TaxTMI 
TaxTMI 
TaxTMI 
2019 (9) TMI 215
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....e authorities to levy Entry Tax at the rate of 12.5% on sale of Excavators by the petitioner within the State of Gujarat. 3.00. Facts leading to the present Special Civil Application, in nutshell are as under :- 3.01. M.H. Khansusiya - petitioner herein is a works contractor engaged in construction of road. 3.02. That the petitioner is duly registered under the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as "the VAT Act". That on sale of Excavators within the State of Gujarat, the State Government levies entry tax on import / entry of Excavators into the State of Gujarat under the provisions of the Gujarat Tax on Entry of Specified Goods into the Local Areas Act, 2001 (hereinafter referred to as "Entry Tax Act"). That the entry tax has been levied at the rate of 12.5% under Entry 1 of Schedule to the entry Tax Act. That the appropriate authority has, therefore, while framing the Assessment Orders has levied entry tax at the rate of 12.5% on the import / entry of the Excavators into the State of Gujarat. That penalty has also been imposed at the rate of 200% under section 17(1) of the Entry Tax Act. 3.03. It is the case on behalf of the petitioner that to levy....
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....om 1/4/2006 to 31/3/2008, which now attract 15% tax rate under the VAT Act are covered under Entry 1 of the Schedule to the Entry Tax Act. 5.04. Mr.Uchit Sheth, learned advocate appearing on behalf of the petitioner has further submitted that Excavators were always covered by a separate entry under the Sales Tax Act as well as under the VAT Act for which the applicable rate of tax under the Sales Tax Act was 8% and the applicable rate of tax under the VAT Act during the period in question is 4%. It is submitted that thus, levy of Entry Tax at the rate of 12.5% on Excavators by considering them as motor vehicles under the Entry Tax Act is dehors the objects and scheme of the Entry Tax Act and contrary to the legislative intention, bad and illegal. 5.05. Mr.Uchit Sheth, learned advocate appearing on behalf of the petitioner has further submitted that in the original Schedule to the Entry Tax Act, there was specific column containing reference to the relevant entry in the Gujarat Sales Tax Act, 1969 (hereinafter referred to as "the Sales Tax Act"). It is submitted that in respect of the first entry relating to motor vehicles, reference was made to Entry 128 of Schedule IIA to the ....
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....as 15%. Correspondingly the Schedule to the Entry Tax Act was amended. It is submitted that in the Statement of Object and reasons of amending Act it was again noted that the purpose of the Entry Tax Act was not to levy additional tax but to provide "level playing field" between the goods entering into the local areas from any place outside the Stat and the goods manufactured or produced in the State. It is submitted that it was further noted that the entry tax rates are having direct linkage with the VAT rates on the same goods and hence change in the VAT rates necessitated change in the Entry Tax Act. Thereafter it was observed that to obviate the need to maintain the Entry Tax Act consequent to change in the VAT rates it was considered necessary to revise the maximum rates of tax on specified goods as mentioned in the Schedule. 5.07. Mr.Uchit Sheth, learned advocate appearing on behalf of the petitioner has further submitted that maximum rate of Entry Tax in respect of motor vehicles was revised to 20% while the notification rate at which the Entry Tax was actually payable was revised to 15% i.e. again equal to the applicable rate of VAT to motor vehicles covered under residua....
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....he Entry Tax Act. 5.11. Mr.Uchit Sheth, learned advocate appearing on behalf of the petitioner has further submitted that the levy of entry tax at the rate of 12.5% on Excavators by considering them as motor vehicles even though the rate of tax for Excavators under the VAT Act was 4% is clearly violating Article 304(a) of the Constitution of India. 5.12. Mr.Uchit Sheth, learned advocate appearing on behalf of the petitioner has further submitted that Article 304(a) of the Constitution of India provides that the Legislature of a State may by law impose on goods imported from other States or Union territories any tax to which similar goods manufactured or produced in that State are subject, so however, not to discriminate between goods so imported and goods so manufactured or produced. It is submitted that when the constitutional validity of the Entry Tax Was challenged before this Court in the case of Eagle Corporation Vs. State of Gujarat, reported in (2007) 6 VST 56 (Guj.) inter-alia on the ground that it is violative of Article 304(a) of the Constitution of India, this Court upheld the constitutional validity of the Entry Tax Act by holding that there would not be any discrim....
