transport (Rajasthan) Ltd.   v.    State of  Rajasthan  for deciding whether a tax is  compensatory or not vide para 19 of the Report (AIR), will  continue to apply and the test of “some connection”  indicated in para 8 (of SCC) of the judgment in Bhagatram  Rajeevkumar  v.  CST and followed in State of Bihar  v.   Bihar Chamber of Commerce is, in our opinion, not good  law.  Accordingly, the constitutional validity of various local  enactments which are the subject-matters of pending  appeals, special leave petitions and writ petitions will now  be listed for being disposed of in the light of this judgment.”  

5. The matters were, in terms of the above direction, listed before a two-Judge  

bench for hearing of the appeals in the light of the above pronouncement of the  

Constitution Bench.  The two-Judge Bench, however, noticed that although the  

basic issue in the appeals revolved around the concept of compensatory tax, the  

High Courts had not examined the same as they had considered themselves  

bound by the view taken in Bhagatram and Bihar Chamber of Commerce cases  

(supra).  The Court further found that in the absence of relevant data before the  

High Courts, the issue whether the levies were compensatory could not have been

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considered and accordingly referred the matter back to the High Courts to decide  

the said aspect.  The appeals were, in the meantime, adjourned to await the  

finding from the High Courts on the question whether the levies were indeed  

compensatory in nature having regard to the decisions of this Court in Atiabari and  

Automobile Transport cases (supra).  

 6. The matters were accordingly taken up by the High Courts, after the remand,  

who came to the conclusion that the impugned levies were neither compensatory  

in character nor was the procedure stipulated by Article 304(b) and the proviso to  

the same followed.  The levies were on that basis held to be in violation of Article  

301 being an impediment to free trade, commerce and intercourse and  

accordingly struck down.  The High Courts of Assam, Arunachal Pradesh,  

Jharkhand, Kerala and Tamil Nadu struck down the levies imposed by their  

respective States also on the ground that they were discriminatory in nature hence  

violative of Article 304(a) of the Constitution.  

 7. All these judgments and orders of the High Courts, passed after the remand,  

then, came to be challenged by the States concerned in the appeals filed against  

the same. These appeals initially came-up before a two-Judge Bench of this Court  

comprising Justice Arijit Pasayat and Justice S.H. Kapadia. Their Lordships referred  

the same to a Constitution Bench for an authoritative pronouncement on as many  

as ten questions formulated in the reference order (Jaiprakash Associates Limited   

v.  State of Madhya Pradesh and Ors. (2009) 7 SCC 339).  The Court noticed the  

arguments advanced on behalf of the assessees that entry taxes were, in essence  

and in the classical sense, in the nature of ‘a fee’ and not ‘a tax’.  It also noted the

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contention that all the cases on which the parties had placed reliance related to  

entry tax in the context of tax on vehicles in contradiction to taxes on entry of  

goods.  The Court was of the view that while the Constitution Bench in Jindal  

Stainless Ltd. (2) (supra) had dealt with some aspects of the matter, certain other  

important constitutional issues remained to be examined especially because a  

conceptually and contextually different approach may be required vis-à-vis  

“transport cases” on the one hand and cases of “entry tax on goods” on the other.   

The questions formulated by the Court for determination by the Constitution Bench  

were in the following words:  

“(1) Whether the State enactments relating to levy of entry  tax have to be tested with reference to both clauses (a)  and (b) of Article 304 of the Constitution for determining  their validity and whether clause (a) of Article 304 is  conjunctive with or separate from clause (b) of Article 304?  

  (2) Whether imposition of entry tax levied in terms of Entry  

52 List II of the Schedule VII is violative of Article 301 of the  Constitution?  If the answer is in the affirmative whether  such levy can be protected if entry tax is compensatory in  character and if the answer to the aforesaid question is in  the affirmative what are the yardsticks to be applied to  determine the compensatory character of the entry tax?  

  (3) Whether Entry 52 List II, Schedule VII of the Constitution  

like other taxing entries in the Schedule, merely provides a  taxing field for exercising the power to levy and whether  collection of entry tax which ordinarily would be credited  to the Consolidated Fund of the State being a revenue  received by the Government of the State and would have  to be appropriated in accordance with law and for the  purposes and in the manner provided in the Constitution as  per Article 266 and there is nothing express or explicit in  Entry 52 List II, Schedule VII which would compel the State  to spend the tax collected within the local area in which it

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was collected?     (4) Will the principles of quid pro quo relevant to a fee  

apply in the matter of taxes imposed under Part XIII?     (5) Whether the entry tax may be levied at all where the  

goods meant for being sold, used or consumed come to  rest (standstill) after the movement of the goods ceases in  the “local area”?  

  (6) Whether the entry tax can be termed a tax on the  

movement of goods when there is no bar to the entry of  goods at the State border or when it passes through a local  area within which they are not sold, used or consumed?  

  (7) Whether interpretation of Articles 301 to 304 in the  

context of tax on vehicles (commonly known as  “transport”) cases in Atiabari case and Automobile  Transport case apply to entry tax cases and if so, to what  extent?  

  (8) Whether the non-discriminatory indirect State tax which  

is capable of being passed on and has been passed on by  traders to the consumers infringes Article 301 of the  Constitution?  

  (9) Whether a tax on goods within the State which directly  

impedes the trade and thus violates Article 301 of the  Constitution can be saved by reference to Article 304 of  the Constitution alone or can be saved by any other  article?  

  (10) Whether a levy under Entry 52 List II, even if held to be  

in nature of a compensatory levy, must, on the principle of  equivalence demonstrate that the value of the  quantifiable benefit is represented by the costs incurred in  procuring the facility/services (which costs in turn become  the basis of reimbursement/recompense for the provider of  the services/facilities) to be provided in the “local area”  concerned and whether the entire State or a part thereof  can be comprehended as local area for the purpose of  entry tax?”  

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8. The matter was accordingly placed before a five-Judge Bench of this Court  

(Jindal Stainless Limited and Anr. v. State of Haryana and Ors.  (2010) 4 SCC 595)  

who briefly referred to the decisions in Atiabari, Automobile Transport cases (supra)  

and Keshav Mills  Co. Ltd.  v. CIT (AIR 1965 SC 1636) and a few others and referred  

the matters to a larger Bench for reconsideration of the judgment of this Court in  

Atiabari and Automobile Transport (supra). The Court noted that the correctness of  

the view taken in the said two cases had been doubted as early as in the year  

1975 in G.K. Krishnan  v.  State of Tamil Nadu (1975) 1 SCC 375.  The reference order  

briefly set out some of the questions that required consideration by a larger Bench.   

The Court said:   

“11. Some of these aspects which need consideration by a  larger Bench of this Court may be briefly enumerated.   Interplay/interrelationship between Article 304(a) and  Article 304(b).  The significance of the word “and”  between Articles 304(a) and 304(b).  The significance of  the non obstante clause in Article 304.  The balancing of  freedom of trade and commerce in Article 301 vis-a-vis the  States’ authority to levy taxes under Articles 245 and 246 of  the Constitution read with the appropriate legislative  entries in the Seventh Schedule, particularly in the context  of movement of trade and commerce.   

  12. Whether Article 304(a) and Article 304(b) deal with  

different subjects? Whether the impugned taxation law to  be valid under Article 304 (a) must also fulfil the conditions  mentioned in Article 304(b), including Presidential assent?   Whether the word “restrictions” in Article 302 and in Article  304(b) includes tax laws?  Whether validity of a law  impugned as violative of Article 301 should be judged only  in the light of the test of non-discrimination?  Does Article  303 circumscribe Article 301?  Whether “internal goods”  would come under Article 304(b) and “external goods”  under Article 304(a)? Whether “per se test” propounded in  Atiabari case should or should not be rejected?  Whether  tax simpliciter constitutes a restriction under Part XIII of the

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Constitution?  Whether the word “restriction” in Article  304(b) includes tax laws?  Is taxation justiciable? Whether  the “working test” laid down in Atiabari makes a tax law  per se violative of Article 301?  Interrelationship between  Article 19(1)(g) and Article 301 of the Constitution?  These  are some of the questions which warrant reconsideration  of the judgments in Atiabari Tea Co. Ltd. and Automobile  Transport (Rajasthan) Ltd. by a larger Bench of this Court.”  

9. At the hearing before us learned counsel for the parties agreed after a day -

long exploratory exercise that the questions that fall for determination by this Court  

could be re-framed as under:  

 1. Can the levy of a non-discriminatory tax per se constitute infraction of  

Article 301 of the Constitution of India?  

2. If answer to question No. 1 is in the affirmative, can a tax which is  

compensatory in nature also fall foul of Article 301 of the Constitution of  

India?  

3. What are the tests for determining whether the tax or levy is compensatory  

in nature?  

4. Is the Entry Tax levied by the States in the present batch of cases violative  

of Article 301 of the Constitution and in particular have the impugned  

State enactments relating to entry tax to be tested with reference to both  

Articles 304(a) and 304(b) of the Constitution for determining their validity?  

10. We have heard learned counsel for the parties at considerable length on the  

above questions which we shall now take up for discussion ad-seriatim.    

 Re: Question No. 1  11. Whether non-discriminatory fiscal measures also impede free trade,  

commerce and intercourse and thereby fall foul of Article 301 of the Constitution

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can be answered only if one keeps in view the Constitutional scheme underlying  

separation of powers in a federal system of governance like the one chosen by us.  

The answer would also depend upon the way we look at, understand and interpret  

the provisions of the Constitution and in particular the provisions of Parts XI, XII and  

XIII thereof. Interpretation of these and indeed every other provision must have due  

regard to what are recognised as the basic features of the Constitution. In doing so,  

the approach of the Courts can neither be rigid nor wooden or pedantic.  Being a  

living and dynamic document, the Constitution ought to receive an equally  

dynamic and pragmatic interpretation that harmonizes and balances competing  

aims and objectives and promotes attainment of national goals and objectives.  It  

must, as observed by this Court, in Kihoto Hollohan v.  Zachillhu (1992) Supp 2 SCC  

651 be read as a logical whole.  The Constitutional provisions cannot be read in  

isolation, nor can they be interpreted in a manner that renders another provision  

redundant declared this Court in T.M.A. Pai Foundation and others v. State of  

Karnataka (2002) 8 SCC 481.  If words used in the provision are imprecise, protean  

or evocative or can reasonably bear meaning more than one, it would be  

legitimate for the Court to go beyond the literal confines of the provision and to call  

in aid other well recognised rules of construction such as legislative history, the  

basic scheme and framework of the statute as a whole, the object sought to be  

achieved and the consequence flowing from the adoption of one in preference to  

the other possible interpretation observed this Court in Chief Justice of Andhra  

Pradesh and others. v. L.V. A. Dixitulu and others  (1979) 2 SCC 34.  Reference may  

also be made to the decision of this Court in Kesavananda Bharati v. State of Kerala  

(1973) 4 SCC 225 where this Court quoted with approval Lord Greene’s

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observations in the following words:  

 “56. ……It is not right to construe words in vacuum and  then insert the meaning into an article. Lord Green  observed in Bidie v. General Accident, Fire and Life  Assurance Corporation [1948] 2 All E.R. 995:    The first thing one has to do, I venture to think, in construing  words in a section of an Act of Parliament is not to take  those words in vacuo, so to speak, and attribute to them  what is sometimes called their natural or ordinary meaning.  Few words in the English language have a natural or  ordinary meaning in the sense that they must be so read  that their meaning is entirely independent of their context.  The method of construing statutes that I prefer is not to  take particular words and attribute to them a sort of prima  facie meaning which you may have to displace or modify.  It is to read the statute as a whole and ask oneself the  question: ‘In this state, in this context, relating to this  subject-matter, what is the true meaning of that word.    57. I respectfully adopt the reasoning of Lord Green in  construing the expression “the amendment of the  Constitution….    xxxxxxxx    61. I may also refer to the observation of Gwyer, C.J., and  Lord Wright:  

“A grant of the power in general terms, standing by  itself, would no doubt be construed in the wider sense; but  it may be qualified by other express provisions in the same  enactment, by the implications of the context, and even  by considerations arising out of what appears to be the  general scheme of the Act.” (Per Gwyer, C.J. — The  Central Provinces and Berar Act, 1939, FCR 18 at 42 MR).  

 “The question, then, is one of construction and in the  

ultimate resort must be determined upon the actual words  used, read not in vacua but as occurring in a single  complex instrument, in which one part may throw light on  another. The Constitution has been described as the

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federal compact, and the Construction must hold a  balance between all its parts.” (Per Lord Wright — James v.  Commonwealth of Australia, 1936 AC 578 at 613.)”  

12. It is trite that a narrow interpretation that may have the potential or tendency  

to subvert the delicate balance which the framers of the Constitution had in mind  

while distributing legislative businesses including the sovereign power to levy taxes  

must be avoided and a construction that is most beneficial for a harmonious  

relationship between different limbs of the State including that between the Centre  

and the States or States inter se adopted.  This may, at times, involve ironing out of  

rough edges which exercise a Constitutional Court must necessarily undertake to  

avoid confusion and resultant negation of the Constitutional objectives.    

 13. Having said so, we must sail smooth on certain fundamentals before we  

address the question whether levy of taxes per se operate as an impediment or  

restriction on the right to free trade, commerce and intercourse.  That is because a  

true and correct answer to Question No.1 can be found only if we constantly keep  

those fundamentals in mind while attempting to resolve what has been found to be  

somewhat difficult to resolve. For instance, whether levy of a tax is an attribute of  

sovereignty and if so whether Article 246 of the Constitution recognises the  

sovereign power of the State to make laws including the power to levy taxes on  

subjects enumerated in  List II of the Seventh Schedule of the Constitution is an  

important dimension that must be addressed as a part of the interpretative  

exercise.  So also, we must examine whether power to tax if held to be subservient  

to Article 301, shall have the effect of denuding the States of their sovereignty in the

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matter of levy of taxes and in the process affect the federal structure of the polity  

envisaged by the Constitution.  If levy of taxes is always presumed to be reasonable  

and in public interest, whether such levies could be said to be within the  

contemplation of Article 304(b) when it provided for imposition of “reasonable  

restrictions in public interest” is yet another aspect that must be explored especially  

when the reasonableness of any restriction within the comprehension of Article  

304(b) is not free from judicial scrutiny by Courts.  These are some of the broad and  

fundamental issues that need to be examined before we attempt to answer the  

question whether levy of taxes per se acts as an impediment for free trade,  

commerce and intercourse.  We may now briefly refer to these fundamentals  

before adverting to the provisions of Part XIII that fall for our interpretation.   

Power to Tax : an Attribute of sovereignty  14. Power to levy taxes has been universally acknowledged as an essential  

attribute of sovereignty. Cooley in his Book on Taxation – Volume-1 (4th Edn.) in  

Chapter-2 recognises the power of taxation to be inherent in a sovereign State. The  

power, says the author, is inherent in the people and is meant to recover a  

contribution of money or other property in accordance with some reasonable rule  

or apportionment for the purpose of defraying public expenses. The following  

passage from the book is apposite:  

“57. Power to tax as an inherent attribute of sovereignty.  

  The power of taxation is an essential and inherent attribute  of sovereignty, belonging as a matter of right to every  independent government.  It is possessed by the  government without being expressly conferred by the  people.  The power is inherent in the people because the  sustenance of the government requires contributions from

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them.  In fact the power of taxation may be defined as  “the power inherent in the sovereign state to recover a  contribution of money or other property, in accordance  with some reasonable rule or apportionment, from the  property or occupations within its jurisdiction for the  purpose of defraying the public expenses.”  Constitutional  provisions relating to the power of taxation do not operate  as grants of the power of taxation to the government but  instead merely constitute limitations upon a power which  would otherwise be practically without limit.  This inherent  power to tax extends to everything over which the  sovereign power extends, but not to anything beyond its  sovereign power.  Even the federal government’s power of  taxation does not include things beyond its sovereign  power.  But where exclusive jurisdiction over land is granted  to another state or country, the land remains subject to the  taxing power of the state within whose boundaries it is  located.”  

15. To the same effect is the decision of this Court in Raja Jagannath Baksh  Singh v. State of U.P. & Anr. (AIR 1962 SC 1563) where this Court observed:  

“…. The power of taxation is, no doubt, the sovereign right  of the State; as was observed by Chief Justice Marshall in  M’Culloch v. Maryland [4 Law Edn.579 p.607] : “The power  of taxing the people and their property is essential to the  very existence of Government, and may be legitimately  exercised on the objects to which it is applicable to the  utmost extent to which the Government may choose to  carry it.”  In that sense, it is not the function of the court to  enquire whether the power of taxation has been  reasonably exercised either in respect of the amount taxed  or in respect of the property which is made the object of  the tax.  Article 265 of the Constitution provides that no tax  shall be levied or collected, except by authority of law;  and so, for deciding whether a tax has been validly levied  or not, it would be necessary first to enquire whether the  legislature which passes the Act was competent to pass it  or not.”   

(Emphasis supplied)    

16. Reference may also be made to Dena Bank v. Bhikhabhai Prabhudas  Parekh & Co. (2000) 5 SCC 694 where this Court held:    

“8.  The principle of priority of government debts is founded

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on the rule of necessity and of public policy. The basic  justification for the claim for priority of State debts rests on  the well-recognised principle that the State is entitled to  raise money by taxation because unless adequate revenue  is received by the State, it would not be able to function as  a sovereign Government at all. It is essential that as a  sovereign, the State should be able to discharge its primary  governmental functions and in order to be able to  discharge such functions efficiently, it must be in possession  of necessary funds and this consideration emphasises the  necessity and the wisdom of conceding to the State, the  right to claim priority in respect of its tax dues (see Builders  Supply Corpn.[AIR 1965 SC 1061: (1965) 56 ITR 91])”         (Emphasis supplied)  

 17. In Commissioner of Income Tax, Udiapur, Rajasthan v.  MCdowell and Co.  

Ltd. (2009) 10 SCC 755 where this Court reiterated the legal position in the following  

words:  

“21. “Tax”, “duty”, “cess” or “fee” constituting a class  denotes to various kinds of imposts by State in its sovereign  power of taxation to raise revenue for the State. Within the  expression of each specie each expression denotes  different kind of impost depending on the purpose for  which they are levied. This power can be exercised in any  of its manifestation only under any law authorising levy and  collection of tax as envisaged under Article 265 which uses  only the expression that no “tax” shall be levied and  collected except authorised by law. It in its elementary  meaning conveys that to support a tax legislative action is  essential, it cannot be levied and collected in the absence  of any legislative sanction by exercise of executive power  of State under Article 73 by the Union or Article 162 by the  State.    22. Under Article 366(28) “Taxation” has been defined to  include the imposition of any tax or impost whether  general or local or special and tax shall be construed  accordingly. “Impost” means compulsory levy. The well- known and well-settled characteristic of “tax” in its wider  sense includes all imposts. Imposts in the context have

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following characteristics:    (i) The power to tax is an incident of sovereignty.  (ii) “Law” in the context of Article 265 means an Act of  legislature and cannot comprise an executive order or rule  without express statutory authority.  (iii) The term “tax” under Article 265 read with Article  366(28) includes imposts of every kind viz. tax, duty, cess or  fees.  (iv) As an incident of sovereignty and in the nature of  compulsory exaction, a liability founded on principle of  contract cannot be a “tax” in its technical sense as an  impost, general, local or special. “           (Emphasis Supplied)  

Power of Taxation under the Constitution:  

18. We shall presently turn to the Constitutional limitations on the sovereign  

power to tax but before we do so we need to point out that while the power to  

levy taxes is an attribute of sovereignty, exercise of that power is controlled by the  

Constitution.   This is evident from the provisions of Article 265 which forbids levy or  

recovery of any tax except by the authority of law.  It reads:  

“265. Taxes not to be imposed save by authority of law –  

No tax shall be levied or collected except by authority of  law.”  

 The authority of law referred to above must be traceable to a provision in the  

Constitution especially where the legislative powers are shared by the Centre and  

the States as is the case with our Constitution which provides for what has been  

described as quasi federal system of governance.   

 The source of power to enact laws is contained in Articles 245 and 246 of the  

Constitution which read:

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“245. Extent of laws made by Parliament and by the  Legislatures of States – (1) Subject to the provisions of this  

Constitution, Parliament may make laws for the whole or  any part of the territory of India, and the Legislature of a  State may make laws for the whole or any part of the  State.  (2) No law made by Parliament shall be deemed to be  invalid on the ground that it would have extra-territorial  operation.    246. Subject-matter of laws made by Parliament and by the  

Legislatures of States – (1) Notwithstanding anything in  

clauses (2) and (3), Parliament has exclusive power to  make laws with respect to any of the matters enumerated  in List I in the Seventh Schedule (in this Constitution referred  to as the “Union List”).    (2) Notwithstanding anything in clause (3), Parliament and ,  subject to clause (1), the Legislature of any State also,  have power to make laws with respect to any of the  matters enumerated in List III in the Seventh Schedule (in  this Constitution referred to as the “Concurrent List”).    (3) Subject to clauses (1) and (2), the Legislature of any  State has exclusive power to make laws for such State or  any part thereof with respect to any of the matters  enumerated in List II in the Seventh Schedule (in this  Constitution referred to as the ‘State List’).    (4)Parliament has power to make laws with respect to any  matter for any part of the territory of India not included [in  a State] notwithstanding that such matter is a matter  enumerated in the State List.”  

   19. Interpreting Articles 245 and 246, a three-Judge Bench of this Court in M/s.  

Hoechst Pharmaceuticals Ltd and Ors. v. State of Bihar and Ors. (1983) 4 SCC 45,  

held on a review of the available decisions that the Constitution effects a complete  

separation of taxing powers of the Union and the States under Article 246 and that  

there is no overlapping anywhere in the exercise of that power.  The sources of

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taxation are clearly delineated, observed the Court.  The Court also held that there  

is a distinction between general subjects of legislation and taxation for the former  

are dealt within one group while the later is dealt with in a separate group.  The  

result is that the power to tax cannot be deduced from a general legislative entry.   

That view was approved by a Constitution Bench of this Court in State of West  

Bengal v. Kesoram Industries Ltd. (2004) 10 SCC 201. The propositions stated in the  

two decisions must therefore be treated to be fairly well settled.  Reference may  

also be made to the decision of this Court in State of Kerala and ors.  v. Mar  

Appraem Kuri Co. Ltd.  and Anr.  (2012) 7 SCC 106 where this Court explained the  

sweep and purport of Articles 245 and 246:  

“35. Article 245 deals with extent of laws made by  

Parliament and by the legislatures of States. The verb  “made”, in past tense, finds place in the Head Note to  Article 245. The verb “make”, in the present tense, exists in  Article 245(1) whereas the verb “made”, in the past tense,  finds place in Article 245(2). While the legislative power is  derived from Article 245, the entries in the Seventh  Schedule of the Constitution only demarcate the legislative  fields of the respective legislatures and do not confer  legislative power as such. While Parliament has power to  make laws for the whole or any part of the territory of India,  the legislature of a State can make laws only for the State  or part thereof. Thus, Article 245 inter alia indicates the  extent of laws made by Parliament and by the State  Legislatures.  

 36. Article 246 deals with the subject-matter of laws made  

by Parliament and by the legislatures of States. The verb  “made” once again finds place in the Head Note to Article  246. This article deals with distribution of legislative powers  as between the Union and the State Legislatures, with  reference to the different Lists in the Seventh Schedule. In  short, Parliament has full and exclusive powers to legislate  with respect to matters in List I and has also power to  legislate with respect to matters in List III, whereas the State

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Legislatures, on the other hand, have exclusive power to  legislate with respect to matters in List II, minus matters  falling in List I and List III and have concurrent power with  respect to matters in List III. (See Subrahmanyan Chettiar v.  Muttuswami Goundan)  

37. Article 246, thus, provides for distribution, as between  

Union and the States, of the legislative powers which are  conferred by Article 245. Article 245 begins with the  expression “subject to the provisions of this Constitution”.  Therefore, Article 246 must be read as “subject to other  provisions of the Constitution”.  

38. For the purposes of this decision, the point which needs  

to be emphasised is that Article 245 deals with conferment  of legislative powers whereas Article 246 provides for  distribution of the legislative powers. Article 245 deals with  extent of laws whereas Article 246 deals with distribution of  legislative powers. In these articles, the Constitution Framers  have used the word “make” and not “commencement”  which has a specific legal connotation. [See Section 3(13)  of the General Clauses Act, 1897.]”   

(Emphasis supplied)  

 Limitations on the Exercise of Power  20. Exercise of sovereign power is, however, subject to Constitutional limitations  

especially in a federal system like ours where the States also to the extent  

permissible exercise the power to make laws including laws that levy taxes, duties  

and fees.  That the power to levy taxes is subject to constitutional limitations is no  

longer res-integra.  A Constitution Bench of this Court has in Synthetics and  

Chemicals Ltd. and Ors. v. State of U.P. and Ors. (1990) 1 SCC 109 recognised that  

in India the Centre and the States both enjoy the exercise of sovereign power, to  

the extent the Constitution confers upon them that power. This Court declared:  

 “56  … We would not like, however, to embark upon any  theory of police power because the Indian Constitution

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does not recognise police power as such. But we must  recognise the exercise of Sovereign power which gives the  State sufficient authority to enact any law subject to the  limitations of the Constitution to discharge its functions.  Hence, the Indian Constitution as a sovereign State has  power to legislate on all branches except to the limitation  as to the division of powers between the Centre and the  States and also subject to the fundamental rights  guaranteed under the Constitution. The Indian States,  between the Centre and the States, has sovereign power.   The sovereign power is plenary and inherent in every  sovereign State to do all things which promote the health,  peace, morals, education and good order of the people.  Sovereignty is difficult to define.  This power of sovereignty  is, however, subject to constitutional limitations.”This power,  according to some constitutional authorities, is to the  public what necessity is to the individual. Right to tax or  levy impost must be in accordance with the provisions of  the Constitution.”    

 21. What then are the Constitutional limitations on the power of the State  

legislatures to levy taxes or for that matter enact legislations in the field reserved for  

them under the relevant entries of List II and III of the Seventh Schedule.  The first  

and the foremost of these limitations appears in Article 13 of the Constitution of  

India which declares that all laws in force in the territory of India immediately  

before the commencement of the Constitution are void to the extent they are  

inconsistent with the provisions of Part III dealing with the fundamental rights  

guaranteed to the citizens.  It forbids the States from making any law which takes  

away or abridges, any provision of Part III. Any law made in contravention of the  

said rights shall to the extent of contravention be void.  There is no gain saying that  

the power to enact laws has been conferred upon the Parliament subject to the  

above Constitutional limitation.  So also in terms of Article 248, the residuary power

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to impose a tax not otherwise mentioned in the Concurrent List or the State List has  

been vested in the Parliament to the exclusion of the State legislatures, and the  

States’ power to levy taxes limited to what is specifically reserved in their favour  

and no more.   

 22. Article 249 similarly empowers the Parliament to legislate with respect to a  matter in the State List for national interest provided the Council of States has  declared by a resolution supported by not less than two-thirds of the members  present and voting that it is necessary or expedient in national interest to do so.  The power is available till such time any resolution remains in force in terms of  Article 249 (2) and the proviso thereunder.     23. Article 250 is yet another provision which empowers the Parliament to  

legislate with respect to any matter in the State List when there is a proclamation  

of emergency.  In the event of an inconsistency between laws made by  

Parliament under Articles 249 and 250, and laws made by legislature of the States,  

the law made by Parliament shall, to the extent of the inconsistency, prevail over  

the law made by the State in terms of Article 251.   

 24. The power of Parliament to legislate for two or more States by consent, in  

regard to matters not otherwise within the power of the Parliament is regulated by  

Article 252, while Article 253 starting with a non-obstante clause empowers  

Parliament to make any law for the whole country or any part of the territory of  

India for implementing any treaty, agreement or convention with any other  

country or countries or any decision made at any international conference,  

association or other body.    

 25. Article 285 exempts the property of the Union from all taxes imposed by the  

States save in so far as the Parliament may by law provide. Article 286 places yet

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another Constitutional limitation on the State’s power to collect any levy that  

imposes or authorises the imposition of a tax on the sale or purchase of goods  

where such sale or purchase takes place outside the State or in the course of  

import of the goods into or export of the goods outside the territory of India.  It also  

makes any law of a State imposing tax on sale or purchase of goods of special  

importance in inter State trade or commerce or a tax on the sale or purchase of  

goods being a tax of the nature referred to in the relevant sub-clauses of clause  

29(A) of Article 366 subject to such restrictions and conditions as to the system of  

levy, rates and other incidents of tax as the Parliament may by law specify.   

 26. Article 287 places a Constitutional limitation on the State’s legislative power  

to enact laws in so far as imposition of tax on consumption or sale of electricity  

consumed by the Government of India or sold to the Government of India for  

consumption by the Government or for consumption of the construction,  

maintenance or operation of any railway by the Government of India or a rail  

company etc.  Similarly, Article 288 contains a Constitutional limitation on the  

power of the State in so far as imposition of a tax in respect of any water or  

electricity stored, generated, consumed, distributed or sold by any authority  

established by any existing law or any law made by the Parliament is concerned.    

 27. It would thus appear that even when Article 246(2) and (3) confers exclusive  

power on the State legislatures to make laws with respect to matters in the Seventh  

Schedule such legislative power is exercisable subject to constitutional limitations  

referred to above.  What is significant is that the power of the State legislatures to  

levy taxes is also subject to the limitations of Article 304(a) of the Constitution

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appearing in Part XIII thereof, which part regulates trade, commerce and  

intercourse within the territory of India and comprises Articles 301 to 307.  The  

provisions of these Articles have been the subject matter of a series of decisions of  

this Court including several Constitution Bench decisions to some of which we shall  

presently refer.  The language employed in the provisions and the non-obstante  

clauses with which the same start have all the same given rise to several  

contentious issues for determination by this Court over the past five decades or so.   

The fact that the present batch of cases had to be referred to a Nine-Judge  

Bench to once again examine the very same issues as have been debated and  

determined in the previous judgments of this Court only shows that the task of  

interpreting the provisions is by no means easy and has in fact become more and  

more difficult on account of the pronouncements of this Court taking different  

views not many of which have been unanimous.  The marked difference in the  

approach adopted by learned counsel for the parties in these appeals is also a  

measure of the complexities of issues that fall for determination.  This is specially so  

because the prevailing legal position in terms of the judgment of this Court in  

Atiabari and Automobile cases (supra) holding that fiscal measures that are  

compensatory fall beyond the mischief of Article 301 has been questioned by both  

sides.  Mr. Harish Salve who led the forensic exercise followed by M/s.Arvind Datar,  

Laxmi Kumaran, Ravindra Shrivastava, N. Venkataraman and others vehemently  

argued that the “Compensatory Tax Theory” propounded by the Seven Judges  

Bench of this Court in Automobile case (supra) had no legal basis or constitutional  

sanction and was neither acceptable nor workable.  That is particularly so  

because the State legislatures had taken umbrage under the “Compensatory Tax

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Theory” and declared the fiscal levies imposed by them to be compensatory in  

character and claimed the same to be outside the mischief of Article 301 and  

consequently immune from any challenge on the ground that these taxes and  

levies were unreasonable restrictions on the right to free trade and commerce.   

The States who have enacted the laws providing for levy of taxes on the entry of  

goods into a local area within the meaning of Entry 52 of List II have, on the other  

hand similarly contended that the Compensatory Tax Theory is bereft of any legal  

basis and that the decision in Atiabari and Automobile cases (supra) need to be  

revisited to restore and protect the sovereign power of legislation of the States and  

the Federal character of our polity.  Suffice it to say that except a feeble attempt  

made by some Counsel, there has been a general consensus that the  

compensatory tax theory deserves to be rejected and the issues examined afresh  

on a true and correct interpretation of the relevant constitutional provisions.  We  

are mentioning all this only to show that even after fifty years and several  

illuminating pronouncements of this Court, the cleavage in the judicial opinion as  

to the true and correct legal position on the subject continues to loom large and  

haunt lawyers and litigants and, if we may say so, even Judges alike.  The present  

reference to a larger Bench is in that backdrop expected to give a quietus to this  

raging legal controversy of considerable complexity, though given the  

perseverance of the litigants and the ingenuity of the bar a quietus is only a pious  

hope which has and may even in future elude us.  

Constitutional Limitations must be Express:

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28. The power to levy taxes, being a sovereign power controlled only  

by the Constitution, any limitation on that power must be express.  That  

proposition is well settled by the decisions of this Court in Maharaj Umeg  

Singh v. State of Bombay, AIR 1955 SC 540 and Firm Bansidhar  

Premsukhdas v. State of Rajasthan AIR 1967 SC 40. In Umeg Singh’s case  

(supra) this Court stated the legal position in the following words:  

“12…….The legislative competence of the State Legislature  can only be circumscribed by express prohibition  contained in the Constitution itself and unless and until  there is any provision in the Constitution expressly  prohibiting legislation on the subject either absolutely or  conditionally, there is no fetter or limitation on the plenary  powers which the State Legislature enjoys to legislate on  the topics enumerated in the Lists II & III of the Seventh  Schedule to the Constitution.    

xxxx xxxx xxxx    13.  The fetter or limitation upon the legislative power of the  State Legislature which had plenary powers of legislation  within the ambit of the legislative heads specified in the  Lists II & III of the Seventh Schedule to the Constitution  could only be imposed by the Constitution itself and not by  any obligation which had been undertaken by either the  Dominion Government or the Province of Bombay or even  the State of Bombay. Under Article 246 the State  Legislature was invested with the power to legislate on the  topics enumerated in Lists II & III of the Seventh Schedule to  the Constitution and this power was by virtue of article  245(1) subject to the provisions of the Constitution.     The Constitution itself laid down the fetters or limitations on  this power, e.g., in Article 303 or article 286(2). But unless  and until the Court came to the conclusion that the  Constitution itself had expressly prohibited legislation on the  subject either absolutely or conditionally the power of the

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State Legislature to enact legislation within its legislative  competence was plenary. Once the topic of legislation  was comprised within any of the entries in the Lists II & III of  the Seventh Schedule to the Constitution the fetter or  limitation on such legislative power had to be found within  the Constitution itself and if there was no such fetter or  limitation to be found there the State Legislature had full  competence to enact the impugned Act no matter  whether such enactment was contrary to the guarantee  given, or the obligation undertaken by the Dominion  Government or the Province of Bombay or even the State  of Bombay.  

29. Again in Bansidhar’s case (supra) this Court reiterated the legal  

position in the following words:  

“8… It is well-established that Parliament or the State  Legislatures are competent to enact a law altering the  terms and conditions of a previous contract or of a grant  under which the liability of the Government of India or of  the State Governments arises. The legislative competence  of Parliament or of the State Legislatures can only be  circumscribed by express prohibition contained in the  Constitution itself and unless and until there is any provision  in the Constitution expressly prohibiting legislation on the  subject either absolutely or conditionally, there is no fetter  of limitation on the plenary powers which the Legislature is  endowed with for legislating on the topics enumerated in  the relevant lists. This view is borne out by the decision of  the Judicial Committee in Thakur Jagannath Baksh Singh v.  The United Provinces [1946 FCR 111] in which a similar  complaint was made by the taluqdars of Oudh against the  United Provinces Tenancy Act (U.P. Act 17 of 1939). It was  held by the Judicial Committee that the Crown cannot  deprive itself of its legislative authority by the mere fact  that in the exercise of its prerogative it makes a grant of  land within the territory over which such legislative authority  exists, and no court can annul the enactment of a  legislative body acting within the legitimate scope of its  sovereign competence. If therefore, it be found that the  subject-matter of a Crown grant is within the competence

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of a Provincial legislature nothing can prevent that  legislature from legislating about it unless the Constitution  Act itself expressly prohibits legislation on the subject either  absolutely or conditionally.  Accordingly, in the absence of  any such express prohibition, the United Provinces Tenancy  Act, 1939, which in consolidating and amending the law  relating to agricultural tenancies and other matters  connected therewith in Agra and Oudh, dealt with matters  within the exclusive legislative competence of the  Provincial legislature under Item 21 of List 11 of the Seventh  schedule to the Government of India Act, 1935, was intra  vires the Provincial legislature notwithstanding that  admittedly some of its provisions cut down the absolute  rights claimed by the appellant taluqdar to be comprised  in the grant of his estate as evidenced by the sanad  granted by the Crown to his predecessor. The same  principle has been reiterated by this Court in Maharaj  Umeg Singh and others v. The State of Bombay [1955 2 SCR  164]. It was pointed out that in view of Art. 246 of the  Constitution, no curtailment of legislative competence can  be spelt out of the terms of clause 5 of the Letters of  Guarantee given by the Dominion Government to the  Rulers of "States" subsequent to the agreements of Merger,  which guaranteed, inter alia, the continuance of Jagirs in  the merged ’States’. This principle also underlies the recent  decision of this Court in Maharaja Shree Umaid Mills Ltd. v.  Union of India [1963 Supp 2 SCR 515]  in which it was  pointed out that there is nothing in Art. 295 of the  Constitution which prohibits Parliament from enacting a  law altering the terms. and conditions of a contract or of a  grant under which the liability of the Government of India  arises….” (Emphasis Supplied)  

30. One other fundamental aspect which must always be kept in mind  

while interpreting the provisions of the Constitution is the federal  

structure envisaged by it. Whether or not the Constitution of India is truly  

federal in character has been the subject matter of debate not only in

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the Constituent Assembly but also in Courts for over 60 years.  The  

character of the Constitutional scheme described in the Constituent  

Assembly Debates was that there were doubts expressed whether the  

Constitution really provided a federal structure in the governance of the  

country.  The criticism was that the scheme underlying the Constitution  

was more unitary than federal, on account not only of several provisions  

in the Constitution that empowered the Centre to at times intervene  

and enact laws for the States but also on account of the Centre’s  

power to take over the governance of the State.  Repelling that  

criticism, Dr. B.R. Ambedkar speaking in the Constituent Assembly  

explained the true character of the Constitution of India in the following  

significant words:  

“There is only one point of constitutional import to which I  propose to make a reference. A serious complaint is made  on the ground that there is too much of centralisation and  that the States have been reduced to municipalities. It is  clear that this view is not only an exaggeration, but is also  founded on a misunderstanding of what exactly the  Constitution contrives to do. As to the relation between the  Centre and the States, it is necessary to bear in mind the  fundamental principle on which it rests. The basic principle  of federalism is that the legislative and executive authority  is partitioned between the Centre and the States not by  any law to be made by the Centre but by the Constitution  itself. This is what Constitution does. The States under our  Constitution are in no way dependent upon the Centre for  their legislative or executive authority. The Centre and the  States are coequal in this matter. It is difficult to see how  such a Constitution can be called centralism. It may be

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that the Constitution assigns to the Centre too large a field  for the operation of its legislative and executive authority  than is to be found in any other federal Constitution. It may  be that the residuary powers are given to the Centre and  not to the States. But these features do not form the  essence of federalism. The chief mark of federalism as I  said lies in the partition of the legislative and executive  authority between the Centre and the units by the  Constitution. This is the principle embodied in our  Constitution.”  

31. To the same effect was the answer given to the criticism by Shri T.T.  

Krishnamachari during the Constituent Assembly Debates on the draft  

Constitution, when he said:  

“Sir, I would like to go into a few fundamental objections  because as I said it would not be right for us to leave these  criticisms uncontroverted. Let me take up a matter which is  perhaps partly theoretical but one which has a validity so  far as the average man in this country is concerned. Are  we framing a unitary Constitution? Is this Constitution  centralising power in Delhi? Is there any way provided by  means of which the position of people in various areas  could be safeguarded, their voices heard in regard to  matters of their local administration? I think it is a very big  charge to make that this Constitution is not a federal  Constitution, and that it is a unitary one. We should not  forget that this question that the Indian Constitution should  be a federal one has been settled by our Leader who is no  more with us, in the Round Table Conference in London  eighteen years back.”  

 “I would ask my honourable friend to apply a very simple  test so far as this Constitution is concerned to find out  whether it is federal or not. The simple definition I have got  from the German school of political philosophy is that the  first criterion is that the State must exercise compulsive  power in the enforcement of a given political order, the  second is that these powers must be regularly exercised

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over all the inhabitants of a given territory, and the third is  the most important and that is that the activity of the State  must not be completely circumscribed by orders handed  down for execution by the superior unit. The important  words are ‘must not be completely circumscribed’, which  envisages some powers of the State are bound to be  circumscribed by the exercise of federal authority. Having  all these factors in view, I will urge that our Constitution is a  federal Constitution. I will urge that our Constitution is one  in which we have given power to the units which are both  substantial and significant in the legislative sphere and in  the executive sphere.” (Emphasis Supplied)  

32. Whether or not the Constitution provides a federal structure for the  

governance of the country has been the subject matter of a long line of  

decisions of this Court, reference to all of which may be unnecessary  

but the legal position appears to be fairly well settled that the  

Constitution provides for a quasi federal character with a strong bias  

towards the Centre.  The pronouncements recognised the proposition  

that even when Constitution may not be strictly federal in its character  

as the United States of America, where sovereign States came together  

to constitute a federal union, where each State enjoins a privilege of  

having a Constitution of its own, the significant feature of a federal  

Constitution are found in the Indian Constitution which makes it a quasi  

federal Constitution, if not truly federal in character and in stricto sensu  

federal.  The two decisions which stand out in the long line of  

pronouncements of this Court on the subject may, at this stage, be

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briefly mentioned.  The first of these cases is the celebrated decisions of  

this Court in Kesavananda Bharati case (supra), wherein a thirteen  

Judges Bench of this Court, Sikri CJ (as His Lordship then was), being one  

of them talks about whether the Constitution of India was federal in  

character and if so whether federal character of the Constitution  

formed the basic feature of the Constitution.  Sikri CJ. summed up the  

basic feature of the Constitution in the following words:  

“292. ... ... ...The true position is that every provision of the  Constitution can be amended provided in the result the  basic foundation and structure of the Constitution remains  the same.  The basic structure may be said to consist of the  following features:  

 (1) Supremacy of the Constitution.  (2) Republican and Democratic form of Government.  (3) Secular character of the Constitution.  (4) Separation of powers between the legislature, the executive  

and the judiciary;  (5) Federal character of the Constitution.  

 293. The above structure is built on the basic foundation i.e.  the dignity and freedom of the individual.  This is of supreme  importance.  This cannot by any form of amendment be  destroyed.    294. The above foundation and the above basic features  are easily discernible not only from the preamble but the  whole scheme of the Constitution, which I have already  discussed.”  

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To the same effect are the views expressed by Shelat and Grover JJ.  

who declared that the federal character of the Constitution is a part of  

its basic structure.    

 33. In S.R. Bommai v. Union of India 1994 (3) SCC 1, this Court had yet  

another occasion to examine whether the Constitution was federal in  

nature.  Speaking for himself and Justice Kuldeep Singh, Sawant J. while  

referring to H.M Seervai’s commentary on “Constitutional Law of India”  

held that the principle of federalism has not been watered down so as  

to make the Constitution unitary in character. The presence in the  

Constitution exclusive legislative powers conferred on the State and the  

provision that such powers may be exercised by the Parliament during  

an emergency may not affect and dilute the federal character of the  

Constitution.  So also, the provisions of Article 355 imposing the duty on  

the Union to protect a State against internal disorder are not  

inconsistent with the federal principles nor are the powers vested in the  

Central Government under Article 356 inconsistent with the federal  

character of the Constitution.   

  The Court, in particular, dealt with the question whether List II contains  

unimportant matters thereby denuding the Constitution of its federal

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character.  The Court observed that List II contains very important  

subjects assigned to the State including the power to levy taxes which  

powers are made mutually exclusive so that ordinarily the States have  

independent source of revenue of their own. The following passages  

from the decision are apposite:  

“.......   97 (k) The view that unimportant matters were assigned to  the States cannot be sustained in face of the very  important subjects assigned to the States in List II, and the  same applies to taxing powers of the States, which are  made mutually exclusive of the taxing powers of the Union  so that ordinarily the States have independent source of  revenue of their own. The legislative entries relating to taxes  in List II show that the sources of revenue available to the  States are substantial and would increasingly become  more substantial. In addition to the exclusive taxing powers  of the States, the States become entitled either to  appropriate taxes collected by the Union or to a share in  the taxes collected by the Union.    99. The above discussion thus shows that the States have  an independent constitutional existence and they have as  important a role to play in the political, social, educational  and cultural life of the people as the Union. They are  neither satellites nor agents of the Centre. The fact that  during emergency and in certain other eventualities their  powers are overridden or invaded by the Centre is not  destructive of the essential federal nature of our  Constitution. The invasion of power in such circumstances is  not a normal feature of the Constitution. They are  exceptions and have to be resorted to only occasionally to  meet the exigencies of the special situations. The  exceptions are not a rule.     100. For our purpose, further it is really not necessary to  determine whether, in spite of the provisions of the  Constitution referred to above, our Constitution is federal,

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quasi-federal or unitary in nature. It is not the theoretical  label given to the Constitution but the practical  implications of the provisions of the Constitution which are  of importance to decide the question that arises in the  present context, viz., whether the powers under Article  356(1) can be exercised by the President arbitrarily and  unmindful of its consequences to the governance in the  State concerned. So long as the States are not mere  administrative units but in their own right constitutional  potentates with the same paraphernalia as the Union, and  with independent Legislature and the Executive  constituted by the same process as the Union, whatever  the bias in favour of the Centre, it cannot be argued that  merely because (and assuming it is correct) the  Constitution is labelled unitary or quasi-federal or a mixture  of federal and unitary structure, the President has  unrestricted power of issuing Proclamation under Article  356(1). If the Presidential powers under the said provision  are subject to judicial review within the limits discussed  above, those limitations will have to be applied strictly  while scrutinising the concerned material.”  

(Emphasis Supplied)    

34. What is important is that B.P. Jeevan Reddy, J. speaking for himself  

and Aggarwal J., while holding the Constitution to be federal in  

character cautioned that the Centre cannot tamper with the powers  

conferred upon the States.  States are not mere appendages of the  

Centre within the sphere allotted to them.  The States are supreme and  

the Centre cannot tamper with their powers.    

35. Justice K. Ramaswamy, speaking for himself also accepted  

federalism of the Indian Constitution as a basic feature.  One other  

decision that has dealt with the federal character of the Constitution of

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India is Kuldeep Nair v. Union of India and Ors. (2006) 7 SCC 1 wherein  

this Court held that nature of federalism in the Indian Constitution is no  

longer res integra. Relying upon the Constituent Assembly Debates to  

which we have referred earlier.  The Court declared:  

“50. A lot of energy has been devoted on behalf of the  petitioners to build up a case that the Constitution of India  is federal. The nature of federalism in the Indian  Constitution is no longer res integra.    51. There can be no quarrel with the proposition that the  Indian model is broadly based on federal form of  governance. Answering the criticism of the tilt towards the  Centre, Shri T.T. Krishnamachari, during debates in the  Constituent Assembly on the draft Constitution, had stated  as follows:  ……….”  

