TaxTMI 
TaxTMI 
2017 (10) TMI 491
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....No.15623/2008, C.A. No. 15978 of 2017 @ SLP(C) No.15495/2008, C.A. No. 15979 of 2017 @ SLP(C) No.15934/2008, C.A. No. 15980 of 2017 @ SLP(C) No.15647/2008, C.A. No. 15981 of 2017 @ SLP(C) No. 16930/2008, C.A. No. 15982 of 2017 @ SLP(C) No.15496/2008, C.A. No. 15983 of 2017 @ SLP(C) No.15491/2008, C.A. No. 15984 of 2017 @ SLP(C) No.16865/2008, C.A. No. 15985 of 2017 @ SLP(C) No.18346/2008, C.A. No. 15986 of 2017 @ SLP(C) No.15356/2008, C.A. No. 15988 of 2017 @ SLP(C) No.15492/2008, C.A. No. 15989 of 2017 @ SLP(C) No.15845/2008, C.A. No. 15990 of 2017 @SLP(C) No.16926/2008, C.A. No. 15991 of 2017 @ SLP(C) No.15405/2008, C.A. No. 15992 of 2017 @ SLP(C) No.15684/2008, C.A. No. 15993 of 2017 @SLP(C) No.16832/2008, C.A. No. 15994 of 2017 @ SLP(C) No.15666/2008, C.A. No. 15995 of 2017 @ SLP(C) No.15636/2008, C.A. No. 15996 of 2017 @SLP(C) No.15498/2008, C.A. No. 15997 of 2017 @ SLP(C) No.15493/2008, C.A. No. 15998 of 2017 @ SLP(C) No.16754/2008, C.A. No. 15999 of 2017 @SLP(C) No.16733/2008, C.A. No. 16000 of 2017 @ SLP(C) No.16689/2008, C.A. No. 16001 of 2017 @ SLP(C) No.17193/2008, C.A. No. 16002 of 2017 @SLP(C) No.18379/2008, C.A. No. 16003 of 2017 @ SLP(C) No.18344/2008, C.A. No. 16004....
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....C.A. No. 16096 of 2017 @ SLP(C) No.12690/2010, C.A. No. 16097 of 2017 @ SLP(C) No.4390/2010, C.A. No. 16098 of 2017 @ SLP(C) No.4389/2010, C.A. No. 16099 of 2017 @SLP(C) No.4388/2010, C.A. No. 16100 of 2017 @ SLP(C) No.6763/2010, C.A. No. 16101 of 2017 @ SLP(C) No.6765/2010, C.A. No. 16102 of 2017 @SLP(C) No.4362/2010, C.A. No. 16103 of 2017 @ SLP(C) No.5309/2010, C.A. No. 16104 of 2017 @ SLP(C) No.4511/2010, C.A. No. 16105 of 2017 @SLP(C) No.3387/2010, C.A. No. 16106 of 2017 @ SLP(C) No.4572/2010, C.A. No. 16107 of 2017 @ SLP(C) No.7929/2010, C.A. No. 16108 of 2017 @SLP(C) No.9022/2010, C.A. No. 16109 of 2017 @ SLP(C) No.9077/2010, C.A. No. 16110 of 2017 @ SLP(C) No.9723/2010, C.A. No. 16120 of 2017 @SLP(C) No.36486/2010, C.A. No. 16112 of 2017 @ SLP(C) No.9702/2010, C.A. No. 16113 of 2017 @ SLP(C) No.10361/2010, C.A. No. 16114 of 2017 @SLP(C) No.14886/2010, C.A. No. 16115 of 2017 @ SLP(C) No.16694/2010, C.A. No. 16116 of 2017 @ SLP(C) No.16720/2010, C.A. No. 16117 of 2017 @SLP(C) No.18318/2010, C.A. No. 16119 of 2017 @ SLP(C) No.19199/2010, C.A. No.5860/2012,C.A. No. 5861/2012,C.A. No.4210/2012,C.A. No.8734/2012, C.A. No. 15968 @ SLP(C) No.33923/2012,C.A. No.8738/2012,C.A. No.873....
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....mar Garg, AOR Mr. Ginny J. Rautray, Adv. Ms. Kanchan Kaur Dhodi, AOR Ms. Vanita Bhargava, Adv. Mr. Ajay Bhargava, Adv. Ms. Abhisaar Bairagi, Adv. M/s. Khaitan & Co., AOR Mr. G. Prakash, AOR Mr. Jishnu M.L. Adv. Ms. Priyanka Prakash, Adv. Ms. Beena Prakash, Adv. Mr. Vijay Shankar V.L. Adv. Mr. U.A. Rana, Adv. Mr. Himanshu Mehta, Adv. M/s. Gagrat And Co, AOR Mr. Sibo Sankar Mishra, AOR M/s. Mitter & Mitter Co., AOR Mr. S. Nandakumar, Adv. Ms. Tanupriya Gupta, Adv. Ms. Senjul Mehta, Adv. Mr. M.S. Saran Kumar, Adv. Mr. Ram Dhan Singh Narwal, Adv. Mr. V. N. Raghupathy, AOR Mr. P. K. Manohar, AOR Mr. Arvind P. Datar, Sr. Adv. Ms. Fereshte D. Sethna, Adv. Ms. Anuradha Dutt, Adv. Mr. Tushar Jarwal, Adv. Mr. Rahul Sateeja, Adv. Mr. Ameya Pant, Adv. Ms. B. Vijayalakshmi Menon, AOR Mr. Shibashish Misra, AOR Sylona Mohapatra, Adv. Mr. Manish Kumar Saran, AOR Mr. Gopal Singh, AOR Mr. Nakul Dewan, Adv. Mr. Pradhuman Gohil, Adv. Mr. Vikash Singh, AOR Ms. Taruna Singh Gohil, Adv. Mr. Himanshu Chaubey, Adv. Mr.Vinayak Panikkar, Adv. Ms. Ishita Singh, Adv. Mr. Zain Maqbool, Adv. Mr. Abhijit Sengupta, AOR Mr. K. Harshavardhan, Adv. Mr. Karthik Sunder, Adv. Mr. Senthil Jagadeesan, AOR Mr. Gaurav Kejri....
