1. The validity of Jammu and Kashmir Entry Tax on Goods Act, 2000 (for short Act of 2000) is called in question in all these petitions. Petitioners have filed these petitions with the prayer that the said Act be declared unconstitutional on the principle ground that it violates the mandate contained in Article 301 of the Constitution of India. Since a common thread is running through all these petitions they were heard together and are being disposed of by this common judgment.
2. Viom Networks Company Ltd. is petitioner in OWP No. 725/2008. It is a limited company incorporated under the provisions of Companies Act, 1956 (for short Act of 1956). As pleaded in the writ petition, petitioner-company is primarily engaged in building infrastructures in telecom sector and also provides infrastructure to various telecom service providers.
3. Dish-net Wireless Ltd. has filed OWP No. 988J/2008 and claims to be a subsidiary company of M/s Aircel Ltd. which is providing GSM Mobile Services in the State of J&K under brand name of Aircel. Petitioner-company is providing GSM Mobile Service and procures required telecom equipment parts, towers, accessories etc. being mobile goods as well as consumable goods.
4. Bharti Tele-media Ltd has filed OWP No. 364/2010. It is a limited company incorporated under the provisions of Act of 1956. Petitioner- company provides Direct to Home (DTH) satellite television service in the State of J&K. Petitioner-company requires network equipment for providing DTH service which include Dish Antenna, Set top box, Cable, Connector, LNBF, Viewing Cord and remote control. These equipments are brought in the State for providing services.
5. Cellular Idea Ltd. has filed OWP No. 761/2009. It is a limited company incorporated under the Act of 1956. The said company in order to conduct its business imports goods into the State of J&K.
6. Bharti Infratel Ltd. has filed OWP No. 914/2009. It is a limited company and is incorporated under the Act of 1956. The main object of the petitioners company is to carry on business of establishing, operating, maintaining and managing wireless communications towers either on its own or in alliance with any other person body/bodies corporate incorporated in India or abroad either under a strategic alliance or joint venture or by any other arrangement. This company in order to conduct its business imports goods into the State of J&K.
7. Bharti Aritel Company Ltd. has filed OWP No. 11/2009. The said company also provides telecom services and in order to effectuate the aforementioned purpose, goods/equipments are imported into the State of J&K.
8. Tata Tele Services Ltd. has filed OWP No. 726/2008. The main object of the company is to carry on business of providing basic telecommunication services, manufacturers, franchisers, dealers, importers, exporters, assemblers, fabricators, repairers, maintainers, owners and operators of all kinds of telecommunication equipments, cryptographic equipment which includes terminator equipment, exchange equipment, subscriber end equipment and equipment of all kinds which is being used to provide voice text data or image communication services etc. Petitioner-company in order to carry on its business is importing goods into the State of J&K.
9. Reliance Communication Ltd. has filed OWP No. 992J/2008. It is limited company incorporated under the Act of 1956. This company is engaged in providing telecom services. For effectively carrying on its business, the company is importing goods into the State of J&K.
10. The majority of the petitioner-companies are telecom service providers and other companies are providing the infrastructure facilities to these companies. In terms of the Act of 2000, petitioner companies have been brought under the entry tax net. Petitioner companies are registered with the competent authority under the J&K General Sales Tax Act, 1962 (for short Act of 1962), Value Added Tax, 2005 (for short Act of 2005).
11. Section 2(h) of the Act of 2000 was substituted vide Act No. XIII of 2007 dated 11.08.2007 and in terms of Section 3 of the Act of 2000, the goods imported into the State of J&K by the petitioners companies were subjected to levy of Entry Tax. Petitioners feeling aggrieved of levying entry taxhave accordingly filed these petitions.
12. On notice issued, respondent-State initially filed preliminary reply affidavit and subsequently with the permission of the Court filed supplementary affidavit.
