TaxTMI 
TaxTMI 
2007 (3) TMI 686
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...., 22679 to 22685/02, 22738/02, 22956 to 22958/02, 23103/02, 23140/02, 23175/02, 23176/02, 23263 to 23266/02, 23443/02, 23553/02 & 23554/02, 23738 to 23742/02, 23941 to 23943/02, 24143/02, 24181 to 24184/02, 24385/02, 24419 to 24420/02, 24525 & 24526/02, 25021/02, 25346/02, 25373/02, 29937/02, 29963/02, 30035/02, 30532/02, 30668 to 30673/02, 30906/02, 31195/02, 31198/02, 31241/02, 31535 to 31540/02, 31541 to 31544/02, 31612 & 31613/02, 31633/02, 31690/02, 32425/02, 32460 & 32461/02, 32463 & 32464/02, 32734 & 32735/02, 33099/02, 33100/02, 33101/02, 33102/02, 33103/02, 33104/02, 33105/02, 33106/02, 33107/02, 33108/02, 33583/02, 34203/02, 34266/02, 34283/02 & 34284/02, 34313/02, 34342/02, 34343/02, 22961/02, 23177/02, 24352/02, 25068/02, 29058 & 29059/02, 29649/02, 29890/02, 32412/02, 32977/02, 33875/02, 34873/02, 35776/02, 36273/02, 36519 to 36521/02, 37078/02, 37465/02, 37480/02, 37660/02, 37718/02, 37778/02, 38430/02, 38855 to 38858/02, 39382 to 39384/02, 40280/02, 29825/02, 33194 to 33197/02, 34130/02, 34132/02, 34145/02, 34156/02, 34159/02, 34162/02, 34173/02, 34186/02, 34402/02, 34406 to 34407/02, 35554/02, 35555/02, 35691/02, 35834/02, 36498/02, 36503/02, 36707/02, 37129 to 3713....
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....4, 24199/04, 11412/04, 11740/04, 12769/04, 12770/04, 3929 to 3931/04, 20764, 20765/05, 18864/05, 18873 & 18874/05, 26122 & 26123/05, 26147 to 26149/05, 26949/05, 30564/05, 32662/05, 100/05, 595 to 597/05, 1144 & 1145/05, 1458/05, 1495/05, 1799 & 1800/05, 1527/05, 2153 & 2154/04, 3824/04, 4676/04, 4676/04, 4679/04, 4730/04, 5926 to 5928/04, 5604 & 5605/04, 5785*04, 5880/04, 6192/04, 6440/04, 6548 to 6551/04. 6915/04, 7418/04, 7421/04, 7453/04, 7472/04, 8719/04, 8964/04, 9078/04, 9156/04, 9393/04, 9620/04, 9806/04, 9980/04, 10362/04, 10655/04, 11223/04, 11224/04, 11239/04, 11494/04, 12573/04, 13278/04, 13279/04, 13630/04, 13631/04, 13561 & 13562/04, 27149/04, 27175/04, 27485/04, 27575/04, 27709/04, 27733/04, 27827/04, 27829/04, 27835/04, 27993 & 27994/04, 28028/04, 28029/04, 28048/04, 28361/04, 29469/04, 29617/04, 29679/04, 29789/04, 29870/04, 5143 & 5144/04, 5644/04, 17096/04, 17163/04, 19095/04, 22114/04, 22437/04, 22614/04, 22791/04, 22793 & 22794/04, 22948/04, 24178/04, 24635/04, 25291/04, 25650/04, 25658/04, 25743/04, 26667 & 26668/04, 29057/04, 29920/04, 30282 & 30283/04, 30496/04, 31084/04, 31210/04,37668/04, 37669/04, 38420/04, 39628/04, 21581/05, 1317/04,1372/04, 1380/04, 15....
