2006 (8) TMI 548 - HC - VAT and Sales Tax

Jharkhand's Amendments to Bihar Entry Tax Act Ruled Unconstitutional

The court held that the Bihar Entry Tax Act, 1993, as adopted and amended by Jharkhand, did not satisfy the requirements under Articles 301 and 304(b) of ... - Issues Involved:1. Constitutionality of the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1993 under Articles 301 and 304 of the Constitution of India.2. Constitutionality of the Jharkhand Tax on Entry of Goods into Local Areas for Consumption, Use or Sale thereof (Amendment) Ordinance, 2001 under Articles 301 and 304 of the Constitution of India.3. Liability to pay entry tax on the entry of coal and heavy earth moving machines into the State of Jharkhand under the Bihar Entry Tax Act, 1993 as amended by Jharkhand Entry Tax (Amendment) Ordinance, 2001.4. Whether the Bihar Entry Tax Act, 1993 as adopted by Jharkhand and amended by Jharkhand Entry Tax (Amendment) Ordinance, 2001 satisfies the test of compensatory tax under Article 304(b) of the Constitution.5. Requirement of Presidential assent for the amendments made by the Jharkhand Entry Tax (Amendment) Ordinance, 2001.6. Whether dozers, dumpers, rollers, excavators, etc., are 'motor vehicles' under Section 2(28) of the Motor Vehicles Act, 1988.Detailed Analysis:1. Constitutionality of the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1993 under Articles 301 and 304 of the Constitution of India:The petitioners challenged the Bihar Entry Tax Act, 1993, arguing it violated Articles 301 and 304 of the Constitution. The Patna High Court had previously declared the Act ultra vires, but the Supreme Court reversed this decision in State of Bihar v. Bihar Chamber of Commerce, holding the Act intra vires. However, the Supreme Court in Jindal Stainless Ltd. v. State of Haryana overruled the earlier test of 'some connection' used to justify compensatory taxes, reaffirming the need for taxes to facilitate trade rather than hinder it.2. Constitutionality of the Jharkhand Tax on Entry of Goods into Local Areas for Consumption, Use or Sale thereof (Amendment) Ordinance, 2001 under Articles 301 and 304 of the Constitution of India:The Jharkhand Entry Tax (Amendment) Ordinance, 2001 was also challenged on similar grounds. The court held that the amendments imposed additional restrictions and required Presidential assent under Article 304(b), which was not obtained. Thus, the amendments were declared ultra vires.3. Liability to pay entry tax on the entry of coal and heavy earth moving machines into the State of Jharkhand under the Bihar Entry Tax Act, 1993 as amended by Jharkhand Entry Tax (Amendment) Ordinance, 2001:The petitioners argued that they should not be liable to pay entry tax on coal and heavy earth moving machines. The court noted that the inclusion of coal in the amended schedule without Presidential assent was illegal. Consequently, the petitioners were not liable to pay entry tax on these items.4. Whether the Bihar Entry Tax Act, 1993 as adopted by Jharkhand and amended by Jharkhand Entry Tax (Amendment) Ordinance, 2001 satisfies the test of compensatory tax under Article 304(b) of the Constitution:The court reiterated that for a tax to be considered compensatory, it must facilitate trade by providing measurable benefits. The Bihar Entry Tax Act, 1993, as amended, did not meet this criterion and thus did not qualify as a compensatory tax under Article 304(b).5. Requirement of Presidential assent for the amendments made by the Jharkhand Entry Tax (Amendment) Ordinance, 2001:The court emphasized that the amendments introduced additional restrictions, necessitating Presidential assent under Article 304(b). Since this assent was not obtained, the amendments were invalid.6. Whether dozers, dumpers, rollers, excavators, etc., are 'motor vehicles' under Section 2(28) of the Motor Vehicles Act, 1988:The court did not provide a definitive ruling on whether these machines are 'motor vehicles' under the Act, as the primary provisions of the Bihar Entry Tax Act, 1993, and its amendments were already declared ultra vires. The issue was left open for future determination.Conclusion:The court held that the Bihar Entry Tax Act, 1993, as adopted and amended by Jharkhand, did not satisfy the requirements under Articles 301 and 304(b) of the Constitution. The amendments were declared ultra vires due to the lack of Presidential assent. Consequently, the State of Jharkhand could not enforce the provisions of the Act or its amendments, and the writ petitions were allowed.