TMI Blog2006 (10) TMI 395X X X X Extracts X X X X X X X X Extracts X X X X ..... to be established that the same is in the public interest and that it requires previous sanction of the President, cannot be accepted. Considering the various provisions of the Statement of Objects, settled legal provision and facts stated hereinabove, it cannot be said that the provisions of the Act and the levy of the entry tax on the specified goods are violative of article 304 of the Constitution of India. We hold that, levy of entry tax is neither discriminatory between the goods so imported and goods so manufactured or produced in a local areas and the challenge to the constitutional validity of the Gujarat Tax on Entry of Specified Goods into Local Areas Act, 2001 (Entry Tax Act) and the levy of entry tax therefore fails. The petition deserves dismissal and it is accordingly dismissed. Rule is discharged. However, there shall be no order as to costs. - R.S. GARG AND M.R. SHAH, JJ. For the Appellant : K.H. Kaji, Adv. for Petitioner 1 and Manish K. Kaji, Adv. for Petitioner 1 For the Respondent : Kamal Trivedi, Adv. General and Sangita Vishen, AGP for Respondents 1-4 JUDGMENT M.R. SHAH, J. 1. By this writ petition under Article 226 of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use or sale therein; (e) 'importer' means a person who brings any of the specified goods into a local area from any place outside the State but not being a place outside the territory of the Union of India, for consumption, use or sale therein; (f) 'local area' means,_ (i) a city within the meaning of the Bombay Provincial Municipal Corporations Act, 1949; (ii) a municipal borough, transitional area, small urban area or a notified area within the meaning of the Gujarat Municipalities Act, 1963; (iii) a village, within the meaning of the Gujarat Panchayats Act, 1993; (iv) a cantonment within the meaning of the Cantonment Act, 1924; (g) (h)(i) (j) ... (k) 'specified goods' means goods specified in column 2 of the Schedule; (l)'state' means the State of Gujarat, (m) 'tax' means the tax payable under this Act, 3. Incidence of tax. (1) Subject to the other provisions of this Act, on and from the 1st day of September, 2001, there shall be levied and collected on the entry of specified goods into a local area, a tax on the purchase of value thereof at such rates as may be fixed by the State Government by notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act, 1969. Maximum 1. 2. 3. 4. 1 Motor vehicles including motor cars, motor taxi cabs, motorettes, motor omnibuses, motor vans, motor lorries. 128(1) Twelve per cent. Motor cycles, motor cycle combinations, motor scooters, mopeds. 128(2) Twelve per cent. Chassis of motor vehicles. 128(4) Twelve per cent. Body which is built on chassis of motor vehicles. 128(5) Twelve per cent. (2) to (7) . . . Explanation For the purposes of this Schedule,- (1) Where sales of any of the specified goods at Sr. No. 1 to 6 of the Schedule is, by notification under Sub-section (2) of Section 49 of the Gujarat Sales Tax Act, 1969 exempt from whole or any part of the tax payable under that Act, the maximum rate of tax fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntry tax and produce evidence thereof failing which the registration under the Gujarat Act may be cancelled and he will be called upon to give security under the provisions of Section 30B of the Act. The petitioner also received notice dated 1.4.2004 from the R.T.O., Rajkot calling upon the petitioner to pay entry tax and produce the proof thereof. As according to the petitioner, the provisions of the Act are violative of Articles 301 and 304 of the Constitution, the petitioner has preferred the present Special Civil Application challenging the constitutional validity of the aforesaid provisions of the Act. 3.1. Shri K.H. Kazi, learned advocate appearing on behalf of the petitioner, has submitted that as the Objects and Reasons, the Act is enacted with a view to compensating the State for loss of salex tax revenue caused to the State owing to diversion of trade to neighbouring States where there is sales-tax at lower rate and therefore it is considered necessary to levy Entry Tax. It is submitted that the Entry Tax is violative of Article 301 of the Constitution because tax is imposed on importer of specified goods from other States into local area in the State of Gujarat which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n between importers and local dealers and therefore it is violative of Article 304(a) of the Constitution. 