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....03, 24069/03, 29841/03, 510/04, 38057/03, 595 to 597/05, 27709/04, 28048 to 28052/04, 28200/04, 26667/04, W.P. 26668/04, 30282/04, 30283/04, 38420/04, 905/05, 28971 to 28973/04, 23881/05, 23882/05, 23923/05., Mr. R.Venkatraman SC Assisted by Mr. T.RameshKutty, W.P. 23333/04, W.P. 23988/04 to 23990/04, 28708/03, Mr. K.Venkatasubramaniam for M/s. R.V. Chitra Associates, W.P. 9244/2003, 13450/2003, 16659/03, 29085/03, W.P. 29913/2003, W.P. 30886/03, 2014/04, 30636/03, W.P. 29963/02, 42749/02, 13407/03, 20305 & 20306/04., Mr. M.N.Rao SC for M/s. R.Hemalatha, W.P. 15830/02, 15833/02, 15862/02, 15896/02, 15898/02, W.P. 15902/02, 15908/02, 16430/02 to 16432/02, 16433/02, 16434/02, 16959/02 to 16962/02, 16469/02 18225/02 20332/02, 20790/02 20791 to 20793/02 31241/02 37078/02 37480/02 38855 to 38858/02 37297, 37298/02 38270/02 39276 to 39279/02 39428 to 39431/02 18875/02 19907/02 19920/02 19931/02 19932/02 35891/02, 41712/02 41784 41785/02 44412/02 44436/02 44470/02 565/03 8631/03, 7623/03 W.P. 9571/03 9627/03, 11326 & 11327/03 22039/03 22040/03 22041/03 35971/03 35972/03 35973/03 35994/03 36078/03 36115/03 36153/03 36493/03 36758/03 38653/03 38654/03 675/04 1175/04 1204/04 1713/04 2693/04 ....
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....to 22958/02, 32734 & 32735/02, 35847/02, 2313/03, 14057/03, 24536/03, 24540/03, 32823/03, 32824/03, 32826/03, 32846/03, 32850/03, 32851/03, 36990 to 36992/03, 39534/04, 5880/04, 10655/04, 1976/04, 13325/04., K.Ramagopal, W.P. 23103/02, 35691/02, 3353/03, P.Radhakrishnan W.P. 23263 to 23266/02, 19603/02, K.R.Krishnan W.P. 23738 to 23742/02, 24181 to 24184/02, 24525 & 24526/03, 31612, 31613/02, 31633/02, 32460/02, 32461/02, 32463 & 32464/02, 29649/02, 29890/02, 39791/02, 23908 to 23919/02, 2293/03, 6184/03, 9134/03, 18068/02, 32777/03, 29266/03, 484/04, 24153 to 24168/02, 37807/03,15453/04, 37582/04, 11740/04, 26122/05, 29617/04, 31084/04,39628/04, 14522/04, 6247/04, 13335/05, 20956/05, 24652/05 R.Mahadevan, W.P. 24385/02, 32425/02, 34283 & 34284/02, 39832 to 39834/02, 11615 & 11616/03, 11620 to 11625/03, 11820 to 11824/03, 17633/03, 23309/03, 25150 to 25153/03, 28618/03, 28618, 28619/04, 29497/03, 30337/03, 35899/03, 29915/04, 24199/04., P.Jagadeesan, W.P. 24419 & 24420/02., S.Kamadevan, W.P. 30532/02, 27000/03, 16083 & 16084/05 W.P. 8948/06, 9865 & 9866/06., M.Vidya W.P. 30668/02, 31535 to 31540/02, 31541 to 31544/02, 39319/02, 16926/03, 31210/04., P.S.Raman,W.P. 37465/02, 35388/02....