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....ry to Statement of the State Government through learned Advocate General before this Court in the case of Eagle Corporation Pvt. Ltd. (supra). It is submitted that in the said case, the State of Gujarat through the learned Advocate General had specifically submitted before this Court that levy of Entry Tax would never exceed the sales tax rate on similar goods in the State. It is submitted that therefore, levy of Entry Tax at the rate of 12.5% on Excavators even though the local VAT rate on tractors is undisputedly 4% during the relevant period, is contrary to the statement of the State Government before this Court on the basis of which the constitutional validity of Entry Tax Act was upheld. It is submitted that therefore, levy of Entry Tax at the rate of 12.5% treating as "motor vehicles" or considering at par with "motor vehicles" is absolutely illegal and in violation of Article 304(a) of the Constitution of India. Making above submissions, and relying upon above decisions, it is requested to quash and set aside the impugned orders passed under the Entry Tax Act levying Entry Tax on Excavators at the rate of 12.5% as being without jurisdiction, illegal, contrary to the provis....
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....e intent of Entry Tax Act and the Statement and Objects of the Entry Tax Act are required to be considered. The Statement and objects of the Entry Tax Act and Preamble of the Entry Tax Act as elaborately dealt with and considered by the Division Bench in the case of Eagle Corporation Pvt. Ltd. (supra), are as under :- "Statement of Objects and Reasons (Bill No.36 of 2001): This Bill seeks to introduce the entry tax on the specified goods with a view to giving effect to the proposal contained in the Budget Speech of the Finance Minister in the Legislative Assembly on the 26th July, 2001. During the recent past, it has been observed that due to the difference in the rate of sales tax between the State of Gujarat and neighbouring States, diversion of trade has taken place and in some cases sales tax payments are avoided or evaded by various methods. This results in the loss of sales tax revenue legitimately due to the State of Gujarat. With a view to compensating such loss of sales tax revenue, it is considered necessary to levy a tax on entry of certain specified goods purchased outside the State and brought into the local areas of the State of Gujarat for use, consumption or....
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....onsidered qua each Act/tax differently and the payment of sales-tax cannot be considered at par or equated with payment of Entry Tax. At this stage, the Statement and Objects of the Act and the Preamble thereon are required to be considered. It appears from the Statement of Objects that, due to the difference in the rate of salestax applicable to the State of Gujarat and the neighbouring States, diversion of trade has taken place and in some cases sales-tax payments are affected or evaded by various methods and the same results in the loss of revenue legitimately due to the State of Gujarat, and with a view to compensate such loss of sales-tax revenue, it is considered necessary to levy a tax on entry of certain specified goods produced/manufactured outside the State and brought into the local areas of the State of Gujarat. Section 4 provides for reduction of tax liability and the Entry Tax is reduced to the extent of the amount of tax paid, if any, under the law relating to sales-tax as may be in force in any other State or Union Territory and/or by an importer who had purchased the specified goods in another State and/or reduced to the extent of amount of tax paid if any under th....
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....State, such an importer would be put at par with the local dealers. Thus, in sum and substance, the importers as well as the local dealers would be paying the tax at 12% in all. It can, therefore, be said that, on the contrary, the vice of discrimination would stand removed by payment of Entry Tax by an importer of specified goods. If the importer is not required to pay Tax on Entry he would stand on better footing because on one side the local person would be required to pay Sales Tax while the importer would be paying 4% tax in other State, which would be discriminatory qua the local person. Not only that, such low tax would persuade local people to import specified goods from another State which shall adversely affect the local production. It is at this point we must see that in the name of free flow of trade the local economy of a State can't be sacrificed. The contention, therefore, on behalf of the petitioner, that the discrimination is required to be considered qua each Act and the tax separately, has no substance at all. Considering the provisions of the Act and the objects for which the Act is enacted, one is required to see whether there is any discrimination qua good....
