Entry tax collection machinery upheld where liability stayed with the dealer and the recovery method was held constitutional.

Section 4-A of the U.P. Tax on Entry of Goods Act, 2000 and Rule 7 of the 2001 Amendment Rules were upheld because they operated as collection machinery only and did not shift the substantive entry tax liability from the dealer to the manufacturer. The dealer remained the person liable for tax on goods brought into the local area, while the manufacturer functioned as a collecting intermediary. The Court held that the recovery method did not alter the character of the levy or offend Entry 52 of List II, and that possible hardship or administrative inconvenience did not render the scheme unconstitutional. The challenge under Article 19(1)(g) also failed as the provision was treated as a reasonable fiscal measure.

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Issues: Whether Section 4-A of the U.P. Tax on Entry of Goods Act, 2000 and Rule 7 of the U.P. Tax on Entry of Goods (Amendment) Rules, 2001 were unconstitutional on the ground that they shifted the entry tax burden from the dealer to the manufacturer, offended Entry 52 of List II of the Seventh Schedule to the Constitution of India, and imposed unreasonable restrictions under Article 19(1)(g) of the Constitution of India.

Analysis: Section 4-A was held to be only a machinery provision for collection of entry tax and not a transference of the substantive tax liability from the dealer to the manufacturer. The liability continued to rest on the dealer who brought the goods into the local area, while the manufacturer acted as a collecting intermediary. The Court held that the mode of recovery does not alter the character of the levy or the legislative competence to impose it. Comparable collection mechanisms, including deduction at source and representative assessment, were treated as familiar devices in fiscal law. The provision for refund where goods were lost or destroyed before entry into the local area showed that the tax remained linked to actual entry and not merely to an intention to enter. The Court further held that alleged hardship, apprehension of misuse, or possible harassment by tax authorities could not by themselves invalidate the legislation. The challenge under Article 19(1)(g) also failed because the provision was viewed as a reasonable fiscal measure designed to facilitate effective collection.

Conclusion: Section 4-A and the connected rule were upheld as valid; the challenge to the notifications also failed, and the constitutional attack was rejected.

Ratio Decidendi: A statutory provision that merely prescribes an efficacious machinery for collection of a tax, while leaving the substantive incidence of the levy unchanged, does not exceed legislative competence or become unconstitutional merely because it creates administrative burden or potential hardship.

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