ORDER

Aftab Alam, J.

1. These two writ petitions challenging the constitutional validity of the Bihar Entry Tax Act were taken up for hearing in light of the direction of the Supreme Court in order dated July 14, 2006 in Jindal Stainless Limited v. State of Haryana .

2. Having regard to the fact that the law in Bihar underwent many changes during the past six years, it becomes necessary to begin at the beginning and to take a brief look at some developments taking place in the past.

3. The Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1993 (Bihar Act 16 of 1993) came into force on August 22, 1993. According to its preamble, the Act provided for levy and collection of tax on entry of goods into local areas for consumption, use or sale therein. Section 2(c) of the Act defined "entry of goods" as follows:

(c) 'Entry of goods' with all its grammatical variations and cognate expressions means entry of goods into a local area from any place outside that local area or any place outside the State for consumption use or sale therein.

4. Sub-sections (d), (e) and (f) defined "importer", "import value" and "local areas" respectively. Section 3(1) provided for levy and collection of tax on entry of the Scheduled goods into a local area for consumption, use or sale therein at such rate, not exceeding five per cent of the import value of the goods, as might be fixed by the State Government. Section 3(2) provided that the tax would be paid by every dealer liable to pay tax under the Bihar Finance Act or any other person who brought or caused to be brought the Scheduled goods into the local areas. Section 4 provided that in case of motor vehicle the payment of entry tax would be adjustable against the sales tax liability resulting from its sale by the dealer. Section 8 provided for the application of the provisions of the Bihar Finance Act, 1981 and empowered the authorities under that Act for enforcement of the provisions of the Entry Tax Act. The Schedule to the Act had listed under it only six goods, namely, (i) motor vehicles, (ii) tobacco products (excluding biris), (iii) Indian-made foreign liquor, (iv) vegetable and hydrogenated oils, (v) cements and (vi) crude oil.

5. The Bihar Entry Tax Act, 1993 was declared ultra vires Articles 301 and 304 of the Constitution and consequently bad and illegal by this Court in Bihar Chamber of Commerce v. State of Bihar [1995] 97 STC 538. The State of Bihar took the matter in appeal before the Supreme Court. A two-Judge Bench of the Supreme Court in State of Bihar v. Bihar Chamber of Commerce reversed the decision of this Court and held that the Bihar Entry Tax Act, 1993 was constitutionally valid. The Supreme Court decision in Bihar Chamber of Commerce found and held that the levy under the Act was

compensatory in nature and hence, it did not offend Article 301 of the Constitution. It further held that the impost constituted reasonable restriction and it was in public interest within the meaning of Article 304(b) of the Constitution. It also held that the Bill had received the assent of the President and, thus, even the requirement of the proviso to Article 304(b) was satisfied. The levy was held to be compensatory in nature by applying, what is called in the later Constitution Bench decision of the Supreme Court in findal Stainless Ltd. v. State of Haryana as the test of "some connection" between the tax and the facilities extended to the trade directly or indirectly.

6. On behalf of the petitioners in the two cases before us it was submitted that the Bihar Entry Tax Act, 1993 that received the seal of approval by the Supreme Court in Bihar Chamber of Commerce was actually the thin edge of the wedge and the

finding in that decision that the Bill (for the 1993 Act) had received the assent of the President was taken by the State as licence to amend and change the Act unrecognisably.

7. The parent Act was amended by the Bihar Tax on Entry of Goods into Local Areas for Consumption/Use or Sale Therein (Amendment) Act 2001 (Bihar Act 10 of 2001) that came into force on November 5, 2001. The amending Act changed the definition of "entry of goods" by inserting the following proviso in Section 2(c):

Provided that in case of such goods which arc liable to tax under Section 12(1) of the Bihar Finance Act, 1981, entry of goods shall mean entry of goods into local area from any place outside the State for consumption, use or sale therein.

8. At the same time, the provision of adjustment towards the sales tax liability resulting from the sale of the goods by the dealer, that was available under Section 4 of the Parent Act only in respect of motor vehicles, was extended to all the Scheduled goods by inserting a second proviso to Sub-section (2) of Section 3. Section 4 thus became redundant and was deleted. The amending Act brought about another major change in the parent Act by expanding the list of goods in the Schedule from six to eighteen.

9. The import of the amendment in the definition of "entry of goods" was that with regard to the Scheduled goods that were subject to levy of sales tax, entry into a local area from another local area within the State was excluded from the levy of entry tax. In other words, with regard to the Scheduled goods, subject to levy of sales tax, only goods coming from a place outside the State would attract the charge of entry tax. Excepting tobacco and tobacco products (excluding biris) at serial Nos. 2 and 14 respectively, all goods listed under the Schedule were subject to levy of sales tax. Hence, it was submitted on behalf of the petitioners that the amendment of the definition of "entry of goods" by the amending Act of 2001 introduced the vice of discrimination against goods imported from other States and rendered the Act violative of Article 304(a) of the Constitution. It was further submitted that both the amendment of Section 2(c) and the expansion of the Schedule were made without the previous sanction of the President and, therefore, the amending Act (Act 10 of 2001) was also in violation of the proviso to Article 304(b) of the Constitution.

10. The Bihar Entry Tax Act was further amended by the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein (Amendment) Act, 2003 (Bihar Act 9 of 2003) that came into force on August 22, 2003. It amended Section 3 of the Parent Act by raising the maximum rate of entry tax from five per cent to 20 per cent. Simultaneously, with the amendment of Section 3, notification bearing SO No. 159, dated August 22, 2003 was issued revising upwards the rates of entry tax on different goods in the Schedule. The amending Act further expanded the list of goods in the Schedule from 18 to 24. The expansion of the Schedule was not confined only to extending the number of entries under the Schedule but it also vastly enlarged the scope and range of many entries. For instance, the 2001 Amendment of the Schedule had introduced "emulsion paints" at serial No. 2. It was substituted by the much enlarged entry as follows:

All types of paints, varnishes and all painter's materials.

11. Similarly, at serial No. 8 of the Schedule was "electrical fittings". It was substituted by the following entry:

Electrical goods, implements, apparatus and appliances including electrical fittings, transformers, inverters, insulators, electrical earthenware and porcelein, testing and maintenance equipment, diesel towers, tower parts, bolt and nuts used therein, conductors, galvanised steel earth wire, lightning arrester, control and relay panels, lighting equipment, PVC cable, power line communication carrier equipment.

12. On the same date (August 22, 2003) yet another amending Act, namely, the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein (Amendment and Validation) Act, 2003 (Bihar Act 11 of 2003) was gazetted.

