TaxTMI 
TaxTMI 
2001 (12) TMI 857
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....ous types of goods in the factories situated in the State of Haryana or have business establishments in Haryana. Only three of the petitioners, namely, Leather Cloth and Plastic Manufacturers Association, New Delhi, New Santra Pipe Fittings Pvt. Ltd., Hawrah, West Bengal and M/s. MRF Ltd., Madras, who have filed C.W.P. Nos. 9705 of 2000, 13374 of 2000 and 15546 of 2000 respectively, do not have factories or business establishments in the State of Haryana. 3.. The petitioners (except those who have filed C.W.P. Nos. 9705, 13374 and 15546 of 2000) have averred that for the purpose of manufacturing their products, they have been importing raw materials and other goods and have been paying various taxes including octroi levied under section 69 read with section 70 of the Haryana Municipal Act, 1973 (for short, "the Municipal Act"). They have alleged that with a view to attract the voters in the forthcoming elections to the Legislative Assembly, the Government of Haryana abolished the octroi in November, 1999 and simultaneously increased the tax on consumption of electricity in the municipal areas under section 70(1)(viii) of the Municipal Act at the rate of five paise per uni....
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....ng into account the exemptions and reductions given. (g) The rate of tax is far higher than the rate of octroi tax earlier charged or the rate of octroi/entry tax in other States. In the petitioners' case, the liability is nearly 50 times of its liability under the earlier regime of octroi tax under section 69 of the Haryana Municipal Act. Such a high tax cannot be said to be an entry tax. (h) Item 14 of Schedule "A" appended to the Act, which exempts textile, tobacco and sugar on which additional excise duty in lieu of sales tax is leviable also shows that wherever either sales tax was being paid or any other duty in lieu of sales tax was payable, the entry tax is not leviable. (i) Section 5(1)(d) of the Act which exempts goods on which sales tax has been paid or has become payable, would also clearly show that the intention of the State is to levy sales tax on all goods on which sales tax has not already been paid or is not payable to the State Government. (j) The real effect of the Ordinance and the provisions of the notifications issued on the same date is that so-called entry tax is levied by way of sales tax in respect of those goods which are not sold within the ....
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.... filed by Leather Cloth and Plastic Manufacturers Association, New Delhi. It has averred that the textile fabrics manufactured by its members are covered by items Nos. 14 to 17 of Schedule B under sections 6 and 15 of the 1973 Act and by virtue of the conditions specified in the said Schedule, the textile fabrics do not attract tax under the 1973 Act because additional excise duty is levied under the Additional Duties of Excise (Goods of Special Importance) Act, 1957. It has challenged the impugned legislation by describing it as a colourable exercise of legislative power of the State, inasmuch as, the tax is sought to be levied on the sale and purchase of goods involving import from outside the State and export in the course of inter-State trade and out of India. It has further averred that the impugned legislation is ultra vires to articles 286, 301 and 304 of the Constitution. 6.. New Santra Pipe Fittings (Pvt.) Ltd. (C.W.P. No. 13374 of 2000) is engaged in the business of manufacturing various types of pipe fittings including G.I. sockets which are sold in different parts of country including the State of Haryana. M/s. M.R.F. Ltd., Madras (C.W.P. No. 15446 of 2000) is engage....
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....titioners' fundamental right guaranteed under article 19(1)(a) and (g) of the Constitution of India. (ix) Section 11(1) of the Ordinance and the Entry Tax Act confers unbridled and unguided power upon the State Government to exempt any class of importers from the levy of entry tax and, therefore, it is liable to be struck down being violative of article 14 of the Constitution. (x) Section 6 of the Entry Tax Act which requires the filing of return and lays down the procedure for assessment is unreasonable and arbitrary. (xi) Exemption notifications issued under section 11(1) of the Ordinance are liable to be quashed on the ground of discrimination because no discernible criteria has been adopted for exempting those engaged in the manufacture of goods relating to information technology. 8.. In the written statements filed on behalf of the respondents, it has been averred that octroi was abolished because there was feeling that it was obnoxious in character and impeding the development of trade and commerce and there was clamour for its abolition and in order to compensate the municipalities for the loss caused due to abolition of octroi, the State Government decided to ge....
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....road contents of the Ordinance were published in "The Tribune" (English) dated May 6, 2000 and "Nav Bharat Times" (Hindi) dated May 13, 2000. 10.. From the abovenoted pleadings, the following questions of law arise for consideration by the court: (i) Whether the Ordinance and the Entry Tax Act are liable to be struck down being colourable piece of legislation and/or beyond the legislative competence of the State? (ii) Whether the entry tax is violative of articles 14, 19(1)(a) and (g), 301 and 304 of the Constitution of India? (iii) Whether exemption notifications dated May 5, 2000 are ultra vires to article 14 of the Constitution of India? 11.. Before adverting to the arguments advanced by the learned counsel in the context of the aforementioned questions, we may notice the relevant provisions of the Ordinance (2000) 15 PHT 177 (JS) and the Entry Tax Act. The same read as under: "Preamble and sections 3, 5 and 11 of the Ordinance: To provide for levy and collection of tax on the entry of goods into the local areas of the State of Haryana for consumption or use therein and matters incidental thereto and connected therewith. 3.. Levy of tax.-(1) The....
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....reas of the State of Haryana for consumption or use therein and matters incidental thereto and connected therewith. 2.. In this Act, unless the context otherwise requires- (5) 'brings goods into a local area' means causing the entry of goods into a local area by bringing them inside the local area or causing the goods to be brought inside the local area from any place outside the local area; (9) 'entry of goods into a local area' means taking or bringing goods into a local area from any place outside the State or from any place inside any other local area in the State; (12) 'gross turnover' used in relation to an importer with reference to a period of time means the sum or value of goods which the importer brings or receives on the entry of such goods into a local area during the given period; (13) 'importer' means any person who, in the course of business, whether on his own account or on account of a principal or any other person, brings any goods into or receives or is entitled to receive any goods on their entry into a local area and includes a casual importer; (14) 'local area' means an area within the limits of a municipal corporation established under the H....
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.... 5.. (1) In calculating the turnover liable to tax for a period, an importer may deduct from his gross turnover during that period(a) the value of goods specified in Schedule A; (b) the value of goods which have, without use or consumption, been delivered outside the local area; (c) the value of goods which have been subjected to tax once under this Act, either as such or in some other form; (d) the value of goods on which sales tax has been paid or has become payable to the State; (e) the value of plant, machinery, equipment and tools, brought or received on lease; (f) the value of goods left in the stock, whether as such or in different form, lying with him in the local area, except when the certificate of registration issued under this Act is cancelled: Provided that the value of goods deducted under this clause shall, except when the certificate of registration issued under this Act is cancelled, form part of the turnover for the period immediately succeeding: Provided further that the value of plant, machinery, equipment and tools, if forming part of the turnover, may form part of the closing stock, if capitalised; and (g) the value of such other goods as....