36. While parting with this aspect we must also refer to the decision of  

this Court in Re: Under Article 143, Constitution of India (Special  

Reference No.1 of 1964) AIR 1965 SC 745 wherein this Court held:  

“39. In dealing with this question, it is necessary to bear in  mind one fundamental feature of a Federal Constitution. In  England, Parliament is sovereign; and in the words of  Dicey, the three distinguishing features of the principle of  Parliamentary Sovereignty are that Parliament has the right  to make or unmake any law whatever; that no person or  body is recognised by the law of England as having a right  to override or set aside the legislation of Parliament, and  that the right or power of Parliament extends to every part  of the Queen’s dominions  (1). On the other hand, the  essential characteristic of federalism is “the distribution of  limited executive, legislative and judicial authority among  bodies which are coordinate with and independent of  each other”. The supremacy of the constitution is

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fundamental to the existence of a federal State in order to  prevent either the legislature of the federal unit or those of  the member States from destroying or impairing that  delicate balance of power which satisfies the particular  requirements of States which are desirous of union, but not  prepared to merge their individuality in a unity. This  supremacy of the constitution is protected by the authority  of an independent judicial body to act as the interpreter of  a scheme of distribution of powers. Nor is any change  possible in the Constitution by the ordinary process of  federal or State legislation (2). Thus the dominant  characteristic of the British Constitution cannot be claimed  by a Federal Constitution like ours.”  

37. Before we turn to the provisions of Articles 301 to 307 comprising  

Part XIII of the Constitution, we need to also bear in mind the historical  

backdrop in which that part of the Constitution was enacted.  While  

doing so we must at the threshold acknowledge that the historical  

perspective of Part XIII has been explored several times during the past  

in several pronouncements of this Court.  The exposition of different  

stages of evolution and development of what comprises Part XIII today  

has been both extensive as well as incisive.  The decisions of the Court  

have gone into great details while examining the history of Part XIII.  It  

will, therefore, be presumptuous for us to suggest that the historical basis  

of Part XIII is a virgin area being traversed for the first time.  In fairness to  

the scholarly pronouncements that have preceded the present batch  

of cases, we must acknowledge with gratitude the usefulness of the in-

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depth study and understanding of the Judges who have examined and  

traced the evolution of Part XIII while drawing their conclusions from the  

same, no matter such inferences and conclusions have more often than  

not been varied which is but natural when one examines history or the  

events that led to its making.   

 38. It is, in our opinion, unnecessary to refer to all the decisions that  

have till now traced the development of the jurisprudence concerning  

Part XIII from its inception. A reference to some of the decisions alone  

should, in our opinion, suffice.  The first of these decisions to which we  

must make a reference is the Constitution Bench decision in M.P.V.  

Sunderaramier v. State of Andhra Pradesh, AIR 1958 SC 468.  That was a  

case filed under Article 32 of the Constitution of India for a Writ of  

Prohibition restraining the State of Andhra Pradesh from imposing a tax  

on inter-State trade of sale and purchase of yarn.  The levy and  

collection of any such tax was according to the petitioner contrary to  

the provision contained in Article 282 (6) of the Constitution of India.  

One of the questions that fell for consideration of the Court was whether  

the States could impose a tax on inter-State sales having regard to the  

provisions of Articles 246 and 301 of the Constitution of India.  The  

argument was that the freedom guaranteed under Article 301 included

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freedom from taxation with the result that any tax on inter-State sales  

would offend that guarantee.  The contention was rejected by this  

Court in unequivocal terms.  The Court said :  

“(50) This contention suffers, in our opinion, from serious  infirmities. It overlooks that our Constitution was not written  on a tabula-rasa, that a Federal Constitution had been  established under the Government of India Act, 1935, and  though that has undergone considerable change by way  of repeal, modification and addition, it still remains the  framework on which the present Constitution is built, and  that the provisions of the Constitution must accordingly be  read in the light of the provisions of the Government of  India Act.”   

      (Emphasis supplied)      

39. Three years later came the Constitution Bench decision of this  

Court in Atiabari Tea Company Ltd. case (supra). The petitioner in that  

case questioned the constitutional validity of Assam Taxation (on Goods  

Carried by Roads or Inland Waterways) Act, (Assam Act XIII of 1954),  

before the High Court.  The Writ Petition having failed, the matter was  

brought up in appeal before this Court which was heard alongwith  

several petitions filed under Article 32 of the Constitution of India.  The  

impugned legislation levied taxes on certain goods carried by road and  

inland waterways in the State of Assam.  The levy under the legislation  

was challenged primarily on the ground that the same was ultra vires of  

the Constitution inter aila because of their repugnance with the

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provision of Article 301 of the Constitution.  This Court by a majority struck  

down the Constitutional validity of the enactment holding that the  

impugned levy operated directly and immediately as a restriction on  

free trade, commerce and intercourse guaranteed under Article 301 of  

the Constitution of India.  The decision propounded three different  

points of view, one each taken by B.P. Sinha, CJ. and J.C. Shah, J. and  

the third by majority comprising P.B. Gajendragadkar, K.N. Wanchoo  

and K.C. Das Gupta, JJ.  We shall presently deal with the rationale  

underlying the three views but before we do so, we may gainfully  

extract from the decision rendered by Sinha, CJ., the historical  

perspective in which Part XIII of the Constitution was enacted. In Para 9  

of the Report, Sinha, CJ., as His Lordship then was, traced the evolution  

of Part XIII in the following words:  

“9. In order to fully appreciate the implications of the  provisions of Part XIII of the Constitution, it is necessary to  bear in mind the history and background of those  provisions.  The Constitution Act of 1935 (Government of  India Act, 26 (‘Geo. 5, Ch. 2) which envisages the federal  constitution for the whole of India, including what was then  Indian India in contradistinction to British India, which could  not be fully implemented and which also introduced full  provincial autonomy enacted  Section 297 prohibiting  certain restrictions on internal trade in these terms:    297. (1) No Provincial Legislature or Government shall –     (a) By virtue  of the entry in the Provincial Legislative List  relating to trade and commerce within the Province, or the

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entry in that list relating to the production, supply, and  distribution of commodities, have power to pass any law or  take any executive action prohibiting or restricting the  entry into, or export from the Province of goods of any  class or description; or    (b) By virtue of anything in this Act have power to impose  any tax, cess, toll or due which, as between goods  manufactured or produced in the Province and similar  goods not so manufactured or produced, discriminates in  favour of the former, or which, in the case of goods  manufactured or produced outside the Province,  discriminates between goods manufactured or produced  in one locality and similar goods manufactured or  produced in another locality.    (2) Any law passed in contravention of this section shall, to  the extent of the contravention, be invalid.”    10.  It will be noticed that the prohibition contained in the  section quoted above applied only to Provincial  Governments and Provincial Legislatures with reference to  entries in the Provincial Legislative List relating to trade and  commerce within the Province and to production, supply  and distribution of commodities. That section dealt with  prohibitions or restrictions in respect of import into or export  from a Province, of goods generally. It also dealt with the  power to impose taxes etc. and prohibited discrimination  against goods manufactured or produced outside a  Province or goods produced in different localities. Part XIII  of the Constitution has introduced all those prohibitions, not  only in respect of State Legislatures, but of Parliament also.  ….    11. In this connection it has got to be remembered that  before the commencement of the Constitution about two- thirds of India was directly under British rule and was called  ‘British India’ and the remaining about one-third was being  directly ruled by the Princes and was known as “Native  States”. There were a large number of them with varying  degrees of sovereignty vested in them. Those rulers had,  broadly speaking, the trappings of a Sovereign State with  power to impose taxes and to regulate the flow of trade,

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commerce and intercourse. It is a notorious fact that many  of them had erected trade barriers seriously impeding the  free flow of trade, commerce and intercourse, not only  shutting out but also shutting in commodities meant for  mass consumption. Between the years 1947 and 1950  almost all the Indian States entered into engagements with  the Government of India and ultimately merged their  individualities into India as one political unit, with the result  that what was called British India, broadly speaking,  became, under the Constitution, Part A States, and subject  to certain exceptions not relevant to our purpose, the  Native States became Part B States. We also know that  before the Constitution introduced the categories of Part A  States, Part B States and Part C States (excluding Part D  relating to other territories), Part B States themselves, before  their being constituted into so many units, contained many  small States, which formed themselves into Unions of a  number of States, and had such trade barriers and custom  posts, even inter se. But even after the merger, the  Constitution had to take notice of the existence of trade  barriers and therefore had to make transitional provisions  with the ultimate objective of abolishing them all. Most of  those Native States, big or small, had their own taxes,  cesses, tolls and other imposts and duties meant not only  for raising revenue, but also as trade barriers and tariff  walls. It was in the background of these facts and  circumstances that the Constitution by Article 301 provided  for the abolition of all those trade barriers and tariff walls.  When for the first time in the history of India the entire  territory within the geographical boundaries of India, minus  what became Pakistan, was knit into one political unit, it  was necessary to abolish all those trade barriers and  custom posts in the interest of national solidarity, economic  and cultural unity as also of freedom of trade, commerce  and intercourse.”   

(Emphasis supplied)  

40. The majority opinion offered by Gajendragadkar J., also traced the  

history of Part XIII in the following words:    

“33. Let us first recall the political and constitutional  background of Part XIII. It is a matter of common

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knowledge that, before the Constitution was adopted,  nearly two-thirds of the territory of India was subject to  British Rule and was then known as British India, while the  remaining part of the territory of India was governed by  Indian Princes and it consisted of several Indian States. A  large number of these States claimed sovereign rights  within the limitations imposed by the paramount power in  that behalf, and they purported to exercise their legislative  power of imposing taxes in respect of trade and  commerce which inevitably led to the erection of customs  barriers between themselves and the rest of India. In the  matter of such barriers British India was governed by the  provisions of Section 297 of the Constitution Act, 1935. To  the provisions of this section we will have occasion later to  refer during the course of this judgment. Thus, prior to 1950  the flow of trade and commerce was impeded at several  points which constituted the boundaries of Indian States.  After India attained political freedom in 1947 and before  the Constitution was adopted the historical process of the  merger and integration of the several Indian States with the  rest of the country was speedily accomplished with the  result that when the Constitution was first passed the  territories of India consisted of Part A States which broadly  stated represented the provinces in British India, and Part B  States which were made up of Indian States. This merger or  integration of Indian States with the Union of India was  preceded by the merger and consolidation of some of the  States inter-se between themselves. It is with the  knowledge of the trade barriers which had been raised by  the Indian States in exercise of their legislative powers that  the Constitution- makers framed the Articles in Part XIII. The  main object of Article 301 obviously was to allow the free  flow of the stream of trade, commerce and intercourse  throughout the territory of India.”  

41. Then came the decision of this Court in Automobile case (supra)  

wherein, this Court examined the challenge to the Rajasthan Motor  

Vehicles Act, inter aila, on the ground that levy of taxes imposed under

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the said Act were offensive to Article 301 of the Constitution of India.   

S.K. Das, J. speaking for the majority also traced the historical  

background of Part XIII in the following words:  

“7. So far we have set out the factual and legal  background against which the problem before us has to  be solved. We must now say a few words regarding the  historical background. It is necessary to do this, because  extensive references have been made to Australian and  American decisions, Australian decisions with regard to the  interpretation of Section 92 of the Australian Constitution  and American decisions with regard to the Commerce  clause of the American Constitution. This Court pointed out  in the Atiabari Tea Co. case (1961) 1 SCR 809 : (AIR 1961 SC  232),  that it would not be always safe to rely upon the  American or Australian decisions in interpreting the  provisions of our Constitution. Valuable as those decisions  might be in showing how the problem of freedom of trade,  commerce and intercourse was dealt with in other federal  constitutions, the provisions of our Constitution must be  interpreted against the historical background in which our  Constitution was made; the background of problems  which the Constitution-makers tried to solve according to  the genius of the Indian people whom the Constitution- makers represented in the Constituent Assembly. The first  thing to be noticed in this connection is that the  Constitution-makers were not writing on a clean slate. They  had the Government of India Act, 1935 and they also had  the administrative set up which that Act envisaged. India  then consisted of various administrative units known as  Provinces, each with its own administrative set up. There  were differences of language, religion etc. Some of the  Provinces were economically more developed than the  others. Even inside the same Province, there were under  developed, developed and highly developed areas from  the point of view of industries, communications etc. The  problem of economic integration with which the  Constitution-makers were faced was a problem with many  facets. Two questions, however, stood out; one question  was how to achieve a federal, economic and fiscal  integration, so that economic policies affecting the

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interests of India as a whole could be carried out without  putting an ever-increasing strain on the unity of India,  particularly in the context of a developing economy. The  second question was how to foster the development of  areas which were under-developed without creating too  many preferential or discriminative barriers. Besides the  Provinces, there were the Indian States also known as  Indian India. After India attained political freedom in 1947  and before the Constitution was adopted, the process of  merger and integration of the- Indian States with the rest of  the country had been accomplished so that when the  Constitution was first passed the territory of India consisted  of Part A States, which broadly stated, represented the  Provinces in British India, and Part B States which were  made up of Indian States. There were trade barriers raised  by the Indian States in the exercise of their legislative  powers and the Constitution-makers had to make  provisions with regard to those trade barriers as well. The  evolution of a federal structure or a quasi-federal structure  necessarily involved, in the context of the conditions then  prevailing, a distribution of powers and a basic part of our  Constitution relates to that distribution with the three  legislative lists in the Seventh Schedule. … … …”  

42. Hidayatullah J., in a separate dissenting opinion traced at great  

length the historical evolution of not only the federal structure of the  

Government of India Act, 1915 but also the recommendations made by  

the Simon Commission and the Joint Parliamentary Committee on the  

Evolution of such Federalism and for the protection of trade, commerce  

and intercourse.  His Lordship referred to the backdrop in which the  

Government of India Act, 1935 was enacted, including the  

recommendations made by the Butler Committee, the Round Table  

Conference, the Federal Structure Committee, the Federal Legislature

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and Provincial Legislature Committee and the Joint Parliamentary  

Committee to eventually conclude that the avowed object underlying  

all these recommendations and constitutional framework was to ensure  

that the accession of the State to the federation implies its acceptance  

of the principle that it will not set up a barrier to free interchange so  

formidable as to constitute a threat to the future of the federation.   

Based on the historical developments decades before the enactment  

of Government of India Act, 1935, his Lordship concluded:  

“95. The detailed examination of the history lying at the  back of the Government of India Act, 1935 lays bare some  fundamental facts and premises. It shows that the process  through a whole century was the breakup of a highly  centralized Government and the creation of autonomous  Provinces with distinct and separate political existence, to  be combined inter se and with the Indian States, at a later  period, in a federation. To achieve this, not only was there  a division of the heads of legislation, but the financial  resources were also divided and separate fiscs for the  federation and the Provinces were established. The fields  of taxation were demarcated, and those for the Provinces  were chosen with special care to make these units self- supporting as far as possible with enough to spare for  “nation-building activities”. In this arrangement, the door  was open for the Indian States to join on the same basis  and on terms of equality. The most important fact was that  unlike the American and the Canadian Constitutions the  commerce power was divided between the Centre and  the Provinces as the Entries quoted by us clearly show. The  commerce power of the Provinces was exercisable within  the Provinces. The fetter on the commercial power of the  Provinces was placed by Section 297. This was in two  directions. Clause (a) of sub-section (1) banned restrictions  at the barriers of the Provinces on the entry and export of  goods, and clause (b) prohibited discrimination in taxing

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goods between goods manufactured and produced in  the Province as against goods not so manufactured or  produced and local discriminations.”  

(Emphasis supplied)  

43. In the opinion of Hidayatullah J., as his Lordship then was, several  

pitfalls existed in the 1935 Act regarding trade and commerce which  

were sought to be remedied by the framers of the Constitution while  

maintaining its federal structure.  The following passage is, in this regard,  

instructive:  

“96. When drafting the Constitution of India, the  Constituent Assembly being aware of the problems in  various countries where freedom of trade, commerce and  intercourse has been provided differently and also the way  the Courts of those countries have viewed the relative  provisions, must have attempted to evolve a pattern of  such freedom suitable to Indian conditions. The Constituent  Assembly realised that the provisions of Section 297 and  the Chapter on Discriminations in the Government of India  Act, 1935 hardly met the case, and were inadequate. They  had to decide the following questions: (a) whether to give  the commerce power only to Parliament or to divide it  between Parliament and the State Legislatures; (b)  whether to ensure freedom of trade, commerce and  intercourse inter-State, that is to say, at the borders of the  States or to ensure it even intra-State; (c) whether to make  the prohibition against restrictions absolute or qualified,  and if so, in what manner; (d) if qualified, by whom was the  restriction to be imposed and to what extent; (e) whether  the freedom should be to the individual or also to trade  and commerce as a whole; (f) what to do with the existing  laws in British India and more so, in the acceding Indian  States; (g) whether any special provisions were needed for  emergencies; (h) what should be the special provisions to  enable the States to levy taxes on sale of goods, which

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taxes were to be the main source of income for the States  according to the experts. All these matters have, in fact,  been covered in Part XIII, and the pitfalls which were  disclosed in the Law Reports of the Countries which had  accepted freedom of trade and commerce have been  attempted to be avoided by choosing language  appropriate for the purpose. In addition to this, the broad  pattern of the political set-up, namely, a federation of  autonomous States was not lost sight of. These autonomous  conditions had strengthened during the operation of the  1935 Constitution and led to what Prof. Coupland  described as “Provincial-patriotism”, for which the reason,  according to the learned Professor was:    “In the course of the last few years, moreover, the sense of  Provincial patriotism has been strengthened by the advent  of a full Provincial self-government. The people took a new  pride in Governments that were now in a sense theirs.” (The  Constitutional Problem in India, part III p. 40).”  

44. The historical backdrop painted by the decisions of this Court  

referred to above has not been challenged on a question of fact.   

Inferences drawn from the same may have, as noticed earlier, varied  

depending on the individual perspective of the Judges about the said  

backdrop.  The common thread that runs through the historical  

narratives in the pronouncements of this Court however is discernible  

and may be briefly summed-up at this stage.  The first of these threads  

that runs through the historical perspective is the fact that before  

commencement of the Constitution nearly 2/3rd of the country was  

ruled by the British while the remaining 1/3rd was ruled by the Princes

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also known as native States that enjoyed varying degrees of  

sovereignty over their respective territories.  These rulers had the power  

to impose taxes and to regulate the flow of trade, commerce and  

intercourse.  Some of them had erected trade barriers thereby  

impeding free flow of trade, commerce and intercourse.  With the  

merger of these Princely States into the dominion of India to constitute  

one single political entity, that part of the country that was ruled by the  

British came to be known as Part-A State while the native States  

became Part B States.  What is significant is that even after the merger  

of these States, the Constitution had to acknowledge the existence of  

trade barriers and make transitional provisions with a view to eventually  

abolishing the same.  It was in that background that the Constitution by  

Article 301 provided for the abolition of all such trade barriers  

consequent upon the entire geographical boundaries of India being  

knit into one political unit.  The whole object underlying the removal of  

such barriers was to facilitate free trade, commerce and intercourse in  

the interest of national solidarity and economic unity of the country.   

The evolution of Articles 301 to 307 comprising Part XIII of the  

Constitution is also punctuated by several events, twists and turns to  

which we may briefly refer at this stage, but, while we may do so, we

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need to remember that Section 297 of the Government of India Act,  

1935 dealt with the subject that eventually came under the umbrella of  

Part XIII and prohibited provincial governments from imposing barriers  

on trade within the country.  The said provision also prohibited levy of  

cess, tolls or other tax duties which discriminated between the goods  

manufactured in one locality as against similar goods manufactured  

elsewhere.  It is because of the said provision that Venkatarama Iyer, J.  

in MPV Sunderaramier’s case (supra) made the observation that the  

Constitution was not written on a tabula rasa.     

45. The first germ plasma for Article 301 was located in what was  

introduced as Clause 13 in the draft submitted by the Sub-Committee  

on fundamental rights comprising Mr. K.M. Munshi, Sir Alladi  

Krishnaswami Ayyar and Sir B.N. Rau amongst others.  The clause was in  

the following words:  

  “Subject to regulation by the law of the Union, trade,  

commerce and intercourse among the units, whether by  means of internal carriage or by ocean navigation, shall be  free:  

  Provided that any unit may by law impose reasonable  

restrictions thereon in the interest of public order, morality or  health.”  

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From the note of Sir B.N. Rau it is evident that the first part of clause 13  

(supra) was adopted from Section 92 of the Australian Constitution  

while the proviso at the end of the clause was new.  

 46. Sir Alladi Krishnaswami Ayyar in the Draft Report of 10th, 14th and  

15th April, 1947 in relation to Clause 13 suggested that it must be made  

clear that:  

“(1) goods from other parts of India than in the units’  concerned coming into the units cannot escape duties  and taxes to which the goods produced in the units in  themselves are subject.  

  (2) It must also be open to the unit in an emergency to  

place restrictions on the rights declared by the clause.”    

 47. The above suggestions were accepted and it was modified and  

incorporated as Clause 14 in the following words:  

  “14.  (1) Subject to regulation by the law of the Union  

trade, commerce and intercourse among the units by and  between the citizens shall be free:  

  Provided that any unit may by law impose reasonable  

restrictions in the interest of public order, morality or health  or in an emergency:  

  Provided that nothing in this section shall prevent any unit  

from imposing on goods imported from other units the  same duties and taxes to which the goods produced in the  unit are subject:  

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Provided further that no preference shall be given by any  regulation of commerce or revenue by a unit to one unit  over another.  

  [N.B. – A proviso will have to be added to meet the  

difficulty pointed out in para 6 of our report.]     (2) Trade, commerce or intercourse within the territories of  

the Union by or with any person other than the citizens shall  be regulated and controlled by the law of the Union.  

48. The above clause then came up for consideration before the  

Advisory Committee where an elaborate debate ensued.  What is of  

considerable importance is the statement of Sir Alladi Krishnaswami  

Ayyar where he explained the purpose of enabling a State to impose  

reasonable restriction in the interest of public order, morality, health or  

in an emergency:  

“Chairman: Then let us take up clause 14    

C. Rajagopalachari:  I Think we should add to 14 (1) that this  

shall not be a bar to the imposition of taxes for genuine  purposes of revenue.    

Many Members: That comes later on:  “N.B. A proviso will  

have to be added to meet the difficulty pointed out in para  6 of our report.”    

C. Rajagopalachari: That is why I am adding it.  

 Alladi Krishnaswami Ayyar:  “Subject to regulation by the  

law of the Union, trade, commerce, and intercourse among  the units by and between the citizens shall be free.”  That is  the general principle.  Then come the exceptions,  “Provided that any unit may by law impose reasonable  restrictions in the interest of public order, morality or health

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or in an emergency.”  Suppose there is a general famine,  and people are starved, that is what is meant here to be  dealt with.    

And then “Provided that nothing in this section shall prevent  any unit from imposing on goods imported from other units  the same duties and taxes to which the goods produced in  the unit are subject.”  That is to say, we ought not to  differentiate; but at the same time, goods coming in should  not go scot-free; they should be subject to the same duty  as goods produced in the area.    And then “Provided further that no preference shall be  given by any regulation of commerce or revenue by a unit  to one unit over another.”  Now, kindly read paragraph 6 of  the report, regarding adding a proviso.     

K.M. Panikkar: Rajaji (C. Rajagopalachari) has raised the  

question of the right of the units to raise taxes, and says this  right should not be denied. I, however, think this is a  dangerous power to be given to the units.  This may result in  the creation of so many competing units.  We have allowed  for two things.  We have allowed the unit to tax its own  industries.  We also allow things brought in to be taxed, for  the sake of parity.  But our friends want to go a little further  and say that the right to impose taxes, or transit duty or  some other kind of duty must be given to the units.  That I  am afraid, will be a negation of the clause.  There are  certain rates and duties existing in Indian States which for  budgetary and other reasons cannot now be extinguished  immediately.  It may be possible to extinguish them over a  period of time, by agreement, but not immediately.    

C. Rajagopalachari:  If the States everywhere can impose  

taxes and duties for revenue, cannot the provinces also do  so?    

Alladi Krishnaswami Ayyar: We do not give a carte blanche  

to the States.  It has been pointed out that certain condition  of things obtain at present in the States, and …    

K.M. Panikkar:  Let me explain the position.  The position  

with regard to the internal customs in the States is

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complicated.  In a large number of States these customs or  duties do not exist.  For example for the whole of the Punjab  States there is no right for internal customs.  For Hyderabad  they have the right to impose a tax up to 5% only, both on  imports and exports.  In Travancore and Cochin it is  governed by what is called inter-portal convention.  A large  number of States have no right whatever even now for  imposing customs duty, but a considerable number of them  do enjoy this power and their budgetary position today is  based on the customs duties they receive, both the  maritime States and the internal States.  Therefore  arrangements will have to be made with them by  agreement and contract for setting this matter.    

Alladi Krishnaswami Ayyar: The Union Powers Committee’s  

attention was drawn to this matter and it was suggested by  Sir V.T. Krishnamachari and Sir B.L. Mitter that some  reference should be made to it in their report.  We wanted  to permit the States to enjoy the indulgence they have  been enjoying.  But we should guard against converting the  country into competing units; that will be against the  federation idea.    

Chairman: What shall we do about the note? A proviso will  

have to be added to meet the difficulty pointed out in para  6 of the report.  Shall we leave it as it is or shall we draft it?    

C. Rajagopalachari:   I would request members who have  

given thought to this subject to please inform me how the  units will raise their revenue.  As it is, the Union does not  contemplate the distribution of subsidies to the provinces.   The provinces or groups differ among themselves, some are  rich and some are poor.  Some are capable of managing  with their existing resources; but others may have to  increase their revenue for managing their affairs.  If you  impose so many limitations on them, how can they do that?   It is all very well to say free trade is necessary; but how are  the provinces to live?    

Alladi Krishnaswami Ayyar:  So far as the provincial  

legislatures are concerned, there is provision in Sec. 297 of  the present Government of India Act itself: (Reads) “No  Provincial Legislature or Government shall by virtue of entry

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*** have power to pass any law or take any executive  action ***description…”    

C. Rajagopalachari:  But at present we have the receipts  

from customs and other receipts.    

Alladi Krishnaswami Ayyar: The other day the Madras  

Premier said he could stop the import of textiles from  Bombay and other places outside Madras: but it was  pointed out to him that until the constitution is altered he  cannot do so.  This theory of self-sufficiency of different units  is dangerous in our country, because we have to depend  upon one another.    Govind Ballabh Pant: There is unanimity about the body of  

this clause and it is clear that there should not be any  discrimination against one unit by another unit.  Otherwise  we will be going against the very sense of a Union or a  Federal Constitution.  If the units are to be discriminated  against, we will come to blows more often than otherwise.   Therefore this should be avoided.  The only thing to be  considered is how to give effect to the suggestion made in  para 6 of the President’s letter which we have received  through the chairman.  Should we append a note to the  effect that the Constituent Assembly may consider how  best to give effect to this clause in relation to the States or  shall we put up a draft.  If we are not going to put up a  draft, then the matter is simple enough.”    

49. The Advisory Committee accepted the recommendation of the  

Sub-Committee in relation to Clause 14 with one change that the sub-

clause providing for central regulation of trade by or with non-citizens  

was dropped as being vague and unnecessary.  The Advisory  

Committee in its report submitted on 23rd April, 1947 incorporated the  

above provision as Clause 10.  Certain amendments to the said clause  

were suggested and adopted by the Constituent Assembly.   

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 50. In the first Draft Constitution of October, 1947, Clause 17  

underwent further amendments and eventually appeared in the Draft  

Constitution of 1948 as Clause 16 incorporated in the Fundamental  

Rights Chapter in the following words:  

  “16. Subject to the provisions of Article 244 of this  Constitution and of any law made by Parliament, trade,  commerce and intercourse throughout the territory of India  shall be free.”  

51. It is noteworthy to mention here that Inter-State trade and  

commerce was dealt with in Articles 243, 244 and 245 in the Draft  

Constitution of 1948 which Articles were in the following terms:  

  “243. No preference shall be given to one State over  another nor shall any discrimination be made between  one State and another by any law or regulation relating to  trade or commerce, whether carried by land, water or air.  

  244. Notwithstanding anything contained in article 16 or in  

the last preceding article of this Constitution, it shall be  lawful for any State –  

 (a) to impose on good imported from other  

States any tax to which similar goods  manufactured or produced in that State  are subject, so, however, as not to  discriminate between goods so imported  and goods so manufactured or  produced; and  

(b) to impose by land such reasonable  restrictions on the freedom of trade,

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commerce or intercourse with that State  as may be required in the public interests:    Provided that during a period of five years  from the commencement of this  Constitution the provisions of clause (b) of  this article shall not apply to trade or  commerce in any of the commodities  mentioned in clause (a) of Article 306 of  this Constitution.  

  245. Parliament shall by law appoint such authority as it  

considers appropriate for the carrying out of the provisions  of Articles 243 and 244 of this Constitution and confer on  the authority so appointed such powers and such duties as  it thinks necessary.”  

52. The Ministry of Industry and Supply expressed some reservation  

regarding clause (b) of Article 244 and demanded abolition of the said  

clause altogether.  The Ministry appears to have argued that it was not  

possible to foresee the circumstances in which the freedom of trade,  

commerce or intercourse with a State will need to be interfered with by  

that State in the public interest, unless it be on the basis of  

discrimination between the residents of one State to another, and this  

would be wholly contrary to the spirit of the Constitution. [See: B. Shiva  

Rao; the Framing of India’s Constitution, Volume-IV, Page 329]  

  53. The note in support of the proposed clause (b) to Article 244,  

however, clearly suggests that restrictions referred to in clause (b) were

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meant to be restrictions other than by way of taxation.  The explanatory  

note which was appended by Sir B.N. Rau was in the following words:  

  “Note: During a period of depression owing to destruction  by flood or otherwise of crops in any particular State, it  may be necessary for the State to impose restrictions on  the export of any crop from such State in the public  interests.  Similarly on the outbreak of any epidemic  disease, like plague, in a State it may be necessary for a  neighbouring State to impose restrictions on the freedom  of intercourse between the inhabitants of that State with  the inhabitants of such neighbouring State.  Clause (b) of  Article 244 is intended to give power to the State to impose  such restrictions.”  

54. On 8th of September, 1949, Dr. B.R. Ambedkar moved an  

amendment seeking to delete Articles 243, 244 and 245 and the same  

was adopted.  Simultaneously, a new Part XA was introduced  

containing draft Article 274-A to E.  Dr. Ambedkar informed the House  

that the Articles that were otherwise scattered were now brought  

together so as to ensure that members could get a holistic idea  

regarding trade and commerce.  Article 274-A was a repetition of  

Article 16 and laid down the general principle. Article 274-B  

empowered Parliament to impose restrictions in public interest. Article  

274-C prohibited Parliament and the State legislatures from making any  

law giving any preference to one State over another, or making any

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discrimination between one State and another, except when  

Parliament found it necessary to do so to deal with a situation arising  

from scarcity of goods; Article 274-D vested with the State legislatures  

the power to impose non-discriminatory tax qua external goods and to  

impose reasonable restrictions in public interest and Article 274-E  

provided for an Inter-State Commission.   

55. The Constituent Assembly Debates suggests that the introduction  

of Articles 274A to 274E was severely criticized by several members of  

the Assembly including Thakur Das Bhargava and Dr. P.S. Deshmukh  

who moved several amendments to these clauses but the same were  

rejected and Articles 274-A to 274-E including Articles 274 DD and 274  

DDD were adopted without any modification.  These Articles are now  

renumbered and appear as Articles 301 to 307 of the Constitution of  

India.  

 56. It is in the above backdrop that question No.1shall have to be  

answered which turns on a true and correct interpretation of Article 301  

of the Constitution.  We must at the threshold say that while attempting  

to answer the question we are not on virgin ground, for this Court has in  

Atiabari Tea Company case (supra) examined the matter at great

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length.  The decision of this Court in Automobile case (supra) has  

modified the view in Atiabari, by bringing in the concept of  

compensatory taxes which this Court held to be outside Part XIII of the  

Constitution.   

 57. While J.C. Shah, J. took the view that all taxes regardless whether  

they are discriminatory or otherwise would constitute an impediment  

on free trade and commerce guaranteed under Article 301 of the  

Constitution of India, Sinha, CJ., held that taxes per se were totally  

outside the purview of Article 301 and could never constitute a  

restriction except where the same operated as a fiscal barrier that  

prevented free trade, commerce and intercourse.  The view taken by  

Justice Shah, J. was not supported by any one of the counsel  

appearing for the parties for it was candidly accepted that the same  

was an extreme view that was legally unsupportable.  What was all the  

same argued on behalf of the dealers/assessees was that the majority  

view that propounded the test of “direct and immediate” effect on  

free trade, commerce and intercourse was the correct view.  Reliance,  

in particular, was placed by learned counsel for the dealers/assessees  

upon the following passages appearing in the majority judgment

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authored by Gajendragadkar, J. to contend that the same  

propounded the correct legal position:  

“50. Let us now revert to Article 301 and ascertain the  width and amplitude of its scope. On a careful  examination of the relevant provisions of Part XIII as a  whole as well as the principle of economic unity which it is  intended to safeguard by making the said provisions, the  conclusion appears to us to be inevitable that the content  of freedom provided for by Article 301 was larger than the  freedom contemplated by Section 297 of the Constitution  Act of 1935, and whatever else it may or may not include,  it certainly includes movement of trade which is of the very  essence of all trade and is its integral part. If the transport  or the movement of goods is taxed solely on the basis that  the goods are thus carried or transported that, in our  opinion, directly affects the freedom of trade as  contemplated by Article 301. If the movement, transport or  the carrying of goods is allowed to be impeded,  obstructed or hampered by taxation without satisfying the  requirements of Part XIII the freedom of trade on which so  much emphasis is laid by Article 301 would turn to be  illusory. When Article 301 provides that trade shall be free  throughout the territory of India primarily it is the movement  part of the trade that it has in mind and the movement or  the transport part of trade must be free subject of course  to the limitations and exceptions provided by the other  Articles of Part XIII. That we think is the result of Article 301  read with the other Articles in Part XIII.    51. Thus the intrinsic evidence furnished by some of the  Articles of Part XIII shows that taxing laws are not excluded  from the operation of Article 301; which means that tax  laws can and do amount to restrictions freedom from  which is guaranteed to trade under the said Part. Does  that mean that all tax laws attract the provisions of Part XIII  whether their impact on trade or its movement is direct  and immediate or indirect and remote? It is precisely  because the words used in Article 301 are very wide, and  in a sense vague and indefinite that the problem of  construing them and determining their exact width and  scope becomes complex and difficult. However, in

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interpreting the provisions of the Constitution we must  always bear in mind that the relevant provision “has to be  read not in vacuo but as occurring in a single complex  instrument in which one part may throw light on another”.  (Vide: James v. Commonwealth of Australia – 1936 A.C.  578 at pg. 613). In construing Article 301 we must,  therefore, have regard to the general scheme of our  Constitution as well as the particular provisions in regard to  taxing laws. The construction of Article 301 should not be  determined on a purely academic or doctrinnaire  considerations; in construing the said Article we must  adopt a realistic approach and bear in mind the essential  features of the separation of powers on which our  Constitution rests. It is a federal constitution which we are  interpreting, and so the impact of Article 301 must be  judged accordingly. Besides, it is not irrelevant to  remember in this connection that the Article we are  construing imposes a constitutional limitation on the power  of the Parliament and State Legislatures to levy taxes, and  generally, but for such limitation, the power of taxation  would be presumed to be for public good and would not  be subject to judicial review or scrutiny. Thus considered  we think it would be reasonable and proper to hold that  restrictions freedom from which is guaranteed by Article  301, would be such restrictions as directly and immediately  restrict or impede the free flow or movement of trade.  Taxes may and do amount to restrictions; but it is only such  taxes as directly and immediately restrict trade that would  fall within the purview of Article 301. The argument that all  taxes should be governed by Article 301 whether or not  their impact on trade is immediate or mediate, direct or  remote, adopts, in our opinion, an extreme approach  which cannot be upheld. If the said argument is accepted  it would mean, for instance, that even a legislative  enactment prescribing the minimum wages to industrial  employees may fall under Part XIII because in an  economic sense an additional wage bill may indirectly  affect trade or commerce. We are, therefore, satisfied that  in determining the limits of the width and amplitude of the  freedom guaranteed by Article 301 a rational and  workable test to apply would be: Does the impugned  restriction operate directly or immediately on trade or its  movement? It is in the light of this test that we propose to

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examine the validity of the Act under scrutiny in the  present proceedings.”  

58. On behalf of the respondent-States it was per contra argued that  

the power to levy taxes is a sovereign power that remains totally  

unaffected by Article 301 of the Constitution of India.  Free trade,  

commerce and intercourse was not, according to the learned counsel,  

to be understood as free from any restrictions, leave alone free from  

taxes which the State legislatures were otherwise competent to levy.   

Enunciation of law by Sinha, CJ. was according to the learned Attorney  

General for India and learned Counsel appearing for the States, the  

correct view which ought to be accepted in preference to the other  

two contrary views propounded in the judgment. Reliance, in  

particular, was placed by Mr. Rohatgi and learned Counsel for the  

respondent-States upon the following passages appearing in Sinha,  

CJ.’s judgment:  

“14. Viewed in this all comprehensive sense taxation on  

trade, commerce and intercourse would have many  ramifications and would cover almost the entire field of  public taxation, both in the Union and in the State Lists. It is  almost impossible to think that the makers of the  Constitution intended to make trade, commerce and  intercourse free from taxation in that comprehensive sense.  If that were so, all laws of taxation relating to sale and  purchase of goods on carriage of goods and  commodities, men and animals, from one place to

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another, both inter-State and intra-State, would come  within the purview of Article 301 and the proviso to Article  304 (b) would make it necessary that all Bills or  Amendments of pre-existing laws shall have to go through  the gamut prescribed by that proviso. That will be putting  too great an impediment to the power of taxation vested  in the States and reduce the States’ limited sovereignty  under the Constitution to a mere fiction. That extreme  position has, therefore, to be rejected as unsound.    

15. In this connection, it is also pertinent to bear in mind  

that all taxation is not necessarily an impediment or a  restraint in the matter of trade, commerce and intercourse.  Instead of being such impediments or restraints, they may,  on the other hand, provide the wherewithals to improve  different kinds of means of transport, for example, in cane  growing areas, unless there are good roads, facility for  transport of sugarcane from sugarcane fields to sugar mills  may be wholly lacking or insufficient. In order to make new  roads as also to improve old ones, cess on the grower of  cane or others interested in the transport of this commodity  has to be imposed, and has been known in some parts of  India to have been imposed at a certain rate per md. or  ton of sugarcane transported to sugar factories. Such an  imposition is a tax on transport of sugarcane from one  place to another, either intra-State or inter-State. It is the  tax thus realised that makes it feasible for opening new  means of communication or for improving old ones. It  cannot, therefore, be said that taxation in every case must  mean an impediment or restraint against free flow of trade  and commerce. Similarly, for the facility of passengers and  goods by motor transport or by railway, a surcharge on  usual fares or freights is levied, or may be levied in future.  But for such a surcharge, improvement in the means of  communication may not be available at all. Hence, in my  opinion, it is not correct to characterise a tax on  movement of goods or passengers as necessarily  connoting an impediment, or a restraint, in the matter of  trade and commerce. That is another good reason in  support of the conclusion that taxation is not ordinarily  included within the terms of Article 301 of the Constitution.    16. In my opinion, another very cogent reason for holding

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that taxation simpliciter is not within the terms of Article 301  of the Constitution is that the very connotation of taxation  is the power of the State to raise money for public purposes  by compelling the payment by persons, both natural and  juristic, of monies earned or possessed by them, by virtue of  the facilities and protection afforded by the State. Such  burdens or imposts, either direct or indirect, are in the  ultimate analysis meant as a contribution by the citizens or  persons residing in the State or dealing with the citizens of  the State, for the support of the Government, with  particular reference to their respective abilities to make  such contributions. Thus public purpose is implicit in every  taxation, as such. Therefore, when Part XIII of the  Constitution speaks of imposition of reasonable restrictions  in public interest, it could not have intended to include  taxation within the generic term “reasonable restrictions”.  This Court has laid it down in the case of Ramjilal v. Income  Tax Officer, Mohindargarh(1951 SCR 127 at page 136) (AIR  1951 SC 97 at page 100),  that imposition and collection of  taxes by authority of law envisaged by Article 265 is outside  the scope of the expression “deprivation of property” in  Article 31(1) of the Constitution. Reasonable restrictions as  used in Part III or Part XIII of the Constitution would in most  cases be less than total deprivation of property rights.  Hence, Part XII dealing with finance etc. as already  indicated, has been treated as a Part dealing with the  sovereign power of the State to impose taxes, which must  always mean imposing burdens on citizens and others, in  public interest. If a law is passed by the Legislature  imposing a tax which in its true nature and effect is meant  to impose an impediment to the free flow of trade,  commerce and intercourse, for example, by imposing a  high tariff wall, or by preventing imports into or exports out  of a State, such a law is outside the significance of  taxation, as such, but assumes the character of a trade  barrier which it was the intention of the Constitution-  makers to abolish by Part XIII. The objections against the  contention that taxation was included within the  prohibition contained in Part XIII may thus be summarised:  (1) Taxation, as such, always implies that it is in public  interest. Hence, it would be outside particular restrictions,  which may be characterised by the courts as reasonable  and in public interest. (2) The power is vested in a sovereign

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State to carry on Government. Our Constitution has laid  the foundations of a welfare State, which means very  much expanding the scope of the activities of  Government and administration, thus making it necessary  for the State to impose taxes on a much larger scale and in  much wider fields. The legislative entries in the three Lists  referred to above empowering the Union Government and  the State Governments to impose certain taxations with  reference to movement of goods and passengers would  be rendered ineffective, if not otiose, if it were held that  taxation simpliciter is within the terms of Article 301. (3) If  the argument on behalf of the appellants were accepted,  many taxes, for example, sales tax by the Union and by the  States, would have to go through the gamut prescribed in  Articles 303 and 304, thus very much detracting from the  limited sovereignty of the States, as envisaged by the  Constitution. (4) Laws relating to taxation, which is  essentially a legislative function of the State, will become  justiciable and every time a taxation law is challenged as  unconstitutional, the State will have to satisfy the courts —  a course which will seriously affect the division of powers on  which modern constitutions, including ours, are based. (5)  Taxation on movement of goods and passengers is not  necessarily an impediment.    17. That conclusion leads to a discussion of the other  extreme position that taxation is wholly out of the purview  of Article 301. That extreme position is equally untenable in  view of the fact that Article 304 contains, and Article 306,  before it was repealed in 1956, contained, reference to  taxation for certain purposes mentioned in those Articles.  But Article 306, which now stands repealed, contained  references to tax or duty on the import of goods into one  State from another or on the exports of goods from one  State to another. Such imposts were really in the nature of  impediments to the free flow of goods and commodities  on account of customs barriers, which it was the intention  of Article 301 to abolish. Similarly, Article 304 while  recognising the power of a State Legislature to tax goods  imported inter-State, insists that a similar tax is imposed on  goods manufactured or produced within the State. The  Article thus brings out the clear distinction between  taxation as such for the purpose of revenue and taxation

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for purposes of making discrimination or giving preference,  both of which are treated by the Constitution as  impediments to free trade and commerce. In other words,  so long as the impost was not in the nature of an  impediment to the free flow of goods and commodities  between one State and another, including in this  expression Union territories also, its legality was not subject  to an attack based on the provisions of Part XIII. But that  does not mean that State Legislatures derive their power of  taxation by virtue of what is contained in Article 304. Article  304 only left intact such power of taxation, but contained  the inhibition that such taxes shall not be permitted to have  the effect of impeding the free flow of goods and  commodities.”    

Sinha, CJ. concluded as follows:    

“18. ….. Thus, on a fair construction of the provisions of Part  XIII, the following propositions emerge: (1) trade,  commerce, and intercourse throughout the territory of  India are not absolutely free, but are subject to certain  powers of legislation by Parliament or the Legislature of a  State; (2) the freedom declared by Article 301 does not  mean freedom from taxation simpliciter, but does mean  freedom from taxation which has the effect of directly  impeding the free flow of trade, commerce and  intercourse; (3) the freedom envisaged in Article 301 is  subject to non-discriminatory restrictions imposed by  Parliament in public interest (Article 302); (4) even  discriminatory or preferential legislation may be made by  Parliament for the purpose of dealing with an emergency  like a scarcity of goods in any part of India [Article 303(2)];  (5) reasonable restrictions may be imposed by the  Legislature of a State in the public interest [Article 304(b)];  (6) non-discriminatory taxes may be imposed by the  Legislature of a State on goods imported from another  State or other States, if similar taxes are imposed on goods  produced or manufactured in that State [Article 304(a)];  and lastly (7) restrictions imposed by existing laws have  been continued, except insofar as the President may by  order otherwise direct (Article 305).”  

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59. Before we examine the rival submissions, we must also refer to the  

decision of this Court in Automobile case (supra) which added a new  

dimension to the legal exposition in Atiabari case (supra) by declaring  

that taxes that were compensatory in nature fell outside Part XIII and  

could never be treated as restrictions offensive to Article 301 of the  

Constitution.  S.K. Das, J. speaking for the majority explained the  

concept of compensatory taxes falling outside Part XIII in the following  

words:  

“10… As the language employed in Article 301 runs  unqualified the Court, bearing in mind the fact that that  provision has to be applied in the working of an orderly  society, has necessarily to add certain qualifications  subject to which alone that freedom may be exercised.  This point has been very lucidly discussed in the dissenting  opinion which Fullagar, J. wrote in McCarter v. Brodie  

(1950) 80 CLR 432 an opinion which was substantially  approved by the Privy Council in Hughes and Vale  Proprietary Ld. v. State of New South Wales 1955 AC 241.  

The learned Judge gave several examples to show the  distinction between what was merely permitted regulation  and what was true interference with freedom of trade and  commerce. He pointed out that in the matter of motor  vehicles most countries have legislation which requires the  motor vehicle to be registered and a fee to be paid on  registration. Every motor vehicle must carry lamps of a  specified kind in front and at the rear and in the hours of  darkness these lamps must be alight if the vehicle is being  driven on the road. Every motor vehicle must carry a  warning device, such as a horn; it must not be driven at a  speed or in a manner which is dangerous to the public. In  certain localities a motor vehicle must not be driven at  more than a certain speed. The weight of the load which  may be carried on a motor vehicle on a public highway is  limited. Such examples may be multiplied indefinitely.

