TMI Blog2011 (6) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... om the date of receipt of a copy of this Order, whereafter it shall be open to the petitioners to avail of the alternative remedy provided under the impugned Act read with the provisions of the VAT Act. We also give liberty to the petitioners to claim refund of tax over and above 12 per cent if it is paid by any of the petitioners. If any such claims are made, the respective assessing officers/Government authority shall dispose them of expeditiously and refund the amount of excess entry tax promptly. - Writ Petition Nos. 12455 of 2005, 21260, 21316, 23253, 25323 of 2007, 8204, 10110, 11216 of 2008, 1564, 7970, 21096, 25856 of 2009, 5946, 6231, 6713, 6864, 7227, 9010, 10922, 11276, 12155, 12213, 12246, 12355, 12358 of 2011 - - - Dated:- 22-6-2011 - Writ Petition Nos. 12455 of 2005, 21260, 21316, 23253, 25323 of 2007, 8204, 10110, 11216 of 2008, 1564, 7970, 21096, 25856 of 2009, 5946, 6231, 6713, 6864, 7227, 9010, 10922, 11276, 12155, 12213, 12246, 12355, 12358, 14378, 14404, 14410, 14834, 15012, 15733, 21336, 21706, 26105, 30662, 33868 of 2010, 2348 of 2011 RAO V.V.S. AND RAMESH RANGANATHAN, JJ. ORDER:- PA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 6,53,56,704 for the purpose of mining limestone. According to them, they are not motor vehicles, they are used at the mines or factory enclosure, no registration is required under the Motor Vehicles Act, 1988 ( the MV Act , for brevity) and, therefore, the impugned Act has no application to earth moving equipment which cannot be considered as motor vehicles. However the Assistant Commissioner, Karimnagar, acting upon the report dated July 15, 2009 of the Regional Vigilance and Enforcement Officer, Hyderabad, issued show-cause notice dated December 21, 2009 proposing to levy tax under the impugned Act. The petitioner submitted objections on December 29, 2009. The Assistant Commissioner by assessment order dated october 23, 2010 confirmed the levy. Being aggrieved, the petitioner filed the writ petition. The petitioner would contend that the impugned Act is violative of articles 301 and 304(a). It is further contended that the impugned Act is in pari materia with the Andhra Pradesh Tax on Entry of Goods into Local Areas Act, 2001 (hereafter A.P. Act No. 39 of 2001), which has been declared unconstitutional by a Division Bench of this court in Sree Rayalaseema Alkalies and Allie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on raised in all the cases is that the vehicle/construction equipment purchased by them outside the State are not motor vehicles because they are not adapted for use on the road and/or because they are used in enclosed premises. (D) The case of the State The CCT filed counter-affidavit on behalf of the State in W.P. No. 2348 of 2011 taking the following pleas: The limitation imposed by article 301 is lifted when the tax is imposed on goods imported from other States or Union Territories when similar goods manufactured in the State are also subjected to such levy. The non-discriminatory levy under the impugned Act does not violate article 304(a). The ban under article 303(1) stands lifted even if discriminatory restrictions are imposed by the State Legislature provided, it fulfils three conditions, namely, such restriction shall be in public interest, they shall be reasonable and shall be subjected to procurement of prior sanction of the President before introduction of the Bill. The Act does not discriminate between the motor vehicles produced locally and motor vehicles imported from other States. It ensures that the ultimate tax burden on both types of motor vehicles is equa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. A.V. Krishna Kaundinya and P. Balaji Varma, the Special Counsel for Commercial Taxes defended the impugned Act. Both the parties referred to various precedents which are adverted to infra. Following is the summary of the petitioners' submissions: (A) There is no specific entry in List II enabling the State to make a law levying tax on entry of motor vehicles into local areas although entry 52 deals with levy of tax on entry of goods into local areas. MV Act coming under entry 35 of List III takes in its fold the mechanically propelled vehicles on which taxes are levied and therefore, the impugned Act is a colourable piece of legislation. (B) The impugned Act is violative of Part XIII of the Constitution. The levy of entry tax on imported motor vehicles is discriminatory and contravenes article 304(a). In the absence of sanction of the President of India under article 304(b), it does not stand exempted from article 301 as levy tax only on the vehicles brought for use or sale, is an unreasonable restriction and is not in public interest. Under section 3 read with section 4 of the impugned Act, entry tax is levied on the vehicles brought from other States and there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a). (F) The entry tax on motor vehicles is compensatory in nature. The tax collected is for the development of trade-friendly infrastructure facilities for promotion of development of trade, and therefore, the Act is immune from challenge on the ground that it is violative of Part XIII of the Constitution. (G) All the vehicles involved in these cases are motor vehicles as held by the Supreme Court in Bose Abraham [2001] 121 STC 614 (SC); [2001] 3 SCC 157; AIR 2001 SC 835 and, in any event, the same is a question of fact. The vehicles not being motor vehicles are not decisive of the vires of the impugned Act. The various submissions and points can conveniently be dealt with under three main headings-(i) legislative competence; (ii) freedom of trade and commerce; and (iii) the nature of the vehicles. PART