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.... Das, Adv. Ms. Apeksha Mehta, Adv. Mr. Punit Dutt Tyagi, AOR Mr. M. P. Devanath, AOR Ms. Sharmila Upadhyay, AOR Mr. Jagdeep Dhankhar, Sr. Adv. Mr. Jagjit Singh Chhabra, AOR Ms. Priyanka Parida, Adv. Mr. A. N. Arora, AOR Mr. T. G. Narayanan Nair, AOR Mr. M. Shoeb Alam, AOR Mr. Ardhendumauli Kumar Prasad, AOR Mr. Dharmendra Kumar Sinha, AOR Mr. R. V. Kameshwaran, AOR Mr. Deba Prasad Mukherjee, AOR Ms. Prabha Swami, AOR Mr. K. R. Sasiprabhu, AOR Mr. Krishnayan Sen, AOR Mr. B. S. Banthia, AOR Mr. Aniruddha P. Mayee, AOR Mr. M. K. Dua, AOR Mr. Parijat Sinha, AOR JUDGMENT ASHOK BHUSHAN, J. Leave granted. 2. These appeals relate to entry tax levied on goods imported from different countries and brought into local area of a State. The legislative competence of the State Legislature to impose entry tax on the goods imported from outside the country entering into local area of the State is questioned. The State legislations are also questioned on the ground that the entry tax legislations do not contemplate levy of an entry tax on goods imported from outside the country. In this batch of appeals we are concerned only with entry tax legislations of States, namely, State of Orissa,....
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.... as it seeks to levy and collect entry tax on imported goods including scheduled goods when brought into the mines premises of the writ petitioner No.1 Company at Purunapani, Kalta, Barsua in the District of Sundergarh and Bolani in the District Keonjhar. The validity of the Act was challenged on various grounds including the ground that 1999 Act is ultra vires to the Constitution. It was further pleaded that provisions of 1999 Act do not provide for levying of tax on imported raw materials for its plants and machineries which is used/consumed at its factory for the manufacture of its finished products. The grounds were also raised that levy is not compensatory. 8. The writ petition was heard along with the bunch of writ petitions raising some similar and some different grounds. The Division Bench vide its judgment dated 18.02.2008 upheld the vires of 1999 Act. Civil Appeals arising out of SLP(C) Nos.12424-12425 of 2008 - M/s. Simples Infrastructures Limited vs. State of Orissa & Ors. also needs to be noted: 9. The writ petitioner is a company which carries on business on works contract for construction of different types of civil and piling works outside at various places....
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....obtained has obtained necessary licenses and permissions from appropriate authorities. (c) That the petitioner is registered under OVAT Act, CST Act and Orissa Entry Tax Act, 1999, and has been allotted TIN number by the Sales Tax Officers of the State. The petitioner brings in various goods including scheduled goods for its plants, from within the state and also from outside the territory of India by way of import. The materials so purchased from various countries are duly supported by Bill of Entry and other documents which have duly been incorporated in the accounts of the petitioner company. A specimen copy of a few Commercial Bills/Bills of Entry representing import of materials is annexed hereto as Annexure1." 12. The writ petitioner pleads that Legislature never intended to levy entry tax on the value of the goods imported from outside the country by Entry Tax Act, 1999. Article 286(1)(b) prevents a State from levying Sales Tax so as not to interfere with the Union's Legislative power with respect to the import and export across Customs Frontiers (Entry 41 of List I) and the duties of Customs including Export Duty (Entry 83 of List I). 13. The States never....
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....er Mills Limited vs. State of Orissa & Ors. 17. The petitioner has set up a large scale industry for manufacture of Paper, paper Board and newsprint in Orissa in the Industrial Estate of Balgopalpur, District Balasore. The petitioner had entered into an agreement with Global Equipment and Machinery Sales Inc., Montgomeryville, Pennsylvania, United States of America and placed orders for a Paper Plant and other machineries to be supplied by the said company to the petitioner. The petitioner imported into India a disassembled paper manufacturing plant in knock down condition with spares. The petitioner also imports other machineries from other countries and the said imported machineries and spare parts enter the Country through different ports and are cleared by the petitioner on payment of the import duty levied under the Customs Act, 1962. Once the said plants and machineries are unloaded and cleared upon payment of the Customs Duty the said plant and machineries are transported to the petitioner's factory at Balgopalpur, Orissa. Besides importing machinery from other countries the petitioner also has to purchase various machineries and spare parts from different manufacture....
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..... Entry tax is not leviable on goods imported from outside India as being violative of Article 286 read with Article 246 of the Constitution; b. Entry tax is not leviable on goods purchased from other States when the same goods are not manufactured within the State of Orissa in terms of Article 304(a) of the Constitution. c. In any case, the goods imported from outside India/purchased from other States by the petitioner are not specified in the schedule appended to the Act and therefore not exigible to entry tax. 19. The writ petition filed by the petitioner has been partly allowed by a common judgment dated 09.10.2012. The High Court although upheld the levy of entry tax on goods imported from outside the country but invalidated the levy of entry tax on certain goods purchased/imported by the petitioner which were not mentioned in the schedule appended to the 1999 Act. Aggrieved by the said judgment, this appeal has been filed. Transferred Case No.149 of 2013 - M/s. Paradeep Phosphates Ltd. vs. State of Orissa and ors. 20. The Transfer Petition (C) No.530 of 2012 was filed by the petitioner, M/s. Paradeep Phosphates Ltd. praying for the transfer of Writ Petition ....
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....nless the basic ingredients, i.e. Entry of Scheduled goods for the purpose of Consumption, Use or Sale into a local area of the State are satisfied, the provisions of the Orissa Entry Tax Act, 1999 shall not be attracted; 2. The goods which enter into local area/areas only for the purpose of transit will not be subject to Entry Tax; and 3. Every manufacture of scheduled goods under Section 26 shall collect by way of Entry Tax amount equal to the tax payable on the value of the finished products under Section 3 of the Act from the buying dealer either directly or through an intermediary only if the scheduled goods sold are intended for ENTRY into any local area of the State for the purpose of Consumption, Use or Sale." 23. Aggrieved by the said judgment, these civil appeals have been filed. Civil Appeals arising out of SLP(C) Nos.1674446 of 2013 - BRG Iron & Steel Co. Pvt. Ltd. vs. Joint Commissioner of Sales Tax, Angul, Orissa. 24. The petitioner company during the course of its business was required to purchase plants and parts of plants, machinery and parts & spares of all kinds of machinery for the purpose of setting up a manufacturing unit at Dhenkana....