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Nobody doubts that the application of rules like the above  does not really affect the freedom of trade and  commerce; on the contrary they facilitate the free flow of  trade and commerce. The reason is that these rules cannot  fairly be said to impose a burden on a trader or deter him  from trading: it would be absurd, for example, to suggest  that freedom of trade is impaired or hindered by laws  which require a motor vehicle to keep to the left of the  road and not drive in a manner dangerous to the public. If  the word “free” in Article 301 means “freedom to do  whatever one wants to do”, then chaos may be the result;  for example, one owner of a motor vehicle may wish to  drive on the left of the road while another may wish to  drive on the right of the road. If they come from opposite  directions, there will be an inevitable clash. Another class  of examples relates to making a charge for the use of  trading facilities, such as, roads, bridges, aerodromes etc.  The collection of a toll or a tax for the use of a road or for  the use of a bridge or for the use of an aerodrome is no  barrier or burden or deterrent to traders who, in their  absence, may have to take a longer or less convenient or  more expensive route. Such compensatory taxes are no  hindrance to anybody’s freedom so long as they remain  reasonable; but they could of course be converted into a  hindrance to the freedom of trade. If the authorities  concerned really wanted to hamper anybody’s trade,  they could easily raise the amount of tax or toll to an  amount which would be prohibitive or deterrent or create  other impediments which instead of facilitating trade and  commerce would hamper them. It is here that the  contrast, between “freedom” (Articles 301) and  “restrictions” (Articles 302 and 304) clearly appears: that  which in reality facilitates trade and commerce is not a  restriction, and that which in reality hampers or burdens  trade and commerce is a restriction. It is the reality or  substance of the matter that has to be determined. It is not  possible a priori to draw a dividing line between that which  would really be a charge for a facility provided and that  which would really be a deterrent to a trade; but the  distinction, if it has to be drawn, is real and clear. For the  tax to become a prohibited tax it has to be a direct tax the  effect of which is to hinder the movement part of trade. So  long as a tax remains compensatory or regulatory it cannot

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operate as a hindrance.      

xxx xxx xxx    

14. After carefully considering the arguments advanced  before us we have come to the conclusion that the narrow  interpretation canvassed for on behalf of the majority of  the States cannot be accepted, namely, that the relevant  articles in Part XIII apply only to legislation in respect of the  entries relating to trade and commerce in any of the lists of  the Seventh Schedule. But we must advert here to one  exception which we have already indicated in an earlier  part of this judgment. Such regulatory measures as do not  impede the freedom of trade, commerce and intercourse  and compensatory taxes for the use of trading facilities are  not hit by the freedom declared by Article 301. They are  excluded from the purview of the provisions of Part XIII of  the Constitution for the simple reason that they do not  hamper trade, commerce and intercourse but rather  facilitate them.    

xxx xxx xxx    

17. We have, therefore, come to the conclusion that  neither the widest interpretation nor the narrow  interpretations canvassed before us are acceptable. The  interpretation which was accepted by the majority in the  Atiabari Tea Co. case is correct, but subject to this  

clarification. Regulatory measures or measures imposing  compensatory taxes for the use of trading facilities do not  come within the purview of the restrictions contemplated  by Article 301 and such measures need not comply with  the requirements of the proviso to Article 304(b) of the  Constitution.”  

60. Hidayatullah, J. in his dissenting judgment, however, took the view  

that even when a tax may be compensatory in character it would be a  

valid levy only if it goes through the process of presidential assent in

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terms of Article 304(b) of the Constitution of India and the proviso  

thereto.  The following passage in this regard is relevant:  

“125. That a tax is a restriction when it is placed upon a  trade directly and immediately may be admitted. But  there is a difference between a tax which burdens a trader  in this manner and a tax, which being general, is paid by  tradesmen in common with others. The first is a levy from  the trade by reason of its being trade, the other is levied  from all, and tradesmen pay it because everyone has to  pay it. There is a vital difference between the two, viewed  from the angle of freedom of trade and commerce. The  first is an impost on trade as such, and may be said to  restrict it; the second may burden the trader, but it is not a  “restriction” of the trade. To refuse to draw such a  distinction would mean that there is no taxing entry in Lists I  and II which is not subject to Articles 301 and 304, however  general the tax and however non-discriminatory its  imposition. To bring all the taxes within the reach of Article  301 and thus to bring them also within the reach of Article  304 is to overlook the concept of a Federation, which  allows freedom of action to the States, subject, however,  to the needs of the unity of India. Just as unity cannot be  allowed to be frittered away by insular action the  existence of separate States is not to be sacrificed by a  fusion beyond what the Constitution envisages. No doubt.  Part XIII ensures economic unity to India and combines the  federating States into the larger State called India. The  Constitution also permits independent powers of taxation.  What the Constitution does not permit is that trade,  commerce and intercourse should be rendered “unfree”.  Trade and commerce remain free even when general  taxes are paid by tradesmen in common with non- tradesmen. The question whether a tax offends Part XIII  can only arise when it seeks to tax trade, commerce and  intercourse. Support for the contrary proposition is not to be  found in 1936 AC 578 James v. Commonwealth. The Privy  

Council in James v. Commonwealth did not lay down:    

“Every step in the series of operations which  constitutes particular transaction is an act of  trade, and control under the State law of any of

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these steps must be an interference with ifs  freedom as trade” (p.629)    

This passage represents the view held in McArthur’s  case 1920 (28) CLR 530. That case was disapproved at p.  631. We have already dealt with this view at some length.    126. Thus, taxation laws and taxes must be divided into two  kinds. Taxes which are general and for revenue purposes  which fall on those engaged in trade, commerce and  intercourse in the same way as they fall on others not so  engaged cannot normally be within the reach of Part XIII.  A motor transport owner cannot claim that he will not pay  property tax in respect of his garage buildings or electricity  tax for the electricity he consumes in lighting them, or  income tax on his profits. Part XIII has nothing to do with  such taxes even though they fall upon tradesmen.    

xx xxx xxx xxx    

132. In our judgment, the first test to apply is what is the  object and scope of the legislation? A regulation of trade  and commerce may achieve some public purpose which  affects trade and commerce incidentally but without  impairing the freedom. Sometimes, however, the  regulation itself may amount to a restriction, and if such a  stage is reached, then under our Constitution the restriction  must be reasonably in the public interest, and the  President’s prior sanction must be obtained, if the law  imposing such restriction is made by the State Legislature,  If, however, it does not reach the stage of restriction of  trade and remains only a regulation incidentally touching  trade and commerce, the regulation is outside the  operation of Articles 301 and 304. It is on this ground that  laws prescribing the rule of the road and like provisions  already referred to as well as a regulation that the height  to which trucks may be loaded must be such as not to  endanger the overhead bridges or wires, do not have to  go before the President, since they do not affect the  freedom guaranteed. The object of such laws cannot be  regarded as a restriction of trade and commerce.  Freedom in Article 301 does not mean anarchy. Similarly, a  demand for a tax from traders in common with others is not  a restriction of their right to carry on trade and commerce.

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A system of licensing of motor vehicles is a regulation, but  does not impair the freedom of trade and commerce  unless the licensing is made to depend upon arbitrary  discretion of the licensing authority. Similarly, a fee for  administrative purposes may also be viewed as a part of  regulation. Such licensing and fees fall outside Article 301,  because they cannot be viewed as restrictions, and  therefore do not need to be processed under Article 304.  Such regulations are designed to give equal opportunity to  everyone, subject to a certain standard. The object being  a public object, such regulations cannot be questioned  unless they amount to restrictions. A tax, however, which is  made the condition precedent of the right to enter upon  and carry on business at all is a very different matter. It is a  restriction on the right to carry on trade and commerce,  and the restriction is released on the payment of the tax,  which is the price of such release. It is from this point of  view that the impugned provisions in this case must be  examined.”    

 61. Subbarao J. as His Lordship then was, agreed with the majority  

view but added the following passage to the same:  

“37. The next question is, what is the content of the  concept of freedom? The word “freedom” is not capable  of precise definition, but it can be stated what would  infringe or detract from the said freedom. Before a  particular law can be said to infringe the said freedom, it  must be ascertained whether the impugned provision  operates as a restriction impeding the free movement of  trade or only as a regulation facilitating the same.  Restrictions obstruct the freedom, whereas regulations  promote it. Police regulations, though they may  superficially appear to restrict the freedom of movement,  in fact provide the necessary conditions for the free  movement. Regulations such as provision for lighting,  speed, good condition of vehicles, timings, rule of the road  and similar others, really facilitate the freedom of  movement rather than retard it. So too, licensing system  with compensatory fees would not be restrictions but

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regulatory provisions; for without it, the necessary lines of  communication, such as roads, water-ways and air-ways,  cannot effectively be maintained and the freedom  declared may in practice turn out to be an empty one. So  too, regulations providing for necessary services to enable  the free movement of traffic, whether charged or not,  cannot also be described as restrictions impeding the  freedom. To say all these is not to say that every provision  couched in the form of regulation but in effect and  substance a restriction can pass off as a permissible  regulation. It is for the Court in a given case to decide  whether a provision purporting to regulate trade is in fact a  restriction on freedom. If it be a colourable exercise of  power and the regulatory provision in fact is a restriction,  unless the said provision is one of the permissible restrictions  under the succeeding articles, it would be struck down. This  view is consistent with the principles laid down by the  Australian High Court and the Privy Council in the context  of interprelation of the words “absolutely free” in Section 92  of the Commonwealth of Australia Constitution Act, which  is more emphatic than the word “free” in Article 301 of our  Constitution.  

 xxx xxx xxx  

 39.  But the more difficult question is, what does the word  “restrictions” mean in Article 302? The dictionary meaning  of the word “restrict” is “to confine, bound, limit”. Therefore,  any limitation placed upon the freedom is a restriction on  that freedom. But the limitation must be real, direct and  immediate, but not fanciful, indirect or remote. In this  context, the principles evolved by American and  Australian decisions in their attempt to reconcile the  commerce power and the State police power or the  freedom of commerce and the Commonwealth power to  make laws affecting that freedom can usefully be invoked  with suitable modifications and adjustments. Of all the  doctrines evolved, in my view, the doctrine of “direct and  immediate effect” on the freedom would be a reasonable  solvent to the difficult situation that might arise under our  Constitution. If a law, whatever may have been its source,  directly and immediately affects the free movement of  trade, it would be restriction on the said freedom. But a law

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which may have only indirect and remote repercussions on  the said freedom cannot be considered to be a restriction  on it. Taking the illustration from taxation law, a law may  impose a tax on the movement of goods or persons by a  motor-vehicle; it directly operates as a restriction on the  free movement of trade, except when it is compensatory  or regulatory. On the other hand, a law may tax a vehicle  as property, or the garage wherein the vehicle used for  conveyance is kept. The said law may have indirect  repercussion on the movement, but the said law is not one  directly imposing restrictions on the free movement. In this  context, two difficulties may have to be faced: firstly,  though a law purporting to impose a tax on a property or a  motor-vehicle, as the case may be, may in fact and in  reality impose a tax on the movement itself; secondly, a  law may not be on the movement of trade, but on the  property itself, but the burden may be so high that it may  indirectly affect the free flow of trade. In the former case,  the court may have to scrutinize the provisions of a  particular statute to ascertain whether the tax is on the  movement. If the provisions disclose a tax on the  movement, it will be a restriction within the meaning of  Article 302. In the latter case, if the provisions show that the  tax is on property, the reasonableness of the tax may have  to be tested against the provisions of Article 19 of the  Constitution. The question whether a law imposes a  restriction or not depends on the question whether the said  law imposes directly and immediately a limitation on the  freedom of movement of trade. If it does, the extent of the  impediment relates to the question of degree rather than  to the nature of it. If it is a restriction, it must satisfy the  conditions laid down in Article 302 of the Constitution.    

xxx xxx xxx    

46. The foregoing discussion may be summarized in the  following propositions: (1) Article 301 declares a right of  free movement of trade without any obstructions by way  of barriers, inter-State or intra-State, or other impediments  operating as such barriers. (2) The said freedom is not  impeded, but, on the other hand, promoted, by  regulations creating conditions for the free movement of  trade, such as, police regulations, provision for services,  maintenance of roads, provision for aerodromes, wharfs

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etc., with or without compensation. (3) Parliament may by  law impose restrictions on such freedom in the public  interest; and the said law can be made by virtue of any  entry with respect whereof Parliament has power to make  a law. (4) The State also, in exercise of its legislative power,  may impose similar restrictions, subject to the two  conditions laid down in Article 304(b) and subject to the  proviso mentioned therein. (5) Neither Parliament nor the  State Legislature can make a law giving preference to one  State over another or making discrimination between one  State and another, by virtue of any entry in the Lists,  infringing the said freedom. (6) This ban is lifted in the case  of Parliament for the purpose of dealing with situations  arising out of scarcity of goods in any part of the territory of  India and also in the case of a State under Article 304(b),  subject to the conditions mentioned therein. And (7) the  State can impose a non-discriminatory tax on goods  imported from other States or the Union territory to which  similar goods manufactured or produced in that State are  subject.”  

 62. The net effect of the decision in Automobile case (supra) is that  

taxes, if the same are compensatory in character, do not offend the  

guarantee of free trade, commerce and intercourse under Article 301  

of the Constitution. The further question whether the compensatory  

character of a tax has to be determined by reference to the direct and  

substantial benefits/ facilities provided by the State to the tax payer  

was examined and answered in the affirmative in Jindal Stainless Steel  

case (supra), where this Court while overruling the decisions in  

Bhagatram and Bihar Chamber of Commerce cases (supra) declared  

that it is not just a remote benefit to the tax payer but only a direct and

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substantial benefit that would justify levy of compensatory taxes without  

offending Article 301 of the Constitution of India.  Speaking for the  

Court, Kapadia, J. observed:  

“49. The concept of compensatory taxes was propounded  in Automobile Transport in which compensatory taxes were  equated with regulatory taxes. In that case, a working test  for deciding whether a tax is compensatory or not was laid  down. In that judgment, it was observed that one has to  enquire whether the trade as a class is having the use of  certain facilities for the better conduct of the  trade/business. This working test remains unaltered even  today.    50. As stated above, in the post 1995 era, the said working  test propounded in Automobile Transport stood disrupted  when in Bhagatram case, a Bench of three Judges  enunciated the test of “some connection” saying that  even if there is some link between the tax and the facilities  extended to the trade directly or indirectly, the levy cannot  be impugned as invalid. In our view, this test of “some  connection” enunciated in Bhagatram case is not only  contrary to the working test propounded in Automobile  Transport case but it obliterates the very basis of  compensatory tax. We may reiterate that when a tax is  imposed in the regulation or as a part of regulatory  measure the controlling factor of the levy shifts from  burden to reimbursement/recompense. The working test  propounded by a Bench of seven Judges in Automobile  Transport and the test of “some connection” enunciated  by a Bench of three Judges in Bhagatram case cannot  stand together. Therefore, in our view, the test of “some  connection” as propounded in Bhagatram case is not  applicable to the concept of compensatory tax and  accordingly to that extent, the judgments of this Court in  Bhagatram Rajeevkumar v. CST and State of Bihar v. Bihar  Chamber of Commerce stand overruled.    

xxx xxx xxx xxx    

52. In our opinion, the doubt expressed by the referring

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Bench about the correctness of the decision in Bhagatram  case followed by the judgment in Bihar Chamber of  Commerce was well founded.    53. We reiterate that the doctrine of “direct and  immediate effect” of the impugned law on trade and  commerce under Article 301 as propounded in Atiabari  Tea Co. Ltd. v. State of Assam and the working test  enunciated in Automobile Transport (Rajasthan) Ltd. v.  State of Rajasthan for deciding whether a tax is  compensatory or not vide para 19 of the Report (AIR), will  continue to apply and the test of “some connection”  indicated in para 8 (of SCC) of the judgment in Bhagatram  Rajeevkumar v. CST and followed in State of Bihar v. Bihar  Chamber of Commerce is, in our opinion, not good law.  Accordingly, the constitutional validity of various local  enactments which are the subject-matters of pending  appeals, special leave petitions and writ petitions will now  be listed for being disposed of in the light of this judgment.”  

63. The legal position that today holds the field in light of the above is  

that compensatory taxes would fall outside Part XIII of the Constitution  

only if tax payers receive benefits and facilities commensurate to the  

levy.  Any and every benefit howsoever remote or distant, would not  

save the levy from an attack on the ground of violation of Article 301.  

Having said that we must mention to the credit of the learned counsel  

for the dealers/assessees that except a feeble attempt made by  

Mr.A.K. Ganguly, learned counsel appearing for Sony India Pvt. Ltd.  

and Mr. Bagaria, learned counsel appearing for Steel Authority of India  

Limited (SAIL) the rest of the counsel fairly accepted that there was no

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constitutional or juristic basis for the Compensatory Tax Theory  

propounded by the majority judgment in Automobile Transport case  

(supra).  Mr. Salve, who led the team of lawyers appearing for the  

dealers/assessees also did not support the compensatory tax theory  

propounded in Automobile case (supra).  Mr. Rohatgi, learned Attorney  

General for India and M/s. Rakesh and Dinesh Dwivedi who appeared  

for some of the States also argued that the Compensatory Tax Theory  

has no basis whatsoever and that the same ought to be abandoned  

not only because of lack of any juristic support but also because of the  

problems that beset the application of the said theory in practice.  It  

may, in the light of the concessions made at the Bar, have become  

unnecessary for us to deal with this aspect at any length but since M/s.  

Ganguly and Bagaria have not fully subscribed to the views urged by  

their colleagues appearing for the dealers, we are left with no option  

but to squarely deal with the question whether the Compensatory Tax  

Theory is indeed sustainable.  Three distinct aspects touching the  

question need be noticed straightaway.  The first and the foremost of  

these aspects is that the concept of compensatory taxes is not  

recognised by the Constitution.  A tax is a compulsory exaction of  

money for general public good and is defined as under by Thomas M

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Cooley in his book The Law of Taxation at page 61(Clark A. Nichols ed., 4th  

ed. 1924) as:  

“Taxes are the enforced proportional contributions from  persons and property, levied by the state by virtue of its  sovereignty for the support of government and for all  public needs.  This definition of taxes, often referred to as  “Cooley’s definition,” has been quoted and endorsed, or  approved, expressly or otherwise, by many different courts.   While this definition of taxes characterizes them as  ‘contributions’, other definitions refer to them as ‘imposts’,  ‘duty or impost’, ‘charges’, ‘burdens’, or ‘exactions’, ; but  these variations in phraseology are of no practical  importance.”    

xxx xxx xxx xxx  xxx xxx xxx xxx  

The term is defined also in The Major Law Lexicon by P.  

Ramanatha Aiyar – Vol. 6  - 4th Edition – Page Nos.6678 and 6679 in the  

following words:  

The term “tax” and “taxes” have been defined as a rate or  sum of money assessed on the person or property of a  citizen by government for the use of the nation or state;  burdens or charges imposed by the legislative power upon  persons or property to raise money for public purposes,  and the enforced proportional contribution of persons and  property levied by authority of the state for the support of  government and for all public needs.  

 xxx xxx xxx xxx  xxx xxx xxx xxx  

Taxes are public burdens, of which every individual may be  compelled to bear his part, and that in proportion to the  extent of protection he receives or the amount of property  held by him, as the will of the Legislature may direct.  The

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power of taxation is said to be an incident of sovereignty,  and co-extensive with that of which it is incident.”    

Blackwell on Tax Titles  as cited in ‘Tata Iron & Steel Co. Ltd.   v.   

State of Bihar, AIR 1991 Patna 75, 81 has the following to say about  

taxes:  

  ‘Taxes are defined to be burdens or charges imposed by  the legislative power upon persons or property to raise  money for public purposes.’        

Black’s Law Dictionary, 7th Edn., P. 1469 defines tax as under:   

“A monetary charge imposed by government on persons,  entities or property to yield public revenue,”  

If taxes are eventually meant to serve larger public good and for  

running the governmental machinery and providing to the people the  

facilities essential for civilized living, there is no question of a tax being  

non-compensatory in character in the broader sense.   

 64. Secondly, because the concept of compensatory tax obliterates  

the distinction between a tax and a fee.  The essential difference  

between a tax and a fee is that while a tax has no element of quid pro  

quo, a fee without that element cannot be validly levied.  The  

difference between a tax and the fee has been examined and  

elaborated in a long line of decisions of this Court.  (See:  

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Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra  

Thirtha Swamiar of Sri Shirur Mutt (AIR 1954 SC 282), Mahant Sri  

Jagannath Ramanuj Das & Anr. v.  State of Orissa & Anr.  (AIR 1954 SC  

400), The Hingir-Rampur Coal Co. Ltd. v. State of Orissa (AIR 1961 SC  

459), Corporation of Calcutta  and anr. v. Liberty Cinema (AIR 1965 SC  

1107), Kewal Krishna Puri and Anr. v. State of Punjab  (1980) 1 SCC 416,  

Krishi Upaj Mandi Samiti and Ors. v. Orient Paper and Industries Ltd.  

(1995) 1 SCC 655), State of Gujarat and Anr. v. Akhil Gujarat Pravasi V.S.  

Mahamendal (2004) 5 SCC 155: State of West Bengal   v.  Kesoram  

Industries Ltd. & ors. (2004) 10 SCC 201.   

65. Thirdly, and lastly, the concept of Compensatory taxes being  

outside Part XIII, is difficult to apply in actual practice.  Experience in the  

present batch of cases has amply demonstrated that difficulty. Most of  

the legislations enacted by the States in these cases have described  

the entry tax levied under the same to be compensatory in character.   

This may have been done to take the levy outside the mischief of  

Article 301 of the Constitution.  The question however is whether tax  

amount collected in terms of the said legislation is really used by the  

State for the purpose of providing or maintaining services and benefits  

to the tax payers and whether the Courts can follow the money trail to

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determine whether the State concerned has actually used the amount  

for the avowed purpose underlying the legislation.  This process is  

fraught with serious difficulties, a fact that was not disputed by learned  

Counsel for the assessees/dealers. Actual application of the  

Compensatory Tax Theory, therefore, runs into difficulties to an extent  

that the theory at some stage breaks down.  M/s. Salve, Rohatgi and  

Dwivedi were in that view perfectly justified in submitting that the  

Compensatory Tax Theory was legally unsupportable and deserved to  

be abandoned.  We have no hesitation in agreeing with that  

submission, the arguments of M/s. Ganguly and Bagaria to the contrary  

notwithstanding.    

 66.  With the Compensatory Tax Theory no longer found acceptable,  

we are left with only two competing view points, one expressed by  

Gajendragadkar, J. and the other by B.P. Sinha, CJ.  Which one is the  

correct view is the critical question that falls for our determination  

having regard to the Constitutional scheme and the language  

employed in Articles 301 to 307 to which we must now turn for a closer  

look.    

Article 301 is as under:  

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“301. Freedom of trade, commerce and intercourse.- Subject to  

the other provisions of this Part, trade, commerce and  intercourse throughout the territory of India shall be free”  

A plain reading of the above would show that freedom of trade,  

commerce and intercourse is by no means absolute, the same being  

subject to the other provisions of Part XIII of the Constitution.  Amongst  

those provisions are Articles 302, 303 and 304 which have a direct  

bearing on the nature and the extent of restrictions subject to which  

only is the right to freedom of trade, commerce and intercourse  

referred to in Article 301 exercisable.    Article 302 reads thus:  

“302. Power of Parliament to impose restrictions on trade,  commerce and intercourse.— Parliament may by law  

impose such restrictions on the freedom of trade,  commerce or intercourse between one State and another  or within any part of the territory of India as may be  required in the public interest.”   

67. The above leaves no manner of doubt that Parliament is  

empowered to impose such restrictions on the freedom of trade,  

commerce and intercourse between one State and another or within  

any part of the territory of India as may be required in public interest.   

Reading Articles 301 and 302 together, it is evident, that freedom of  

trade, commerce and intercourse is subject to restrictions which  

Parliament may by law impose in public interest.  The absolute  

character of the freedom of trade, commerce and intercourse is thus

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lost by reason of Article 302 itself empowering Parliament to impose  

such restrictions as it may consider necessary in public interest.  Article  

303, in turn, places restrictions on the legislative powers of the  

Parliament and of the States, when it says :  

“303. Restrictions on the legislative powers of the Union and  of the States with regard to trade and commerce.—(1)  

Notwithstanding anything in article 302, neither Parliament  nor the Legislature of a State shall have power to make  any law giving, or authorising the giving of, any preference  to one State over another, or making, or authorising the  making of, any discrimination between one State and  another, by virtue of any entry relating to trade and  commerce in any of the Lists in the Seventh Schedule.     (2) Nothing in clause (1) shall prevent Parliament from  making any law giving, or authorising the giving of, any  preference or making, or authorising the making of, any  discrimination if it is declared by such law that it is  necessary to do so for the purpose of dealing with a  situation arising from scarcity of goods in any part of the  territory of India.”   

68. A careful reading of the above would show that notwithstanding  

the power vested in the Parliament under Article 302, it shall not make  

any law giving, or authorising the giving of any preference to one State  

over another, or making, or authorising the making of, any  

discrimination between one State and another, by virtue of any entry  

relating to trade and commerce in any of the Lists in the Seventh  

Schedule.  From Clause (2) of Article 303 (supra) it is manifest that the  

restriction on the power vested in Parliament in terms of Clause (1) of

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Article 303 shall not extend to Parliament making any law with a view to  

giving or authorising the giving of, any preference or making, or  

authorising the making of, any discrimination if it is declared by such  

law that it is necessary to do so for the purpose of dealing with a  

situation arising out of scarcity. A conjoint reading of Clauses (1) and (2)  

of Article 303 would thus make it clear that while Parliament/ Legislature  

of a State shall have no power to make a law imposing restriction on  

trade, commerce and intercourse, by giving or authorizing the giving of  

any preference to one State over the other, such limitation on the  

legislative power of Parliament shall not extend to giving of any  

preference or making or authorizing any discrimination if it is declared  

by law that a situation has arisen out of scarcity of goods that makes it  

necessary to do so.  In other words, while the Parliament may impose  

restrictions in public interest under Article 302, the restriction so imposed  

shall not be in the nature of giving preference or discrimination  

between one State or the other except when the law declares that  

scarcity of goods in any part of India necessitates such preference or  

discrimination.    

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69. That brings us to Article 304 of the Constitution which too like  

Articles 302 and 303 deals with restrictions on the freedom of trade,  

commerce and intercourse.  It reads:  

 “304. Restrictions on trade, commerce and intercourse  among States.—Notwithstanding anything in Article 301 or  

Article 303, the Legislature of a State may by law— (a)  impose on goods imported from other States or the Union  territories any tax to which similar goods manufactured or  produced in that State are subject, so, however, as not to  discriminate between goods so imported and goods so  manufactured or produced; and (b) impose such  reasonable restrictions on the freedom of trade,  commerce or intercourse with or within that State as may  be required in the public interest: Provided that no Bill or  amendment for the purposes of clause (b) shall be  introduced or moved in the Legislature of a State without  the previous sanction of the President.”   

The Article starts with a “non-obstante” clause which has been the  

subject matter of forensic debates in several cases.  We do not for the  

present propose to address the effect of the non-obstante clause at  

this stage or the interplay between the expression “subject to”  

appearing in Article 301 and the non obstante clause in Article 304.  We  

shall turn to that aspect a little later.  What we wish to examine is  

whether Article 304(a) treats taxes as a restriction so that any such levy  

may fall foul of Article 301.  The answer to that question, we say without  

any hesitation is in the negative. Article 304(a) far from treating taxes as

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a restriction per se, specifically recognises the State legislature’s power  

to impose the same on goods imported from other States or Union  

Territories.  The expression “the legislature of a State may by law impose  

on goods imported from other States (or Union Territories) any tax” are  

much too clear and specific to be capable of any equivocation or  

confusion.  It is true that the source of power available to the State  

legislature to levy a tax is found in Articles 245 and 246 of the  

Constitution but, the availability of such power for taxing goods  

imported from other States or Union Territories is clearly recognised by  

Article 304 (a).  The expression ‘may by law impose’ is certainly not a  

restriction on the power to tax. That does not, however, mean that the  

power to tax goods imported from other States or Union Territories is  

unqualified or unrestricted. There are, in our opinion, two restrictions on  

that power.  The words “to which similar goods manufactured or  

produced in that State are subject” impose the first restriction on the  

power of the State legislature to levy any such tax.  These words would  

imply that a tax on import of goods from other States will be justified  

only if similar goods manufactured or produced in the State are also  

taxed.  The second restriction comes from the expression “so, however,  

as not to discriminate between goods so imported and goods so

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manufactured or produced”.  The State legislature cannot in the  

matter of levying taxes discriminate between goods imported from  

other States and those manufactured or produced within the State  

levying such a tax.  The net effect of Article 304 (a) therefore is that  

while levy of taxes on goods imported from others State and Union  

territories is clearly recognised as Constitutionally permissible, the  

exercise of such power is subject to the two restrictive conditions  

referred to above.  That does not however detract from the proposition  

that levy of taxes on goods imported from other States is constitutionally  

permissible so long as the State legislatures abide by the limitations  

placed on the exercise of that power.  To put it differently, levy of taxes  

on import of goods from other States is not by itself an impediment  

under the scheme of Part XIII or Article 301 appearing therein.  

 70. That brings us to the question whether Clauses (a) and (b) have to  

be read conjunctively.   It was contended on behalf of the  

dealers/assessees that even when a tax in terms of Article 304 (a) is not  

forbidden being non-discriminatory, it may still constitute a restriction  

under Clause (b) thereof.  The argument is that just because a tax  

passes muster under Clause (a) of Article 304 being non-discriminatory  

does not mean that the levy of such a tax is not a restriction on the

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freedom of trade, commerce and intercourse.  It was contended that  

while a discriminatory tax must be treated as a restriction by itself the  

reasonableness of a non-discriminatory tax will have to be seen by the  

President in terms of the Proviso to Clause (b).  It was argued that  

Article 304(a) does not exhaust the universe in so far as levy of taxes is  

concerned for even when the law complies with the requirement of  

Clause (a), it may fail to pass the test of reasonableness and of public  

interest under Clause (b) in which event the President may decline the  

sanction for introduction of any Bill aimed at levying such a tax.    

 71. There is, in our opinion, no merit in any of the contentions noted  

above.   Clauses (a) and (b) of Article 304 deal with two distinct  

subjects and must, therefore, be understood to be independent of  

each other. While Clause (a) deals entirely with imposition of taxes on  

goods imported from other States, Clause (b) deals with imposition of  

reasonable restriction in public interest.   It is trite that levy of a tax in  

terms of Article 304(a) may or may not be accompanied by the  

imposition of any restriction whether reasonable or unreasonable. There  

is, in our opinion, no rationale in the contention that the legislature of a  

State cannot levy a tax without imposing one or more reasonable  

restrictions or that a law that is simply imposing restrictions in terms of

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Clause (b) to Article 304 must be accompanied by the levy of a tax on  

the import of goods.  The use of the word ‘and’ between clauses (a)  

and (b) does not admit of an interpretation that may impose an  

obligation upon the legislature to necessarily impose a tax and a  

restriction together.  The law may simply impose a tax without any  

restriction reasonable or otherwise or it may simply impose a  

reasonable restriction in public interest without imposing any tax  

whatsoever. It may also levy a tax and impose such reasonable  

restriction as may be considered necessary in public interest.  All the  

three situations are fully covered and permissible under Article 304 in  

view of the phraseology used therein.  The word ‘and’ can me an ‘or’  

as well as ‘and’ depending upon the context in which the law enacted  

by the legislature uses the same.   Suffice it to say that levy of taxes do  

not constitute a restriction under Part XIII except in cases where the  

same are discriminatory in nature.  Once Article 304 (a) is understood in  

that fashion, Clause (b) dealing with reasonable restrictions must  

necessarily apply to restrictions other than those by way of taxes.  It  

follows that for levy of taxes prior Presidential sanction in terms of the  

proviso under Article 304(b) will be wholly unnecessary.   This view is

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reinforced on the plain language of proviso to Article 304(b), which is  

limited to law relating to reasonable restrictions referred to in clause (b).  

 72. The sum total of what we have said above regarding Articles 301,  

302, 303 & 304 may be summarized as under:  

1. Freedom of trade, commerce and intercourse in terms of Article 301  

is not absolute but is subject to the Provisions of Part XIII.   

2. Article 302 which appears in Part XIII empowers the Parliament to  

impose restrictions on trade, commerce and intercourse in public  

interest.  

 3. The restrictions which Parliament may impose in terms of Article 302  

cannot however give any preference to one State over another by  

virtue of any entry relating to trade and commerce in any of the lists  

in the Seventh Schedule.  

4. The restriction that the Parliament may impose in terms of Article 302  

may extend to giving of preference or permitting discrimination  

between one State over another only if Parliament by law declares  

that a situation arising out of scarcity of goods warrants such  

discrimination or preference.  

5. Article 304(a) recognizes the availability of the power to impose  

taxes on goods imported from other States, the legislative power to  

do so being found in Articles 245 and 246 of the Constitution.  

6. Such power to levy taxes is however subject to the condition that  

similar goods manufactured or produced in the State levying the tax

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are also subjected to tax and that there is no discrimination on that  

account between goods so imported and goods so manufactured  

or produced.  

7. The limitation on the power to levy taxes is entirely covered by  

Clause (a) of Article 304 which exhausts the universe in so far as the  

State legislature’s power to levy of taxes is concerned.   

8. Resultantly a discriminatory tax on the import of goods from other  

States alone will work as an impediment on free trade, commerce  

and intercourse within the meaning of Article 301.   

 9. Reasonable restrictions in public interest referred to in Clause (b) of  

Article 304 do not comprehend levy of taxes as a restriction  

especially when taxes are presumed to be both reasonable and in  

public interest.   

73. The inferences enumerated above are based on a textual  

interpretation of the provisions of Article 301 to Article 304.   An  

interpretation which is both textual and contextual has always been  

found to be more acceptable.   That is so because it is only when both  

the text and the context are kept in view that the statutory provisions  

can be best understood. An interpretation that makes the textual  

match the contextual meaning of the provision is preferred by Courts  

over one that prefers one at the cost of the other.    

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74. In  Reserve Bank of India v. Peerless General Finance and  

Investment Co. Ltd. (1987) 1 SCC 424 this Court pithily summed up the  

law on the subject in the following words:  

“33. Interpretation must depend on the text and the context.   They are the basis of interpretation.  One may well say if the  text is the texture, context is what gives the colour.   Neither  can be ignored.   Both are important.  The interpretation is  best which makes the textual interpretation match the  contextual… … …”  

75. We may also refer to the following passage of Constitutional Law  

of India (4th Edition) by H.M. Seervai where the distinguished author has  

adverted to the golden rule of interpretation applicable to  

Constitutional provisions in the following words:  

“2.12. The golden rule of interpretation is that words should  be read in their ordinary, natural and grammatical  meaning subject to the rider that in construing words in a  Constitution conferring legislative power the most liberal  construction should be put upon the words so that they  may have effect in their widest amplitude.”  

76. Let us then see whether the textual interpretation placed on  

Articles 301 to 304 matches the contextual.  The contextual  

interpretation of Part XIII must, out of necessity, start with the historical  

perspective of that Part. We have with great advantage extracted in  

the earlier part of this Judgment the historical backdrop as set out in  

the decisions of this Court both in Atiabari and Automobile cases

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(supra). While it is unnecessary to recall the said passages over again,  

we need to remember that Part XIII had a historical precursor in the  

form of Section 297 of the Government of India Act, 1935 that  

governed what was then called the British India comprising the territory  

of India subject to British Rule.  The rest of the territories were at that  

time Princely States who claimed sovereign rights within the limitations  

imposed by the paramount power. The power to levy taxes was one  

such power wielded by the Princely States which led to erection of  

customs barriers impeding the flow of trade, commerce and  

intercourse. Section 297 aimed at removing such trade barriers.  It  

provided for a prohibition against enactment of any law or taking of  

any executive action by the provincial legislature that restricted the  

entry into or export from the province goods of any class or description.   

 77. More importantly, in terms of clause (b) of Section 297(1) of  

Government of India Act, 1935 no provincial legislature or Government  

could impose any tax, cess, toll or due which discriminated between  

goods manufactured or produced in the provinces and goods not so  

manufactured or produced or between goods manufactured or  

produced outside the province discriminated between goods  

manufactured or produced in one locality and similar goods

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manufactured or produced in another locality.  With India attaining its  

freedom, Part XIII of the Constitution adopted by it, was aimed at  

bringing about economic unity.  The object underlying Part XIII was to  

make movement and exchange of goods free throughout the territory  

of India.  This was achieved by Article 301 to Article 304 adopting  

substantially the scheme underlying the 1935 Act.  The only difference  

between the said provisions and Section 297 of the 1935 Act was that  

the principles enunciated in the latter were extended to the Union  

Government and the Union Parliament and to the territory which had  

after merger become a part of India.  Notably, the essence of the  

freedom of trade commerce and intercourse as recognized in the 1935  

Act and in the Constitution under Part XIII remained the same.  It was  

for that reason that Justice Venkatarama Iyer had in M.P.V.  

Sunderaramier’s case (Supra) observed and if we may say so rightly  

that the Constitution of India was not written on a tabula rasa.  The  

common feature which the two provisions share is that the provincial  

legislature’s power to impose taxes is recognized subject only to the  

limitation that there is no discrimination between goods manufactured  

or produced within the Province or State vis-a-vis  those imported from  

outside. In Atiabari’s case (supra), the majority speaking through

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Gajendragadkar, J. noticed the co-relation between Section 297 of  

1935 Act, and Article 301 of the Constitution of India but concluded  

that Article 301 did not simply adopt Section 297 of the 1935 Act but  

widened and enriched the same in content.  The Court did not,  

however, elaborate as to how much richer and wider did Article 301  

make the freedom of trade, commerce and intercourse then what was  

envisaged under Section 297. The Court said :  

“42. … … …That is why we are inclined to hold that the broad  and unambiguous words used in Article 301 are intended to  emphasize that the freedom of trade, commerce and  intercourse guaranteed was richer and wider in content than  was the case under Section 297; how much wider and how  much richer can be determined only on a fair and  reasonable construction of Article 301 read along with the rest  of the articles in Part XIII. In our opinion therefore, the  argument that tax laws are outside Part XIII cannot be  accepted.”  

(emphasis supplied)  

78. We have with great respect to the distinguished Judges failed to  

persuade ourselves to subscribe to the above view.  The argument  

that Article 301 had enriched and widened the content of trade,  

commerce and intercourse beyond what is evident from a  

comparison of the language between the two provisions namely (a)  

extending the prohibition against discrimination to the Union  

Government and the Parliament and (b) making the provision  

applicable to the territory of India as defined by the Constitution, has

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not impressed us.  The textual interpretation placed by us upon Articles  

301-304 instead gets considerable support from the contextual and the  

historical perspective of Part XIII.   

 79. We may now turn to yet another contextual feature that has a  

bearing on the true and correct interpretation of Part XIII namely the  

sovereign character of the power to tax available to the State  

legislature.  It is now fairly well settled that the Constitutionally vested  

power to levy tax can be regulated or controlled only by specific  

Constitutional limitations, if any. We have in the earlier part of this  

judgment elaborated how the power to levy taxes is a sovereign  

power with several limitations specifically stipulated by the Constitution  

itself. We have also explained at some length how legislative  

competence of the State legislatures can be circumscribed only by  

express provisions of the Constitution and unless there is an express  

limitation on the plenary taxing power of the States, there is no other  

fetter on the exercise of that power.   

 80. Applying the above principle to the case at hand, we do not see  

any specific limitation on the State’s power to levy taxes on the import  

of goods from other States except the one referred to in Article 304(a)

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of the Constitution. That limitation we have sufficiently explained is  

confined to levy of discriminatory taxes within the comprehension of  

Article 304(a).  So long as taxes are non-discriminatory and, therefore,  

consistent with Article 304(a), there is no limitation leave alone any  

express limitation on the States’ legislative power to levy any tax on  

the import of goods from another State.  The power to levy a tax in  

terms of Articles 245 and 246 read with Entry 52 of list II not being in  

dispute in the cases at hand, the absence of any specific limitation  

forbidding the exercise of such power whether for the sake of free  

trade, commerce and intercourse or otherwise simply means that the  

State legislatures are free to levy taxes that are non-discriminatory in  

nature.  

 81. That brings us to the third contextual feature relevant to the interpretation of  

Part XIII.  We have in the earlier part of this judgment referred to the decisions of this  

Court in Kuldip Nayyar’s case and S.R. Bommai’s case apart from the decisions of  

this Court in Special Reference No. 1 of 1964 (supra) to hold that the Indian  

Constitution if not federal in the strict sense of the term is at least quasi federal in  

character.  That proposition has not been disputed even by the counsel for the  

assesses/dealers, and must be held to be fairly well settled.  Equally well settled is  

the proposition that India’s federal structure is one of the basic features of the  

Constitution. Relying upon the settled legal position Mr. Mukul Rohtagi, Attorney

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General, followed by Mr. Rakesh Dwivedi, Mr. PP Rao, Mr. AK Sinha and Mr. Devdatt  

Kamath strenuously argued, and in our opinion rightly so that the provisions of our  

Constitution are aimed at vesting and maintaining with the States substantial and  

significant powers in the legislative and executive fields so that States enjoy their  

share of autonomy and sovereignty in their sphere of governance.  This can in turn  

be done by interpreting the provisions of the Constitution including those found in  

Part XIII in a manner that preserves and promotes the federal set-up instead of  

diluting or undermining the same.  In ITC Limited   v.  Agricultural Produce Market  

Committee and Ors. (2002) 9 SCC 232 this Court ruled that the Constitution of India  

must be interpreted in a manner that does not whittle down the powers of the  

State legislature.  An interpretation that supports and promotes federalism while  

upholding the Central supremacy as contemplated by some of the Articles must be  

preferred.  To the same effect is the nine judge Bench decision of this Court in S.R.  

Bommai’s case (supra) where this Court cautioned against adoption of an  

interpretation that has the effect of whittling down the powers reserved to the  

States. This Court said:    

“276. The fact that under the scheme of our Constitution,  greater power is conferred upon the Centre vis-a-vis the  States does not mean that States are mere appendages of  the Centre. Within the sphere allotted to them, States are  supreme. The Centre cannot tamper with their powers.  More particularly, the Courts should not adopt an  approach, an interpretation, which has the effect of or  tends to have the effect of whittling down the powers  reserved to the States. It is a matter of common knowledge  that over the last several decades, the trend the world  over is towards strengthening of Central Governments be it  the result of advances in technological/scientific fields or  otherwise, and that even in USA the Centre has become

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far more powerful notwithstanding the obvious bias in that  Constitution in favour of the States. All this must put the  court on guard against any conscious whittling down of  the powers of the States. Let it be said that the federalism  in the Indian Constitution is not a matter of administrative  convenience, but one of principle - the outcome of our  own historical process and a recognition of the ground  realities. This aspect has been dealt with elaborately by Shri  M.C. Setalvad in his Tagore Law Lectures "Union and State  relations under the Indian Constitution" (Eastern Law House,  Calcutta, 1974). The nature of the Indian federation with  reference to its historical background, the distribution of  legislative powers, financial and administrative relations,  powers of taxation, provisions relating to trade, commerce  and industry, have all been dealt with analytically. It is not  possible nor is it necessary for the present purposes to refer  to them. It is enough to note that our Constitution has  certainly a bias towards Centre vis-a-vis the States:  Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan.  It is equally necessary to emphasise that courts should be  careful not to upset the delicately-crafted constitutional  scheme by a process of interpretation.”  

     (emphasis supplied)       

82. Reference may also be made to Kesavananda Bharati’s case  (supra) where  

a Bench of thirteen Judges cautioned that the process of interpretation should not  

diminish or whittle down the provisions of the original contract upon which the  

federation was founded nor is it legitimate to impose by a process of judicial  

construction a new contract upon the federating states.  To the same effect is the  

decision of this Court in M/s. International Tourist Corporation  & ors.  v.  State of  

Haryana and Ors. (1981) 2 SCC 318 where this Court observed:  

“6A.  There is a patent fallacy in the submission of Shri  Sorabji.  Before exclusive legislative competence can be  claimed for Parliament by resort to the residuary power, the  legislative incompetence of the State legislature must be  clearly established.  Entry 97 itself is specific that a matter  can be brought under that entry only if it is not enumerated

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in List II or List III and in the case of a tax if it is not mentioned  in either of those lists.  In a Federal Constitution like ours  where there is a division of legislative subjects but the  residuary power is vested in Parliament, such residuary  power cannot be so expansively interpreted, as to whittle  down the power of the State legislature.  That might affect  and jeopardize the very federal principle.  The federal  nature of the Constitution demands that an interpretation  which would allow the exercise of legislative power by  Parliament pursuant to the residuary powers vested in it to  trench upon State legislation and which would thereby  destroy or belittle state autonomy must be rejected.”  

               (emphasis supplied)  

 83. An approach which tends to dilute the federal character of our  Constitutional scheme must, therefore, be avoided and one that supports and  promotes the concept of federalism preferred by the courts while interpreting the  provisions of the Constitution.      84. Dealing in particular with the scope and meaning of Article 304 (b) of the  

Constitution on a true and correct interpretation Seervai in his treatise Constitutional  

Law of India (supra) sounded a note of caution and observed that if Article 304(b)  

was interpreted in a manner that would include levy of taxes as a restriction within  

the meaning of that Article, it would totally dislocate the scheme under our  

Constitution.  The celebrated author, in our opinion, was right in saying so for the  

taxing power of the Union and the States are mutually exclusive.  While the  

Parliament cannot legislate on the subjects reserved for the States, the States  

cannot similarly trespass onto the taxing powers of the Union.  If the Constitutional  

scheme does not allow the Parliament to usurp the taxing powers of the State  

Legislatures, such process of usurpation cannot also be permitted to take place in  

the garb of making Union executive’s concurrence an essential pre-requisite for  

any taxing legislation.  The following passage from Seervai’s book (Vol. 3, Page

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2607) is in this regard instructive:  

 “23.43.  Thirdly, the whole scheme of taxation in our  Constitution would be completely dislocated if Article  304(b) included a tax.  The taxing powers of the Union and  the States have been made mutually exclusive so that  Parliament cannot deprive the States of their taxing powers  as has happened in countries where the powers of taxation  are concurrent.  It would be surprising if the Union  legislature, i.e. Parliament could not take away the taxing  powers of the State legislatures and yet it would be open to  the Union executive under Article 304(b) to deprive the  State legislatures of their taxing powers.”  

 85. To the same effect are the following observations made by Mathew’s, J. in  G.K. Krishnan’s case (supra):    

“27. … … …Article 304(a) prohibits only imposition of a  discriminatory tax.  It is not clear from the article that a tax  simpliciter can be treated as a restriction on the freedom of  internal trade.  Article 304(a) is intended to prevent  discrimination against imported goods by imposing on them  tax at a higher rate than that borne by goods produced in  the State.  A discriminatory tax against outside goods is not  a tax simpliciter but is a barrier to trade and commerce.   Articled 304 itself makes a distinction between tax and  restriction.  That apart, taxing powers of the Union and  States are separate and mutually exclusive.  It is rather  strange that power to tax given to states, say, for instance  under entry 54 of List II to pass a law imposing tax on sale of  goods should depend upon the goodwill of the Union  executive.”  

 86. Suffice it to say that the interpretation of any provision of the Constitution will  

be true and perfect only when the Court looks at the Constitution holistically and  

keeps in view all important and significant features of the Constitutional scheme  

constantly reminding itself of the need for a harmonious construction lest  

interpretation placed on a given provision has the effect of diluting or whittling  

down the effect or the importance of any other provision or feature of the

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Constitution.  So interpreted Article 301 appearing in Part XIII does not, in our  

opinion, work as an impediment on the States’ taxing powers except in situations  

where such taxes fall foul of Article 304(a) of the Constitution.   The contextual  

approach thus fully matches the textual interpretation which we have placed on  

Part XIII.  