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.... 24119/03, 29476/03, S.A.Rajan, W.P. 24745/03, R.Seeniappan W.P. 26710/03, 28718/04, 28720/04, 518/06, V.Sanjeevi W.P. 27049/03, 6440/04, 8644/05, M.Mohamd Riyaz W.P. 27479/03, 33271/03, 33319/02, 37026/03, 38543/03, 158/04, 989/04, 15487, 15492/02, 12769/04, 12770/04, 35055/03, 4676/04, 9156/04, 27175/04, 17096, 17163/04, 22614/04, 16599/04, 18736/04, 5840/04, 34410, 34410/04., M.Alagarsamy W.P. 28289/03, R.Venkatakrishnan W.P. 32767/03, B.Saravan W.P. 38544/03, N.Sriprakash W.P. 38608/03, A.Ravichandran W.P. 955/04, 10410/05, T.Meikandan W.P. 2515/04, L.S.M.Hasan Fizal W.P. 2691/04, P.Kalaiarasan W.P. 26042 to 26044/04, 27485/04, 27835/04, 28361/04, Muthumani doraisamy W.P. 37626/04, S.Ramanathan W.P. 38024/04, 38033/04, K.R.Govindarajan W.P. 1799/05, and 1800/05, S.Silambanan W.P. 6915/04, 7472/04, J.Pothiraj W.P. 10362/04, P.Gunaraj W.P. 27149/04, 27827/04, 27829/04, 25658/04, 29057/04, 29920/04, 8406/05, V.J.Latha W.P. 28028, 28029/04, K.Balasubramanian W.P. 1380/04, S.Sivanandam W.P. 7091/04, 7092/04, 18073/05, P.V.Sudhakar W.P. 14372/04, S.Srinivasan W.P. 22031 and 22032/04., V.Srikanth W.P. 8848/05, 11800/05, 1474/06, 16250/05, 15864 and 15865/05, 19131/04, 19845/04, 6236/0....
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....of Articles 301 and 304 of the Constitution. 4. It is necessary at this stage to notice the broad features of the Act. The long title and the preamble of the Act demonstrates the purpose for which the Act was enacted, it being to provide for the levy of tax on the entry of scheduled goods into local areas for consumption, use or sale thereunder. Section 3 of the Act, which is the charging section, reads as under: - "3. Levy and Collection of tax - (1) Subject to the provisions of this Act, there shall be levied and collected a tax on the entry of any scheduled goods into any local area for consumption, use or sale therein. The rate of tax of shall be at such rate not exceeding thirty percent on the value of the scheduled goods as may be fixed by the Government, by notification and different rates may be fixed for different scheduled goods. (2) The tax shall be payable by an importer in accordance with the provisions of the Act." 5. The expression "entry of goods into local area" has been defined under the Act vide Section 2(c) and it reads as follows: "Section - 2(c): Entry of goods into a local area - with all its grammatical variations an....
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....follows:- "Section - 4 Reduction in tax liability - (1) Where an importer of any scheduled goods liable to pay tax under this Act, being a dealer in scheduled goods becomes liable to pay tax under the General Sales Tax Act and additional sales tax under the Tamil Nadu Additional Sales Tax Act, 1970 (Tamil Nadu Act No.14 of 1970), by virtue of the sale of such scheduled goods, then his liability under those Acts shall be reduced to the extent of tax paid under this Act. (2) Where an importer who, not being a dealer in scheduled goods, had purchased the scheduled goods for his own use or consumption in any Union Territory, or any other State, then his liability under this Act, shall, subject to such conditions as may be prescribed be reduced to the extent of the amount of tax paid, if any, under the law relating to General Sales Tax as may be in force in that Union Territory or State." 9. Chapter III of the Act provides for offences and penalties and cognizance of offences, Chapter IV deals with appeals and revisions and Chapter V contains provisions for returns, assessments, payments, recoveries and refunds of tax and reviews. 10. Learned counsel appearing on....
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....specific facility, convenience or services is provided to the assessees who are required to pay impugned tax nor is there any co-relationship between the quantum of tax recovered from the assessees and the value of convenience/facility or services provided. It was submitted that the Act has not received the assent of the President as required under Article 255 of the Constitution nor the Bill was moved on the floor of the Assembly with the previous sanction of the President as required under the proviso to Section 304(b) of the Constitution, and thus, the Act is not saved by Article 304(b) of the Constitution. Learned counsel further submitted that there is an element of discrimination between the goods entering the local areas from outside the State and goods entering the local areas from within the State i.e., from one local area to another local area. The latter class of goods is not subjected to levy though all the facilities, if at all provided, are there in course of inter-State movement and entry of goods in local areas. Learned counsel, therefore, submitted that this discrimination per se militates against the impugned levy being termed as compensatory. The levy thus violat....