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.... any other local area in the State than the local area in which his place of business is situated; (c) the value of goods which has been delivered as such by him to any other person as a result of sale by him; (d) the value of goods which has been delivered as such by him outside the State subject to production of proof of despatch and receipt of goods outside the State; Note.-Production of declarations in form F, prescribed under the provisions of the Central Sales Tax (Registration and Turnover) Rules, 1957, shall be admissible as evidence for the purposes of this clause subject to verification of the correctness, genuineness and validity of the declaration produced; (e) the value of goods specified in Schedule A of the Ordinance; (f) the value of goods returned as such to the consignor within six months of their entry into the local area; and (g) the value of goods left in the stock except when the business is closed or the certificate of registration issued under the Ordinance is cancelled: Provided that the turnover deducted under this clause shall form part of the turnover for the period immediately succeeding: Provided further that the value of....
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.... industries from the tax payable under the said Ordinance with immediate effect: (i) Industries included in the information technology, industry manufacturing the goods given in annexure I; (ii) Industrial units availing of exemption from the payment of tax under sections 13 and 13B of the Haryana General Sales Tax Act, 1973 (Act 20 of 1973) and industrial units availing the facility of deferment of tax under section 25A thereof for the period of such exemption or deferment; and (iii) Export oriented industrial units exporting out of the territory of India 75 per cent or more of their products in terms of value in a given period not exceeding one year. ANNEXURE I Categories of industries included in the scope/definition of information technology industry (A) Computing devices, namely- Desktop Personal computer Servers Work station Nodes Terminals Network P.C. Home P.C. Lap-top computers Note book computers Palms Top Computer/PDA (B) Network controller cards/memories, namely: Network interface card (NIC) Adaptor-ethernet/PCI/EISA/Combo/PCMICA SIMMS-memory DIMMS-memory Central Processing Unit (CPU) Controller-SCS....
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....gned legislation, the State has tried to impose tax on the purchase of raw material from other States by a manufacturer in the State of Haryana and the State Legislature does not have the competence to enact such law because this subject falls exclusively within the domain of the Parliament under entry 92-A of List I. Shri Shanti Bhushan also referred to the various incidents of the impugned tax and argued that in reality, it is a sales tax on transactions which are otherwise outside the legislative competence of the State. In support of his arguments, Shri Shanti Bhushan relied on the decisions of the Supreme Court In Re: The Insurance Act of Canada [1932] AC 41, Attorney-General for Alberta v. AttorneyGeneral for Canada [1939] AC 117, K.C. Gajapati Narayan Deo v. State of Orissa AIR 1953 SC 375 and Federation of Hotel and Restaurant Association of India v. Union of India [1989] 74 STC 102 (SC); AIR 1990 SC 1637. Shri Shanti Bhushan further argued that entry 52 of List II of the Seventh Schedule authorises the Legislature of a State to make law relating to tax on entry of goods into a local area for consumption, use or sale therein and it is not open to the State to tax only those....
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....ax in terms of rule 9(1)(b) of the 2000 Rules. Likewise, if a manufacturer purchases raw material from within the State and exports the finished products outside the State for the purpose of sale, no tax is leviable on such transaction. He further pointed out that if a manufacturer brings raw material into the State from other States and uses the same for manufacturing a finished product which is exported to other States, then such transaction is also exempted in terms of notification dated September 29, 2000 and a manufacturer, who does not sell the final product and simply adds the same to the stocks, is not liable to pay tax by virtue of section 5(1)(f) of the Entry Tax Act. 18.. S/Shri B.K. Jhingan, Mohan Jain, Parag Tripathi, Rajesh Bindal, Nikhil Nayyar, Rajiv Bhalla, Sanjiv Goel, S.K. Sarwal, Rakesh Aggarwal, S.K. Sud, Vikas Suri, D.S. Dhankar, Manish Jain, Rajiv Agnihotri and Hemant Kumar adopted the arguments of S/Shri Shanti Bhushan, A.K. Ganguly and Dr. A.M. Singhvi. 19.. Shri P.P. Rao, Senior Advocate for the State and the learned Advocate-General, Haryana, referred to entry 52 of List II of the Seventh Schedule, sections 2(5), (9), (12), (13) and (29), 3 and 5 of....
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....ution envisages distribution of legislative powers between the Parliament and the Legislatures of the States. The Parliament can enact laws on the subjects enumerated in List I. The Legislatures of the States can enact laws on the subject enumerated in List II and both the Legislatures can enact laws on the subjects enumerated in List III subject to the constitutional limitations contained in Part IX. When a particular piece of legislation is challenged on the ground that the Legislature did not have the competence to enact the same, the court can make an enquiry whether the Legislature has, in the particular case, transgressed the limits of its constitutional powers. Such transgression may be patent or direct. It may also be disguised, covert or indirect and if the court comes to the conclusion that even though the particular legislation appears to have been enacted by the Legislature within the sphere allocated to it but has, in fact, transgressed the limits of its constitutional powers, the legislation is called colourable legislation. 23.. In K.C. Gajapati Narayan Deo v. State of Orissa AIR 1953 SC 375, a Constitution Bench of the Supreme Court considered the constitutional ....
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....t in substance and in reality it transgressed these powers, the transgression being veiled by what appears, on proper examination, to be a mere pretence or disguise. As was said by Duff, J. in Attorney-General for Ontario v. Reciprocal Insurers [1924] AC 328 at p. 337(B): 'Where the law-making authority is of a limited or qualified character it may be necessary to examine with some strictness the substance of the legislation for the purpose of determining what is that the Legislature is really doing.' In other words, it is the substance of the Act that is material and not merely the form or outward appearance, and if the subjectmatter in substance is something which is beyond the powers of that Legislature to legislate upon, the form in which the law is clothed would not save it from condemnation. The Legislature cannot violate the constitutional prohibitions by employing an indirect method. In cases like these, the enquiry must always be as to the true nature and character of the challenged legislation and it is the result of such investigation and not the form alone that will determine as to whether or not it relates to a subject which is within the power of the legi....
