Jindal Stainless Ltd. & Anr. v. State of Haryana
Quick Summary
The Supreme Court ruled that “free” trade in Article 301 does not mean “tax-free.” States may levy entry tax under Entry 52 (List II) if the tax is non-discriminatory. Any tax that gives an edge to local goods over out-of-State goods breaks Article 304(a) and is invalid.
Issues
- Does entry tax under Entry 52 (State List) violate Article 301’s freedom of trade?
- Can a “local area” include the whole State for entry tax purposes?
- Is the Haryana Local Area Development Act, 2000 consistent with Articles 301 and 304(a)?
Rules
- Entry 52, List II lets States tax entry of goods into a “local area” for use, sale, or consumption.
- Article 301 protects free trade from discriminatory burdens; it does not bar neutral taxes.
- Article 304(a) forbids fiscal discrimination against goods from other States.
- Being in the Seventh Schedule is not enough— the law must still meet constitutional limits.
Facts (Timeline)
Industry: Steel
Arguments
Appellant (Jindal)
- Entry tax restricts free trade under Article 301.
- Tax treats outside goods worse than local goods; violates Article 304(a).
- “Local area” cannot mean the whole State without clear, valid design.
Respondent (State)
- Entry 52 authorizes entry tax; Article 301 allows non-discriminatory taxes.
- “Local area” can be any area fixed by statute, even the whole State.
- Purpose is fiscal parity; no unfair benefit to local industries.
Judgment
Non-discriminatory tax = Valid
The Court clarified:
- Article 301: “Free” means free from discriminatory barriers, not free from tax.
- Entry tax: Valid if it does not discriminate against goods from other States.
- Local area: The statute may define it broadly, including the whole State.
Result: States can levy entry tax, but the design must ensure equal treatment of out-of-State goods (Article 304(a)).
Ratio
A State entry tax under Entry 52 is constitutional when it is non-discriminatory in substance and effect. If the tax tilts the playing field toward local goods, it violates Article 304(a) and fails the Article 301 guarantee.
Why It Matters
- Sets the compass for State tax power vs. national market freedom.
- Explains what “discrimination” means in trade taxation.
- Guides drafting of future entry tax/GST-era levies to avoid bias.
Key Takeaways
- “Free” in Article 301 ≠ “tax-free.”
- State entry tax stands only if it treats outside goods on par with local goods.
- “Local area” can be broad if the statute says so and remains non-discriminatory.
- Article 304(a) is the equality gatekeeper for State trade taxes.
Mnemonic + 3-Step Hook
Mnemonic: “FREE ≠ FEE-FREE”
- Find the tax power: Entry 52 allows entry tax.
- Filter for fairness: Does it treat outside goods equally? (Art. 304(a))
- Fit Article 301: No discriminatory barriers to trade.
IRAC Outline
Issue
Is State entry tax compatible with Articles 301 and 304(a), and can “local area” span the whole State?
Rule
Entry 52 permits entry tax; Article 301 guards free trade; Article 304(a) bans discriminatory taxation.
Application
Check if the tax design or effect favors local goods. If yes, it is invalid; if neutral, it stands.
Conclusion
Entry tax is valid only when non-discriminatory. “Local area” may be broad if constitutionally applied.
Glossary
- Entry Tax
- Tax on entry of goods into a local area for use, sale, or consumption.
- Article 301
- Ensures freedom of trade and commerce across India.
- Article 304(a)
- Bars States from taxing out-of-State goods more than local goods.
- Entry 52, List II
- State power to levy entry tax.
- Local Area
- Area defined by statute—could be a town, district, or even the whole State.
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