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.... be taken into account. He, therefore, submitted that there is no violation of Article 304(a) of the Constitution. 12. In view of the rival contentions raised at the Bar, two questions arise for our consideration, namely, a) Whether the levy of entry tax under Tamil Nadu Act 20 of 2001 can be justified as a compensatory tax? b) Whether the impugned levy of entry tax is violative of Article 304(a) of the Constitution? Re. Question(a): - 13. Articles 301, 302, 303 & 304 are relevant for the purpose of deciding the controversy: "301. Freedom of trade, commerce and intercourse - Subject to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free. 302. Power of Parliament to impose restrictions on trade, commerce and intercourse - Parliament may by law impose such restrictions on the freedom of trade, commerce or intercourse between one State and another or within any part of the territory of India as may be required in the public interest. 303. Restrictions on the legislative powers of the Union and of the States with regard to trade and commerce - (1) Notwithstanding anythin....
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....d 303. Article 304(a) places goods imported from sister-States on a par with similar goods manufactured or produced inside the State in regard to State taxation within the allocated field. Article 304(b) is the State analogue to Article 302, for it makes the State's power contained in Article 304(b) expressly free from the prohibition contained in Article 303(1) by reason of the opening words of Article 304. Whereas in Article 302 the restrictions are not subject to such requirement of reasonableness, the restrictions under Article 304(b) are so subject. 15. In Atiabari Tea Co. Vs. State of Assam, AIR 1961 SC 232 the constitutionality of Assam Taxation (On Goods Carried by Roads and Inland Waterways) Act, 1954 enacted by the Legislature of Assam providing for levy of tax on certain goods carried by road or inland waterways in the State of Assam, was questioned by a number of tea companies who sold most of their products outside the State of Assam after transporting them by road or waterways to West Bengal and other States. The majority opinion (Gajendragadkar, Wanchoo and Das Gupta, JJ.) stated their conclusion in the following words: 52)"......... Our conclusion....
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....ated by the majority and by Shah, J. in Atiabari Tea Co. (supra) the matters were referred to a larger Constitution Bench of seven Judges. By a majority 4:3 (S.K.Das, Kapur and Sarkaria, JJ. Joined by Subba Rao, J.), the Supreme Court upheld the constitutionality of the Act on the ground that the taxes levied by it are compensatory in nature and, therefore, outside the purview of Article 301. Once outside the purview of Article 301, it was held, Article 304 was also not attracted. The Court observed in paragraph - 19 that: "The taxes are compensatory taxes which instead of hindering trade, commerce and intercourse facilitate them by providing roads and maintaining the roads......." (AIR page 1425) Vide para. 21 of the Report, it was observed that: "If a statue fixes a charge for a convenience or service provided by the State or an agency of the State, and imposes it upon those who choose to avail themselves of the service or convenience, the freedom of trade and commerce may well be considered unimpaired." (AIR page. 1425) Thus, the concept of "compensatory tax" was propounded. Therefore, taxes which would otherwise interfere with the unfettered freedo....
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....essary to examine whether the trades people are having the use of certain facilities for the better conduct of business and paying not patently much more than what is required for providing the facilities. 21. At this juncture, it is necessary to take note of what has been stated about the scope of Articles 301, 302 & 304 vis-à-vis compensatory tax by the Constitution Bench in Jindal's case which read as follows: (SCC pp.268 & 269) "45. To sum up, the basis of every levy is the controlling factor. In the case of "a tax", the levy is a part of common burden based on the principle of ability or capacity to pay. In the case of "a fee", the basis is the special benefit to the payer (individual as such) based on the principle of equivalence. When the tax is imposed as a part of regulation or as a part of regulatory measure, its basis shifts from the concept of "burden" to the concept of measurable/quantifiable benefit and then it becomes "a compensatory tax" and its payment is then not for revenue but as reimbursement/recompense to the service/facility provider. It is then a tax on recompense. Compensatory tax is by nature hybrid but it is more closer to fees than to ....