 87. On behalf of the dealers/assessees it was contended with considerable  

amount of tenacity that since Article 304 starts with a non-obstante clause the  

inference was that the framers of the Constitution treated taxes as impediments for  

free trade, commerce and intercourse.  The argument was that unless Article 301  

was understood to mean that taxes could also be restrictions on free trade and  

commerce, there was no need for the framers of the Constitution to start Article 304  

with a non-obstante clause inasmuch as a non-obstante clause is meant to be only  

an exception to the generality of the provision.  Similar contentions urged in the  

past have been noticed by this Court and by jurists alike while attempting  

interpretation of Part XIII.  This is evident from the passages which have dealt with  

the anomaly arising out of the use of the expression ‘subject to’ in Article 301 and  

the non-obstante clause in Article 304 of the Constitution.  This Court has often  

found the use of the non-obstante clause in Article 304 to be either confusing or an  

unnecessary surplusage.  But the problem with the use of non-obstante clauses in  

Part XIII has been the subject matter of criticism even in the Constituent Assembly  

as is evident from the following passages from the debates:  

Constitution Assembly Debates (Vol. IX Page 1131):   

“Dr. P S Deshmukh: If we analyse the new articles that have  

been proposed, it is very difficult to understand them and I think

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the comment is absolutely justified that this is going to be a  

lawyers' constitution, a "paradise for lawyers" where there will be  

so many innumerable loopholes that we will be wasting years  

and years before we could come to the final and correct  

interpretation of many clauses. If we read this article 274, you  

will find, Sir, that this is one of the most wonderful articles in the  

whole Constitution. This is not the only one; there are many  

others. If we count the use of the word 'notwithstanding' in this  

Constitution, I am certain that the number of times that word is  

used will far exceed the use of the word 'Parliament' or  

'Constitution' in the whole Constitution. If you will permit me, Sir, I  

will describe the situation a little graphically. We first of all  

provide and say or declare that a certain person is a man. Then,  

we say, notwithstanding this declaration, you shall wear a sari  

and nothing but a sari.   

Shri T.T. Krishnamachari : There is no bar to that.   

Dr. P.S. Deshmukh : Then, notwithstanding the fact that you are  

considered a man, and notwithstanding the fact that you wear  

nothing else but saris, you will wear a Gandhi cap also. Then we  

have another 'notwithstanding'. Notwithstanding that you are a  

man, notwithstanding that you shall wear nothing but a sari,  

notwithstanding that you shall also wear a Gandhi cap, you will  

be at liberty to describe yourself as a woman. (Laughter)  

Something of that sort, as funny and as amusing, is really the  

situation so far as  this article 274 is concerned.  If you read  

through it, you will see that as soon as the first part is over, we  

start with "notwithstanding whatever is said in the first part, such  

and such a thing will happen". In the next clause, we say not  

only notwithstanding what is contained in the first clause,  

together with notwithstanding what is contained in the other  

clauses' and then add something more. I think there is a better  

method of drafting. Even if it is necessary to cope with complex  

situations and to provide something on the lines proposed, there  

should be a simpler and more direct way of drafting and  

making a provision which is not so ununderstandable that only  

supermen could read this constitution, even assuming that only

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supermen are to be born in India hereafter. If this Constitution is  

made for the average man, if it is going to affect the rights and  

privileges of the ordinary common man, it is necessary that the  

drafters of this constitution should be more clear and use  

phraseology which is more easily understandable and simpler.  

xxx xxx xxx xxx  

I hope therefore that the whole chapter will be made simpler.  

Instead of tying the hands of both the States as well as of  

Parliament, it would be far better not to commit ourselves to any  

policy, but to leave the whole thing to Parliament. Otherwise,  

the situation which has arisen already in respect of article 16  

may arise in respect of article 274 itself. It is, therefore, better to  

have simpler provisions and I have given them the simplest form.  

I hope that this will appeal to the drafters of the Constitution  

and if they accept it, I can tell them that they will be out of  

much of the trouble. But if they insist upon the draft that they  

have produced, it will be very difficult for trade and commerce  

not only to prosper but even to exist.”   

88. In Automobile Transport case (supra), S K Das, J. speaking for the majority  

noticed the anomaly arising out of the use of the non-obstante clause in Article 304  

and described the same to be “somewhat inappropriate”.  The majority judgment  

in Automobile Transport case (supra) in fact took the view that the mix up of  

exception upon exception in the series of Articles in Part XIII makes a purely textual  

interpretation difficult.  The following passage is in this regard apposite:  

“10.  Art. 304 again begins with a non obstinate clause  mentioning both Art. 301 and Article 303, though Article  304 relates only to the Legislature of a State. Article 303  relates to both the State Legislature and Parliament and  again the non obstante clause in Article 304 is somewhat  inappropriate. The fact of the matter is that there is such a  mix up of exception upon exception in the series of articles  in Part XIII that a purely textual interpretation may not  disclose the true intendment of the articles.”

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 89. Subba Rao, J., as His Lordship then was, in a separate judgment delivered in  

Automobile Transport case (supra) also found the use of the non-obstante clause to  

be a “defect in phraseology”.  His Lordship held that the non-obstante clause has  

no relevance to Article 303 even when the Article is mentioned alongwith the non-

obstante clause. The importance of the non-obstante clause was then confined to  

Article 304(b) as is clear from the following paragraph of the judgment :  

“42. … … …The non-obstante clause vis-a-vis Article 304(a)  may have some relevance so far as Article 301 is  concerned, for it enables the Legislature of a State to  impose an impediment on the free movement of trade in  spite of the freedom declared under Article 301. But it has  no relevance to Article 303, which only prohibits the State  Legislature from making a discriminatory law and it does  not in any way prohibit the State Legislature from imposing  a non-discriminatory tax permitted under Art. 304(a). But,  with reference to Art. 304(b), the non-obstante clause has  significance and meaning even in regard to Art. 303, as  clause (b) lifts the ban imposed by Art. 303, subject to the  limitation mentioned therein. Therefore, the non-obstante  clause must be deemed to apply only to that part of Art.  304 appropriate to the said clause. If so read, the difficulty  in the construction disappears. Art. 304(a) lifts the general  ban imposed by Article 301 in respect of imposition of non- discriminatory taxes on goods imported, which indicates  that but for the said provision the law of taxation in that  regard would infringe the freedom declared under Art.  301.”  

 90. Hidayatullah, J. also found the non-obstante clause in Article 304 to be  

somewhat anomalous and described the same as “inaccurate drafting of the  

Constitution”.    

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91. Suffice it to say that the use of the non-obstante clause in Article  

304 has had its share of criticism from the very inception which criticism  

has to an extent been prophetic for the interpretation of Part XIII has  

indeed been a lawyer’s paradise over the past fifty years or so. Seervai  

has in his treatise adverted to this anomaly arising from the use of the  

non-obstante clause and said that the same covers both the clauses  

(a) and (b) of Article 304.  He argues with considerable forensic force  

that reference to Article 301 in the non-obstante clause is meaningless  

having regard to the fact that the freedom granted thereunder is itself  

subject to other provisions of Part XIII including Article 304. This would  

necessarily imply that Article 304 (a) and (b) do not subtract anything  

from Article 301. That appears to us to be the correct view on the  

subject. While it is true that legislature does not waste words and that  

no part of a legislation can be rendered a surplusage, the only rational  

meaning that can be attributed to the non-obstante clause  

appearing in Article 304 is that the same was used only as a manner of  

abundant caution and a possible reassurance that Article 301 is  

indeed subordinate to Article 304 which it was even otherwise without  

the use of that clause.  The net effect of the discussion therefore is that  

the expression ‘subject to other provisions of this Part’ appearing in

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Article 301 and the non-obstante clause appearing in Article 304 do  

not traverse in different directions. There is no conflict in the two  

provisions on account of the use of the said expressions. Interpreted  

individually or conjointly, the said two expressions simply mean that  

Article 304 takes precedence over Article 301. While Article 304(a)  

recognizes the power of the State Legislatures to tax goods imported  

from other State, it also imposes limitations on the exercise of that  

power. On the other hand clause (b) to Article 304 permits imposition  

of reasonable restrictions subject to the proviso appearing below that  

clause.  We have thus no hesitation in rejecting the argument that the  

use of the non-obstante clause in Article 304 is suggestive of the  

Constitution recognizing taxes as restrictions under Article 301 or that  

the power to impose a reasonable restriction under Article 304(b) is  

meant to include the power to levy taxes so that levy of taxes may be  

permissible only in case the procedure provided under the proviso is  

followed.  

 92. On behalf of the dealers/ assessee it was argued that the State legislatures  

may levy taxes that may operate as fiscal barriers and thereby prevent or restrict  

inter State trade, commerce and intercourse. It was urged that if such statutory  

fiscal barrier is also held not to be a restriction upon the freedom of trade,

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commerce and intercourse guaranteed under Part XIII, a citizen whose right under  

that Part is affected may have no redress against such levies. Relying upon the  

decision of this Court in Ramjilal v. Income Tax Officer, Mohindargarh, AIR 1951 SC  

97, it was contended that a challenge to a fiscal statute shall not be maintainable  

even under Part III of the Constitution, thereby, not only violating the citizen’s  

constitutional rights of free trade and commerce but also denying them the  

remedy against such violation.  This according to the learned counsel was one  

among other reasons why levy of taxes ought to be treated as restrictions on free  

trade, commerce and intercourse.  

 93. In Ramjilal’s case (supra), a petition under Article 32 of the Constitution was  

filed before this Court by the petitioner who was carrying on business in the State of  

Nabha.  With the merger of Nabha into the State of Pepsu, the petitioner was  

required by the assessing authority to file return and pay income tax for the income  

earned by him during the previous years. Aggrieved, the petitioner challenged the  

proceedings inter alia on the ground that the assessment of tax for previous year  

violated his right guaranteed under Article 14.  This Court repelled the contention  

founded on Article 14 holding that there was reasonable classification of assessee  

under the relevant statute and that the petitioner’s challenge to the proceedings  

under Article 14 was untenable.  Having said that, the Court examined the question  

whether the taxing statute violated Right to Property guaranteed under Article 31  

(1) of the Constitution. Repelling the contention this Court held that if collection of  

taxes amounted to deprivation of property within the meaning of Article 31 (1),  

there was no point in making a separate provision regarding the same as is made

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in Article 265. This Court declared that Article 31(1) must be regarded as a  

guarantee against deprivation of property otherwise, than by imposition of tax for  

otherwise Article 265 would become wholly redundant.  The Court declared that  

the Constitution had treated taxation as distinct from compulsory acquisition of  

property and has made independent provisions giving protection against taxation.   

 94. Then came Kunnathat Thathunni Moopil Nair v. The State of Kerala & Anr., AIR  

1961 SC 552, where again one of the questions that fell for consideration was  

whether Article 265 of the Constitution was a complete answer to the attack  

against the Constitutionality of a taxing statute.  This Court held that in order that a  

taxing law may be valid, the tax proposed to be levied must be within the  

legislative competence of the legislature imposing the tax and authorizing the  

collection thereof and that the tax must be subject to the condition laid down  

under Article 13 of the Constitution.  One of such conditions declared by this Court  

was that the legislature shall not make any law that takes away or abridges the  

equality clause in Article 14.  The Court declared that the guarantee of equal  

protection of laws must extend even to taxing statutes.  It clarified that every  

person may not be taxed equally but property of the same character has to be  

taxed, the taxation must be by the same standard so that the burden of taxation  

may fall equally on all persons holding that kind and extent of property. If the  

taxation, generally speaking, imposes similar burden on everyone with reference to  

that particular kind and extent of property on the basis of such taxation, the law  

shall not be open to attack on the ground of inequality even though the result of  

taxation may be that the total burden on different persons may be unequal. The

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Court summed up that taxing statute is not fully immune from an attack on the  

ground that it infringes equality clause under Article 14, no matter the Courts are  

not concerned with the policy underlying the taxing statute or whether a particular  

tax could have been imposed in a different way or a way that the Court might  

think would have been more equitable in the interest of equity.   

 95. To the same effect is the decision in Laxmanappa Hanumantappa  

Jamkhandi v. Union of India, AIR 1955 SC 3.  Reference may also be made to Smt.  

Ujjam Bai v. State of Uttar Pradesh, AIR 1962 SC 1621 which took note of the  

pronouncements of this Court in the three cases mentioned above  to examine  

whether there was any conflict between the view taken in Moopil Nair case on the  

one hand and Ramjilal and Laxmanappa cases on the other, the Court found on a  

closer examination that there was no such conflict and clarified that the  

observation made in Ramjilal and Laxmanappa cases must in the context bear  

reference to abrogation of Article 31 (1) only in so far as the admissibility of a  

challenge to taxation law with reference to Part III is concerned.  The Court  

explained that in Moopil Nair’s case this Court has held that a taxing statute was  

not immune from challenge under Article 14 just because the legislature that  

imposed the tax was competent to levy the tax in terms of Article 265.  This Court  

summed up the legal position in the following words:  

“ The result of the authorities may thus be summed up:    (1) A tax will be valid only if it is authorized by a law  enacted by a competent legislature.  That is Article 265.    (2) A law which is authorized as aforesaid must further be  not repugnant to any of the provisions of the Constitution.  

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Thus, a law which contravenes Articles 14 will be bad,  Moopil Nair’s case.  

 (3) A law which is made by a competent legislature and  which is not otherwise invalid, is not open to attack under  Article 31 (1). Ramjilal’s case and Laxmanappa’s case.    (4) A law which is ultra vires either because the legislature  has no competence over it or it contravenes, some  constitutional inhibition, has no legal existence, and any  action taken thereunder will be an infringement of Article  19 (1) (g) Himmatlal’s case and Laxmanappa’s case.  The  result will be the same when the law is a colourable piece  of legislation.     (5) Where assessment proceedings are taken without the  authority of law, or where the proceedings are repugnant  to rules of natural justice, there is an infringement of the  right guaranteed under Article 19(1)(f) and Article 19(1)(g);  Tata Iron & Steel Co. Ltd; Moopil Nair’s case and Shri  Madan Lal Arora’s case.”  

96. The above statement of law in our view is legally unexceptionable. The  

argument that Ramjilal and Laxmanappa’s cases place taxing statute beyond the  

purview of challenge under Part III has been correctly repelled and fiscal statutes  

are also held to be open to challenge on the touchstone of Article 14 of the  

Constitution.  The contention that an aggrieved citizen may have no remedy  

against a taxing statute does not, therefore, hold good.  Whether or not a  

challenge to such a statute succeeds is, however, a different matter.  It is fairly well  

settled by now that Courts show considerable deference to the legislature in the  

matter of quantum of tax that may be levied as also the subjects and individuals  

upon whom the same may be levied.  Just because room for challenge to a fiscal  

statute is limited is in our view no reason to hold that levy of taxes otherwise within

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the competence of the legislature imposing the same should be seen as a  

restriction on free trade and commerce guaranteed under Article 301 which Article  

does not either textually or contextually recognize levy of taxes as impediments  

except in cases where the same are discriminatory in nature thereby being  

offensive to Article 304 (a) of the Constitution.    

 97. On behalf of the States it was argued by the learned Attorney General, and  

M/s. Rao and Dwivedi that the decisions of this Court in Atiabari and Automobile  

Transport cases had drawn support for their conclusion on the Australian and  

American decisions.  It was urged that although the view taken by the majority  

decision in the former had recognized that decisions from other jurisdictions may  

not be helpful while interpreting the provisions of our Constitution, yet the Court had  

referred to and relied upon those decisions to buttress its conclusions.  The  

Australian decisions relied upon by the majority have, it was contended, been  

reversed by subsequent pronouncements of the Australian High Court, which  

pronouncements are now gravitating towards the theory that discriminatory taxes  

alone will operate as restrictions against free trade, commerce and intercourse.  It  

was in that view argued that the theoretical basis borrowed from the foreign  

judgments by this Court in Atiabari case stood demolished or atleast substantially  

eroded by the subsequent pronouncements of the Australian High Courts, thereby,  

rendering the correctness of the view taken by the majority in Atiabari’s case open  

to serious doubts.    

 98. There is, in our view, considerable merit in that submission.  In Atiabari’s case  

(supra), Gajendragadkar J., speaking for the majority while referring to the

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American and Australian decisions observed:  

“59…. … … We have deliberately not referred to these  decisions earlier because we thought it would be  unreasonable to refer to or rely on the said section or the  decisions thereon for the purpose of construing the relevant  Articles of Part XIII of our Constitution.  It is commonplace to  say that the political and historical background of the  federal polity adopted by the Australian Commonwealth,  the setting of the Constitution itself, the distribution of  powers and the general scheme of the Constitution are  different, and so it would not be safe to seek for guidance  or assistance from the Australian decisions when we are  called upon to construe the provisions of our Constitution.   In this connection we have already referred to the note of  warning struck by Venkatarama Aiyar, J., against  indiscriminate reliance being placed on Australian and  American decisions in interpreting our Constitution in the  case of M.P.V. Sundararamier & Co.  The same caution was  expressed by Gwyer, C.J., as early as 1939 when he  observed in The Central Provinces and Berar Sales of Motor  Spirit and Lubricants Taxation Act, 1938.  In the matter of AIR  1939 F.C. 1 at P.5; “there are few subjects on which the  decisions of other Courts require to be treated with greater  caution than that of federal and provincial powers, for in  the last analysis the decision must depend upon the words  of the Constitution which the Court is interpreting; and since  no two Constitutions are in identical terms it is extremely  unsafe to assume that a decision on one of them can be  applied without qualification to another.  This may be so  even where the words or expressions used are the same in  both cases, for a word or a phrase may take a colour from  its context and bear different senses accordingly.”  

(emphasis supplied)  99. Having said that Gajendragadkar J., referred to these decisions with a view  to supporting his conclusions by reference to Judges in other jurisdiction responding  to similar challenges posed by interpretation of what His Lordship described as  “sister constitutions”. He said:  

“59. … … …When you are dealing with the problem of  construing a constitutional provision which is none-too- clear or lucid you feel inclined to inquire how other judicial  minds have responded to the challenge presented by  similar provisions in other sister Constitutions.  It is in that spirit

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that we propose to refer to two Privy Council decisions  which dealt with the construction of Section 92 of the  Australian Constitution.”  

 100. The Court, then, relied upon the decisions of the Australian High Court in  

James  v.  Commonwealth of Australia (1936) A.C. 578  and Commonwealth of  

Australia and others   v.   Bank of New South Wales and others [1950] A.C. 235 to  

hold that the test of direct and immediate effect evolved by the Australian High  

Court pronouncements, while interpreting Section 92 of the Australian Constitution,  

was the correct test applicable even to our Constitution including interpretation of  

Article 301 thereof.  The Court said:  

  Commonwealth of Australia  v.  Bank of New South Wales  

“61. … … … In deciding the said question one of the tests  which was applied by Lord Porter was: “Does the act not  remotely or incidentally (as to which they will say  something later) but directly restrict the inter-State business  of banking”, and he concluded that “two general  propositions may be accepted, (1) that regulation of  trade, commerce and intercourse among the States is  compatible with its absolute freedom, and (2) that Section  92 is violated only when a legislative or executive act  operates to restrict such trade, commerce and intercourse  directly and immediately as distinct from creating some  indirect or consequential impediment which may fairly be  regarded as remote”.  This decision thus justifies the  conclusion we have reached about the scope and effect  of Article 301.”  

 (emphasis supplied)  

 101. In Automobile’s case (supra) also Das, J. while speaking for the majority  

followed the direct and immediate effect test relying upon the pronouncements of  the High Court of Australia in Commonwealth of Australia and Ors.  v.  Bank of New  South Wales and Ors. [1950] A.C. 235. This is evident from the following passage:   

“10.  … … …In Section 92 of the Australian Constitution the

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expression used was “absolutely free” and repeatedly the  question was posed as to what this freedom meant.  We  do not propose to recite the somewhat chequered history  of the Australian decisions in respect of which Lord Porter,  after a review of the earlier cases, said in Commonwealth  of Australia  v.   Bank of New South Wales that in the  “labyrinth of cases decided under Section 92 there was no  golden thread”.  What is more important for our purpose is  that he expressed the view that two general propositions  stood out from the decisions: (i) that regulation of trade,  commerce and intercourse among the States is  compatible with its absolute freedom, and (ii) that Section  92 of the Australian Constitution is violated only when a  legislative or executive act operates to restrict such trade,  commerce and intercourse directly and immediately as  distinct from creating some indirect or inconsequential  impediment which may fairly be regarded as remote. … …  …”  

   102. On behalf of the States it was contended and, in our opinion, rightly so that  

the “direct and immediate” effect test evolved by the pronouncement of the  

Australian High Court has itself been watered down and diluted.  The current view  

in Australia is that only such taxes as are discriminatory introduced by way of a  

protectionist measure operate as restrictions on the freedom of trade, commerce  

and intercourse. This is evident from the decisions of the Australia High Court in Cole   

v.  Whitfield (1988) 165 CLR 360.  The Court in that case reviewed the case law on  

the subject and rejected the argument that if Section 92 of the Australian  

Constitution was interpreted to be forbidding only discriminatory burdens it would  

have the effect of denying the freedom of trade, commerce and intercourse.  The  

Court said:  

“… .. ..Plainly, however, the construction which treats  Section 92 as being concerned to guarantee the freedom

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of inter-State trade and commerce from discriminatory  burdens does not involve the consequence that the grant  of legislative power with respect to inter-State trade and  commerce is deprived of its essential content.”  

103. The Court noticed the evolution of the law on the subject and held that it is  

only discriminatory burdens that are forbidden by Section 92 and that the question  

whether a burden is indeed discriminatory is a question of fact and degree to be  

answered upon judicial interpretation and impressions. The following passage is, in  

this regard, instructive.   

“ Departing now from the doctrine which has failed to  retain general acceptance, we adopt the interpretation  which, as we have shown, is favoured by history and  context.  In doing so, we must say something about the  resolution of cases in which no impermissible purpose  appears on the face of the impugned law, but its effect is  discriminatory in that it discriminates against inter-State  trade and commerce and thereby protects intra-State and  commerce of the same kind.  We mention first  Commonwealth laws enacted under Section 51(i) which  govern the conduct of inter-State trade and commerce.   Such laws will commonly not appear to discriminate in a  relevant sense if they apply to all transactions of a given  kind within the reach of the Parliament.  It is, however,  possible for a general law enacted under Section 51(i) to  offend Section 92 if its effect is discriminatory and the  discrimination is upon protectionist grounds.  Whether such  a law is discriminatory in effect and whether the  discrimination is of a protectionist character are questions  raising issues of fact and degree.  The answer to those  questions may, in the ultimate, depend upon judicial  impression.”  

        (emphasis supplied)  

   104. The Court also held that it is only if the discrimination is of a protectionist  

character that Section 92 of the Australian Constitution would stand violated.   The

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Court said:  

“In the case of a State law, the resolution of the case must  start with a consideration of the nature of the law  impugned.  If it applies to all trade and commerce, inter- State and intra-State alike, it is less likely to be protectionist  than if there is discrimination appearing on the face of the  law.  But where the law in effect, if not in form,  discriminates in favour of intra-State trade, it will  nevertheless offend against Section 92 if the discrimination  is of a protectionist character. A law which has as its real  object the prescription of a standard for a product or a  service or a norm of commercial conduct will not ordinarily  be grounded in protectionism and will not be prohibited by  Section 92.  But if  a law, which may be otherwise justified  by reference to an object which is not protectionist,  discriminates against inter-State trade or commerce in  pursuit of that object in a way or to an extent which  warrants characterization of the law as protectionist, a  court will be justified in concluding that it nonetheless  offends Section 92.”   

(emphasis supplied)    105. The above passage signifies a paradigm shift in the judicial opinion in  

Australia as regards the interpretation of Section 92 of the Australian Constitution.   

The earlier view that any impediment including one in the nature of a tax which  

directly and immediately affects free trade, commerce and intercourse would  

violate Section 92 has been evidently abandoned by the Australian jurists.  It follows  

that whatever support may have been available from the earlier decisions for the  

view taken in Atiabari (supra) and Automobile(supra) cases as to the true test  

applicable for interpreting Part XIII, has, if we may use that expression, “fizzled out”  

with the passage of time.   

 106. We may, at this stage, deal with yet another contention urged on behalf of

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the dealers in support of their case that taxes were, in the scheme of Part XIII,  

treated as restrictions.  It was argued that the presence of Article 306 of the  

Constitution which now stands repealed by Constitution 7th Amendment Act, 1956  

was itself suggestive of the fact that taxes were intended to be restrictions on free  

trade, commerce and intercourse, for otherwise, there was no reason why a  

provision like Article 306 should have been incorporated by the framers of the  

Constitution.  Article 306, as it stood, before its deletion, was in the following terms:  

“Article 306. Power of certain States in Part B of the First  Schedule to impose restrictions on trade and commerce. -    

Notwithstanding anything in the foregoing provisions of this  Part or in any other provisions of the Constitution, any State  specified in Part B of the First Schedule which before the  commencement of this Constitution was levying any tax or  duty on the import of goods into the State from other  States or on the export of goods from the State to other  States may, if an agreement in that behalf has been  entered into between the Government of India and the  Government of that State, continue to levy and collect  such tax or duty subject to the terms of such agreement  and for such period not exceeding ten years from the  commencement of this Constitution as may be specified in  the agreement.     Provided that the President may at any time after the  expiration of five years from such commencement  terminate or modify any such agreement if, after  consideration of the report of the Finance Commission  constituted under Article 280, he thinks it necessary to do  so.”      

107. A careful reading of the above would show that the provision started with a  

non-obstante clause and made it constitutionally permissible for any State specified  

in Part B of the First Schedule to continue levying taxes or duties on the import of  

goods into the State from other States or on the export of goods from the State to

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other States, if an agreement in that behalf has been entered into between the  

Government of India and the Government of that State for such period not  

exceeding ten years as has been  stipulated in the agreement.   

  108. The historic rationale behind incorporation of Article 306 lay in the fact that  

some States were imposing taxes/duties on the import of goods into their territory  

and on the export of goods from their territory, which taxes and levies were  

inconsistent with the Scheme of Part XIII, but, since the States were heavily relying  

upon the revenue so collected, the tax barriers set-up for such collection could not  

be completely taken away in one go.  The framers of the Constitution in that view  

considered it necessary in the interest of stability of revenue to preserve the power  

exercised by the States for a limited period subject to the conditions stipulated in  

Article 306.  The true effect of Article 306, therefore, was that while the States had  

no power under the Constitutional Scheme to levy customs duties on the import  

and export of goods to and from a State and even when such taxes and levies  

were discriminatory vis-à-vis goods produced/manufactured from outside the  

State, the discriminatory duties and levies were in larger interest of stability of  

revenue of the concerned States permitted, but, conditionally for a limited period.  

The marginal note of Article 306, therefore, rightly mentions such levies and duties  

to be restrictions on trade, commerce and intercourse.  The reason for such  

description being the discriminatory nature of such taxes and levies. Seen in the  

historical perspective, it is futile to argue that Article 306 lends any assistance for  

determining whether taxes act as restrictions on free trade, commerce and  

intercourse.  Seervai has correctly summed-up the true import of Article 306 in the

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following passage from his treatise (supra):  

“24.42.  Again, Article 306 enabled the former Native  States, which became Part B States, to continue to levy  any tax or duty on the import of goods into such States  from other States and to impose a duty on the export of  goods out of such States for a limited period of time.  The  reason for enacting this provision is simple.  First, Part B  States claimed to be sovereign States vis-à-vis British India,  and vis-à-vis other Native States so that the provinces of  British India were in relation to Native States, and the Native  States were foreign States to one another.  The duties of  import and export levied by Native States were thus duties  of customs which are well known for creating tariff barriers.   Thus a customs duty on the import of goods creates a tariff  wall which the outside goods must surmount since there is  no obligation on the Native State imposing such duty to  impose any corresponding duty on similar goods  manufactured and produced in the other States.  And the  same is true of duties of export for they can effectively  prevent goods going out of the State by making them  unsaleable in States where goods bear no such tax or bear  a very much smaller tax.  This scheme of taxation is  basically opposed to the scheme of our Constitution  because the States of India are not foreign States to one  another, and no State can levy a duty or customs on  goods imported from another, for no State has power to  levy a duty of customs.  That power belongs exclusively to  Parliament in relation to foreign countries.  Secondly, such  duties would ordinarily contravene Article 304(a) so far as  import from other States is concerned.  However, as the  revenues of the Native States were to a greater or smaller  extent dependent on duties of customs, to have prohibited  them at once would have dislocated the finances of those  States.  So, for a limited period of time, these duties were  allowed to continue.”    

For all that we have said above we have no hesitation in rejecting the  contention urged on behalf of the dealers.   

 109. It was next argued on behalf of the dealers that an unreasonably high rate of  

tax could by itself constitute a restriction offensive to Article 301 of the Constitution.  

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This was according to learned counsel for the dealers acknowledged even in the  

minority judgment delivered by Sinha, CJ in Atiabari’s case (supra).  If that be so,  

the only way such a restriction could meet the constitutional requirements would  

be through the medium of the proviso to Article 304(b) of the Constitution.  There is,  

in our opinion, no merit in that contention either and we say so for two precise  

reasons.  Firstly, because taxes whether high or low do not constitute restrictions on  

the freedom of trade and commerce.  We have held so in the previous paragraphs  

of the judgment based on our textual understanding of the provisions of Part XIII  

which is matched by the contextual interpretation.  That being so the mere fact  

that a tax casts a heavy burden is no reason for holding that it is a restriction on the  

freedom of trade and commerce.  Any such excessive tax burden may be open to  

challenge under Part III of the Constitution but the extent of burden would not by  

itself justify the levy being struck down as a restriction contrary to Article 301 of the  

Constitution.    

110. Secondly because, levy of taxes is both an attribute of sovereignty and an  

unavoidable necessity.  No responsible government can do without levying and  

collecting taxes for it is only through taxes that governments are run and objectives  

of general public good achieved.  The conceptual or juristic basis underlying the  

need for taxation has not, therefore, been disputed by learned counsel for the  

dealers and, in our opinion, rightly so.  That taxation is essential for fulfilling the  

needs of the government is even otherwise well-settled.  A reference to “A Treatise  

on the Constitutional Limitations” (8th Edn. 1927 – Vol. II Page 986) by Thomas M  

Cooley brings home the point with commendable clarity.  Dealing with power of  

taxation Cooley says:

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“Taxes are defined to be burdens or charges imposed by  the legislative power upon persons or property, to raise  money for public purposes.  The power to tax rests upon  necessity, and is inherent in every sovereignty.  The  legislature of every free State will possess it under the  general grant of legislative power, whether particularly  specified in the constitution among the powers to be  exercised by it or not.  No constitutional government can  exist without it, and no arbitrary government without  regular and steady taxation could be anything but an  oppressive and vexatious despotism, since the only  alternative to taxation would be a forced extortion for the  needs of government from such persons or objects as the  men in power might select as victims.”  

 111. Reference may also be made to the following passage appearing in  

McCulloch v. Maryland, 17 US 316 (1819) where Chief Justice Marshall recognized  

the power of taxation and pointed out that the only security against the abuse of  

such power lies in the structure of the government itself. The court said:  

“43. … .. ..It is admitted that the power of taxing the people  and their property is essential to the very existence of  government, and may be legitimately exercised on the  objects to which it is applicable to the utmost extent to  which the government may choose to carry it.  The only  security against the abuse of this power is found in the  structure of the government itself.  In imposing a tax, the  legislature acts upon its constituents.  This is, in general, a  sufficient security against erroneous and oppressive  taxation.      44. The people of a State, therefore, give to their  government a right of taxing themselves and their  property; and as the exigencies of the government cannot  be limited, they prescribe no limits to the exercise of this  right, resting confidently on the interest of the legislator,  and on the influence of the constituents over their  representative, to guard them against its abuse.”  

 112.  To the same effect is the decision of this Court in State of Madras  v.  N.K.  Nataraja Mudaliar (AIR 1969 SC 147)  where this Court recognized that political and

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economic forces would operate against the levy of an unduly high rate of tax.  The  Court said:   “16.… … …Again, in a democratic constitution political  

forces would operate against the levy of an unduly high  rate of tax.  The rate of tax on sales of a commodity may  not ordinarily be based on arbitrary considerations, but in  the light of the facility of trade in a particular commodity,  the market conditions internal and external – and the  likelihood of consumers not being scared away by the  price which includes a high rate of tax.  Attention must also  be directed sub-Section (5) of Section 8 which authorizes  the State Government, notwithstanding anything  contained in Section 8, in the public interest to waive tax or  impose tax on sales at a lower rate on inter-State trade or  commerce.  It is clear that the legislature has  contemplated that elasticity of rates consistent with  economic forces is clearly intended to be maintained.”  

 113. Also apposite is the following passage from the said decision where this Court  

held that free flow of trade does not necessarily depend upon the rate of taxes but  

upon a variety of factors which the Court identified in the following words:   

“14. … … … The flow of trade does not necessarily depend  upon the rates of sales tax: it depends upon a variety of factors,  such as the source of supply, place of consumption, existence  of trade, channels, the rates of freight, trading facilities,  availability of efficient transport and other facilities for carrying  on trade.  Instances can easily be imagined of cases in which  notwithstanding the lower rate of tax in a particular part of the  country goods may be purchased from another part, where a  higher rate of tax prevails.  Supposing in a particular State in  respect of a commodity, the rate of tax is 2 per cent but if the  benefit of that low rate is offset by the freight which a merchant  in another State may have to pay for carrying that commodity  over a long distance, the merchant would be willing to  purchase the goods from a nearer State, even though the rate  of tax in that State may be higher.  Existence of long standing  

business relations, availability of  communications, credit  facilities and a host of other factors – natural and business –  enter into the maintenance of trade relations and the free  flow of trade cannot necessarily be deemed to have been  obstructed merely because in a particular State the rate of  tax on sales is higher than the rates prevailing in other

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States.”    

114. Reliance by the counsel for the dealers upon the judgment of Sinha, CJ is  also, in our opinion, of no avail to them. After holding taxes to be outside the  purview of Part XIII of the Constitution, His Lordship made the following observations:  

“17. … … … If a law is passed by the Legislature imposing a  tax which in its true nature and effect is meant to impose  an impediment to the free flow of trade, commerce and  intercourse, for example, by imposing a high tariff wall, or  by preventing imports into or exports out of a State, such a  law is outside the significance of taxation, as such, but  assumes the character of a trade barrier which it was the  intention of the Constitution makers to abolish by Part XIII.”  

 115. A careful reading of the above would show that Sinha, CJ had two situations  

in mind.  One, where the State prevents imports into and exports out of the State  

and the other where the State imposes the high tariff wall with a view to imposing  

an impediment to the free flow of trade, commerce and intercourse.  Insofar as the  

first category viz. laws that forbid imports into and exports out of a State are  

concerned, the same would work as a restriction in terms of restrictions within the  

contemplation of Part XIII and may be permissible in the manner and to the extent  

the said Part permits to do so, but, in the second case, viz. legislature imposing a  

high tariff wall so as to operate as an impediment to free flow of trade, commerce  

and intercourse, there are considerable difficulties. That is so because the judgment  

does not elaborate as to what would constitute a high tariff wall for the tax to  

operate as a restriction/impediment.    

116. Counsel for the parties were, in the course of arguments, repeatedly asked  

whether any objective standards and norms can be evolved to determine the  

height and the width of the wall referred to in the passage extracted above.  They  

were, however, unable to suggest any such norms.  They fairly conceded that it

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was difficult if not impossible to evolve any such norm applicable to myraid  

situations that would arise before the courts.  This implies that the tariff wall theory  

actually breaks down and is not amenable to judicially manageable dimensions.   

What may sound a high tariff wall or a fiscal barrier to one may not be so to the  

other.  What may constitute a fiscal wall or barrier for one category of traders may  

not be so for other categories. So also, the tax at a given rate may be high on a  

particular commodity but reasonable qua another.  Suffice it to say that the fiscal  

wall theory gets into serious difficulties when it comes to enforcement or  

effectuating the same.  The logic behind the theory in fact cracks and gives-up.   

Such being the position, we have little hesitation in holding that the fiscal wall  

theory propounded in Sinha, CJ’s minority judgment is not really workable and has  

not commended itself to us.  It follows that simply because the tax is high is no  

reason for it to change its character and take the form of a restriction within the  

meaning of Part XIII, no matter any one aggrieved of such heavy burden shall have  

the liberty to assail the same on all such grounds as may be available to him under  

Part III of the Constitution.  We are conscious of the fact that some decisions of this  

Court in Raja Jagannath Baksh Singh  v.  State of UP AIR 1962 SC 1563; Federation of  

Hotel & Restaurant Assn. of India etc.  v.  Union of India & ors. (1989) 3 SCC 634; Y V  

Srinivasamurthy  and ors. v. State of Mysore and Anr.  AIR 1959 SC 894; D G Gose &  

Co. (Agents) (P) Ltd. v. State of Kerala and anr.  (1980) 2 SCC 410; A Suresh and  

others v. State of TN and another (1997) 1 SCC 319 have declared that just because  

a tax is heavy is no reason for it to be contrary to Part III, but we leave that question  

open to be examined in appropriate cases as and when any such challenge is  

mounted by anyone aggrieved of an unduly heavy tax rate.  

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  117. That brings us to the question whether the use of the expression  

“by virtue of any entry relating to trade and commerce” appearing in  

Article 303 are wide enough to include entries relating to levy of taxes  

also.  The argument advanced amongst others by Mr. Datar is that the  

expression “relating to trade and commerce” appearing in the said  

Article must be interpreted liberally so as to include not only Entry 42 in  

List I, Entry 26 in List II and Entry 33 in List III but also other entries that  

empower the Parliament and State Legislatures to levy taxes.  By that  

logic it was contended that levy of taxes is also treated as a restriction  

within the contemplation of Part XIII making it necessary for the  

legislature to resort to Article 304(b) and the proviso for doing so.  There  

is in our opinion no merit in that contention also.    

 118. We say so for two  precise reasons.  Firstly because entries relating  

to Trade and commerce by themselves are not sufficient to empower  

the legislature to levy taxes.  The constitutional scheme is such that a  

taxing entry is distinct from other entries and a levy of tax is possible  

only if there is an entry which authorizes the competent legislature to  

levy the same.  This distinction has for long been maintained by judicial

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pronouncements of this Court.  We may in this regard refer to M.P.V.  

Sunderaramier’s case (supra) where this Court has declared:  

   “51. In List I, Entries 1 to 81 mention the several matters over  

which Parliament has authority to legislate. Entries 82 to 92  enumerate the taxes which could be imposed by a law of  Parliament. An examination of these two groups of Entries  shows that while the main subject of legislation figures in  the first group, a tax in relation thereto is separately  mentioned in the second. Thus, Entry 22 in List I is  “Railways”, and Entry 89 is “Terminal taxes on goods or  passengers, carried by railway, sea or air; taxes on railway  fares and freights”. If Entry 22 is to be construed as involving  taxes to be imposed, then Entry 89 would be superfluous.  Entry 41 mentions “Trade and commerce with foreign  countries; import and export across customs frontiers”. If  these expressions are to be interpreted as including duties  to be levied in respect of that trade and commerce, then  Entry 83 which is “Duties of customs including export duties”  would be wholly redundant. Entries 43 and 44 relate to  incorporation, regulation and winding up of corporations.  Entry 85 provides separately for corporation tax. Turning to  List II, Entries 1 to 44 form one group mentioning the  subjects on which the States could legislate. Entries 45 to 63  in that List form another group, and they deal with taxes.  Entry 18, for example, is “Land” and Entry 45 is “Land  revenue”. Entry 23 is “Regulation of mines” and Entry 50 is  “Taxes on mineral rights”. The above analysis — and it is not  exhaustive of the Entries in the Lists — leads to the  inference that taxation is not intended to be comprised in  the main subject in which it might on an extended  construction be regarded as included, but is treated as a  distinct matter for purposes of legislative competence. And  this distinction is also manifest in the language of Article  248, clauses (1) and (2) and of Entry 97 in List I of the  Constitution. Construing Entry 42 in the light of the above  scheme, it is difficult to resist the conclusion that the power  of Parliament to legislate on inter-State trade and  commerce under Entry 42 does not include a power to  impose a tax on sales in the course of such trade and  commerce.”

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xxx xxx xxx   55.  To sum up: (1) Entry 54 is successor to Entry 48 in the  

Government of India Act, and it would be legitimate to  construe it as including tax on inter-State sales unless, there  is anything repugnant to it in the Constitution and there is  none such.  (2)  Under the scheme of the Entries in the Lists,  taxation is regarded as a distinct matter and is separately  set out. … … ..”   

 119.  The above pronouncement is, in our opinion, the correct  

enunciation of the legal position in the light whereof it is difficult to  

appreciate how entries relating to trade and commerce could be  

understood to be including levy of taxes also.  That apart, once taxes  

are held to be outside Part XIII  for the reason that we have already set  

out earlier, there is no way we can bring them back into that Part by a  

tenuous interpretation or understanding of Article 303. As explained by  

us earlier, Article 303 is an exception to Article 302, inasmuch as it limits  

the power conceded to the Parliament under Article 302 to impose  

restrictions on freedom of Trade, commerce and intercourse in public  

interest.  The power exercised by Article 302 cannot be so exercised as  

to give preference to one state over another except under a situation  

covered by Article 303(2) namely situation arising from scarcity of  

goods in any part of the territory of India.    We cannot add to this  

Article any artificially extended meaning the ingenuity of the bar in  

coining any such interpretation notwithstanding.

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120. Relying upon the decision in Mudaliar’s case (supra) it was argued  

on behalf of the assessee that this Court has upheld the constitutional  

validity of the Central State Tax Act on the ground that such a tax was  

in public interest within the contemplation of Article 302 of the  

Constitution of India, hence, validly leviable.  This, according to the  

learned counsel, implied that the tax was recognised as a restriction  

which could be levied only if found to be in public interest as  

stipulated in Article 302. We have no difficulty in rejecting that  

contention. In Mudaliar’s case, this Court was bound by and followed  

the pronouncement of the larger bench in Atiabari’s case holding that  

taxes could also be restrictions on free trade and commerce if they  

directly and immediately impeded their free flow. We have, in the  

preceding part of this judgment, held that view to be legally  

unsustainable on a proper construction of the provision of Part XIII and  

the Constitutional scheme. Once the premise on which Atiabari’s case  

was decided is held to be flawed, Mudaliar that simply followed the  

ratio of that decision cannot stand scrutiny. The argument that Central  

Sales Tax was valid in terms of Article 302 as such a tax was in public  

interest becomes academic if taxes are held to be outside the purview  

of Part XIII.  This incidentally will be true in respect of every other

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pronouncement where benches of smaller strength have dealt with  

similar other legislations and taken a view following the ratio in  

Atiabari’s case.   

121. We may at this stage deal with yet another contention urged on  

behalf of the assesses who argued that while Article 304(a) forbids  

discriminatory fiscal legislation in respect of goods coming from  

another state there was no provision which prevented the States from  

levying discriminatory taxes within its territorial limits. The argument was  

that the absence of any provision against discriminatory taxation  

within a State must be understood to mean that taxes would generally  

be restrictions  and unless the States take recourse to Article 304(b)  

they cannot levy such taxes upon trade and commerce within their  

territorial limits. The argument is, in our view, more in despair than  

substantial.  It is true that Part XIII does not in terms forbid the levy of  

discriminatory taxes on goods produced within the States but the fact  

that there is no such prohibition does not necessarily mean that if such  

discriminatory taxation does indeed take place the same is  

constitutionally permissible.  Whether or not there is hostile  

discrimination between goods from one part of the State and those  

from another part is a matter which will have to be judged on a case

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to case basis and on the touchstone of Article 14. Having said that we  

need to remind ourselves that Part XIII of the Constitution was aimed at  

addressing the mischief arising from fiscal and other barriers which the  

princely states had imposed and which gravely impeded free trade  

and commerce. The Constituent Assembly Debates show that framers  

of the Constitution were concerned with the removal of such barriers.   

Discrimination intra-State in terms of levy of taxes was never  

considered to be a challenge for presumably the Constituent  

Assembly never considered the same to be a real possibility  

necessitating a specific provision prohibiting levy of discriminatory  

intra-State taxes.   

122.  On behalf of the assessees-dealers, it was  next argued that  

levy of entry tax on import of goods from outside the local area in the  

State will be per se discriminatory if goods so imported or similar are not  

produced or manufactured within the State. That is, argued the  

learned counsel, because the levy will fall unequally thereby violating  

the guarantee against discrimination contained in Article 304(a).  We  

have no difficulty in rejecting that submission as well.  The reason is  

obvious. Article 304(a), in our opinion, strikes at discriminatory taxation  

implying thereby that the levy falls unequally as between goods

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produced or manufactured within the State and those being imported  

from outside. The essence of the guarantee in Article 304(a) lies in the  

same or similar goods being treated similarly in the matter of taxation.  

The question, therefore, is whether that guarantee is violated if the  

goods subjected to levy of entry tax are not produced or  

manufactured within the State levying the tax. Our answer is in the  

negative. This is because there is no question of any discrimination if  

goods from outside the State are not at a disadvantage vis-a-vis  

goods produced or manufactured within that State.  It is true that a  

levy on goods that are not produced or manufactured in the State is  

likely to make such goods costlier but that is not enough for the levy to  

be considered unconstitutional.  A responsive Government aware of  

the needs of its constituents will be under tremendous pressure to keep  

such taxes low enough for its constituents to be able to afford the  

same. Democratic processes and pressures within the system of  

governance that we have will itself take care of any aberration in this  

regard.  What is absolutely clear, however, is that Article 304(a) will not  

frown at a levy simply because same or similar goods as are taxed are  

not produced or manufactured in the State.  Reliance upon the  

decision in Kalyani Stores AIR 1966 SC 1686 does not, in our opinion,

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help the assessees. The majority judgment in that case looked at  

Article 304(a) as the source of power to levy a tax or duty.  We have in  

the earlier parts of the judgment explained that the source of power to  

levy taxes/duties lies in Articles 245 and 246 of the Constitution read  

with the entries in the three lists contained in Schedule VII. Article  

304(a), in that view, only places a constitutional restriction on the  

power to levy taxes or duties while recognizing the availability of such  

powers to the State legislatures. The restrictions as explained by us in  

the earlier paras to levy taxes/duties is confined to levy of  

discriminatory taxes and duties alone.  To the extent, Kalyani Stores  

takes the view that the power to levy taxes is traceable to Article  

304(a) the decision, in our opinion, is not sound nor is it correct to say  

that since goods being taxed are not produced in the State, the  

power to levy a tax gets obliterated.   

 123.  Appearing for some of the assessees Mr. Venkatraman  

argued that the Central Sales Tax Act was a classic example of the  

Union exercising its power under Article 302 of Part XIII. He contended  

that the restrictions so imposed signify that tax and restrictions are  

synonymous within the contemplation of part XIII.    

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124.  The Central Sales Tax Act, 1956 was enacted pursuant to the  

Sixth Amendment Act, 1956 whereby taxes on sale and purchase of  

goods in the course of inter-state trade and commerce were expressly  

brought within the purview of the legislative competence of  

Parliament. This included the power to impose restrictions upon the  

power of the State legislature insofar as levy of taxes of sale or  

purchase of goods of special importance is concerned. Entry 92-A  

added by the Sixth Amendment Act 1956 empowered the Parliament  

to levy taxes on the sale and purchase of the goods other than  

newspapers in the course of trade and commerce.  Entry 54 of the  

State List by the same amendment was redrawn to make the taxes on  

the sale and purchase of goods subject to Entry 92-A of List I. The two  

entries read as under:  

“92-A.  Taxes on the sale or purchase of goods other than  newspapers, where such sale or purchase takes place in  the course of inter-State trade or commerce.  