III Analysis of the impugned Act (1) The Scheme of the Act The Act provides for the levy of tax on entry of motor vehicles into local areas in the State of Andhra Pradesh . It has seven chapters and 31 sections. Chapter I contains title and the dictionary clause; Chapters II and III contain the charging sections and the machinery provisions. Chapters IV, V and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section; (ii) a computation section; (iii) a procedural section for assessment; (iv) limitation provision for completion of assessment; and (v) the provisions for imposition of interest and penalty. To be compliant with article 265 of the Constitution, the legislative scheme of the tax law must be free from uncertainty or vagueness in defining any of the four components of the levy. So as to appreciate the contentions in these cases, we may analyse the impugned Act with reference to four components of levy of the entry tax. The relevant provisions which need to be read are certain terms as defined in section 2 and sections 3 and 4. S. 2. Definitions (d) 'entry of motor vehicle into a local area' with all its grammatical variations and cognate expressions, means entry of motor vehicle into a local area from any place outside the State for use or sale therein; (e) 'General Sales Tax Act' means the Andhra Pradesh General Sales Tax Act, 1957 (Act No. VI of 1957); (g) 'Importer' means a person who brings a motor vehicle into a local area from any place outside the State for use or sale therein or who owns the vehicle at the time of its entry into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teen months or more from the date on which, it is registered in the State : Provided further that no tax shall be levied and collected in respect of any motor vehicle, which is owned by Central Government and is used exclusively for the purposes relating to the Defence of India. (2) The tax shall be payable by the importer in such manner and within such time as may be prescribed. (3) Where the motor vehicle is taken delivery of, on its entry into a local area or brought into a local area by a person other than importer, the importer who takes delivery of the motor vehicle from such person shall be deemed to have brought or caused to have brought the motor vehicle into the local area. S. 4. Reduction in tax liability.-(1) Where an importer of a motor vehicle liable to pay tax under this Act, being a dealer in motor vehicles, becomes liable to pay tax under the General Sales Tax Act, as a result, of the sale of such motor vehicle, then the amount of tax payable under the General Sales Tax Act, shall be reduced by the amount of the tax paid under this Act. (2) An importer, other than a dealer, liable to pay tax under this Act, causes entry of motor vehicle into a local ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. [1980] 1 SCC 66; AIR 1980 SC 148 and International Tourist Corporation v. State of Haryana [1981] 2 SCC 318; AIR 1981 SC 774). The entry of motor vehicle may be for the purpose of use or sale. Whoever be the person who brings a motor vehicle into local area for use or sale is the person on whom levy is imposed. What is the rate and measure of tax? It is left to the Government to notify the rate of tax. In this regard, there is a non-variable factor and variable factor. The non-variable is the rate of tax as fixed by the Government not exceeding the rates specified for motor vehicles in the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957 ( the Sales Tax Act , for brevity). The variable factor is the measure of entry tax which is the purchase value of the motor vehicle. As per section 2(n) of the Act, purchase value means the value of a motor vehicle as ascertained from the invoice. This value also includes the value of accessories fitted to the vehicle, insurance, excise duties, countervailing duties, sales tax, transport fee, freight charges and other charges incidentally levied on the purchase of a motor vehicle. The two provisos to section 3(1) describe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts powers and if such transgression is indirect, covert or disguised, such legislation is described as colourable in legal parlance. In other words, if in pith and substance, the legislation does not belong to the subject falling within the limits of its powers but is outside it, the mere form of legislation will not determine the legislative competence (Ashok Kumar alias Golu v. Union of India [1991] 3 SCC 498; AIR 1991 SC 1792). The colourable exercise of legislative power is inseparably connected with the issue of legislative competence and what cannot be done directly is not permitted to be done indirectly. It is always a different question as to whether the law made by the Parliament or the State Legislature suffers from any other infirmities, namely, legislative incompetence, breach of fundamental rights and/or unconstitutionality (State of Andhra Pradesh v. McDowell Co. [1996] 3 SCC 709; AIR 1996 SC 1627 and Gujarat Ambuja Cements Ltd. v. Union of India [2005] 1 VST 1 (SC); [2005] 4 SCC 214; AIR 2005 SC 3020). The doctrine of colourable legislation can be invoked only when there is a doubt about the legislative competence to enact the impugned statute. Once a conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l matters which are not specifically included in the State List. Even if the subject is not specifically enumerated in the Union List, the words any other matter in entry 97 of Union List and article 248 confer power on the Parliament. Therefore when the Parliamentary legislation is challenged, it would be enough to see if such law does not fall within the State List subjects. After examining the State List, if it is not possible to say