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Financial Federalism

Jindal Stainless Steel Ltd. v. State of Haryana, (2017) 12 SCC 1

ISSUE:

Whether the imposition of Entry Tax by the State of Haryana on goods imported into a local area violates Article 301 and 304 of the Constitution of India?

RULE:

Entry tax must not impede the free flow of trade and commerce guaranteed under Article 301.

The tax imposed must have a reasonable nexus with the services provided by the state.

It should not result in double taxation or undue burden on trade.

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Financial Federalism

Jindal Stainless Ltd. & Anr v. State Of Haryana & Ors. Appeal (civil) 3453 of 2002

ISSUE:

Whether the imposition of a nondiscriminatory tax constitute a violation of Article 301 of the Indian Constitution?

Whether a tax of a compensating character possibly violate Article 301 of the Indian Constitution?

RULE:

Compensatory Tax Doctrine: The court applied the principle that taxes can be considered compensatory if they provide services or conveniences that facilitate trade, as established in prior rulings. The essence of a compensatory tax is that it should be commensurate with the cost of the facilities provided to traders.

Restrictions on Trade: The court reiterated that while taxes can impose restrictions on trade under Article 301, such restrictions are permissible if they comply with the provisions of Article 304, particularly regarding compensatory taxes.

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Distribution of Legislative Competence

D.A.V. College, Bhatinda v. State of Punjab, AIR 1971 SC 1731

ISSUE:

Whether Hindus can be considered a minority community in the State of Punjab for the purposes of Article 30(1) of the Indian Constitution?

RULE:

Fundamental Rights of Minorities: The Court emphasized the rights of religious and linguistic minorities to establish and administer educational institutions of their choice. This includes the right to choose the medium of instruction and script, which is guaranteed under Articles 29(1) and 30(1) of the Constitution.

Legislative Competence: The principle that no State has the legislative power to prescribe a particular medium of instruction for higher education that infringes upon the Parliament's authority under Item 66 of List I, which relates to coordinating and determining standards in such institutions.

Harmonious Construction: The Court utilized the doctrine of harmonious construction to reconcile conflicting legislative powers between State and Union laws, asserting that Union legislation prevails when there is an overlap regarding educational matters.

Non-Infringement of Rights: The Court held that the State must harmonize its powers to prescribe the medium of instruction with the rights of minorities, ensuring that they are not compelled to adopt a medium or script that does not reflect their cultural and linguistic identity.

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Distribution of Legislative Competence

Federation of Hotels and Restaurants Association of India v. Union of India, (1989) 3 SCC 634

ISSUE:

Whether the Hotel Expenditure Act, 1987, fall within the legislative competence of the Union Parliament?

Whether the classification of the hotels under the Act based on room charges arbitrary and violative of Article 14?

Whether imposing restrictions by the Act on hotel businesses onerous and without reasonable justification?

RULE:

The Court considered whether the restrictions imposed by the legislation were reasonable under Article 19(6) of the Constitution, allowing the state to impose reasonable restrictions on trade or business for public health, morality, and welfare.

Union parliament has the legislative competence to enact the Expenditure Act, 1987 under Article 248 read with Entry 97 of List I of the Seventh Schedule.

The Court noted that while the legislative powers between the Union and the States may overlap, this overlap must be viewed in law and distinguished based on the aspect theory. The same transaction can give rise to different taxable events from legislative perspective.

Expenditure tax is not specifically mentioned in either List I or List II of the Constitution, the Court recognized it as a sui generis tax, justifying its imposition through the exercise of residuary powers under List I.

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Distribution of Legislative Competence

Jayantilal Amritlal Shodhan v. F.N. Rana, AIR 1964 SC 648

ISSUE:

Whether the President's notification entrusting functions to state officers remained effective after the reorganization of the Bombay state, particularly in relation to land acquisition for Union purposes in the newly formed State of Gujarat?

Whether the notification issued by the President comes within the purview of being a law under Section 87 read with Section 2(d) of the Bombay Reorganisation Act?

Whether the proceeding under Section 5A of the Land Acquisition Act, being quasi-judicial, allowed delegation of authority by the Commissioner and consideration of reports made by delegated officers?

Whether the Commissioner of the newly formed State of Gujarat had the power under the Land Acquisition Act in terms of the Presidential notification?

RULE:

Article 258(1) of the Constitution empowers the President to entrust executive functions of the Union to state officers with the consent of the concerned State government.

The entrustment of functions must be within the scope of executive power vested in the Union.

Functions thus entrusted effectively amend the relevant Act by substituting the words of the notification therein. The basic concept of law requires that orders must contain rules regulating conduct enforceable in a court of law. The notification itself does not affect an amendment of the law but acts as an executive order.

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Distribution of Legislative Competence

Prof. Yashpal and Anr. v. State of Chhattisgarh, AIR 2005 SC 2026

ISSUE:

Whether certain provisions of the Chhattisgarh Niji Kshetra Vishwavidyalaya (Sthapana Aur Viniyaman) Adhiniyam, 2002 (the Act) is ultra vires the Constitution of India?

Whether the notifications issued by the State of Chhattisgarh establishing various private universities under the Act are valid?