3.3. Meeting with the submission on behalf of the State that the local dealer pays sales tax at the same rate as the levy of tax leviable on importer and therefore there is no discrimination, it is submitted by Shri Kazi, learned advocate for the petitioner that the words 'any tax' in Article 304(a) of the Constitution mean same tax which is levied on a importer and which is not levied on a local dealer. It is submitted that the discrimination should be considered qua the same tax and not with regard to different taxes. It is submitted that Entry Tax is a tax on entry and not on sale, while the sales-tax is a tax on sale. Two taxing events are totally different and operate at different points of time and cannot be said to be pari materia so as to avoid the charge of discrimination. It is submitted that the importer may have bought the goods manufactured from another State who may not be liable to pay sales tax in that State because of incentive scheme but the importer has to pay entry tax as the provision in Section 4 of the Entry Tax Act providing for reduction or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction on the free movement of goods. Relying upon paragraphs No. 43 and 45 of the Judgment of the Hon'ble Supreme Court in the case of Jindal Stainless Ltd. and Anr. (supra), it is submitted that the tax is a restriction on freedom of trade and therefore, of necessity, it has to comply with both Articles, i.e., Article 304(a) and 304(b) of the Constitution. It is submitted that it is not sufficient to comply only Article 304(a) of the Constitution because every tax is held to be a restriction on the movement of goods. 3.7. As regards interpretation of Article 304 of the Constitution, the learned advocate appearing on behalf of the petitioner has relied upon the decision of the Hon'ble Supreme Court in the case of Indian Cement v. State of Andhra Pradesh reported in 69 S.T.C. 305. It is submitted that in the said decision, challenge was to the notification issued by the State Government providing lower rate of sales tax in respect of cement manufactured within the State as against cement manufactured from outside the State. It is submitted that dealing with interpretation of Article 304(a) of the Constitution, in the said Judgment, the Hon'ble Supreme Court has observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid decision, more particularly of the Allahabad High Court, it is submitted that even if the Entry Tax is not considered as discriminatory between importers and local dealers, still Entry Tax must comply with Article 304(b) of the Constitution. It is submitted that in the present case it is admitted that sanction of the President was not obtained before the Bill was moved in the State Legislature and further there is nothing to show that the restrictions imposed are reasonable or in the public interest. It is further submitted that as the tax itself is a restriction and the same is imposed on the movement of goods from one State to another State, Article 304 of the Constitution has to be complied with. 3.9. Meeting with the decision of the Hon'ble Supreme Court in the case of Shanktikumar M. Sancheti v. State of Maharashtra (1995) 1 SCC 351 , relied upon by the State, it is submitted by Shri Kazi on behalf of the petitioner that though the challenge was to the Entry Tax in the State of Maharashtra which tax was levied to compensate for the loss of sales-tax on account of business going to neighbouring States, and the Supreme Court upheld the levy, it is submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivedi has relied upon the Judgment of the Hon'ble Supreme Court in the case of Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan reported in [1963] 1 SCR 491 . 4.1. Shri Trivedi has heavily relied upon the judgment of the Hon'ble Supreme Court in the case of Shaktikumar M. Sancheti and Anr. v. State of Maharashtra and Ors. (1995) 1 SCC 351 and has submitted that a similar provision under Maharashtra Tax on Entry of Motor Vehicles into Local Areas Act, 1987, was challenged before the Hon'ble Supreme Court and the constitutionality and validity of the similar type of legislation has been upheld by the Hon'ble Supreme Court. It is submitted that challenge to the aforesaid provision was on various grounds including the ground that it impeded freedom of the appellant under Article 301 of the Constitution and the same has been turned down by the Hon'ble Supreme Court. Referring to the Judgment of the Karnataka High Court in the case of Syndicate Bank v. State of Karnataka and Ors. 119 STC 155, more particularly the last para of the said decision, it is submitted that even while striking down a legislation of Karnataka Tax on Entry of Goods into Local Area ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further submitted that while considering the provisions of Gujarat Entry Tax Act 2001, one cannot keep in mind San entry tax' in isolation inasmuch as by the very language of the said Act 'Sales-Tax' is also brought in the picture, which may be considered to be an example of 'legislation by reference'. It is submitted that by virtue of Sub-section (3) of Section 4, provisions of Gujarat Entry Tax Act, 2001 are to be considered conjointly with Gujarat Sales Tax Act, 1969, so as to work out ultimate burden of tax and consequent reduction in the liability of the sales tax. If the said provisions are read in juxtaposition of Explanation (1) below Parts I and II of the Schedule to the Gujarat Entry Tax Act, 2001, it would become abundantly clear that the said provisions are aimed at achieving level playing field so as to obviate any chance of discrimination. It is submitted that this is because of the fact that when there is a reduction in the effective rate of sales tax under the Gujarat Sales Tax, 1969, there will be automatic corresponding reduction in the maximum rate of entry tax prescribed in the schedule, so that the goods brought from outside the State are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a and Ors. 2005 CriLJ 3439 . 