   54.  Taxes on the sale or purchase of goods other than  newspapers, subject to the provisions of Entry 92-A of List- I.”  

125.  The States’ power it is evident is made subservient to the  

powers of the Parliament under Entry 92-A. Section 15 of the Central  

Sales Tax Act, therefore, has overriding effect vis-a-vis any State Law

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authorizing imposition of taxes on sale/purchase of declared goods.  

Seen in the above perspective, Parliament has limited the legislative  

power of the State insofar as taxes on declared goods are concerned.   

We find it difficult to read into such restrictions the meaning sought to  

be drawn by the learned counsel that taxes themselves are restrictions  

within the comprehension of Part XIII.  The imposition of restrictions on  

the State’s power of taxation in regard to declared goods is not, in our  

opinion, suggestive of taxes themselves being restrictions for purposes  

of Part XIII of the Constitution.  Not only that, Article 286(3) provides the  

source of power for the Parliament to impose any restriction on the  

State authority to levy a tax on goods of special importance declared  

by Parliament.  Article 286 (3) reads as :   

 “286.Restriction as to imposition of tax on the sale or  purchase of goods:  

    (1)….    (2)….    (3) Any law of a State shall, in so far as it imposes,  

or authorises the imposition of,—     

(a) a tax on the sale or purchase of goods  declared by Parliament by law to be of special  importance in inter-State trade or commerce; or  

   (b) a tax on the sale or purchase of goods, being  

a tax of the nature referred to in sub-clause (b),  sub clause (c) or sub-clause (d) of clause (29A) of  article 366,  

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be subject to such restrictions and conditions in  regard to the system of levy, rates and other incidents  of the tax as Parliament made by law specify.”  

126.  In the light of what we have said above, we answer Question No.1 in  

the negative and declare that a non-discriminatory tax does not per se constitute a  

restriction on the right to free trade, commerce and intercourse guaranteed under  

Article 301. Decisions taking a contrary view in Atiabari’s case (supra) followed by a  

series of later decisions shall, therefore, stand overruled including the decision in  

Automobile Transport (supra) declaring that taxes generally are restrictions on the  

freedom of trade, commerce and intercourse but such of them as are  

compensatory in nature do not offend Article 301. Resultantly decisions of his Court  

in Jindal Stainless Limited(2) and anr.   v.   State of Haryana and ors. (2006) 7 SCC  

241 shall also stand overruled.   

 127.  Re. Question No.2    In view of our answer to Question No.1, Question No.2 does not arise for  consideration.      128.  Re. Question No.3  In the light of what we have said in Question Nos. 1 and 2, this question also does  

not survive for consideration.  

129.  Re. Question No.4    This question touching the constitutional validity of the impugned State enactments  

can be split into two parts.  The first part which can be briefly dealt with at the  

outset is whether the constitutional validity of the impugned legislations has to be  

tested by reference to both Articles 304(a) and 304(b) as contended by learned  

counsel for the assessees or only by reference to Article 304(a) as argued by the

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States.  In the light of what we have said while dealing with question No.1 we have  

no hesitation in holding that Article 304(b) does not deal with taxes as restrictions.  

At the risk of repetition, we may say that restrictions referred to in Article 304(b) are  

non-fiscal in nature. Constitutional validity of any taxing statute has, therefore, to be  

tested only on the anvil of Article 304(a) and if the law is found to be non-

discriminatory, it can be declared to be constitutionally valid without the legislation  

having to go through the test or the process envisaged by Article 304(b). Should,  

however, the statute fail the test of non-discrimination under Article 304(a) it must  

be struck down for the same cannot be sustained even if it had gone through the  

process stipulated by Article 304(b). That is because what is constitutionally  

impermissible in terms of Article 304(a) cannot be validated and sanctioned  

through the medium of Article 304(b). Suffice it to say that a fiscal statute shall be  

open to challenge only under Article 304(a) of the Constitution without being  

subjected to the test of Article 304(b) either in terms of the existence of public  

interest or reasonableness of the levy.    

 130.  That brings us to the second part of question No.4 viz. whether the  

impugned State enactments violate Article 304(a) of the Constitution.  That aspect  

will necessarily involve a careful reading of the impugned enactments and a  

proper appreciation of the scheme underlying the same.  While we have at some  

length heard learned counsel for the parties on that aspect, we do not propose to  

deal with all the dimensions of that challenge based on Article 304(a) except two  

of them that were argued at great length by learned counsel for the parties. The  

first of these two dimensions touches upon the State’s power to promote industrial

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development by granting incentives including those in the nature of exemptions or  

reduced rates of levy on goods locally produced or manufactured. On behalf of  

the assesses it was contended that grant of exemptions and incentives in favour of  

locally manufactured/produced goods is also one form of insidious discrimination  

which was impermissible in terms of article 304(a) for such exemptions and  

incentives had the effect of putting goods from another State at a disadvantage.  

Relying upon a decision of two-Judge Bench of this Court in Shree Mahavir Oil Mills  

and Anr. v. State of Jammu and Kashmir and Ors. (1996) 2 SCC 39 it was argued  

that exemptions in favour of locally produced goods from payment of taxes was  

constitutionally impermissible and offensive to article 304(a).  That was a case  

where the State Government had totally exempted goods manufactured by small  

scale industries within the State from payment of sales tax even when the sales tax  

payable by other industries including manufacturers of goods  in adjoining States  

was in the range of 8%.  This exemption was questioned by manufacturers of edible  

oils from other States on the ground that the same was discriminatory and violative  

of Articles 301 and 304 of the Constitution.  

 131. This Court held that the exemption given to manufacturers of edible oil was  

total and unconditional, while producers of edible oil from industries in adjoining  

states had to pay sales tax @ 8%.  Grant of exemption to local oil producing units  

thereby put the former at a disadvantage. Having said that, the Court exercised its  

powers under Article 142 of the Constitution and struck down the exemption by  

moulding the reliefs to suit the exigencies of the situation. The Court no doubt  

noticed a three-Judge Bench decision in Video Electronics vs. State of Punjab

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(1990) 3 SCC 87 in which notifications issued by the States of U.P and Punjab  

providing for exemptions to new units established in certain areas for a prescribed  

period of 3 to 7 years were assailed as discriminatory. The challenge to the  

exemption was in that case also based on the alleged violation of Articles 301 and  

304. This Court however upheld the notifications in question on the ground that the  

same related to a specific class of industrial units and the benefit under the same  

was admissible for a limited period of time only. The Court observed that if an  

overwhelmingly large number of local manufacturers were subject to sales tax, it  

could not be said that the local manufactures were favored as a class against  

outsiders.   

 Adverting to the decision in Video Electronics (supra) this Court in Mahavir  

(supra) held the same to be distinguishable on the ground that the Punjab and U.P  

notifications were qualitatively different from the one issued by the Government of  

Jammu and Kashmir in as much as while the former benefitted only specified units  

and limited the benefit to a specified period, the latter was not subject to any  

such limitations. This declared the Court resulted in discrimination vis-a-vis. outside  

goods. What is important is that in Video Electronics (supra) this Court recognized  

the difference between differentiation and discrimination and held that every  

differentiation is not discrimination. This Court noted that the word discrimination  

was not used in Article 14 as it has been used in Article 16, Article 303 and Article  

304 (a). The use of the word in 304 (a) observed this Court involved an element of  

“intentional and unfavorable bias”. So long as there was no such bias evident from  

the measure adopted by the state, mere grant of exemption or incentives aimed

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at supporting local industries in their growth, development and progress did not  

constitute discrimination.   

 132.  We respectfully agree with the line of reasoning adopted in Video  

Electronics (supra). The expression “discrimination” has not been defined in the  

Constitution though the same has fallen for interpretation of this Court on several  

occasions. The earliest of these decisions was rendered in Kathi Raning Rawat v. The  

State of Saurashtra AIR 1952 SC 123, where a seven-Judge Bench of this Court held  

that all legislative differentiation is not necessarily discriminatory. Relying upon the  

meaning of the expression in Oxford Dictionary, Patanjali Sastri, CJ (as His Lordship  

then was) explained :   

“7. All legislative differentiation is not necessarily  discriminatory. In fact, the word “discrimination” does not  occur in Article 14. The expression “discriminate against” is  used in Article 15(1) and Article 16(2), and it means,  according to the Oxford Dictionary, “to make an adverse  distinction with regard to; to distinguish unfavourably from  others”. Discrimination thus involves an element of  unfavourable bias and it is in that sense that the expression  has to be understood in this context. If such bias is disclosed  and is based on any of the grounds mentioned in Articles 15  and 16, it may well be that the statute will, without more,  incur condemnation as violating a specific constitutional  prohibition unless it is saved by one or other of the provisos to  those articles. But the position under Article 14 is different.  Equal protection claims under that article are examined with  the presumption that the State action is reasonable and  justified. This presumption of constitutionality stems from the  wide power of classifi-cation which the legislature must, of  necessity, possess in making laws operating differently as  regards different groups of persons in order to give effect to  its policies… .. ..”  

 133. Fazl Ali J. in his concurring judgment explained the concept in the following

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words:  

“19. I think that a distinction should be drawn between  “discrimination without reason” and “discrimination with  reason”. The whole doctrine of classification is based on this  distinction and on the well-known fact that the  circumstances which govern one set of persons or objects  may not necessarily be the same as those governing another  set of persons or objects, so that the question of unequal  treatment does not really arise as between persons governed  by different conditions and different sets of circumstances.  The main objection to the West Bengal Act was that it  permitted discrimination “without reason” or without any  rational basis.”  

 Any challenge to a fiscal enactment on the touchstone of Article 304(a)  

must in our opinion be tested by the same standard as in Kathi’s case (supra). The  

Court ought to examine whether the differentiation made is intended or inspired  

by an element of unfavourable bias in favour of the goods produced or  

manufactured in the State as against those imported from outside. If the answer  

be in the affirmative, the differentiation would fall foul of Article 304(a) and may  

tantamount to discrimination. Conversely, if the Court were to find that there is no  

such element of intentional bias favouring the locally produced goods as against  

those from outside, it may have to go further and see whether the differentiation  

would be supported by valid reasons. In the words of Fazl Ali, J. discrimination  

without reason would be unconstitutional whereas discrimination with reason may  

be legally acceptable. In Video Electronic’s case, this Court noted that the  

differentiation made was supported by reasons. This Court held that if economic  

unity of India is one of the Constitutional aspirations and if attaining and  

maintaining such unity is a Constitutional goal, such unity and objectives can be  

achieved only if all parts of the Country develop equally. There is, if we may say so,

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with respect considerable merit in that line of reasoning. A State which is  

economically and industrially backward on account of several factors must have  

the opportunity and the freedom to pursue and achieve development in a  

measure equal to other and more fortunate regions of the country which have for  

historical reasons, developed faster and thereby acquired an edge over its less  

fortunate country cousins. Economic unity from the point of view of such  

underdeveloped or developing states will be an illusion if they do not have the  

opportunity or the legal entitlement to promote industries within their respective  

territories by granting incentives and exemptions necessary for such growth and  

development. The argument that power to grant exemption cannot be used by  

the State even in case where such exemptions are manifestly intended to promote  

industrial growth or promoting industrial activity has not appealed to us. The power  

to grant exemption is a part of the sovereign power to levy taxes which cannot be  

taken away from the States that are otherwise competent to impose taxes and  

duties. The conceptual foundation on which such exemptions and incentives have  

been held permissible and upheld by this Court in Video’s case is, in our opinion,  

juristically sound and legally unexceptionable. Video Electronics, therefore,  

correctly states the legal position as regards the approach to be adopted by the  

Courts while examining the validity of levies. So long as the differentiation made by  

the States is not intended to create an unfavourable bias and so long as the  

differentiation is intended to benefit a distinct class of industries and the life of the  

benefit is limited in terms of period, the benefit must be held to flow from a  

legitimate desire to promote industries within its territory. Grant of exemptions and  

incentives in such cases must be deemed to have been inspired by considerations

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which in the larger context help achieve the Constitutional goal of economic  

unity.   

 134. Seen in the above context the decision in Mahabir Oil’s case is indeed  

distinguishable in as much as the manufactures of edible oil were exempt totally  

and unconditionally while other manufacturers from outside the State were not so  

exempt. Whether or not the impugned enactments in the present batch of cases  

satisfy the tests referred to above and elaborated in Video Electronics case is a  

matter on which we do not propose to express any opinion for that aspect is best  

left open to be considered by the regular benches hearing these matters after the  

reference is disposed off.         

 135. The other dimension of what according to the assesses amounts to  

discrimination lies in goods coming from outside the State for sale, consumption or  

use within a local area of another State being subjected to an entry tax at a rate  

different from the one at which goods manufactured within the taxing State are  

taxed.  We are not getting into the substantive or machinery provisions of the State  

enactments that levy entry tax on goods entering a local area.  This can be done  

more appropriately by the bench hearing the matter after the reference has been  

answered.  What we propose to examine is whether grant of exemption or  

adjustment/ setoff/ credit to goods produced or manufactured within the taxing  

State can vis a vis goods coming from outside the State constitute discrimination  

against such outside goods.  According to the assessee it does constitute  

discrimination against such outside goods while according to the State any  

provision which is aimed at equalizing the impact of taxes on goods after their

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production/ manufacture is legitimate and constitutionally permissible.  

 136.  The States argue that the grant of exemption to indigenous goods is aimed  

only at neutralizing the impact of entry tax on those goods, in cases where VAT/  

Sales Tax payable on such goods is equivalent to the rate at which entry tax is  

chargeable. The exemption in such cases has the effect of rendering the locally  

produced goods free from entry tax liability. In cases where there is a difference in  

the rate of VAT/ Sales Tax and entry tax adjustment/credit of the amount paid  

towards VAT/ Sales tax has the effect of reducing the entry tax liability  

proportionately. It is argued that so long as similar credit/adjustment/setoff is made  

admissible to goods coming from another state there is no  question of any  

discrimination qua them. The rate of tax paid on such goods in the state from  

where they are brought including the Central Sales Tax, if any payable on the same  

may be equal to the entry tax payable under the relevant statute in which case  

such outside goods also enjoy the same advantage as goods manufactured in the  

taxing state, dispelling any misconceived impression about any discrimination qua  

such goods.    

 137. The legal position as to the approach that courts adopt towards fiscal  

measures while examining their constitutional validity is fairly well settled by a long  

line of decisions of this Court. The law on the subject is so well settled that it calls for  

no elaborate discussion of the same.  Courts have almost universally accepted the  

principle that keeping in view the inherent complexities of fiscal adjustments and  

the diverse elements and inputs that go into such exercise a greater latitude is due  

to the legislature in taxation related legislations. It is unnecessary to refer to all the

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decisions in which this Court has conceded such play at the joints to the legislature.  

Reference to some of the decision of this Court should in our opinion suffice. In  

Mafatlal v. Union of India  1997(5) SCC 536 in a separate but concurring opinion  

Paripoornan, J. held:  

 “ 343. .. ..In the matter of taxation laws, the Court permits a  great latitude to the discretion to the legislature.  The State is  allowed to pick and choose districts, objects, persons,  methods and even rate for taxation if it does so reasonably.   The Courts view the laws relating to economic activities with  greater latitude than other matters. [See Collector of  Customs  v. Nathella Sampathu Chetty and Anr. AIR 1962 SC  316; Khyerbari Tea Company Ltd. and Anr. v. State of Assam  and Ors. AIR 1964 SC 925; R.K. Garg v. Union of India and  Ors. AIR 1981 SC 2138; Gauri Shanker and Ors v. Union of  India and Ors.  (1994) 6 SCC 349 and Union of India and Anr.  v. A. Sanyasi Rao and Ors. (1996) 3 SCC 465]etc.”    

 138. Reference may also be made to the Constitution bench decision of this  

Court in Khandige Sham Bhat v. Agrl. ITO, AIR 1963 SC 591 where this Court  

declared that a law may facially appear to be non discrimination and yet its  

impact on persons and property similarly situate may operate unequally in which  

event, the law would offend the equity clause. This implies that facial equality is not  

the only test for determining whether the law is constitutionally valid.  What is  

equally important is the impact of the legislation.  This Court held:   

 “7…Though a law ex facie appears to treat all that fall within  a class alike, if in effect it operates unevenly on persons or  property similarly situated, it may be said that the law  offends the equality clause. It will then be the duty of the  court to scrutinise the effect of the law carefully to ascertain  its real impact on the persons or property similarly situated.  Conversely, a law may treat persons who appear to be

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similarly situate differently; but on investigation they may be  found not to be similarly situate. To state it differently, it is not  the phraseology of a statute that governs the situation but  the effect of the law that is decisive. If there is equality and  uniformity within each group, the law will not be  condemned as discriminative, though due to some  fortuitous circumstance arising out of a peculiar situation  some included in a class get an advantage over others, so  long as they are not singled out for special treatment.  Taxation law is not an exception to this doctrine vide  Purshottam Govindji v. B.M. Desai, and Kunnathat Thathuni  Moopil Nair v. State of Kerala. But in the application of the  principles, the courts, in view of the inherent complexity of  fiscal adjustment of diverse elements, permit a larger  discretion to the legislature in the matter of classification, so  long it adheres to the fundamental principles underlying the  said doctrine. The power of the legislature to classify is of  “wide range and flexibiliy” so that it can adjust its system of  taxation in all proper and reasonable ways.”       

139.  In V. Guruviah Naidu and Sons and ors.  v.   State of Tamil Nadu and ors,  

(1977) 1 SCC 234 the Court was examining whether levy of sales tax on hides and  

skins from within or outside the State was discriminatory and offensive to Article  

304(a) of the Constitution. Repelling the contention that it was violative of Article  

304(a), this Court held:  

“8. None of the circumstances which led this Court to strike  down the relevant provisions in the abovementioned two  cases exists in the present case. In Mehtab’s case  

discrimination was found to exist because of the fact that  tax was being levied at the same rate in respect of both raw  hides and skins as well as dressed hides and skins, even  though the price of dressed hides and skins was much  higher. The position was worse in the case of Hajee Abdul  Shukoor because in that case the sales tax was found to  have been charged at a higher rate in respect of dressed  hides and skins than that on the sale of raw hides and skins in  spite of the fact that the price of dressed hides and skins was

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higher than that of raw hides and skins. The position in the  present case is materially different, for here the rate of sales  tax for raw hides and skins is 3 per cent, while that for  dressed hides and skins is 11/2 per cent. It is plain that the  lower rate of tax in the case of dressed hides and skins has  been prescribed with a view to offset the difference  between the higher price of dressed hides and skins and the  lower price of raw hides and skins. No material has been  brought on the record to show that despite the lower rate of  sales tax for dressed hides and skins, the imported hides and  skins are being subjected to discrimination. The onus to show  that there would be discrimination between the hides and  skins which were purchased locally in the raw form and  thereafter tanned and the hides and skins which were  imported from other States was upon the appellant. The  appellant, we find, has failed to discharge such onus.    9. Article 304(a) does not prevent levy of tax on goods; what  it prohibits is such levy of tax on goods as would result in  discrimination between goods imported from other States  and similar goods manufactured or produced within the  State. The object is to prevent discrimination against  imported goods by imposing tax on such goods at a rate  higher than that borne by local goods since the difference  between the two rates would constitute a tariff wall or fiscal  barrier and thus impede the free flow of inter-State trade  and commerce. The question as to when the levy of tax  would constitute discrimination would depend upon a  variety of factors including the rate of tax and the item of  goods in respect of the sale of which it is levied. The scheme  of Items 7(a) and 7(b) of the Second Schedule to the State  Act is that in case of raw hides and skins which are  purchased locally in the State, the levy of tax would be at  the rate of 3 per cent at the point of last purchase in the  State. When those locally purchased raw hides and skins are  tanned and are sold locally as dressed hides and skins, no  levy would be made on such sales as those hides and skins  have already been subjected to local tax at the rate of 3  per cent when they were purchased in raw form. As against  that, in the case of hides and skins which have been  imported from other States in raw form and are thereafter  tanned and then sold inside the State as dressed hides and  skins, the levy of the tax is at the rate of 11/2 per cent at the

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point of first sale in the State of the dressed hides and skins.  This levy cannot be considered to be discriminatory as it  takes into account the higher price of dressed hides and  skins compared to the price of raw hides and skins. It also  further takes note of the fact that no tax under the State Act  has been paid in respect of those hides and skins. The  legislature, it seems, calculated the price of hides and skins  in dressed condition to be double the price of such hides  and skins in raw state. To obviate and prevent any  discrimination or differential treatment in the matter of levy  of tax, the legislature therefore prescribed a rate of tax for  sale of dressed hides and skins which was half of that levied  under Item 7(a) in respect of raw hides and skins.”  

   140. In Malwa Bus Service (Private) Ltd. v. State of Punjab and others (1983) 3 SCC  

237 this Court held that a difference in the rate of tax by itself cannot be  

considered to be discriminatory and offensive to the equality clause:   

“21. The next submission urged on behalf of the petitioners is  based on Article 14 of the Constitution. It is contended by  the petitioners that the Act by levying Rs 35,000 as the  annual tax on a motor vehicle used as a stage carriage but  only Rs 1500 per year on a motor vehicle used as a goods  carrier suffers from the vice of hostile discrimination and is,  therefore, liable to be struck down. There is no dispute that  even a fiscal legislation is subject to Article 14 of the  Constitution. But it is well settled that a legislature in order to  tax some need not tax all. It can adopt a reasonable  classification of persons and things in imposing tax liabilities.  A law of taxation cannot be termed as being discriminatory  because different rates of taxation are prescribed in respect  of different items, provided it is possible to hold that the said  items belong to distinct and separate groups and that there  is a reasonable nexus between the classification and the  object to be achieved by the imposition of different rates of  taxation. The mere fact that a tax falls more heavily on  certain goods or persons may not result in its invalidity. As  observed by this Court in Khandige Sham Bhat v. Agricultural  Income Tax Officer in respect of taxation laws, the power of  legislature to classify goods, things or persons are necessarily  wide and flexible so as to enable it to adjust its system of

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taxation in all proper and reasonable ways. The Courts lean  more readily in favour of upholding the constitutionality of a  taxing law in view of the complexities involved in the social  and economic life of the community. It is one of the duties  of a modern legislature to utilise the measures of taxation  introduced by it for the purpose of achieving maximum  social good and one has to trust the wisdom of the  legislature in this regard. Unless the fiscal law in question is  manifestly discriminatory the court should refrain from striking  it down on the ground of discrimination. These are some of  the broad principles laid down by this Court in several of its  decisions and it is unnecessary to burden this judgment with  citations. Applying these principles it is seen that stage  carriages which travel on an average about 260 kilometres  every day on a specified route or routes with an almost  assured quantum of traffic which invariably is overcrowded  belong to a class distinct and separate from public carriers  which carry goods on undefined routes. Moreover the public  carriers may not be operating every day in the State. There  are also other economic considerations which distinguish  stage carriages and public carriers from each other. The  amount of wear and tear caused to the roads by any class  of motor vehicles may not always be a determining factor in  classifying motor vehicles for purposes of taxation. The  reasons given by this Court in G.K. Krishnan case for  upholding the classification made between stage carriages  and contract carriages both of which are engaged in  carrying passengers are not relevant to the case of a  classification made between stage carriages which carry  passengers and public carriers which transport goods. The  petitioners have not placed before the court sufficient  material to hold that the impugned levy suffers from the vice  of discrimination on the above ground.”  

 141. Seen in the context of the above, we are inclined to accept the submission  

made on behalf of the State that so long as the intention behind the grant of  

exemption/adjustment/credit is to equalize the fall of the fiscal burden on the  

goods from within the State and those from outside the State such exemption or set  

off will not amount to hostile discrimination offensive to Article 304(a). Having said

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that, we leave open for examination by the regular benches hearing the matters  

whether the impugned enactment achieve the object of such equalization or lead  

to a situation that exposes goods from outside the state to suffer any disadvantage  

vis-a-vis those produced or manufactured in the taxing State.   

142. We must, while parting, mention that learned counsel for the parties had  

attempted to raise certain other issues like whether the entire State can be treated  

as a local area and whether entry tax can be levied on goods imported from  

outside the country. We do not, however, consider it necessary in the present  

reference to address all those issues which are hereby left open to be decided by  

the regular bench hearing the matter.    

 143. With that observation the reference is answered.  The Registry shall now  

place the matters before regular benches for an expeditious disposal of the same  

in the light of what has been observed by us above.   

.……………..………….…..…CJI.         (T.S. THAKUR)  

 …………………………….…..…J.  

       (A.K. SIKRI)    

…………………………….…..…J.          (A.M. KHANWILKAR)  

New Delhi  November 11, 2016

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                           REPORTABLE  

IN THE SUPREME COURT OF INDIA  CIVIL APPELLATE JURISDICTION  

CIVIL  APPEAL No. 3453  OF 2002 etc. etc.     

 Jindal Stainless Ltd. & Anr.                  .. Appellant(s)  

    VERSUS  

State of Haryana & Ors.                   ..Respondent(s)  

JUDGMENT  

S. A. BOBDE, J.   

I am in respectful agreement with the Judgment of the  

Chief Justice, on the question that taxes are not restrictions  

on the freedom of trade, commerce and intercourse  

guaranteed by Article 301.    

Taxes are not restrictions on Trade  

2. In addition to the reasons stated in the judgment, it  

appears that there is a more fundamental reason why tax is  

not liable to be viewed as a restriction on the freedom of  

trade, commerce and intercourse.  On the contrary it seems  

that a tax, such as the one we are concerned with  is  

predicated on the freedom of trade and commerce.  This is  

particularly true of an entry tax. It is an impost levied on  

transactions which are entered into in the course of that

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freedom.  In fact, but for such freedom of trade there would  

be no transaction and no occasion for the levy of a tax.  The  

levy of a tax is a distinct event from the transaction.  Trade  

and commerce must take place to attract a tax.  Undoubtedly  

a tax may make the transaction less profitable to the extent  

of the tax.  But that is far from being an impediment on the  

transaction which is part of trade, the freedom which is  

guaranteed under Article 301.  It is not possible to readily                  

conceive of a tax, which in itself, restricts or impedes the  

freedom of trade.  The circumstances are much like the  

freedom of movement of an individual by a bus and the  

charge of a bus ticket for such movement.  It can hardly be  

contended that the charge of a bus ticket impedes the  

freedom of movement.  

3. The other related contentions have been adequately  

dealt with by the Judgment of the Chief Justice and I fully  

subscribe to the same.  I would also agree in this regard with  

the view of Sinha, CJ, in Atiabari that a tax is not a  

restriction.  Sinha, CJ, observed that “…….if a law is passed by  

the Legislature imposing a tax which in its true nature and  

effect is meant to impose an impediment to the free flow of  

trade, commerce and intercourse, for example, by imposing a  

high tariff wall, or by preventing imports into or exports out of  

a State, such a law is outside the significance of taxation, as

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such, but assumes the character of a trade barrier which it  

was the intention of the Constitution makers to abolish by  

Part-XIII”.  However, it is difficult to implement such a test  

since it does not disclose any objective standard for  

determining when such a law would assume the character of  

a trade barrier.  In principle, a tax cannot constitute a  

restriction on the freedom of trade, commerce and  

intercourse as held by Sinha, CJ.  Therefore, it would not be  

possible to construe a tax as a trade barrier merely because  

the rates are high. As regards apprehensions expressed  

regarding high rates of taxation, it would be apposite to rely  

on the observations of Marshall, CJ, in McCulloch v.  

Maryland, 17 US 316 (1819), that the only security against  

the abuse of such power lies in the structure of the  

government itself.   

Article 304 (a)   

4. In regard to the question whether the levy of entry tax  

on import of goods from outside the local area in the State  

will be per se discriminatory if goods similar to those imported  

are not produced or manufactured within the State, I find it  

difficult to agree with the conclusion that a tax on goods  

imported into a State can be levied even if similar goods are  

not manufactured or produced in the importing State.  I  

would agree with the conclusion drawn by Ashok Bhushan, J.,

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in this regard.    

Article 304 reads as follows:  

“Restrictions on trade, commerce and  intercourse among States.- Notwithstanding  

anything in Article 301 or Article 303, the  Legislature of a State may by law-  

(a) impose on goods imported from other States  [or the Union territories] any tax to which similar  

goods manufactured or produced in that State are  subject, so, however, as not to discriminate  

between goods so imported and goods so  manufactured or produced; and  

(b) impose such reasonable restrictions on the  freedom of trade, commerce or intercourse with or  

within that State as may be required in the public  

interest:   

Provided that no Bill or amendment for the  

purposes of clause (b) shall be introduced or  moved in the Legislature of a State without the  

previous sanction of the President.”    

5. The non-discriminatory principle is embedded in two  

provisions of Part XIII: Article 303 (1) - Parliament cannot  

impose restrictions under Article 302 and make a  

discriminatory law under any entry relating to trade and  

commerce; the other is Article 304 (a) which (unlike Section  

297 of the erstwhile Government of India   

Act, 1935 which prohibited - through a negative mandate,  

discriminatory treatment) empowers State Legislatures   

to impose non-discriminatory taxes on goods. Thus,   

Article 304 (a) differentiates between discriminatory and non-

discriminatory taxes. The premise underlying   

this provision is the paramount aim of Part XIII  

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to establish and foster economic unity of the country.   

Non-discrimination, or parity of treatment is therefore at the  

core of its purpose, which Shri T.T Krishnamachari stressed, in  

his speech in the Constituent Assembly. He said that  

“restrictions by the State have to be prevented so that the  

particular idiosyncrasy of some people in power or narrow  

provincial policies of certain States should not be allowed to  

come into play and affect the general economy of the  

country.” [Constituent Assembly Debates, 1139 (1949)].  

6. The Article, therefore, recognizes the power of a  

Legislature to a State to impose the tax on the imported  

goods so, however, as not to discriminate between goods so  

imported and goods so manufactured or produced.  While  

there is no doubt that this Article recognizes the power to  

legislate on a State, it equally qualifies that power with the  

condition that such a law must comply with. That condition is  

that the law which imposes a tax on imported goods cannot  

“discriminate” between goods so imported and the goods so  

manufactured or produced.  It also postulates that the tax on  

import is a “tax to which similar goods manufactured or  

produced in that State are subject.”  The Article thus imposes  

two conditions: firstly, that a law may impose a tax on goods  

imported from other States, ‘any tax’ to which “similar goods  

manufactured or produced’ in that State are subject.  This

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clearly implies that the goods imported from other States may  

be subjected to a tax where similar goods are in fact,  

manufactured or produced in the importing State and are   

subjected to tax.  In other words, (a) the goods imported  

from other States must be similar to (b) the goods  

manufactured or produced in the importing State and   

(c) the goods so locally manufactured or produced must be  

subject to tax.  The second condition is the tax that is  

imposed on imported goods should not discriminate between  

the imported goods and goods manufactured or produced in  

the importing State.  

7. The intention of the Article thus, clearly is that where a  

tax exists on goods imported into a State there should be no  

discrimination between such a tax and a tax on similar goods  

manufactured or produced in the importing State. The  

reference point for tax on imported goods is the tax on locally  

manufactured goods.  It is not possible to construe the  

prohibition against discrimination where there is no tax upon  

similar goods manufactured or produced in the importing  

State.  Undoubtedly, the effect of such a construction is that  

the imported goods cannot be taxed where similar goods are  

not manufactured or produced in the importing State and are  

therefore, not subjected   

to similar tax and that seems to be the clear intention  

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of this Article.S  

8. In the normal course, a State in which certain goods are  

not manufactured would rely on the supply of such goods  

from other States and the effect of this provision would be to  

make the goods so imported available without the additional  

burden of tax. In sum, the premise on which tax can be  

imposed is the existence of not mere taxes on goods  

produced or manufactured locally, or the theoretical possibility  

of taxation, to avoid the prohibition under Article 304 (a), but  

the actual production or manufacture of similar goods, that  

are subject to like or similar tax. Absent this condition, the  

levy would fall foul of Article 304 (a) since it would constitute  

an additional burden (the goods already having suffered some  

form of taxation in the producing state). This interpretation,  

in my opinion would also further economic progress and the  

unhindered availability of goods in states which do not have  

manufacturing capacities and may not be able to develop it,  

having regard to lack of natural resources or other  

geographical limitations. It also furthers the aims underlying  

Article 301 of the Constitution of India.   

Conclusion  

9. I answer Question No.1 in the negative and I agree with  

the conclusions drawn by the Chief Justice.  I would also

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answer Question Nos. 2, 3 and 4 in agreement with the Chief  

Justice.  

.....................………J.                                                       [ S.A. BOBDE ]  

NEW DELHI,     NOVEMBER 11, 2016

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REPORTABLE  

IN THE SUPREME COURT OF INDIA  

CIVIL APPELLATE  JURISDICTION  

CIVIL APPEAL No.3453 OF 2002  

Jindal Stainless Ltd. & Anr.       …..Appellant(s)  

Versus  

State of Haryana & Ors.       .....Respondent(s)  

W I T H  

CONNECTED MATTERS     

J U D G M E N T  

Shiva Kirti Singh, J.  

1. Since I am in respectful agreement with the judgment by T.S.  

Thakur, CJI, I do not propose to go into whole gamut of  

documents, materials, relevant constitutional provisions and  

the precedents which have already been noticed not only by T.S.  

Thakur, CJI, but also by N.V. Ramana, R. Banumathi, D.Y.  

Chandrachud, and Ashok Bhushan, JJ. in their separate  

detailed judgments, which I had the privilege to go through.  

2.   

3. While recording my agreement with judgment of T.S. Thakur,  

CJI and other similar views, in the light of some of the differing  

judgments, I feel it necessary to underline my understanding of  

the core issues and why they need to be answered in a  

particular way.  

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4. The basic issue which has generated the present litigation  

arises out of a challenge to various taxing statutes enacted by  

several States to impose Entry Tax on goods in exercise of  

specific power available to the State legislature under Entry 52  

of List II in the 7th Schedule of the Constitution. If the  

Constitution Bench judgments in Atiabari’s case and in  

Automobile Transport’s case were not under doubt, then as  

per majority view in Atiabari’s case one was required to apply  

the test of “direct or immediate” effect of Entry Tax.  If it  

restricts freedom of trade and commerce, it had to be struck  

down.  Since such a view did not permit certain levies imposed  

by the State legislature to provide better facilities for interstate  

trade and commerce, the concept of regulatory and  

compensatory taxation was advanced as a permissible  

exception, by the majority view in Automobile Transport case.   

The purpose was to reconcile the freedom of trade and  

commerce stipulated by Article 301 with the need of resources  

for the States through imposition of taxes on trade and  

commerce.  Such tax was held permissible if it was to provide  

facilities which would improve and help freedom of trade and  

commerce through activities such as construction and upkeep  

of roads and other similar facilities.  

5. As discussed in detail in the other judgments, ultimately States  

felt the need to exercise their legislative power to impose taxes

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even for general welfare measures and police duties. Resultantly  

it became more and more difficult to justify such tax as  

compensatory tax and such attempts brought excessive strain  

on the very concept of regulatory and compensatory tax.  On the  

one side Trade and Industry seriously criticised such attempts,  

inter-alia, on the ground that it blurs the distinction between  

compensatory tax and regular tax.  On the other hand, the  

States comprising the Indian Union are clearly unhappy with  

the law settled in Atiabari’s case as well as in Automobile  

Transport case which permits them to impose taxes affecting  

freedom of trade and commerce but on the condition that it is  

actually by way of a fee, justified by some sort of quid pro quo.  

6. In the above factual background the heavy burden that has  

befallen on this nine Judges Bench is to interpret Articles 301  

to 304 comprising Part XIII of the Indian Constitution in a  

manner which is justified both by the text as well as the  

historical context and also effects the desired balance between  

the need of the country to have free movement of trade and  

commerce on one hand and the sovereign taxing powers of the  

States given to them by the Constitution on the other.  

Limitation on such power must be explicit in the Constitution.  

For safeguarding freedom of trade and commerce, such  

limitation is to be found only in Article 304(a) of Part XIII of the  

Constitution.

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7. Answering the question No. 1 in the negative or in other words  

declaring that levy of a non-discriminatory tax per-se does not  

violate Article 301, in my opinion means that the majority view  

in respect of limits in imposition of tax through legislation in  

Atiabari case (supra) as well as in Automobile Transport case  

is no longer a good law.  Since, in the matter of levy of taxes the  

compensatory theory is no more relevant, the State Legislatures  

are free to exercise their taxing powers without the need of  

declaring and showing that taxes imposed by them on outside  

goods are for the benefit of concerned traders or manufacturers.   

But such tax must be, in essence, non-discriminatory, both, in  

the ultimate tax burden and in machinery provisions.   To  

muster compliance with Part XIII of the Constitution, the tax  

must pass the twin tests embodied in Article 304(a) - (i) Similar  

goods produced locally must also be subjected to similar tax  

and (ii) such state action should not attract the vice of  

discrimination between the two varieties of goods.  

8.  The entire discussion in my view leads to a fair conclusion that  

the views summarized by Sinha, CJI in paragraph 18 of his  

judgment in Atiabari case depict the law emanating from Part  

XIII of the Constitution in the correct perspective.  However  

same cannot be said of observations in paragraph 16 where His  

Lordship used the expression – “If a law is passed by the  

legislature ……. imposing a high tariff wall--------assumes the

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character of a trade barrier which it was the intention of the  

Constitution makers to abolish by Part XIII.”  These  

observations do create practical difficulties of insurmountable  

proportions.  Hence these deserve to be treated as obiter or  

interpreted in the light of the entire passage, to mean such  

taxes which impose an impediment to the free flow of trade,  

commerce and intercourse by creating discriminatory tariff  

wall/trade barrier (emphasis supplied). For Part XIII there can  

be no real impediment through tax unless the so called wall or  

barrier is one of hostile discrimination between local goods and  

outside goods.  

                          ……………………………….J.  

                          [SHIVA KIRTI SINGH]  

New Delhi.  November 11, 2016.  

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         REPORTABLEE    

IN THE SUPREME COURT OF INDIA  CIVIL APPELLATE JURISDICTION  

 CIVIL APPEAL NO. 3453 OF 2002  

 JINDAL STAINLESS LTD. & ANR.                 …APPELLANT(S)  

VERSUS  STATE OF HARYANA & ORS.                   …RESPONDENT(S)    

WITH CONNECTED MATTERS  

J UDGMENT     

N .  V.  R A M A N A ,  J .        Table Of Contents  Part-I : Introduction Para 1.1 – 1.3  

Part-II : Case history Para 2.1 – 2.3   

Part-III : Arguments canvased Para 3.1 - 3.10  

Part-IV : Need for review Para 4.1 - 4.2  

Part-V : Constitutional Interpretation Para 5.1 - 5.9  

Part-VI : Introduction to taxation and its importance Para 6.1 – 6.2  

Part-VII : Freedom of trade, commerce and intercourse Para 7.1 – 7.41  

Part-VIII : Article 304 of the Constitution Para 8.1 – 8.26  

Part-IX : Conclusions Para 9.1 - 9.2  

 PART - I : INTRODUCTION    1.1. I have had the privilege of  going through the draft judgments prepared by the learned  

Chief  Justice T.S. Thakur and my brother/sister judges. I am broadly in agreement with  

the conclusion of  the learned Chief  Justice on most of  the issues. The erudite draft  

judgment of  learned Chief  Justice would in the usual course may not have warranted  

another concurring judgment. But when a Bench of  nine judges of  this Court has been

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assembled to consider the seminal issues that have been bothering the nation for about  

fifty years and such issues have been debated in the Court over a period of  four weeks,  

many aspects having a bearing, canvassed about a constitutional question, a concurring  

judgment cannot be treated as a repetitive burden or a superfluous legal  

exercise.1Therefore I propose to deliver a brief  judgment concurring with the judgment  

of  the learned Chief  Justice, giving my own reasons.  

1.2. As a caveat, I may mention that the contentious matter herein is important not only from  

the legal point of  view but also for a common man who ultimately bears the tax burden.  

Secondly in constitutional matters, judgment with clarity is preferable to a judgment of   

wandering complexities. It is appropriate to quote Lord Denning2 He said-  

  ‘…I avoid long sentences like the plague: because they lead to  obscurity. It is no good if  the hearers cannot follow them… I refer  sometimes to previous authorities. I have to do so because I know  people are prone not to accept my views unless they have support  from the books. But never at much length. Only a sentence or two…  I finish with a conclusion – and epilogue – again as the chorus does  in Shakespeare. In it, I gather the threads together and give the  result’.   

(emphasis supplied)    

Although I have tried in this Judgment to keep it as simple as possible yet sometimes  

                                                 1        � Journey Started from Atiabari Tea Co., Ltd. V. The State of  Assam and Ors., A.I.R 1961 S.C  232 [hereinafter ‘Atiabari’]; continued in Automobile Transport (Rajasthan) Ltd. V. The State of  Rajasthan,  A.I.R 1962 S.C 1406 [hereinafter ‘Automobile’]. Doubted for first time in G. K. Krishnan v. State of  Tamil  Nadu, A.I.R 1975 S.C 583 [hereinafter ‘GK Krishnan’]. Dilution of  compensatory took place in Bhagatram  Rajeev Kumar v. CIT, MP, 1995 Supp. (1) S.C.C 673 [hereinafter ‘Baghatram’] and State of  Bihar v. Bihar  Chamber of  Commerce and Otr., (1996) 9 S.C.C 136 [hereinafter ‘Bihar Chamber of  Commerce’]. Further  went back to old formulation in Jindal Stainless Ltd. And Anr. V. State of  Haryana and Ors., A.I.R 2006  S.C 2550 [hereinafter Jindal (2)]. Referred to larger Bench in JaiprakashAssosiates v. State of  MP, 2009 (7)  S.C.C 339 [hereinafter ‘Jaiprakash’]; further Constitution Bench has referred the matter before us in Jindal  Stainless Ltd. And Anr. V. State of  Haryana, 2010 (4) S.C.C 595 [hereinafter ‘Jindal (3)’].  2   �Lord Denning, Family Story, p. 207 (1999)

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legal jargon becomes unavoidable to keep the essence of  the law.  

1.3. As detailed by the learned Chief  Justice below the referral order formulated as many as  

twelve (12) questions. Nonetheless on very first day with the consent of  the learned  

counsels, we reframed these questions as under-  

1. Can levy of  a non-discriminatory tax per se constitute infraction of  Article 301 of  the  

Constitution of  India?   

2. If  the answer to Question No.1 is in the affirmative, can a tax which is  

compensatory in nature also fall foul of  Article 301 of  the Constitution of  India?  

3. What are the tests for determining whether the tax or levy is compensatory in  

nature?  

4. Is the entry tax levied by the states in the present batch of  cases is violative of   

Article 301 of  the Constitution and in particular have the impugned State  

enactments relating to entry tax to be tested with reference to Articles 304(a) and  

304(b) of  the Constitution for determining their validity?  

PART II : CASE HISTORY    

2.1 Let me take up the first case in the batch of  appeals (Civil Appeal No. 3453 of  2002 (Jindal  

Stainless Steel Ltd. v. State of  Haryana). On May 5, 2000, the State of  Haryana issued the  

Haryana Local Area Development Tax Ordinance, 2000 (Ordinance No. 10 of  2000). The  

Ordinance was later replaced by the Haryana Local Area Development Tax Act, 2000.  

Therein, a provision was made for levy and collection of  tax on entry of  goods into local  

area. The validity of  the said Act was challenged on the ground that it violated  

Articles 301 and 304 of  the Constitution. C.W.P. No. 6630 of  2000 (Jindal Strips Limited v.  

State of  Haryana) and connected petitions were dismissed by the High Court on

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December 21, 20013. Following the judgments of  this Court, inter alia, in Bhagatram and  

Bihar Chamber of  Commerce, the High Court upheld the validity of  the said Act. It was held  

that the entry tax was compensatory as per parameters laid down by this Court in the said  

judgments and thus, did not violate Articles 301/304 of  the Constitution. On appeal to  

this Court, the matter was referred to the Constitution Bench in Civil Appeal No. 3453 of   

2002 vide order dated September 26, 2003. The said order is reported as Jindal Stripe Ltd.  

v. State of  Haryana [hereinafter ‘Jindal (1)’]4. On April 13, 2006, the Constitution Bench  

delivered its judgment in Jindal (2), and reversed the earlier judgments in Bhagatram and  

Bihar Chamber of  Commerce. The Constitution Bench laid down the ingredients of   

compensatory tax as being value of  direct, measurable and quantifiable special benefits  

provided by the State to tax-payers on the basis of  equivalence. The matter was thereafter  

placed before a Division Bench of  this Court for decision in the light of  judgment of  the  

Constitution Bench. On July 14, 2006, the Division Bench of  this court in its order in  

Jindal Stainless Ltd. v. State of  Haryana5, observed that relevant data had not been placed  

before the High Court for determining the nature of  tax and asked the High Court to deal  

with the basic issue whether the levy was compensatory in nature. Accordingly, the State  

filed data by means of  affidavits and vide order dated March 14, 2007 (reported as Jindal  

Strips Limited v. State of  Haryana, a Division Bench of  High Court held that the levy was not  

compensatory in character and amounted to restriction on free flow of  trade and  

commerce and violated Articles 301 and 304 of  the Constitution of  India. On April 16,  

2008, the State of  Haryana repealed the 2000 Act and enacted the Haryana Tax on Entry  

of  Goods into Local Areas Act, 2008, impugned in this Appeal. The High Court in Indian  

                                                 3   � Jindal Strips Ltd. v. State of  Haryana, [2003] 129 S.T.C 534  4   � 2003 (8) S.C.C 60  5   � 2006 (7) S.C.C 271

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Oil Corporation v. State of  Haryana6, declared that the provisions of  the Haryana Tax on  

Entry of  Goods into Local Areas Act, 2008 to be unconstitutional and void. The Punjab  

and Haryana High Court invalidated the Haryana Act, the matters again came to this Court  

in a connected matter being Jaiprakash Associates7(A two judge bench) referred ten questions  

to the constitutional bench.8  

                                                 6   � (2009) 21 V.S.T 10 (P&H)  7   � 2009 (7) S.C.C 339.  8   �  Questions are-  

1.Whether the State enactments relating to levy of  Entry Tax have to be tested with reference to  both Clauses (a) and (b) of  Article 304 of  the Constitution for determining their validity and  whether Clause (a) of  Article 304 is conjunctive with or separate from Clause (b) of  Article 304?   2.Whether imposition of  Entry Tax levied in terms of  Entry 52 List II of  7th Schedule is  violative of  Article 301 of  the Constitution? If  the answer is in the affirmative whether such levy  can be protected if  Entry Tax is compensatory in character and if  the answer to the aforesaid  question is in the affirmative what are the yardsticks to be applied to determine the compensatory  character of  the Entry Tax.   3.Whether Entry 52, List II, 7th Schedule of  the Constitution like other taxing entries in the  Schedule, merely  provides a taxing field for exercising the power to levy and whether collection of   Entry tax which ordinarily would be credited to the Consolidated Fund of  the State being a revenue  received by the Government of  the State and would have to be appropriated in accordance with  law and for the purposes and in the manner provided in the Constitution as per Article 266 and  there is nothing express or explicit in Entry 52, List II, 7th Schedule which would compel the State  to spend the tax collected within the local area in which it was collected?   4. Will the principles of  quid pro quo relevant to a fee apply in the matter of  taxes imposed  under Part XIII?.   5. Whether the Entry Tax may be levied at all where the goods meant for being sold, used or  consumed come to rest (standstill) after the movement of  the goods ceases in the `local area'?   6. Whether the Entry Tax can be termed a tax on the movement of  goods when there is no bar  to the entry of  goods at the State border or when it passes through a local area within which they  are not sold, used or consumed?   7. Whether interpretation of  Articles 301 to 304 in the context of  Tax on vehicles (commonly  known as `transport') cases in Atiabari's (supra) and Automobile Transport's case (supra) apply to  Entry Tax cases and if  so, to what extent.   8. Whether the non discriminatory indirect State Tax which is capable of  being passed on and  has been passed on by traders to the consumers infringes Article 301 of  the Constitution?   9. Whether a tax on goods within the State which directly impedes the trade and thus violates  Article 301 of  the Constitution can be saved by reference to Article 304 of  the Constitution alone  or can be saved by any other Article?    10. Whether a levy under Entry 52, List II, even if  held to be in the nature of  a compensatory  levy, it must, on the principle of  equivalence demonstrate that the value of  the quantifiable benefit  is represented by the costs incurred in procuring the facility/services (which costs in turn become  the basis of  re- imbursement/recompense for the provider of  the services/facilities) to be  provided in the concerned `local area' and whether the entire State or a part thereof  can be

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2.2 One of  the questions is whether State enactment relating to levy of  entry tax has to be  

tested with reference to both Articles 304 (a) and 304(b). When the matter was placed  

before the constitutional bench along with Jindal (3)9, the constitutional bench was  

confronted with the arguments by the State that the tests propounded by the Atiabari and  

Automobile failed to strike a balance between freedom of  trade and commerce under Article  

301 and taxing power of  the State under Article 246 r/w relevant legislative entries to the  

Constitution of  India. The constitutional bench, found merit to refer to suitable larger  

bench for reconsideration of  Atiabari and Automobile. For doing so support was drawn  

from Keshav Mills10, GK Krishnan, Dawoodi Bora11. That’s how the matter is before us.   