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....l Nos. 33813400 of 1998 State Of Kerala & Ors Vs. FR. William Fernandez & Ors. 27. The State is in appeal against the Division Bench judgment dated 06.01.1998 of Kerala High Court delivered in a batch of writ appeals including Writ Petition No. 770/1997; Father William Fernandez & Ors. vs State of Kerala & Ors. The various petitioners imported motor vehicles from abroad after obtaining custom clearance and payment of custom duties and thereafter brought the vehicles in the State of Kerala. Some of the petitioners have also got their vehicles registered under the Motor Vehicles Act which have been given notice demanding entry tax under Kerala Tax on Entry of Goods into Local Areas Act, 1994 (hereinafter referred to as '1994 Act'). The writ petition was heard by learned Single Judge who vide its common judgment dated 20.2.1997 dismissed all the writ petitions holding that entry tax can be collected from the owners of the vehicles who brought them from abroad before granting them registration in the State for consumption, use or sale. Writ Appeals were filed against judgment dated 20.2.1997 which have been decided vide common judgment dated 06.01.1998. Although, the Division ....
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.... imported through Cochin Port within the State of Kerala. The said sale & purchase in the course of import is exempted from the levy of tax under Article 286 of the Constitution of India read with Section 5(2) of the Central Sales Tax Act, 1956. The respondent directed the first petitioner to remit the entry tax of purchase price of crude palmolin imported by the petitioner. Petitioner has also relied on Division Bench judgment of the Kerala High Court delivered in bunch of writ appeals including Writ Appeal 770 of 1997 against which SLP/Civil Appeal has been filed being CA 3381 - 3400 of 1998 and is pending. Civil Appeals relating to State of Bihar Civil Appeal arising out of SLP(C) No. 26543 of 2008 M/s ITC Ltd. vs. State of Bihar 30. This appeal has been filed against Division Bench judgment of Patna High Court dated 27.08.2008 by which the writ petition has been disposed of in terms of Para 69 Page 70 of the earlier decision in the case of M/s Indian Oil Corporation Ltd. (dated 09.1.2007 reported in 2007 10 BST 140 Patna). The petitioner is a company engaged in the business of manufacturing and selling of cigarettes and smoking mixtures. Company carrying on business....
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....06, has become compensatory and constitutionally valid. Civil Appeal of State of Jharkhand Civil Appeal arising out of SLP (C) 1101 OF 2007- State of Jharkhand & Ors.v.Tata Iron & SteelCo. Ltd. 33. State of Jharkhand filed an appeal against the Division Bench judgment dated 14.08.2006 delivered in Writ Petition(T) No. 5354 of 2004, Tata Iron & Steel Co. Ltd. Jamshedpur, Sinhbhumi vs. State of Jharkhand. The petitioner is engaged in manufacturing the iron & steel products by its integrated steel plant at Jamshedpur in the State of Jharkhand. For the purpose of manufacturing activities, company is importing coal from Australia and Newzealand in pursuant to several foreign contracts executed with foreign parties which comes to Haldia and Paradeep Ports in India and from there said coal is transported either by rail or road to Jamshedpur in the State of Jharkhand. 1993, Act was adopted in the State of Jharkhand after its creation from 15.11.2000. A Notification dated 23.03.2002 was issued under Sub section 1 of Section 2 by adding 10 new items to the schedule. Notification dated 23.03.2002 was issued levying the entry tax on imported coal. A memorandum was issued by Commiss....
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....ntry Tax Act, 1999. Entry of goods has been defined in Section 2(d) which contemplates entry of goods into a local area from any place (i) outside that local area or (ii) any place outside the State. The provision does not contemplate goods entering from any place outside the country. Putting a literal interpretation of the 1999, Act, it is clear that legislature never intended to cover the goods imported from outside the country. It is submitted that wherever legislature intended to impose entry tax on the imported goods coming from outside the country, the entry tax legislation specifically mentioned so in the legislation. The reference has been made to the provisions of the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Act, 1993 (as Amended by Bihar Act 11 of 2003 and 19 of 2006) wherein an explanation and a new Section 2(c) to the following effect was inserted:"( iii) into a local area from any place outside the territory of India." Further in Uttar Pradesh Tax on Entry of Goods into Local Area Act, 2007 under Section 2(1)(c) following is specifically provided for "(iii) into a local area from any place outside the territory of India." Simil....
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....nothing but the levy that is known as octroi, which is a tax levied by a local self authority on the entry of goods into the area administered by such local government. The expression 'local area' in Entry 52 signifies that tax in this entry is a local tax. The local authority into whose local area, the goods enters for consumption, use or sale therein can levy and collect the said tax. The tax refers to in Entry 49 of Provincial List under the Government of India Act, 1935 and Entry 52 of List II under the Constitution is 'octroi', which have been prior thereto, was levied by and for the benefit of local authorities and usurpation of this levy by State would thus be beyond the legislative power of the State under Entry 52. v. The imported machineries which are imported in completely knocked out condition are not covered by Schedule of 1999, Act. A plant imported in knocked out condition is neither machinery nor equipment and is not covered by Part II of Schedule. Hence, no entry tax could have been levied on imported plants which are received in knocked out condition. vi. Section 4 Of Bihar Act 1993 as inserted by Bihar Act 19 of 2006 is violative of Article 266 ....
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....ing power of Union and the State. When by Entry 52 List II, entry of goods in the local area for consumption, use or sale has been specifically provided the said entry has to be given its full meaning and content. 42. Learned counsel appearing for the writ petitioners in the State of Bihar in civil appeal arising out of judgment of Patna High Court as well as Jharkhand High Court has also adopted the above submissions raised on behalf of the petitioners. In reply thereto, learned counsel for the State of Bihar and Jharkhand has reiterated the same submissions as noted above. 43. Shri V. Giri, learned senior counsel appearing on behalf of the State of Kerala adopting the submission of Shri Rakesh Dwivedi contends that the judgment of Kerala High Court holding that entry tax cannot be levied on imported motor vehicles is fallacious. It is submitted that definition clause and charging section in the 1994, Act are clear enough to include goods entering from any place outside the State for consumption, use or sale therein including outside territory of India. Learned counsel appearing for the respondent in civil appeals of State of Kerala has reiterated the submissions raised on b....