13. Counsel for M/s. Indian Oil Corporation, one of the two petitioners before the court, submitted that the amendment made by Bihar Act 11 of 2003 was actually induced by an interim order passed by this Court in C.W.J.C. No. 2739 of 2003 (one of the two cases in hand). The writ petition was filed challenging the levy of entry tax on crude oil imported from other countries. It was contended that the provisions of the Bihar Entry Tax Act did not justify levy of entry tax on crude oil imported from outside the country and the State Legislature was not competent to levy an impost on imported goods. In support of the submission, reliance was placed on a decision of the Kerala High Court FR. William Fernandez v. State of Kerala reported in [1999] 115 STC 591 (Ker) which was at that time subject to an appeal pending before the Supreme Court S.L.P. (Civil) Nos. 9938-9957 of 1998. In those circumstances, a bench of this Court adjourned the case till the disposal of the appeal by the Supreme Court and passed an interim order on April 7, 2003 by which the petitioner was directed to go on paying 50 per cent of the entry tax and the realisation of the balance half was stayed till decision of the matter by the Supreme Court. On behalf of the petitioner, it was submitted that the Amendment and Validation Act 2003 was brought with a view to overcome the challenge raised by the petitioner and circumvent the court's order. The Amendment and Validation Act was made retrospectively effective from February 25, 1993 (the date on which the first ordinance preceding the Parent Act was promulgated). It inserted an Explanation in the definition of "entry of goods", that brought within the sweep of the Act also goods coming from any place outside the territory of India. It also made certain consequential amendments in the definitions of "importer" and "import value". The Amendment and Validation Act had recurrent deeming Clauses saying that those amendments would be part of the Act since its inception. The amending Act also contained a provision to validate the levy of entry tax made in the past, present or future on any Scheduled goods imported from any place outside the territory of India, notwithstanding any judgment, decree or order of the court, Tribunal or authority.

14. It needs to be noted here that both the Amendment Acts of 2003 (i.e., Bihar Act 9 of 2003 and Bihar Act 11 of 2003) were brought into existence without the previous sanction of the President.

15. The Act underwent yet another amendment on April 19, 2006 by Bihar Finance Act, 2006 (Act 7 of 2006). By the amending Act, it was stipulated that the facility of adjustment towards sales tax would not be available on goods that were exempted from payment of sales tax in terms of any notification issued under Section 7(3) of the Bihar Finance Act, 1981. The amendment was retrospectively with effect from February 25, 1993.

16. While the aforesaid legislative developments/changes were taking place in the State, the issue of constitutional validity of the laws framed by different States for the levy of entry tax reached the Supreme Court in Jindal Stainless Ltd. v. State of Haryana. Among the many analogous cases tagged along with Jindal were these two cases from this court, one in the form of Civil Appeal No. 6331 of 2003 from C.W.J.C. No. 6540 of 2002 : Harinagar Sugar Mills Limited v. State of Bihar and the other in the form of Transferred case (Civil) No. 13 of 2004 from C W.J.C. No. 2739 of 2003 : Indian Oil Co. Ltd. v. State of Bihar.

17. A two-Judge Bench of the Supreme Court hearing Jindal Stripe Ltd. [2004] 134 STC 303 (and other analogous cases) doubted the correctness of the view taken in Bhagatram Rajeev Kumar v. Commissioner of Sales Tax relied on in State of Bihar v. Bihar Chamber of Commerce by which the constitutional validity of the Bihar Act in its unamended form was upheld by the Supreme Court. As a result, the cases came up before the Constitution Bench of the Supreme Court "to decide with certitude the parameters of the judicially evolved concept of 'compensatory tax' vis-a-vis Article 301". The Constitution Bench by its judgment and order in Jindal Stainless Ltd. held that the decisions in Rajeev Kumar

and Bihar Chamber of Commerce had

erred in deviating from the concept of regulatory and compensatory tax as evolved in Atiabari Tea Co. Ltd. v. State of Assam and the working test for determining whether the tax was regulatory or compensatory as laid down in Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan and substituting it by the test of "some connection" between the tax and the facilities extended to the trade directly or indirectly. The Constitution Bench recorded its conclusion in paragraph 53 of the judgment which is as follows (para 50 of 145 STC):

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 Rajeev Kumar v. Commissioner of Sales Tax and followed in the case of 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.

18. When the matter was once again put up before the two-Judge Bench of the Supreme Court, it passed an order dated July 14, 2006 Reported as Jindal Stainless Ltd. v. State of Haryana remitting the cases to the respective High Courts with the following observation and direction:

Since relevant data do not appear to have been placed before the High Courts, we permit the parties to place them in the writ petitions concerned within two months. The High Courts concerned shall deal with the basic issue as to whether the impugned levy was compensatory in nature. The High Courts are requested to decide the aforesaid issue within five months from the date of receipt of our order. The judgment in the respective cases shall be placed on record by the parties concerned within a month from the date of the decision in each case pursuant to our directions.

19. After the order of the Supreme Court/on August 29, 2006 the State came out with yet another amendment Act, namely, the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein (Amendment) Act, 2006. It made some basic amendments in the Act apparently with a view to remove certain lacunae in it and to satisfy the test approved by the last Constitution Bench decision of the Supreme Court in Jindal Stainless Ltd. for

determining whether a tax was regulatory or compensatory in character. The Amendment Act, 2006 re-defined "entry of goods" in the following manner:

2(c) 'Entry of goods', with all its grammatical variations and cognate expressions, means, entry of goods:

(i) into a local area from any place outside such area,

(ii) into a local area from any place outside the State,

(iii) into a local area from any place outside the territory of India, for consumption, use or sale therein.

20. It extended the provision for adjustment of entry tax against the sales tax liability that was earlier available on sale of those goods by the dealer, also to sale of goods manufactured by consuming the imported Scheduled goods. In case of manufactured goods, however, the provision of adjustment was subject to a number of limitations and restrictions.

21. The most significant amendment introduced by the Amendment Act, 2006 was the creation of the Bihar Trade Development Fund and the declaration incorporated in the Act that the money collected as entry tax would be spent exclusively for the purpose of development of trade, commerce and industry in the State. In this regard, the amending Act, 2006:

(i) inserted Clause (cc) in Section 2 defining 'Fund' to mean the Bihar Trade Development Fund;

(ii) added the following expressions in the charging Section 3,...for the purpose of development of trade, commerce and industry in the State..., and finally

(iii) re-inserted Section 4 that was earlier deleted by Act 10 of 2001.

