1996 (8) TMI 481 - HC - VAT and Sales Tax

Summary

Issues:
1. Challenge to the validity of certain provisions of the Entry Tax Act, 1976.
2. Demand for entry tax on goods purchased for construction of a factory.
3. Applicability of entry tax on goods purchased for construction purposes.
4. Comparison with previous judgments on similar cases.

Analysis:
The petitioners in this case sought to challenge the validity of clause (1)(c), (d), and (e) of section 2 of the Entry Tax Act, 1976, and requested the quashing of a notice. However, their counsel clarified that they were not challenging the validity of the provisions, leading to the exclusion of this issue from the petition. The petitioners, a public sector company and its managing director, were setting up a chemical fertilizer project on forest land in Madhya Pradesh. They purchased goods for construction through various modes, including railway freight and transport. The respondent demanded entry tax on these goods, leading to a notice and a demand for Rs. 5 lakhs as entry tax. The petitioners contended that the goods were solely for construction purposes, not for business, citing a previous judgment regarding a similar case involving entry tax on construction materials.

The court considered the facts of the case, noting that all purchases were indeed for the construction of the factory, which began production in 1987. The period for assessment during which the goods were acquired for construction fell before the commencement of business operations. Relying on previous judgments, including one involving Maihar Cement, the court concluded that the petitioners were not liable to pay entry tax on goods purchased for construction purposes. The court quashed the demand notice for entry tax, stating that the goods were not subject to entry tax as they were acquired specifically for construction. The petition was allowed, with no costs imposed, and any security amount was ordered to be refunded to the petitioners.