13. Mr. Z. A. Shah, learned senior counsel appearing in most of the cases launched frontal attack on the Act of 2000 on the principle ground that the same infringes the Constitutional guarantee as contained in Article 301 of the Constitution of India. Learned counsel while elaborating his submissions stated that Article 301 guarantees freedom of trade, commerce and intercourse which guaranteed right of the petitioners is violated by the Act of 2000. Learned counsel submitted that in terms of the Section 3 of the Act of 2000 entry taxwhich has been levied on the entry of the scheduled goods, in essence affects the movement of goods into the State of J&K and that being the position same is to be declared unconstitutional offending the Article 301 of the Constitution of India. Learned counsel in support of his submissions referred to and relied upon judgment of Honble Supreme Court in case titled Automobile Transport Ltd. etc. (Appellants) v. State of Rajastan and ors. (respondents); reported in AIR 1962 SC 1406. Learned counsel invited the attention of the Court to the paragraph 32 to 35 thereof. Learned counsel also invited the attention of the Court to the paragraph 9 of the said judgment. Learned counsel referred to and relied upon case titled G. K. Krishnan and ors. (appellants) v. State of Tamil Nadu and ors. (respondents) reported in (1975) 1 SCC 375. Learned counsel also referred to case titled Jindal Stipe Ltd. And anr. (appellants) v. State of Haryana and ors. (respondents) reported in (2003) 8 SCC 60, case titled Jindal Stainless Ltd. (2) and anr. (appellants) v. State of Haryana and ors. (respondents) reported in (2006) 7 SCC 241 and invited the attention of the Court to paragraph 38, 42 and 48 thereof. Learned counsel also referred to case titled Jindal Stainless Ltd. and anr. (appellants) v. State of Haryana and ors. (respondents) reported in (2010) 4 SCC 595.
14. Mr. Z. A. Shah, learned senior counsel assisted by M/s Asif Maqbool and Umais Kawoosa further submitted that by levying entry tax on the goods which are being brought into the State of J&K not only tax is charged on goods but even movement of goods is affected. Learned counsel submitted that the Act of 2000, in this backdrop, is an offence to Article 301 of the Constitution of India and requires to be declared unconstitutional. Learned counsel also submitted that other grounds which are urged in the writ petition be also considered for deciding these cases. Learned counsel submitted that State of J&K where unemployment of educated youth is a threatening problem, the Government instead of discouraging the business houses by levying tax, should have encouraged them by providing facilities as these companies are providing jobs to hundreds of youth. Learned counsel while inviting the attention of the Court to the respective pleadings of the parties made a specific reference to the stand taken by the respondents and the reasons given in their affidavits for enacting the Act of 2000. Learned counsel submitted that it appears that main purpose for enacting the Act of 2000 is to augment the State Revenue as the Honble Finance Minister on the Floor of the Legislative Assembly made statement that because of evasion of sales tax, State is losing crores of rupees every year. Learned counsel submitted that the purpose and intendment of enacting the Act of 2000 is, thus, on the face of it, to augment the revenue of the State and in view of the law laid down by the Honble Supreme Court in Attibaris case, levying tax places restriction on the free trade. Learned counsel submitted that there is a complete mechanism provided in the Act of 1962 to deal with the tax evaders. Learned counsel submitted that the Act of 2000 could not be brought into existence as a mechanism to arrest the evasion of sales tax. Learned counsel further submitted that if the State legislature had to make the law of imposing tax, which has been made in this case, placing reasonable restrictions on the freedom of the trade, commerce or intercourse with or within the State, then before introducing the bill in the legislature of the State, the Government was under the Constitutional Mandate to seek previous sanction of the President under Article 304(b). Learned counsel submitted that as no previous sanction of the President has been obtained, the State legislature lacked power to legislate the law, which is impugned in these petitions.
15. Mr. Z. A. Shah learned senior counsel in his inimitable style and with strong intellectual prowess made all out efforts to persuade the Court to take the view that the impugned Act of 2000 casts restriction on the free flow of trade and commerce of the petitioners. The contention of the learned counsel is that impugned Act of 2000 has direct effect on the movement of the goods, thus, is against the protection available to petitioners and rights guaranteed under Article 301 of the Constitution of India. Learned counsel further submitted that part XIII of the Constitution of India not only guarantees but also ensures the financial integrity and unity of the Country. Learned counsel submitted that petitioners who are paying sales tax under the Act of 1962 cannot be subjected to further tax under the impugned Act of 2000.