22. The newly inserted Section 4 in the Act reads as follows:

4. Utilisation of the proceeds of the levy under the Act. -(1) The proceeds of the levy under the Act shall be appropriated to the fund and shall be utilised exclusively for the development of trade, commerce and industry in the State of Bihar which shall include the following:

(a) construction, development and maintenance of roads and bridges for linking the market and industrial areas to their hinterlands,

(b) providing finances, aids, grants and subsidies to financial, industrial and commercial units,

(c) creating infrastructure for supply of electrical energy and water supply to industries, marketing and other commercial complexes,

(d) creation, development and maintenance of other infrastructure for the furtherance of trade, commerce and industry in general.

(2) The State Government shall, by a notification issued in this behalf, satisfy the manner of deposit of tax under appropriate heads of accounts and the manner in which the proceeds of the levy shall be utilised exclusively for the development of trade and commerce in the State of Bihar.

23. It is in the aforesaid background that I now proceed to examine the two writ petitions.

24. Harinagar Sugar Mills Ltd., the petitioner in C.W.J.C. Nos. 6540 and 6746 of 2002, is a company incorporated under the Indian Companies Act. It is engaged in the production and sale of sugar and it has its factory at Harinagar where sugar is manufactured by vacuum pan process. The petitioner purchases a large variety of manufactured goods from outside the State of Bihar. The goods are purchased in course of inter-State trade or commerce, on payment of Central sales tax. The goods purchased by the petitioner and subjected to the levy of entry tax constitute a wide range. These include (i) goods made from iron and steel, (ii) plastic, steel and PVC pipes, (iii) electrical goods, (iv) petroleum products, (v) paints and varnishes, (vi) computer hardware and software, (vii) different kinds of motor vehicles, (viii) telephone sets and spares, (ix) timber plywood, etc., (x) cement, (xi) steam coal, (xii) air-conditioners and air coolers, (xiii) building materials, (xiv) marble, granite, ceramic and glazed tiles, (xv) sanitary goods and fittings, (xvi) paper of all kinds, etc., etc. It is stated on its behalf that consumables like petroleum products, paints, varnishes, etc., are consumed and the other goods are used as fixtures, fittings or installations in the factory or factory premises and these ultimately become part of the fixed capital asset of the company. It is asserted that none of the purchased goods are sold by the petitioner to any person or consumed or used as raw materials for the manufacture of a new commodity for sale.

25. The goods purchased by the petitioner from outside the State for its different uses were brought within the ambit of the Bihar entry tax following the 2001 Amendment of the Act that expanded the schedule and brought a number of manifold goods under it. The petitioner is aggrieved by the levy of entry tax on the goods purchased by it from outside the State for different uses and seeks to challenge it on a number of grounds.

26. The writ petition was earlier dismissed by a bench of this Court by judgment and order dated April 25, 2003 Harinagar Sugar Mills Ltd. v. State of Bihar C.W.J.C. Nos. 6540 and 6746 of 2002 primarily relying on the Supreme Court decision in the Bihar Chamber of Commerce . It is once again taken up for hearing as directed by the Supreme Court in the order passed in Jindal Stainless Ltd. .

27. M/s Indian Oil Corporation Ltd., is the Petitioner in C.W.J.C. No. 2739 of 2003. It seeks to challenge the levy of entry tax on crude oil imported from place(s) outside the territory of India. The petitioner is a Government company incorporated under the Indian Companies Act. One of its refineries is situate at Barauni in the district of Begusarai, Bihar. The Barauni refinery previously used to get its crude oil from Assam oil fields but after January, 2001 it is not getting any crude oil from indigenous sources and it is now dependent for supply of crude oil on imports from foreign countries. It is stated in the writ petition that the imported crude oil from outside the territory of India is centrally procured by the petitioner-company for all its refineries situated at different places in the country, including the refinery at Barauni. The consignment of crude oil imported from outside the territory of India is off-loaded from oil tankers and is transported to different refinery locations. It is stated that the process of import is concluded only when the crude oil reaches the terminal points, one of them being at Barauni, Bihar. The imported crude oil is then refined and the petroleum products are transferred to the Company's Marketing Division for distribution. In the writ petition, it was contended that the scheme of the Bihar entry tax does not allow for levy of entry tax on goods (crude oil in this case) imported from other countries.

28. The writ petition was pending before the court when it was transferred to the Supreme Court and was registered there as Transferred Case (Civil) No. 13 of 2004 [arising out of Transferred Petition (Civil) No. 422 of 2003]. Following the order in Jindal Stainless Ltd. it was taken up for hearing.

29. Pursuant to the Supreme Court direction, permitting the parties to place the relevant data in the writ petitions, both the petitioners filed supplementary affidavits in their respective cases.

30. M/s. Harinagar Sugar Mills Ltd., filed (third) supplementary affidavit in C.W.J. C. No. 6540 of 2002. In this affidavit, it is stated that over a period of about six years, the sum of Rs. 78,39,493.60 was realised from the petitioner as entry tax.

31. It is stated in the affidavit that in return the petitioner did not receive any facility, benefit or service from the State that would promote trade or commerce. It was stated that apart from payment of entry tax, the petitioner was obliged to share the expenses in the construction of link roads, culverts, etc., in its area with the Zonal Development Council constituted under the Bihar Sugarcane (Regulation of Supply and Purchase) Act, 1981. It was further stated that under the Bihar and Orissa Municipal Act, Ramnagar Notified Area Committee had the obligation to provide all civil amenities, such as water, etc., and it levied taxes for the purposes. The petitioner was already paying taxes, rates and charges to different statutory bodies for the civil amenities and elements of infrastructure which were practically non-existent. The petitioner was generating electricity for its use and was now in a position to supply energy to the Electricity Board. The relevant details in this regard are contained in paragraphs 13 to 24 of the third supplementary affidavit.

32. Similarly, M/s Indian Oil Corporation Ltd., filed a supplementary affidavit in C.W.J.C. No. 2739 of 2003. It is stated in this affidavit that the petitioner had incurred the total liability as entry tax amounting to Rs. 2,21,30,96,611 out of which it has actually paid Rs. 1,09,09,66,012 and the balance amount of Rs. 1,12,21,30,599 was in abeyance awaiting the decision of the court. It also gave details of the huge expenses and investments made by the Corporation in setting up the oil pipelines and other ancillary installations. It is also stated that it incurred huge expenses in providing civic amenities not only for the refinery but also for the towns of Barauni and Begusarai, etc. In return of the tax paid by it, it did not get from the State any facility or benefit promoting trade or commerce.

