Refusing to side with big corporate groups challenging the constitutional validity of state entry tax on goods, the Centre on Wednesday stoutly defended the levy and said imposition of this tax was states’ sovereign legislative function.
A nine-judge bench of Chief Justice T S Thakur and justices A K Sikri, S A Bobde, S K Singh, N V Ramana, R Banumathi, A M Khanwilkar, D Y Chandrachud and Ashok Bhushan has taken up a batch of around 2,000 petitions, the first of which was filed nearly 15 years ago, for a decision on the validity of entry tax. Total liability of all cor porate groups and manufacturers is around Rs 30,000 crore and if the court affirms the validity , it would spell huge revenue accrual for states with poor finances.
On behalf of the Centre, attorney general Mukul Rohatgi and advocate Madhavi Divan repelled the challengers’ arguments articulated by senior advocate Harish Salve and said: “Levy of a non-discriminatory entry tax per se does not constitute infraction of Article 301 of the Constitution.“
Article 301 provides that “subject to the other provisions of Part XIII of Constitution, trade, commerce and intercourse throughout the territory of India shall be free“. Those opposing entry tax had argued that levy on goods entering a geographical territory was a violation of this constitutional provision and hence illegal.
Rohatgi drew the court’s attention to Article 304, which provides that “notwithstanding anything in Article 301 or Article 303, the legislature of a state may by law impose on goods imported from other states or UTs any tax“ but with a caveat that such tax would not discriminate in imposing levy on goods manufactured in the state and those imported from other states.
The AG said Article 304(b) also provided that the state legislature could impose reasonable restrictions on the freedom of trade, commerce and intercourse as may be required in public interest. The arguments will continue on Thursday .
Rohatgi said: “A compensatory tax (entry tax) will provide impetus to smooth and free trade and commerce rather than being an impediment. As such, it will not fall foul of Article 301.“
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