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....into a local area for consumption, use or sale therein and matters incidental thereto and connected therewith. Section 2 contains definitions. Section 2(d) defines "entry of goods", Section 2(e) defines "importer", Section 2(f) defines "local area" as follows : "2. In this Act, unless the context otherwise requires, xxx xxx xxx (d) "Entry of goods" with all its grammatical variations and cognate expressions, means entry of goods into a local area from any place that local area or any place outside the State for consumption, use or sale therein; (e) "Importer" means a dealer or any other person who in any capacity brings or causes to be brought any scheduled goods into a 1mal area for consumption, use or sale therein; (f) "Local area" means the areas within the limits of any (i) Municipal Corporation, (ii) Municipality, (iii) Notified Area Council, (iv) Grama Panchayat, and (v) Other loca1 authority by whatever name called, constituted or continued in any law for the time being in force and shall also include an Orissa Act industrial township constitu....
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....d otherwise than by way of purchase, then the purchase value shall be the value or price at, which the goods of like kind or quality is sold or is capable of being sold, in open market" 49. Section 3 is a charging Section which is as follows: "Section 3 Levy of Tax Substituted by Act 23 of 1996 w.e.f. 2971996.) (1) Subject to the provisions of this Act, tax shall be levied and collected a tax on the entry of any goods into any local area for consumption, use or sale therein. (Inserted by Act 10 of 2005.) The Tax on such goods shall be at such rate or rates as may be fixed by Government by notification, on the purchase value of goods not exceeding the tax payable for the goods as per the (Substituted by Act 23 of 1996 w.e.f. 2971996.) [Schedule to the Kerala General Sales Tax Act, 1963 or the Kerala Value Added Tax Act, 2003. Provided that no tax shall be levied and collected in respect of any motor vehicle which was registered in any Union Territory or any other State under the provisions of Motor Vehicles Act, 1988 (Central Act, 59 of 1988), prior to a period of fifteen months or more from the date on which it is registered in the State: ....
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....be prescribed: Provided different rates for different scheduled goods may be specified by the State Government. Provided further, that if an importer claims that he imported goods notified under sub-section (1) not for the purpose of consumption, use or sale, the burden of proving that the import was for purposes other than for consumption, use or sale shall be on importer importing such goods and making such claim." ["Provided further, that if an importer claims that he imported goods notified under sub-section (1) not for the purpose of consumption, use or sale, the burden of providing that the import was for purposes other than for consumption, use or sale, shall be on importer importing such goods and making such claim." "(1A) The tax under sub-section (1) shall be continued to be levied till such time as is required to improve infrastructure within the State such as power, road, market, condition etc. with a view to facilitate better market condition for trade, commerce and industry and to bring it to the level of, National average." 52. The definition as given in Section 2(c) was amended by Bihar Act 19 of 2006. It was published on 9th August, 2006. Secti....
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....as provided for. Reference of various other States' enactments have been made where any place outside the country has been expressly mentioned. Reference has been made to West Bengal Tax on Entry of Goods into Local Area Act, 2012, Section 2(h) which is to the following effect: "(h) "entry of goods", with all its grammatical variations and cognate expressions, means bringing of goods into a local area from any place outside that local area or any place outside the State or from outside India, for consumption, use or sale therein, whether by a dealer or an importer other than a dealer himself or by any other person;" 57. Section 2(1)(h) of Uttar Pradesh Tax on Entry of Goods into Local Area Act, 2007 and Section 2(1)(c) of the Uttarakhand Tax on Entry of Goods into Local Area Act, 2009 has been mentioned wherein the definition clause specifically includes "into a local area from any place outside the territory of India'. 58. The plain and literal construction when put to Section 3 read with Section 2(d) clearly means that goods entering into local area from any place outside the local area or outside the State are to be charged with entry tax. Foreign territor....
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.... counsel for the appellant drew attention to Item 19 of List 1 which covers "Import and export across customs frontier as defined by the Dominion Government", and argued that if "intoxicating liquors" in Item 31 of List II were held to include also liquors imported, from abroad, then the Provincial Legislature, by prohibiting possession of such liquors by all persons, whether private consumers, common carriers, or warehousemen, could defeat the power of the Federal Legislature to regulate imports of foreign liquors across the sea or land frontiers of British India which are customs frontiers as defined by the Central Government and thus seriously jeopardize an important source of central customs revenue. As under S. 100, Constitution Act, the Provincial legislative powers under List II were subject to the exclusive powers of the Federal Legislature in List I, the Bombay Act to the extent to which it trenched upon the subject of Item 19 of the latter List must, it was submitted, be regarded as a nullity. We are unable to accede to this contention. As pointed out by this Court in Bhola Prasad v. Emperor, 1942 F.C.R. 17 : (A.I.R 1912 F.C. 17 : 43 Cr. L.J. 481 F.C.) the legisl....
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....n "fairness" doctrine as it lays down that if it is not very clear from the provisions of the Act as to whether the particular tax is to be levied to a particular class of persons or not, the subject should not be fastened with any liability to pay tax. This principle also acts as a balancing factor between the two jurisprudential theories of justice - Libertarian theory on the one hand and Kantian theory along with Egalitarian theory propounded by John Rawls on the other hand. 41.3. Tax laws are clearly in derogation of personal rights and property interests and are, therefore, subject to strict construction, and any ambiguity must be resolved against imposition of the tax. In Billings v. United States, the Supreme Court clearly acknowledged this basic and longstanding rule of statutory construction: (L Ed p. 598) "Tax statutes ... should be strictly construed; and if any ambiguity be found to exist, it must be resolved in favour of the citizen." 62. Further, in Mathuram Agrawal v. State of M.P., 1999(8) SCC 667, in paragraph 12 following has been stated: "12....The intention of the legislature in a taxation statute is to be gathered from the language....
