TMI Blog1992 (8) TMI 270X X X X Extracts X X X X X X X X Extracts X X X X ..... m 1984 onwards some States and the Union territories adjoining the State of Maharashtra have reduced the rate of sales tax on motor vehicles and chassis substantially. Such reduction in tax rates by the neighbouring States have resulted in diversion of trade to these areas and the manufacturers of motor vehicles in Maharashtra, for want of market, had to resort to branch transfers to these areas and cater to the needs of consumers in Maharashtra, from those areas. This resulted in the avoidable loss of legitimate sales tax revenue to a large extent by the State of Maharashtra. With a view to compensate such loss of legitimate revenue, the State Government has decided to levy with immediate effect a tax on entry of motor vehicles purchased outside the State and brought in the local areas of the State for use or sale." 4.. Section 2 defines certain expressions. Most important and material definition is of the expression "local area" given in clause (h). It means the area within the limits of- (i) Municipal corporation established under the Bombay Municipal Corporation Act, the Bombay Provincial Municipal Corporation Act, 1949 and the City of Nagpur Corporation Act, 1948. (ii) M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd (ii) reduction in liability of an importer (other than dealer who had purchased the vehicle for personal use in the other State or the Union Territory, to pay entry tax to the extent of sales tax paid under the General Sales Tax Act of that State or territory. 6.. By notification issued forthwith under section 3, tax was fixed at 12 paise in a rupee. Rules known as "Maharashtra Tax on Entry of Motor Vehicles into Local Areas Rules, 1987" have been framed under section 17. Section 12 dealing with exemptions reads thus: "Subject to such conditions as it may impose the State Government may, if it is necessary so to do in the public interest, by notification in the Official Gazette, exempt any specified class of importers from payment of the whole or any part of the tax payable under this Act or from all or any of the provisions of this Act and such exemption shall take effect from the date of the publication of the notification in the official gazette, or such other date as may be mentioned therein." Thus, it will be noticed that the salient features of the Act are that the State shall levy and collect entry tax on the purchase value of a motor vehicle, entry of which is effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment of tax, machinery by which it is assessed and collected or the motive for the imports is no criterion for judging the nature of the tax. Direct decisions of the Supreme Court dealing with this subject are: (1) Jall Parsi v. Union of India AIR 1962 SC 1281. (2) R.R. Engineering Co. v. Zila Parishad AIR 1980 SC 1088. 9.. Keeping the above basic tenets of interpretation in view, there is no manner of doubt that the levy is upon entry of vehicle in the local area for use or sale in that area and not upon its sale or purchase outside the State. No entry tax is leviable on a vehicle which is brought even for sale or use in a particular local area after 15 months of its registration outside the State. Even if the vehicle is acquired not through purchase-say for example is acquired by gift-the levy is imposable though sales tax may not be impossible. Undoubtedly, measure of levy, machinery for assessment and recovery, motive for the impost are relatable to the BST Act but those factors are of not much significance for locating the subject-matter of levy for which charging section 3 has to be looked into. Therefore, we reject this part of the ground as not tenable. Linked wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat section 3 was invalid only so far as it seeks to levy tax on entry of goods in the factory premises from the same local area in which they are situate. It consequently held that tax could be validly levied on entry of goods in the factory premises imported from outside the local area. The relevant portion of the minority view is (para 32): "In other words, the view which they favoured was to read the expression 'local area' practically to mean any 'area' entry into which was by the relevant fiscal statute, made the subject of taxation. In my opinion, that is not a correct interpretation of the entry and I agree with my learned brethren that having regard to the historical material, which has been exhaustively set out and discussed in their judgment, the word 'local area' can in the entry designate only a predetermined local unit-a unit demarcated by statutes pertaining to local selfGovernment and placed under the control and administration of a local authority such as a municipality, a cantonment, a district or a local board, a union or a panchayat, etc., and not any region, place or building within the State which might be defined, described or demarcated by the State's taxi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e than one local area, which together covers the entire area of the State, could make no difference and would not put the Act beyond the legislative competence of the State Legislature under entry 52. 