Compensatory tax must conform to facilities provided: SC

New Delhi, Apr 13 (UNI) The Supreme Court today held that compensatory tax must conform to the facilities provided by the state to its payers.

A constitution bench headed by Mrs. Justice Ruma Pal while disposing of a bunch of appeals including one filed by M/s Jindal Stainless Steel Ltd. and others overruled the earlier three judge bench judgment in Bhagat Ram and Bihar Chamber of Commerce case in which it was held that compensatory tax could be imposed in public interest also. The facilities provided should be quantifiable, the court held.

Other judges on the bench were Mr. Justices B.N. Srikrishna, S.H. Kapadia, Tarun Chatterjee and P.P. Naolekar.

The court while remitting back the matter to the high court to be disposed of by full bench held that traders must be duly compensated for the compensatory tax levied on them. The appeals were filed against Compensatory taxes imposed on trade and industries in the state of Haryana. The judgment has been written by Mr. Justice Kapadia.

The Court held that compensatory tax must be proportionately beneficial to the payers.

The court held that the concept of compensatory tax is in the nature of reimbursement and the payers of compensatory tax must be compensated in terms of quantifiable benefits and facilities provided by the state.

The petitioner Jindal Stainless Limited had contended that the law laid down in Bhagatram's case was not correct and it desereves to be reconsidered.

The court said restrictions on freight rate can be imposed only if it is the interest of the nation or the people.

UNI AKS/SC RP HT1830