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.... 2(1) (c) of Uttar Pradesh Tax on Entry of Goods into Local Area Act, 2007, Section 2(1)(c) of the Uttarakhand Tax on Entry of Goods into Local Areas Act, 2009 as well as Section 2(1)(c) of the West Bengal Tax on Entry of Goods into Local Areas Act, 2012 which expressly includes entering into local area from any place outside the territory of India, we only say that the said inclusion of words 'from outside the India' is a provision made by way of abundant caution. 65. The Bihar Amendment Act, 2006 by which Section 2(c) was inserted by including clause (iii) is also by way of abundant caution and to provide it expressly which was already included in the definition of Section 2(c) read with Section 3. 66. Similarly when by Bihar Act 11 of 2003 Section 2 was amended in following manner: "2. Amendment of Section2 of Bihar Act 16, 1993 - i) After the proviso to sub-section( e) of section2 of the Act, the following explanation shall be inserted and shall be deemed always to have been so inserted "Explanation- Entry of goods into a local area for consumption, use or sale therein from any place outside the territory of India shall also be deemed to....
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....arcated. This is further clear by the fact that in List III, i.e. Concurrent List, no taxing entry is included except the entry of stamp duty & levying of fee in respect of any of the matters in List III but not including fees taken in any Court. 72. Constitution Bench of this Court in Godfrey Phillips India Ltd. & Anr. Vs. State of U.P. & Ors., (2005) 2 SCC 515, had elaborately considered the entries in Seventh Schedule of the Constitution of India. Following was laid down in Paragraphs 44 and 45: "44. The Indian Constitution is unique in that it contains an exhaustive enumeration and division of legislative powers of taxation between the Centre and the States. This mutual exclusivity is reflected in Article 246(1) and has been noted in H.M. Seervai's Constitutional Law of India, 4th Edn., Vol. 1 at p. 166 in para 1A.25 where, after commenting on the problems created by the overlapping powers of taxation provided for in other countries with federal structures such as the United States, Canada and Australia, the learned author opined: "The lists contained in Schedule VII to the Government of India Act, 1935, provided for distinct and separate fields of taxation....
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....ticular enactment is within the purview of one Legislature or the other, it is pith and substance of the legislation that has to be looked into. Whenever a State legislation is challenged as being under the competence of the State Legislature, the test, which has been laid down by this Court is that one must find out by applying the rule of pith and substance that whether the legislation falls within any of the List II, if it does, no further question arises. Attack on the ground of legislative competence must fail. This Court in State of A.P. & Ors. Vs. Mcdowell & Co. & Ors., (1996) 3 SCC 709 laid down following in Paragraph 36: - " 36. In view of our finding that the impugned enactment is perfectly within the legislative competence of the State Legislature and is fully covered by Entry 8 read with Entry 6 of List II, it is not necessary for us to deal with the arguments based upon clause (3) of Article 246 of the Constitution except to say the following: once the impugned enactment is within the four corners of Entry 8 read with Entry 6, no Central law whether made with reference to an entry in List I or with reference to an entry in List III can affect the validity of s....
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....al Legislature. The High Court accepted the challenge and held that State Legislature was not competent to tax. In the Government of India Act, 1935, the Federal Legislature, under List I Entry 45, has an exclusive power to impose duties of excise whereas the Provincial Legislature, under List II Entry 48, has an exclusive power to impose taxes on the sale of goods. CHIEF JUSTICE GWYER reversing the judgment of the High Court held that duties are levied upon the manufacturer or producer in respect of manufacturer or production of the commodity taxed whereas tax on the sale of goods is levied as qua seller and not qua manufacturer. Federal Court held that there is no overlapping in law. Following observations were made: " The duties of excise which the Constitution Act assigns exclusively to the Central Legislature are, according to the Central Provinces Case, duties levied upon the manufactory or producer in respect of the manufacture or production of the commodity taxed. The tax on the sale of goods, which the Act assigns exclusively to the Provincial Legislatures, is a tax levied on the occasion of the sale of the goods. Plainly a tax levied on the first sale must in the....
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....uch a controversy it is a principle, that it is not the name of the tax but its real nature, its "pith and substance", which must determine into what category it falls. After referring to the provisions of Madras General Sales Tax Act, 1939, Lordship opined that its real nature, its pith and substance is that it imposes a tax on the sale of goods. The Privy Council further observed that the Indian Constitution (The Government of India Act, 1935) contains what purports to be an exhaustive enumeration and division of legislative powers between the Federal and the Provincial Legislatures. Upholding the Legislative power of the Provincial Legislature, the Privy Council laid down following: ".... An exhaustive discussion of this subject, from which their Lordships have obtained valuable assistance, is to be found in the judgment of the Federal Court in re the Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act No. 14 of 1938 ('39) 26 A.I.R. 1939 F.C. 1. Consistently with this decision, their Lordships are of opinion that a duty of excise is primarily a duty levied upon a manufacturer or producer in respect of the commodity manufactured or produced.....
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....it reaches the stage of manufacture mentioned in Item 9 of the Schedule to the Excise Act. Even before it is converted into bidis or any other article mentioned in the entry it has become excisable goods and liable to pay excise duty. The levy of such duty is therefore not in conflict with the levy of an impost on the entry of the goods within a certain area." 79. Another judgment which needs to be noticed is Jiyajeerao Cotton Mills Ltd., Birlanagar, Gwalior Vs. State of Madhya Pradesh, AIR 1963 SC 414. The appellant was a textile mill generating electricity for the purpose of running its mills. State of Madhya Pradesh imposed electricity duty under Central Provinces and Berar Electricity Duty Act, 1949. The imposition of duty was challenged on the ground that Provincial Legislature has no competence to impose electricity duty since on manufacture of electricity, it is Central Legislature under Entry 84 List I has competence. This Court repelling the contention laid down following in Paragraph 6: - " 6. It is difficult to see how the levy of duty upon consumption of electrical energy can be regarded as duty of excise falling within Entry 84 of List I. Under that Entr....
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....at p. 1258: "Another principle for reconciling apparently conflicting tax entries follows from the fact that a tax has two elements: the person, thing or activity on which the tax is imposed, and the amount of the tax. The amount may be measured in many ways; but decided cases establish a clear distinction between the subjectmatter of a tax and the standard by which the amount of tax is measured. These two elements are described as the subject of a tax and the measure of a tax." It may well be that one's building may imperceptibly be the subjectmatter of tax, say the wealth tax, as a component of his assets, under Entry 86 (List I); and it may also be subjected to tax, say a direct tax under Entry 46 (sic 49)(List II), but as the two taxes are separate and distinct imposts, they cannot be said to overlap each other, and would be within the competence of the legislatures concerned." 82. Nine Judges Constitution Bench in Jindal Stainless Ltd. & Ors. Vs. State of Haryana & Ors., (2016) 11 SCALE 1 has also held that taxing power of the Union and the States are mutually exclusive. Approving the findings expressed by H.M. Seervai in its treatise Constitutional Law of....