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....is: what is the scope of the operation of the law? Whether it has chosen an activity like movement of trade, commerce and intercourse throughout India, as the criterion of its operation? If yes, the next question is: what is the effect of operation of the law on the freedom guaranteed under Article 301? If the effect is to facilitate free flow of trade and commerce then it is regulation and if it is to impede or burden the activity, then the law is a restraint. After finding the law to be a restraint/restriction one has to see whether the impugned law is enacted by Parliament or the State Legislature. Clause (b) of Article 304 confers a power upon the State Legislature similar to that conferred upon Parliament by Article 302 subject to the following differences: (a) While the power of Parliament under Article 302 is subject to the prohibition of preference and discrimination decreed by Article 303(1) unless Parliament makes the declaration under Article 303(2), the State power contained in Article 304(b) is made expressly free from the prohibition contained in Article 303(1) because the opening words of Article 304 contain a non obstante clause both to Article 301 and Arti....
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......... ....... ........ 4. Tax imposed for augmenting general revenue of the State such as sales-tax is not compensatory ........" 23. In the counter filed by the State, the test of some connection or the existence of an even indirect link as propounded by the decisions in Bhagatram Rajeevkumar Vs. CST, State of Bihar Vs. Bihar Chamber of Commerce (supra) was pressed into service. Both the decisions have been overruled and hence, the reliance placed by the State on the aforesaid decisions is rather misplaced. In the wake of decision of the Constitution Bench in Jindal's case the State has filed an additional counter whereby the State has sought to project certain figures of expenditure incurred from the year 2002 - 03 to 2005 - 06 in the matter of laying roads, construction of bridges, etc., which according to the State is said to be a quantifiable data to satisfy the parameters laid down in Jindal's case. The following are those two charts: - EXPENDITURE INCURRED BY THE STATE Year Entry Tax collected on goods Expenditure on road maintenance Expenditure on construction of bridges Total Expenditure (Rupees in Crores) &....
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....y. In the first place, the above data is rather ambiguous, as it does not provide details or even examples of the specific areas where the alleged roads have been laid and does not even name the few bridges that have been constructed with the amount collected as entry tax. In Jindal's case, the Court has categorically ruled that for a law to be compensatory, there has to be a rational nexus between the levy and the services provided. The decision proceeds to make a clear-cut distinction between the general taxing power of the State and the levy of compensatory tax. The essence of compensatory tax is that the services rendered or facilities provided should be more or less commensurate with the tax levied. Services provided will have a direct co-relation with the trade. The main basis of compensatory tax is the quantifiable and measurable benefit represented by the cost incurred in procuring the facilities/services. The cost in turn becomes the basis of reimbursement/recompense for provider of services/facilities. As held in Jindal's case, the compensatory tax is a charge for offering trade facilities and they are based on the principles of equivalence. Applying the above test, it ca....
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.... all to be substantiated as a compensatory tax, then it has to be done with reference to the nature of such tax i.e., a tax payable by a special class of dealers in a local area who import only the specified goods from outside the State and the special benefits/facilities provided to such payers of the tax within the local area concerned. As to what could satisfy such a test in the context of an entry tax could be gathered from Para 28 in Hansa Corporation. (AIR 1981 SC 463 at para.28 p.473) which is extracted below: "The State did not attempt in the High court to sustain the validity of the impugned tax law on the submission that it was compensatory in character. No attempt was made to establish that the dealers in scheduled goods in a local area would be availing of municipal services and municipal services can be efficiently rendered if the municipality charged with a duty to render services has enough and adequate funds and that the impugned tax was a measure for compensating the municipalities for the loss of revenue or for augmenting its finances. As such a stand was not taken, it is not necessary for us to examine whether the tax is compensatory in character. " (....