4.4. Relying upon the decisions of the Hon'ble Supreme Court in the case of G.K. Krishnan and Ors. v. State of Tamil Nadu and Ors. (supra), and in the case of State of Karnataka and Anr. v. Hansa Corporation, (supra), it is submitted by Shri Trivedi that there is always a presumption of constitutionality of a Statute and there has been a practice to show judicial deference to Legislature in instances of economic regulation. Relying upon the Judgment of the Hon'ble Supreme Court in the case of Sushil Kumar Sharma v. Union of India and Ors. [supra], it is submitted that mere possibility of abuse of provision of law does not per se invalidate a legislation. By making above submissions and relying upon above decisions and more particularly relying upon the decision of the Hon'ble Supreme Court in the case of Shaktikumar M. Sancheti and Anr. v. State of Maharashtra and Ors. (supra), wherein a similar provision of Maharashtra Entry Tax Act was challenged before the Hon'ble Supreme court, and Supreme Court has upheld the levy of entry tax, Shri Trivedi has requested to dismiss the present Special Civil Application by upholding the constituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in-reply was filed, the concept of compensatory tax, as per the law laid down by the Hon'ble Supreme Court at the relevant time, was some what different and the earlier decisions of the Hon'ble Supreme Court came to be considered by the Hon'ble Supreme Court in its recent decision in the case of Jindal Stainless (supra) which lays down that, the tax would be compensatory tax, if there are some quantifiable and measurable benefits to the class of persons who are made liable to pay such a tax and therefore the State Government has by another affidavit-in-reply has clarified and has not contended that the Entry Tax in question is a 'compensatory tax'. However, it is the contention on behalf of the State Government that Article 304 is exception to Article 301 of the Constitution, and even if the tax is not held to be 'compensatory tax', in that case also a taxation legislation which seeks to levy tax of non-discriminatory in nature in the matter of its ultimate incidence and effect as between the goods imported from other States on one hand, and the similar goods manufactured within the State on the other hand, is protected from the vice of unconstitutionali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax, 1956. Considering the Schedule appended thereto that the rate of Entry Tax provided for each specified goods is maximum upto 12%. Thus, considering the provisions of the Act, if the rate of sales-tax on specified goods in the State of Gujarat is 12 per cent and rate of sales-tax payable by the importer in a particular State is 4%, and if an 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%. It is required to be noted that, so far as the liability of sales-tax on local person is concerned, it is 12 per cent. Thus, when 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 per cent which puts such importer at par with the local persons. 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. It is also required to be noted that, as per Section 12 of the Act, no tax shall be levied and/or collected in respect of the motor v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and payment of sales-tax/tax thereon, and as stated hereinabove, on payment of Entry Tax fixed as aforesaid and considering the reduction as mentioned in Section 4 of the Act, an importer would be at par with a local dealer. In view of the clear position obtained in the case, the contention on behalf of the petitioner, that levy of entry tax is discriminatory, is required to be rejected. It is also to be noted at this stage that as per Section 30B(a) discrimination is required to be considered between goods so imported and goods so manufactured or produced. It is undisputed 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. If no Entry Tax is levied then the importer would steal a march over the local person and he would be in a dominating position to the extent of the Tax difference. 8. Now, on perusal of plethora of provisions of the Act, it is evident that they are aimed at achieving level-playing field so as to obviate any chance of discrimination. When there is a reduction in the effective rate of sales-tax under the Gujarat Sales-Tax Act, automatically there will be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en what is mentioned in Article 304(b) could have been mentioned in Article 304(a) itself and both would not have been worded separately. Under the circumstances, the contention on behalf of the petitioner, that even if the levy of tax is found to be non-discriminatory in that case too it is to be established that the same is in the public interest and that it requires previous sanction of the President, cannot be accepted. 11. As stated hereinabove, the learned Counsel appearing on behalf of the petitioner has mainly relied upon the recent decision of the Hon'ble Supreme Court in the case of Jindal Stainless (supra). However, it is required to be noted that the decision of the Hon'ble Supreme Court in the case of Jindal Stainless (supra) is with regard to tax being compensatory in nature dealing with Article 301 of the Constitution of India. As stated above, considering the recent decision, the State Government has given up their stand that levy of entry tax is compensatory in nature and is compensatory tax. Therefore, the decision relied upon by the learned Counsel appearing on behalf of the petitioner would not be of any assistance to the petitioner. On the contrary, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Andhra Steel Corporation v. Commissioner of Commercial Taxes [supra], the challenge was against exemption of goods manufactured out of locally purchased raw material while the goods manufactured out of imported raw material were not exempted, the same was found to be discriminatory and violative of Article 304(a) of the Constitution, it was struck down by the Hon'ble Supreme Court. Considering the facts of the present case and the provisions of the Act, as stated above, levy of Entry Tax is not discriminatory between goods so imported and goods so manufactured or produced, as on payment of Entry Tax as stated above the importer would be at par with the local dealer. 13. So far as the decision of the Karnataka High Court in the case of Syndicate Bank v. State of Karnataka and Ors. [supra], upholding the challenge to the levy of tax on vehicles imported from outside the state alone while no tax was levied on vehicles manufactured in the State is concerned, it is required to be noted that in the said provisions there was no such provision like Section 4 of the Gujarat Act and therefore the Karnataka High Court held the said provision and levy was ultra vires the Arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titute a tariff wall or fiscal barrier and thus impede the free flow of inter-State trade and commerce. The question as to when the levy of tax would constitute discrimination would depend upon a variety of factors including the rate of tax and the item of goods in respect of the sale of which it is levied. 16. So far as the powers of the Courts, while considering economic legislation, the Hon'ble Supreme Court, in the case of G.K. Krishnan and Ors. v. State of Tamil Nadu and Ors. reported in [1975] 2 SCR 715 , has observed in Paragraphs No. 37 and 38 as under; 37. In State of Gujarat v. Ambica Mills Ltd., this Court said: SCC P.678 para 67, SCC (L S) p. 403 In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint, if not judicial deference to legislative judgment. The Legislature, after all has the affirmative responsibility. The Courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events ---- self-limitation can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th reproducing in extenso in Seaford Court Estates Ltd. v. Asher. It reads as under: Whenever a statute comes up for consideration it must be remembered that it is not within human powers to foresee the manifold sets of facts which may arise, and, even if it were, it is not possible to provide for them in terms free from all ambiguity. The English language is not an instrument of mathematical precision. Our literature would be much the poorer if it were. This is where the draftsmen of Acts of Parliament have often been unfairly criticised. A judge, believing himself to be fettered by the supposed rule that he must look to the language and nothing else, laments that the draftsmen have not provided for this or that, or have been guilty of some or other ambiguity. It would certainly save the judges trouble if Acts of Parliament were drafted with divine prescience and perfect clarity. In the absence of it, when a defect appears a judge cannot simply fold his hands and blame the draftsman. He must set to work on the constructive task of finding the intention of Parliament, and he must do this not only from the language of the statute, but also from a consideration of the social condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objects, persons, methods and even rates for taxation if it does so reasonably' (see Willis on CONSTITUTIONAL LAW, p. 387). This statement of law has been approved by this Court in the case of East India Tobacco Co. v. State of A.P. The question, therefore, is, whether a tax of a certain kind can be levied on entry of goods in certain local areas; the classification of local areas, if found to be reasonable, the levy of tax would not be invalid on the ground that choosing certain areas only excluding some others would violate Article 14. Whether in this case the classification is reasonable would be presently examined but the contention that if the State Government is granted a choice in the matter of selection of local area, ipso facto, the statute would be unconstitutional as being violative of Article 14, must be negatived. 18. Considering the various provisions of the Act, Statement of Objects, settled legal position and the facts stated hereinabove, it cannot be said that the provisions of the Act and the levy of the Entry Tax on the specified goods are violative of Article 304 of the Constitution of India. We hold that, levy of Entry Tax is neither discriminatory betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
