ITC LIMITED Vs. STATE OF U P

JUDGEMENT

(1.) IN all these writ petitions the petitioners as traders, manufacturers and importers bringing scheduled goods into the local areas in the State of U.P. for consumption, use or sale therein have challenged the validity of the U.P. Tax on Entry of Goods into Local Areas Act, 2007, (in short the U.P. Act of 2007) on the grounds of lack of the legislative competence of the State of U.P. of enactment, as also violative of freedom of trade, commerce and intercourse guaranteed under Article 301 and not saved by Article 304 (b) of the Constitution of INdia. The petitioners have also challenged the retrospectivity of the Act. w.e.f. 1.11.1999, when the U.P. Tax on Entry of Goods Ordinance, 1999, replaced by U.P. Tax on Entry of Goods Act, 2000, was promulgated and which was struck down by this Court in INdian Oil Corporation Ltd. v. State of U.P., AIR 2004 All 277.

(2.) THE substance of challenge in all these writ petitions to the constitutional validity of the U.P. Act of 2007 is that the entry tax is levied under the Act is by way of payment of compensatory tax of which the quantifiable/ measurable benefits are not provided either facially or patently to its payers, in view of the tests laid down in Jindal Stainless Ltd. (2) and another v. State of Haryana and another, (2006) 7 SCC 241. THE expenditure of the entry tax as compensatory tax collected is not broadly in proportion to defray the cost of regulation, or to meet the outley incurred for some special benefit to the trade commerce and industry. THEre is no link between the entry tax collected and the facilities extended to the trades, directly or indirectly, and for which the State on which the burden of proof lies has failed to prove the direct and immediate effect on trade and commerce, as laid down in Atiabari Tea Co. Ltd. v. State of Assam, AIR 1961 SC 232, and the working trest enunciated in Automobile Transport (Rajashtan) Ltd. v. State of Rajasthan, AIR 1962 SC 1406.

(3.) THE Act of 2000 was challenged by M/s Indian Oil Corporation Ltd. and many other companies and traders importing scheduled goods into local area of the State. A Division Bench consisting of Hon'ble Mr. Justice M. Katju (as he then was) and Mrs. Justice Poonam Srivastava by their judgment dated 27.1.2004 reported in AIR 2004 All 277, declared the Act as violative of Articles 301 and 304 of the Constitution of India and thus ultra vires, and allowed all the writ petitions. THE observations of the Bench made in paragraph 51, 54, 66, 67, 68, 69 and 107 are quoted as below :