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....ea. (ii) that the respondents had not established any broad correlation between the entry tax being realized and the expenditure on the facilities for facilitating trade and commerce. The petitioner had already paid more than Rs.758 crores as entry tax. In none of the affidavits filed by the respondents had it been stated how much was the amount of the total entry tax collected under the Act and how much was the expenditure on facilities for facilitating trade and commerce. The burden was on the respondents to establish this broad correlation but they had failed to do so. There was nothing to show that the amount realized as entry tax could not be used or had not been used for setting up schools, housing, payment of salary to Government employees, payment of salaries to ministers, M.L.As., constructing Government buildings, acquiring land, etc. No facility had been provided by the U.P.Government, directly or indirectly, for transportation of the crude oil. The underground pipes for transporting the oil were built by the petitioner and not by the respondents. (iii) that the fact that the State Government provides funds to local self- Governments to enable them to f....
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....s., v. State of Maharashtra, 2004 Vol.135 STC 25 (Bom.), a Division Bench of the Bombay High Court has held that for an Act to be compensatory in nature, there must be a clear nexus between the tax collected and benefits conferred upon the persons from whom such tax is collected. In the absence of any link between the entry tax on imported goods, and the facilities extended to the importers directly or indirectly, the levy of entry tax which is discriminatory cannot be said to be compensatory in nature. In these circumstances, subjecting the goods imported from outside the State to entry tax becomes unauthorized, arbitrary, discriminatory and violative of Article 301 of the Constitution. It was held that Entry 13 of the Schedule to the Maharashtra Tax on the Entry of Goods into Local Areas Act, 2002 insofar as it purports to levy entry tax on furnace oil and low sulphur waxy residue oil is unauthorized and unconstitutional. 33. In view of the foregoing discussion, we hold that the impugned Act does not satisfy the test laid down for compensatory tax and as no Presidential assent has been obtained under Article 304(b) of the Constitution the provisions of the impugned Act are ult....
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....t is, in truth, a provision prohibiting discrimination against the imported goods. In the matter of levy of tax - and this is important to bear in mind - the clause tells the State Legislatures - 'tax you may the goods imported from other States/Union Territories but do not, in that process, discriminate against them vis-à-vis goods manufactured locally'. In short, the clause says: levy of tax on both ought to be at the same rate. This was and is a ringing declaration against the States creating what may be called 'tax barriers' - or 'fiscal barriers' as they may be called - at or along their boundaries in the interest of freedom of trade, commerce and intercourse throughout the territory of India, guaranteed by Article 301. As we shall presently point out, this clause does not prevent in any manner the States from encouraging or promoting the local industries in such manner as they think fit so long as they do not use the weapon of taxation to discriminate against the imported goods viz-a-vis the locally manufactured goods. To repeat, the clause bars the States from creating tax barriers - or fiscal barriers as they can be called - around themselves and/or insulate themselv....
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....ed 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 of Rule 16 of the Rules, then the tax is discriminatory and unconstitutional and must be struck down." 37. In H.Anraj Vs. Govt. of T.N., (1986) 1 SCC 414 the Government of Tamil Nadu exempted the lottery tickets issued by it totally while levying tax on lottery tickets issued by other Governments and sold in Tamil Nadu. The Court held that laws imposing taxes can amount to restriction on trade, commerce and intercourse if they hampered the free flow of trade unless they are compensatory in nature and that the sales tax which had the effect of discriminating between goods of one State and another may affect free flow of trade and would be offensive to Article 301 unless saved by Article 304(a). It was held that the direct and immediate result of the notification was to impose an unfavourable and discriminatory tax. 38. In India Cement Vs. State of A.P., (1988) 1 SCC 743 the Government of Andhra Pradesh has iss....