33. Both the affidavits filed by the petitioners in the two cases are full of facts and figures aimed at showing that the levy and collection of entry tax had no element of reimbursement or recompense for any facilities, benefits or services provided to trade and commerce.

34. The State has filed affidavits in both the cases. The affidavits are brief and do not state anything about the money received by the State as entry tax and the expenses incurred by it in providing any benefits or facilities aimed at promoting trade and commerce. The State's affidavits solely rely upon the amendments made in the Act on August 29, 2006. It brings on record the notification dated October 23, 2006 issued under Sub-section (2) of the newly inserted Section 4 in the Act. On behalf of the State, it is maintained that the creation of the Bihar Trade Development Fund and the issuance of the notification under Section 4(2) of the Act squarely brought the levy of entry tax within the concept of compensatory tax as propounded by the Supreme Court in Atiabari and as enunciated in the later decision in Automobile Transport (Rajasthan) Ltd. and Jindal Stainless Ltd. .

35. Dr. Debi Pal, Senior Advocate appearing for the petitioner in C.W.J.C. No. 2739 of 2003 submitted that the Constitution Bench decision of the Supreme Court in Jindal Stainless Ltd. knocked the bottom off the Parent Act of 1993 and the later amendments made the Constitutional position of the Act from bad to worse. As a result of the later amendments, the Act became discriminatory in regard to the scheduled goods coming from other States and it thus become violative of Article 304(a) of the Constitution. Moreover, the amendments were introduced without the previous sanction of the President which was in violation of the proviso to Article 304(b) of the Constitution. Dr. Pal assailed, in particular, the Amendment and Validation Act, namely, Bihar Act 11 of 2003 that brought, with retrospective effect, the Scheduled goods imported from other countries also within the ambit of the Act. He submitted that in making the amendment date back to the inception of the parent Act, the State had not only overstepped its legislative powers but in the absence of the previous sanction by the President, the amendment was also violative of Article 304(b) of the Constitution. As regards the last amendment to the Act, Dr. Pal submitted that it was a futile exercise inasmuch as there was no scope to mend, alter or amend an Act that was bad and unconstitutional from its beginning. He also submitted that even the last amendment failed to make the levy of entry tax in the nature of a compensatory tax.

36. Mr. K.N. Jain, Senior Advocate appearing for the petitioner in C.W.J.C. No. 6540 of 2002 assailed the Act (following the 2001 Amendment) for being patently discriminatory in respect of the scheduled goods coming from outside the State. Mr. Jain further submitted that though the last amendment in July, 2006 sought to remove the element of discrimination against the goods from other States, it failed to give to the levy of entry tax any compensatory character. He also submitted that in the absence of previous sanction or consent by the President, the amendments were bad and illegal being violative of Article 304(b) of the Constitution.

37. The Advocate-General appearing on behalf of the State, on the other hand, submitted that so far the Supreme Court had not declared the Bihar entry tax bad or invalid. On the contrary; the constitutional validity of the Act was expressly upheld by the Supreme Court in Bihar Chamber of Commerce and that position remained

subsisting till date. Learned Advocate-General pointed out that the decision in Bihar Chamber of Commerce , apart from holding that the levy of tax under the Act was compensatory in character, had gone on to examine the constitutional position of the Act proceeding on the assumption that the tax was not compensatory. In that connection, the decision found and held that the impost constituted reasonable restriction on the freedom of trade and was in public interest. It also found, as a matter of fact, that the Bill had received the assent of the President and thus the Act satisfied all the three requirements of Article 304(b) and its proviso and was, therefore, a valid piece of legislation regardless of the injunction of Article 301 of the Constitution. He submitted that the Constitution Bench in Jindal Stainless Ltd. held that the test of "some connection" applied in Bihar Chamber of Commerce was incorrect but it did not set aside or upset the judgment in Bihar Chamber of Commerce as a whole. The validity of the Act was, therefore, beyond question. He further submitted that the later amendments to the Act were of a nature that did not warrant the previous sanction of the President on each separate occasion. He also submitted that it was quite fallacious to contend that after the amendment in 2001, the Act had become discriminatory in regard to the scheduled goods coming from outside the State and stated that the submission was unsustainable both on facts and in law. He finally submitted that following the amendments of July, 2006, the levy under the Act had firmly regained its compensatory character and the levy was, therefore, in perfect, accord and harmony with Article 301 of the Constitution and the provisions of Article 304(a) or (b) of the Constitution were, therefore, not attracted.

38. In light of the directions of the Supreme Court in Jindal Stainless Limited and in view of the submissions made at the Bar, the following questions arise for consideration in the two cases.

1. (a) Whether the levy under the Bihar Entry Tax Act, 1993 before its amendments can be said to be compensatory in nature and, therefore, involving no conflict with Article 304(a) of the Constitution in light of the test approved by the decisions of the Constitution Bench of the Supreme Court in Jindal Stainless Ltd. ?

(b) In case the answer to the above is in the negative, can the Parent Act of 1993 still be held to be a valid piece of legislation with reference to Article 304(b) of the Constitution?

2. Whether the Bihar Entry Tax Act suffered from the vice of discrimination against goods imported from other States and hence, offended Articles 301 and 304(a) of the Constitution since the amendment in the definition of "entry of goods" on November 5, 2001 by amending Act 10 of 2001 till the expression was redefined on August 29, 2006 by Bihar Act 19 of 2006?

3. Whether the following changes made in the Act were violative of the proviso to Article 304(b) of the Constitution for want of previous sanction by the President:

(a) The amendment in the definition of "entry of goods" and the expansion of the Schedule by amending Act 10 of 2001.

(b) The raising of the maximum limit of entry tax from five per cent to 20 per cent and the further expansion of the Schedule by amending Act 9 of 2003.

4. Whether the amendment in the definition of "Entry of Goods" bringing within its ambit goods imported from other countries was bad and invalid?

(a) for seeking to introduce the amendment with retrospective effect?

(b) for want of previous sanction by the President?

5. Whether the levy by the Bihar Entry Tax Act after its last amendment on August 29, 2006 by amending Act 19 of 2006 acquires/regains the nature of compensatory tax and becomes in accord with Article 301 of the Constitution?

6. If the answer to the above is in the affirmative, whether the Act after its amendment on August 29, 2006 need not conform to the provisions of Article 304(b) of the Constitution and its proviso?