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....of its own powers to carry out an object which is beyond its powers and a trespass on the exclusive power of the other.'" 24.. In Federation of Hotel and Restaurant Association of India v. Union of India [1989] 74 STC 102 (SC); AIR 1990 SC 1637, another Constitution Bench stated the doctrine of colourable legislation in the following words: "The constitutionality of the law becomes essentially a question of power which, in a federal constitution, unlike a legally omnipotent Legislature like the British Parliament, turns upon the construction of the entries in the legislative Lists. If a legislature with limited or qualified jurisdiction transgresses its powers, such transgression may be open, direct and overt, or disguised, indirect and covert. The latter kind of trespass is figuratively referred to as 'colourable legislation', connoting that although apparently the Legislature purports to act within the limits of its own powers yet, in substance and in reality, it encroaches upon a field prohibited to it, requiring an examination, with some strictness, the substance of the legislation for the purpose of determining what is that the Legislature was really doing. Wherever l....
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....tax referred to in article 366(29A), (b), (c) and (d) shall be subject to such restrictions and conditions as the Parliament may by law specify. 26.. Entries 41, 83, 92-A and 92-B of List I and entry 52 of List II of the Seventh Schedule to which reference has been made by the learned counsel for the parties, are as under: Entries 41, 83, 92-A and 92-B of List I: 41.. Trade and commerce with foreign countries; import and export across customs frontiers; definition of customs frontiers. Import: Import does not include sale or possession of the imported goods. 83.. Duties of customs including export duties. Customs: A duty of customs being a tax on the act of importation or exportation, cannot be regarded as a tax on property. 92-A. Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce. 92-B. Taxes on the consignment of goods (whether the consignment is to the person making it or to any other person), where such consignment takes place in the course of inter-State trade or commerce. Entry 52, List II of the Constitution: 52.. Taxes on the entry of goods into a loc....
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....el for the petitioners that the entry tax is in substance a tax on sale of goods effected by branch/consignment transfers or in the course of interState trade and commerce. Learned counsel laid considerable emphasis on the fact that except the manufacturers all others have been exempted from payment of entry tax and this should be treated as conclusive of the real nature of the tax sought to be imposed by the impugned legislation. On a casual reading of the provisions of the Ordinance and the Entry Tax Act, one may get an impression that only certain manufacturers are being subjected to entry tax, but a careful examination of the entire scheme of the Entry Tax Act leads to an irresistible inference that it is not a tax on manufacturers who export goods out of Haryana by branch/consignment transfers or in the course of inter-State trade. 29.. The preamble of the Entry Tax Act shows that it was enacted to provide for levy and collection of tax on the import of goods into local areas of the State of Haryana for consumption or use therein and matters incidental thereto and connected therewith. As per section 2(5) term, "brings goods into a local area" means causing the entry of good....
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....entry into any local area does not exceed Rs. 10 lacs in a year or such other sum as the State Government may, by notification, specify. Second proviso lays down that an importer who has once become liable to pay tax shall continue to be so liable until the expiry of three consecutive years during each of which the aggregate value of any taxable goods he brings into or receives on their entry into any local area does not exceed the amount specified in the first proviso. From these provisions, it is clear that the incidence of this tax is on the entry of goods into a local area. Such entry into a local area may be from any place outside the State or from any place inside the State. The incidence of tax falls uniformly if the entry of goods in a local area is for consumption or use therein. No distinction for the purpose of incidence of tax has been made under the charging section 3 for the goods which enter into a local area from outside the State or from any place inside the State. 30.. Section 5(1) provides for various deductions from gross turnover. Clause (a) of sub-section (1) of section 5 provides for deduction of the value of the goods specified in Schedule "A". Clause (b)....
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....ut of Haryana in the course of inter-State trade or by branch transfer. Likewise, the benefit of exemption or reduction in tax contemplated in the notification issued by the Government under section 11(1) is available to all those who belong to the particular class of importers. 31.. In our opinion, the mere fact that a large number of importers are not liable to pay entry tax because the aggregate value of the taxable goods brought by them into or received on their entry into local area does not exceed Rs. 10 lacs in a year or they are entitled to the benefit of deduction specified in section 5(1) or exemption/reduction in terms of notification issued under section 11 of the Act and the fact that the petitioners, who are importing bulk goods are liable to pay tax under the Entry Tax Act, cannot lead to an inference that the entry tax is, in reality and substance, a tax on sale and purchase of goods in the course of inter-State trade or branch/consignment transfers or export out of India and, therefore, the impugned legislation is beyond the legislative competence of the State or is a colourable piece of legislation. 32.. We are further of the view that the averments made in ....
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....mption therein deserves to be rejected because it is well-settled that the Legislature has wide discretion in selecting the transactions, goods and persons who may be subjected to tax and it is always not necessary to tax everything. The use of the word "or" in entry 52 gives choice to the Legislature to levy entry tax only on goods which enter a local area for consumption alone or for consumption or use therein or for consumption, use or sale therein and, therefore, the Entry Tax Act cannot be dubbed as unconstitutional merely because it leaves out sale from its purview. In this connection, we may refer to the decision of the Supreme Court in Sri Krishna Das v. Town Area Committee, Chirgaon [1990] 77 STC 395. In that case, the appellant had challenged the validity of the bye-laws promulgated under the United Provinces Town Areas Act, 1914. One of the grounds of challenge was that the tax is discriminatory, inasmuch as, exemption was granted to some of the products and to those who entered the Town Area Committee by rail or motor transport. While rejecting the said grounds, the Supreme Court laid down the following principles: "It is for the Legislature or the taxing authority t....
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.... the measure varies with the centre of sale of tea, the variation must relate to a reason to be found in the nature of the tea estate or classes of tea estates. In other words, there must be a reason why one class of tea is treated differently from another class of tea when deciding upon the rate to be applied to different classes of tea and that reason must be found in the nature of the tea estate concerned. Ultimately the benefit of exemption or reduced levy must be related to the need for exempting the tea estate from that levy or relieving it from part of the normal levy. In the present case the nexus with the tea estate is lost altogether in the provisions for exemption or reduction of the levy and throughout the nexus is confined to despatches of tea rather than related to the tea estate. There is also no relationship or nexus between the tea estate and the varied treatment of accorded in respect of despatches of different kinds of tea. Thus, having regard to all the relevant provisions of the statute, including section 4(2)(aa) and section 4(4), in substance the impugned levy is a levy in respect of despatches of tea and not in respect of tea estates. The Bill or the a....
