Tax-free goods did not negate dealer liability to entry tax under the sales tax scheme.

Dealers trading in cloth, sugar and tobacco remained liable to entry tax under the Entry Tax Act even though those goods were tax-free under section 10 of the Sales Tax Act. The court distinguished between exemption of particular goods and the dealer's underlying liability to tax under the sales tax scheme. Tax-free goods are excluded in computing taxable turnover, but that exclusion does not erase the dealer's status as a dealer liable to tax. For section 3 of the Entry Tax Act, liability depends on the dealer's tax status under the Sales Tax Act, not merely on whether the specific goods are taxable.

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Issues: Whether dealers dealing in cloth, sugar and tobacco, though such goods were declared tax-free under section 10 of the Madhya Pradesh General Sales Tax Act, 1958, remained liable to entry tax under section 3 of the Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976.

Analysis: Section 3 of the Entry Tax Act fastens liability on every dealer liable to tax under the Sales Tax Act who effects entry of specified goods. Section 10 of the Sales Tax Act declares certain goods tax-free, but the scheme of the Act, including the definitions of turnover and taxable turnover, shows that such goods are excluded for the purpose of computation of taxable turnover and are not thereby erased from the dealer's status as a dealer liable to tax. The distinction between non-liability to tax and exemption from tax was material. The tax-free character of the goods did not ipso facto extinguish the dealer's liability under the Sales Tax Act for the purpose of the entry tax charge.

Conclusion: The petitioners were held liable to entry tax notwithstanding that the goods dealt in were tax-free under section 10 of the Sales Tax Act.

Ratio Decidendi: For the purpose of section 3 of the Entry Tax Act, the expression "dealer liable to tax under the Sales Tax Act" refers to liability of the dealer under the taxing scheme and not merely to the taxability of the particular goods; tax-free goods are excluded in computing taxable turnover but do not negate the dealer's liability to tax.

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