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....cept & Extent of Import 84. Now, we come to Issue No.IV relating to import and its extent. Import and export are concepts which denote trade between different countries. The term "import" signifies etymologically "to bring in". To import goods into the territory of India means to bring them into the territory of India from abroad. Black's Law Dictionary, Tenth Edition, defines import as follows: " 1. A product brought into a country from a foreign country where it originated imports declined in the third quarter. See parallel imports. 2. The process or activity of bringing foreign goods into a country the import of products affects the domestic economy in significant ways. Cf. Export, n. 3. Meaning; esp., implied meaning the court must decide the import of that obscure provision. 4. Importance; significance time will tell the relative import of Judge Kozinski's decisions in American law." 85. In Advanced Law Lexicon, by P. Ramanatha Aiyar, 3rd Edition, import has been defined in following words:" The term "import" means to bring into a country merchandise from abroad, and is the direct converse of the term "export" which means to carry from a state or countr....
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....clause is the sale or purchase of goods taking place in the course of the import of the goods into or export of the goods out of the territory of India. It is obvious that the words "import into" and "export out of" in this context do not mean the article or commodity imported or exported. The reference to "the goods" and to "the territory of India" make it clear that the words "export out of" and "import into" mean the exportation out of the country and importation into the country respectively. The word "course" etymologically denotes movement from one point to another, and the expression "in the course of" not only implies a period of time during which the movement is in progress but postulates also a connected relation...." 89. The purchase for the purpose of import and similarly, the sale after import were held to be distinct legal transactions, it was held: " 10. The phrase "integrated activities" was used in the previous decision to denote that "such a sale" (i.e. a sale which occasions the export) "cannot be dissociated from the export without which it cannot be effectuated, and the sale and the resultant export form parts of a single transaction". It i....
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....the territory of India." 91. It is supported that though Article 286 deals with the restriction on the State legislative power qua imposition of tax on the sale or purchase of goods nevertheless the formulation of the principle by the Parliament with regard to "in the course of the import or export" clearly shows that the legislative domain in this regard is with Parliament and not with States. In point of fact, any legislation relating to the "course of import or export" has to relate to Entry 41 read with Entry 83 of List I and it cannot relate to any other Entry and definitely not to any Entry in State List. Reliance was also placed on Section 5(3) of the Central Sales Tax Act, 1956. On the strength of Section 5, it is sought to be contended that on parity of logic the first sale after the import be treated as in the course of import. 92. Article 286 of the Constitution provides for restrictions as to the imposition of the tax on the sale or purchase of goods. The subjectmatter of laws made by Parliament and legislatures of the States as per Article 246 read with Seventh Schedule and Article 245 are subject to the provisions of the Constitution. Legislative power as contai....
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....ntained in Article 286 is with regard to taxing on sale or purchase of goods which takes place outside the State or in the course of import of the goods or services or export of goods or services. The restriction of Article 286 does not ipso facto can be placed while considering the legislative field of the State under Entry 52 and by virtue of Article 286 no restriction can be put on the legislative competence of the State in the field as defined under Entry 52. However, the concept underlined in "the course of import of the goods" as in Article 286(1)(b) can very well be applied to find out as to when the import of goods come to an end. We thus proceed to examine certain cases/judgments of this Court which were delivered in the context of Article 286. 95. The term import again came for consideration before this Court in J.V. Gokal & Co. (Private) Ltd. Vs. Assistant Collector of Sales Tax (Inspection) & Ors., AIR 1960 SC 595. This Court explained the word import and the phrase "in the course of the import of the goods into the territory of India". In paragraphs 9 and 11, following has been held: " 9. What does the phrase "in the course of the import of the goods into t....
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.... The legal position visavis the importsale can be summarised thus: (1) The course of import of goods starts at a point when the goods cross the customs barrier of the foreign country and ends at a point in the importing country after the goods cross the customs barrier; (2) the sale which occasions the import is a sale in the course of import; (3) a purchase by an importer of goods when they are on the high seas by payment against shipping documents is also a purchase in the course of import, and (4) a sale by an importer of goods, after the property in the goods passed to him either after the receipt of the documents of title against payment or otherwise, to a third party by a similar process is also a sale in the course of import." 96. Learned counsel for the petitioners has placed much reliance on Nine Judges Constitution Bench in re Sea Customs Act Case, AIR 1963 SC 1760. This Court in the aforesaid case had answered a reference made under Article 143(1). Three questions to be answered were as follows: "(1) Do the provisions of Article 289 of the Constitution preclude the Union from imposing, or authorising the imposition of, customs duties on the import or export o....
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.... following was stated: "(26) Similarly in the case of duties of customs including export duties though they are levied with reference to goods, the taxable event is either the import of goods within the customs barriers or their export outside the customs barriers. They are also indirect taxes like excise and cannot in our opinion be equated with direct taxes on goods themselves. Now, what is the true nature of an import or export duty? Truly speaking, the imposition of an import duty, by and large, results in a condition which must be fulfilled before the goods can be brought inside the customs barriers i.e. before they form part of the mass of goods within the country. Such a condition is imposed by way of the exercise of the power of the Union to regulate the manner and terms on which goods may be brought into the country from a foreign land...." 99. Learned counsel for the writ petitioners has laid much emphasis on the observations made by nineJudge Constitution Bench in paragraph 26 as quoted above. The above observations were made by the nineJudge Constitution Bench while considering the nature of import and export. It was held that the imposition of import duty r....
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....d for home consumption, the character of imported goods is lost and thereafter no longer the goods could be called as imported goods. The import transit is only till the goods are released for home consumption. The taxing event for entry tax under Entry 52 List II is entirely different and has nothing to do with the customs duty. The State by imposing entry tax in any manner is not entrenching in the power of the Parliament to impose customs duty. The goods are released for home consumption only after payment of the customs duty due to the Central Government. The goods which are imported cannot be held to be insulated so as to not subject to any State tax, any such insulation of the imported goods shall be a protectionist measure which will be discriminatory and invalid. When all normal goods are subjected to State tax no exemption can be claimed by goods, which have been imported from payment of entry tax. To take a common example, all goods, which pass through a toll bridge are liable to pay toll tax, can it be said that the imported goods which after having been released from customs barriers and are passing through a toll bridge, are not liable to pay the toll tax, the answer h....