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....ovisions as also the Parliamentary declaration, contemplated by List I, entry 54, have been made in the Mines and Minerals (Regulation and Development) Act, 1957, regarding all kinds of taxation on minerals and mineral rights-tax, royalty, fee, dead rent, etc. The State Legislature is denuded or deprived of the power to enact any law or to impose any tax or other levy with reference to List II, entry 23 or List II, entry 50. The levy of tax on mineral-bearing lands and coal-bearing lands under section 3 read with section 2(a)(1) and section 2(d) of the Act is therefore, beyond the competence of the State Legislature and is ultra vires." 37.. The propositions laid down in the aforementioned decisions are unexceptionable, but in view of the conclusion we have reached about the true nature of the impugned levy, we have no hesitation to hold that the impugned legislation cannot be declared unconstitutional on the ground of lack of legislative competence. Re: Question No. (ii): 38.. The second question can also be divided into the following two parts: (i) Whether the Entry Tax Act is unconstitutional being violative of articles 301 and 304 of the Constitution? (ii) Whethe....
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....of the Constitution. Shri Ganguly pointed out that Part-XIII was engrafted in the Constitution with the object of securing economic unity of the country as a whole and, therefore, the State's power to impose tax and duties on goods would be subject to the limitations enshrined in that Part. He relied on the decisions of the Supreme Court in Atiabari Tea Co. Ltd. v. State of Assam [1961] 1 SCR 809 and Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan [1963] 1 SCR 491 and argued that the impugned levy should be declared unconstitutional because it directly and immediately restricts and impedes the free flow of movement of goods which are in the nature of raw material and which petitionerSony India Ltd. (C.W.P. No. 8700 of 2000) is compelled to import from outside the State of Haryana and also from outside India to enable it to manufacture colour TV sets and other audio visual products, like video cameras, computer monitors, etc. Shri Ganguly also referred to the plea of the respondents that the tax in question is compensatory in nature and argued that the bald assertion made in the written statement and section 22 of the Entry Tax Act cannot be taken as decisive of the comp....
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....tax cannot be treated as compensatory because,- (a) no special/extra facilities are provided to persons liable to pay entry tax; and (b) all except those manufacturers, who import raw material and convert it into final products and then export the same out of Haryana by way of branch transfer or on consignment basis, have been exempted from levy of entry tax and all persons having turnover of less than Rs. 10 lacs have been exempted from levy of such tax. 42.. Dr. Singhvi also laid emphasis on the absence of material in the counter-affidavit to support the compensatory nature of the tax and submitted that the court should not accept the bald assertion made in the written statement. In this respect, he cited the decisions of the Supreme Court in G.K. Krishnan v. State of Tamil Nadu AIR 1975 SC 583 and State of Assam v. Labanya Probha Devi AIR 1967 SC 1575 (SC). 43.. On the other hand, Shri P.P. Rao and the learned AdvocateGeneral, Haryana, laid emphasis on the fact that the entry tax is compensatory in nature. They heavily relied on the provisions contained in Parts IX and IX-A of the Constitution and section 22 of the Entry Tax Act and submitted that the entire amount o....
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....t, and, subject to clause (1) the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III of the Seventh Schedule. Clause (3) declares that subject to clauses (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule. It is, thus, evident that the Legislature of a State has the exclusive power to make laws for the whole or any part of the territory of that State in respect of the matters enumerated in List II of the Seventh Schedule, but this power is subject to the other provisions of the Constitution. This means that the power of the Legislature to make laws is also subject to the provisions of Part XIII of the Constitution. Article 301, which is first in the family of articles dealing with trade, commerce and intercourse within the territory of India, lays down that subject to other provisions of this Part (Part XIII), trade, commerce and intercourse throughout the territory of India shall be free. Article 302 declares that the Parliament may by law impose such restrictions on the freedom ....
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....taxation as such for the purpose of revenue on the one hand and taxation for the purpose of making discrimination or giving preference on the other hand and recorded the following conclusion: "Thus, on a fair construction of the provisions of Part XIII, the following propositions emerge: (1) trade, commerce, and intercourse throughout the territory of India are not absolutely free, but are subject to certain powers of legislation by Parliament or the Legislature of a State; (2) the freedom declared by article 301 does not mean freedom from taxation simpliciter, but does mean freedom from taxation which has the effect of directly impeding the free flow of trade, commerce and intercourse; (3) the freedom envisaged in article 301 is subject to non-discriminatory restrictions imposed by Parliament in public interest (article 302); (4) even discriminatory or preferential legislation may be made by Parliament for the purpose of dealing with an emergency like a scarcity of goods in any part of India [article 303(2)]; (5) reasonable restrictions may be imposed by the Legislature of a State in the public interest [article 304(b); (6) non-discriminatory taxes may be imposed by the Legi....
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....rce is an act of trade or commerce and burdens or impediments imposed on any such step are restrictions on the freedom of trade, commerce and intercourse. What is guaranteed is freedom in its widest amplitude-freedom from prohibition, control, burden or impediment in commercial intercourse." 48.. In Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan [1963] 1 SCR 491, a seven-Judge Bench of the Supreme Court considered the constitutional validity of the Rajasthan Motor Vehicles Taxation Act, 1951. Four of the Judges constituting the Bench disapproved the extreme views expressed by B.P. Sinha, C.J. and Shah, J., in Atiabari Tea Co. Ltd. v. State of Assam [1961] 1 SCR 809. They also explained the majority view in the following words: "If the word 'free' in article 301 means 'freedom to do whatever one wants to do' then chaos may be the result; for example, one owner of a motor vehicle may wish to drive on the left of the road, while another may wish to drive on the right of the road. If they come from opposite directions, there will be an inevitable clash. Another class of examples relates to making a charge for the use of trading facilities, such as, road, bridges, ....
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.... accepted by the majority in the Atiabari Tea Co. case [1961] 1 SCR 809; AIR 1961 SC 232 is correct, but subject to this clarification. Regulatory measures or measures imposing compensatory taxes for the use of trading facilities do not come within the purview of the restrictions contemplated by article 301 and such measures need not comply with the requirements of the proviso to article 304(b) of the Constitution. " (Underlining is ours) 49.. The court also rejected the argument that tax cannot be regarded as compensatory if the amount collected is not actually used for providing any facility and held that a working test for deciding whether a tax is compensatory or not is to enquire whether the trades people are having the use of certain facilities for the better conduct Here italicised. of their business and paying not patently much more than what is required for providing the facilities. Their Lordships further observed that it would be impossible to judge the compensatory nature of a tax by a meticulous test. 50.. The decisions of the Supreme Court in Atiabari Tea Co. Ltd. v. State of Assam [1961] 1 SCR 809; AIR 1961 SC 232 and Automobile Transport (Rajasthan) Ltd. v.....
