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2019 (9) TMI 215 - GUJARAT HIGH COURTLevy of Entry Tax - import / sale of Excavators within the State of Gujarat - Treating the Excavators as “motor vehicles” - taxable at the rate of 12.5% - year 2006-07- works contractor engaged in construction of road Gujarat VAT Act - HELD THAT:- The statement and objects of the Entry Tax Act make it clear that due to the difference in the rate of Sales Tax applicable to the State of Gujarat and that to neighbouring States, diversion of trade has taken place and cases sales tax payments are avoided or evaded by various methods, in some cases resulting in the loss of sales tax revenue legitimately due to the State of Gujarat and with a view to compensating such loss of sales tax revenue, it was considered necessary to levy a tax on entry of certain specified goods purchased / manufactured outside the State and brought into the local areas of the State of Gujarat. Before this High Court in the case of Eagle Corporation Pvt. Ltd (supra) constitutional validity of the Entry Tax Act was challenged and after considering the Statement and Objects of the Entry Tax, Preamble and the relevant provisions of the Act, while upholding the constitutional validity of the Entry Tax Act, the Division Bench of this Court in the case of EAGLE CORPORATION PVT. LTD. VERSUS STATE OF GUJARAT AND OTHERS [2006 (10) TMI 395 - GUJARAT HIGH COURT], upheld the vires of Entry Tax Act by observing that if the rate of sales tax on specified goods in the State of Gujarat is 12% and rate of sales tax payable by the importer in a particular state is 4% and if the importer in 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 - 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 Entry Tax is levied then the importer would still a march over the local person and he would be in a dominating position to the extent of the Tax difference. Considering various decisions and 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. The entire legislative history of the Entry Tax Act as well as object and reasons behind the introduction as well as amendments of the Entry Tax Act establish that Entry Tax was always sought to be levied at the rates prescribed for such goods under the Sales Tax Act / VAT Act - In other words, there is a nexus between the Entry Tax rates and local Sales Tax / VAT rates on similar goods. Thus, only those motor vehicles which were covered under Entry 128 of Schedule-IIA to the Sales Tax Act and which are now covered under residuary Entry 87 of Schedule-II to the VAT Act which attract 15% tax under the VAT Act would be covered under the entry of motor vehicles under the Entry Tax Act. Levy of entry tax at the rate of 12.5% on Excavators by treating them as falling under Entry for motor vehicles even though Excavators have always been covered by separate entry under the Sales Tax Act and the VAT Act during the relevant period and for which rate of tax under the VAT Act is 4%, therefore is dehors the scheme of the Entry Tax Act as countenanced by the legislative history as well as objects of the Entry Tax Act. Levy of Entry Tax at the rate of 12.5% treating Excavators as “motor vehicles” and/or at par with the “motor vehicles” is hereby held to be illegal, discriminatory, violative of Article 304(a) of the Constitution of India and against the object and purpose of the levy of Entry Tax under the Entry Tax Act - the respondents–State cannot levy / charge Entry Tax on Excavators beyond Value Added Tax under the VAT Act i.e. beyond 4%. Petition allowed.
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