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2009 (1) TMI 790 - HC - VAT and Sales TaxValidity of the Assam Entry Tax Act 2008 and the Rules framed thereunder along with the provisions of the Assam Entry Tax (Amendment) Ordinance 2008 questioned - Held that - Levy of entry tax by the Act of 2008 is compensatory. The said finding would enable us to reach the further conclusion that by enacting the Act of 2008 the State Legislature had removed the defects in the earlier law i.e. the Act of 2001 on account of which the said Act was declared to be ultra vires. We have also reached the conclusion that the Amendment Ordinance of 2008 is valid subject to our observations with regard to the date(s) from which the different specified goods will become taxable. Consequently all the writ petitions are dismissed.
Issues Involved:
1. Validity of the extended meaning of the expression "importer" for goods transported through pipelines. 2. Whether the entry tax levied by the Assam Entry Tax Act, 2008 is compensatory and thereby obviates the requirement of prior Presidential sanction under Article 304(b) of the Constitution. 3. Validity of the provisions of the Assam Entry Tax (Amendment) Ordinance, 2008, particularly its retrospective effect from October 1, 2001. Issue-wise Detailed Analysis: 1. Validity of the Extended Meaning of "Importer": The court examined the definition of "importer" in the context of goods transported through pipelines. The petitioners argued that they were mere recipients of crude oil at the refinery point and not responsible for transportation. The court acknowledged the legislative power to define "importer" through a deeming provision, citing J.K. Cotton Spinning and Weaving Mills Ltd. v. Union of India [1988] 68 STC 421 (SC). The court found the definition consistent with the Act's intent to levy tax on those responsible for goods entering a local area. The court also noted that the State provided security for pipelines, benefiting the recipient refinery, establishing a discernible relationship between the tax and the service provided. 2. Compensatory Nature of the Entry Tax: The court analyzed whether the entry tax was compensatory, referencing the evolution of the concept in judicial decisions, particularly Atiabari Tea Co. Ltd. v. State of Assam AIR 1961 SC 232 and Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan AIR 1962 SC 1406. The court reiterated the principle that compensatory tax must offer measurable benefits to the taxpayer, as reaffirmed in Jindal Stainless Ltd. v. State of Haryana [2006] 145 STC 544 (SC). The court found that the Assam Entry Tax Act, 2008, with its provisions for a special fund and exclusive use for infrastructure development, satisfied the criteria for compensatory tax. The court noted that the State had earmarked Rs. 250 crore for infrastructure development in the 2008-09 budget, further supporting the compensatory nature of the tax. 3. Validity of the Assam Entry Tax (Amendment) Ordinance, 2008: The court addressed the retrospective effect of the Ordinance, which made the Act effective from October 1, 2001. The petitioners challenged the necessity and propriety of the Ordinance. The court, however, found that validating legislation often needs to be retrospective to correct defects in the previous law, as supported by Municipal Committee Patiala v. Model Town Residents Assn. [2007] 8 SCC 669. The court clarified that the retrospective application would align with the dates from which items were included in the Schedule to the 2001 Act, ensuring no goods were taxed before their inclusion. Conclusion: The court upheld the Assam Entry Tax Act, 2008, as compensatory, thereby removing defects in the previous law and validating the tax collected under the 2001 Act. The Amendment Ordinance was also deemed valid, subject to the clarification on the retrospective application. Consequently, all writ petitions were dismissed without costs.
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