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....tory statutes as discussed by Hidayatullah, J., is much narrower than the scope of the regulatory statutes as considered by Subba Rao, J. In the result, the majority view expressed in the case of the Atiabari Tea Co. Ltd. [1961] 1 SCR 809; AIR 1961 SC 232 was substantially accepted by the majority of the learned Judges constituting the larger Bench which heard Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan case [1963] 1 SCR 491; AIR 1962 SC 1406 but a corollary was added to the said view as we have just indicated. The majority view in Atiabari Tea Co. Ltd. case [1961] 1 SCR 809; AIR 1961 SC 232 proceeded on the basis that the Australian decisions which dealt with the scope and effect of section 92 of the Australian Constitution would be of no assistance in construing the effect of the provisions in Part XIII of our Constitution, because the legislative, historical and political background, the structure and the effect of the relevant provisions contained in Part XIII were in material particulars different from those of section 92 of the Australian Constitution; section 92 is absolute in terms and on its literal construction, admits of no exceptions. The Australia....
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....e by declaring it to be violative of articles 301 and 304 of the Constitution. The facts of that case were that the appellant, who was dealing in liquor at Rourkela in Orissa challenged the imposition of a duty of excise on foreign liquor imported into the State levied at first at Rs. 40 per L.P. Gallon and from April 1, 1961 at Rs. 70 under section 27 of the Bihar and Orissa Excise Act, 1915. The argument of the appellant was that the duty amounted to unreasonable restriction on the freedom of trade and commerce because foreign liquor is not manufactured in the State and as such, no duty of excise could be levied on the locally manufactured foreign liquor. By a majority of 4: 1, their Lordships of the Supreme Court upheld the challenge and observed as under: "The notification levying duty at the enhanced rate is purely a fiscal measure and cannot be said to be a reasonable restriction on the freedom of trade in the public interest. Article 301 has declared freedom of trade, commerce and intercourse throughout the territory of India, and restriction on that freedom may only be justified if it falls within article 304. Reasonableness of the restriction would have to be adjudged i....
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....n infringement of article 301. As we have already pointed out it is well-established by numerous authorities of this Court that only such restrictions or impediments which directly or immediately impede the free-flow of trade, commerce and intercourse fall within the prohibition imposed by article 301. A tax may in certain cases directly and immediately restrict or hamper the flow of trade, but every imposition of tax does not do so. Every case must be judged on its own facts and in its own setting of time and circumstance. In the present case, the High Court has not gone into the question whether the provisions of Act 9 of 1964 and the notification dated January 25, 1951 issued under the Cochin Tobacco Act constitute such restrictions or impediments as directly and immediately hamper free-flow of trade, commerce and intercourse and, therefore, fall within the prohibition imposed under article 301 of the Constitution. Unless the High Court first comes to the finding on the available material whether or not there is infringement of the guarantee under article 301 of the Constitution, the further question as to whether the statute is saved under article 304(b) does not arise and the ....
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....contemplated in article 301 and that such measures need not comply with the requirement of the provisions of article 304(b). In whatever way one may choose to put it, the effect of the majority decision in the Automobile case [1963] 1 SCR 491; AIR 1962 SC 1406 is that a compensatory tax is not a restriction upon the movement part of trade and commerce. .................... Regulations like rules of traffic facilitate freedom of trade and commerce whereas restrictions impede that freedom. The collections of toll or tax for the use of roads, bridges, or aerodromes, etc., do not operate as barriers or hindrance to trade. For a tax to become a prohibited tax, it has to be a direct tax, the effect of which is to hinder the movement part of the trade. If the tax is compensatory or regulatory, it cannot operate as a restriction on the freedom of trade or commerce. ................... Strictly speaking, a compensatory tax is based on the nature and the extent of the use made of the roads, as, for example, a mileage or ton-mileage charge or the like, and if the proceeds are devoted to the repair, upkeep, maintenance and depreciation of relevant roads and the collection of the ex....
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....egislative power of State to enact law which may infringe the freedom of inter-State trade and commerce if its requirements are fulfilled. Article 304(a) imposes a restriction on the power of Legislature of a State to levy tax which may be discriminatory in character by according discriminatory treatment to goods manufactured in the State and identical goods imported from outside the State. The effect of article 304(a) is to treat imported goods on the same basis as goods manufactured or produced in a State. This article further enables the State to levy tax on such imported goods in the same manner and to the same extent as may be levied on the goods manufactured or produced inside the State. If a State tax law accords identical treatment in the matter of levy and collection of tax on the goods manufactured within the State and identical goods imported from outside the State, article 304(a) would be complied with. There is an underlying assumption in article 304(a) that such a tax when levied within the constraints of article 304(a) would not be violative of article 301 and State Legislature has the power to levy such tax. Tax under the impugned legislation would be levied on s....
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....s assent. If prior Presidential sanction is a sine qua non, the requirement of the proviso is not satisfied but in this context it would be advantageous to refer to article 255 which provides that no Act of Parliament or of the Legislature of a State and no provision in any such Act shall be invalid by reason only that some recommendation or previous sanction Here italicised. required by the Constitution was not given if assent to that Act was given by the President. Now, in this case, it is common ground that the President did accord his sanction to the impugned Act. Therefore the requirement of the proviso is satisfied." 56.. The apex Court also rejected the plea that the Act amounted to unreasonable restriction on the fundamental rights of the petty dealers to carry on their trade and observed as under: "Looking at the matter from a slightly different angle it must be confessed that if the contention of the respondents were to be upheld it would provide a fruitful source for evasion of tax. If petty dealers are to be excluded some criterion will have to be provided relatable to his turnover in scheduled goods for classifying who are petty dealers. That turnover will....
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.... It was argued that the impugned legislation was bad because it did not contain any indication about the utilisation of the tax upon the local bodies. The Supreme Court negatived this ground of challenge and observed as under: "How the tax collected will be utilised or apportioned is not a matter affecting the levy, nor is it a matter affecting the legislative power of the body enacting that law. As observed by the Supreme Court in Jaora Sugar Mills v. State of M.P. AIR 1966 SC 416, 'it is difficult to understand how the Act can be said to be invalid because the cesses recovered under it are not dealt with in the manner provided by the Constitution. The validity of the Act must be judged in the light of the legislative competence of the Legislature which passes the Act and may have to be examined in certain cases by reference to the question as to whether fundamental rights of citizens have been improperly contravened, or other considerations which may be relevant in that behalf. Normally, it would be inappropriate and indeed illegitimate to hold an enquiry into the manner in which the funds raised by an Act would be dealt with when the court is considering the question about th....
