Court sets aside entry tax on limestone, grants refund to petitioners.

The court allowed the writ petitions, setting aside the impugned notifications imposing a 25% entry tax on limestone when clinkerised and stock transferred outside the State. The petitioners were entitled to a refund of the additional entry tax paid, with interest accruing if not refunded within three months.

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Issues Involved:
1. Imposition of a higher rate of entry tax on limestone when clinkerised and stock transferred outside the State.
2. Validity of amendments to the notification dated 29.9.1997.
3. State's power to levy different rates of entry tax.
4. Classification and sub-classification for tax purposes.
5. Compliance with Section 9 of the Act for notification amendments.
6. Nature of tax and compensatory nature of entry tax.
7. Restitution and refund of additional entry tax paid by petitioners.

Issue-wise Detailed Analysis:

1. Imposition of Higher Rate of Entry Tax on Limestone:
The petitioners, cement companies, challenged the imposition of a higher rate of entry tax on limestone when it is clinkerised in the local area but stock transferred to their units outside the State for cement manufacture. They argued that the liability for entry tax arises under the Chhattisgarh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976, based on the entry of goods into a local area for consumption, use, or sale therein. The State's notification dated 31.3.2010, which imposed a 25% entry tax on limestone used for clinkerisation and stock transferred outside the State, was contested as it lacked rationale and nexus for sub-classification.

2. Validity of Amendments to the Notification Dated 29.9.1997:
The amendments to the notification dated 29.9.1997 were argued to be inconsistent with Section 9 of the Act, which mandates gazette publication of amendments to Schedules II and III. The petitioners asserted that the amendments were not properly notified, making them invalid. The court noted that the amendments were not in consonance with Section 9, supporting the petitioners' claim.

3. State's Power to Levy Different Rates of Entry Tax:
The State argued that it had the power to levy a higher rate of entry tax on goods entering a local area for manufacture of other goods, as upheld in previous court rulings. However, the court found that while the State could impose a higher rate of tax on limestone used for clinkerisation, it was impermissible to impose differential rates based on the end use of the goods manufactured. The court held that the State's attempt to levy a higher rate of entry tax on clinker stock transferred outside the State was unjustified.

4. Classification and Sub-classification for Tax Purposes:
The court emphasized that classification for tax purposes must be based on intelligible differentia with a rational relation to the object sought to be achieved. The sub-classification of clinker for different rates of tax based on its end user was found to lack authority under Section 4-A and was deemed unsustainable in law. The court reiterated the principles of valid classification, highlighting the need for reasonable and non-arbitrary differentiation.

5. Compliance with Section 9 of the Act for Notification Amendments:
The petitioners argued that the procedure under Section 9(2) of the Act, requiring proper Gazette notification for amendments, was not followed. The court agreed, stating that there was no amendment by either addition or deletion of limestone in Schedule II, rendering the amendments invalid.

6. Nature of Tax and Compensatory Nature of Entry Tax:
The court acknowledged that entry tax is compensatory in nature, as settled by law and recognized by the State. The revenue generated from entry tax was used for public benefits such as road works, street lights, and irrigation. The court noted that the compensatory nature of the tax need not be discussed further as it was undisputed.

7. Restitution and Refund of Additional Entry Tax Paid by Petitioners:
The court directed that the notifications imposing a 25% entry tax on limestone clinkerised and stock transferred outside the State were unsustainable. Consequently, the petitioners were entitled to restitution. The court ordered the refund of the 15% additional entry tax paid by the petitioners within three months, failing which it would carry interest at the bank rate until payment.

Conclusion:
The court allowed the writ petitions, setting aside the impugned notifications to the extent they imposed a 25% entry tax on limestone clinkerised and stock transferred outside the State. The petitioners were entitled to a refund of the additional entry tax paid, with interest if not refunded within the stipulated period.

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