STATE OF HIMACHAL PRADESH THROUGH PRINCIPAL SECRETARY EXCISE AND TAXATION DEPARTMENT Vs. JAI PRAKASH ASSOCIATES LIMITED

JUDGEMENT

(1.) THE complexity of compensatory tax has been the subject matter of several litigations, mainly in the constitutional context of Articles 301 and 304 of the Constitution of India. Its subtle nicety in contradistinction to tax has been dealt with in the celebrated decision in Jindal Stainleess Ltd. (2) and another versus State of Haryana and others, reported in (2006) 7 SCC 241. It has been held that in the case of tax, it is the principle of ability which is the guiding and relevant factor whereas in the case of compensatory tax, it is the principle of equivalence. In tax where there is no identification of a specified benefit and even if there is such identification, the same is not capable of direct measurement and the benefit if any is only incidental to the State's action. But, in the case of compensatory tax, the quantifiable benefit is represented by the cost incurred in availing the facility or service and that cost in turn becomes the basis of the recompense for the service provided. Tax is for revenue whereas in compensatory tax, it is only the reimbursement or recompense to the service provider, a tax on recompense and thus it is in the shape of a fee for any particular service. Still further, it has been held that the guiding principle in compensatory tax is pay for the value and it is a sub class of a fee; it is a charge for offering trading facilities and adds to the value of trade and commerce which is not available and which is an irrelevant factor as far as the tax is concerned. It will be profitable to refer to the relevant paragraphs at 40, 41 & 42, which read as follows:

(2.) STILL further, at paragraph 45, it has been held that the compensatory tax is hybrid by nature and it is closer to fee than tax. We may also extract paragraphs 44 & 45, which would be relevant in the instant case:

(3.) THE question arising for consideration in this case is simple. Whether the industrial unit of the first petitioner engaged in the manufacture of clinker and cement is entitled to the benefit of exemption from payment of the tax under the Himachal Pradesh Taxation (on Certain Goods Carried by Road) Act, 1999 (hereinafter called the 1999 Act), in terms of Rule 19 of the Rules Regarding Grant of Incentives, Concessions & Facilities to Industrial Units in Himachal Pradesh, 2004 (hereinafter called 2004 Rules). THE learned Single Judge has held in favour of the writ petitioner and thus aggrieved, the State has come up in appeal. It will be profitable to extract paragraph 20 of the judgment, which has summed up the conclusions: