9911796707
TMI Blog2007 (3) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... 56 to 22958/02, 23103/02, 23140/02, 23175/02, 23176/02, 23263 to 23266/02, 23443/02, 23553/02 & 23554/02, 23738 to 23742/02, 23941 to 23943/02, 24143/02, 24181 to 24184/02, 24385/02, 24419 to 24420/02, 24525 & 24526/02, 25021/02, 25346/02, 25373/02, 29937/02, 29963/02, 30035/02, 30532/02, 30668 to 30673/02, 30906/02, 31195/02, 31198/02, 31241/02, 31535 to 31540/02, 31541 to 31544/02, 31612 & 31613/02, 31633/02, 31690/02, 32425/02, 32460 & 32461/02, 32463 & 32464/02, 32734 & 32735/02, 33099/02, 33100/02, 33101/02, 33102/02, 33103/02, 33104/02, 33105/02, 33106/02, 33107/02, 33108/02, 33583/02, 34203/02, 34266/02, 34283/02 & 34284/02, 34313/02, 34342/02, 34343/02, 22961/02, 23177/02, 24352/02, 25068/02, 29058 & 29059/02, 29649/02, 29890/02, 32412/02, 32977/02, 33875/02, 34873/02, 35776/02, 36273/02, 36519 to 36521/02, 37078/02, 37465/02, 37480/02, 37660/02, 37718/02, 37778/02, 38430/02, 38855 to 38858/02, 39382 to 39384/02, 40280/02, 29825/02, 33194 to 33197/02, 34130/02, 34132/02, 34145/02, 34156/02, 34159/02, 34162/02, 34173/02, 34186/02, 34402/02, 34406 to 34407/02, 35554/02, 35555/02, 35691/02, 35834/02, 36498/02, 36503/02, 36707/02, 37129 to 37132/02, 37281 & 37282/02, 37297/02, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2769/04, 12770/04, 3929 to 3931/04, 20764, 20765/05, 18864/05, 18873 & 18874/05, 26122 & 26123/05, 26147 to 26149/05, 26949/05, 30564/05, 32662/05, 100/05, 595 to 597/05, 1144 & 1145/05, 1458/05, 1495/05, 1799 & 1800/05, 1527/05, 2153 & 2154/04, 3824/04, 4676/04, 4676/04, 4679/04, 4730/04, 5926 to 5928/04, 5604 & 5605/04, 5785*04, 5880/04, 6192/04, 6440/04, 6548 to 6551/04. 6915/04, 7418/04, 7421/04, 7453/04, 7472/04, 8719/04, 8964/04, 9078/04, 9156/04, 9393/04, 9620/04, 9806/04, 9980/04, 10362/04, 10655/04, 11223/04, 11224/04, 11239/04, 11494/04, 12573/04, 13278/04, 13279/04, 13630/04, 13631/04, 13561 & 13562/04, 27149/04, 27175/04, 27485/04, 27575/04, 27709/04, 27733/04, 27827/04, 27829/04, 27835/04, 27993 & 27994/04, 28028/04, 28029/04, 28048/04, 28361/04, 29469/04, 29617/04, 29679/04, 29789/04, 29870/04, 5143 & 5144/04, 5644/04, 17096/04, 17163/04, 19095/04, 22114/04, 22437/04, 22614/04, 22791/04, 22793 & 22794/04, 22948/04, 24178/04, 24635/04, 25291/04, 25650/04, 25658/04, 25743/04, 26667 & 26668/04, 29057/04, 29920/04, 30282 & 30283/04, 30496/04, 31084/04, 31210/04,37668/04, 37669/04, 38420/04, 39628/04, 21581/05, 1317/04,1372/04, 1380/04, 1513/04, 1976/04, 2336 & 2337/04, 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7/03, 595 to 597/05, 27709/04, 28048 to 28052/04, 28200/04, 26667/04, W.P. 26668/04, 30282/04, 30283/04, 38420/04, 905/05, 28971 to 28973/04, 23881/05, 23882/05, 23923/05., Mr. R.Venkatraman SC Assisted by Mr. T.RameshKutty, W.P. 23333/04, W.P. 23988/04 to 23990/04, 28708/03, Mr. K.Venkatasubramaniam for M/s. R.V. Chitra Associates, W.P. 9244/2003, 13450/2003, 16659/03, 29085/03, W.P. 29913/2003, W.P. 30886/03, 2014/04, 30636/03, W.P. 29963/02, 42749/02, 13407/03, 20305 & 20306/04., Mr. M.N.Rao SC for M/s. R.Hemalatha, W.P. 15830/02, 15833/02, 15862/02, 15896/02, 15898/02, W.P. 15902/02, 15908/02, 16430/02 to 16432/02, 16433/02, 16434/02, 16959/02 to 16962/02, 16469/02 18225/02 20332/02, 20790/02 20791 to 20793/02 31241/02 37078/02 37480/02 38855 to 38858/02 37297, 37298/02 38270/02 39276 to 39279/02 39428 to 39431/02 18875/02 19907/02 19920/02 19931/02 19932/02 35891/02, 41712/02 41784 41785/02 44412/02 44436/02 44470/02 565/03 8631/03, 7623/03 W.P. 9571/03 9627/03, 11326 & 11327/03 22039/03 22040/03 22041/03 35971/03 35972/03 35973/03 35994/03 36078/03 36115/03 36153/03 36493/03 36758/03 38653/03 38654/03 675/04 1175/04 1204/04 1713/04 2693/04 2839/04 2960/04 3091/04 3716/04 3720 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /02, 2313/03, 14057/03, 24536/03, 24540/03, 32823/03, 32824/03, 32826/03, 32846/03, 32850/03, 32851/03, 36990 to 36992/03, 39534/04, 5880/04, 10655/04, 1976/04, 13325/04., K.Ramagopal, W.P. 23103/02, 35691/02, 3353/03, P.Radhakrishnan W.P. 23263 to 23266/02, 19603/02, K.R.Krishnan W.P. 23738 to 23742/02, 24181 to 24184/02, 24525 & 24526/03, 31612, 31613/02, 31633/02, 32460/02, 32461/02, 32463 & 32464/02, 29649/02, 29890/02, 39791/02, 23908 to 23919/02, 2293/03, 6184/03, 9134/03, 18068/02, 32777/03, 29266/03, 484/04, 24153 to 24168/02, 37807/03,15453/04, 37582/04, 11740/04, 26122/05, 29617/04, 31084/04,39628/04, 14522/04, 6247/04, 13335/05, 20956/05, 24652/05 R.Mahadevan, W.P. 24385/02, 32425/02, 34283 & 34284/02, 39832 to 39834/02, 11615 & 11616/03, 11620 to 11625/03, 11820 to 11824/03, 17633/03, 23309/03, 25150 to 25153/03, 28618/03, 28618, 28619/04, 29497/03, 30337/03, 35899/03, 29915/04, 24199/04., P.Jagadeesan, W.P. 24419 & 24420/02., S.Kamadevan, W.P. 30532/02, 27000/03, 16083 & 16084/05 W.P. 8948/06, 9865 & 9866/06., M.Vidya W.P. 30668/02, 31535 to 31540/02, 31541 to 31544/02, 39319/02, 16926/03, 31210/04., P.S.Raman,W.P. 37465/02, 35388/02, 38261/02, 44697/02., S.N.kirubanan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24745/03, R.Seeniappan W.P. 26710/03, 28718/04, 28720/04, 518/06, V.Sanjeevi W.P. 27049/03, 6440/04, 8644/05, M.Mohamd Riyaz W.P. 27479/03, 33271/03, 33319/02, 37026/03, 38543/03, 158/04, 989/04, 15487, 15492/02, 12769/04, 12770/04, 35055/03, 4676/04, 9156/04, 27175/04, 17096, 17163/04, 22614/04, 16599/04, 18736/04, 5840/04, 34410, 34410/04., M.Alagarsamy W.P. 28289/03, R.Venkatakrishnan W.P. 32767/03, B.Saravan W.P. 38544/03, N.Sriprakash W.P. 38608/03, A.Ravichandran W.P. 955/04, 10410/05, T.Meikandan W.P. 2515/04, L.S.M.Hasan Fizal W.P. 2691/04, P.Kalaiarasan W.P. 26042 to 26044/04, 27485/04, 27835/04, 28361/04, Muthumani doraisamy W.P. 37626/04, S.Ramanathan W.P. 38024/04, 38033/04, K.R.Govindarajan W.P. 1799/05, and 1800/05, S.Silambanan W.P. 6915/04, 7472/04, J.Pothiraj W.P. 10362/04, P.Gunaraj W.P. 27149/04, 27827/04, 27829/04, 25658/04, 29057/04, 29920/04, 8406/05, V.J.Latha W.P. 28028, 28029/04, K.Balasubramanian W.P. 1380/04, S.Sivanandam W.P. 7091/04, 7092/04, 18073/05, P.V.Sudhakar W.P. 14372/04, S.Srinivasan W.P. 22031 and 22032/04., V.Srikanth W.P. 8848/05, 11800/05, 1474/06, 16250/05, 15864 and 15865/05, 19131/04, 19845/04, 6236/05, 6240/05, 6241/05, 33965/05, 35909 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is necessary at this stage to notice the broad features of the Act. The long title and the preamble of the Act demonstrates the purpose for which the Act was enacted, it being to provide for the levy of tax on the entry of scheduled goods into local areas for consumption, use or sale thereunder. Section 3 of the Act, which is the charging section, reads as under: - "3. Levy and Collection of tax - (1) Subject to the provisions of this Act, there shall be levied and collected a tax on the entry of any scheduled goods into any local area for consumption, use or sale therein. The rate of tax of shall be at such rate not exceeding thirty percent on the value of the scheduled goods as may be fixed by the Government, by notification and different rates may be fixed for different scheduled goods. (2) The tax shall be payable by an importer in accordance with the provisions of the Act." 5. The expression "entry of goods into local area" has been defined under the Act vide Section 2(c) and it reads as follows: "Section - 2(c): Entry of goods into a local area - with all its grammatical variations and cognate expressions, means entry of scheduled goods into a local area from any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods becomes liable to pay tax under the General Sales Tax Act and additional sales tax under the Tamil Nadu Additional Sales Tax Act, 1970 (Tamil Nadu Act No.14 of 1970), by virtue of the sale of such scheduled goods, then his liability under those Acts shall be reduced to the extent of tax paid under this Act. (2) Where an importer who, not being a dealer in scheduled goods, had purchased the scheduled goods for his own use or consumption in any Union Territory, or any other State, then his liability under this Act, shall, subject to such conditions as may be prescribed be reduced to the extent of the amount of tax paid, if any, under the law relating to General Sales Tax as may be in force in that Union Territory or State." 9. Chapter III of the Act provides for offences and penalties and cognizance of offences, Chapter IV deals with appeals and revisions and Chapter V contains provisions for returns, assessments, payments, recoveries and refunds of tax and reviews. 10. Learned counsel appearing on behalf of the petitioners submitted that the right of the State to impose entry tax has to be decided in the light of the decision of the Constitution Bench of the Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the assessees and the value of convenience/facility or services provided. It was submitted that the Act has not received the assent of the President as required under Article 255 of the Constitution nor the Bill was moved on the floor of the Assembly with the previous sanction of the President as required under the proviso to Section 304(b) of the Constitution, and thus, the Act is not saved by Article 304(b) of the Constitution. Learned counsel further submitted that there is an element of discrimination between the goods entering the local areas from outside the State and goods entering the local areas from within the State i.e., from one local area to another local area. The latter class of goods is not subjected to levy though all the facilities, if at all provided, are there in course of inter-State movement and entry of goods in local areas. Learned counsel, therefore, submitted that this discrimination per se militates against the impugned levy being termed as compensatory. The levy thus violates the non-discrimination clause in Article 304(a) of the Constitution. 11. In reply, on behalf of the State, it was submitted by the learned Advocate General that Tamil Nadu Act 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns arise for our consideration, namely, a) Whether the levy of entry tax under Tamil Nadu Act 20 of 2001 can be justified as a compensatory tax? b) Whether the impugned levy of entry tax is violative of Article 304(a) of the Constitution? Re. Question(a): - 13. Articles 301, 302, 303 & 304 are relevant for the purpose of deciding the controversy: "301. Freedom of trade, commerce and intercourse - Subject to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free. 302. Power of Parliament to impose restrictions on trade, commerce and intercourse - Parliament may by law impose such restrictions on the freedom of trade, commerce or intercourse between one State and another or within any part of the territory of India as may be required in the public interest. 303. Restrictions on the legislative powers of the Union and of the States with regard to trade and commerce - (1) Notwithstanding anything in Article 302, neither Parliament nor the legislature of a State shall have power to make any law giving, or authorising the giving of, any preference to one State over another, or making, or authorising the making of, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te's power contained in Article 304(b) expressly free from the prohibition contained in Article 303(1) by reason of the opening words of Article 304. Whereas in Article 302 the restrictions are not subject to such requirement of reasonableness, the restrictions under Article 304(b) are so subject. 15. In Atiabari Tea Co. Vs. State of Assam, AIR 1961 SC 232 the constitutionality of Assam Taxation (On Goods Carried by Roads and Inland Waterways) Act, 1954 enacted by the Legislature of Assam providing for levy of tax on certain goods carried by road or inland waterways in the State of Assam, was questioned by a number of tea companies who sold most of their products outside the State of Assam after transporting them by road or waterways to West Bengal and other States. The majority opinion (Gajendragadkar, Wanchoo and Das Gupta, JJ.) stated their conclusion in the following words: 52)"......... Our conclusion, therefore, is that when Article 301 provides that trade shall be free throughout the territory of India it means that the flow of trade shall run smooth and unhampered by any restriction either at the boundaries of the States or at any other points inside the States thems ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und that the taxes levied by it are compensatory in nature and, therefore, outside the purview of Article 301. Once outside the purview of Article 301, it was held, Article 304 was also not attracted. The Court observed in paragraph - 19 that: "The taxes are compensatory taxes which instead of hindering trade, commerce and intercourse facilitate them by providing roads and maintaining the roads......." (AIR page 1425) Vide para. 21 of the Report, it was observed that: "If a statue fixes a charge for a convenience or service provided by the State or an agency of the State, and imposes it upon those who choose to avail themselves of the service or convenience, the freedom of trade and commerce may well be considered unimpaired." (AIR page. 1425) Thus, the concept of "compensatory tax" was propounded. Therefore, taxes which would otherwise interfere with the unfettered freedom under Article 301 will be protected from the vice of unconstitutionality if they are compensatory. 17. In Automobile Transport it was said, vide (AIR page.1425, para 19), that "a working test for deciding whether a tax is compensatory or not is to enquire whether the trade is having the use of certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -vis compensatory tax by the Constitution Bench in Jindal's case which read as follows: (SCC pp.268 & 269) "45. To sum up, the basis of every levy is the controlling factor. In the case of "a tax", the levy is a part of common burden based on the principle of ability or capacity to pay. In the case of "a fee", the basis is the special benefit to the payer (individual as such) based on the principle of equivalence. When the tax is imposed as a part of regulation or as a part of regulatory measure, its basis shifts from the concept of "burden" to the concept of measurable/quantifiable benefit and then it becomes "a compensatory tax" and its payment is then not for revenue but as reimbursement/recompense to the service/facility provider. It is then a tax on recompense. Compensatory tax is by nature hybrid but it is more closer to fees than to tax as both fees and compensatory taxes are based on the principle of equivalence and on the basis of reimbursement/recompense. If the impugned law chooses an activity like trade and commerce as the criterion of its operation and if the effect of the operation of the enactment is to impede trade and commerce then Article 301 is violated. 46. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then it is regulation and if it is to impede or burden the activity, then the law is a restraint. After finding the law to be a restraint/restriction one has to see whether the impugned law is enacted by Parliament or the State Legislature. Clause (b) of Article 304 confers a power upon the State Legislature similar to that conferred upon Parliament by Article 302 subject to the following differences: (a) While the power of Parliament under Article 302 is subject to the prohibition of preference and discrimination decreed by Article 303(1) unless Parliament makes the declaration under Article 303(2), the State power contained in Article 304(b) is made expressly free from the prohibition contained in Article 303(1) because the opening words of Article 304 contain a non obstante clause both to Article 301 and Article 303. (b) While Parliament's power to impose restriction under Article 302 is not subject to the requirement of reasonableness, the power of the State to impose restrictions under Article 304 is subject to the condition that they are reasonable. (c) An additional requisite for the exercise of the power under Article 304(b) by the State Legislature is that previ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een overruled and hence, the reliance placed by the State on the aforesaid decisions is rather misplaced. In the wake of decision of the Constitution Bench in Jindal's case the State has filed an additional counter whereby the State has sought to project certain figures of expenditure incurred from the year 2002 - 03 to 2005 - 06 in the matter of laying roads, construction of bridges, etc., which according to the State is said to be a quantifiable data to satisfy the parameters laid down in Jindal's case. The following are those two charts: - EXPENDITURE INCURRED BY THE STATE Year Entry Tax collected on goods Expenditure on road maintenance Expenditure on construction of bridges Total Expenditure (Rupees in Crores) 2002-03 228.77 189.57 107.84 297.41 2003-04 249.02 322.02 880.89 1202.91 2004-05 288.56 442.65 488.41 931.06 2005-06 360.23 478.13 1388.30 1866.43 Total 1126.58 1432.44 2865.44 4297.81 EXPENDITURE INCURRED BY THE HIGHWAYS DEPARTMENT Year Roads (Length in Km.) Expenditure (Rs. In Lakhs) No. of Bridges Expenditure (Rs. In Lakhs) Total Expenditure 2002-03 1541.41 33767.81 185 9392.48 43160.29 2003 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y tax. The essence of compensatory tax is that the services rendered or facilities provided should be more or less commensurate with the tax levied. Services provided will have a direct co-relation with the trade. The main basis of compensatory tax is the quantifiable and measurable benefit represented by the cost incurred in procuring the facilities/services. The cost in turn becomes the basis of reimbursement/recompense for provider of services/facilities. As held in Jindal's case, the compensatory tax is a charge for offering trade facilities and they are based on the principles of equivalence. Applying the above test, it cannot be said that maintaining of roads, providing bridges etc., is compensatory in nature so as to constitute special advantage to trade, commerce and intercourse. Even otherwise, a welfare State is bestowed with the responsibilities of providing good roads and bridges for the benefit of the tax paying citizens and hence to contend that the impugned levy is being raised only for the said purpose is not justified. Maintenance of roads, bridges etc., are generally met from the general funds or revenue. Whether goods are transported into the State or outside Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the validity of the impugned tax law on the submission that it was compensatory in character. No attempt was made to establish that the dealers in scheduled goods in a local area would be availing of municipal services and municipal services can be efficiently rendered if the municipality charged with a duty to render services has enough and adequate funds and that the impugned tax was a measure for compensating the municipalities for the loss of revenue or for augmenting its finances. As such a stand was not taken, it is not necessary for us to examine whether the tax is compensatory in character. " (emphasis supplied) 28. As per the statement of objects appended to the impugned legislation, the State is also bound to provide for trading facilities and the welfare of the markets established, but both the counters filed by the State are silent on this aspect. The additional counter of the State merely gives the statistics with regard to total cost of building of roads and bridges and on the maintenance of roads that is incurred from year to year by the State. This expenditure merely represents the expenditure incurred by the State from its general total taxes revenue and other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to show that the amount realized as entry tax could not be used or had not been used for setting up schools, housing, payment of salary to Government employees, payment of salaries to ministers, M.L.As., constructing Government buildings, acquiring land, etc. No facility had been provided by the U.P.Government, directly or indirectly, for transportation of the crude oil. The underground pipes for transporting the oil were built by the petitioner and not by the respondents. (iii) that the fact that the State Government provides funds to local self- Governments to enable them to function as institutions of self-Government with respect to preparation of plans for economic development and social justice and to implement the scheme for economic development and social justice as may be entrusted to them including those in relation to the matters listed in the Eleventh Schedule to the Constitution of India had no correlation with the amounts realized as entry tax under the Act. There was nothing in the Act which stated that the revenue realized by the entry tax would be utilize d for facilitating trade and commerce, directly or indirectly. The amount realized as entry tax could be used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, arbitrary, discriminatory and violative of Article 301 of the Constitution. It was held that Entry 13 of the Schedule to the Maharashtra Tax on the Entry of Goods into Local Areas Act, 2002 insofar as it purports to levy entry tax on furnace oil and low sulphur waxy residue oil is unauthorized and unconstitutional. 33. In view of the foregoing discussion, we hold that the impugned Act does not satisfy the test laid down for compensatory tax and as no Presidential assent has been obtained under Article 304(b) of the Constitution the provisions of the impugned Act are ultra vires Article 301 of the Constitution. Re. Question (b): - 34. The validity of the Act is also challenged on the ground that the tax sought to be levied under the Act is patently discriminatory since entry tax is being levied on import of specified goods from outside the State and not on the specified goods if produced/ manufactured within the State even though they are brought into local area of the State for consumption, use or sale therein. According to the petitioner the discrimination which is made between goods imported into the State of Tamil Nadu and goods which are indigenously produced/obtained wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edom of trade, commerce and intercourse throughout the territory of India, guaranteed by Article 301. As we shall presently point out, this clause does not prevent in any manner the States from encouraging or promoting the local industries in such manner as they think fit so long as they do not use the weapon of taxation to discriminate against the imported goods viz-a-vis the locally manufactured goods. To repeat, the clause bars the States from creating tax barriers - or fiscal barriers as they can be called - around themselves and/or insulate themselves from the remaining territories of India by erecting such 'tariff walls'. Part XIII is premised of other States uniformly, there is no infringement of the freedom guaranteed by Article 301; no State would tax its people at a higher level merely with a view to tax the people of other States at that level. ...... ....... ....... As a matter of fact, it can well be said that clause (a) of Article 304 is not really an exception to Article 301, notwithstanding the non obstante clause in Article 304 and that it is but a restatement of a facet of the very freedom guaranteed by Article 301, viz., power of taxation by the States." 36. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion on trade, commerce and intercourse if they hampered the free flow of trade unless they are compensatory in nature and that the sales tax which had the effect of discriminating between goods of one State and another may affect free flow of trade and would be offensive to Article 301 unless saved by Article 304(a). It was held that the direct and immediate result of the notification was to impose an unfavourable and discriminatory tax. 38. In India Cement Vs. State of A.P., (1988) 1 SCC 743 the Government of Andhra Pradesh has issued two notifications, one under Section 9(1) of the A.P.General State Sales Tax Act, 1957 and the other under Section 8(5) of the Central Sales Tax Act. Under the first notification, sales tax on sale of cement manufactured by cement factories situated in the State and sold to the manufacturing units situated within the State was reduced from 13.5% to 4%. Under the second notification, the central sales tax was reduced to two per cent. The Government of Karnataka also issued a similar notification reducing in similar situation central sales tax from 15 % to 2%. These were challenged as violative of Articles 301 and 304 and the challenge was upheld. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom adjoining States claimed that the exemption granted from payment of tax to the local industries was discriminatory. The exemption given by the Government of J & K to the manufacturers of edible oil was total and the period of exemption was 5 years and which was later extended by another 5 years period. It was held that the unconditional exemption granted to the edible oil industry within the State for a period of 10 years and at the same time subjecting edible oil industry from other States to sales-tax at 8% was discriminatory and violative of Article 304(a) of the Constitution. It was observed in paragraph - 25 (SCC p.53) as follows: "25. Now, what is the ratio of the decisions of this Court so far as clause (a) of Article 304 is concerned? In our opinion, it is this: the States are certainly free to exercise the power to levy taxes on goods imported from other States/Union Territories but this freedom, or power, shall not be so exercised as to bring about a discrimination between the imported goods and the similar goods manufactured or produced in that State. The clause deals only with discrimination by means of taxation; it prohibits it. The prohibition cannot be extended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory and violative of the appellant's right to freedom of trade and commerce throughout India. Accepting the challenge the Court held as follows:- "What has been done by Entry 24 of the First Schedule is to impose a lower rate of duty on groundnut oil or refined oil obtained from groundnuts that have been taxed under the A.P.Act.The contention that groundnut oil manufactured in Andhra Pradesh has not generally been charged at a lower rate of tax has not been substantiated by any fact or figure. It is not the case of the State that only a small portion of the oil manufactured by local manufacturers is produced from groundnuts purchased in Andhra Pradesh. Unless that can be established, it cannot be held that groundnut oil or refined oil within the State is generally charged at the same rate as the imported oil. The only justification that has been made out for this discrimination is that groundnut out of which the oil is manufactured locally has already borne tax. The appellant's contention, which has not been denied by the State, is that the oil manufactured in Karnataka which was imported into Andhra Pradesh was manufactured out of groundnuts which had also borne tax under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d legislation. His submission is that the sum total of taxes levied on the goods will have to be taken into consideration especially keeping in view the provisions of Section 4 of the Act which contemplate reduction in tax liability. This very argument was rejected by a Division Bench of the Karnataka High Court in Avinyl Polymers Pvt. Ltd. Vs. State of Karnataka, 109 STC 27 Kar). The relevant portion of the judgment has been extracted below: - "The next facet is as to how the discrimination pertaining to levy of any tax vis-à-vis similar goods needs to be worked out. The contention of the petitioners is that for working out the discrimination one is required to only see the rate of tax applied to imported goods as compared to locally manufactured or produced goods and whether it is the same or different and nothing more. But the contention of the State is that the discrimination envisaged under Article 304 (a) should be viewed by taking at the forefront the constitutional scheme under Articles 301 to 303 which intends to ensure trade, commerce and intercourse throughout the territory of India to be free and the economic unity of India may not be broken up by internal ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 4 of the Act on entry of goods into local areas. It is seen from the charts that the importer of goods from outside State is clearly put to disadvantage as compared to a local manufacturer or producer. It may also be noted that the set off under Section 4 of the Act is not available for entry tax paid on the goods used as input raw materials. We have therefore no hesitation in holding that the levy of entry tax under the impugned Act is violative of clause (a) of Art.304 of the Constitution. 47. We may mention that the petitioners also raised the issue of legislative competence of the State Government to levy entry tax under Entry 52 of List II on goods imported from outside the State. But in view of our foregoing conclusion that the levy is violative of Article 301 of the Constitution, it is not necessary for us to express our opinion on this issue. 48. In the result, we hold that the levy of entry tax on goods imported from other States to the State of Tamil Nadu and from abroad is not compensatory in nature, since the State Government could not discharge its burden by placing materials before the Court that payment of levy of entry tax is reimbursement/recompense for ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