2.3 Entry tax is levied by the State of  Haryana under the provisions of  Haryana tax on Entry  

of  Goods into Local Areas Act, 2008. Section 3 of  the Act contains the charging the  

provision which states that the tax is levied ‘for the purpose of  development of  trade,  

commerce and industry and for creation and maintenance of  infrastructure facilities for  

free flow of  trade and commerce in State’. Section 25 of  the Act provides that the  

proceeds of  the levy shall be appropriated to a fund notified by the Government and shall  

be exclusively utilized for the development or facilitating the trade, commerce and industry  

in the State and also inter alia provides benefits towards which the proceeds may be applied.  

Most of  the States in appeal have enacted similar provisions under the impugned  

enactments.  

                                                                                                                                                                    comprehended as local area for the purpose of  Entry Tax?  

9   � 2010 (4) S.C.C 595  10   �A.I.R 1965 S.C 1636  11   � 2005 (2) S.C.C 673

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Part-III : Arguments canvassed  

ARGUMENTS OF PETITIONERS/APPELLANTS (ASSESSEE(S))  

3.1 Mr. Harish Salve, learned senior counsel argued as below-  

� That taxes generally amount to restriction but it is only such taxes that directly and  

immediately restrict trade that will fall within the Article 301. Applying this test the  

court can strike down the law as violative of  Article 301 unless saved by Article  

304(b).   

� The result of  reading Article 304(a) and (b) together appears to be that a tax can be  

levied by State on goods manufactured/produced or imported in the State and  

thereby reasonable restrictions can be placed on the freedom of  trade either with  

another State or between different areas of  the same State.  

� The vital federal safeguard provided in the proviso is pervious sanction of  the  

President. Article 301 operates to restrict legislative power of  State. Lastly, he argues  

that proviso of  Article 304 can be read down in appropriate cases.  

� In rejoinder he argues that as Article 304(a) of  the Constitution envisages the rule of   

per se violation there is no question of  impact test or comparative tax burden test  

under it as the text of  the same does not accept such interpretation.  

3.2 Mr. A. K. Ganguli, his main contentions are-  

� The Reference Order to a larger bench to ‘reconsider’ the decisions in Atiabari and  

Automobile is not warranted and runs contrary to the settled law laid down by this Hon'ble  

Court as it constitutes a binding precedent under Article 141 of  the Constitution.  

� Regarding the construction of  Article 304 of  the Constitution he submits that it is inherent  

in the drafting of  the clause (a) itself  that both clauses (a) and (b) of  article 304 are not  

mutually exclusive. It is submitted that clause (b) acts as a gateway to protect those laws  

which don't satisfy the dual conditions laid down in clause (a).

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� Further he supported the concept of  compensatory tax which has stood the test of  time.  

 3.3 Mr. T.R. Andhyarujina, learned senior counsel argues as follows-  

� That there is no requirement of  reference to a larger bench as there is no public mischief   

being caused by the prior Judgment. In alternative he submits that the compensatory taxes  

levied by the States would in a large measure negative the freedom of  trade and commerce  

guaranteed by Article 301 because there is no proof  that the State will utilize the tax for the  

improvement of  trade facilities etc. Even assuming a State in the Act that the tax collected  

will be used for that particular purpose. A declaration to that effect would only mean a  

clever device to refute the abridgment of  free trade.  

� Hence, it is his submission that where a State claims to have imposed a compensatory tax, it  

should not be permitted to impose a tax without complying with the requirement of  Article  

304(b). Otherwise according to him all taxes would be outside the purview of  the freedom  

of  trade by mere assertion as is done by 22 States that the tax is compensatory.  

3.4 Mr. Arvind P. Datar contends-  

� That Concept of  compensatory tax may be confined to Entry no. 56 and 57 and not applied  

to any other tax/duty in State List.  

�  Further the working test contemplated in Automobile Case has not worked satisfactorily.   

� Neither the “direct or immediate effect” test of  Atiabari nor the “working test” of   

Automobile Case is feasible in practice.   

� He suggested the bench to adopt “Appreciable Adverse Effect on Trade & Commerce  

[AAETC]” borrowed from section 3 of  the Competition Act, 2002. The difference between  

enactment of  AAETC before and after the impugned Law will provide the impact on Trade  

& commerce.   

� The Burden of  Proof  will be on the petitioner to establish, prima facie, to prove actual or

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potential AAETC.  

3.5 Mr. S.K. Bagaria, learned senior advocate, Mr. J. Dhankar, learned senior  

advocate, Mr. N. Venkatraman, learned senior advocate, Mr. R. Srivastava,  

learned senior advocates, Mr. Dhruv Aggrawal, learned senior advocate, Mr.  

Gopal Jain, learned senior advocate, Mr. Tushar Mehta, learned Additional  

Solicitor General, Mr. Dilip Tandon, Smt. Suruchi Aggrawal, Mr. V.  

Lakshmikumaran for assesses have either adopted the submissions made by the  

above named advocates or provided alternative reasons for the conclusions  

reached by the abovementioned advocates.  

3.6 Mr. Mukul Rohatgi, learned Attorney General of  India submits-  

� That that power to tax is an incident of  sovereignty provided under specific entries in List  

II. It is to be noted that such power cannot be suppressed even by the Parliament of  India  

under our Constitution.   

� Part XIII generally does not deal with Taxes except in so far as Article 304(a). Part XIII is  

only concerned with deliberate discrimination. If  discrimination is done for alleviation of   

economic condition than such a measure would not be covered under the mischief  of   

Article 304(a).   

� Furthermore 304(a) and 304(b) are disjunctive in which only (a) applies to taxes and (b)  

applied to non-fiscal measures. It is always assumed taxes are imposed in public interest and  

is reasonable. Therefore inclusion of  taxes under Article 304(b) would be an exercise in  

redundancy which will never be the intention of  our Constitution framers. Therefore,  

Sovereign power of  the State cannot be made a plaything of  Executive.   

� Federalism is to be disjointed from economic unity. Part XIII and Part III are at different

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pedestal. Part III is individualistic in nature and has sufficient remedies to cover excessive  

taxation and other burdens.  

� Moreover, Hon’ble C.J Sinha’s View in Atiabari has not required any reconsideration and the  

same should be followed even by this court. He submits that any test under article 301 will  

have to draw a line as to when taxes become Trade barriers. Such examination by Courts is  

not warranted.   

� Part XIII has its origin in section 297 of  Government of  India Act 1935. It is to be noticed  

that earlier Article 301 was present as Article 16 under Part III of  Constitution which was  

subsequently taken out.   

� The source of  Power to tax is present both under Article 245 as well as Article 246. We  

should not separate Article 246 and read taxing power only under 246. He argues that our  

Constitution is organic and flexible document which was considerate about providing level  

playing field to various States. He lastly argues that Video Electronic Case should be upheld.  

ARGUMENTS OF RESPONDENTS (STATES/AUTHORITIES)  

3.7 Mr. P. P. Rao, learned senior counsel contends-  

� that scope of  Entry 52 of  the State List cannot be reduced.   

� Discrimination only arises if  goods are available. If  no tax can be imposed on the ground  

that there is no production that consumer state loses their revenue and the same is  

detrimental to the existence of  very State itself. Therefore, the interpretation that sub-serves  

the intent and autonomy of  State should be adopted in a Federal Constitution.   

� that 304 (a) is not a part of  301 and the only restriction on imposition of  tax is article 304(a)  

of  Constitution.   

� He argues that inclusion of  taxes under article 304(b) was never argued before the bench of   

Atiabari. The observation in Atiabari is per in curium as there was no discussion or

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deliberation regarding the same.  

3.8 Mr. Rakesh Dwivedi, learned counsel submits-  

� That Part XIII is not a basic feature of  the Constitution and every provision of  Constitution  

though important cannot be elevated to the pedestal of  basic feature. Economic Unity is not  

defined and for trade, commerce and intercourse political unity is equally important.   

� If  Article 19(1)(g) is explicitly given to citizens, Article 301 cannot be expanded to give same  

right to foreigners.   

� “Free” in Art 301 does not mean free from Taxation.   

� “Subject to” is the dominant expression in Art 301 and indicates subservience to at least Art  

302, 303 and 304. Art 302-304 are mere restatement of  powers under Art 246 r/w VII  

schedule with some limitations. Each restated power by itself  overrides the freedom in Art  

301.   

� The equation between compensatory tax and fee is inconsistent with the Scheme of  our  

Constitution which specifically draws distinction between two concepts.   

� The judgments of  Atiabari and Automobile erred in reaching the concepts of  direct and  

immediate impediment and compensatory Tax.   

� Further subjecting taxing power to executive clearance under Article 304(b) will not be  

justifiable as assent of  the President cannot be reviewed.  

.  

3.9 Mr. Shyam Divan, learned senior counsel argues that-  

� The wordings of  Article 301 are free from protectionist barriers.   

� Tax is obviously a restriction which would require this court to examine the height of  the  

barrier on a case to case basis.  

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3.10 Mr. Dinesh Dwivedi, learned senior counsel, Mr. S. V. Giri, learned senior  

counsel, Mr. A. K. Sinha, learned senior advocate, Mr. J. K. Gilda, learned  

Advocate General of  State of  Chhattisgarh, Mrs. Madhvi Divan, assisting the  

learned Attorney General of  India, Mr. Devdutt Kamath, learned Additional  

Advocate General for the State of  Karnataka, Mr. S. S. Shamshery, learned  

Additional Advocate General for the State of  Rajasthan, have either adopted  

the submissions made by the above named advocates or provided alternative  

reasons for the conclusions reached by the abovementioned advocates.  

 PART - IV : NEED FOR REVIEW    4.1 The learned counsel for the dealers/assesses argued for rejection of  the  

reference itself.  Shri T.R. Andhyarujina and Shri A.K. Ganguli, Learned Senior  

Counsel submitted that the doctrine of  direct and immediate effect as well as  

compensatory tax which furnish a workable test vis-à-vis validity of  a tax law in  

the context of  inter-State trade are sound.  Therefore, there is no need to review  

the decisions in Atiabari and Automobile.  They would urge that these two  

decisions have been followed by this Court in half  a dozen judgments and by  

various High Courts, and therefore, the ratio therein acquired the status of  stare  

decisis. According to them, in the absence of  any compelling changes in the  

Constitution or the law, the reference may not be necessary.  They would point  

out that after the decision in Automobile, every State which made law for the levy  

of  tax on entry of  goods, declaring such tax to be compensatory so as to save  

such law from the effect of  Articles 301 and 304 of  the Constitution.  We have

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given our earnest and anxious consideration to these submissions and are not  

able to agree with any of  these contentions.   

4.2 This Court has over-ruled approximately 60 Constitutional judgments in its 60  

years of  existence12, which is an impressive rate in itself, considering the fact that  

our nation is comparatively young and is developing jurisprudence in many  

aspects. Further it is interesting to note that there are only Seventeen Judgments  

of  this Court with nine or higher bench strength.13 It is further important to  

note that most of  the times nine judge bench decisions have led to change in law  

by legislative measure like Madhav Rao Scindia14, R.C. Cooper15etc. All this points  

out that the exercise of  constituting higher bench strength has taken place where  

there is grave need for settling the issue which caused grave mischief  to the  

general-public at large. These numbers speak of  restraint in over-ruling its own  

decisions. When Atiabari was decided, States sovereign power to levy tax within                                                    12   �A. Lakshminath, Precedent in India (3rd Ed.) p. 178 (2009)  13   � In re Sea Customs Act, A.I.R 1963 S.C 1760 (9 judge bench); State Trading Corp. of  India Ltd. v.  CTO, A.I.R 1963 S.C 1811 (9 judge bench); Golaknath v. State of  Punjab, A.I.R 1967 S.C 1643 (hereinafter  ‘Golak Nath’) (11 judge bench); Naresh ShridharMirajkar v. State of  Maharastra, A.I.R 1967 S.C 1 (9 judge  bench); Suptd. And Remembrancer of  Legal Affair v. Corp. of  Calcutta, A.I.R 1967 S.C 997 (9 judge  bench); RC Cooper v. UOI, (1970) 1 S.C.C 248 (11 judge bench); Madho Rao JivajiScindia v. Union of   India, (1971) 1 S.C.C 85 (11 judge bench); Kesavananda Bharti v. State of  Kerala, 1973 4 S.C.C 225  (hereinafter Keshavananda Bharti) (13 Judge bench); Ahmedabad St. Xavier Collage Society v. State of   Gujarat, (1974) 1 S.C.C 717 (9 judge bench); Indira Sawhney v. UoI, 1992 Supp. (3) S.C.C 215 (9 judge  bench); Supreme Court Advocates on Record Association v. UoI, (1993) 4 S.C.C 441 (9 judge bench); SR  Bommai v. UoI, (1994) 3 S.C.C 1 (hereinafter ‘S.R. Bomnai’)(9 judge bench); Attorney General of  India v.  AmritlalPrajvandas (1994) 5 S.C.C 54 (9 judge bench); Mafatlal Industries v. UoI, 1997 (5) S.C.C 536 (9  judge bench); NMDC v. State of  Punjab, (1997) 7 S.C.C 339 (9 judge bench); TMA Pai Foundation Case,  (2002) 8 S.C.C 481 (11 judge bench); I.R. Coelho v. State of  TN, (2007) 2 S.C.C 1 (9 judge bench).  14   �A.I.R 1971 S.C 530  15   �A.I.R 1970 S.C 564

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its permissible Constitutional competence stood curtailed.  Probably, for this  

reason, two years after the decision in Atiabari came the decision in Automobile on  

the premise that the ruling in Atiabari was insufficient.  Indeed, Automobile added  

new dimension to the tax by introducing the doctrine of  compensatory tax  

which is very conspicuous in the Constitutional scheme by its absence.  The  

judicial innovation of  compensatory tax was seemingly to unfetter the State’s  

power to some extent the levy of  taxes on entry of  goods.  There is no  

gainsaying that Part XIII nowhere, much less Article 301 either expressly or  

impliedly contemplate compensatory tax.  The workable test of  compensatory  

tax to comply with the Constitutional principle was doubted within a decade of   

the decision in G.K. Krishnan (1974), followed by the decisions in Bhagat Ram and  

Bihar Chamber of  Commerce.  From 1960 to 1996, there remained uncertainty with  

regard to the power of  the State to levy tax as per entry 52 of  the State List and  

principle of  compensatory tax to immunize such entry tax from the perceived  

injunctive rigor of  Articles 301 and 304(a).  Thus, it would not be sound to argue  

that the principle laid down in Atiabarithat is “direct and immediate effect” and  

doctrine of  “compensatory tax” evolved in Automobile attained any finality.   

Further even in Jindal (2), the aspect of  compensatory tax was doubted by Justice  

S. H. Kapadia also (as his lordship then was). Therefore, this cannot be a ground  

to doubt the sound reasoning in the referral order of  five Judges Bench of  this  

Court in Jindal (3). Thus there is a need for review.  

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PART-V :CONSTITUTIONAL INTERPRETATIONThe resolution of  constitutional  

litigation ultimately rests upon the plain language of  the text. In the event of  vagueness in the  

language or when the language is capable of  two different meanings it is not a bar to analyze  

the context16. In interpreting the constitutional text the court may not feel shy of  using all the  

tools and employing all the aids of  construction. The Learned Chief  Justice has elaborately  

analyzed various provisions in Part XIII and dealt with contextual aspects to see whether the  

contextual aspects match the textual. I am in respectful agreement with the nine postulations  

summarized by the Learned Chief  Justice regarding the purport of  Article 301, 302, 303 and  

304.  

5.2 Apart from the general principles of  interpretations in my considered opinion, the relevant  

provisions of  the Constitution especially those relating to legislative powers, the provisions  

limiting those powers, the external aids like Constituent Assembly Debates, other documents  

and the precedents are required to be considered. Be that as it is, it is a settled proposition that  

generally the construction of  the Constitution must be most beneficial and widest possible  

amplitude. The court must gather from the spirit of  the Constitution and the language must  

not be construed in a narrow and pedantic manner. In re CP and Berar Act, 193817, Gwayer CJ.,  

summed up this principle in the following manner –  

 …the Court should seek to ascertain the meaning and  intention of  Parliament from the language of  the statute  itself; but with the motives of  Parliament it has no  concern.... The Constitution is not to be construed in any  narrow and pedantic sense.... A broad and liberal spirit  should inspire those whose duty it is to interpret it; but I  do not imply by this that they are free to stretch or pervert  the language of  the enactment in the interests of  any legal  

                                                 16   �  RBI v. Pearless General Finance, A.I.R 1987 S.C 1023  17   �  1939 F.C.R 18

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or constitutional theory, or even for the purpose of   supplying omissions or of  correcting supposed errors.    

5.3 Equally important point is that legislative powers especially taxing powers cannot be tested by  

implication. Unless there is express limitation on the power of  the State to enact the State law,  

it is not the province of  the court to curtail the power of  the state by interpretative process.  

We have reached a stage that every law must be tested with reference to preamble and  

Directive Principles of  State Policy. As held in Atam Prakash v. State of  Haryana [herein after  

‘Atam Prakash’]18, if  preamble is the guiding light Directive Principles of  State Policy is the  

book of  interpretation, this was lucidly explained in Atam Prakash.  

 ‘The Preamble embodies and expresses the hopes and aspirations of   the people. The Directive Principles set out proximate goals. When we  go about the task of  examining statutes against the Constitution, it is  through these glasses that we must look, 'distant vision' or 'near  vision'. The Constitution being sui-generis, where Constitutional  issues are under consideration, narrow interpretative rules which may  have relevance when legislative enactments are interpreted may be  misplaced. Originally the Preamble to the Constitution proclaimed the  resolution of  the people of  India to constitute India into 'a Sovereign  Democratic Republic' and set forth 'Justice, Liberty, Equality and  Fraternity', the very rights mentioned in the French Declarations of   the Rights of  Man as our hopes and aspirations. That was in 1950  when we had just emerged from the colonial-feudal rule. Time passed.  The people's hopes and aspirations grew. In 1977 the 42nd  amendment proclaimed India as a Socialist Republic. The word  'socialist' was introduced into the Preamble to the Constitution. The  implication of  the introduction of  the word 'socialist', which has now  become the center of  the hopes and aspirations of  the people a  beacon to guide and inspire all that is enshrined in the articles of  the  Constitution, is clearly to set up a "vibrant throbbing socialist welfare  society" in the place of  a "Feudal exploited society". Whatever article  of  the Constitution it is that we seek to interpret, whatever statute it is  whose constitutional validity is sought to be questioned, we must  strive to give such an interpretation as will promote the march and  progress towards a Socialistic Democratic State.’19   

 5.4 Our constitutional history shows that we at one point had rigorously defended individualistic  

                                                 18   �  (1986) 2 S.C.C 249  19   � Ibid.

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rights [for ex. Right to Property]. Slowly we have moved towards community rights by  

invoking Directive Principles of  State Policy as a tool to judicially interpret Part III of  the  

Constitution. Directive Principles of  State Policy is a normative goal in the Constitution. Such  

important part cannot be restricted to only Part III interpretation and reduced to two wheels  

of  Chariot20 rather it is like a bright sun which should shine in every part of  the Constitution.  

5.5 Before consideration of  legal aspects, we need to passingly refer to certain factual scenarios  

which may be pertinent to the issues of  economic unity, balanced growth and development of   

all regions of  India. India that is Bharath is said to be a Country with economic unity. But such  

assertion cannot be sustained for the reason that 82.5˚ Meridian or Indian Standard Time line  

seems to starkly divide India broadly as affluent West and destitute East. Top 5 states share  

44.87% of  India's total economy.21 Five states of  South India share 25.98%.22 Eight States of   

North-East India share only 2.64% of  economy.23 13 States/UTs have Gross State Domestic  

Product less than Rs. 1 lakh Crore.24 While the growth in 2013-14 in Maharashtra was pegged  

at 8.71% while Rajasthan recorded mere 4.6% growth at 2004-2005 prices.25 As per Tendulkar  

formulation Bihar has 54.4% population below poverty line while Jammu Kashmir has only  

13.2%.26 Population in Uttar Pradesh was pegged at 199,812,341 while Kerala is 33,406,061, as  

                                                 20   �Minerva Mills v. Union of  India, A.I.R 1980 S.C 1789  21   �  NITI Aayog (last visited on 15.10.2016): http://niti.gov.in/state-statistics. Relevant table  is http://niti.gov.in/content/gsdp-constant-2004-05prices-2004-05-2014-15  22   �  Ibid.  23   �  Ibid.  24   �  Ibid.  25   �NitiAayog, GSDP and at constant prices, percent growth available at table (last visited on  15.10.2016): http://niti.gov.in/content/gsdp-constant2004-05prices-percent-growth-2004-05- 2014-15  26   �  Tendulkar committee report. The table is available at PRS website (last visited on

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per Census 2011.27 Literacy Rate in Kerala is 94% while in Bihar its 61%.28 Sex ratio in Kerala  

is 1084 while in Haryana is 879.29 In Andhra Pradesh 12.04% live in slums whereas in Assam  

only 0.63% live in slums.30 The Utility of  the Union to attain political and economic prosperity  

does not reflect in the figures or statistics so portrayed above. All is not lost in what we have  

achieved. We have stood with each other and for what is right? We have enacted laws and  

struck them down for right reasons. We have been beaten down but never gave up. We have  

braved poverty and hunger. We have cared about neighbors and have strived to be a welfare  

State. We have constructed great many things and achieved many more. We have advanced on  

scientific fronts and reached distances in universe which were unfathomable five decades back.  

We have earned a respectable name in the international scenario. We have produced great  

artists, many leaders and great men. We were not scared so easily by any adverse situation. First  

step in solving any problem troubling the present is recognizing that there is one India but  

India as a union of  States. States being independent entities under the Constitution require  

resource to perform their duties under the Constitution.  

5.6 Before a detailed discussion on legal fronts of  this Case it is necessary to consider certain  

                                                                                                                                                                    15.10.2016), http://www.prsindia.org/theprsblog/?tag=tendulkar-committee  27   �  Uttar Pradesh, Census of  India (last visited on 15.10.2016)   http://censusindia.gov.in/2011census/censusinfodashboard/stock/profiles/en/IND009_ Uttar%20Pradesh.pdf   Kerala   http://censusindia.gov.in/2011census/censusinfodashboard/stock/profiles/en/IND032_ Kerala.pdf  28   �  (last visited on 15.10.2016) http://censusindia.gov.in/2011-prov- results/data_files/india/Final_PPT_2011_chapter6.pdf  29   �  Kerala State Profile, Census of  India (last visited on 15.10.2016)   http://censusindia.gov.in/2011census/censusinfodashboard/stock/profiles/en/IND032_ Kerala.pdf   Haryana state profile, Census of  India   http://censusindia.gov.in/2011census/censusinfodashboard/stock/profiles/en/IND006_ Haryana.pdf  30   �  (Last visited on 15.10.2016) http://www.census2011.co.in/slums.php.

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Constitutional principles and ethos. On considering the scheme of  the Constitution, the power  

of  Union and State are parallel. The Parliament as a super-legislature over State assemblies  

cannot be accepted. On legislative front, demarcation of  power is apparent from the language  

of  Article 246 read with VII Schedule of  the Constitution. People have vested the power in  

States to administer and provide welfare measures. For this process it is the State Government  

which has been elected by the people to administer by taking into consideration priorities and  

peculiarities of  that particular region.  

5.7 This Constitutional principle should not be ignored while imposing restrictions on the State.  

While feeling happy that we are one nation, we must not ignore the State rights. The facts and  

realities cannot be forgotten in the first place. The Union does not exist in isolation rather it is  

a co-operative association of  the States. Taking into consideration of  various problems faced  

and differences which exists between the States, importance of  State’s power to tax cannot be  

ignored or stifled. Poverty, unemployment, backwardness and adverse climate etc. are running  

amok within our Country. Natural calamities, insurgencies and extremism are confronted by  

certain States. Over-growth and industrialization have taken place only in some places whereas  

rest of  the country is reeling under under-development because of  various facts such as  

geographical positioning, colonial establishments and discriminatory policies that have resulted  

in concentration of  wealth in only certain affluent areas. No State, in this grand Union, should  

be made to feel discriminated and embarrassed because of  the mere fact that history has not  

been congenial to them and have remained under-developed. Any restriction imposed should  

not come in the way of  natural development of  a State on the ground that it creates barriers  

for free movement of  the goods and trade. All States must be provided an equal level playing  

field for development and opportunities. This was the grand intention of  the framers of  our  

Constitution to not make a lassiez faire State.31Determined to make our Country a co-operative  

                                                 31

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federalist, our framers set definite rules to achieve the objective. Through interpretation,  

Constitution cannot be re-constructed so that the goal envisaged by our framers will be more  

fully achieved by such construction. Such measure would not be justified in light of  clear  

demarcation of  functions bequeathed by our Constitution.  

5.8 The Union and the States are co-equal in the Indian Federal structure. Our framers created a  

unique federal structure which cannot be abridged in a sentence or two. The nature of  our  

federalism can only be studied having a thorough understanding of  all the provisions of  the  

Constitution. Confirmation that the Union and States are co-equals in the Indian federal  

structure. can be found in the speeches of  Hon’ble P.S. Deshmukh, Shri T. T. Krishnamachari  

and Hon’ble Dr. B. R. Ambedkar32before the Constituent Assembly.  Common philosophy  

which runs through our Constitution is that both Center and States have been vested with the  

substantial powers which are necessary to preserve our unique federation with clear   

demarcation of  power. Calling India as quasi-federal might not be advisable as our features are  

unique and quite different from other Countries like United States of  America etc. Courts in  

India should strive to preserve this unique balance which our framers envisaged, any  

interference into this balancing act would be detrimental for grand vision proscribed by our  

                                                                                                                                                                     �  Constituent Assembly Debate, Vol. IX, September 8, 1949.  32   �There is only one point of  Constitutional import to which I propose to make a reference. A serious complaint is  made on the ground that there is too much of  centralization and that the States have been reduced to Municipalities. It is  clear that this view is not only an exaggeration, but is also founded on a misunderstanding of  what exactly the  Constitution contrives to do. As to the relation between the center and the States, it is necessary to bear in mind the  

fundamental principle on which it rests. The basic principle of Federalism is that the legislative and  executive authority is partitioned between the center and the States not by any law to be made  by the center but the Constitution itself.This is what the Constitution does. The States, under our  Constitution, are in no way dependent upon the center for their legislative or executive  authority. The center and the States are CO-EQUAL in this matter.It is difficult to see how such a  Constitution can be called centralism. It may be that the Constitution assigns to the center too large a field for  the operation of  its legislative and executive authority than is to be found in any other Federal Constitution. It may be that  the residuary powers are given to the center and not to the States. But these features do not form the essence  of  federalism. The chief  mark of  federalism, as I said lies in the partition of  the legislative and executive authority  between the centre and the Units by the Constitution. This is the principle embodied in our Constitution.   (Emphasis Supplied)

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makers.33 Amphibious nature of  our federalism has been even noted by the Sarkaria  

Commission Report on Center-State relationship. Co-operative federalism envisaged under our  

Constitution is a result of  pick and choose policy which our framers abstracted from the  

wisdom of  working experience of  other Constitutions. Some Judgments which are illustrative  

of  nature of  federalism in India are (i)West Bengal (6 Judge Bench), a case relating to the power  

of  Union to acquire land and right in and over the land, which are vested in State. This case  

produced two opinions, one by C. J. B.P. Sinha (majority opinion) and other by K. Subba Rao J.  

(dissenting opinion). As per the majority, there is undoubtedly distribution of  powers between  

the Union and the States in matters legislative and executive; but distribution of  powers is not  

always an index of  political sovereignty. The exercise of  powers legislative and executive in the  

allotted fields is hedged in by numerous restrictions, so that the powers of  the States are not  

coordinate with the Union and are not in many respects independent. Minority Judgment held  

that the Indian Constitution accepts the federal concept and distributes the sovereign powers  

between the co-ordinate constitutional entities, namely, the Union and the States. This concept  

implies that one cannot encroach upon the governmental functions or instrumentalities of  the  

other, unless the Constitution expressly provides for such interference. In (ii) Kesavanada  

Bharathi v. State of  Kerala [hereinafter ‘Keshvanada Bharathi’]34, majority held that the power  

conferred under Article 368 of  the Constitution was not absolute. They took the view that by  

an amendment, the basic structure of  the Constitution cannot be damaged or destroyed. And,  

as to what are the basic structures of  the Constitution, illustrations were given by each of   

these Judges. They include supremacy of  the Constitution, democratic, republican form of   

Government, secular character of  the Constitution, separation of  powers among the  

                                                 33   � State of  West Bengal v.  Union of  India, [1964] 1 S.C.R 371 [hereinafter ‘West Bengal’], S. R.  Bommai, State of  Karnataka v. Union of  India and Anr., [1978] 2 S.C.R1, (Special Reference No. 1 of   1964) AIR 1965 SC 745, ITC Ltd. v. Agricultural Produce Market Committee and Ors, (2002)1 S.C.R  441 [hereinafter ‘ITC’].  34   � 1973 (4) S.C.C 225

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legislature, executive and judiciary, the federal character of  the Constitution, Rule of  Law,  

equality of  status and of  opportunity; justice, social, economic and political; unity and integrity  

of  the nation and the dignity of  the individual secured by the various provisions of  the  

Constitution. In (iii) S.R. Bommai, this Court while determining the constitutional validity of   

emergency proclamations issued by the Centre in various States observed that federalism, as  

understood by the American Scholars is absent in Indian Constitution which is more of  a  

hybrid of  pure federalist character and pure unitary character. However, the distribution of   

powers must not be rubbished out as being absent. It was observed by Ahmadi J. that in order  

to maintain the unity and integrity of  the nation our founding fathers appear to have leaned in  

favour of  a strong Centre while distributing the powers and functions between Centre and the  

States. But the essential characteristics can be understood by knowing the “effects” of  such a  

system. As per Sawant and Kuldip Singh JJ: The features in the Constitution which  

provide the Centre with overriding powers over the states is only an exception and are  

not normal features of  the Constitution. K. Ramaswamy J., observed that Indian  

Federalism places the nation as a whole under control of  a national Government, while States  

are allowed to exercise their sovereign power within their legislative sphere.  As per Jeevan  

Reddy and Agrawal, JJ. the bias in favour of  the Centre does not make the states mere  

appendages of  the Centre. States are supreme in the sphere allotted to them. The ultimate  

conclusion reached by this Court was that the fundamental feature of  federalism being that  

irrespective of  each list, each legislature is supreme. In (iv) ITC, the majority led by Justice  

Ruma Pal held that the Constitution of  India deserves to be interpreted in a manner that it  

does not whittle down the powers of  State Legislatures and preserves the federalism while also  

upholding the central supremacy as contemplated by some of  the Articles. In (v) State of  West  

Bengal v. Kesoram Industries Ltd.35, it was concerned with Entries 52, 54 and 97 in List I and  

Entries 23, 49, 50 and 66 in List II of  the Seventh Schedule to the Constitution of  India as  

                                                 35   �A.I.R 2005 S.C 1646

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also the extent and purport of  the residuary power of  legislation vested in the Union of  India.  

Wherein it was observed therein that federalism is one of  the basic pillars of  the Indian  

Constitution and that having regard to Articles 245, 248, 250, 256, 257, 356 and Entry 97 in  

list I of  the seventh Schedule of  the Constitution, it is not possible to say that India is not a  

subscriber to federalism but although having unique federal character it can, be said to be  

quasi-federal or hybrid federal State. Thus constitutional courts have interpreted that India has  

a federal polity and that each State has independent constitutional existence assigned with  

important role of  Constitutional governance.  

5.9 In view of  these aspects, we need to consider the controversies in these cases and interpret  

relevant provisions of  the Constitution in light of  following rules and principles, which are-  

1. That Directive Principles of  State Policy should be utilized for interpreting every part  

of  the Constitution. and  

2. In a federal Constitution, an interpretation which preserves the State’s power should  

be preferred.  

PART-VI :INTRODUCTION TO TAXATION AND ITS IMPORTANCEThe States in  

the modern era are not strictly confined to political activities and law making functions.  

They function in a welfare society. Such working of  States was visualized by our framers  

also, who were aware of  responsibilities a State must shoulder and discharge. This is the  

very reason for existence of  Directive Principles of  State Policy and which sets normative  

and positive standards for the Government. When the State is burdened with such  

normative goals as its primary responsibility, such activities are inevitably dependent on  

availability of  monitory resources. The definition of  Sovereignty has acquired a new flavor  

in the recent past, ‘Sovereignty is responsibility’. In a democratic system the elected

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Governments are always responsible for its people. If  there is any high taxation which is  

affecting their life, this puts pressure on the Governments to reduce taxes and elected  

Governments are answerable to public every five years. No Government can raise tax  

which would cause public inconvenience. In this context, Sovereignty is no more endless  

power, rather it is responsibility. A responsible government in a democracy should always  

strive to keep taxes as low as possible, so that no heavy burden is placed on the individuals.  

Although States are empowered to tax under the Constitution, it does not necessarily mean  

that they should tax at exorbitant rates. Tax is a way of  apportioning the cost of   

government among those who in some measure are privileged to enjoy the benefits and  

must therefore bear its burdens. Fundamentally the exercise of  sovereignty also includes  

lawful taxation as its incident. Assesses/dealer on the other hand stated that all powers  

exercised by the state such as police powers, power of  eminent domain and power to tax  

are also incidents of  sovereignty.36 There is nothing which mandates this Court to deny  

latitude in use of  taxing powers in comparison to other similar powers. Although all  

powers exercised by State are incidents of  sovereignty, there is need to treat taxation on a  

different pedestal to sustain the Government at the current level and to achieve the  

Constitutional goals set by our framers.  

6.2 A tax is a burden or charge imposed by a competent legislature upon persons or property,  

to raise money for public purposes.37Important elements of  a tax may be said to be first,  

that it is a compulsory exaction; secondly, it is payable to the State or to some public  

authority on its behalf; and thirdly, that it is an exaction for purposes of  public interest.  

Our Constitution has demarcated the taxing powers between the Center and States. Taxing  

                                                 36   � Jaganathbaksh Singh v. State of  UP, (1963) 1 S.C.R 220; Dena Bank v. BhikhabhaiPrabhudas  Parekh & Co., (2000) 5 S.C.C 694; Commissioner of  Income Tax, Udaipur, Rajasthan v. McDowell and  co. Ltd., (2009) 10 S.C.C 755.  37   �  Cooley on taxation-volume 1, 4th ed., Ch. 2.

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power of  the Union as well as the States resides in Article 245 read with 246 of  the Indian  

Constitution. The Article 246 of  the Constitution, lays down that Parliament has exclusive  

power to make laws with respect to any matter enumerated in Union List (List I of   

schedule VII). The States have complete power to make laws with respect to any matter  

enumerated in the State List (List II of  schedule VII) and both Parliament and State  

Legislature have power to make laws with respect to any matter enumerated in the  

Concurrent List (List III of  schedule VII). As per Article 265, no taxes shall be levied or  

collected except by the authority of  law. It is important to note that taxation entries are to  

be found only in lists I and II, indicating that in our Constitutional scheme, taxation  

powers of  the Centre and the States are mutually exclusive. There are no Entries in the  

Concurrent List which gives power of  taxation. This being the case, the moment the levy  

contained in a taxing statute transgresses into a prohibited field, it is liable to be struck  

down.  

PART-VII :FREEDOM OF TRADE, COMMERCE AND INTERCOURSETo consider  

the question as to whether the tax laws come under the ambit of  Article 301 vis-à-vis  

freedom of  trade, commerce and intercourse, it is necessary to refer to the constitutional  

provisions, Constituent Assembly Debates and precedents. To begin with, I will first  

consider the relevant Articles, by extracting Part XIII verbatim.  

PART XIII  TRADE, COMMERCE AND INTERCOURSE WITHIN  

THE TERRITORY OF INDIA  301.Freedom of  trade, commerce and intercourse.—  Subject to the other provisions of  this Part, trade, commerce and  intercourse throughout the territory of  India shall be free.   302. Power of  Parliament to impose restrictions on trade,  commerce and intercourse.—  Parliament may by law impose such restrictions on the freedom of   trade, commerce or intercourse between one State and another or  within any part of  the territory of  India as may be required in the  public interest.   303. Restrictions on the legislative powers of  the Union and of  

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the States with regard to trade and commerce.—  (1) Notwithstanding anything in article 302, neither Parliament nor  the Legislature of  a State shall have power to make any law giving, or  authorising the giving of, any preference to one State over another,  or making, or authorizing the making of, any discrimination between  one State and another, by virtue of  any entry relating to trade and  commerce in any of  the Lists in the Seventh Schedule.   (2) Nothing in clause (1) shall prevent Parliament from making any  law giving, or authorizing the giving of, any preference or making, or  authorizing the making of, any discrimination if  it is declared by such  law that it is necessary to do so for the purpose of  dealing with a  situation arising from scarcity of  goods in any part of  the territory  of  India.   304. Restrictions on trade, commerce and intercourse among  States.—notwithstanding anything in article 301 or article 303, the  Legislature of  a State may by law—   (a) impose on goods imported from other States or the Union  territories any tax to which similar goods manufactured or produced  in that State are subject, so, however, as not to discriminate between  goods so imported and goods so manufactured or produced; and   (b) impose such reasonable restrictions on the freedom of  trade,  commerce or intercourse with or within that State as may be required  in the public interest:   Provided that no Bill or amendment for the purposes of  clause (b)  shall be introduced or moved in the Legislature of  a State without  the previous sanction of  the President.   305. Saving of  existing laws and laws providing for State  monopolies.—  Nothing in articles 301 and 303 shall affect the provisions of  any  existing law except in so far as the President may by order otherwise  direct; and nothing in article 301 shall affect the operation of  any law  made before the commencement of  the Constitution (Fourth  Amendment) Act, 1955, in so far as it relates to, or prevent  Parliament or the Legislature of  a State from making any law relating  to, any such matter as is referred to in sub-clause (ii) of  clause (6) of   article 19.   306.[Power of  certain States in Part B of  the First Schedule to  impose restrictions on trade and commerce.]38  

                                                 38   �Repealed Article 306-  

"Notwithstanding anything in the foregoing provisions of  this Part or in any other provisions of   this Constitution, any State specified in Part B of  the First Schedule which before the  commencement of  this Constitution was levying any tax or duty on the import of  goods into the  State from other States or on the export of  goods from the State to other States may, if  an  agreement in that behalf  has been entered into between the Government of  India and the  Government of  that State, continue to levy and collect such tax or duty subject to the terms of   such agreement and for such period not exceeding ten years from the commencement of  this  Constitution as may be specified in the agreement :   Provided that the President may at any time after the expiration of  five years from such  commencement terminate or modify any such agreement if, after consideration of  the report of   the Finance Commission constituted under article 280, he thinks it necessary to do so."

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Rep. by the Constitution (Seventh Amendment) Act, 1956, s. 29 and  Sch.   307. Appointment of  authority for carrying out the purposes of   articles 301 to 304.—  Parliament may by law appoint such authority as it considers  appropriate for carrying out the purposes of  articles 301, 302, 303  and 304, and confer on the authority so appointed such powers and  such duties as it thinks necessary.  

 7.2 Needless to mention that when the language of  the provision is clear and unambiguous  

that, the intention of  the law makers should be inferred from a plain reading of  the  

provision itself. Ordinarily, we need not go beyond the clear language of  the provision to  

interpret the Statute.   

7.3 The freedom of  trade, commerce and intercourse throughout the territory of  India is  

assured, but such freedom of  trade is subject to Part XIII of  the Constitution. When we  

evaluate the impact of  Article 301 on the plenary taxing power of  the Sovereign State, the  

opening words become significant. Be that as it may, Article 301 only guarantees  

throughoutness of  trade and commerce, the freedom, however, is not absolute freedom  

nor is it free from regulations.   

7.4 The dissection of  Article 301 shows that it has three significant parts or phrases. These  

are, ‘subject to other provisions of  this part’, and ‘Trade, Commerce and Intercourse throughout territory  

of  India’, ‘shall be free’. Which everway one reads, the plain meaning of  this is that trade,  

commerce and intercourse, shall be free, subject to Articles 302 to 307 of  the Constitution.  

The two sets of  the provisions which are mainly contemplated in the phrase ‘subject to  

other provisions’ are Articles 302, 303 and 304 (a) and (b).  Article 303. The Parliament  

may by law restrict the freedom of  trade in public interest and such law would be free  

from Article 301.  

 7.5 Article 301 of  the Constitution begins with the phrase ‘Subject to other provisions of  this

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Part’. This phrase gives an initial indication as to what to expect? The position of  this  

phrase should be taken into consideration. Even before the declaration of  freedom of   

Trade, Commerce and Intercourse, it is being subjected to limitations. Further the opening  

words of  Article 301, namely, ‘subject to the provisions of  this part’ require that all the  

Articles of  the Part XIII have to be read together so as to understand the width and  

meaning of  the Part XIII. ‘Subject to’ is the dominant expression so far as Article 301 is  

concerned. It indicates subservience to at least Articles 302, 303 and 304. Articles 302 to  

304 embody a restatement of  powers under Article 246 r/w the State List under the VII  

Schedule. Each restated power by itself  overrides the freedom of  trade in Article 301.  

7.6 Article 301 loses its prime place, if  States make laws under any of  the taxing entries,  

erecting reasonable restrictions or imposing tax on the free trade. Such power over-rides  

freedom of  trade and commerce. Thus, the general declaration by Article 301 is relaxed in  

favor of  Parliament by Article 302 and in favor of  the States by Articles 303 and 304. It is  

interesting to note that Article 304 starts with a non-obstante clause whereas Article 302 does  

not have a non-obstante clause.  As the freedom of  trade in Article 301 is itself  subject to  

302 and 304, the intention of  the framers, to my mind, appears to be clear.  The  

Constitution guards and protects the State legislations under Article 304(a) and (b) from  

overemphasized effect on freedom of  trade under Article 301.  

7.7 It is a sound principle of  jurisprudence that entire statute has to be construed as a whole  

and not in isolation. While doing so, no clause in any provision can be ignored especially  

when we interpret the Constitution which is ‘suprema lex’. The difference between the  

power of  the Union and the States vis-a-vis Article 301 is that Article 302 does not have  

application to tax laws like Article 304(a), but under Article 304(a), tax can be imposed on  

the goods imported from other States. From the understanding of  the Articles 301, 302,

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303 and 304, what emerges is summarized below-  

1. Article 302 is an exception to Article 301.  

2. The limitation under Article 302 is again subject to Article 303.  

3. Articles 302 and 303 do not refer to laws under taxing entries.  

4. Article 304 can be an exception to be generally construed as dealing with  

non-tax discriminatory tax and restrictions.  

7.8 In addition to plain reading, an analysis of  the relevant provisions and the legislative  

history of  Article 301, is also relevant, in understanding the free trade clause in our  

Constitution. This can be considered also with reference to Constituent Assembly Debates  

and the legislative history which are equally important external aids.   

7.9 In this connection, it has to be remembered that before the commencement of  the  

Constitution, about two-thirds of  India was directly under the British rule and was called  

'British India' and the remaining about one third was being directly ruled by the native  

Princes and was known as 'Native States'. There were a large number of  them with varying  

degrees of  sovereignty vested in them. Those rulers had, broadly speaking, the trappings  

of  a Sovereign State with power to impose taxes and to regulate inter-State trade.  It is well  

known fact that many of  them had erected trade barriers seriously impeding the free flow  

of  trade, commerce and intercourse, thereby not only shutting out but also shutting in  

commodities meant for mass consumption. Between the years 1947 and 1950, almost all  

the Indian States entered into agreements with the Government of  India and merged into  

India as one political unit, with the result that what was called British India, broadly  

speaking, came under the Constitution.  The native States became Part ‘B’ States. These  

Part ‘B’ States, in turn, were some sort of  unions of  small States or individual princely

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States.  They erected, more often than not, trade barriers and customs posts even amongst  

themselves.  It was in this background, India for the first time, was constituted as one  

political unit.  Hence, it was necessary to abolish all those trade barriers and custom posts  

in the interest of  national solidarity, economic and cultural unity as also of  freedom of   

trade.  

7.10 One of  the early tasks to engage the attention of  the Constituent Assembly in 1947 was  

freedom of  trade and commerce within territories of  the Union. It is important to note  

that in the Draft Constitution, the freedom of  trade, commerce and intercourse which was  

a part of  fundamental right, was dropped as such. Basic principles were formulated in the  

notes submitted to the sub-committee on Fundamental Rights by Dr. K.M. Munshi39 and  

SirAlladi Krishnaswami Iyer40. The Sub-Committee discussed Sir B.N. Rau’s draft provision  

on the subject on March 29, 1947 and was adopted in the following form:  

 Subject to regulation by the law of  the Union, trade, commerce, and  intercourse among the units, whether by means of  internal carriage  or by ocean navigation, shall be free:   Provided that any unit may by law impose reasonable restrictions  thereon in the interest of  public order, morality or health.  

