2018 (10) TMI 1526 - HC - VAT and Sales Tax

Telecom provider liable for Entry Tax on goods under M.P. law

M/s. IDEA Cellular Ltd., M/s. BTA Cellcom. Versus Assistant Commissioner, Commercial Tax. & others., Divisional Dy. Commissioner, Commercial Tax. & others, Appellate Commissioner, Commercial Tax. & others., Commissioner, Commercial Tax & others.

The court dismissed all petitions and appeals, holding that the telecommunication service provider is liable to pay Entry Tax under the M.P. Entry Tax Act ... Interpretation of statute - Liability of Entry tax - SIM Cards - whether a dealer registered under the VAT Act, 2002 is only liable to pay Entry tax u/s 3(1) of the Entry Tax Act - Held that:- The Madhya Pradesh Legislature has brought the Entry Tax Act in order to levy a tax on entry of goods into a local area of Madhya Pradesh for consumption, use or sale therein. Before coming into force of Entry Tax Act w.e.f. 2.10.1976, all local authorities used to collect Octroi on entry of any goods within their local area - if the goods brought into the local area from outside the State for consumption, use or sale, the same is subjected to payment of Entry Tax as per value of the goods. Hence, the goods brought not only for its sale but consumption and use is also material eventuality for payment of entry tax. It is also immaterial that who is bringing the good within the local area - Entry tax is payable once either u/s. 3(1) or u/s. 3(2) of the Entry Tax Act by dealer or any person. Whether the Assesse being service provider not a dealer is liable to pay Entry Tax u/s. 3(1) or u/s. 3(2) of the Entry Tax Act? - Held that:- The Division Bench of this Court in the case of Sanjay Trading Co. V/s. Commissioner of Sales Tax & others [1994 (2) TMI 284 - MADHYA PRADESH HIGH COURT], had held that M.P. Entry Tax Act is intended to levy Entry Tax on entry of specified goods into the local area for consumption, use or sale. The Entry Tax is not a tax on goods, but a tax on entry of goods into the local area for particular purpose. The Entry Tax is not a part and parcel of VAT Act, where a dealer who is covered under the VAT Act is only liable to pay Entry Tax. Any businessman who brings the goods for consumption, use or sale is liable to pay Entry Tax whether he is a dealer under the VAT Act or not because, provisions of u/s. 3(2), are applicable to such person who is not engaged in any business and simply brings the goods within the local area for any purpose. Section 3(1) is applicable to those persons who are engaged in the business and effecting entries of the goods in the local area for use, sale and consumption in his course of business - the Assesse is covered under the provisions of Section 3(1) of Entry tax Act. Levy of Entry tax on sale of SIM Cards - Held that:- Since, the SIM Card is being used and consumed in the course of business of service. Hence, it will fall under the incidence of Taxation under Section 3(1) of the Entry Tax Act - In case of Maheshwari Fish Seed Farm v. T.N. Electricity Board, [2004 (4) TMI 632 - SUPREME COURT], the Apex court has held that the definition of the term in one statute does not afford a guide to the construction of the same term in another statute and the sense in which the term has been understood in the several statutes does not necessarily throw any light on the manner in which the term should be understood generally - SIM cards can be termed as ‘goods’ for the purposes of Entry Tax as the same is being used and consumed in order to provide service to the customer by the Assesses. Petition dismissed - decided against petitioner. Issues Involved:1. Applicability of the M.P. Entry Tax Act to a telecommunication service provider.2. Liability of Entry Tax on goods imported from outside India.3. Entry Tax applicability on SIM cards and recharge coupons.Issue-wise Detailed Analysis:1. Applicability of the M.P. Entry Tax Act to a Telecommunication Service Provider:The Assesse, a telecommunication service provider, contended that their activities are purely service-oriented and do not involve the sale or purchase of goods, thus falling outside the purview of the MPCT Act and VAT Act. The State argued that the Assesse, engaged in providing telecommunication services and purchasing goods for this purpose, is liable to pay Entry Tax. The court held that the Assesse, by distributing and supplying goods like SIM cards to customers, falls under the definition of a 'dealer' under the Entry Tax Act. The court emphasized that the definition of 'dealer' includes those who supply or distribute goods for business purposes, thus making the Assesse liable under Section 3(1) of the M.P. Entry Tax Act.2. Liability of Entry Tax on Goods Imported from Outside India:The Assesse argued that imposing Entry Tax on goods imported from outside India violates Article 286 of the Constitution and is beyond the purview of Section 3 of the Entry Tax Act. The court clarified that as per the definition in Section 2(1)(aa), 'entry of goods into a local area' includes goods brought from any place outside the local area, including outside the State. Therefore, the Assesse is liable to pay Entry Tax on goods brought from outside India.3. Entry Tax Applicability on SIM Cards and Recharge Coupons:The Assesse contended that SIM cards and recharge coupons, being non-goods as per the Supreme Court's decision, should not be liable for Entry Tax. The court acknowledged that while SIM cards are not considered goods for sales tax purposes, they are tangible items used in providing telecommunication services. The court concluded that SIM cards and recharge coupons, being used and consumed in the course of business, fall under the incidence of taxation under Section 3(1) of the Entry Tax Act.Conclusion:The court dismissed all petitions and appeals, holding that the Assesse is liable to pay Entry Tax under the M.P. Entry Tax Act for goods brought into the local area for consumption, use, or sale, including SIM cards and recharge coupons. The court affirmed that the Assesse, engaged in supplying and distributing goods as part of its telecommunication services, qualifies as a dealer under the Entry Tax Act.