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....are imported and continue when the goods enters into the customs frontiers of imported country and ends when goods are released for home consumption. Till the event of import is over, Parliamentary Legislation, the control of Union continues for ensuring the realisation of the customs duties. 105. In view of the foregoing discussions, we are of the clear opinion that taxing event with regard to levy of customs duty by Parliament and levy of entry tax by States under Entry 52 List II are entirely different and separate. The taxing event pertaining to levy of entry tax occurs only after the taxing event of levy of customs duty is over. Thus, the State Legislation imposing entry tax in no manner encroaches upon the Parliamentary Legislation under Entry 41 and Entry 83. There is no invalidity in levy of entry tax by the States. Original/Unbroken Package Theory 106. The Original Package/ Unbroken Package is a theory which was evolved by U.S. Supreme Court in reference to the imported goods. The genesis of the theory is from the Chief Justice Marshall, in the case of Brown Vs. The State of Maryland, 6 L.Ed. 678. State of Maryland has enacted a law that all importers of for....
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....aw of California, which subjects all property, real or personal, in the state, with certain exceptions to an ad valorem tax. The defendant was at the time the tax collector of the city and country of San Francisco, and as such officer levied upon the cases of wines thus stored, for the amount of the tax assessed and was about to sell them, when the plaintiffs paid the amount and the charges incurred, under protest, and then brought the present action in one of the district courts of the state, to recover back money paid. The district court gave judgment for the plaintiffs; the supreme court of the state reversed the judgment and the case is brought here on writ of error. The simple question presented in this case for our consideration is whether imported merchandise, upon which the duties and charges at the customhouse have been paid, is subject to state taxation, whilst remaining in the original cases, unbroken and unsold, in the hands of the importer" 109. Justice Field relied on the statement made by Chief Justice Marshall in the case of Brown Vs. The State of Maryland as quoted above. Relying on the said judgment, Justice Field laid down following: ".... Bu....
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....reme Court that had sustained the constitutionality of California's nondiscriminatory ad valorem tax on the ground that the ImportExport Clause only prohibited taxes upon the character of the goods as imports and therefore did not prohibit nondiscriminatory taxes upon the goods as property. See 13 Wall., at 3031 20 L Ed 517. This Court reversed on its reading of the seminal opinion construing the ImportExport Clause, Brown v. Maryland, 12 Wheat. 419, 6 L.Ed. 678 (1827), as holding that "(w)hilst retaining their character as imports, a tax upon them, in any shape, is within the constitutional prohibition." 13 Wall., at 34 20 L Ed 517. Scholarly analysis has been uniformly critical of Low v. Austin. It is true that Mr. Chief Justice Marshall, speaking for the Court in Brown v. Maryland, supra, at 442, 6 L Ed 678 said that "while (the thing imported remains) the property of the importer, in his warehouse, in the original form or package in which it was imported, a tax upon it is too plainly a duty on imports to escape the prohibition in the constitution." Commentators have uniformly agreed that Low v. Austin misread this dictum in holding that the Court in Brown ....
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.... the imported goods, but it cannot be read to accord imported goods preferential treatment that permits escape from uniform taxes imposed without regard to foreign origin for services which the State supplies....." 114. Referring to Brown Vs. The State of Maryland, it was further held: - "The Court stated that there were two situations in which the prohibition would not apply. One was the case of a state tax levied after the imported goods had lost their status as imports. The Court devised an evidentiary tool, the "original package" test, for use in making that determination. The formula was: "It is sufficient for the present to say, generally, that when the importer has so acted upon the thing imported, that it has become incorporated and mixed up with the mass of property in the country, it has, perhaps, lost its distinctive character as an import, and has become subject to the taxing power of the State; but while remaining the property of the importer, in his warehouse, in the original form or package in which it was imported, a tax upon it is too plainly a duty on imports to escape the prohibition in the constitution." Id., at 441442 6 L Ed 678. "It is a m....
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....y the Framers. The tax could not affect the Federal Government's exclusive regulation of foreign commerce since it did not fall on imports as such. Neither did the tax interfere with the free flow of imported goods among the States. The Clause, while not specifically excepting nondiscriminatory taxes that had some impact on imports, was not couched in terms of a broad prohibition of every tax, but prohibited States only from laying "Imposts or Duties," which historically connoted exactions directed only at imports or commercial activities as such. The Court concluded that its reliance a century earlier in Low v. Austin "upon the Brown dictum . . . was misplaced." 423 US, at 283, 46 L Ed 2d 495, 96 S Ct 535. Chief Justice Taney's opinion in the License Cases, 5 How 504, 12 L Ed 256 (1847), was carefully analyzed, with the Court concluding that that opinion had been misread in Low. "Precisely contrary" to the reading it was given in Low, Chief Justice Taney's License Cases opinion was authority "that nondiscriminatory ad valorem property taxes are not prohibited by the ImportExport Clause." 423 US, at 301, 46 L Ed 2d 495, 96 S Ct 535. It followed, this C....
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....19. Now, we come to the judgment of Federal Court and this Court wherein the aforesaid doctrine has been considered and specifically departed with. 120. Federal Court in the case of The Province of Madras Vs. Messrs. Boddu Paidanna and Sons.(supra) has noticed the case of Brown Vs. The State of Maryland (supra). The Federal Court held that in our Constitution no such question arises and made the following observations: ".... In the Indian Constitution Act no such question arises; and the right of the Provincial Legislatures to levy a tax on sales can be considered without any reference to so formidable a power vested in the Central Government. Lastly, the prohibition in the American Constitution is against the laying of "any imposts or duties on imports or exports"; the prohibition is not merely against the laying of duties of customs, but is expressed in what we conceive to be far wiser terms ; and it does not appear to us that it would necessarily follow from the principle of the Maryland decision that in India the payment of customs duty on goods imported from abroad or the payment of an excise duty on goods manufactured or produced in India can be regarded as confer....
