New Delhi, Nov. 11 (PTI): The Supreme Court today upheld the validity of tax levied by various states on goods entering their territory, saying they are "well within their right" to design their fiscal legislations.

In a majority verdict of 7:2, a Constitution bench headed by Chief Justice T.S. Thakur said the compensatory tax theory as evolved in earlier judgments had no juristic value and was over-ruled.

"States are well within their right to design their fiscal legislations to ensure that the tax burden on goods imported from other states and goods produced within the state fall equally. Such measures, if taken, would not contravene Article 304(a) of the Constitution.

"The question whether the levies in the present case indeed satisfy this test is left to be determined by the regular benches hearing the matters," Justice Thakur, who penned down the judgment for Justices A.K. Sikri and A.M. Khanwilkar, said. The proposed goods and services tax would have ended this levy.

Entry tax is imposed by state governments on movement of goods from one state to another. It is levied by the state that receives goods.

Justices S.A. Bobde, Shiva Kirti Singh, N.V. Ramana and R. Bhanumathi also concurred with the findings of the Chief Justice.

Separate minority judgments were delivered by Justices D.Y. Chandrachud and Ashok Bhushan, which held as unconstitutional the power of the states to legislate their entry tax laws.

Justice Bhanumathi preferred to write a separate judgment, saying she had difference of opinion on one or two points only, but otherwise was in agreement with the majority view. She said while the majority verdict had left to a smaller bench to give a meaning to the term "local area", she was of the view that it implied the entire territory of the state.

The majority verdict said if taxing law was non- discriminatory, it could be said to be constitutionally valid without the legislation having to go through the test or the process envisaged by Article 304(b).

"The constitutional validity of any taxing statute has, therefore, to be tested only on the anvil of Article 304(a) and if the law is found to be non-discriminatory, it can be declared to be constitutionally valid without the legislation having to go through the test or the process envisaged by Article 304(b)," the 911-page judgment, including both the dissenting judgments, said.