 7.11 Commenting on the Clause when the draft of  the sub-committee’s report was under  

Consideration. Sir Alladi Krishnaswami Iyer suggested that goods entering a particular unit  

from other units of  the Union should not escape duties and taxes to which goods  

                                                 39   �B. Shiva Rao, The Framing of  India’s Constitution, Vol.II, p. 69 (1967). [hereinafter ‘B. Shiva Rao’]   Extract from the Note and draft Articles on Fundamental Rights by Dr. K. M. Munshi, dt.  March 17, 1947 –  

Article V- (1) Every Citizen within the limits of  the law of  the Union and in accordance  therewith has :   (i)The right of  free movement and trade within the territories of  the Union.  

40   �  B. Shiva Rao, p. 68   Extract from the Note on Fundamental Rights by Alladi Krishnaswami Iyer, dt. March 14, 1947-  

‘The Union powers being restricted in scope, care will have to be taken to bring in (a) the  freedom of  Inter-state and inter-provincial trade, (b.) inter-state and inter-provincial  movement…’

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produced in the concerned unit itself  were subjected to.  These suggestions were accepted  

by the Sub-committee and incorporated in the report submitted to the Advisory  

Committee on April 16, 1947. On April 21, 1947 the clause came up for debate before the  

Advisory Committee. Shri C. Rajgopalchari expressed his view that the units must be  

allowed to raise some kind of  custom duties for genuine revenue purposes, for which the  

reply of  Shri K. M. Panikkar is relevant for our discussion:  

 K. M. Panikkar: Rajaji (C. Rajgopalchari) has raised the question of   the right of  the units to raise taxes, and to say this right should not  be denied. I, however, think this is dangerous power to be given to  the units. This may result in creation of  competing units. We have  allowed two things. We have allowed the unit to tax its own  industries. We also allow things brought in to be taxed, for sake of   parity. But our friend wants go little further and say that the right to  impose taxes or transit duty or some kind of  duty must be given to  the units. That, I am afraid, will be a negation of  the clause.41  

7.12 In the interim report of  the Advisory Committee dt.23.04.1947 placed by Shri Sardar  

Vallabhai Patel, the following recommendations were made :  

 “While agreeing in principle with this clause we  recommend that instead of  being included in Fundamental  Rights, it should find a place in some other part of  the  Constitution.”  

7.13 Taking into consideration above deliberations and decisions of  the Assembly, Sir B.N. Rau  

incorporated the following clause in his draft Constitution of  October, 1947 under Part  

III-Fundamental Rights including Directive Principles of  State Policy42:-  

 17. Provided that nothing in  this section shall prevent any  unit from imposing on goods  manufactured or produced in  

Freedom of  trade,  commerce and  intercourse among  the units.  

                                                 41   �B. Shiva Rao, p. 253  42   �B. Shiva Rao, p. 701

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that unit are subject, so,  however, as not to discriminate  between goods so imported  and goods so manufactured or  produced :  Provided further that no  preference shall be given by  any regulation of  trade,  commerce or revenue to one  unit over another :  Provided also that nothing in  this section shall preclude the  Federal Parliament from  imposing by Act restrictions  on the freedom of  trade,  commerce and intercourse  among the units in the  interests of  public order,  morality or health or in cases  of  emergency.  

[Cf. Common  wealth of  Australia  Constitution Act.  Ss. 92 and 99,  Government of   India Act, 1935, s.  297  

7.14 With some modifications, this clause was retained in the Fundamental Rights chapter in the  

draft Constitution of  February 21, 1948. The proviso was redrafted and included as an  

independent Article under a separate heading, namely, “Inter-state trade and commerce” in  

Part IX of  the Draft Constitution pertaining to relations between the Union and the  

States.43  

7.15 Further when the draft Constitution was published and circulated for suggestions and  

opinions, Sir Alladi Krishnaswami Iyer commented in the following manner:-  

“Comments of  AlladiKrishnaswamiAyyar: In this  regard to interstate trade there are three main provisions in  the Draft Constitution :  

I. The freedom of  inter-state trade secured by Article  16;  

                                                 43   �B. Shiva Rao, p. 524 and p. 610

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II. Subject to an interference by federal law :  III. An interference by a provision or state law to the  

extent provided in item 33, 44, List II.  The power of  interference under Sub-clause (b) of  the  Article 244 is too drastic and much wider than that  provided in the Original Draft. Would not this  provision practically nullify the freedom of  trade  secured by the Article 16 as the expression ‘interests  of  public is vague and uncertain and cannot be  subject to judicial review.”  

7.16 Draft Articles relating to trade and commerce were scattered in different parts of  the draft  

Constitution (i.e., Clause 16 and Articles 243 to 245) and the purpose was to string  

together all these scattered provisions under one head. Dr. Ambedkar stated before the  

Constituent Assembly that :  

 Sir, all that I need do at this stage is to inform the House  that originally the articles dealing with freedom of  trade  and commerce were scattered in different parts of  the  Draft Constitution. One article found its place in the list of   Fundamental Rights, namely, article 16, which said that  trade and commerce, subject to any law made by  Parliament, shall be free throughout the territory of  India.  The other articles, namely, 243, 244 and 245 were included  in some other part of  the Draft Constitution. it was found  in the course of  discussion that a large number of   members of  the House were not in a position to  understand the implications of  articles 243, 244 and 245,  because these articles were dissociated from article 16. In  order, therefore, to give the House a complete picture  of  all the provisions. relating to freedom of  trade and  commerce the Drafting Committee felt that it was  much better to assemble all these different articles  scattered in the different parts of  the Draft  Constitution into one single part and to set them out  seriatim, so that at one glance it would be possible to  know what are the provisions with regard to the  

                                                 44   �  Draft of  Constitution, February 21, 1948-Seventh Schedule, List II- State List   

33. Regulation of  trade, commerce and intercourse with other states for the purposes of  the  provisions of  Article 244 of  this Constitution.

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freedom of  trade and commerce throughout India. I  should also like, to say that according to the provisions  contained in this part it is not the intention to make trade  and commerce absolutely free, that is to say, deprive both  Parliament as well as the States of  any power to depart  from the fundamental provision that trade and commerce  shall be free throughout India.45  

(Emphasis Supplied)  

7.17 From the above legislative history and Constituent Assembly Debates, four propositions  

would emerge:-  

a. It is clear from a comparison of  Clause 16, 243, 244 and 245 of  the draft  

Constitution with Articles in Part XA (now Part XIII) that they were not  

merely arranged in seriatim but were substantially altered.   

b. That freedom of  trade, commerce and intercourse is not a fundamental right.  

c. That trade, commerce and intercourse in India is not absolutely free.  

d. That the discriminatory tax (like erstwhile custom duties imposed by certain  

independent states) is harmful for the federation.  

PLAINS OF GANGES CAN NEVER BE FERTILIZED BY WATER OF MURRAY OR POTMAC  RIVERS  

7.18 The precedents as well support the view that tax laws are not contemplated in Article 301.   

Before considering the relevant precedents, a brief  reference to the extent and scope of   

right to free trade as enforced in Australia, USA and Canada may be refereed to. It is to be  

kept in mind that the plains of  Ganges can never be fertilized by waters of  Murray46 or  

Potmac47. But it is important to see the course which they have sailed and taken their  

countries to glory. It is imperative to mention that during the drafting process of  Article  

                                                 45   �  Constituent Assembly Debate, Vol. IX, 8th September 1949  46   �  Longest River of  Australia  47   �  River in United States of  America

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301, foot note for the same had reference to Australian Constitution. It is no gainsaying  

that our framers were learned men who drew our Constitution having hindsight of  the  

wisdom of  these great federations.   

7.19 The main inspiration for Part XIII has been American and Australian models. These  

models present before the Constituent Assembly were re-designed and expanded by the  

framers of  the Constitution in India according to the needs of  Indians.  It is important to  

note that the interpretation provided by other countries are just indicative.  They may have  

persuasive value because the context and history has been quite different as compared to  

India. At least in relation to Part XIII of  the Constitution an indigenous interpretation  

should be provided without placing heavy reliance on the foreign cases as they may be  

subject to change which will inevitably stir the matter once again. Moreover, our  

constitutional structure is quite different from those provided under Australian and  

American Constitutions.  

7.20 In Australia and the United States of  America, giving textual meaning to the applicable  

Constitutional provisions, the Courts interpreted the ‘commerce clause’ or ‘free trade  

clause’ in such a manner that the (federal units) were completely barred to levy any taxes  

on inter-state trade and commerce, Fortunately off  late, in these jurisdictions, the law has  

been diluted to enable the federal units to regulate inter-state trade and commerce even by  

imposing levies.  This would be clear by brief  reference to the case law governing inter-

state trade in Australia, Canada and the United States of  America.     

COMMONWEALTH OF AUSTRALIA  

7.21 Section 92 of  the Australian Constitution declares that ‘on the imposition of  uniform  

duties of  customs, trade, commerce and intercourse among the States, whether by means  

of  internal carriage or ocean navigation, shall be absolutely free. In Cole v Whitfield[Herein

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after ‘Cole’]48, and later in CastlemaineTooheys Ltd v South Australia49 and, most recently,  

in Betfair Pty Ltd v Western Australia50, the Court observed that Section 92 of  the Australian  

Constitution only meant that Australia was free from those measures which were  

discriminatory and protectionist burdens. Cole insisted that Section 92 proscribes both  

direct and indirect protectionist discrimination: -  

 ‘The concept of  discrimination in its application to interstate trade  and commerce necessarily embraces factual discrimination as well as  legal operation. A law will discriminate against interstate trade or  commerce if  the law on its face subjects that trade or commerce to a  disability or disadvantage or if  the factual operation of  the law  produces such a result’.51    

7.22 Earlier to this, Australian Courts have grappled to achieve uniformity until 1988 [Cole].  

Earlier Judgments had taken a right based approach, wherein a single trader who was  

burdened, could claim violation of  Section 92 of  the Australian Constitution.52 Such wide  

interpretation given in the earlier case laws led to development of  narrower test by the  

High Court in Cole. Earlier Case laws were available and were cited in the Atiabari and  

Automobile also. It is interesting to note that our framers drawing experience of  Bank  

Nationalization Case53, were concerned about stifling the natural growth of  the Country by  

broad law such as Section 92 of  Australian Constitution.54  

                                                 48   �  (1988) 165 C.L.R 360  49   � (1990) 169 C.L.R 436  50   � (2008) 234 C.L.R 418  51   �  Ibid, p. 399  52   �  Common wealth v. Bank of  new South Wales, (1949) 79 C.L.R 497.  53   �  Ibid.  54   �  Constituent Assembly Debate, Vol. IX, 8th September 1949

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UNITED STATES OF AMERICA  

7.23 Article 1 Section 8 Clause 3 of  the U.S. Constitution states that “The Congress shall have the  

legislative power to regulate commerce, with foreign nations and among several States, and with Indian  

Tribes.” This Clause also known as the ‘Commerce Clause’ has been under judicial scrutiny  

for a long time. The plain reading of  this Article means that the Federal Legislature is  

empowered to regulate the inter-state trade.   

7.24 In Brown v. Maryland55, a case involving the constitutionality of  a Maryland law requiring all  

importers and wholesalers of  foreign articles to obtain a license, Chief  Justice Marshall  

reasoned that the rationale of  McCulloch56 was "entirely applicable" to state taxation of   

private enterprises engaged in inter-state commerce. Thus, holding the Maryland statute  

unconstitutional, Justice Marshall stated:   

‘We admit this power (of  a State to tax its own citizens on their  property within its territory) to be sacred.... We cannot admit that it  may be used so as to obstruct or defeat (Congress') power to regulate  commerce. It has been observed that the powers remaining with the  States may be so exercised as to come in conflict with those vested in  Congress. When this happens, that which is not supreme must yield  to that which is supreme’.    

7.25 The Supreme Court in Freeman v. Hewitt57, put a bar on the States to tax such activities  

which directly affected inter-state commerce as federal government was the sole authority  

to regulate these matters. Following extract may be relevant-  

‘The Commerce Clause was not. merely an authorization to Congress  to enact laws for the protection and encouragement of  commerce  among the States, but by its own force created an area of  trade free  from interference by the States. In short, the Commerce Clause even  without implementing legislation by Congress is a limitation upon the  

                                                 55   � 25 U.S. (12 Wheat.) 419 (1827)  56  

� 4 Wheat. 316 (1819)  

57   � 329 U.S. 249 (1946)

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power of  the States.... This limitation on State power ... does not  merely forbid a State to single out interstate commerce for hostile  action. A State is also precluded from taking any action which may  fairly be deemed to have the effect of  impeding the free flow of   trade between States. It is immaterial that local commerce is  subjected to a similar encumbrance’.  

7.26 In 1977 in a landmark judgment in Complete Auto Transit vs. Brady58, the Supreme Court  

went back on the above approach and adopted practical effects approach, according to  

which, a State law which is “applied to an activity with a substantial nexus with the taxing  

state, fairly apportioned, non-discriminatory against inter-state commerce, and fairly  

related to the services provided by the State” shall not be invalidated on the ground that  

States lack legislative competence.  Subsequently the Supreme Court has further  

empowered the States to adopt legislations and it now only requires that there should be a  

fair relation or connection between the tax imposed and the general benefits provided to  

the taxpayers which include civic services as maintenance of  public roads and running of   

mass transits (refer D.H. Holmes Company Ltd. vs. Shirley McNamara59). In the Commonwealth  

Edison Company vs. State of  Montana60 the Supreme Court has observed that-  

‘when a general revenue tax does not discriminate against interstate  commerce and is apportioned to activities occurring within the State,  the State is free to pursue its own fiscal policies unembarrassed by  the Constitution.’    

It is obvious from the line of  cases that America has been moving towards empowering  

States to develop their own fiscal policy under the Commerce Clause. Our Constitution, on  

the other hand, has achieved directly what the US Courts are trying to achieve by way of   

judicial interpretation.  

                                                 58   � 430 U.S. 274 (1977)  59   � 486 U.S. 24 (1988)  60   � 453 U.S. 609 (1981)

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CANADA  

7.27 Canadian Constitution envisages freedom of  trade under Section 121 as follows  

‘All Articles of  the Growth, Produce, or Manufacture of  any one of  the Provinces shall,  

from and after the Union, be admitted free into each of  the other Provinces’. It is  

important to note the federal scheme before referring to interpretation provided by the  

Courts in Canada. Under Section 92(2) provincial power to tax is restricted by three  

limitations i. The tax must be ‘direct’ ii. The tax must be ‘within the province’ iii. The tax  

must be for ‘provincial purposes’.61 Federal and Provincial powers overlap in the field of   

direct taxation, which includes the two most lucrative taxes, namely, income tax and the  

sales tax. Section 121 has been interpreted by the Supreme Court in Gold Seal Case (1921)62,  

In this Case the Supreme Court of  Canada speaking through Duff  J. observed that:   

 ‘The capacity of  the Parliament of  Canada to enact the amendment  of  1919 is denied. With this I do not agree. And, first, I am unable to  accept the contention founded upon Section 121 of  the B.N.A. Act;  the phraseology adopted, when the context is considered in which  this section is found, shews, I think, that the real object of  the clause  is to prohibit the establishment of  customs duties affecting  interprovincial trade in the products of  any province of  the Union.’63    

Similarly, Mignault J. stated:    

‘I think that, like the enactment I have just quoted, the object of   section 121 was not to decree that all articles of  the growth, produce  or manufacture of  any of  the provinces should be admitted into the  others, but merely to secure that they should be admitted “free,” that  is to say without any tax or duty imposed as a condition of  their  admission. The essential word here is “free” and what is prohibited is  the levying of  custom duties or other charges of  a like nature in  matters of  interprovincial trade.’64  

                                                 61   �  Constitutional Law of  Canada, Peter W. Hogg, Vol.1, pg. 857.  62   �  Gold Seal Ltd. V. Alberta AG, (1921) 62 S.C.R 424.   63   �  Ibid. at 456  64   �  Ibid. at 470.

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7.28 The Conspectus of  law in Australia and the United States of  America which have federal  

Constitutions would show that initially the highest courts in those countries interpreted  

their respective constitutional provisions as totally prohibiting the States (federal Units)  

from levying any tax or regulating on inter-State trade and commerce, but subsequently  

there is a paradigm shift even in these jurisdictions and currently the existing provisions  

have been interpreted so as not to deny such powers to States.  

INDIAN CASE LAW  

7.29 Returning to the main controversy in the case, it may be noted that apart from the two  

leading judgments on the entry tax and compensatory tax in the context of  transportation  

Cases, we have large number of  cases decided by the various High courts and this Court. It  

is however not necessary to refer to all cases. It would be suffice to refer to a few.   

7.30 In Atiabari, the validity of  Assam Taxation (on Goods Carried by Roads and Inland  

Waterways) Act, 1954, which squarely comes under Entry 56 of  List II fell for  

consideration. It was assailed as violating Article 301, and as not saved by Article 304(b).  

The challenge was upheld. It is necessary to extract the following from the Atiabari. :  

‘…It is obvious that whatever may be the content of  the  said freedom it is not intended to be an absolute freedom;  absolute freedom in matters of  trade, commerce and  intercourse would lead to economic confusion, if  not  chaos and anarchy; and so the freedom guaranteed by  Article 301 is made subject to the exceptions provided by  the other Articles in Part XIII. The freedom guaranteed is  limited in the manner specified by the said Articles but it is  not limited by any other provisions of  the Constitution  outside Part XIII. That is why it seems to us that Article  301, read in its proper context and subject to the  limitations prescribed by the other relevant Articles in Part  XIII, must be regarded as imposing a constitutional  limitation on the legislative power of  Parliament and the  Legislatures of  the States. What entries in the legislative  lists will attract the provisions of  Article 301 is another

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matter; that will depend upon the content of  the freedom  guaranteed; but wherever it is held that Article 301 applies  the legislative competence of  the Legislature in question  will have to be judged in the light of  the relevant Articles  of  Part XIII; this position appears to us to be inescapable.   

50. Let us now revert to Article 301 and ascertain the width  and amplitude of  its scope. On a careful examination of   the relevant provisions of  Part XIII as a whole as well as  the principle of  economic unity which it is intended to  safeguard by making the said provisions, the conclusion  appears to us to be inevitable that the content of  freedom  provided for by Article 301....   

51. certainly includes movement of  free trade which is of   the very essence of  all trade and is its integral part. If  the  transport or the movement of  goods is taxed solely on the  basis that the goods are thus carried or transported that, in  our opinion, directly affects the freedom of  trade as  contemplated by Article 301. If  the movement, transport  or the carrying of  goods is allowed to be impeded,  obstructed or hampered by taxation without satisfying the  requirements of  Part XIII the freedom of  trade on which  so much emphasis is laid by Article 301 would turn to be  illusory. When Article 301 provides that trade shall be free  throughout the territory of  India, primarily it is the  movement part of  the trade that it has in mind and the  movement or the transport part of  trade must be free  subject of  course to the limitations and exceptions  provided by the other Articles of  Part XIII....Besides, it is  not irrelevant to remember in this connection that the  Article we are construing imposes a constitutional  limitation on the power of  the Parliament and State  Legislatures to levy taxes, and generally, but for such  limitation, the power of  taxation would be presumed  to be for public good and would not be subject to  judicial review or scrutiny. Thus considered we think  it would be reasonable and proper to hold that  restrictions freedom from which is guaranteed by  Article 301, would be such restrictions as directly and  immediately restrict or impede the free flow or  movement of  trade. Taxes may and do amount to  restrictions; but it is only such taxes as directly and  immediately restrict trade that would fall within the  purview of  Article 301.’

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(Emphasis Supplied)  

7.31 In Atiabari, Chief  Justice B. P. Sinha wrote a dissenting opinion holding that any inference  

that the taxation simpliciter is within the terms of  Article 301 cannot be justified under the  

Constitution. Indeed, it is observed that, it is only such taxes which directly and  

immediately affect trade would fall within the purview of  Article 301, though both the  

Learned Judges used different languages, the purports appears to be same. It is only such  

laws which operate in a restrictive manner, right to free trade that are prohibited. Be that as  

it is, rejecting the submission that Article 301 must be construed as freedom from all kinds  

of  impediments, restraints and trade barriers including freedom from all taxation, the  

Learned Chief  Justice said as follows:   

‘In my opinion, there is no warrant for such an extreme  position. It has to be remembered that trade, commerce an  intercourse include individual freedom of  movement of   every citizen of  India from State to State, which is also  guaranteed by Art.19(1)(d) of  the Constitution. The three  terms used in Art. 301 include not only free buying and  selling, but also the freedom of  bargain and contract and  transmission of  information relating to such bargains and  contract as also transport of  goods and commodities for  the purposes of  production, distribution and consumption  in all their aspects, that is to say, transportation by land, air  or water. They must also include commerce not only in  goods and commodities, but also transportation of  men  and animals by all means of  transportation. Commerce  would thus include dealings over the telegraph, telephone  or wireless and every kind of  contract relating to sale,  purchase, exchange etc. of  goods and commodities.  

15. Viewed in this, all comprehensive sense, taxation on  trade, commerce and intercourse would have many  ramifications and would cover almost the entire field of   public taxation, both in the Union and in the State Lists. It  is almost impossible to think that the makers of  the  Constitution intended to make trade, commerce and  intercourse free from taxation in that comprehensive sense.  If  that were so, all laws of  taxation relating to sale and  purchase of  goods on carriage of  goods and commodities,

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men and animals, from one place to another, both inter- State and intra-State, would come within the purview of   Art. 301 and the proviso to Art. 304(b) would make it  necessary that all bills or Amendments or pre-existing laws  shall have to go thereof  the gamut prescribed by that  proviso. That will be putting too great an impediment to  the power of  taxation vested in the States and reduce the  States' limited sovereignty under the Constitution to a mere  fiction. That extreme position has, therefore, to be rejected  as unsound.’  

7.32 Dealing with the importance of  taxing power of  the State to raise money the learned  

Chief  Justice. opined thus :-  

‘In my opinion, another very cogent reason for holding  that taxation simpliciter is not within the terms of  Art. 301  of  the Constitution is that the very connotation of  taxation  is the power of  the State to raise money for public  purposes by compelling the payment by persons, both  natural and juristic, of  monies earned or possessed by  them, by virtue of  the facilities and protection afforded by  the State. Such burdens or imposts, either direct or indirect,  are in the ultimate analysis meant as a contribution by the  citizens or persons residing in the State or dealing with the  citizens of  the State, for the support of  the Government,  with particular reference to their respective abilities to  make such contributions. Thus public purpose is implicit in  every taxation, as such. Therefore, when Part XIII of  the  Constitution speaks of  imposition of  reasonable  restrictions in public interest, it could not have intended to  include taxation within the generic term "reasonable  restrictions"’  

7.33 In Automobile, the challenge was to the Rajasthan Motor Vehicles Taxation Act, 1951. The  

Appellants were unsuccessful before the Rajasthan High Court, which upheld the said Act.  

By majority of  4:3 this Court affirmed the judgment of  the High Court. Justice S.K.Das  

who wrote the lead judgment observed that Part XIII is intended to achieve the federal  

economic and fiscal integration and addresses the questions of  economic unity. He held  

that, "regulatory measures or measures imposing compensatory taxes for the use of  

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trading facilities do not come within the purview of  the restrictions contemplated by  

Article 301 and such measures need not comply with the requirements of  the proviso to  

Article 304(b) of  the Constitution, (and) that the relevant Articles in Part XIII apply only  

to legislation in respect of  the entries relating to trade and commerce in any of  the lists of   

the Seventh Schedule. But we must advert here to one exception which we have already  

indicated in an earlier part of  this Judgment. Such regulatory measures do not impede the  

freedom of  trade, commerce and intercourse and compensatory taxes for the use of   

trading facilities are not hit by the freedom declared by Article 301. They are excluded  

from the purview of  the provisions of  Part XIII of  the Constitution for the simple reason  

that they do not hamper trade, commerce and intercourse but rather facilitate them".  

7.34 Justice K. Subba Rao (as his lordship then was) in a separate opinion concurred with the  

majority and summarized the following principles that are to be applied while testing a law  

under challenge as violating Article 301 of  the Constitution (1) Article 301 declares a right  

of  free movement of  trade without any obstructions by way of  barriers, inter-State or  

intra-State, or other impediments operating as such barriers. (2) The said freedom is not  

impeded, but, on the other hand, promoted, by Regulations creating conditions for the free  

movement of  trade, such as, police Regulations, provision for services, maintenance of   

roads, provision for aerodromes, wharfs etc., with or without compensation. (3)  

Parliament, may by law, impose restrictions on such freedom in the public interest; and the  

said law can be made by virtue of  any entry with respect whereof  Parliament has power to  

make a law.(4) The State also, in exercise of  its legislative power, may impose similar  

restrictions, subject to the two conditions laid down in Article 304(b) and subject to the  

proviso mentioned therein. (5) Neither Parliament nor the State Legislature can make a law  

giving preference to one State over another or making discrimination between one State  

and another, by virtue of  any entry in the Lists, infringing the said freedom. (6) This ban is

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lifted in the case of  Parliament for the purpose of  dealing with situations arising out of   

scarcity of  goods in any part of  the territory of  India and also in the case of  a State under  

Article 304(b), subject to the conditions mentioned therein; and (7) The State can impose a  

non-discriminatory tax on goods imported from other States or the Union territory to  

which similar goods manufactured or produced in that State are subject.  

7.35 As discussed above, a Constitution Bench of  this Court in Atiabari had struck down the  

Assam Act levying the tax on goods carried by road or inland waterways. Making certain  

additional provisions, Assam Assembly enacted the Assam Act No. 10 of  1961, coming  

under Entry 56 of  the State List, with the previous sanction of  the President with the  

same nomenclature, which was impeached as unreasonable under Article 32 of  the  

Constitution, in Khyerbari Tea Company v. State of  Assam65. By the time, this Court took up  

the case, the scope and effect of  provisions contained in Part XIII of  the Constitution  

came to be considered in Automobile. Rejecting the challenge this Court observed that the  

freedom can be restricted by a law satisfying the two conditions in Article 304. In  

examining the constitutionality of  the statute, it must be assumed that the legislature  

understands and appreciates the needs of  the people and the laws it enacts are directed to  

problems which are made manifest by experience and that the legislature enacts the laws  

which the people’s representatives consider to be reasonable for the purpose for which  

they are enacted. The presumption is in favor of  the constitutionality of  enactment.  

However, when it is shown that an Act invades the freedom of  trade, it is necessary to  

enquire whether the State has proved that the restrictions imposed by way of  taxation are  

reasonable and in public interest within the meaning of  Article 304(b). It was also held that  

a law passed under Article 304(b) can be made to have retrospective effect.  

                                                 65   �  (1964) 5 SCR 975 : AIR 1964 SC 925

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7.36 In Jindal (2), the law was summarized by the Constitutional Bench as under:  

 ‘Article 301 is binding upon the Union Legislature and the State  Legislatures, but Parliament can get rid of  the limitation imposed by  Article 301 by enacting a law under Article 302. Similarly, a law made  by the State Legislature in compliance with the conditions imposed  by Article 304 shall not be hit by Article 301. Article 301 thus  provides for freedom of  inter-State as well as intra-State trade and  commerce subject to other provisions of  Part XIII and  correspondingly it imposes a general limitation on the legislative  powers, which is relaxed under the following circumstances:  

(a) Limitation is relaxed in favour of  Parliament  under Article 302, in which case Parliament can  impose restrictions in public interest. Although the  fetter is limited enabling Parliament to impose by  law restrictions on the freedom of  trade in public  interest under Article 302, nonetheless, it is clarified  in Clause (1) of  Article 303 that notwithstanding  anything contained in Article 302, Parliament is not  authorised even in public interest, in the making of   any law, to give preference to one State over another.  However, the said clarification is subject to one  exception and that too only in favour of  Parliament,  where discrimination or preference is admissible to  Parliament in making of  laws in case of  scarcity.  This is provided in Clause (2) of  Article 303.  

(b) As regards the State Legislatures, apart from the  limitation imposed by Article 301, Clause (1) of   Article 303 imposes additional limitation, namely,  that it must not give preference or make  discrimination between one State or another in  exercise of  its powers relating to trade and  commerce under Entry 26 of  List II or List III.  However, this limitation on the State Legislatures is  lifted in two cases, namely, it may impose on goods  imported from sister State(s) or Union Territories  any tax to which similar goods manufactured in its  own State are subjected but not so as to discriminate  between the imported goods and the goods  manufactured in the State [see Clause (a) of  Article  304]. In other words, Clause (a) of  Article 304  authorises a State Legislature to impose a non- discriminatory tax on goods imported from sister

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State(s), even though it interferes with the freedom  of  trade and commerce guaranteed by Article 301.  Secondly, the ban under Article 303(1) shall stand  lifted even if  discriminatory restrictions are imposed  by the State Legislature provided they fulfil the  following three conditions, namely, that such  restrictions shall be in public interest; they shall be  reasonable; and lastly, they shall be subject to the  procurement of  prior sanction of  the President  before introduction of  the Bill.’  

7.37 One need to note that Atiabari dealt with the challenge to an enactment which squarely  

comes under Entry 56 whereas Automobile is a case concerned with the challenge to  

Rajasthan Motor Vehicle Taxation Act. Taxes on motor vehicles is a subject which falls  

under Entry 57. The cases which were subsequently decided by this court in relation to  

Part XIII, were decided by this Court were not concerned with Entries 56 and 57. Be that  

as it may, deviating a little, let me now examine the scope of  Entry 52 and the nature of   

the tax contemplated there under. Entry 52 of  the State list deals with ‘taxes on the entry of   

the goods for consumption use or sale therein’. A law made under this entry like various Acts  

which are impugned in these appeals levy tax on entry of  goods from one State to other.  

The taxable event is the entry into local area in another State. As defined in Concise  

Oxford Dictionary the verb ‘enter’ means ‘to come or go into and entry as a noun is act of   

coming or going’.66 There is a palpable difference between the entry of  goods and sale of   

goods. Many enactments levying tax on sale define the sale as ‘transfer of  property from  

one person to another in course of  business for cash or deferred payment.’ When goods  

enter the State it may be for consumption, use or sale. The factum of  entry and sale may  

not happen at the same time and, therefore, entry of  goods is one thing and consumption,  

use or sale is another thing. Therefore, the mere fact that the goods are intended for sale is  

no significance to the taxable event in law on the entry of  goods.   

                                                 66   �  Concise Oxford Dictionary, p. 474 (10th Ed.)

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7.38 In Hansa Corp.67, the Constitutional validity of  Karnataka Tax on Entry of  Goods into  

Local Areas for Consumption, Use or Sale Therein Act, 1979 was challenged before this  

Court. This Court upheld the validity of  the Act and pointed out that the formulation in  

Atiabari and Automobile was even applicable for Entry Tax under Entry 52 of  the State List.  

This Court summed up the position of  law as below-  

 ‘Entry 52 in State List read with Article 246 of  the Constitution  confers power on the State legislature to enact a law to levy tax on  the entry of  goods into a local area for consumption, use or sale  therein. This tax in common parlance is known as 'octroi'. Octroi was  leviable by the municipality under the power delegated to it under  various laws providing for setting up of  and administration of   municipal corporations and municipalities. Octroi thus understood  was being levied by various municipalities and  municipal corporations in Karnataka State. Since some time a feeling  had grown that octroi was obnoxious in character and impeded the  development of  trade and commerce and there was a clamour for its  abolition. Taking note of  the resentment of  the business community,  Karnataka State abolished octroi with effect from April 1, 1979.  However, no one was in doubt that octroi was a major source of   revenue to municipalities and its abolition would cause such a dent  on municipal finances that compensation for the loss would be  inevitable. Accordingly, the State Government undertook a policy of   compensating the municipalities year by year. For generating funds  for this compensation, rates of  sales tax were raised and in some  cases a surcharge was levied. The amount so collected was not  sufficient to bridge the gap in municipal budget. To further augment  the finances for compensating the municipalities, additional fund was  sought to be generated by levy of  tax under the impugned legislation.  No doubt, the tax levied was one on entry of  scheduled goods in  local areas meaning thereby it had all the broad features of  octroi, yet  the manner of  levy, the method of  collection and the persons liable  to pay the same were so devised by the impugned Act as to remove  the obnoxious features of  octroi. As the charging section shows, the  tax was to be levied on entry of  scheduled goods in a local area at a  rate to be specified by the Government not exceeding 2% ad  valorem. The taxing event would be the entry of  scheduled goods in  a local area. In fact, octroi was being levied on almost all conceivable  goods entering into a local area for consumption, use or sale therein.  There appears to be a discernible policy in selecting the goods set out  in the schedule, the entry of  which in a local area would provide the  taxing event. The goods selected for levy are textiles, tobacco and  

                                                 67   �  1980 (4) S.C.C 463

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sugar. Way back in 1957 there was a demand for abolition of  sales  tax on the scheduled goods and at the instance of  the Union  Government the State Governments agreed to forego their right to  levy sales tax on the aforementioned scheduled goods on the  condition that the Union Government would levy additional excise  duty on them and distribute the net proceeds of  such duty amongst  the consenting States. Parliament accordingly has enacted the  Additional Duties on Goods (Goods of  Special Importance) Act,  1957. Therefore, while raising rates of  sales tax and levying surcharge  in respect of  some other items the State Government could not have  levied sales tax on the scheduled goods. They were, therefore,  selected for the levy of  the tax under the impugned Act on their  entry into a local area’.   

XXX  ‘On a conspectus of  these decisions it appears well settled that if  a  tax is compensatory in character it would be immune from the  challenge under Article 301. If  on the other hand the tax is not  shown to be compensatory in character it would be necessary for the  party seeking to sustain the validity of  the tax law to show that the  requirements of  Article 304 have been satisfied’.  

 7.39 In Atiabari, majority held that the legislative competence of  the legislature will have to be  

judged in the light of  relevant Articles of  Part XIII and that what entries will attract  

Article 301 will depend on the content of  freedom guaranteed. In Jaiprakash, this Court  

ruled that concept of  compensatory tax evolved in Automobile does not apply to general  

notion of  entry tax. As pointed out earlier Atiabari is a case dealing with tax under Entry  

56, whereas Automobile is a case under Entry 57. In view of  this it would not be safe to  

apply the majority opinion in Atiabari and Automobile while dealing with entry tax. I am  

therefore compelled to hold that tax law simpliciter is not contemplated in Article 301 of   

the Constitution.  

7.40 There is no gainsaying that the law made by Parliament or State legislature is subject to  

Constitutional limitations.  A law which abridges fundamental rights is rendered void by  

reason of  Article 13. A law by the Union or the States relating to a subject matter outside  

the powers assigned under Articles 245 read with Article 246 and relevant legislative entries  

in the Seventh Schedule would be ultra vires as legislatively incompetent. Apart from these  

limitations, the law of  the Union or the States is also subject to other Constitutional

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limitations. The provisions of  Part XIII, especially, Article 304(a) and (b) also act as a  

limitation on the legislative jurisdiction of  the Union and the States. The power endowed  

under Articles 245 and Article 246 to a competent legislature to make laws is ‘subject to  

the provisions of  the Constitution.  Nonetheless, if  a State makes law under Article 245(1)  

r/w. Article 246(3) in respect of  the subjects enumerated in Entries 45 to 63 of  List II in  

the Seventh Schedule, it is doubtful whether it can be invalidated only on the ground that it  

does not comply with Articles 301 and 304(a). Indeed various provisions of  the  

Constitution dealing with fiscal measures in Part XII, for instance Articles 265, 269, 276  

and 286, specifically deal with taxes, but in Part XIII, except Article 304(a), no other  

Article deals with taxes. Further Chapter I of  Part XII of  the Constitution specifically  

deals with provisions regarding ‘Finance’, whereas Part XIII deals with ‘Trade, Commerce  

and Intercourse’ within the territory of  India. Thus, these two Parts are kept distinctly  

separate. Though every law is made subject to all provisions of  the Constitution, it does  

not mean that every tax law made by the State must be made answerable to the general  

provisions relating to trade, commerce and intercourse. The provisions of  the  

Constitution, the Constituent Assembly Debates and the precedents, lead us to such a  

conclusion. The reasons for this conclusion are summarized as below-  

First, Taxation is an incident of  sovereignty, which cannot be  

curtailed by any implied limitations.68  

Secondly, It is part of  any sovereign government to ensure a welfare  

State. To achieve the same, tax is the only course available to the  

government to generate revenue for purposes of  welfare activities.  

Courts, therefore, cannot abridge the taxing power of  the sovereign  

                                                 68   �  Maharaj Umeg Singh v. State of  Bombay, A.I.R 1955 S.C 540.

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State.   

Thirdly, the very conception of  Part XIII was only to prevent  

discriminatory taxes under Article 304(a).   

Fourthly, argument of  inconvenience cannot affect the  

interpretation of  Article 301 to bring in new tests and expand the  

provision beyond what was imagined by the framers of  our  

Constitution. Article 304 (a) is an isolated provision which only deals  

with the discriminatory taxes. Existence of  such provision cannot  

furnish evidence to say that Article 301 is not subject to taxing power  

of  the State.   

Fifthly, the taxing entries are specifically provided for in the Seventh  

Schedule. It is settled principle under our Constitution that taxing  

power cannot be derived from a general entry.69In light of  this  

principle the Constituent Assembly passed the Articles and Entries in  

the following time line: On 13 June, 1949 present Article 245 which  

was Article 217 (in the draft Constitution) was passed. On September  

02, 1949 Entry 52 of  State List (which was entry 61 in the draft  

Constitution) was passed. On September 08, 1949 PART XIII (which  

was PART XA in the draft Constitution) was passed. This shows that  

our Constitution framers are presumed to be aware of  the inter-play  

of  taxing provisions. Therefore, the only explicit limitation imposed  

on the taxing power of  the State is Article 304(a) of  the  

                                                 69   �M.P.V. Sundararamier & Co. vs. The State of  Andhra Pradesh and Anr., AIR 1958 SC 468

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Constitution.  

Sixthly, we cannot ignore the legislative journey of  Article 301 in  

Part XIII. At the stage of  drafting, free trade, commerce and  

intercourse was in fact sought to be made a fundamental right but it  

was not accepted. Ultimately it was resolved to bring all the  

provisions relating to free trade, commerce and intercourse at one  

place. What started as a fundamental right came to be enacted as a  

constitutional right? Thus, there is abundant guidance from the  

legislative history in regard to incorporation of  Article 301 only as a  

constitutional right.  

Seventhly, That Article 306 cannot have an impact on the  

interpretation of  Article 301, as it only saved certain discriminatory  

taxes. Since the framers wanted to preserve the imposition of  such  

discriminatory taxes for a limited period, which otherwise would have  

been beyond the competence of  State legislature to impose tax on  

import or on export of  goods. Therefore taxes are not covered under  

the Article 301 only inter-state discriminatory taxes are barred under  

Article 304(a) of  the Indian Constitution.  

Eighthly, Tax management is a province of  political sphere.  

Judiciary should provide certain latitude for the government as taxes  

are lifeline of  the Governments.   

Ninthly, Article 301 of  the Indian Constitution uses the term ‘free’.

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The word ‘free’ means ‘which is not confined or restricted’. Either  

the trade is ‘free or not free’. To state that trade, commerce and  

intercourse throughout the territory in India is free and then qualify  

this Article 301 with subsequent Articles under 302, 303 and 304  

only portrays that Article 301 is merely clarificatory in nature. If   

trade was, indeed, free then majority of  Articles in the Constitution  

would have been redundant. From the history, context and  

interpretation it is clear that Article 301 is just a form to be  

understood subject to other provisions of  Part XIII. If  no other  

motive for its insertion can be suggested, a sufficient one is found in  

the desire to remove all doubts i.e., the wordings of  Article 301 is  

beyond any doubt a clarificatory provision and the extent of  freedom  

is limited to those discriminatory taxes, restrictions (other than  

taxation simpliciter) and prohibitions provided explicitly under  

Articles 302, 303 and 304.   

7.41 In Atiabari and Automobile this Court relied on a non-obstante clause in Article 304 to hold  

that, by necessary implication, tax law come within the purview of  Article 301. This view  

is not sound because one has to read the text and context while interpreting the  

constitutional provisions. In this regard, I respectfully agree with the reasoning and  

conclusions reached by Hon’ble the Chief  Justice that non-obstante clause in Article 304 (a)  

is not determinative in the interpretation of  Article 301.  

PART-VIII : ARTICLE 304 OF THE CONSTITUTIONWhether a law levying tax on entry  

of  goods needs to be tested with reference to Article 304(a) and (b) of  the Constitution?  In  

order to appreciate the implication of  Article 304 of  the Constitution, it is necessary to bear in

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mind that historical background of  these provisions. The Government of  India Act, 1935  

envisaged a federal Constitution for the whole of  British India.  The Government imposed  

restriction on the legislature of  the States to legislate in relation to internal trade under Section  

297 in the following terms:-  

 ‘297. (1)No Provincial Legislature or Government shall.  (a) by virtue of  the entry in the Provincial Legislative List  relation to trade and commerce within the Province, or the  entry in that list relating to the production, supply, and  distribution of  commodities, have power to pass any law or  take any executive action prohibiting or restricting the entry  into or export from, the Province of  goods of  any class or  description; or  (b) by virtue of  anything in this Act have power to impose any  tax, cess, toll, or due which, as between goods manufactured,  or produced in the Province and similar goods not so  manufactured or produced, discriminates in favour of  the  former or which, in the case of  goods manufactured or  produced outside that Province, discriminates between goods  manufactured or produced in another locality.  (2)Any law passed in contravention of  this section shall, to the  extent of  the contravention, be invalid.’  

 8.2 It may be noticed that prohibition contained in the section quoted above applied only to  

Provincial Governments and Provincial legislatures with reference to entries in the legislative  

list relating to trade and commerce and to production, supply and distribution of   

commodities. This section dealt with prohibitions or restrictions in respect of  import into or  

export from a Province, of  goods generally. It also dealt with the power to impose taxes etc.  

and prohibited discrimination against goods manufactured or produced outside a Province or  

goods produced in different localities.  

8.3 The Sub Committee on Fundamental Rights comprising of  Shri. K. M. Munshi, Sir Alladi  

Krishnaswami Iyer and Sir. B. N. Rau on March, 29 1947 introduced Clause 13 in the following  

form:-  

 ‘Subject to regulation by the law of  the Union, trade, commerce and  intercourse among the units, whether by means of  internal carriage or

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by Ocean Navigation, shall be free:  Provided that any unit may by law impose reasonable restrictions  thereon in the interest of  public order, morality or health.’70  

(Emphasis supplied)    

8.4 The proviso herein above empowered the ‘Unit’ to impose by law, reasonable restrictions in  

the interest of  the public order, morality or health. Sir B. N. Rau in his comments to the  

aforesaid draft discussed by the Sub Committee stated that ‘the first paragraph of  Clause 13 is  

adopted from the Australian Constitution (Sec. 92) while the proviso was new’. Further, Sir  

Alladi Krishnaswami Iyer in his comments on Draft Report of  10th, 14th& 15th April, 1947, in  

relation to Clause 13 suggested that it must be made clear that :  

 ‘(1) Goods from other parts of  India than in the units’ concerned  coming into the units cannot escape duties and taxes to which the  goods produced in the units in themselves are subject.  (2) It must also be open to the unit in an emergency to place  restrictions on the rights declared by the clause’’71    

8.5 The suggestions of  Sir. Alladi Krishnaswami Iyer were accepted and the Clause was  

accordingly modified and incorporated as Clause 14 as below :  

 14. (1) Subject to regulation by the law of  the Union trade, commerce  and intercourse among the units by and between the citizens shall be  free:  Provided that any unit may by law impose reasonable restrictions in  the interest of  public order, morality or health or in an emergency:  Provided that nothing in this Section shall prevent any unit from  imposing on goods imported from other units the same duties and  taxes to which the goods produced in the unit are subject:  Provided further that no preference shall be given by any regulation  of  commerce or revenue by unit to one unit over another.72    

8.6 It may be relevant to note that while imposing reasonable restriction in the first Proviso, the  

imposition of  non-discriminatory tax was in the second Proviso. The third Proviso was a pre-

cursor of  Article 303. On 21.04.1947, the aforesaid Clause 14 came up for consideration of   

                                                 70   �B. Shiva Rao, Framing of  India’s Constitution, A Study (2nd Ed.), p. 699 to 707  71   � Ibid., p. 157-161  72   � Ibid.

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the Advisory Committee. Explaining the purpose of  enabling a State to impose reasonable  

restriction in the interest of  public order, morality, health or in emergency, Sir Alladi  

Krishnaswamy Iyer said:  

 ‘Suppose there is a general famine and people are starved that is what  is meant here to be dealt with’  The advisory Committee accepted the recommendation of  the Sub- Committee in relation to Clause 14 with ‘one change; the sub-clause  providing for central regulation of  trade by or with non-citizens was  dropped as being vague and unnecessary.73    

8.7 The Advisory Committee submitted its report on 23.04.1947 wherein Clause 10 provided as  

under:  

 ‘10. Subject to regulation by the law of  the Union, trade, commerce  and intercourse among the units by and between the citizens shall be  free:  Provided that any unit may by law impose reasonable restrictions in  the interest of  public order, morality or health or in any emergency:  Provided that nothing in this section shall prevent any unit from  imposing on goods imported from other units the same duties and  taxes to which the goods produced in the unit are subject:  Provided further that no preference shall be given by any regulation  of  commerce or revenue by a unit to one unit over the another’.74    

8.8 On 01.05.1947 certain amendments were suggested which were adopted by the Constituent  

Assembly. Clause 10, as amended, reads as follows:  

 ‘10. Subject to regulation by the law of  the Union, trade,  commerce, and intercourse among the units by and between  the citizens shall be free:  Provided that any unit may by law impose reasonable  restrictions in the interest of  public order, morality or  health or in any emergency:  Provided that nothing in this section shall prevent any unit  from imposing on goods imported from other units the  same duties and taxes to which the goods produced in the  unit are subject:  

                                                 73   � Ibid., p. 253  74   �  Ibid., P. 297

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Provided further that no preference shall be given by any  regulation of  commerce or revenue by a unit to one unit  over another.    