16. Learned counsel appearing for other petitioners adopted the arguments of Mr. Z. A. Shah.
17. Mr. M. L. Verma, learned Senior Counsel appearing for the State of J&K assisted by Mr. T. H. Khawaja and Mr. Satvik Verma, Advocates, submitted that the Act of 2000 does not, in any manner whatsoever, infringe the mandate contained in Article 301 of the Constitution of India. Learned counsel submitted that the Section 5 of the Constitution of J&K authorizes the State legislature to make laws. Learned counsel further submitted that the list II of Schedule VII of the Constitution of India is not applicable to the State of J&K. Learned counsel also submitted that the provisions of Constitution of India are not applicable to the State of J&K in their entirety by their own force, but have been made applicable either in their original form or modified form in terms of Presidential orders. Learned counsel in order to elaborate his submissions invited the attention of the Court to the case reported in (1983) 1 SCC 147, case titled State of Bihar and ors. v. Bihar Distillery Ltd. and ors. reported in (1997) 2 SCC 453, case titled Firm A. T. B. Mehtab Majid and Co., (petitioner) v. State of Madrass and another, (respondents) reported in AIR 1963 SC 928, case titled The State of Madras, (appellant) v. N. K. Nataraja Mudaliar, (respondent) reported in AIR 1969 SC 147, case titled Automobile Transport (Rajastan) Ltd., etc. (appellants) v. State of Rajastan and ors. (respondents) reported in AIR 1962 SC 1406.
18. Mr. M. L. Verma, learned senior counsel submitted that the State legislature has also power to make the law in terms of Section 304(a) of the Constitution of India. Learned counsel was at pains to explain that the levying tax on the entry of goodsdoes not impede, in any manner whatsoever, the movements of the goods.
19. Learned counsel invited the attention of the Court to the affidavits filed by the respondent-State authorities wherein it is indicated that under the guise of importing goods into the State of J&K for personal use or consumption, the same were being routed into the market and this dubious act of unscrupulous traders affected the business interest of the bonafide honest traders and would also cause loss to the State Revenue. Learned counsel submitted that Act of 2000 is, thus, regulatory in nature and in view of the law laid down by the Honble Supreme Court in Automobile Transports case, it is a valid legislation. Learned counsel submitted that this being the position, the Article 301 of the Constitution of India is not attracted. Learned counsel also submitted that to seek invalidation of Act of 2000, what has been done by the petitioners is that they have relied upon the principles of law contained in Article 301 of the Constitution of India without laying any factual foundation thereof, to get the said Article attracted to the facts of these cases. Learned counsel further submitted that State Government in exercise of its powers conferred by Sub Section 2 of the Section 3 of the Act of 2000 has issued notification SRO No. 270 dated 1st September, 2009 whereunder the exemption has been granted from payment of entry tax levied under the Act in respect of plant, machinery and communication equipment imported into the State by Telecom/Cellular agencies, subject to the conditions specified in the said notification. Learned counsel also submitted that what is required to be seen is as to whether the Act of 2000 in reality hampers the movement of goods. Learned counsel further submitted that despite the Act of 2000, petitioners have been importing goods into the State of J&K.