Issue No. 1(a)

39. The issue first came up for consideration in the case of Bihar Chamber of Commerce. At that stage, on behalf of the State it was simply stated that entry tax was levied to make up for the loss of revenue from cess on minerals resulting from the decision of the Supreme Court in the case of India Cement Ltd.

followed by a number of decisions by this court. No attempt was made to show that entry tax was levied as reimbursement/recompense for providing some facilities/benefits directly promoting trade and commerce. As a matter of fact, it was the admitted position that the money collected as entry tax went to the consolidated fund of the State. Nevertheless, the decision in Bihar Chamber of Commerce , by applying the test of "some connection" between the tax and the trading facilities provided by the State, held that entry tax was compensatory in nature. In Jindal Stainless Ltd. , a Constitution Bench of the Supreme Court observed that the levy was held to be compensatory in nature on an incorrect premise. The test of "some connection" was not a valid test to determine compensatory nature of a tax and in fact it would be destructive of the very idea of a compensatory tax as evolved in Atiabari . It further held that the compensatory character of tax could only be determined on the basis of "direct and immediate effect" of the impugned law on trade and commerce under Article 301 of the Constitution as propounded in Atiabari Tea Co. Ltd. and the working test enunciated in Automobile

Transport (Rajasthan) Ltd. . Since the appeals before the Supreme Court were against judgments rendered by the High Courts at a time when Bihar Chamber of Commerce held the field, the pleadings of the parties before the High Court did not contain the relevant data to judge the compensatory nature of the levy, applying the doctrine of "direct and immediate effect" on trade and commerce. (In the two cases before us the counter-affidavits filed by the State (before the matter reached the Supreme Court) defended the Act/Notifications issued under it solely on the basis of Bihar Chamber of Commerce.) Hence, the Supreme Court deemed it just and proper that the matter be re-examined by the High Courts after permitting the parties to incorporate the relevant data in their respective pleadings.

40. As noted above, the petitioners in the two cases have filed supplementary affidavits in their respective cases bringing on record the relevant data for application of the test of "direct and immediate effect". The State too has filed supplementary counter-affidavits in the two cases but the State's affidavits do not contain any relevant data. On behalf of the State, reliance is placed solely on the amending Act 19 of 2006, dated August 29, 2006 and the notification, dated October 23, 2006 issued under Sub-section (2) of Section 4 introduced in the Act by the amendment. As noted earlier, the Amendment Act, 2006 created the Bihar Trade Development Fund and stated that the proceeds of the levy under the Act would be utilised exclusively for the development of trade, commerce and industry in the State in ways enumerated in Clauses (a) to (d) of Section 4(1). The State has not produced any data to show that the levy of entry tax was a reimbursement recompense for the quantifiable/measurable benefit provided or to be provided to its payer(s). Here I may recall the observations made by the Constitution Bench of the Supreme Court in paragraph 46 of the judgment in Jindal Stainless Ltd. specifically referred to in paragraph 4 of the order in Jindal Stainless Ltd. .

46 (43). Applying the above tests/parameters, whenever a law is impugned as violative of Article 301 of the Constitution, the court has to see whether the impugned enactment facially or patently indicates quantifiable data on the basis of which the compensatory tax is sought to be levied. The Act must facially indicate the benefit which is quantifiable or measurable. It must broadly indicate proportionality to the quantifiable benefit. If the provisions are ambiguous or even if the Act does not indicate facially the quantifiable benefit, the burden will be on the State as a service/facility provider to show by placing the material before the court, that the payment of compensatory tax is a reimbursement/recompense for the quantifiable/measurable benefit provided or to be provided to its payer(s). As soon as it is shown that the Act invades freedom of trade it is necessary to enquire whether the State has proved that the restrictions imposed by it by way of taxation are reasonable and in public interest within the meaning of Article 304(b) [See : para 35 of the decision in the case of Khyerbari Tea Co. Ltd. v. State of Assam .

41. In the absence of any material produced by the State to show that it provided any quantifiable/measurable benefit, facility or service to promote trade and commerce and the levy was a reimbursement/recompense for providing the benefit, facility or service, there is no escape from the conclusion that the levy was not compensatory in nature under the Parent Act of 1993 and in any event till the amendment of the Act on August 29, 2006. Whether or not the levy acquired the character of compensatory tax after the amendment of the Act on August 29, 2006 will be examined separately in issue No. 5.

Issue No. 1(b):

42. The Advocate-General submitted that in Bihar Chamber of Commerce , the validity of the Act was tested and upheld, quite independently of Article 301 under Article 304(b) of the Constitution and that part of the decision was left undisturbed by Jindal Stainless Ltd. . He pointed out that with regard to Articles 301 and 304(b), issues were framed separately as questions (1) and (2). After upholding the State's contention that the levy under the Act was compensatory in nature, the decision had proceeded to examine the validity of the Act under Article 304(b) of the Constitution on the assumption that the levy was not compensatory1. The Advocate-General invited our attention to paragraph 13 of the judgment where it was observed as follows (page 9 of STC):

13. The impugned tax is a tax on entry-on movement of goods into a local area. If it is assumed to be neither compensatory, nor regulatory (as mentioned above) it may be said to be offending Article 301, unless, of course, it is saved by virtue of the provision contained in Article 304(b) read with Article 255 of the Constitution, as contended by the learned Additional Solicitor-General.

43. Paragraph 22 of the judgment recorded the finding on the issue as follows:

...on the material brought to the notice of the court and for the reasons recorded hereinabove, the requirements of Article 304(b) must be held to have been satisfied in this case. The attack upon the validity of the impugned Act on the ground of violation of Article 301 accordingly fails.

44. On behalf of the petitioners, it was submitted that any reliance on Bihar Chamber of Commerce would be misplaced in view of the observations made by the Constitution Bench of the Supreme Court in Jindal Stainless Ltd. . It was further submitted that the basic issue in the matter was the compensatory character of the levy and once the impost was held to be non-compensatory, its validity cannot be saved under Article 304(b) of the Constitution. Reliance was also placed on a Division Bench decision of the Jharkhand High Court in Tata Iron & Steel Co. Ltd. v. State of Jharkhand [2007] 6 VST 587 : [2006] BRLJ 111 where it was held that Bihar Chamber of Commerce was impliedly overruled by the Jindal

Stainless Ltd. .