Whether the functioning of these private universities would hinder the statutory duties of expert bodies like University Grants Commission (UGC), Medical Council of India, and All India Council for Technical Education?

RULE:

Doctrine of Legislative Competence: The court held that state legislatures lack the power to enact laws that infringe upon the Union's authority over coordination and determination of standards in higher education.

Doctrine of Ultra Vires: The court found the Act unconstitutional because it permitted the establishment of universities without adequate oversight, infringing on the Union’s power to set higher education standards.

Principle of Regulatory Oversight by Expert Bodies: Expert bodies like UGC must regulate standards to prevent unrecognised degrees, protecting the quality and legitimacy of education.

Territorial Limitations on State Legislatures: The state legislature could not authorize private universities to establish campuses outside the state’s territorial jurisdiction, as this exceeded state legislative powers.

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Distribution of Legislative Competence

Union of India v. Harbhajan Singh Dhillon, AIR 1972 SC 1061.

ISSUE:

Whether Parliament has the power under residuary provisions to impose a wealth tax on agricultural land when such power is not explicitly mentioned in any of the three Lists of the Seventh Schedule?

Whether the Wealth Tax Act falls under Entry 86, List I or Entry 97, List I of the Constitution?

RULE:

The residuary power of Parliament includes any matter not enumerated in State List (List II) or Concurrent List (List III), even if it's not specifically mentioned in Union List (List I).

When interpreting constitutional distribution of powers, the content of residuary power does not change whether it's conferred on Parliament or States.

The Constitution makers intended to make the center strong by giving Parliament comprehensive residuary powers, including the power to impose taxes not mentioned in other lists.

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Formation and Reorganisation of States

Mulla Periyar Environmental Protection Forum v. Union Of India(2006) 3 SCC 643

ISSUE:

Whether the raising of water level of the reservoir from 136 ft. to 142 ft. would result in jeopardising the safety of the people and also degradation of environment?

Whether the jurisdiction of this Court is barred in view of Article 262 read with Section 11 of the Inter-State Water Disputes Act, 1956?

Whether Article 363 of the Constitution bars the jurisdiction of this Court?

Whether the agreements from 1886 and 1970 are still legally valid?

RULE:

Parliamentary supremacy in state reorganisation matters is absolute and overrides state legislative powers - The Court used this principle to establish that when Parliament reorganizes states, it has complete authority to make provisions about division of resources and continuation of existing agreements between states, which cannot be challenged based on state powers.

Courts retain jurisdiction over dam safety and structural disputes even when they involve interstate water bodies - The Court applied this to establish its authority to hear the case, holding that while interstate water distribution disputes may be barred, issues of dam safety remain within judicial purview.

Environmental impact assessment is not required when activities restore previously approved conditions rather than create new interventions - The Court used this principle to permit raising the water level to 142 feet since this was within the dam's original design parameters and would actually benefit the local ecosystem rather than harm it.

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Financial Federalism

Prof. Bhim Singh v. Union of India, Union Home Secretary (2010) 5 SCC 538

ISSUE:

Whether undertrial prisoners (UTPs) languishing in jails for periods exceeding half of the maximum sentence for their alleged offense have an automatic right to bail.

Whether Section 436A of the Code of Criminal Procedure should be implemented to address the issue of undertrials in Indian prisons?

RULE:

Principle of Fair Trial: The court emphasized the necessity of ensuring that all individuals, particularly under-trial prisoners, are afforded a fair trial. By facilitating timely hearings and reviews of detention, the court sought to uphold the rights of these individuals and prevent indefinite detention without trial.

Right to Liberty: The court recognised the right to liberty as a fundamental right. By mandating the release of under-trial prisoners who have completed the stipulated period of detention, the court aimed to prevent unjust and prolonged incarceration, particularly for individuals who may have already served a significant portion of their potential sentence.

Legislative Intent: The court interpreted the legislative provisions concerning under-trial detention, particularly emphasizing the need for effective implementation of laws designed to protect the rights of such prisoners. The court acted on the intent of the law to avoid excessive detention and to ensure that the rights of under-trial prisoners are respected.

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Emergency Powers

Makhan Singh Tarsikka v. State of Punjab (AIR 1964 SC 381)

ISSUE:

Does a presidential order suspending rights during an emergency prevent challenging the factual basis of a detention order?

Whether the service of an order of detention to the appellant is valid when already a person is in custody?

Whether the plea of mala fide raised by the appellant will be acceptable?

RULE:

Even during a state of emergency, a person has the right to challenge the factual basis of a detention order issued under the Preventive Detention Act. This right is not suspended by a presidential order issued under Article 359(1) of the Indian Constitution.

The right to personal liberty is fundamental and distinct from the remedy available to enforce it. Suspending the right to enforce the right to liberty (Article 21) does not extinguish the right to challenge the legality of the detention itself.

There is a difference between suspension of fundamental rights and suspension of enforceability. In the case of the right to move to the Court for enforcement, which is suspended, the rights still remain alive theoretically.

A person cannot be served an order of detention when he is already in jail due to pending criminal proceedings against him in an alleged offense.

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