20. In order to appreciate the submissions made at the Bar by the learned counsel for the parties, it is deemed apposite to take notice of Sections 2(b), 2(d), 2(e), 2(h), sub-sepction 2 of Section 2, Section 3 and Section 6 of the Act of 2000, Part XIII of the Constitution of India and Section 5 of the Constitution of J&K:
2 (b) goodsmeans all kinds of moveable property, materials, articles and commodities brought into the State of Jammu and Kashmir for use or consumption;
2(d) importermeans a person who brings or causes to be brought goods into the State of Jammu and Kashmir from any place outside the State for use or consumption within the State;
2(e) personsmeans an individual or body of individuals, whether incorporated or not, and also a Hindu undivided family, a firm, a society, a club, an individual, a company, an association, a local authority or a State Government;
2 (h) scheduled goodsmeans the goods as specified under the provisions of the Jammu and Kashmir General Sales Tax Act, 1962 or the Jammu and Kashmir Value Added Tax Act, 2005 and include Motor Spirit and Diesel Oil as defined under the Jammu and Kashmir Motor Spirit and Diesel Oil (Taxation of Sales) Act, Samvat 2005 (1948 A.D.);
2(2) words and expressions used but not defined in this Act shall have the same meaning as assigned to them under the Jammu and Kashmir General Sales Tax Act, 1962.
3. Incidence and levy of tax
(1) Subject to the provisions of this Act and the rules made there under, there shall be levied a tax on the entry of scheduled goods into the State, to be called entry taxat the rates as may be notified from time to time under the Jammu and Kashmir General Sales Tax Act, 1962, the Jammu and Kashmir Value Added Tax Act, 2005 or the Jammu and Kashmir Motor Spirit and Diesel Oil (Taxation of Sales) Act, Samvat 2005, as the case may be, and such tax shall be charged and collected at the checkpost by such authority and in such manner as may be prescribed:
Provided that no entry tax shall be levied or collected on scheduled goods
(i) the value of which does not exceed rupees five thousand; or
(ii) which are by any person in consequence of transfer of residence into the State; or
(iii) where, through documentary evidence, it is established that-
(a) the goods are imported into the State by a person in connection with tourism or pilgrimage.
Explanation: - For the purpose of this sub- clause, the person means a person visiting the State temporarily in connection with tourism or pilgrimage.
(a) the goods imported are the same which had moved outside the State in connection with repairs/maintenance.
(2) The Government may subject to such conditions as may be prescribed exempt wholly or in part any class or description of goods by quantity or value, or both form payment of entry tax.
6. Application of certain provisions of the Jammu and Kashmir General Sales Tax Act, 1962.
The provisions of the Jammu and Kashmir General Sales Tax Act, 1962 relating to appeal, revisions, appellate tribunal, power to withdraw and transfer cases, recovery of fines, taxes or penalty 9[refund of taxes and penalties, power to take evidence on oath] powers by authorized person, powers to give instructions and determination of issues shall, mutatis mutandis, apply to all such proceedings under this Act.
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 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 authorizing 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.
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.
Section 5 of Constitution of J&K Extent of executive and legislative power of the State: The executive and legislative power of the State extends to all matters except those with respect to which Parliament has power to make laws for the State, under the provisions of the Constitution of India.
21. Relevant part of the budget speech of the Honble Finance Minister made on 06.03.2000 on the Floor of the Legislative Assembly is extracted as under:
32 Entry Tax The sales tax rate was between the States leading to diversion of trade may settle down with the implementation of floor rates agreed upon by the States in the recent past. The menace of disguising the transaction of import of the taxable goods under the garb of personal use, as per our latest studies, is hitting us hard below the belt. During the current financial year the value of taxable goods entering the State through this device has been of the order or Rs. 20.20 crore ending February, 2000.
I propose to levy an entry tax on import of taxable goods for personal use at the rate equivalent to the rate of sales tax chargeable on such commodities in the State. This measure should be welcome by the traders as it would largely arrest the practice of import of taxable commodities by the unscrupulous, who ultimately channel such goods into the trade, to the detriment of the genuine dealers. This measure is estimated to generate additional resource of Rs. 1.00 crore.