45. I am unable to accept the submission. The policy mandated by Article 301 of the Constitution is expressly subject to the other provisions of Part XIII of the Constitution. On the other hand, Article 304 begins with the words "Notwithstanding anything in Article 301 or Article 303...." It is well-settled that Article 304 of the Constitution is an exception to Article 301 and a taxing statute though coming within the purview of Article 301 may yet be valid if it satisfied the requirements of Article 304 of the Constitution. The Supreme Court in State of Karnataka v. Hansa Corporation considered the very issue in paragraphs 24 to 27 of the judgment. On closely examining the earlier decisions of the court in Atiabari , Automobile Transport (Rajasthan) Ltd. and Khyerbari Tea Co. Ltd. v. State of Assam

, following conclusion was recorded in paragraph 27 of the judgment:

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.

46. I, therefore, find no substance in the submission that once the impost was held to be non-compensatory, its validity could not be sustained even with reference to Article 304(b) of the Constitution.

47. Coming now to the next submission that on the issue of Article 304(b) Bihar Chamber of Commerce was impliedly

overruled by Jindal Stainless Limited . It is to be noted that Bihar Chamber of Commerce took the view that the levy under the Act was a reasonable restriction on the freedom guaranteed by Article 301 of the Constitution and the impost was in public interest on two grounds. These were (i) The State's finances were badly hit due to the loss of revenue from cess on minerals as a result of the judgment of the Supreme Court in India Cement Ltd. and a number of High Court decisions following it. It was, therefore, imperative and strongly in public interest to find alternate sources of revenue in order to keep various public welfare programmes and other Governmental functions going on, (ii) In practical terms, the levy did not create any additional burden on the dealers. In case of four out of the six Scheduled goods, credit was given for entry tax levied and collected towards the sales tax payable on the sale of those goods. Tobacco products (the fifth Scheduled goods) already suffered excise duty to the extent of 250 to 300 per cent of their value and an additional levy of three per cent would be of no consequence, especially having regard to the inherent harmful nature of the tobacco products. As for crude oil, the last Scheduled goods, there was no provision for credit towards sales tax because crude oil was not sold in Bihar. It is important to note that in support of the first ground assigned to hold that the impost was a reasonable restriction and it was in public interest, Bihar Chamber of Commerce relied upon the earlier decisions in (i) Hansa

Corporation , (ii) Bhagatram Rajeev Kumar

, (iii) Shaktikumar M. Sancheti v. State of

Maharashtra and (iv) Khyerbari Tea Co. Ltd.

. Now, Jindal Stainless Ltd.

undoubtedly held that the test of "some connection" in paragraph 8 of the judgment in Bhagatram Rajeev Kumar [1995] 96 STC 654 (SQ was not good law but it made no adverse comment insofar as the other three decisions are concerned. The decision in Hansa Corporation that was repeatedly relied upon in Bihar Chamber of Commerce was specifically considered in Jindal

Stainless Ltd. . In paragraphs 13 and 14 of the

judgment, it was observed that for introducing the doctrine of "substantial or some link" Bhagatram Rajeev Kumar had wrongly relied on Hansa Corporation as in the latter decision the issue of compensatory nature of tax was expressly left open.

13. In Bhagatram's case , the challenge was to M.P. Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976. In that case, although it was demonstrated by the State and not disputed by the assessee that the levy was compensatory, nevertheless, the court went on to say, vide SCC page 678, para 8, (page 658 of STC) that:

The concept of compensatory nature of tax has been widened and if there is substantial or even some link between the tax and the facilities extended to dealers directly or indirectly the levy cannot be impugned as invalid,

In this connection, reliance was placed on the judgment of this court in the case of State of Karnataka v. Hansa Corporation . At this stage, it may be noted that although

there was a challenge to the levy of entry tax in the case of Hansa Corporation , the issue whether the tax was

compensatory in nature was expressly left open, particularly, because Article 304(b) stood complied with. In fact, the impugned Act was saved because Article 304 was complied with. It was for that reason alone that the Act could not be struck down in Hansa Corporation's case .

48. From paragraph 14 quoted above, it appears that Jindal Stainless Ltd. did not disapprove Hansa Corporation

, insofar as it held that the impugned Act was saved because Article 304 was complied with, while leaving the question regarding compensatory nature of the Act open.

49. The Jharkhand High Court decision in Tata Iron & Steel Co. Ltd. [2007] 6 VST 587 : [2006] BRLJ 111 failed to notice that the decision in Bihar Chamber of Commerce on the issue of Article 304 was based not so much on Bhagatram Rajeev Kumar but on Hansa Corporation and Khyerbari Tea Co. Ltd. . Therefore, it does not appear to me to be quite justified to say that on the issue of Article 304 too Bihar Chamber of Commerce was impliedly overruled because Jindal Stainless Ltd. overruled Bhagatram Rajeev Kumar with regard to the test of "some connection"

indicated in paragraph 8 of the judgment. With respect therefore, I am unable to follow the decision of the Jharkhand High Court in Tata Iron & Steel Co. Ltd. [2007] 6 VST 587 : [2006] BRLJ 111 and I am of the considered view that the decision in Bihar Chamber of Commerce on the issue of Article 304(b) of the Constitution remains undisturbed. The Advocate-General is, therefore/correct in his submission that on the question of Article 304(b) of the Constitution (with regard to the Parent Act before its amendments), this Court is bound by the decision in Bihar Chamber of Commerce [1995] 97 STC 538 and it cannot take a different view. It is, therefore, held that though the levy under the Parent Act was not compensatory in nature, the impost was constitutionally valid by virtue of Article 304(b) of the Constitution.

Issue No. 2:

50. On behalf of the petitioners in the two cases, it was contended that the amendment in the definition of "entry of goods" by amending Act 10 of 2001, with effect from November 5, 2001, made the Act apparently discriminatory against goods imported from other States and made it violative of Articles 301 and 304(a) of the Constitution. It was pointed out that the Parent Act of 1993 did not make any distinction between the goods brought to a local area from another local area within the State or from a place outside the State. Hence, it did not offend Article 304(a) of the Constitution. But the 2001 Amendment excluded goods brought to a local area from another local area within the State from the purview of the Act with the result that only goods coming from outside the State remained subject to the levy. The Act thus clearly violated Articles 301 and 304(a) of the Constitution. In support of the submission that following the amendment in the definition of "entry of goods", the Act became violative of Article 304(a) read with Article 301 of the Constitution, Dr. Pal, counsel appearing for M/s. Indian Oil Corporation Ltd., relied on two Supreme Court decisions in West Bengal Hosiery Association v. State of Bihar [1988] 71 STC 298 : [1988] 4 SCC 134 (paragraphs 5, 6 and 7) and Weston Electroniks v. State of Gujarat (paragraph 6). He also relied on a Bench decision of the Bombay High Court in Eurotex Industries and Exports Ltd. v. State of Maharashtra [2004] 135 STC 25 and a single Judge decision by the Karnataka High Court in Syndicate Bank v. State of Karnataka [2000] 119 STC 155.

