2010 (8) TMI 844 - HC - VAT and Sales Tax

Whether notification dated April 11 2007 be quashed being ultra vires to the extent of exclusion of petrol and diesel from the purview of exemption granted under the said notification? Held that - It cannot be said that petrol and diesel form homogeneous part of other class covered under the exemption notification. Though exemption was enjoyed earlier at the time when Madhya Pradesh Commercial Tax Act was in force it is permissible to look into that circumstances but that would not invalidate exemption which has been withdrawn by State Government by the impugned notification. It is permissible to withdraw the exemption to any class of goods at any point of time. Scope of judicial review is extremely narrow in such cases. It is the prerogative of the State. We are not satisfied that by withdrawal of the said exemption any annihilation has been done to the spirit of article 14 of the Constitution of India in the facts of the instant case. Merely by the fact that composition has been availed of under section 11A of the Madhya Pradesh VAT Act by the petitioner cannot come to the rescue of the petitioner to make the rate of one per cent applicable when exemption itself has been withdrawn and rate has been prescribed in notification issued under section 4A dated April 11 2007. The said notification has to be given full effect to. The petitioner is liable to pay entry tax. Necessary concomitant is that the petitioner is liable to make payment of tax at 27 per cent as prescribed in the notification dated April 1 2007. Merely by the fact that the petitioner has been granted the facility of composition in the matter of payment of tax under section 11A of the VAT Act cannot be a ground to give the benefit to the petitioner of concessional rate of one per cent for the reasons mentioned hereinabove. Appeal dismissed.

Summary

Issues Involved:
1. The validity of the notification dated April 11, 2007, which excludes petrol and diesel from the exemption granted under the Entry Tax Act.
2. Whether the petitioner is liable to pay entry tax on petrol and diesel despite opting for composition under section 11A of the Madhya Pradesh Value Added Tax Act, 2002.
3. Whether the notification dated April 11, 2007, is discriminatory and violative of Article 14 of the Constitution of India.
4. The applicability of Notification Nos. 79 and 80 dated September 30, 1997, regarding the rate of entry tax.
5. The validity of the Commissioner's order dated October 6, 2008, rejecting the petitioner's application for a concessional rate of tax.

Detailed Analysis:

1. Validity of the Notification Dated April 11, 2007:
The notification dated April 11, 2007, was challenged on the grounds that it was ultra vires to the extent that it excluded petrol and diesel from the exemption granted under the Entry Tax Act. The court upheld the notification, stating that the State Government has the power under section 10 of the Entry Tax Act to exempt any class of goods from payment of entry tax either prospectively or retrospectively. The notification was deemed to be in accordance with the provisions of section 10.

2. Liability to Pay Entry Tax Despite Composition Scheme:
The petitioner argued that they should be exempt from entry tax on petrol and diesel as they had opted for a composition scheme under section 11A of the Madhya Pradesh VAT Act. The court held that the composition scheme was not relevant for the purpose of petrol and diesel in view of the notification dated April 11, 2007. The rate of 27 per cent prescribed by the notification dated April 1, 2007, was applicable, and the petitioner was liable to pay this tax.

3. Discrimination and Violation of Article 14:
The petitioner contended that the notification dated April 11, 2007, was arbitrary and violative of Article 14 of the Constitution of India. The court found no discrimination, as the class of contractors availing the composition facility remained unchanged. The differentiation was made with respect to the class of goods (petrol and diesel) and not the class of dealers. The court concluded that petrol and diesel could be separated from the exemption as they form a different class of commodities, and this classification was permissible under section 10 of the Entry Tax Act.

4. Applicability of Notification Nos. 79 and 80 Dated September 30, 1997:
The petitioner in W.P. No. 14160 of 2008 argued that Notification Nos. 79 and 80 dated September 30, 1997, which prescribed a 1 per cent entry tax rate, were still applicable. The court held that these notifications were not applicable as they had an exception clause for works contracts exceeding Rs. 50,000. The notification dated April 1, 2007, prescribing a 27 per cent rate for petrol and diesel, was applicable, and the subsequent notification dated April 11, 2007, took petrol and diesel out of the exemption purview.

5. Validity of the Commissioner's Order Dated October 6, 2008:
The court upheld the Commissioner's order dated October 6, 2008, which rejected the petitioner's application for a concessional rate of tax. The petitioner was liable to pay entry tax at the rate of 27 per cent as per the notification dated April 1, 2007, and the benefit of the composition scheme under section 11A of the VAT Act did not apply to petrol and diesel.

Conclusion:
The court dismissed the writ petitions, holding that the notification dated April 11, 2007, was valid and not discriminatory. The petitioners were liable to pay entry tax on petrol and diesel at the rate of 27 per cent as prescribed by the notification dated April 1, 2007. The benefit of the composition scheme under section 11A of the Madhya Pradesh VAT Act did not extend to petrol and diesel.