22. We the people of Indiahave given to ourselves the Constitution, preamble whereof, refers to solemn resolution to constitute India into sovereign, socialist and secular democratic republic and it is resolved to secure to all its citizens;
Justice, social, economic and political;
Liberty of thought, expression, belief, faith and worship;
Equality of status and of opportunity;
and to promote among them all Fraternity assuring the dignity of the individual and the [unity and integrity of the nation];
23. Our country is possessed of immense human and material/natural resources. We the peopleare masters and have to be beneficiaries of these natural resources. The occupation of this country by external rulers has drained it of most of its material/natural resources. This country which has history of thousands of years, at the mid night, when it was declared to be free and independent country, inherited body politic which was suffering from many maladies. The subjugation of centuries had reduced a vast majority of its population to abject poverty. The external aggressors and rulers had ruthlessly exploited the material/natural resources of this rich country. The majority of the population at the dawn of freedom of the country was very poor and it was very difficult for them to make the both ends meet. The Constitution makers who were great visionaries, in order to bridge the huge yawning gap between poor and the rich and in order to ensure that the basic necessities of life become affordable to every citizen of this country, made solemn declaration to secure justice, social, economic and political to its citizens.
24. For variety of reasons, a section of population got catapulted to an advantageous position and the vast majority suffered all kinds of deprivations. The class of people who were and are on the right side of the advantages, went on flexing their economic muscles to make huge money/economic empires. The already deprived class of the society became victim of actions of their own people. The people in democratic society like ours are sovereign and all types of resources which are available in this country, thus, are property of people of this country. The people of this country are Masters of all natural/material resources. A group of people because of their advantageous position and even capacities and abilities exploited these material/natural resources which are owned by the people of this country and have consequently build great money/economic empires. The Government which represents the will of the people in our Constitutional Scheme is deemed to be in control of all the material/natural resources available in this country. These material/natural resources are to be utilized in a manner by the State and its authorities which will ensure in achieving the goal of securing social and economic justice as enshrined in the preamble of the Constitution to all its citizens. The class of the people who have become affluent and rich have definitely right to retain the fruits of their labour but in a manner which suits our Constitution designed and engineered by its architects to create a socialist State. The Constitutional bodies and Constitutional authorities owe a duty to the people of this country to unveil humanist ideology of the Constitution of which preamble is repository and its vivid colours are painted strikingly by the constitutional painters in Article 38 and 39 thereof. The justice which is social and economic in all its contours will be achieved only when it is ensured that every individual of this country gets the basic necessities of life and the void between haves and have nots does not become unbridgeable. An exercise is to be undertaken to level down and level up two classes of the society so as to ensure that Clement Itlays Prophecy if a free society cannot help the many who are poor, it cannot save the few who are rich does not become true. The soul of our constitution is socialist in nature. Pt. Jawahar Lal Nehru said, I see no way of ending poverty, the vast unemployment, the degradation and the subjection of Indian people except through socialism.
25. The State in our Constitutional Scheme in order to ameliorate the lot of suffering masses has sovereign power to levy tax on those who are on the advantageous position and who have build huge economic empires by exploiting material/natural resources of this country. The taxes are being exacted for the public good. The imposition of tax belongs to sovereign power of the State and levying thereof is authorized by the Constitution of this Country. The exaction of the tax in the social, economic and political backdrop of our country has to be looked upon favourably. The people who belong to a habitation are required to create certain facilities for themselves. In a democratic country like ours, since the Government is put in place to provide these facilities, the people who are able and in a position to pay, have to be levied with taxes. No Government can run without taxes being imposed on that section of the population which is able to pay.
26. The issue is to be looked at from another stand point as well. In our Constitutional Scheme representatives of the people ultimately form the Government and are answerable to the people in accordance with the mandate of Constitution of India and laws made thereunder. Governments are accountable and answerable for their every act to the people of the country. In contradistinction thereto, those who wield money or economic power are not answerable and accountable in the like manner. In the recent times value system has completely changed. The money power has taken control of almost all other public institutions. In present times people can be grouped by and large into two main classes viz. human beings and commercial beings. The events have unfolded and unveiled the ugly facts and facets which have shown that money power is affecting the political power of the State. The state has to wake up and respond to these ringing alarms by making laws which would effectively control the money power/economic power and make it more answerable and accountable. The unbridled economic power has potential to destabilize the political order of the State. If the necessary checks and breaks are not put on the economic/money power, vast majority of the people will become poor and poorer. The people who suffer at the cruel hands of the deprivation, it is seen are, either committing suicide or joining outlawed groups. The State has to distribute the natural resources for overall good of society. The State in order to secure the Constitutional goal of having a socialist society has to necessarily have absolute control on the natural resources of this country.