51. In reply, the learned Advocate-General submitted that the petitioners' contention was quite fallacious and overlooked the fact that simultaneously with the amendment in the definition of "entry of goods" a provision was introduced [vide second proviso to Sub-section (2) of Section 3] for giving credit for entry tax levied and collected towards the sales tax payable on the sale of goods. He submitted that on reading the amended definition of "entry of goods" along with the second proviso to Section 3(2) of the Act it would become plain and clear that in reality there was no discrimination against the goods imported from other States. The Advocate-General further submitted that the rates of entry tax were always lower than the rates of sales tax with the result that the aggregate of entry tax and sales tax levied and collected on goods imported from other States always remained equal to the sales tax levied and collected on goods produced and manufactured in this State. In support of the submission/he submitted charts showing that the difference in total incidence of tax (entry tax + sales tax on goods from other States and sales tax on goods from this State) was nil. On behalf of the petitioners, the chart was disputed and it was stated that for sometime, the rate of entry tax on wheat and rice was higher than the rate of sales tax on their sale with the result that wheat and rice imported from outside the State suffered a higher incidence of tax. The Advocate-General submitted that if the levy of entry tax was fixed at a rate higher than the rate of sales tax for some period and in case of some of the goods it might be a ground to challenge the notification issued under Section 3 of the Entry Tax Act but on that basis it could not be argued that the Act itself was discriminatory or violative of Article 304(a). He submitted that the Act had an internal balancing provision that saved it from being discriminatory against goods imported from their States.

52. I am inclined to agree with the submission of the Advocate-General on this issue.

53. But Mr. K.N. Jain appearing for M/s. Harinagar Sugar Mills Limited submitted that the Advocate-General's submission was only with reference to goods that were brought into a local area for sale whereas entry tax was leviable also on goods brought into a local area not for sale but for consumption or use. He further submitted that consumption or use may be in two ways. The goods brought into a local area may be used as raw material for producing a new commodity for sale or they may be consumed as they are, as in the case of his client, the petitioner in C.W.J.C. No. 6540 of 2002. In these two cases, the provision of set-off in the sales tax liability would not apply and in these two cases, therefore, the Act was quite discriminatory with regard to the goods imported from other States. The submission of Mr. Jain cannot be said to be without substance. Therefore, while agreeing with the submission of the Advocate-General that there was no discrimination against goods imported from other States insofar as those goods were brought for resale, it has to be held that there was an apparent discrimination against goods imported from other States for the purpose of consumption or use. I, therefore, conclude that the amendment in the definition of "entry of goods" with effect from November 5, 2001 did introduce an element of discrimination against goods imported from other States that were brought to the local area for consumption or use.

Issue No. 3:

54. It is noted above that on November 5, 2001 and again on August 22, 2003 basic and major amendments were introduced in the Act. These included (i) the change in the definition of "entry of goods", (ii) enlargement of the Schedule, and (iii) raising the maximum limit in the rate of entry tax from 5 to 20 per cent of the import value of goods. All these amendments were undeniably made without the previous sanction of the President.

55. Mr. Advocate-General submitted that once the President gave his assent to the levy of entry tax on entry of goods into the local area from outside there was no need for obtaining previous sanction separately for each amendment. In support of the submission, he relied upon the decision of the Supreme Court in Syed Ahmed Aga v. State of Mysore (paragraphs 7, 11, 14, 16, 18 to 20) and following it another decision in Subodhaya Chit Fund (P) Ltd. v. Director of Chits Madras . In Section Ahmed Aga

, the Supreme Court upheld the case of the State that the amendments were of a nature that did not require the previous sanction of the President and made the following observations in paragraph 18 of the judgment:

18. ...In the case before us, the principal Act had the sanction of the President and enables orders to be passed which had the force of law enabling restrictions to be imposed by rules covered by the purposes of the Act. We have already cited Section 18 of the principal Act to show the amplitude of the rule-making power which had the required Presidential sanction. And, we have found that the amendments before us only varied the form of restrictiveness without appreciably adding to its content. This case has, therefore, no application to the situation before us.

56. Further in paragraph 24 of the judgment, it was observed as follows:

24. ...In the case before us, the amendment did not, in our opinion, go beyond a regulation which was fully authorised by the language of the provisions of the principal Act. Even any additional licensing involved did not go beyond the purview of the provisions of the principal Act and the Rules framed thereunder. The mere change in form, from statutory rules to statutory provisions, could hardly constitute even additional 'regulation'. It is only an additional 'restriction' from the special point of view of Article 304(b) which requires Presidential sanction.

57. From the above, it appears that the Supreme Court sustained the amendments even without the previous sanction of the President because those were found to be, so to say, procedural in nature but the position in the present case is quite different. The amendments materially and substantively transformed the Act in its scope, range and ambit insofar as the Scheduled goods are concerned as also with regard to the extent of taxation, I am, therefore, of the view that the decisions relied upon by the Advocate-General are of no help in this case.

58. On the other hand, Dr. Pal placed reliance in support of the contention that the amendments were bad in the absence of previous sanction by the President on a decision of the Supreme Court in Kaiser-I-Hind Pvt. Ltd. v. National Textile Corporation Ltd. (paragraphs 76 and 77). He also relied on Syed Ahmed Aga v. State of Mysore (paragraph 24). He also relied on two-Bench decisions of the Karnataka High Court reported in Jyothi Home Industries v. State of Karnataka [1987] 64 STC 208 and Jyothi Home Industries v. State of Karnataka [1987] 64 STC 254 [App]. Both the decisions were in the same case Jyothi Home Industries v. State of Karnataka and were rendered by the honourable Justice Mr. M.N. Venkatachaliah as his lordship then was.

59. Mr. Jain cited a Bench decision of this Court in Hanant Lal Agrawal v. State of Bihar (paragraphs 4 to 7), another

decision of the Madhya Pradesh High Court in Dugdh Utpadak Evam Vikreta Sangh, Jabalpur v. State of Madhya Pradesh

(paragraphs 15 and 16) and yet another decision of the Allahabad High Court in Indian Oil Corporation Ltd. v. State of U.P. . Another decision cited on behalf of the petitioners was Buxa Dooars Tea Co. Ltd. v. State of West Bengal (paragraphs 12 and 13). All these decisions tend to support the petitioners' contention but the decisions of the Karnataka High Court in Jyothi Home Industries seem to clinch the issue. It is significant to note that Jyothi Home Industries also considered in detail the Supreme Court decision in Syed Ahmed Aga . The facts of the case and the nature of the amendments also appear to be very close to the case in hand. In light of all those decisions, I have no hesitation in coming to the conclusion that the amendments sought to be introduced in the Parent Act vide amending Act 10 of 2001, dated November 5, 2001 and the amending Act 9 of 2003, dated August 22, 2003 were bad and violative of Article 304(b) of the Constitution for want of the Presidential sanction/assent.