that the legislation comes under any of the entries therein, enquiry should stop there, and a conclusive presumption in favour of the Parliament's competency is to be drawn (Union of India v. Harbhajan Singh Dhillon [1972] 83 ITR 582 (SC); [1971] 2 SCC 779; AIR 1972 SC 1061 and Attorney General for India v. Amratlal Prajivandas [1994] 5 SCC 54; AIR 1994 SC 2179). The test to be applied in a case of challenge to the law made by the State Legislature is slightly different. The issue is resolved by looking to the substance of the matter. If in pith and substance, the State law is with any of the matters enumerated in the State List even if it incidentally embraces any subject in the Union List or any matter specifically assigned by the Constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich Parliament has authority to legislate and entries 82 to 92 enumerate the taxes which could be imposed by law of the Parliament. Similarly, in State List, entries 1 to 44 form one group mentioning the 'subjects' on which States could legislate and entries 45 to 63 in that List form another group which deal with taxes . The Supreme Court also observed that, the clear grouping of entries shows that taxation is not intended to be compromised in the main subject in which an extended construction can be given as the test cannot be applied to taxation. Taxing entries are distinct entries. The enactment of law by the Parliament with respect to the entry in the Union List, therefore, does not prevent the State Legislature from making a tax law if the State is so prompted by any of the entries 45 to 63 . Thus, even if a competent State tax law is targeted against the persons or things which are incidentally also subject-matter of Parliamentary legislation, still the former has to be sustained. (iv) Entry 52 of the State List Entry 52 deals with taxes on entry of goods into local area for consumption, use or sale therein , whereas entry 57 is concerned with the taxes on v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'article' requires no great learning either to expound or to understand. A machine is a tangible thing which can both be seen and felt and as such it answers the description of an 'article' within the meaning of section 2(b)(iii) of the Act. The 'Shorter Oxford English Dictionary' (Edition 1964, Volume I, page102) says that 'article' means, inter alia, 'a piece of goods or property'. Webster's 'New World Dictionary' defines an 'article' as a 'commodity' and 'commodity' as 'any useful thing' or 'any article of commerce' (See Edition 1962, pages 83 and 295). Putting it simply, a 'machine' is a 'thing' and is therefore an 'article'. Law may not all be commonsense and logic may not be the life of law but commonsense is not taboo in law courts. A machine is after all intended to be and is conceived as a useful thing and is therefore an 'article'. In Commissioner of Income-tax v. N.C. Budharaja and Co. [1993] 91 STC 450 (SC); [1993] 204 ITR 412 (SC); AIR 1993 SC 2529, it was held that, the word article must be understood in its normal connotation and the langu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005) indisputably come under entry 54 which deals with taxes on the sale and purchase of goods. Motor vehicles fall within entry 1 of the First Schedule to the Sales Tax Act. There is also no dispute that motor vehicles, except tractors, harvesters, tractor trainers Fall under entry 63 of the Fourth Schedule exigible to VAT at four per cent, fall under Schedule V (residuary) attracting VAT rate of 14.5 per cent. In this scenario, the moot question would be when motor vehicles are goods for the purpose of entry 54 (taxes on sale and purchase) why they are not goods for the purpose of entry 52 (entry tax)? The answer is simple. Motor vehicles are goods within the definition of article 366(12) of the Constitution and therefore, they are goods for the purposes of both the entries 52 and 54. The levy of tax by the State on motor vehicles-be it under MV Act, MV Taxation Act, the Sales Tax Act and the VAT Act is not only as motor vehicles but as goods as well. The entries in the legislative Lists should receive widest meaning and any restrictive reading of goods in entry 52 would be contrary to article 366(12) and has to be avoided. Therefore, on this aspect, we hold that motor vehi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , when by reason of unamended article 286, the States were incompetent to levy and collect tax on the inter-State trade or commerce. Thus, by reason of article 246(1), (3) and entry 92A, State cannot make a legislation imposing tax on the sale or purchase that takes place in the course of inter-State trade and commerce. It can however levy and collect tax under the law made by the Parliament under entry 92A. It is also within the scheme of the Constitution that a law made by the State referable to article 286(3) shall be subject to restrictions and conditions as may be specified by Parliamentary law. If any Act, though ostensibly falls either under entry 52, 54 or 57, in fact intends to levy tax on inter-State trade and commerce, it would certainly be a colourable legislation. The key is the nature of tax sought to be levied under the State enactment; is it a tax on inter-State trade and commerce or is it any other tax? (b) Nature of levy The salient aspects of the impugned Act and the ambit and scope of charging provision have been adverted to supra. From a reading of section 3, and understanding the words employed therein in the light of the dictionary clause, the conclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entry of a motor vehicle and the sale of a motor vehicle. The Sales Tax Act defines sale as a transfer of property in goods by one person to