27. The people who are liable to pay taxes and who evade payment of taxes by adopting all kinds of illegal, immoral and dubious methods are not only causing irreparable damage to the common good of the people but are also posing great threat to the economic stability of the State itself. In order to ensure that the actions of such unscrupulous elements of the society do not cause enormous damage to the financial health of the State, a duty is cast on the State to initiate measures and take regulatory steps by halting efforts of such people in their tracks. Taking regulatory steps for ensuring that immoral and illegal activities in economic field do not take place, is solemn inherent duty of the state and State cannot be frightened away from taking such regulatory measures by exhibiting constitutional arsenal to it. The Constitution which is supreme law given by the people to themselves cannot be said to either visualize or authorize any kind of immoral or illegal action in any field of activity. The State cannot either shut its eyes to such illegal activities. If the laws provide for room and scope of manipulating it by unscrupulous elements then such law has to be regulated and State has inherent powers to take regulatory steps so as to ensure that laws are not maneuvered and manipulated. The State cannot escape the responsibility of taking regulatory steps as in the words of Rousseu, it is because the force of circumstances tends to destroy equality that the force of legislation must always tend to maintain it.
28. Before dealing with the arguments advanced at the Bar, it would be appropriate to refer to two basic and fundamental judgments viz. Attabari Tea Co. Ltd. (petitioner) v. The State of Assam and ors., (respondents) reported in AIR 1961 SC 232 in which the majority view held as under:
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.
And Automobile Transport (Rajastan) Ltd., etc., Appellant v. State of Rajastan and ors., respondents reported in 1962 SC 1406 in which at paragraph 17 the majority view held as under:
We have, therefore, come to the conclusion that neither the widest interpretation nor the narrow interpretations canvassed before us are acceptable. An interpretation which was accepted by the majority in the Attibari Tea Co. Ltd. case, (1961) 1 SCR 809 : (AIR 1961 SC 232) 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 restriction contemplated by Article 301 and such measures need not comply with the requirements of proviso to Article 304(b) of the Constitution.
29. The Honble Supreme Court in case Jindal Stainless Ltd. (2) and anr. v. State of Haryana and ors., reported in (2006) 7 SCC 241 at paragraph 53 held as under:
We reiterate that doctrine of direct and immediate effectof the impugned law on trade and commerce under Article 301 as propounded in Attibari Co. Ltd. v. State of Assam and the working test enunciated in Automobile Transport (Rajastan) Ltd. v. State of Rajastan 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, Constitutional validity of various local enactments which are subject matters of pending appeals, special review petitions and writ petitions will now be listed for being disposed of in the light of this judgment.
