TMI Blog2012 (11) TMI 789X X X X Extracts X X X X X X X X Extracts X X X X ..... ross custom barriers by invoking the powers conferred on the State Legislature covered under Entry 52 of List II of the Seventh Schedule, there is no encroachment of the powers of the Parliament. - Decided in favor of revenue. Entry tax on goods from import from outside the country - Whether the interpretation of provision of the Orissa Entry Tax Act itself shows that entry tax is not leviable on the goods imported from outside the country - Held that:- By applying the principle of interpretation of the taxing law that charging section is not to be controlled by subservient components, the definition “entry of goods” cannot be taken help to urge that the entry tax on imported goods cannot be levied. - the argument that entry tax is not leviable on the goods imported through buyers is attractive but is without substance. - Decided in favor of revenue. Levy of entry tax on plant and machinery, which are brought from USA to establish a factory at Balgopalpur for production of papers - held that:- Plant, which is brought in knock down condition, is a combination of machinery in a systematic manner so as to produce goods and, therefore, it is coming within the definition of mach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n raw materials and goods imported from outside the country and purchased from outside the State when such materials have not been listed in the schedule appended to the Orissa Entry Tax Act? and (iv) Whether the Orissa Entry Tax Act, 1999, hereinafter referred to as the Act for brevity, is violative of Entry 83 of List I of Seventh Schedule and Article 246 of the Constitution of India. 2. The petitioners, in all these writ petitions except a few, whose cases shall be described separately below, are operating different industries for which they are importing coal from outside the country for being used as raw materials for production of various products. The petitioners, in order to carry out their manufacturing activity both inside the State and the factories located outside the State, import raw materials from outside India, for which they obtained necessary license from the appropriate authority. They have been registered under the OVAT Act, CST Act and the Orissa Entry Tax Act, 1999 and have been allotted TIN number by the Sales Tax Officer. They bring various goods including scheduled goods for their plants from within the State and also from outside the territory of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pray that the entry tax levied on the imports should be exempted and the State should be directed to refund the tax collected from them on account of entry tax. 5. Some of the cases have different set of facts, and therefore, they are discussed separately with proper heading as follows:- In W.P.(c) No.13978 of 2008 (M/s Emami Paper Mills Ltd. vs. State of Orissa and others), the petitioner claims that it is an incorporated company and has a paper manufacturing plant at Balgopalpur in the district of Balasore. They are producing newsprint, various writing and printing paper by using 100% recycled waste papers. The company has stopped rice straw from April, 2006 and, therefore, now using 100% waste paper as raw materials for manufacturing paper. They decided to expand their plant. Thus, for additional capacity they have placed orders for a major plant and machinery. In pursuance of such expansion program, they entered into agreement and placed order for a paper plant and other machinery on a company namely Global Equipment and Machinery Sales Inc., Montgomeryville, Pennsylvania, USA . Pursuant to such agreement and orders, the petitioner has imported into India a paper manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paper plant is a mega plant and it had to purchase different types of machinery, its spare parts from different manufacturers in other States of the Country. These machinery and spare parts are of definite specifications and are neither manufactured in Orissa nor available otherwise. Therefore of necessity, the petitioner has to purchase the same from different parts of the Country (other than Odisha) and these are not manufactured in Odisha. The petitioner claims that the spare parts have a definite commercial identity of its own and bear a different name and as such are not scheduled goods under the Schedule of Act. The petitioner further submits that even though it is not liable to pay entry tax on the goods purchased from different States in as much as those are neither scheduled goods nor can those goods be subjected to levy of entry tax, the opposite party no.3 has assessed the petitioner to tax in respect of these goods both imported from outside the Country and purchased from outside the States (CST Goods) and imported into the local area of Balasore. The opposite party no.3 has completed assessment of the years, 2005-06 and 2006-2007 under the Act and in the said order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable to pay entry tax in respect of the said imported items. The opposite party no.3 has been collecting the same and the petitioner has been effecting payment thereof under protest. The petitioner claims that the company is not liable to pay entry tax as the same is not falling within the definition of scheduled goods as identified in the Act, but the opposite party no.3 has threatened to stop issuing way bills and C forms for which the company has been paying entry tax on purchase. Besides, the raw material imported from other countries, the petitioner also uses raw materials available in other States of the country, which are not manufactured in Odisha. These raw materials are Mag Alumina Spinel, Zircon sand/Flour, Bauxite (Rotary Kiln/Calcined), Tabular Alumina, Brown Fused Alumina, While Fused Alumina, Reactive Alumina, Dead Burn Magnesia, Silicon Carbide, Borax, Allu Metal, Carbon Black. The petitioner has no other alternative but to effect payment of entry tax on these items and the company should be exempted from the payment of entry tax and tax already paid should be refunded to it. 7. In W.P.