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....ments contends that the definition of purchase value having not included "custom duty" legislature intended that no entry tax be levied on the purchase value. For ready reference Section 2(j) is reproduced below: " 2(j). "Purchase value" means the value of scheduled goods as ascertained, from original invoice or bill and includes insurance charges, excise duties countervailing charges, sales tax, transport charges, freight charges and all other charges incidental to the purchase of such goods: Provided that where purchase value of any scheduled goods is not ascertainable on account of nonavailability or nonproduction of the original invoice or bill or when the, invoice or bill produced is proved to be false or if the scheduled goods are required or obtained otherwise than by way of purchase, then the purchase value shall be the value or the price at which the scheduled goods of like kind or quality is sold or is capable of being sold in open market;" 125. From the definition of purchase value given in 2(j) three aspects are noticeable. Firstly, purchase value means the value of scheduled goods as ascertained from original invoice or bill. Secondly, it includes ....
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....sically on the decision of this Court in Shroff & Co. v. Municipal Corpn of Greater Bombay, 1989 Supp(1) SCC 347 held that even though the customs duty was not mentioned in the rule yet it was liable to be included while determining the value under Rule 17. The learned counsel for the appellant urged that since the words "custom duty" do not find place in Rule 17, they could not be included for determining valuation under the rule. Reliance was also placed on Goodyear India Ltd. v. State of Haryana, (1990) 2 SCC 71 and McDowell & Co. Ltd. v. CTO, (1977) 1 SCC 441 and it was urged that in case the provision in taxing statute was susceptible to two constructions, then the one favouring the assessee should be accepted." 126. Similar argument was raised before Court that custom duty having not mentioned in Rule 17, no octroi is leviable on import of goods. The argument was repelled by this Court in para 4 of the judgment which is to the following effect: "4. Rule 17 provides for determination of value of goods brought inside the Corporation or Municipal Board for consumption, use or sale. The use of various words in the rule widens its scope. It provides for inclusion of co....
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....ly, 'terminal tax on goods and passengers carried by railway, sea or air, tax on railway fair and freight'. This court in BurmahShell Oil Storage and Distributing co. of India Ltd. Belgaum vs. The Belgaum Borough Municipality, Belgaum, AIR 1963 SC 906, had addressed the history of octroi and the constitutional entry regarding entry of goods. This Court has stated that Constitution has avoided the word 'octroi', in para 15 following has been mentioned: "15. It will be noticed that in the Government of India Act 'octroi' was named but not described and now the Constitution avoids the word 'octroi', as did the Government of India Act 1935 before, and gives a description...." 1 30. In para 17 & 18 following has been held: "17. Octrois and terminal taxes were different taxes though they resembled in one respect, namely, that they were leviable in respect of goods brought into a local area. While terminal taxes were leviable on goods 'imported or exported' from the Municipal limits denoting thereby that they were connected with the traffic of goods, octrois, according to the legislative practice then obtaining were, le....
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.... as a general tax or a local tax. The nature of tax, measure of tax and machinery for tax collection are all different aspects. The submission of the petitioner that tax in Entry 52 should be collected by local authorities and State has no legislative competence to levy such tax is fallacious. It is well within the jurisdiction of the legislature to formulate its policy regarding levy of tax and its collection. Entry 52 of List II has to be given its wide and full meaning and no limitation in the legislative power of the State can be read as contended by counsel for the petitioner. 133. The Constitution framers have abandoned the use of word 'octroi' which has to be given a meaning and purpose. While interpreting a taxing entry no shackles can be put nor use of any expression in the Constitution of India, referring to a tax can be tied up to any preconstitutional tax or levy. Further, any pre-constitutional tax practice cannot put any fetter on Constitution farmers to define any tax, to elaborate the concept of tax or to move away or forward from any kind of earlier levy. This Court in Municipal Corporation of Delhi v. Birla Cotton, Spinning and Weaving Mills, Delhi a....
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.... necessary to carry on any trade or mechanical business, or any mechanical operation or process. Webster defines the word "plant" to be "the fixtures and tools necessary to carry on any trade or mechanical business." The word is defined by Worcester to be "The machinery, apparatus or fixtures by which a business is carried on". The word is not equivalent to the word "undertaking", which is defined by Webster as "any business, work or project which a person engages in or attempts to perform; enterprise"." 139. The Plant in a knocked out condition is nothing but a collection of machineries. The plant being a wide term including machinery also, we fail to see how a knocked out plant shall not be covered by Item No. 9 of Part II of the Schedule. Machinery and equipments are wide words which shall also cover plant in a knocked out condition. We thus reject the contention of the counsel for the petitioner that a plant which is imported in knocked out condition is not covered by the Part II of Schedule of Orissa Act, 1999. 140. One more submission raised by one of the learned counsel for the writ petitioners also needs to be noted. Section 4 of Bihar Act, 1993 as inserted b....
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....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 the validity of the Act itself." 141. Although learned counsel for the writ petitioners sought to distinguish the above decision on the ground that the said observations were made while the Court was considering the entirely different issue that is an issue relating to interse transfer of money from Consolidated Funds of respective States to Consolidated Fund of India. As per aforesaid judgment the challenge to the validity of the Act on the ground that it is violative of Article 266 was repelled. What was held by this Court as quoted above clearly negates the submissions raised by the learned counsel for the writ petitioners on the basis of Article 266. In any view of the ma....
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....s in Local Area for Consumption, Use or Sale, 1993 (before its amendment by Bihar Act, 2003 and 2006) do not exclude levy of entry tax on the goods imported from any place outside territories of India into a local area for consumption, use or sale. (ii) All the Entry Tax Legislations questioned in these appeals are legislations which are within the legislative competence of the State legislatures and do not intrude the legislative domain of Parliament as reserved in Entry 41 & Entry 83 of List I. (iii) The import of goods from any territory outside India comes to an end when the goods enter into the custom frontiers of India and are released for home consumption. (iv) After import of goods comes to an end the State legislature has full legislative competence to levy entry tax under Entry 52 List II. (v) The Original Package Theory as developed by the American Supreme Court in case of Brown vs. State of Maryland(supra) is not applicable in this country and the imported goods are not exempted from entry tax till it reaches to the factory premises/destination of its consumption, use or sale. (vi) Non inclusion of custom duty in the definiti....