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....much as before levy of the said tax previous sanction of the President is required, is concerned, such a contention is required to be rejected outright. The provisions of Article 304(a) and 304(b) are to be construed and interpreted separately. If levy of a tax is found to be non-discriminatory between the goods so imported and the goods so manufactured or produced, in that case the conditions imposed under Article 304(b) of the Constitution are not required to be complied with. If it is found that levy of tax is discriminatory between the goods so imported and the goods so manufactured or produced in a local area, then in such a case, on proof that imposition of such levy is in the public interest even if it is found to be 'discriminatory', the same will be valid if the same is imposed after obtaining previous sanction of the President. Thus, on fair reading of the provisions of Article 304(a) and 304(b), if the levy of tax is found to be nondiscriminatory, in that case, previous sanction of the President is not required. If the contention on behalf of the petitioner is accepted, then there is no purpose in enacting Article 304(a) and 304(b) separately. If the argument is ....
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.... fact pays sales-tax and/or central sales-tax at the rate of 4%, then, in that case, while importing the specified goods into the State of Gujarat/local area, such an importer is required to pay the entry tax at the rate of 8%. The Division Bench has also further observed that, thus, an importer who has paid 4% of sales-tax in a particular State while importing the goods in the State of Gujarat is required to pay Entry Tax at 8% which puts such importer at par with the local persons and thus when there is no discrimination at all in view of juxtapose effect of the two Acts, levy of entry-tax would be non-discriminatory. 8.04. While holding that the levy of Entry Tax Act is not in violation of Article 304(a) of the Constitution of India, it is observed by the Division Bench of this Court that as per Article 304(a) of the Constitution of India, discrimination is required to be considered between the goods so imported and the goods so manufactured or produced. It has been further observed that on payment of Entry Tax as a reduced liability does not put the importer at a position worse in comparison to local producer, dealer or manufacturer. It has been further observed that if no En....
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....and observations made by the Division Bench of this Court in the case of Eagle Corporation Pvt. Ltd. (supra) as well as in the case of Tractors and Farm Equipment Ltd. (supra) and considering the Statement and Objects of enactment and/or levy of Entry Tax under the Entry Tax Act, controversy in the present case i.e. levy of Entry Tax on Excavators at the rate of 12.5% is required to be considered. 8.08. It is required to be noted and as averred by the petitioner, rate of Value Added Tax on Excavators in the State of Gujarat was 4%. Therefore, if on entry / import of the Excavators from the aforesaid States into the State of Gujarat and sale of Excavators in the State of Gujarat, if the petitioner are liable to pay entry tax at 12.5%, in that case, the same would be discriminatory and directly in violation of Article 304(a) of the Constitution of India and the same shall be contrary to the scheme and object and purpose of introducing Entry Tax under the Entry Tax Act. If the importer like the petitioner are required to pay entry tax higher than VAT levied on sale of goods in the State of Gujarat, in that case, such importers would be at a disadvantageous position and there shall n....
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.... Act w.e.f. 1/4/2006 was only consequential to replacement of the Sales Tax Act by the VAT Act and only those motor vehicles were sought to be taxed under the entry Tax Act which were earlier classifiable under Entry 128 of Schedule-IIA to the sales Tax Act and later on under residuary Entry 87 of Schedule-II of the VAT Act attracting local rate of 12.5%. That thereafter, additional tax was introduced under section 7(1A) of the VAT Act w.e.f. 1/4/2008. In so far as the goods covered under residuary entry 87 of Schedule-II of the VAT Act are concerned, the rate of additional tax was 2.5%. Thus, the effective rate of VAT on such goods was 15%. Correspondingly the Schedule to the Entry Tax Act was amended. It is to be noted that in the Statement of Objects and reasons of amending Act it was again noted that the purpose of the Entry Tax Act was not to levy additional tax but to provide "level playing field" between the goods entering into the local areas from any place outside the State and the goods manufactured or produced in the State. It was further noted that the entry tax rates are having direct linkage with the VAT rates on the same goods and hence change in the VAT rates necess....