Seven-judge Bench to hear arguments from 22 September 2026
States’ power to impose taxes based on annual turnoverJudges: Surya Kant CJI, Joymalya Bagchi J, V. Mohana J
Today, a Bench of Chief Justice Surya Kant and Justices Joymalya Bagchi and V. Mohana listed a batch of petitions challenging the power of state legislatures to make laws imposing a surcharge on sales tax on 22 September 2026. The challenge will be heard by a Bench of seven judges—composition is yet to be notified. It is one of the five pending seven-judge matters as per the National Judicial Data Grid (NJDG).
What is the case about?
As per Article 246 of the Constitution, the Union and State Legislatures are allowed to make laws on the subjects mentioned in the Union, State, and Concurrent lists under the Seventh Schedule. Entry 54 of the State List empowers the State Legislature to make law related to taxes on sale and purchase of goods.
On 15 November 1997, the Odisha government amended the Odisha Sales Tax Act, 1947 to include a surcharge (additional tax) on dealers at a rate of 10 percent on payable tax if their annual turnover exceeded rupees Rs 10 lakh but remained under Rs 1 crore. If the annual turnover exceeded Rs 1 crore, the rate was 15 percent. The power to impose taxes based on annual turnover is a part of the Union’s domain under Entry 82 of the Union List.
The Odisha Law was challenged in the Supreme Court by way of civil appeal. Arjun Flour Mills argued that the Act encroached upon the domain of the Union legislature. However, a similar provision of the Bihar Finance Act, 1981 was upheld by the Supreme Court in 1983 in Hoechst Pharmaceuticals Ltd. v State of Bihar. The provision was upheld on the understanding that the surcharge fell into the category of a sales tax, which fell squarely within the state’s power under Entry 54 of the state list.
The counsel for Arjun Flour Mills had then relied on India Cement Ltd v State Of Tamil Nadu (1989) which held ultra vires provisions of the Madras Panchayats Act, 1958 which imposed a cess on the land revenue and put a surcharge on that cess for excavation and mining.
In August 1998, faced with these conflicting judgements, the Court referred the challenge by Arjun Flour Mills to a five-judge bench. Later, in October 1999, the matter was listed before seven judges.
The case remained in judicial limbo until October 2023 where the Court announced that it will take up the matter along with other pending seven-judge matters. The matter was listed to be heard in April 2024 but was not taken up.
Supreme Court: Not a lengthy issue
Today, the Bench directed that the challenge be heard over three days, from 22 to 24 September 2026, commencing arguments at 2:00 PM each day. This afternoon schedule allows the Court to clear fresh and miscellaneous matters during the morning session.
CJI Surya Kant explained that this arrangement prevents a backlog of routine cases while the Bench addresses the challenge. Senior Advocate Kapil Sibal expressed concern that afternoon-only sessions might prolong the proceedings, suggesting instead that starting arguments in the morning would better help the Bench manage time. CJI Surya Kant responded that the Court would test this approach on an experimental basis. He noted that the issue in Arjun Flour Mills was not overly lengthy.
Finally, the Bench instructed counsel to strictly adhere to their allocated time limits and conclude their arguments within the designated schedule.