30. The contentions raised have to be considered and answered in the peculiar backdrop in which the impugned Act of 2000 has been brought into existence. The Honble Finance Minister in his budget speech on the floor of the legislature highlighted one aspect as to how some unscrupulous trader/elements of the society were indulging in immoral and illegal acts, by claiming that goods imported into the State are for personal use and consumption and would thus not pay the tax under the Act of 1962, but these goods, however, would be - routed into the market. The effect of such abominable, immoral and illegal act has had drastic and adverse affect on the bonafide and honest traders as same goods would be available at a lesser rate in the market. At the hands of unscrupulous trades, the honest and bonafide traders would thus enormously suffer in their business and trading activities, and on the other hand the common good of the general public would also become a casualty as the tax evasion by some persons would denude the revenue reservoir of the State of a substantial amount which would otherwise, be recovered as tax. The provisions contained in the Act of 1962 to deal with the tax evaders being not omnipresent and omnipotent could not and would not bring within its penal net all those persons who would evade tax. The unscrupulous traders taking illegal benefit of human fallibility would thus on the one hand take an advantage not permitted by law and on the other hand make that class of traders to suffer who would pay the tax honestly. Curing of this malaise, had become inevitable, as otherwise, even honest traders would be tempted to tread the path of immortality. Neither Constitution nor any law would prevent State from maintaining and preserving the moral fabric of the society. The laws cannot be means of plunder and aggrandizement. In fact, underlying purpose of the Constitution of India and all laws is to maintain and preserve moral fabric of the society. The State was duty bound to take regulatory measures for ensuring that honest traders do not tread path of illegality and immorality and enemies of virtues and values do not go unnoticed in their illegal and immoral activities, accordingly trading activity was required to be regulated. Under the Act of 1962, the State was entitled to receive certain amount of taxes on the taxable goods. The people who would evade payment of tax would impinge upon the authority of the State to collect and receive the taxes. Besides, ensuring that honest traders who were put to loss by dishonest tax evaders do not leave the path of honesty and truthfulness and in order to protect their just and lawful interest, a duty was cast on the State to regulate the conduct of the trading people. The purpose of enacting the impugned Act of 2000 was not thus to impose tax to augment State revenue, but has been primarily and fundamentally enacted as a measure to regulate the conduct of the traders/people. The State is authorized under Section 5 of the Constitution of J&K to make law like Act of 2000. The Entry tax does not fall in list I and III of Schedule VII of the Constitution of India. The State is thus empowered to make law on this subject. It cannot be said in the facts of these cases that Act imposes tax, but it is only a regulatory measure. In view of the law laid down by the Honble Supreme Court in Automobiles case (supra), the impugned Act would not restrict free flow of trade and Article 301 of the Constitution of India would not be attracted. In this legal scenario there would be no need to follow the mandate contained in Article 304(b) of Constitution of India. The sheet anchor of the argument of learned counsel for the petitioners, that by the impugned Act of 2000 their rights are infringed, loses all sting and takes the wind out of the sails of their cases. The argument further suffers eclipse in view of the observations of Honble Supreme Court, which for sake of brevity are summarized as under:
(a) The Honble Supreme Court in case titled The State of Madrass, appellant v. N. K. Nataraja Mudaliar, respondent reported in AIR 1969 SC 147 at paragraph 38 has held that A measure which is intended to check evasion of tax is undoubtedly a valid measure.
(b) The Honble Supreme Court in case titled G. K. Krishnan, appellant v. State of Tamil Naidu and other connected matters reported in (1975) 1 SCC 375 at paragraph 14 while dealing with the expression freein Article 301 stated that the said expression does not mean freedom from regulation. The Honble Supreme Court further held that there is a clear distinction between laws interfering with the freedom to carry out the activities constituting trade and laws imposing on those engaged therein rules of proper conduct or other restraints directed to the due and orderly manner of carrying out the activities. The distinction is described as regulation.In the said case at paragraph 9, it is further stated, if an authority has power to impose a tax, the fact that it gave a wrong reason for exercising the power would not derogate from the validity of the tax. Therefore, there is no substance in the first contention.
(c) The Honble Supreme Court in case titled Jindal Stainless limited (2) and another v. State of Harayana and others reported in (2006) 7 SCC 241 at paragraph 38 has while making differentiation between exercise of taxing and regulatory power held that if the impugned law seeks to control the conditions under which an activity like trade is to take place then such law is regulatory. It was further held that however, if the law enacted is to enforce discipline or conduct under which the trade is to perform or if the payment is for regulation of conditions or incidents of trade or manufacture then the levy is regulatory.
