TMI Blog1994 (2) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... ultra vires the charging section; and (d) consequential reliefs such as quashing notices requiring them to deposit tax, prohibiting the Sales Tax Officers from proceeding with the pending assessment; restraining them from levying tax on the petitioners and directing them to refund tax illegally collected. 3.. Respondents have filed returns as well as additional submissions. Additional submissions have been filed on behalf of the petitioners in some other cases. Shri M.S. Choudhary, learned counsel for the petitioners in some of the petitions who led the arguments and counsel in other petitions, made the following submissions in the course of their arguments: (i) Dealers in the aforesaid goods are not covered by section 3 of the Entry Tax Act which is the charging section. (ii) In view of the provisions of the Central Sales Tax Act, 1956, levy of tax on first purchase outside the State is hit by article 286(3) of the Constitution. (iii) Levy on the aforesaid goods amounts to levy of consignment tax in the guise of entry tax and offends entry 92-A of List I of the Seventh Schedule to the Constitution. (iv) The scheme of levy of entry tax under the Entry Tax Act discrimi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax under the Sales Tax Act is in issue, the scheme of the provisions of that Act has to be considered. Section 2(d) of the Sales Tax Act defines "dealer" as any person who carries on the business of buying, selling, supplying or distributing goods directly or otherwise. "Turnover" is defined in section 2(t) as the aggregate of the amount of sale price received and receivable by a dealer in respect of any sale or supply or distribution of goods made during a particular period, whether or not the whole or any portion of such turnover is liable to tax, but after deducting the amount, if any, refunded by the dealer to the purchaser in respect of any goods purchased and returned by the purchaser within the prescribed period. "Tax-paid goods" is defined in section 2(rr) as meaning any goods specified in Parts II to VI of Schedule II which have been purchased by such dealer from a registered dealer inside the State, except the goods the sale whereof by such registered dealer is exempted in whole from payment of tax. "Taxable turnover" is defined in section 2(r) as meaning that part of a dealer's turnover for such period which remains after deducting therefrom the sale price of goods m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; AIR 1989 SC 222, Vrajlal Manilal and Company v. State of Madhya Pradesh [1972] 30 STC 291 (MP), affirmed by the Supreme Court in [1986] 63 STC 1 (SC); AIR 1986 SC 1085 (Vrajlal Manilal Co. v. State of Madhya Pradesh), Fernandez v. State of Kerala [1957] 8 STC 561 (SC); AIR 1957 SC 657, Mohanlal Hargovind Das v. State of Madhya Pradesh [1955] 6 STC 687 (SC); AIR 1955 SC 786, Kedarnath Jute Mfg. Co. Ltd. v. Commissioner of Income-tax [1971] 28 STC 627 (SC); [1971] 82 ITR 353 (SC); AIR 1971 SC 2145 and Bhawani Cotton Mills Ltd. v. State of Punjab [1967] 20 STC 290 (SC); AIR 1967 SC 1616. We do not think these decisions really help the petitioners. These decisions have been relied on to bring out the distinction between "non-liability to pay tax" and "exemption from sales tax". We will assume for the purpose of this discussion that in so far as the three types of goods are concerned, it is a case of non-liability and not exemption. We will quote the relevant portion of section 3(1)(a) of the Entry Tax Act: "There shall be levied an entry tax- (a) on the entry in the course of business of a dealer of goods specified in Schedule II, into each local area for consumption, use or sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and conditions in regard to the system of levy, rates and other incidents of tax as the Parliament may, by law, specify. Section 14 of the Central Sales Tax Act, 1956, declares the goods enumerated therein to be of special importance in inter-State trade or commerce. Items (ii), (iv), (viii) and (ix) relate to cotton fabrics, iron and steel, sugar and tobacco respectively. Section 15 provides for restrictions and conditions in regard to tax on sale or purchase of declared goods under any State legislation. There are limitations with regard to limit of taxation and single point taxation, and reimbursement of tax paid. 11.. Petitioners contend that they are bringing these goods from outside the State, paying tax under the Central Sales Tax Act and once the goods enter a local area, it is in the local area that entry tax is required to be paid. It is pointed out that though entry tax is payable only on entry of goods into a local area in the course of business of a dealer of specified goods for consumption, use or sale therein, yet the Act does not contain any machinery for verification of the purpose of entry and there is no procedure for assessment or refund and, therefore, the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spapers, where such sale or purchase takes place in the course of inter-State trade or commerce. Item 92-B relates to tax on consignment of goods. Tax on sale or purchase, tax on entry of goods into local area for consumption, use or sale therein and tax on consignment of goods are different in nature and character and are imposed by local authorities under separate laws. Octroi is in the nature of a multi-point imposition. Various State Legislatures, with the intention of reducing harassment of dealers, abolished octroi which is a multi-point imposition and at the same time, legislated on single point entry tax for the purpose of compensating the local authorities who suffered loss of revenue on account of abolition of octroi. *Here italicised. 13.. Single point entry tax is a substitute for multi-point octroi and falls within the ambit of entry 52 of List II. It is a tax on entry and does not restrict freedom of trade or commerce, as is made clear in Transport Corporation of India v. Chairman, Municipal Council, Municipal Corporation, Indore AIR 1963 MP 253 and City Municipality v. Mahado Seetha Ram AIR 1967 AP 363. It is true that State Legislature is competent to levy entry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitution is not tenable. 16.. The petitioners contend that where specified goods are imported from outside the State, they must necessarily enter a local area and entry tax becomes leviable, while goods manufactured inside the State may not be entering a local area and, therefore, entry tax is not leviable and thus there is a restriction imposed on inter-State trade and commerce and, therefore, the Act offends articles 301 and 304 of the Constitution. 17.. Article 301 requires that trade, commerce and intercourse throughout the territory of India should be free subject to other provisions of Part XIII. Imposition of a tax on entry or movement as long as it is not otherwise arbitrary or unreasonable, cannot be regarded as adversely affecting the system of trade, commerce or intercourse. 18.. Article 304 reads as follows: "304. Notwithstanding anything in article 301 or article 303, the Legislature of a State may, by law.- (a) impose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 961 SC 232 and Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan AIR 1962 SC 1406. The decision clarifies the position in para 25 as follows: "............If a measure is shown to be regulatory or the tax imposed is compensatory in character meaning the tax instead of hampering trade or commerce would facilitate the same, it would be immune from a challenge under article 301. In other words, if the tax is shown to be compensatory in character, irrespective of the fact whether it is saved by article 304 or not, it does not come within the inhibition of article 301. Accordingly, if validity of a tax law is challenged on the ground that it violates freedom of inter-State commerce, trade and intercourse guaranteed by article 301, the contention may be repelled by showing (i) that the tax is compensatory in character as explained in Automobile Transport (Rajasthan) Ltd.'s case AIR 1962 SC 1406 or (ii) it satisfies the requirements of article 304." The court further held as follows: "On a conspectus of these decisions, it appears well-settled that if a tax is compensatory in character, it would be immune from the challenge under article 301. If on the other hand, the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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