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....tion of the President was not obtained but, after the Act was passed by the Legislature, it was reserved for, and obtained the assent of the President. As held by the Supreme Court in Atiabari Tea Co. Ltd. v. State of Assam AIR 1961 SC 232 and Automobile Transport v. State of Rajasthan AIR 1962 SC 1406 such an assent cures the defect, if any, in not obtaining the previous sanction of the President before introducing the Bill." 61.. In Bhagatram Rajeev Kumar v. Commissioner of Sales Tax, Madhya Pradesh [1995] 96 STC 654 (SC), a three-Judge Bench of the Supreme Court considered the validity of M.P. Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976, and rejected the challenge based on the ground that those who were not liable to pay sales tax were exempted and that it was violative of article 301 of the Constitution. The relevant observations made on these issues are extracted below: "Liability to pay sales tax on the goods specified in Schedule II is thus not an essential ingredient of levy. The expression 'liable to tax' has been used to identify the person who shall pay the entry tax. To put it conversely if any goods mentioned in Schedule II are brought fr....
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.... made over to the local bodies to compensate them for the loss caused, makes the impost compensatory in nature, as augmentation of their finance would enable them to provide municipal services more efficiently, which would help or ease free-flow of trade and commerce because of which the impost has to be regarded as compensatory in nature, in view of what has been stated in the aforesaid decisions, more particularly in Hansa Corporation's case [1981] 1 SCR 823; AIR 1981 SC 463." (Underlining is ours) 62.. In Sanjay Trading Co. v. Commissioner of Sales Tax [1994] 93 STC 589, a division Bench of the Madhya Pradesh High Court considered the constitutionality of the Madhya Pradesh Entry Tax Act, 1976. It was argued on behalf of the petitioners that the impugned enactment is ultra vires articles 19(1)(g), 286(3) and 304(a) of the Constitution. The petitioner relied on entries 92A and 92B of List II. While rejecting the argument that the State Legislature was not competent to enact such law and only the Parliament was competent to do so, the division Bench of the High Court observed as under: "Item 54 of List II of the Seventh Schedule to the Constitution relates to tax on sale ....
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....that such goods are entered into local area for consumption, use or sale therein. Where the dealer purchases specified goods in a local area from a person or dealer who is not a registered dealer, it shall be presumed, until the contrary is proved by him, that the entry of goods had been effected by him into the local area. Section 11 deals with burden of proof of certain aspects and makes the matter clearer. The burden of proving that a dealer or a notified person has not effected entry of specified goods in the local area for consumption, use or sale therein, lies on him. The Rules framed under the Act provide among other things, for furnishing of returns, payment of tax or penalty imposed on him, order of assessment and form thereof, authority and manner for assessment of tax and appeal or revision against the order of assessment. These provisions completely negative the contention of the petitioners that in pith and substance, entry tax contemplated under the Act is a tax on entry, irrespective of the purpose of entry and amounts to purchase tax. Therefore, article 286(3) of the Constitution and section 15 of the Central Sales Tax Act, 1956, are not attracted to this legislatio....
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.... M.P. Octroi Compensation Fund under section 7-B of the Sales Tax Act. By Act No. 24 of 1978, this provision was omitted with effect from April 1, 1978. Section 7-B was introduced in the Sales Tax Act with effect from October 1, 1978, specifically providing for grant-in-aid for loss of octroi to the municipality. This provision was deleted in 1990. This is the foundation for the contention that the entry tax is not compensatory in character. Here italicised. The Statement of Objects and Reasons of the Act states that it is enacted to levy a tax on entry of goods in lieu of octroi tax collected by the municipalities and municipal corporations and to make transportation of goods trouble-free by abolishing octroi check-posts. A copy of the Statement of Objects and Reasons is found in annexure A.R-1 appended to the additional submissions made on behalf of the respondents in M.P. No. 2289 of 1989. It indicates that the statute had the view of raising financial resources to compensate local bodies consequent upon abolition of octroi with a view to simplifying the taxation structure. Annexure A.R-3 gives summary in respect of levy and details of allotment made to local bodies. The d....
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....the Bihar Legislature is deprived of its legislative competence to enact the impugned Act on account of the enactment of ADE Act and/or because the State of Bihar is getting a portion of the taxes levied and collected under the ADE Act? (4) Whether the impugned enactment is outside the purview of entry 52 in List II of the Seventh Schedule to the Constitution and, therefore, beyond the legislative competence of the Bihar Legislature for the reason that it does not provide for the revenues raised thereunder to be passed on to the local authorities for being used for the purposes of the respective local areas? (5) Whether the proviso to section 3(1) and section 6 are void for the reasons assigned by the High Court? 66.. On the first question, the court referred to the judgment of the seven-Judge Bench in Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan [1963] 1 SCR 491; AIR 1962 SC 1406 and accepted the argument of the Additional Solicitor-General that the tax was compensatory in nature and observed as under: "Where the local areas contemplated by the Act cover the entire State, the distinction between the State and the local areas practically disappears. (The ....
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....sam [1964] 5 SCR 975; AIR 1964 SC 925 and held that the impugned levy was in public interest. On the third question, the court held that the impugned legislation was not in conflict with the Additional Duties of Excise (Goods of Special Importance) Act, 1957. While dealing with the fourth question, the court noticed some of the judgments relied upon by the counsel for the appellants and observed as under: "The tax, by whatever name called, is levied upon the entry of goods into a local area for consumption, use or sale therein. The decisions relied upon by Sri Ganesh too use the same words. Entry 52 empowers the State Legislature to levy this tax. The local authorities cannot themselves levy this tax. The power is that of the State Legislature and of none else. So long as the tax is levied upon the entry of goods into a local area for the purpose of consumption, use or sale therein, the requirement of entry 52 is satisfied. The character of the tax so levied is that of entry tax-by whatever name it is called. The decisions relied upon by Sri Ganesh do not say that the State must levy the tax and make over the collection part of it to local authorities nor do they say that ....
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....n or propriety of a legislation but it is legality or illegality which renders it valid or invalid'." (Underlining is ours) 68.. In Godfrey Philips India Ltd. v. State of Rajasthan [2001] 121 STC 54, a division Bench of the Rajasthan High Court rejected the challenge to the constitutionality of the Rajasthan Tax on Entry Here italicised. of Goods into Local Areas Act, 1999. The said Act was enacted for the levy and collection of tax on entry of goods into local areas in the State of Rajasthan for consumption, use or sale therein and matters incidental thereto. The division Bench of the Rajasthan High Court referred to the various decisions of the Supreme Court and the High Courts and held that the Act was not violative of articles 301 and 304(b) of the Constitution by recording the following observations: "Indisputably, octroi is abolished in State of Rajasthan. Due to abolition of octroi, the local bodies, i.e., Panchayats, established under the Rajasthan Panchayati Raj Act, 1994, municipalities, established under the Rajasthan Municipalities Act, 1959 and notified area committees and cantonment boards suffered a financial dent, on account of abolition of octroi cannot be ru....
