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2013 (8) TMI 16 - HC - VAT and Sales Tax


Issues Involved:
1. Constitutionality of Rule 106 (tha) of the Rules framed by the Board of Revenue.
2. Legislative competence of the State and the Board of Revenue.
3. Nature of the levy as a fee or tax.
4. Impact on inter-State trade and commerce under Article 301 of the Constitution of India.

Analysis:

1. Constitutionality of Rule 106 (tha):
The petitioner challenged Rule 106 (tha) of the Rules framed by the Board of Revenue, which levies an import fee of Rs. 6.00 per LP Litre on rectified spirit imported for the manufacture of Extra Neutral Alcohol (ENA) and Indian Made Foreign Liquor (IMFL). The petitioner argued that this rule is ultra vires the Constitution of India and beyond the rule-making power of the Board of Revenue under Articles 265 and relevant entries in the Seventh Schedule of the Constitution.

2. Legislative Competence:
The petitioner contended that the levy is beyond the legislative competence of the State and the Board of Revenue. The State Legislature is empowered to make laws regarding intoxicating liquors fit for human consumption under Entry 8 of List-II of the Seventh Schedule. However, rectified spirit, which is not fit for human consumption, falls under the Union List (Entry 52 and 84 of List-I). The court referred to the judgment in Synthetics and Chemicals Ltd. vs. State of U.P., where it was held that the State cannot levy duty or tax on alcohol not fit for human consumption.

3. Nature of the Levy:
The petitioner argued that the levy is essentially a tax disguised as a fee, as there is no quid pro quo (no services provided in return for the fee). The court noted that the petitioner already pays various fees for licenses and establishment charges for excise officials. The State could not justify the levy as a regulatory fee for supervision and control of potable liquor.

4. Impact on Inter-State Trade and Commerce:
The petitioner claimed that the levy violates Article 301 of the Constitution, which guarantees freedom of trade and commerce across State borders. The court agreed, stating that the levy impedes inter-State trade and commerce and is beyond the legislative competence of the State Legislature.

Conclusion:
The court quashed the notification dated 10th November 2012 issued by the Board of Revenue, Jharkhand, and the consequential demand notice dated 24th November 2012 for the deposit of import fees on rectified spirit. The petitioner was entitled to a refund of any import fees deposited under the impugned notification. The writ petition was allowed.

 

 

 

 

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