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....42 and reaffirmed its decision in A.T.B.Mahtab Majid & Co. case (supra). 40. The question was once again examined in the case of Shree Mahavir Oil Mills Vs. State of J & K (supra). In that case, with a view to protect local edible oil industry, Government of J & K issued an order exempting the goods manufactured by small-scale dealers within the State from payment of sales-tax for a specified period. The rate of sales-tax payable for other industry including manufactures of adjoining States was 4%. A subsequent notification was issued on 10.12.1993 as a result of it the general rate of sale -tax payable on edible oil became 8%. The manufactures of edible oil from adjoining States claimed that the exemption granted from payment of tax to the local industries was discriminatory. The exemption given by the Government of J & K to the manufacturers of edible oil was total and the period of exemption was 5 years and which was later extended by another 5 years period. It was held that the unconditional exemption granted to the edible oil industry within the State for a period of 10 years and at the same time subjecting edible oil industry from other States to sales-tax at 8% was discri....
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....ourt held that (SCC p.699, para 3) "once the discrimination is made out, the enquiry by court ends. The price structure of the imported goods vis-à-vis the locally manufactured goods or the economics of the importer need not be gone into". (emphasis supplied) 42. In Anand Commercial Agencies Vs. The Commercial Tax Officer VI Circle, Hyderabad, (1998) 1 SCC 101 the case of the appellant was that the oil had been extracted out of groundnuts which had borne tax under the Karanataka Sales Tax Act. The levy of tax on the oil imported from Karnataka into Andhra pradesh at a rate higher than the rate at which the oil manufactured in Andhra Pradesh is taxed is discriminatory and violative of the appellant's right to freedom of trade and commerce throughout India. Accepting the challenge the Court held as follows:- "What has been done by Entry 24 of the First Schedule is to impose a lower rate of duty on groundnut oil or refined oil obtained from groundnuts that have been taxed under the A.P.Act.The contention that groundnut oil manufactured in Andhra Pradesh has not generally been charged at a lower rate of tax has not been substantiated by any fact or figure....
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....or as against C- Declarations paying 4% central sales tax. But after the enactment the same manufacturer apart from 4% central sales tax is required to pay entry tax even when the material is being used in further processing or manufacturing inside the State and further sold inside the State itself. This clearly offends clause (a) of Article 304. As observed in G.K.Krishan Vs. State of Tamil Nadu (supra) "a discriminatory tax imposed on outside goods is not a tax simplicitor but is a barrier to trade and commerce". (AIR page.385 para.27) 45. Learned Advocate General sought to argue that the question of discrimination cannot be worked out by merely referring only to entry tax levied under the impugned legislation. His submission is that the sum total of taxes levied on the goods will have to be taken into consideration especially keeping in view the provisions of Section 4 of the Act which contemplate reduction in tax liability. This very argument was rejected by a Division Bench of the Karnataka High Court in Avinyl Polymers Pvt. Ltd. Vs. State of Karnataka, 109 STC 27 Kar). The relevant portion of the judgment has been extracted below: - "The next facet is as to how th....
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....dvocate General is not factually correct. For example, there is no local sales tax levied on cigarettes and other tobacco products. Therefore, Section 4(2) does not have any application to cigarette and other tobacco products and it cannot be contended that there is no discrimination. As regards, any other scheduled goods, which a dealer imports by way of purchase from another State, such importer suffers central sales tax of 4% in the exporting State and in addition thereto suffers the impugned entry tax. Thus, over and above the entry tax, the purchaser has suffered central sales tax in the exporting State. Learned counsel appearing for the petitioners filed charts showing entry tax and sales tax structure and the effect of Section 4 of the Act on entry of goods into local areas. It is seen from the charts that the importer of goods from outside State is clearly put to disadvantage as compared to a local manufacturer or producer. It may also be noted that the set off under Section 4 of the Act is not available for entry tax paid on the goods used as input raw materials. We have therefore no hesitation in holding that the levy of entry tax under the impugned Act is violative of cl....