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....tion and entry 52 in State List of the Seventh Schedule to the Constitution which is not acceptable to us being contrary to federal structure of our Constitution." 69.. The following principles can be deduced from the above noted decisions: (i) The freedom of trade, commerce and intercourse guaranteed under article 301 is not absolute. A tax can be treated as restriction on this freedom if it hinders the movement part of trade, but so long as the tax remains compensatory or regulatory, it cannot operate as hindrance. (ii) Regulatory measures or measures imposing compensatory taxes for the use of trading facilities do not come within the purview of restrictions contemplated by article 301 and such measures need not comply with the requirements of the proviso to article 304(b) of the Constitution. (iii) A tax will be regarded as compensatory tax if it is levied on those using trading facilities which include roads, bridges, markets and such tax would retain its character as compensatory tax if some link is established between the tax and the facilities extended directly or indirectly to those who are required to pay the tax. (iv) If the amount collected by the levy of ....
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....areas and municipalities in the urban areas by declaring them as institutions of self-Government and simultaneously conferring upon them powers, authority and duties including the authority to levy, collect and appropriate taxes, tolls, etc. Article 243(d) defines the panchayat as an institution of self-Government constituted under article 243B for rural areas. Likewise, article 243-P(e) defines the municipality as an institution of self-Government constituted under article 243Q. Article 243-G declares that subject to the provisions of the Constitution, the Legislature of a State may, by law, endow the panchayats with such powers and authority as may be necessary to enable them to function as institutions of self-Government and such law may contain provisions for the devolution of powers and responsibilities upon the panchayats at appropriate level, subject to the conditions as may be specified therein, with respect to-(i) the preparation of plans for economic development and social justice; and (ii) the performance of functions and the implementation of schemes as may be entrusted to them including those in relation to the matters listed in the Eleventh Schedule. Identical provisi....
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....lture including agricultural extension. 2. Land improvement, implementation of land reforms, land consolidation and soil conservation. 3.. Minor irrigation, water management and watershed development. 4. Animal husbandry, dairying and poultry. 5. Fisheries. 6. Social forestry and farm forestry. 7. Minor forest produce. 8. Small-scale industries, including food processing industries. 9. Khadi, village and cottage industries. 10. Rural housing. 11. Drinking water. 12. Fuel and fodder. 13. Roads, culverts, bridges, ferries, waterways and other means of communication. 14. Rural electrification, including distribution of electricity. 15. Non-conventional energy sources. 16. Poverty alleviation programme. 17. Education, including primary and secondary schools. 18. Technical training and vocational education. 19. Adult and non-formal education. 20. Libraries. 21. Cultural activities. 22. Markets and fairs. 23. Health and sanitation, including hospitals, primary health centres and dispensaries. 24. Family welfare. 25. Women and child development. 26. Social welfare, including welfare of the handicapped and me....
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.... as the State Government may make with respect to the priority to be given to the several duties of the committee, the municipal fund shall be applicable to the payment in whole or in part, of the charges and expenses incidental to the following matters: "(a) the construction, maintenance, improvement, cleansing and repair of all public streets, bridges, town-walls, town-gates, embankments, drains, privies, latrines, urinals, tanks and water-courses and the preparation of compost manure; (b) the watering and lighting of such streets or any of them; (c) the construction, establishment and maintenance of schools, hospitals and dispensaries and other institutions for the promotion of education or for the benefit of the public health, and of rest-houses, sarais, poor houses, markets, stalls, encamping grounds, pounds, and other works of public utility, and the control and administration of public institutions of any of these descriptions; (d) grants-in-aid to schools, hospitals, dispensaries, poor-houses, leper-asylums and other educational or charitable institutions; (e) the training of teachers and the establishment of scholarships; (f) the giving of relief a....
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....icles 14 and 304(a) of the Constitution is based on a misconceived assumption that the tax is limited to manufacturers. At the cost of repetition, it would be appropriate to mention that levy of tax under section 3(1) of the Entry Tax Act is on entry of goods into a local area for consumption or use therein. Thus, the taxable event is on the entry of goods into a local area for consumption or use therein and not manufacture of a product. The manufacturer who brings raw material into the local area for consumption and produce goods, which are either sold in the State or transferred outside the State subsequently, are liable to pay the tax. Even non-manufacturer who brings any goods into a local area for use therein, is liable to pay tax. Those bringing goods into a local area from one local area or outside the State are liable to pay tax in similar measure at the same rate. Therefore, section 3 of the Entry Tax Act cannot be regarded as discriminatory and violative of articles 14 and 304(a) of the Constitution. 75.. The deductions envisaged by section 5(1) or exemptions granted by the Government by issuing notification under section 11 of the Entry Tax Act are also uniformly appl....
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....course. It enables the imposition of taxes on goods from other States if similar goods in the State are subjected to similar taxes, so as not to discriminate between the goods manufactured or produced in that State and the goods which are imported from other States. This means that if the effect of the sales tax on tanned hides or skins imported from outside is that the latter becomes subject to a higher tax by the application of the proviso to sub-rule (2) of rule 16 of the Rules, then the tax is discriminatory and unconstitutional and must be struck down." (Underlining is ours) 77.. In Andhra Steel Corporation v. Commissioner of Commercial Taxes in Karnataka [1990] 78 STC 243; (1990) Supp SCC 617, the Supreme Court applied the ratio of Firm A.T.B. Mehtab Majid and Co. v. State of Madras [1963] 14 STC 355 (SC) and held that section 5(4) of the Karnataka Sales Tax Act, under which exemption was granted from payment of sales tax to finished goods manufactured out of locally purchased raw material while taxing sale of finished goods manufactured out of imported raw material was discriminatory and violative of article 304(a) of the Constitution. Here italicised. 78.. In Shree Ma....