Issue No. 4

60. Dr. Pal strongly argued that the introduction of goods imported from other countries in the definition of "entry of goods" was bad, both for its retrospectivity and for want of previous sanction by the President. Learned Counsel submitted that the amendment in question was not of a nature to remove a lacuna in the Act but the amendment created a new liability that was not in existence from before. That being the position, to make the amendment effective from the date of the inception of the Act was patently unfair, unjust and unreasonable and amounted to the State overstepping its legislative powers. In support of the submission, he relied upon the decisions of the Supreme Court in (i) D. Cawasji & Co. v. State of Mysore and on a Bench decision of the Karnataka High Court in Netley "B" Estate v. Assistant Commissioner of Agriculture Income-tax . The submission of Dr. Pal appears to be well-founded on both counts. I, accordingly, hold that the Amending and Validating Act 11 of 2003 was bad, both on account of giving a retrospective effect to the amendment and for want of previous sanction by the President.

Issue No. 5

61. This brings us to the Act in its present form after its amendment by Amending Act 9 of 2006, dated August 29, 2006. On this issue, Dr. Pal submitted that the 2006 Amendment was a futile exercise inasmuch as the Act was bad and illegal for violation of the Constitutional provisions from its beginning. He submitted that an Act, ultra vires the Constitution was "dead and gone" and it could not be cured by any amendment. He further submitted that in case the State wished to save the law by introduction of the trade development fund, it was incumbent on it to come out with a fresh legislation and not to try to amend a bad Act. In support of the submission, he relied on the decisions of the Supreme Court in (i) Saghir Ahmad v. State of U.P. , (ii) Deep Chand v. State of Uttar Pradesh

, (iii) Mahendra Lal jaini v. State of Uttar Pradesh (paragraph 24) and (iv) B. Shama Rao v. Union

Territory of Pondicherry (paragraph 14).

62. Mr. K.N. Jain, learned Counsel appearing for the petitioner in the other case assailed the amendment in a different way. Mr. Jain submitted that even the creation of the trade development fund would not make the levy compensatory in nature. He submitted that by the 2006 Amendment, all that was done was that a fund was created and certain declarations were made that the money collected as entry tax would go to that fund and would be utilised for promoting trade, commerce and industry in ways enumerated in the different Clauses of Section 4(1) of the Act. Learned Counsel pointed out that in the order passed by the Supreme Court in Jindal Stainless Limited , the

direction was to produce the relevant data before the High Court. The relevant data would only mean the figures relating to collection as entry tax and expenses incurred by the State in providing the benefits, facilities or services promoting trade or commerce. Learned Counsel submitted that the mere declaration of intent would not make the levy compensatory in character.

63. I am unable to accept the submission of Dr. Pal and Mr. Jain and on this issue, I find that the Advocate-General is on firmer grounds. The submission of Dr. Pal will apply to cases where an Act has been held to be unconstitutional and invalid by a competent court of law. In the case in hand, the position is just the contrary. It is seen above that the finding in the Bihar Chamber of Commerce [1996] 103 STC 1 that at least the Parent Act was constitutionally valid by virtue of Article 304(b) of the Constitution remains subsisting till date. It is true that after Bihar Chamber of Commerce [1996] 103 STC 1, several amendments were introduced which are held to be invalid in this judgment. But before the Act or the amendments were declared unconstitutional or invalid by any court of law, the features offending the constitutional provisions were removed and the Act was brought in conformity with the constitutional provisions. I am, therefore, unable to accept the contention that the 2006 Amendment was a meaningless exercise inasmuch as it sought to amend an Act that was "dead and gone".

64. The submission of Mr. Jain is equally unacceptable. The order in Jindal Stainless Limited quoted paragraph 46 from Jindal Stainless Ltd. where it was observed as

follows (page 573):

...The burden will be on the State as a service/facility provider to show by placing the material before the court, that the payment of compensatory tax is a reimbursement/recompense for the quantifiable/measurable benefit provided or to be provided to its payer(s).

(Here italicized.)

65. From the highlighted position in the above quotation, it is clear that the facility, benefit or service may come after the collection of the levy. Section 4 inserted in the Act by the 2006 Amendment makes it clear that the proceeds of the levy under the Act shall be used exclusively for the development of trade, commerce and industry in the State of Bihar.

66. In the light of the decisions of the Supreme Court, it must, therefore, be held that the levy under the Act acquired the nature of a compensatory tax after its amendment by Act dated August 29, 2006.

Issue No. 6:

67. In Automobile Transport (Rajasthan) Ltd. , it was held in paragraph 17 as follows:

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.'s 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.

68. It is well-settled by a catena of decisions that only in case an Act is violative of Article 301 of the Constitution, its validity is required to be tested with reference to Article 304(b). The levy of the tax in its present form being compensatory in character, the need to satisfy the requirements of Article 304(b) of the Constitution does not arise.

69. In light of the above discussions, I may summarise the conclusion as follows:

(i) The levy under the Parent Act of 1993, before its amendments, was not compensatory in character and was, therefore, violative of Article 301 of the Constitution.

(ii) The Parent Act of 1993, before its amendments, was nevertheless saved by virtue of Article 304(b) of the Constitution and the decision in Bihar Chamber of Commerce to that

extent remain subsisting till date.

(iii) The amendments introduced in the Act by amending Acts 10 of 2001 and 9 of 2004 were bad because the former made the Act violative of Article 304(a) of the Constitution and further because both the amendments were made without the previous sanction of the President.

(iv) The introduction of imported goods within the definition of "entry of goods" was bad for being retrospective as also for want of the Presidential sanction/assent.

(v) After the 2006 Amendment the levy under the Act acquired the nature of a compensatory tax and the Act in its present form is a valid piece of legislation.

70. In light of the above discussions, the two cases are fit to be allowei because they relate to the period 2001-2006. But I would refrain from making any order or direction in that regard since the matter is already pending before the Supreme Court.

71. The two cases are thus disposed of as directed by the Supreme Court in Jindal Stainless Limited .

Samarendra Pratap Singh, J.

I agree.