Liability for Entry Tax on Imported Vehicles Upheld, Penalties Apply from 29.01.2019

The court held that petitioners are liable to pay entry tax on imported vehicles as demanded by the Revenue. Penalties for non-payment can only be imposed from 29.01.2019 onwards, considering the legal uncertainty prior to that date. The Revenue must verify payment dates and impose penalties only for delays post-29.01.2019. Full tax and penalties can be recovered from 29.01.2019 until complete recovery. The writ petitions were disposed of with no order as to costs, and connected miscellaneous petitions were closed.

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Issues Involved:
1. Liability to pay entry tax on imported vehicles.
2. Requirement of an assessment order before tax recovery.
3. Applicability of the limitation period for assessment.
4. Imposition of penalties for non-payment of entry tax.

Detailed Analysis:

Liability to Pay Entry Tax on Imported Vehicles:
The petitioners, consisting of individuals and a private limited hotel, challenged the demand for entry tax on imported vehicles. The legal position on the liability to pay entry tax was clarified by the Supreme Court in the case of *State of Kerala v. Fr. William Fernandez* (2017 SCC Online SC 1291), which upheld the validity of entry tax on imported vehicles. Following this, the Madras High Court in *V. Krishnamurthy v. State of Tamil Nadu* (2019 SCC Online Mad 8523) confirmed that importers of foreign vehicles into Tamil Nadu are liable to pay entry tax. The court reiterated that the petitioners are liable to pay entry tax as per the settled legal position.

Requirement of an Assessment Order Before Tax Recovery:
The petitioners argued that an assessment order must precede any demand for tax recovery. Section 8 of the Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990 (Entry Tax Act) outlines the assessment procedure, requiring an assessment order to be issued within three years from the last date prescribed for filing returns. The court found that the petitioners had not filed the required returns, allowing the Revenue to proceed with a best judgment assessment based on available data. The court rejected the argument that an assessment order was necessary before tax recovery, given the petitioners' failure to file returns.

Applicability of the Limitation Period for Assessment:
The petitioners contended that the limitation period for making an assessment had expired. However, the court noted that the litigation period should be excluded from the limitation period. The court emphasized that due to the long-standing legal uncertainty and interim orders restraining the Revenue from collecting entry tax, the limitation period should be tolled. The court concluded that the Revenue's actions were not barred by limitation, as the period during which the legal position was unclear and litigation was pending should be excluded.

Imposition of Penalties for Non-Payment of Entry Tax:
The petitioners argued against the imposition of penalties for non-payment of entry tax, citing the legal uncertainty that persisted until the Supreme Court's decision in 2017 and the subsequent Madras High Court decision in 2019. Section 15 of the Entry Tax Act allows for penalties if tax is not paid without reasonable cause. The court acknowledged that the legal ambiguity provided a reasonable cause for the delay in payment. Therefore, penalties could only be imposed from 29.01.2019, the date of the Division Bench judgment in *V. Krishnamurthy's* case, until the date of full payment of the tax. The court directed the Revenue to verify the payment dates and impose penalties accordingly.

Conclusion:
The court disposed of the writ petitions with the following orders:
1. Petitioners are liable to pay the entry tax as demanded by the Revenue.
2. Penalties for non-payment of tax can only be imposed from 29.01.2019 onwards.
3. The Revenue must verify the payment dates and impose penalties only for delays post-29.01.2019.
4. The Revenue can recover full tax and applicable penalties from 29.01.2019 until complete recovery.

The petitions were thus disposed of with no order as to costs, and connected miscellaneous petitions were closed.

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