(C) No.5764 of 2007 (M/s Maheswari Coal Services (P) Ltd. Vs. State of Oris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds into a local area as per Entry 52 of List II of the Seventh Schedule. The State submits that incidence of import ends once the goods cross the customs barrier. After crossing of customs barrier, the goods enter into the local area for consumption, use or sale. On behalf of the State Government learned Advocate General further submits that the observation made with reference to terminal tax is not applicable to entry tax. So, it is erroneous to submit that as because imported goods do not mingle with mass of domestic goods, the levy of entry tax on imported goods would be out of purview of domain of the State. The learned Advocate General submits that Section 2(j) of the Act, which defines purchase value, does not expressly provide for including the import duty. However, it provides for all other charges incidental to the purchase of such goods. Therefore, it includes import duty. Furthermore, it is contended that purchase value means the value of schedule goods as ascertained from original invoice or bill. In case of imported goods the bill of indent includes import duty and, therefore, it is included in the definition within the purchase value. The State Government ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods imported outside the country?, III. Whether the plant, which has been brought into the local area of Balgopalpur in knock down condition is leviable with entry tax or not? and IV. Whether different raw materials, as described earlier in the case of M/s IFGL Refractories vs. State of Orissa and others in W.P.(c) No.7 of 2008 are liable for entry tax as they are not included in the schedule appended to the Act and to what relief the petitioners are entitled to.? 10. The first question relates to ban imposed under Article 286 of the Constitution of India on the legislative power of the State legislation to impose tax on sale or purchase of goods where such sale or purchase takes place in course of import of goods into the country. Article 286 of the Constitution reads as follows:- 286. Restrictions as to imposition of tax on the sale or purchase of goods.- (1) No law of a State shall impose, or authorize the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place- (a) outside the State; or (b) in the course of the import of the goods into, or export of the goods out of, the territory of India. (2) Parliament may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ater in this judgment. The aforesaid view was taken by the Gauhati High Court in the case of Primus Imaging Pvt. Ltd. Vs. State of Assam, (2007) 9 VST 528 (Gau). At paragraph-12 of the said case, the Gauhati High Court has held as follows:- 12. From a reading of Article 286 of the Constitution, it becomes clear that this article does not permit States to levy tax on the sale or purchase of goods, which takes place in the course of import into, or export out of the territory of India. The restriction, imposed on the State, is, thus, in respect of levy of tax on the sale or purchase of goods, which takes place in the course of import into, or export out of, the territory of India. The power to levy sales tax is derived from entry 54 of List II of the Seventh Schedule to the Constitution of India; whereas the power to levy entry tax is derived by entry 52 of the List II of the Seventh Schedule to the Constitution. Under entry 54, the point of levy is purchase or sale, but under entry 52, the point of levy is the point of entry into a local area. Therefore, taxable event under the Entry Tax Act is entry of specific goods into a local area for consumption, use or sale therein. View ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers enumerated in List II in the Seventh Schedule (in this Constitution referred to as the State List ). 13. The legislative power of the Union and the State cover altogether different fields of legislation and the incidence of both taxes are distinct and separate. The Parliament has enacted Customs Act, 1962 in super-session of the Sea Customs Act, 1878. Section 12 of the Customs Act, 1962, levies duties on goods imported into India as may be specified in the Customs Tariff Act, 1975. The incidence of customs duty is on importation of goods into the territory of India. The word import has been defined in Section 23 of the Customs Act, 1962. It is apposite to quote the same. Import will all its grammatical variations and cognate expressions, means bringing into India from a place outside India. From the scheme of the Act it is seen that the point of levy of custom duty is a condition precedent for importation of goods to the country, i.e., before its clearance and before the goods are allowed to cross the custom barriers. On the other hand, the levy of entry tax, as per Section 3 of the Act, is that entry of goods into a local area for the purpose of consumption, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ajasthan, AIR 1995 Rajasthan 225, the imposition of octroi duty, which is levied under Entry 52 of List-II of the Seventh Schedule to the Constitution on goods imported from outside the country, is held to be valid. 15. The petitioners, in all these cases, placed reliance on the ratio decided in Godfrey Phillips India Ltd. Vs. State of Uttar Pradesh, (2005) 139 STC 537 (SC). The ratio decided in the above case is distinguishable and is not applicable to the present cases and the same is demonstrated as follows:- In Godfrey Phillips India Ltd.(Supra) the assesses were either manufacturer or dealer of tobacco products. They assailed the levy of luxury tax on tobacco and its products under Uttar Pradesh Tax on Luxuries Act, 1995; the Andhra Pradesh Tax on Luxuries Act, 1987; and the West Bengal Tax on Luxuries Act, 1994. While interpreting Entry 62 of List II of the Seventh Schedule to the Constitution, the Supreme Court held that the word Luxury takes colour from the words entertainment, amusement, betting and gambling and therefore, the legislature has no jurisdiction to levy tax on tobacco (a goods) in the garb of luxury by describing Tobacco as a luxury goods. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in Godfrey Phillips India Ltd. (supra) does not render any aid to the petitioners contention. Therefore, it is held that entry tax can be imposed on the goods, which are imported from outside the territory of India. The ratio decided in the aforesaid case is not applicable to the present case. 16. Relying upon in Central India Spinning and Weaving and Manufacturing Company Ltd. Vs. Municipal Committee, Wardha, AIR 1958 SC 341, the petitioners contended that the activity of importation does not end up on the crossing of the custom barriers but continues till the imported goods reach the godown of the importer in course of which goods have also to enter one or several local areas. Thereupon, it is urged that the entry tax leviable on entry of goods into the local area is essentially a tax on import of goods which is authorized only under Entry 83 of List I of the Seventh Schedule to the Constitution. The ratio decided in the aforesaid can be distinguished and is not applicable to the present case. In that case, the Hon ble Supreme Court was dealing with levy of terminal tax at the point of exit from a local area. There the question was whether goods passing through Wardha Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause (kk), as described above to the Municipality Act, was repealed. Section 36 of the Act further provides for assignment of proceeds of tax among the local authorities. Rule 33-A of the OET Rules and procedure prescribes the method of distribution of entry tax collected to each local authority every year. The entry tax is, thus, in essence a tax in lieu of octroi duty. Therefore, the decisions rendered in the context of levy of octroi are applicable to this case. 19. Thus, on the basis of the aforesaid discussion, this Court comes to the conclusion that the contention of the petitioners that levy of a tax on import of goods is within the exclusive legislative domain of the Parliament, and this power conferred on the Parliament by the Constitution cannot be encroached upon, directly or indirectly, by any State Legislature. In the cases at hand, as the entry tax has been levied on such goods which cross custom barriers by invoking the powers conferred on the State Legislature covered under Entry 52 of List II of the Seventh Schedule, there is no encroachment of the powers of the Parliament. 20. The next question that arises for determination is whether the interpretation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Government by notification on the purchase value of such motor vehicles. Explanation.- For the removal of doubts, it is hereby declared that where any scheduled goods have been subjected to the levy of octroi under the Orissa Municipal Act, 1950 ( Orissa Act 23 of 1950), prior to the commencement of this Act for entry into any local area, those goods shall not be subjected to the levy of entry tax under this Act for their entry into that area on or after such commencement. 21. From the plain reading of the above provision, it is clear that the legislature has no intention that imported goods are intended to be left out from the charging Section. The entry tax is leviable on scheduled goods brought into a local area for consumption, use and sale therein. 22. In Polestar Electronics (Pvt) Ltd. Vs. Additional Commissioner of Sales Tax, (1978) 41 STC 409 (SC), it is held that: xxx it is only from the language of the Statute that the intention of the legislature must be gathered, for the legislature means no more and no less than what it say. It is not permissible to the Court to speculate as to what the Legislature must have intended and then to twist or bend th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation Vs. Union of India, (2004) 135 STC 480 (SC). At paragraph-44 the Supreme Court has held that it is well settled that the measure of taxation cannot affect the nature of taxation and, therefore, the fact that service tax is levied as a percentage of gross charges for catering cannot alter or affect the legislative competence of Parliament in the matter. 28. Viewed in a slightly different context, it is seen that purchase value has been defined under Section 2(j) of the Act and it reads as follows:- (j) Purchase Value means the value of scheduled goods as ascertain from original invoice or bill and includes insurance charges, excise duties, countervailing charges, sales tax, [value added tax or, as the case may be, turnover tax] transport charges, freight charges and all other charges incidental to the purchase of such goods; Provided that where purchase value of any scheduled goods is not ascertainable on account of non-availability or non-production of the original invoice or bill or when the invoice or bill produced is proved to be false or if the scheduled goods are acquired or obtained otherwise than by way of purchase, then the purchase value shall be the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of purchase value in Section 2(j) of the Act, it will give rise to the inference that legislature intended not to levy entry tax on imported goods is without substance. 31. The learned counsel for the petitioners submits that the definition of entry tax as defined in sub-Section 2(d) of the Act does not include from outside the country and, therefore, the tax on imported goods is clearly beyond the ambit of entry tax. However, if we adopt the literal construction of statute, as has been discussed in the earlier paragraphs, without adding anything, outside the State means any place outside the State and includes all places outside the State as well as outside the country. Had the legislature intended to exclude imported goods from the net of taxation, the words except goods brought from outside the country would have been mentioned in the above definition. The two phrases any place outside that local area and any place outside the State were used to signify that entry tax will be levied on (a) when goods move into the local area from another local area within the State and (b) when the goods are brought into the State. 32. By applying the principle of interpret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls Vs. State of Orissa (W.P.(c) No.13978 of 2008). The learned counsel for the petitioner, in this case, has submitted that since the aforesaid plant and machinery were brought in knock down condition, as it was impossible to move the plant to USA to the site on which the plant is to be established, the said plant and machinery brought in knock down condition were transported in parts. As such it is contended that since the plant is not a scheduled item in the entry tax Act, the petitioner is not liable to pay entry tax on the same. 38. Part-II of Schedule-1 Entry 9 reads as follows:- Machinery and equipments including earthmovers, excavators, bulldozers and road-rollers and spare parts and components used in manufacture, mining, generation of electricity, or for execution of work of contract or for any other purpose 39. Thus, it is to be seen whether the plant and machinery, which are brought from USA to establish a factory at Balgopalpur for production of papers, are liable to entry tax or not. As Plant has not been defined separately in the Act, we have to go by the grammatical definition of Plant . Plant , as per the Concise Oxford Dictionary, means a place wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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