8.9 In the first Draft Constitution of  October, 1947, Clause 17 reads as follows:  

 ‘17. Subject to the provisions of  any Federal Law, trade,  commerce and intercourse among the units shall, if   between the citizens of  the federation, be free:  Provided that nothing in this section shall prevent ny unit  from imposing goods imported from other unit from  imposing goods imported from other units any tax to which  similar goods manufactured or produced in that unit are  subject, so, however, as not to discriminate between goods  so imported and goods so manufactured or produced:  Provided further that no preference shall be given by any  regulation of  trade, commerce or revenue to one unit over  another:  Provided also that nothing in this section shall preclude the  Federal Parliament from imposing by Act restrictions on the  freedom of  trade, commerce and intercourse among the  units in the interests of  public order, morality or health or  in cases of  emergency’.75    

8.10 On 01.11.1947, the Drafting Committee considered Clause 17 and was of  the opinion that  

‘the first and second provisos to this clause should be transferred as independent clauses in the  

chapter dealing with relations between the different States and the third proviso was  

unnecessary.76  

8.11 On 28.01.1948, the Drafting Committee decided to introduce three new clauses, namely  

Clause 192 E, 192 F & 192 G, relating to trade, commerce and intercourse. Clause 192 E, 192  

F and 192 G as introduced by the Drafting Committee on 28.01.1948, reads as follows:  

                                                 75   �B. Shiva Rao, Framing of  India’s Constitution, Vol. III, p. 9 (2nd Ed.)  76   � Ibid, p. 330

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‘192E. No Preference shall be given by any regulation of  trade,  commerce or revenue to one State or any part thereof  over another  State or any part thereof.  192-F. Notwithstanding anything contained in Article 17 or in the last  preceding Article of  this Constitution, it shall be lawful for any state-  To impose on goods imported from other State any tax to which  similar goods manufactured or produced in that State are subject, so,  however, as not to discriminate between goods so imported and  goods so manufactured or produced: and  To impose by law any restrictions on the freedom of  trade, commerce  or intercourse with that State in the interests of  public order, morality  and health or in cases of  emergency.  *The committee is of  opinion that the provisions contained in  Articles 192-E and 192-F should more appropriately be included in  this Chapter than in Part III dealing with fundamental rights.  192-G (1) there shall be an Inter-State Commerce Commission  consisting of  such members as the president may think fit to appoint  for the execution and maintenance within the territory of  India of  the  provisions of  this Constitution relating to Trade and Commerce.  (2) The term of  the office of  the members of  the commission, and  the remuneration to be paid to them shall be such as the President  may by Order determine.  (3) The procedure of  the commission shall be defined by the  President by the Order and the Commission shall have such powers  including the power of  adjudication as the President may, from time  to time, by Order, confer on it.  (4) It shall be the duty of  the Commission to decide any dispute  relating to Trade or Commerce between the States referred to it by the  President for adjudication and the decision of  the Commission shall  be final and shall not be questioned in any Court’.    

On 29.01.1948, the said clause was further revised and the revised clause reads as  

follows:  

‘*192-E. No preference shall be given to nor shall any  discrimination be made between one state or any part  thereof  and another State or any part thereof  by ay  regulation of  trade or commerce, whether by means of   internal carriage through roads, railways or rivers or by  means of  navigation through seas.  *192-F Notwithstanding anything contained in Article 17 or  in the last preceding Article of  this Constitution, it shall be  lawful for any State-  (a) to impose on goods imported from other State any tax  to which similar goods manufactured or produced in that  State are subject, so, however, as not to discriminate  between goods so imported and goods so manufactured or  produced; and  

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(b) To impose by law such reasonable restrictions on the  freedom of  trade, commerce or intercourse with that State  as may be required in the public interests.  *The committee is of  opinion that the provisions contained in  Articles 192-E and 192-F should more appropriately be included in  this Chapter than in Part-III dealing with the fundamental rights.  *192-G. Parliament shall by law appoint such authority as it considers  appropriate for the carrying out of  the provisions of  Article 192-E  and 192-F of  this Constitution and confer on the authority so  appointed such powers and such duties as it thinks necessary.    

In the Draft Constitution of  1948, Clause 16 was incorporated in the  

Fundamental rights Chapter which reads as under:  

‘16. Subject to the provisions of  Article 244 of  this Constitution and  of  any law made by the Parliament, trade, commerce and intercourse  throughout the territory of  India shall be free.    

Inter-State trade and Commerce was dealt with in Article 243, Article 244 and  

Article 245 which reads as below:  

‘*243. No preference shall be given to one State over  another nor shall any discrimination be made between one  state and another by any law or regulation relating to trade  or commerce, whether carried by land, water or air.  *244. Notwithstanding anything contained in Article 16 or  in the last preceding Article of  this Constitution, it shall be  lawful for any State-  (a) to impose on goods imported from other States any tax  to which similar goods manufactured or produced in that  State are subject, so, however, as not to discriminate  between goods so imported and goods so manufactured or  produced: and  (b) To impose by land such reasonable restrictions on the  freedom of  trade, commerce or intercourse with that State  as may be required in public interests:  Provided that during a period of  five years from the  commencement of  this Constitution the provisions of   Clause (b) of  this Article shall not apply to trade or  commerce in any of  the Commodities mentioned in Clause  (a) of  Article 306 of  this Constitution.  245. Parliament shall by law appoint such authority as it  considers appropriate for the carrying out of  the provisions  of  Articles 243 and 244 of  this Constitution and confer on

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the authority so appointed such powers and such duties as it  thinks necessary.77    

8.12 In the comments and suggestions to the Draft Constitution of  February, 1948, the note to  

the comment of  the Ministry of  Industry and Supply is relevant. The Ministry of  Industry and  

Supply has expressed the view that Clause (b) of  Article 244 is open to serious objection on  

principle and should be deleted altogether. The Ministry has pointed out that it is not possible  

to foresee the circumstances in which the freedom of  trade, commerce or intercourse with a  

State will need to be interfered with by the State in the Public interest, unless it be on the basis  

of  discrimination between the residents of  one State and another, and this would be wholly  

contrary to the spirit of  the Constitution.78  

8.13 On 08.09.1949, Hon’ble Dr. Ambedkar moved for the deletion of  these Articles and the  

motion was adopted by the Constituent Assembly without any opposition. The substance of   

these Articles was however, embodied in another amendment moved by Hon’ble Dr.  

Ambedkar immediately thereafter on the same day. All these Articles were added in Part XA.   

The events at the stage of  drafting the Constitution, especially Part XIII would show the  

following which I may summarize at the cost of  repetition:  

First, initially the right to free trade was a Fundamental Right, but it was not  

accepted by the Advisory Committee and not even moved in the Constituent  

Assembly for adoption.    

Second, though the precursor clause to Article 304 underwent repeated changes  

before the Advisory Committee and the Drafting Committee, never it was  

suggested that freedom of  trade was meant to be freedom from payment of  taxes.  

                                                 77   � Ibid., p. 453 to 454  78   �B. Shiva Rao, The Framing of  India’s Constitution, Vol. IV, pg. 329  

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Third, the power of  federal unit to levy tax on the goods imported from other  

units was specifically adumbrated to dispel any doubt about taxing power of  the  

State.  The logical conclusion is that the power of  the State to levy any tax on  

goods imported is specifically saved and declared in the final clause, therefore it  

would be impermissible to test a law imposing entry tax with reference to Article  

304(b).  

Fourth, taxes were never intended to be a restriction on freedom of  trade.  

8.14 Another important question which needs to be answered as a part of  this reference is  

whether State enactments relating to levy of  entry tax have to be tested with reference to both  

clauses (a) and (b) of  Article 304 or only with reference to clause (a) of  Article 304 of  the  

Constitution? In other words is Clause (a) and (b) of  Article 304 is conjunctive or disjunctive?  

The answer must be that the history, the context and the plain words indicate that Article 304  

(a) and (b) are disjunctive in nature. A levy of  tax need not be tested with reference to Article  

304 (b) of  the Constitution. Following are the reasons for reading Article 304 (a) and (b) of   

the Indian Constitution disjunctively.  

First, the legislative history and the intention of  the framers as elucidated above  

clearly point out that taxes were never treated as restrictions in the first place.  

Secondly, Article 304(a) does not bar or limit State power to levy non-

discriminatory taxes on the goods imported from other States.  What is restricted is  

levy of  discriminatory tax only, so to say, similar goods manufactured or produced  

in that State are also subjected to tax, so as not to discriminate between the goods  

imported and goods manufactured or produced in the State.   

Thirdly, the two clauses of  Article 304 are connected by the word ‘and’. Sub-

clause (a) puts a restriction on the State to not impose a discriminatory tax,

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whereas sub-clause (b) deals with other restrictions relating to trade, commerce and  

intercourse.    

Fourthly, Article 304 (a) and (b), on a careful reading would show that Article 304  

(a) and (b) are disjunctive. This is made clear by the proviso, which is to the effect  

that a Bill for the purpose of  Article 304 (b) can be moved by the Legislature of   

the States, only by the previous sanction of  the President.  If  Clauses (a) and (b)  

are not disjunctive, then the language of  the proviso would have been certainly  

different and the Bill for the purpose for Clause (a) would have been mentioned.  

Conspicuous absence of  reference to 304(a) in the proviso would certainly lend  

support to the view that Clause (a) and (b) of  Article 304 are distinct and  

disjunctive. The proviso, it is well settled, is intended to explain the main operating  

part of  the Article. It is never used or interpreted as expanding the operative part  

of  the provision.    

Fifthly, if  one reads Clauses (a) and (b) of  Article 304 conjunctively, then it would  

not subserve the federal nature of  the Constitution which is a basic structure.    

8.15 I will now deal with the purport and scope of  the word “discrimination” used in Article  

304(a) by making some general observations.  Article 304(a) should be interpreted keeping in  

mind the balanced development of  the country, which is an important part of  economic  

integration. To achieve the economic unity of  the country, allowing trade and commerce  

without imposing taxes is not the only solution but it can also be achieved by bringing in  

overall prosperity. Part XIII of  the Constitution permits some forms of  differentiation, for  

example, to encourage a backward region or to create a level playing field for parts of  the  

Country that may not have reached the desired level of  economic development. Therefore,  

Part XIII envisions a twofold object: (i) facilitation of  a common market through ease of   

trade, commerce and intercourse by erasing barriers; and (ii) regulations (or restrictions) which

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may be necessary for development of  backward regions or in public interest.  A brief   

reference to the Constituent Assembly debates would amply demonstrate the same.  Hon’ble  

Member Shri P. S. Deshmukh said:  

‘How pompously did we decide that there shall be "free trade"  everywhere! It is not such an easy thing as that and I hope  advancement and progress of  the various units of  the Union varies  considerably. Some of  them are backward like Assam or Orissa where  there are very few industries and very little trade is in the hands, at  least of  the indigenous population. We may have probably to give  them some protection in order that they may rapidly come on  par with other units. It may be necessary also from time to time  to vary our provisions so far as aid and concessions to industries  and other things are concerned. I therefore do not think that is  right to bar all discrimination, as it is called (in fact it is  not),barring all possibility of  help to those who are backward  and who are unable to compete with the more advanced, and  who therefore stand in need of  assistance. From that point of   view, my amendment seeks to give Parliament a blank cheque and  leave to it entirely the determination of  the policy with regard to trade  and commerce not only of  the whole Union or in regard to any  particular State or States, but so far as all States and their trade and  commerce inter se is concerned. Therefore, I have proposed a very  simple provision as has been embodied in my amendment No. 340’.    

(emphasis supplied)  

Sir Alladi Krishnaswami Iyer stated:  

 ‘My friend Mr. Krishnamachari has pointed out that this freedom  clause in the Australian Constitution has given rise to considerable  trouble and to conflicting decisions of  the highest Court. There has  been a feeling in those parts of  Australia which depend for their  well-being on agricultural conditions that their interests are being  sacrificed to manufacturing regions, and there has been rivalry  between manufacturing and agricultural interests. Therefore, in a  federation what you have to do is, first, you will have to take into  account the larger interests of  India and permit freedom of  trade  and intercourse as far as possible. Secondly, you cannot ignore  altogether regional interests. Thirdly, there must be the power  intervention of  the Centre in any case of  crisis to deal with peculiar  problems that might arise in any part of  India. All these three factors  are taken into account in the scheme that has been placed before  you’.  

 8.16 To what extent economic unity in India and regional interests has to be kept in mind while

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meaningfully implementing free trade clause in Article 301?  In Video Electronics79 this Court  

had an occasion to delve into these aspects.  This Court even suggested that there could be  

differentiation among regions and among the goods exchanged between the regions without  

attracting the tag of  discrimination.  The following passage from Video Electronics is apposite:  

 ‘Economic unity is a desired goal, economic equilibrium and  prosperity is also the goal. Development on parity is one of  the  commitments of  the Constitution. Directive principles enshrined in  Articles 38 and 39 must be harmonized with economic unity as well as  economic development of  developed and under developed areas. In  that light on Article 14 of  the Constitution, it is necessary that the  prohibitions in Article 301 and the scope of  Article 304(a) and (b)  should be understood and construed. Constitution is a living organism  and the latent meaning of  the expressions used can be given effect to  only if  a particular situation arises. It is not that with changing times  the meaning changes but changing times illustrate and illuminate the  meaning of  the expressions used. The connotation of  the expressions  used takes its shape and color in evolving dynamic situations. A  backward State or a disturbed State cannot with parity engage in  competition with advanced or developed States. Even within a State,  there are often backward areas which can be developed only if  some  special incentives are granted. If  the incentives in the form of   subsidies or grant are given to any part of  units of  a State so that it  may come out of  its limping or infancy to compete as equals with  others, that, in our opinion, does not and cannot contravene the spirit  and the letter of  Part XIII of  the Constitution. However, this is  permissible only if  there is a valid reason, that is to say, if  there are  justifiable and rational reasons for differentiation. If  there is none, it  will amount to hostile discrimination’.80    

8.17 There is a vital difference between mere ‘differentiation’ and ‘discrimination. It is  

discrimination not differentiation that is sought to be prevented through Part XIII.  Again  

reference to certain observations of  this Court in Video Electronics would be pertinent:  

‘… very differentiation is not discrimination. The word  'discrimination' is not used in art. 14 but is used in Articles  16, 303 & 304(a). When used in Article 304(a), it involves an  element of  intentional and purposeful differentiation  thereby creating economic barrier and involves an element  of  an unfavorable bias. Discrimination implies an unfair  

                                                 79   �  Video Electronics v. State of  Punjab, (1990) 3 SCC 87.  80   �  Ibid. p. 113

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classification. Reference may be made to the observations  of  this Court in Kathi Raning Rawat v. The State of    Saurashtra, [1952] SCR 435 where Chief  Justice Shastri at p.  442 of  the report reiterated that all legislative differentiation  is not necessarily discriminatory. At p. 448 of  the report,  Justice Fazal Ali noticed the distinction between  'discrimination without reason' and 'discrimination with  reason'. The whole doctrine of  classification is based on this  and on the well-known fact that the circumstances covering  one set of  provisions or objects may not necessarily be the  same as these covering another set of  provisions and  objects so that the question of  unequal treatment does not  arise as between the provisions covered by different sets of   circumstances’.81  

8.18 In the above case exemption and incentive granted by one State to its inhabitants was  

challenged as being violative of  Article of  304 (a). Recognizing the concept of  economic  

equality, this Court held :  

 ‘Concept of  economic barrier must be adopted in a dynamic sense  with changing conditions. What constitutes an economic barrier at  one point of  time often cease to be so at another point of  time. It will  be wrong to denude the people of  the State of  the right to grant  exemptions which flow from the plenary powers of  legislative heads  in list II of  the 7th Schedule of  the Constitution. In a federal polity,  all the States having powers to grant exemption to specified class for  limited period, such granting of  exemption cannot be held to be  contrary to the concept of  economic unity. The contents of   economic unity by the people of  India would necessarily include the  power to grant exemption or to reduce the rate of  tax in special cases  for achieving the industrial development or to provide tax incentives  to attain economic equality in growth and development. When all the  States have such provisions to exempt or reduce rates the question of   economic war between the States inter se or economic disintegration  of  the country as such does not arise. It is not open to any party to  say that this should be done and this should not be done by either one  way or the other. It cannot be disputed that it is open to the  States to realize tax and thereafter remit the same or pay back to  the local manufacturers in the shape of  subsidies and that  would neither discriminate nor be hit by art.304(a) of  the  Constitution. In this case and as in all constitutional adjudications  the substance of  the matter has to be looked into to find out whether  there is any discrimination in violation of  the constitutional mandate’.   

(emphasis supplied)    

                                                 81   �  Ibid, p. 106-107.

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8.19 Thus stated, the principle laid down in Video Electronics is that, if  a backward area in a State  

needs impetus for the development, and in such circumstances incentives are given for the  

industry to develop whether by way of  subsidies or tax exemptions for a certain period of   

time as desired by the competent legislature, the same would be permissible and would fall  

outside the scope of  Article 304 (a). Such State enactment is not inherently discriminatory, but  

rather aims to ensure economic equality which is a facet of  economic unity.  

8.20 A State law directed towards development of  a particular region is permissible under Part  

XIII.  In support, we may again refer to the discussion in the Constituent Assembly debates  

dealing with the concepts of  “public interest” and “interest of  general public”. Clause 13 was  

introduced in Chapter dealing with Fundamental Rights making the right to free trade,  

commerce and intercourse as a Fundamental Right subject to reasonable restriction.  Pandit  

Thakur Das Bhargava sought to move an amendment82 to substitute the words, ‘public  

interest’ for ‘interests of  the general public’ he said :  

 ‘I maintain that there is great difference between the two expressions.  'Public interest' in regard to a State would only include the interests of   the inhabitants of  that State at the most though the word 'public'  includes portions of  the public. Therefore, the interests of  a part of   the inhabitants of  a State would also mean 'public interest', whereas if   you use the words "interests of  the general public" they would have  reference to the interests, of  the. general public of  India as a whole. It  may be that on many occasions a conflict may arise. between the  public interest as understood in the amendment of  Dr. Ambedkar and  'the interests of  the general public' as used in article 13. When that  conflict arises it would be encouraging provincialism and the interests  of  a few as against the general interest if  we accept the words 'public  interest' in the place of  the words "in the interests of  the general  public’83.  

                                                 82   �  Constituent Assembly Debates, 1949, vol. IX, Page 1145.   ‘That is amendment No. 269 of  List IV (Seventh Week), in clause (b) of  the proposed new Article  274-D, for the words ‘in the public interest’, the words ‘interests of  the general public and are not  inconsistent with the provision of  Article 13 be substituted.’    83   �  Constituent Assembly debates, 1949, Vol. IX, p. 1125.

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 8.21 This amendment was negatived. The fact that this amendment did not go through would  

indicate that ‘public interest’ could imply a regional interest that needs to be protected which  

may not be ‘in the interests of  the general public’ but specific to a smaller region. Such an  

interpretation is supported by the manner in which the word ‘discrimination’ has been  

interpreted by a three Judge bench of  this Court in Video Electronics. Thus it can be said that  

the common thread in Part XIII is the achievement of  economic unity and parity which does  

not altogether preclude differentiation for justifiable and rational reasons wherever necessary.  

The heart and soul of  Part XIII is to dissolve hostile discrimination within the territory of   

India.  

8.22 The second facet is that Article 304 (a) is a limitation to impose any tax on goods imported  

from other States. This power is subject to the condition that the goods manufactured or  

produced within the State are also subjected to tax, so as not to discriminate between the  

goods imported from outside the State. Article 304(a) is not a limitation on the legislature of  a  

State to impose such tax on goods imported. The only condition envisaged under Article 304  

(a) is, same tax is imposable on the goods imported from other States as well as goods if   

manufactured in that State.  

8.23 The contention that the taxing power lies in Article 304 (a) and not in Article 245 r/w 246  

is not correct.  The words “may by law” appearing in Article 304 is not source of  legislative  

power.  It is an option given to the States in case it decides to levy any tax on the goods  

imported from other States.  The source of  legislative power resides in Article 245 r/w. Article  

246 which is indisputable.  This power is not subject to any implied limitation.  The plain  

reading would show that in a given situation, the State may by choice decide not to levy any tax  

imported from other States or opt to levy taxes on certain goods imported from other States.   

Indeed in all the entry tax laws, the charging section enables the levy of  entry tax only on the

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scheduled goods.  The scheduled goods are goods declared as attracting entry tax.    

8.24 Discrimination is a relative concept; in order to discriminate a reference point is required.  

Article 304(a) rather than being an enabling provision to allow the State to impose tax, is a  

restricting provision, which prevents such levy of  tax on goods as would result in  

discrimination between goods imported from other States and similar goods manufactured or  

produced within the State. The object is to prevent discrimination against imported goods by  

imposing tax on such goods at a rate higher than that borne by local goods since the difference  

between the two rates would constitute a tariff  wall or fiscal barrier and thus impede the free  

flow of  inter-State trade and commerce. It does not prohibit levy of  tax as such in the  

situation wherein the goods are not produced or manufactured in the State itself  and does not  

affect the authority of  the State to tax the imported goods. It only bars discrimination on the  

basis of  taxing the products manufactured within the State vis-á-vis imported goods which will  

only occur if  the precondition of  manufacturing in the taxing State is satisfied.  

8.25 I agree with the conclusions and reasons given by the learned Chief  Justice regarding the  

exemption/set off/credit with respect to Sales tax.  

 8.26 There was good amount of  debate on the doctrine of  compensatory tax evolved by this  

Court in Automobile.  I am in respectful agreement with the consideration, reasoning and  

conclusion in the judgment of  the learned Chief  Justice, who held that concept of   

compensatory tax has neither any juristic basis nor a part of  Indian Constitutional law.  It is  

interesting and glaring to note that at the stage of  drafting, at the stage of  consideration by the  

Sub-Committee as well as Advisory Committee and when the Part XA (now Part XIII) was  

adopted by the Constituent Assembly,  never even for a moment, the principle of   

compensatory tax was thought of.   

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PART-IX:CONCLUSIONSOn an analysis and reasoning as herein above the  

following conclusions would emerge-  

a. Part XIII does not contemplate tax laws within its ambit except to the extent of   

Article 304(a) of  the Constitution.  

b. Article 304 (a) and (b) are disjunctive.  

c. Restrictions mentioned under Article 304(b) of  the Constitution do not include  

tax.  

d. It is not correct to say that since goods being taxed are not produced in the State  

the power to levy a tax gets obliterated, that is to say, that Article 304 (a) does not  

bar levy of  tax if  the goods are not manufactured or produced within the State.  

e. Article 304(a) of  the Constitution protects from discrimination (for protectionism)  

and not mere differentiation.  

9.2 Before parting with this case, I would like to express my appreciation for the way the hearing  

of  the case took place before the Court. Attorney General needs to be specially mentioned  

and thanked, who had appeared and assisted the Court. Lastly, it was a wonderful sight to see  

young practitioners ably assisting their seniors which only goes on to reflect vibrancy of   

Indian Supreme Court Bar.  

…………………………………J.    (N. V. RAMANA)  

New Delhi  November 11, 2016

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REPORTABLE    

IN THE SUPREME COURT OF INDIA  CIVIL APPELLATE JURISDICTION  

 CIVIL APPEAL NO. 3453 OF 2002  

 JINDAL STAINLESS LTD.& ANR.     Appellants   

 Versus  

 STATE OF HARYANA & ORS.         Respondents  

 WITH  

 CA NO. 6383-6421/1997, CA NO. 6422-6435/1997, CA NO. 6436/1997, CA  NO. 6437-6440/1997 , CA NO. 3381-3400/1998, CA NO. 4651/1998, CA NO.  918/1999, CA NO. 2769/2000, CA NO. 4471/2000, CA NO. 3314/2001, CA  NO. 3454/2002, CA NO. 3455/2002, CA NO. 3456-3459/2002, CA NO.  3460/2002, CA NO. 3461/2002, CA NO. 3462-3463/2002, CA NO.  3464/2002, CA NO. 3465/2002, CA NO. 3466/2002, CA NO. 3467/2002, CA  NO. 3468/2002, CA NO. 3469/2002, CA NO. 3470/2002, CA NO. 3471/2002,  CA NO. 4008/2002, CA NO. 5385/2002, CA NO. 5740/2002, CA NO.  5858/2002, WP(C) NO. 512/2003, WP(C) NO. 574/2003, CA NO. 2608/2003,  CA NO. 2633/2003, CA NO. 2637/2003, CA NO. 2638/2003, CA NO. 3720- 3722/2003, CA NO. 6331/2003, CA NO. 8241/2003, CA NO. 8242/2003, CA  NO. 8243/2003, CA NO. 8244/2003, CA NO. 8245/2003, CA NO. 8246/2003,  CA NO. 8247/2003, CA NO. 8248/2003, CA NO. 8249/2003, CA NO.  8250/2003, CA NO. 8251/2003, CA NO. 8252/2003, TC(C) NO. 13/2004,  WP(C) NO. 66/2004, WP(C) NO. 221/2004, CA NO. 997-998/2004, CA NO.  3144/2004, CA NO. 3145/2004, CA NO. 3146/2004, CA NO. 4953/2004, CA  NO. 4954/2004, CA NO. 5139/2004, CA NO. 5141/2004, CA NO. 5142/2004,  CA NO. 5143/2004, CA NO. 5144/2004, CA NO. 5145/2004, CA NO.  5147/2004, CA NO. 5148/2004, CA NO. 5149/2004, CA NO. 5150/2004, CA  NO. 5151/2004, CA NO. 5152/2004, CA NO. 5153/2004, CA NO. 5154/2004,  CA NO. 5155/2004, CA NO. 5156/2004, CA NO. 5157/2004, CA NO.  5158/2004, CA NO. 5159/2004, CA NO. 5160/2004, CA NO. 5162/2004, CA  NO. 5163/2004, CA NO. 5164/2004, CA NO. 5165/2004, CA NO. 5166/2004,  CA NO. 5167/2004, CA NO. 5168/2004, CA NO. 5169/2004, CA NO.  5170/2004, CA NO. 7658/2004, SLP(C) NO. 9479/2004, SLP(C) NO.  9496/2004, SLP(C) NO. 9569/2004, SLP(C) NO. 9832/2004, SLP(C) NO.  9883/2004, SLP(C) NO. 9885/2004, SLP(C) NO. 9891/2004, SLP(C) NO.  9893/2004, SLP(C) NO. 9898/2004, SLP(C) NO. 9899/2004, SLP(C) NO.  9901/2004, SLP(C) NO. 9904/2004, SLP(C) NO. 9910/2004, SLP(C) NO.  9911/2004, SLP(C) NO. 9912/2004, SLP(C) NO. 9950/2004, SLP(C) NO.

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9964/2004, SLP(C) NO. 9976/2004, SLP(C) NO. 9989/2004, SLP(C) NO.  9991/2004, SLP(C) NO. 9993/2004, SLP(C) NO. 9998/2004, SLP(C) NO.  9999/2004, SLP(C) NO. 10003/2004, SLP(C) NO. 10007/2004, SLP(C) NO.  10129/2004, SLP(C) NO. 10133/2004, SLP(C) NO. 10134/2004, SLP(C) NO.  10153/2004, SLP(C) NO. 10154/2004, SLP(C) NO. 10156/2004, SLP(C) NO.  10161/2004, SLP(C) NO. 10164/2004, SLP(C) NO. 10167/2004, SLP(C) NO.  10206/2004, SLP(C) NO. 10207/2004, SLP(C) NO. 10232/2004, SLP(C) NO.  10366/2004, SLP(C) NO. 10381/2004, SLP(C) NO. 10382/2004, SLP(C) NO.  10384/2004, SLP(C) NO. 10385/2004, SLP(C) NO. 10391/2004, SLP(C) NO.  10402/2004, SLP(C) NO. 10403/2004, SLP(C) NO. 10404/2004, SLP(C) NO.  10407/2004, SLP(C) NO. 10417/2004, SLP(C) NO. 10449/2004, SLP(C) NO.  10493/2004, SLP(C) NO. 10495/2004, SLP(C) NO. 10497/2004, SLP(C) NO.  10501/2004, SLP(C) NO. 10505/2004, SLP(C) NO. 10539/2004, SLP(C) NO.  10557/2004, SLP(C) NO. 10563/2004, SLP(C) NO. 10566/2004, SLP(C) NO.  10567/2004, SLP(C) NO. 10568/2004, SLP(C) NO. 10569/2004, SLP(C) NO.  10571/2004, SLP(C) NO. 10704/2004, SLP(C) NO. 10706/2004, SLP(C) NO.  10708/2004, SLP(C) NO. 10736/2004, SLP(C) NO. 10906/2004, SLP(C) NO.  10907/2004, SLP(C) NO. 10908/2004, SLP(C) NO. 10909/2004, SLP(C) NO.  10910/2004, SLP(C) NO. 10923/2004, SLP(C) NO. 10929/2004, SLP(C) NO.  10977/2004, SLP(C) NO. 11012/2004, SLP(C) NO. 11266/2004, SLP(C) NO.  11271/2004, SLP(C) NO. 11274/2004, SLP(C) NO. 11281/2004, SLP(C) NO.  11320/2004, SLP(C) NO. 11326/2004, SLP(C) NO. 11328/2004, SLP(C) NO.  11329/2004, SLP(C) NO. 11370/2004, SLP(C) NO. 14380/2005, SLP(C) NO.  1101/2007, SLP(C) NO. 1288/2007, SLP(C) NO. 6914/2007, SLP(C) NO.  9054/2007, SLP(C) NO. 10694/2007, SLP(C) NO. 12959/2007, SLP(C) NO.  13806/2007, SLP(C) NO. 14070/2007, SLP(C) NO. 14819/2007, SLP(C) NO.  14820/2007, SLP(C) NO. 14821/2007, SLP(C) NO. 14823/2007, SLP(C) NO.  14824/2007, SLP(C) NO. 14826/2007, SLP(C) NO. 14828/2007, SLP(C) NO.  14829/2007, SLP(C) NO. 14830/2007, SLP(C) NO. 14832/2007, SLP(C) NO.  14833/2007, SLP(C) NO. 14835/2007, SLP(C) NO. 14837/2007, SLP(C) NO.  14838/2007, SLP(C) NO. 14839/2007, SLP(C) NO. 14841/2007, SLP(C) NO.  14842/2007, SLP(C) NO. 14845/2007, SLP(C) NO. 14846/2007, SLP(C) NO.  14847/2007, SLP(C) NO. 15082-15085/2007, SLP(C) NO. 15807/2007,  SLP(C) NO. 16351/2007, SLP(C) NO. 17589/2007, SLP(C) NO. 17590/2007,  SLP(C) NO. 17905/2007, SLP(C) NO. 17906/2007, SLP(C) NO. 17907/2007,  SLP(C) NO. 17908/2007, SLP(C) NO. 17909/2007, SLP(C) NO. 17910/2007,  SLP(C) NO. 17911/2007, SLP(C) NO. 17913/2007, SLP(C) NO. 17914/2007,  SLP(C) NO. 17915/2007, SLP(C) NO. 17916/2007, SLP(C) NO. 17917/2007,  SLP(C) NO. 17918/2007, SLP(C) NO. 17919/2007, SLP(C) NO. 17920/2007,  SLP(C) NO. 17921/2007, SLP(C) NO. 17922/2007, SLP(C) NO. 17923/2007,  SLP(C) NO. 17924/2007, SLP(C) NO. 17925/2007, SLP(C) NO. 17926/2007,  SLP(C) NO. 17929/2007, SLP(C) NO. 17930/2007, SLP(C) NO. 17933/2007,  SLP(C) NO. 17934/2007, SLP(C) NO. 17936/2007, SLP(C) NO. 17937/2007,  SLP(C) NO. 17938/2007, SLP(C) NO. 17939/2007, SLP(C) NO. 17941/2007,  SLP(C) NO. 17942/2007, SLP(C) NO. 17943/2007, SLP(C) NO. 17944/2007,  SLP(C) NO. 17957/2007, SLP(C) NO. 17959/2007, SLP(C) NO. 17960/2007,

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SLP(C) NO. 17961/2007, SLP(C) NO. 17962/2007, SLP(C) NO. 17963/2007,  SLP(C) NO. 17964/2007, SLP(C) NO. 17965/2007, SLP(C) NO. 17972/2007,  SLP(C) NO. 17973/2007, SLP(C) NO. 17974/2007, SLP(C) NO. 17975/2007,  SLP(C) NO. 17976/2007, SLP(C) NO. 17977/2007, SLP(C) NO. 17978/2007,  SLP(C) NO. 17979/2007, SLP(C) NO. 17980/2007, SLP(C) NO. 17981/2007,  SLP(C) NO. 17983/2007, SLP(C) NO. 17984/2007, SLP(C) NO. 18036/2007,  SLP(C) NO. 18037/2007, SLP(C) NO. 18038/2007, SLP(C) NO. 18039/2007,  SLP(C) NO. 18040/2007, SLP(C) NO. 18041/2007, SLP(C) NO. 18042/2007,  SLP(C) NO. 18043/2007, SLP(C) NO. 18044/2007, SLP(C) NO. 18045/2007,  SLP(C) NO. 18046/2007, SLP(C) NO. 18047/2007, SLP(C) NO. 18048/2007,  SLP(C) NO. 18049/2007, SLP(C) NO. 18050/2007, SLP(C) NO. 18051/2007,  SLP(C) NO. 18053/2007, SLP(C) NO. 18054/2007, SLP(C) NO. 18055/2007,  SLP(C) NO. 18056/2007, SLP(C) NO. 18057/2007, SLP(C) NO. 18058/2007,  SLP(C) NO. 18059/2007, SLP(C) NO. 18061/2007, SLP(C) NO. 18062/2007,  SLP(C) NO. 18063/2007, SLP(C) NO. 18064/2007, SLP(C) NO. 18065/2007,  SLP(C) NO. 18066/2007, SLP(C) NO. 18067/2007, SLP(C) NO. 18068/2007,  SLP(C) NO. 18069/2007, SLP(C) NO. 18073/2007, SLP(C) NO. 18074/2007,  SLP(C) NO. 18075/2007, SLP(C) NO. 18076/2007, SLP(C) NO. 18077/2007,  SLP(C) NO. 18078/2007, SLP(C) NO. 18079/2007, SLP(C) NO. 18080/2007,  SLP(C) NO. 18081/2007, SLP(C) NO. 18082/2007, SLP(C) NO. 18083/2007,  SLP(C) NO. 18084/2007, SLP(C) NO. 18085/2007, SLP(C) NO. 18086/2007,  SLP(C) NO. 18087/2007, SLP(C) NO. 18088/2007, SLP(C) NO. 18089/2007,  SLP(C) NO. 18090/2007, SLP(C) NO. 18091/2007, SLP(C) NO. 18092/2007,  SLP(C) NO. 19049/2007, SLP(C) NO. 19050/2007, SLP(C) NO. 19051/2007,  SLP(C) NO. 19052/2007, SLP(C) NO. 19053/2007, SLP(C) NO. 19055/2007,  SLP(C) NO. 19057/2007, SLP(C) NO. 19059/2007, SLP(C) NO. 19060/2007,  SLP(C) NO. 19062/2007, SLP(C) NO. 19064/2007, SLP(C) NO. 19066/2007,  SLP(C) NO. 19068/2007, SLP(C) NO. 19070/2007, SLP(C) NO. 19071/2007,  SLP(C) NO. 19072/2007, SLP(C) NO. 19073/2007, SLP(C) NO. 19074/2007,  SLP(C) NO. 19076/2007, SLP(C) NO. 19077/2007, SLP(C) NO. 19094/2007,  SLP(C) NO. 19095/2007, SLP(C) NO. 19096/2007, SLP(C) NO. 19099/2007,  SLP(C) NO. 19100/2007, SLP(C) NO. 19101/2007, SLP(C) NO. 19102/2007,  SLP(C) NO. 19103/2007, SLP(C) NO. 19104/2007, SLP(C) NO. 19105/2007,  SLP(C) NO. 19106/2007, SLP(C) NO. 19107/2007, SLP(C) NO. 19108/2007,  SLP(C) NO. 19110/2007, SLP(C) NO. 19111/2007, SLP(C) NO. 19113/2007,  SLP(C) NO. 19114/2007, SLP(C) NO. 19505/2007, SLP(C) NO. 19506/2007,  SLP(C) NO. 19507/2007, SLP(C) NO. 19508/2007, SLP(C) NO. 19510/2007,  SLP(C) NO. 19511/2007, SLP(C) NO. 19512/2007, SLP(C) NO. 19513/2007,  SLP(C) NO. 19514/2007, SLP(C) NO. 19515/2007, SLP(C) NO. 19516/2007,  SLP(C) NO. 19518/2007, SLP(C) NO. 19521/2007, SLP(C) NO. 19522/2007,  SLP(C) NO. 19523-19528/2007, SLP(C) NO. 19529/2007, SLP(C) NO.  19530/2007, SLP(C) NO. 19531/2007, SLP(C) NO. 19543-19547/2007,  SLP(C) NO. 20527/2007, SLP(C) NO. 20529/2007, SLP(C) NO. 20559/2007,  SLP(C) NO. 21841/2007, SLP(C) NO. 21843/2007, SLP(C) NO. 21844/2007,  SLP(C) NO. 21845/2007, SLP(C) NO. 21846/2007, SLP(C) NO. 21847/2007,  SLP(C) NO. 21848/2007, SLP(C) NO. 21849/2007, SLP(C) NO. 21851/2007,

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SLP(C) NO. 21855/2007, SLP(C) NO. 21864/2007, SLP(C) NO. 21866/2007,  SLP(C) NO. 21867/2007, SLP(C) NO. 21871-21904/2007, SLP(C) NO.  21905/2007, SLP(C) NO. 21907/2007, SLP(C) NO. 21908/2007, SLP(C) NO.  21909/2007, SLP(C) NO. 21910/2007, SLP(C) NO. 22947/2007, SLP(C) NO.  22958/2007, SLP(C) NO. 24934-25066/2007, SLP(C) NO. 742/2008, SLP(C)  NO. 746/2008, SLP(C) NO. 747/2008, SLP(C) NO. 3230/2008, SLP(C) NO.  3231/2008, SLP(C) NO. 3233/2008, SLP(C) NO. 3234/2008, SLP(C) NO.  3236/2008, SLP(C) NO. 3237/2008, SLP(C) NO. 3238-3262/2008, CA NO.  4715/2008, CA NO. 5041-5042/2008, SLP(C) NO. 5407/2008, SLP(C) NO.  5408/2008, SLP(C) NO. 6148-6152/2008, SLP(C) NO. 6831/2008, SLP(C)  NO. 7914/2008, SLP(C) NO. 8053-8077/2008, SLP(C) NO. 8199/2008,  SLP(C) NO. 9227/2008, SLP(C) NO. 12424-12425/2008, SLP(C) NO.  13327/2008, SLP(C) NO. 13889/2008, SLP(C) NO. 14232-14252/2008,  SLP(C) NO. 14454-14778/2008, SLP(C) NO. 14828/2008, SLP(C) NO.  14829/2008, SLP(C) NO. 14875/2008, SLP(C) NO. 15047/2008, SLP(C) NO.  15078/2008, SLP(C) NO. 15090/2008, SLP(C) NO. 15161/2008, SLP(C) NO.  15164/2008, SLP(C) NO. 15179/2008, SLP(C) NO. 15253/2008, SLP(C) NO.  15273/2008, SLP(C) NO. 15274/2008, SLP(C) NO. 15286-15287/2008,  SLP(C) NO. 15288-15289/2008, S.L.P.(C)... /2008 CC NO. 15314 , SLP(C)  NO. 15324/2008, SLP(C) NO. 15325/2008, SLP(C) NO. 15326/2008, SLP(C)  NO. 15327/2008, SLP(C) NO. 15328/2008, SLP(C) NO. 15329/2008, SLP(C)  NO. 15330/2008, SLP(C) NO. 15331/2008, SLP(C) NO. 15335/2008, SLP(C)  NO. 15337/2008, SLP(C) NO. 15356/2008, SLP(C) NO. 15357/2008, SLP(C)  NO. 15369/2008, SLP(C) NO. 15405/2008, SLP(C) NO. 15491/2008, SLP(C)  NO. 15492/2008, SLP(C) NO. 15493/2008, SLP(C) NO. 15495/2008, SLP(C)  NO. 15496/2008, SLP(C) NO. 15498/2008, SLP(C) NO. 15540/2008, SLP(C)  NO. 15551/2008, SLP(C) NO. 15579/2008, SLP(C) NO. 15605/2008, SLP(C)  NO. 15618/2008, SLP(C) NO. 15623/2008, SLP(C) NO. 15628/2008, SLP(C)  NO. 15629/2008, SLP(C) NO. 15630/2008, SLP(C) NO. 15631/2008, SLP(C)  NO. 15632/2008, SLP(C) NO. 15633/2008, SLP(C) NO. 15636/2008, SLP(C)  NO. 15643/2008, SLP(C) NO. 15647/2008, SLP(C) NO. 15652/2008, SLP(C)  NO. 15653/2008, SLP(C) NO. 15655/2008, SLP(C) NO. 15656/2008, SLP(C)  NO. 15657/2008, SLP(C) NO. 15659/2008, SLP(C) NO. 15660/2008, SLP(C)  NO. 15666/2008, SLP(C) NO. 15684/2008, SLP(C) NO. 15700/2008, SLP(C)  NO. 15711/2008, SLP(C) NO. 15819/2008, SLP(C) NO. 15845/2008, SLP(C)  NO. 15934/2008, SLP(C) NO. 16664/2008, SLP(C) NO. 16667/2008, SLP(C)  NO. 16689/2008, SLP(C) NO. 16733/2008, SLP(C) NO. 16754/2008, SLP(C)  NO. 16832/2008, SLP(C) NO. 16837/2008, SLP(C) NO. 16841/2008, SLP(C)  NO. 16865/2008, SLP(C) NO. 16885/2008, SLP(C) NO. 16926/2008, SLP(C)  NO. 16930/2008, SLP(C) NO. 17187/2008, SLP(C) NO. 17192/2008, SLP(C)  NO. 17193/2008, SLP(C) NO. 17203/2008, SLP(C) NO. 17204/2008, SLP(C)  NO. 17233/2008, SLP(C) NO. 17267/2008, SLP(C) NO. 17269/2008, SLP(C)  NO. 17271/2008, SLP(C) NO. 17272/2008, SLP(C) NO. 17274/2008, SLP(C)  NO. 17276/2008, SLP(C) NO. 17277/2008, SLP(C) NO. 17279/2008, SLP(C)  NO. 17280/2008, SLP(C) NO. 17282/2008, SLP(C) NO. 17367/2008, SLP(C)  NO. 17368/2008, SLP(C) NO. 17369/2008, SLP(C) NO. 17370/2008, SLP(C)

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NO. 17372/2008, SLP(C) NO. 17373/2008, SLP(C) NO. 17374/2008, SLP(C)  NO. 17375/2008, SLP(C) NO. 17376/2008, SLP(C) NO. 17377/2008, SLP(C)  NO. 17408/2008, SLP(C) NO. 17865/2008, SLP(C) NO. 17892/2008, SLP(C)  NO. 18001/2008, SLP(C) NO. 18030/2008, SLP(C) NO. 18034/2008, SLP(C)  NO. 18035/2008, SLP(C) NO. 18040/2008, SLP(C) NO. 18066-18067/2008,  SLP(C) NO. 18344/2008, SLP(C) NO. 18346/2008, SLP(C) NO. 18354/2008,  SLP(C) NO. 18360-18364/2008, SLP(C) NO. 18379/2008, SLP(C) NO.  18405/2008, SLP(C) NO. 18532/2008, SLP(C) NO. 18533/2008, SLP(C) NO.  18582/2008, SLP(C) NO. 18684-18714/2008, SLP(C) NO. 18850/2008,  SLP(C) NO. 18857/2008, SLP(C) NO. 18865/2008, SLP(C) NO. 18870/2008,  SLP(C) NO. 18871/2008, SLP(C) NO. 19019/2008, SLP(C) NO. 19026/2008,  SLP(C) NO. 19030/2008, SLP(C) NO. 19049/2008, SLP(C) NO. 19120/2008,  SLP(C) NO. 19141/2008, SLP(C) NO. 19372/2008, SLP(C) NO. 19421/2008,  SLP(C) NO. 19425/2008, SLP(C) NO. 19460/2008, SLP(C) NO. 19470/2008,  SLP(C) NO. 19714/2008, SLP(C) NO. 19722/2008, SLP(C) NO. 19731/2008,  SLP(C) NO. 19737/2008, SLP(C) NO. 19802/2008, SLP(C) NO. 19847/2008,  SLP(C) NO. 19849/2008, SLP(C) NO. 19867/2008, SLP(C) NO. 19873/2008,  SLP(C) NO. 19876/2008, SLP(C) NO. 19986/2008, SLP(C) NO. 20068/2008,  SLP(C) NO. 20089/2008, SLP(C) NO. 20165/2008, SLP(C) NO. 20766/2008,  SLP(C) NO. 20795/2008, SLP(C) NO. 21107/2008, SLP(C) NO. 21117- 21125/2008, SLP(C) NO. 21127/2008, SLP(C) NO. 21506/2008, SLP(C) NO.  21509/2008, SLP(C) NO. 21510/2008, SLP(C) NO. 21819/2008, SLP(C) NO.  22081/2008, SLP(C) NO. 22083/2008, SLP(C) NO. 22084/2008, SLP(C) NO.  22086/2008, SLP(C) NO. 22100-22101/2008, SLP(C) NO. 22195/2008,  SLP(C) NO. 22707/2008, SLP(C) NO. 22735/2008, SLP(C) NO. 22931/2008,  SLP(C) NO. 23075/2008, SLP(C) NO. 23077/2008, SLP(C) NO. 23270/2008,  SLP(C) NO. 23277/2008, SLP(C) NO. 23383/2008, SLP(C) NO. 23609/2008,  SLP(C) NO. 23623/2008, SLP(C) NO. 25378/2008, SLP(C) NO. 25498/2008,  SLP(C) NO. 26377/2008, SLP(C) NO. 26543/2008, SLP(C) NO. 26571/2008,  SLP(C) NO. 26572/2008, SLP(C) NO. 26593/2008, SLP(C) NO. 26750/2008,  SLP(C) NO. 26813/2008, SLP(C) NO. 26972/2008, SLP(C) NO. 27442- 27444/2008, SLP(C) NO. 27606/2008, SLP(C) NO. 27927/2008, SLP(C) NO.  29194/2008, SLP(C) NO. 29196/2008, SLP(C) NO. 29561-29570/2008,  SLP(C) NO. 29763/2008, SLP(C) NO. 29764/2008, SLP(C) NO. 30276/2008,  SLP(C) NO. 30533/2008, SLP(C) NO. 30534-30540/2008, SLP(C) NO.  30542/2008, S.L.P.(C)... /2009 CC NO. 2867, SLP(C) NO. 3276/2009, SLP(C)  NO. 4720/2009, S.L.P.(C)... /2009 CC NO. 5143, S.L.P.(C)... /2009 CC NO.  5311, SLP(C) NO. 5371/2009, SLP(C) NO. 5376/2009, SLP(C) NO.  5381/2009, SLP(C) NO. 5383/2009, SLP(C) NO. 5384/2009, SLP(C) NO.  5393/2009, SLP(C) NO. 5395/2009, SLP(C) NO. 5396/2009, SLP(C) NO.  5399/2009, SLP(C) NO. 5401/2009, SLP(C) NO. 5403/2009, SLP(C) NO.  5405/2009, SLP(C) NO. 5406/2009, SLP(C) NO. 5408/2009, SLP(C) NO.  5409/2009, SLP(C) NO. 5410/2009, SLP(C) NO. 5411/2009, SLP(C) NO.  5412/2009, SLP(C) NO. 5413/2009, SLP(C) NO. 5414/2009, SLP(C) NO.  5420/2009, SLP(C) NO. 5421/2009, SLP(C) NO. 5422/2009, SLP(C) NO.  5424/2009, SLP(C) NO. 5426/2009, SLP(C) NO. 5493-5494/2009, SLP(C)