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....States to sales tax at eight per cent, the State of Jammu and Kashmir has brought about discrimination by taxation prohibited by article 304(a) of the Constitution." 79.. In Anand Commercial Agencies v. Commercial Tax Officer, Hyderabad [1997] 107 STC 586 (SC), the levy of higher rate of tax on groundnut oil brought from other States as compared to the groundnut oil extracted from groundnut already taxed in the State was declared discriminatory and violative of articles 301 and 304 of the Constitution. 80.. In State of U.P. v. Laxmi Paper Mart [1997] 105 STC 1 (SC), the exemption granted by the State of U.P to the exercise books of paper purchased within Uttar Pradesh while subjecting other exercise books to tax under the Uttar Pradesh Sales Tax Act was declared violative of article 304(a) by applying the ratio of Firm A.T.B. Mehtab Majid and Co. v. State of Madras [1963] 14 STC 355 (SC) and Shree Mahavir Oil Mills v. State of Jammu and Kashmir [1997] 104 STC 148 (SC). 81.. In Weston Electroniks v. State of Gujarat [1988] 70 STC 52 (SC); AIR 1988 SC 2038, the levy of different rates of sales tax between electronic goods imported into the State of Gujarat and goods manufact....
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....es not suffer from excessive delegation because the power under that section has to be exercised in public interest. With regard to notification dated May 5, 2000, Shri Rao pointed out that exemption given by the Government is to the goods being used by Information Technology Industry and not to the particular importer and the classification is justified because it is intended to provide which needed impetus to the growth of information technology in the State. 85.. We have given serious thought to the respective arguments. In our opinion, section 11(1) does not suffer from the vice of excessive delegation because the power vested in the State Government to grant exemption or reduce the tax payable by any class of importers can be exercised only on formation of opinion that it is necessary to do so in public interest. In other words, before granting exemption or reducing the tax payable by any class of importers, the State Government has to apply its mind to the requirement of that particular class as also the public interest. This necessarily means that the State Government cannot grant exemption arbitrarily to any particular importer or class of importers in respect of the par....
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....95, another Constitution Bench of the Supreme Court, while dealing with challenge to sections 4 and 5 of the Punjab General Sales Tax Act, 1948, enunciated the following principle: "The Constitution confers a power and imposes a duty on the Legislature to make laws. The essential legislative function is the determination of the legislative policy and its formulation as a rule of conduct. Obviously it cannot abdicate its functions in favour of another. But in view of the multifarious activities of a welfare State, it cannot presumably work out all the details to suit the varying aspects of a complex situation. It must necessarily delegate the working out of details to the executive or any other agency. But there is a danger inherent in such a process of delegation. An overburdened Legislature or one controlled by a powerful executive may unduly over-step the limits of delegation. It may not lay down any policy at all; it may declare its policy in vague and general terms; it may not set down any standard for the guidance of the executive; it may confer an arbitrary power on the executive to change or modify the policy laid down by it without reserving for itself any control over s....
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....nd upon the circumstance of each statute under consideration. In some cases guidance in broad general terms may be enough. In other cases more detailed guidance may be necessary. In the field of taxation the guidance may take the form of providing maximum rates of tax up to which a local body may be given the discretion to make its choice, or it may take the form of providing for consultation with the people of the local area and then fixing also rates after such consultation. It may also take the form of subjecting the rate to be fixed by the local body to the approval of Government which acts as a watch-dog on the actions of the local body in this matter on behalf of the Legislature. There may be other ways in which guidance may be provided. But the purpose of guidance, whatsoever may be the manner thereof, is to see that the local body fixes a reasonable rate of taxation for the local area concerned. So long as the Legislature has made provision to achieve that reasonable rates of taxation are fixed by local bodies, whatever may be the method employed for this purpose provided it is effective it may be said that there is guidance for the purpose of fixation of rates of taxation.....
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....such as the impact of the levy on the society, economic consequences and the administrative convenience will have to be considered. These factors may change from time to time. Hence in the very nature of things, these details have got to be left to the executive." (Underlining is ours) 91.. In Lohia Machines Ltd. v. Union of India [1985] 152 ITR 308 (SC); (1985) 2 SCC 197, the Supreme Court considered the challenge to the vires of rule 19-A of the Income-tax Rules, 1962, on the ground that it suffered from the vice of excessive delegation. Their Lordships referred to the earlier judgments in Pandit Banarsi Dass Bhanot v. State of M.P. [1958] 9 STC 388 (SC); AIR 1958 SC 909 and Hira Lal Rattan Lal v. State of U.P. [1973] 31 STC 178 (SC); AIR 1973 SC 1034 and upheld the provisions by making the following observations: "The principles laid down in these observations from the decided cases clearly govern the present case and conclusively repel the contention of Mr. Palkhivala that if sub-section (1) of section 80-J were construed in the manner suggested by the learned AttorneyGeneral on behalf of the Revenue, it would be rendered void on the ground of excessive delegation of legi....
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....ted the claim of exemption and held that section 36 of the Payment of Bonus Act, 1965 is a piece of conditional legislation and not a delegated legislation. 94.. The challenge to notification dated May 5, 2000 vide which the importers of the goods of the industries specified in annexure I have been exempted from payment of tax does not suffer from the vice of arbitrariness because the sole object of the exemption is to give impetus to the industries relating to Information Technology. 95.. The argument of Shri Ganguly that the notification seeks to exempt particular importer sounds attractive, but lacks merit and deserves to be rejected. The expression "tax payable" used in section 11(1) is directly referable to the liability to pay tax under section 3(1) and that liability has to be discharged by the importer in terms of section 3(2) qua the goods imported into the local area. Therefore, it cannot be said that the exemption is to the importers and not in respect of the goods brought into a local area. That apart, in our considered view, petitioner, M/s. Sony India Ltd., is free to approach the Government and claim exemption in respect of the particular goods by showing that ....
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....b) cannot survive and it cannot affect the validity of the Entry Tax Act. In this connection, we may refer to the decision of the Supreme Court in Hotel Balaji v. State of Andhra Pradesh [1993] 88 STC 98; AIR 1993 SC 1048. In that case, the Supreme Court examined the challenge to the constitutionality of various sales tax statutes of various States including Gujarat Sales Tax Act, 1970. Section 15-B of that Act was challenged by relying upon the decision of the Supreme Court in Goodyear India Ltd. v. State of Haryana [1990] 76 STC 71; AIR 1990 SC 781. During the pendency of the writ petitions, section 15B of the Gujarat Act was amended with retrospective effect. On behalf of the appellants-assessees, it was argued that new section 15-B was not different from the earlier provision and the only thing done by the amendment was to split the scheme of the earlier provision into two provisions, namely, substituted section 15-B and rule 42-E of the Gujarat Sales Tax Rules. While dealing with this ground of challenge, their Lordships observed as under: "Condition No. 4, emphasised by the assessees, says that the benefit of set-off/drawback/refund shall be available only if the manufactu....