14.. Impost of tax by the State on entry of goods into local area has not been made by this State only. Lead seems to have been taken in the matter by the State of Karnataka by making the Karnataka Tax on Entry of Goods into Local Areas for Consumption, Use or Sale therein Act, 1979. That impost was intended to be a substitute for the octroi duty levied by the local bodies under relevant municipal laws. Owing to the abolition of octroi duty, there was loss of revenue and the said tax was intended to compensate that loss. In the said Act, the term "local area" is defined as including the area within municipal corporations and municipalities in the State of Karnataka. Section 3 authorises the levy of tax on entry of specified goods into a local area for consumption, use or sale therein at such rate not exceeding two per cent ad valorem as may be specified by the State Government by a notification. Notification was issued specifying different rates of tax on import of specified goods i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... radesh also undertook such an exercise by enacting the Andhra Pradesh Entry of Goods into Local Area Tax Act, 1987. Section 2(e) of the said Act defines "local area" to mean "the area within the limits of a city as declared under the Hyderabad Municipal Corporation Act, 1955, or the Visakhapatnam Municipal Corporation Act, 1979, or the Vijayawada Municipal Corporation Act, 1981, as the case may be, a municipality as constituted or deemed to have been constituted under the Andhra Pradesh Municipalities Act, 1965 and includes such other area within the limits of one or more gram panchayats, as may be declared by the Government by notification to be a local area for the purpose of this Act". 17.. The validity of the said Act was upheld by the State High Court in the case of Suresh Chand Sri Gopal v. Union of India [1989] 72 STC 241 repelling all challenges including that the "local area" as defined in the said Act, covered whole of the State, the impost was for raising revenues of the State and not the local bodies and hence the impost could not be justified with reference to entry 52, List II. The Andhra Pradesh High Court held that language of the entry 52 does not warrant a concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act bring the legislation within its powers, the Act cannot be considered ultra vires." In a leading decision on the subject of colourable legislation, the Supreme Court in the case of Gajapati Naravan Deo v. State of Orissa AIR 1953 SC 375 has observed (page 379): "It may be made clear at the outset that the doctrine of colourable legislation does not involve any question of 'bona fides' or 'mala fides' on the part of the Legislature. The whole doctrine resolves itself into the question of competency of a particular Legislature to enact a particular law. If the Legislature is competent to pass a particular law, the motives which impelled it to act are really irrelevant. On the other hand, if the Legislature lacks competency, the question of motive does not arise at all. Whether a statute is constitutional or not is thus always a question of power." The above principle has been consistently accepted by the Supreme Court in a number of decisions. As observed in these decisions the whole doctrine of colourable legislation is based upon the maxim that "you cannot do indirectly what you cannot do directly". If the Legislature is competent to do a thing directly, then the mere fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Supreme Court: (i) Anraj v. Government of Tamil Nadu [1986] 61 STC 165; AIR 1986 SC 63 and (ii) Weston Electroniks v. State of Gujarat [1988] 70 STC 52; AIR 1988 SC 2038 to which our attention was drawn on behalf of the petitioners. In the former decision levy of sales tax only on sale of lottery tickets of other States while granting exemption to its own tickets was held to be discriminatory under article 304(a). In the latter, levy of sales tax at different rates on goods imported in the State and goods manufactured in the State was held to be similarly discriminatory. In our view the ratio of those decisions do not apply to the matter at hand. This ground, therefore, cannot succeed. 23.. Ground (d): Submission of the petitioner is that there is in the field a tax in the nature of octroi duty imposed under the various municipal laws made under entry 52, List II and hence impost referable to that very entry amounts to double taxation and hence is bad in law. The submission is wholly misconceived. In the first place, there is neither constitutional nor statutory bar in express terms prohibiting levy of double taxes. Article 265 of the Constitution only mandates that "no tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es uncanalized or unguided discretion to the executive capable of being misused. Purpose and policy of legislation is clear. No exhaustive list of categories, situations or persons entitled to exemption can be given in the Act in the modern complexities. Some discretions, some play in the joints have to be provided for. One cannot also lose sight of the fact that discretion is vested in the State Government itself and not in the minor officers. Grant or refusal to grant exemption has to have nexus with the object of the Act. If the nexus does not exist or the action is mala fide or is vitiated by non-application of mind, the action may become bad. There is no power on earth, which is not capable of being misused. But that hard reality cannot render the provision bad. Section 12 refers to specified class of importers, but that does not mean individual cases cannot be considered on merit. Even one case may form a specified class. The respondents inform us that exemptions have in fact been granted even to genuine individual cases. This last ground also, therefore, falls. Conclusion: The Act is valid and also enforceable. Result: Petitions dismissed. Rules discharged. No costs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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