31. These judgments act as beacon lights and are to be faithfully followed. The pleadings in the writ petitions that the Article 286 of the Constitution of India does not authorize the State to make such a law, cannot be accepted, inasmuch as, no tax on the sale or possession of goods is imposed in the manner it is provided in the said Article. Even otherwise, the said article is not attracted to these cases as impugned Act of 2000 is a regulatory measure. The further pleadings in the writ petition that Article 19 of the Constitution of India is infringed by the impugned Act of 2000 cannot be accepted as the right to carry on trade or business is not taken away by the impugned legislation and reasonable restrictions can be placed on the exercise of such right by making law. Article 14 of the Constitution of India also is not attracted as no factual matrix has been laid to show that petitioner has been subjected to any kind of discrimination and secondly there being no discrimination apparent on the face of the record, the said article would not be attracted.
32. The contention of the learned counsel for the petitioners that petitioners have been subjected to double taxation, cannot be sustained for the reason that the provisions of Act of 1962 and Act of 2000 operate in the circumstances which are materially different. The State has power to enact both types of laws and purpose to be secured being not similar, it cannot be said that petitioners have been subjected to double taxation. The law laid down by the Honble Supreme Court in case titled Jindal Stripe Limited appellant v. State of Haryana and ors respondents reported in 2003 8 SCC 60 is not attracted to the facts of these case. In the said case, it was held that tax imposed on traders is not compensatory tax as it had no direct nexus with trading facilities. Further feeble argument was made that in presence of Central Sales Tax, 1956, the State of J&K was not authorized to charge tax in terms of Section 3 of the Act of 2000. In view of the discussion made in this judgment, this argument merits rejection as the Act of 2000 does not impinge upon the provisions of Central Sales Tax Act, 1956. Two Acts operate in two different fields. Under the Act of 2000, no tax is levied on inter-State sales.
33. In view of the fact that the Court has accepted the contention of the learned Senior Counsel appearing for the State of J&K that impugned Act is regulatory measure, th
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ere is no requirement to deal with other submissions made by him at the Bar. Learned counsel made valid submissions which were not only enlightening but were innovative as well. 34. The Constitution Bench of the Honble Supreme Court in case titled Jindal Stainless Ltd. and another v. State of Haryana and ors. reported in (2010) 4 SCC 595 enumerated questions of importance at paragraphs 11 and 12 of the said judgment, which are reproduced as under: 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 andbetween 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-`-vis the Statesauthority to levy taxes under Article 245 and Article 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 restrictionsin 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 goodswould come under Article 304 (b) and external goodsunder 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 Constitution? Whether the word restrictionin 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. The Constitution Bench in view of the importance of the issues raised referred the matter in terms of paragraph 14 of the judgment which is reproduced as under: 14. For the aforestated reasons, let this batch of cases be put before the Honble the Chief Justice of India for constituting a suitable larger Bench for reconsideration of the judgments of this Court in Atiabari Tea Co. and Automobile Transport (Rajasthan) Ltd. 35. It was submitted at the Bar that the issues of importance highlighted in (2010) 4 SCC 595 Jindal Stainless Ltd.s case are under consideration of the larger Bench of the Honble Supreme Court. 36. The Court in view of the discussion made in this judgment has held that the impugned Act of 2000 is a regulatory measure, thus Article 301 of the Constitution is not attracted. The Honble Supreme Court in Automobile Transports case by judicial engineering made it permissible for the State to legislate a law which is either regulatory or compensatory in nature. This issue is not before the larger bench of the Honble Supreme Court. 37. The ultimate result of the above discussion gets manifested in the dismissal of these petitions, which are, accordingly, dismissed. 38. The determined taxes are the revenue of the State. The amount collected in the reservoir of the State is being spent on the welfare programmes benefiting the people at large. The non payment of tax has affected the people. Compensating the people in absolute terms may not be possible. The petitioners by investing the tax money in business activities have benefited themselves at the cost of public welfare and common good. In order to inculcate respect for laws, the petitioners are saddled with costs of Rs. ten lacs each and this amount each writ petitioner shall have to pay to State of Jammu and Kashmir. The said amount shall be spend on the welfare of the orphaned children. The costs are accordingly ordered. 39. The judgment is concluded by what Mark Antony said in William Shakespheres play Julius Ceasar about Julius Ceasarafter he was assassinated, When that the poor have cried, Ceasar hath wept.