Entry tax on imported paddy, rice and wheat was invalid where the statute and rate notification violated Article 304(b).

Entry tax on paddy, rice and wheat for 1 April 2006 to 30 June 2006 was unenforceable because the Bihar Entry Tax Act, 1993, as amended, remained constitutionally invalid during that period and had not yet regained compensatory character under Article 304(b). The levy was therefore unauthorised and illegal. Notification No. S.O. 32 dated 1 April 2006 was also invalid because it fixed entry tax at four per cent on those goods while the sales tax rate was one per cent, creating a higher burden on imported goods than on locally sourced goods. The assessment, penalty, demand notices and bank attachment based on the levy were quashed.

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Issues: (i) Whether the levy of entry tax on paddy, rice and wheat during 1 April 2006 to 30 June 2006 was legally enforceable in view of the constitutional validity of the Bihar entry tax law during that period; (ii) Whether Notification No. S.O. 32 dated 1 April 2006 fixing entry tax at four per cent on paddy, rice and wheat was discriminatory and invalid.

Issue (i): Whether the levy of entry tax on paddy, rice and wheat during 1 April 2006 to 30 June 2006 was legally enforceable in view of the constitutional validity of the Bihar entry tax law during that period.

Analysis: The relevant period fell within the span in which the Bihar Entry Tax Act, 1993, as amended, had been held to be constitutionally invalid. The earlier unamended enactment had been saved, but the amendments made by Amending Act 10 of 2001 and Amending Act 9 of 2003, together with the validating amendment, were found to have deprived the statute of protection under Article 304(b) of the Constitution of India until the later amendment of 2006 restored compensatory character. The impugned levy related to the period before that restoration.

Conclusion: The levy was unauthorised, bad and illegal, and the assessee succeeds on this issue.

Issue (ii): Whether Notification No. S.O. 32 dated 1 April 2006 fixing entry tax at four per cent on paddy, rice and wheat was discriminatory and invalid.

Analysis: The notification fixed entry tax on the concerned goods at four per cent even though the sales tax rate on those goods was one per cent. The consequence was a higher tax burden on the same goods when imported from outside the State than when procured within the State. In such circumstances, the notification could not be sustained as part of the constitutional scheme protecting trade and non-discrimination.

Conclusion: The notification was invalid and liable to be struck down, and the assessee succeeds on this issue as well.

Final Conclusion: The assessment, penalty, demand notices and bank attachment based on the impugned levy could not be sustained and were quashed.

Ratio Decidendi: An entry tax levy for a period when the governing statute is constitutionally invalid, and a rate notification that creates a higher burden on imported goods than on locally sourced goods for the same commodity, cannot be sustained under Article 304(b) of the Constitution of India.

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