another person in the course of trade or business for cash or deferred payment . The term sale is defined in similar terms in the VAT Act as well. When a motor vehicle enters the State, it could be either for use or sale. Both of them may or may not happen immediately. The entry of motor vehicle is one thing and use or sale of motor vehicle is another thing. The mere fact that the use of the motor vehicle attracts tax under the MV Taxation Act is of no significance to the taxable event under the impugned Act. Similarly, the motor vehicle imported from any place outside India into the State of Andhra Pradesh would attract tax under the VAT Act at a subsequent stage when the property in such motor vehicle is transferred to another person. The levy under section 3 of the impugned Act, therefore, cannot be considered as a tax on sale. Even if the vehicle on import enters a local area for sale, the different considerations with regard to levy may arise but it has no debilitating effect on the charge of entry tax under the impugned Act. On th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e therein. The decision of the Bombay High Court received approval by the Supreme Court in Shaktikumar M. Sancheti [1995] 96 STC 659 (SC); [1995] 1 SCC 351, wherein construing the charging section in Maharashtra Act, it is held (page 662 in 96 STC): This section is an illustration of the charge or incidence of tax and the measure of tax rolled in one. It creates liability on the one hand for payment of tax on entry of any vehicle in a local area for use or sale therein and on the other provides that the amount of tax shall be on the purchase value of the vehicle. The latter part is what is commonly known as the machinery or procedural part pertaining to calculation and realization of tax. The charge is on the entry of vehicle into a local area for use or sale and not on its purchase. The submission founded on the expression, 'there shall be levied and collected a tax on the purchase value of a motor vehicle' proceeded thus on a misconception. Therefore, so long as the levy is on the entry of the vehicle into a local area for use or sale therein it cannot be said to be invalid merely because the measure of levy has been provided to the purchase value of the motor vehicle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate, it cannot be held that the legislation is incompetent. The taxable event being entry of the motor vehicle into the local area, even if the tax is on the purchase value of the motor vehicle, the Act is not rendered incompetent. We accordingly hold that the contention that the impugned Act is beyond legislative competence is devoid of any merit and is accordingly rejected. PART V Freedom of trade and commerce Principles of the law Every law made by competent Legislature is subject to constitutional limitations. Article 13(2) renders any law void if it impinges, takes away or abridges the fundamental rights. A law made by the Parliament or State Legislature outside the powers assigned under articles 245 and 246 read with the legislative entries in the Seventh Schedule would be ultra vires. Similarly, a law made by the State Legislature on a subject in respect of which the power is donated to the Parliament is unenforceable. The State Legislature with respect to one of the matters enumerated in the Concurrent List would be void to the extent it is repugnant to the law made by the Parliament with respect to the same subject unless the State law has received the assent o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 301 is relaxed by article 302 in favour of the Parliament and by article 304(a) and (b) in favour of the State Legislatures. It is interesting to note that article 304 starts with a non obstante clause whereas article 302 does not. As the freedom of trade under article 301 is itself subject to articles 302 and 304, though it may not make any difference, considered in the light of relations between the Union and the States, the non obstante clause in article 304 has significance. The intention appears to be to ensure, guard and protect the State legislations falling either under article 304(a) or 304(b). The difference between the power of the Union and the States vis-a-vis freedom of trade is that article 302 has no application to tax laws like article 304(b), but under article 304(a), tax can be imposed on the goods imported from other States. Article 304(a) and 304(b) deal with two distinct topics. The former deals with taxes and the latter deals with restrictions. Both are covered by the opening words of article 304, notwithstanding anything in articles 301 and 303 , but any law under article 304(a) imposing any tax is absolute power of the State whereas the law imposing re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guaranteed under article 301 of the Constitution as discussed supra, is well supported by the precedents discussed infra, and would reveal the following position. The freedom of trade, commerce and intercourse throughout the territory of India guaranteed by article 301 is subject to the law made by the Parliament imposing restrictions under article 302 or reasonable restrictions under a law made by the States under article 304(b) with Presidential assent. Further, a State law imposing non-discriminatory taxes on goods imported from other States is also saved from the mischief of article 301. In addition to these two categories of laws, a law levying compensatory taxes which fosters growth of inter-State trade and commerce is also exempt from article 301. A law by way of regulations to provide trade-friendly facilities gives fillip to trade and commerce rather than impeding it. Therefore, unless the tax law directly and immediately restricts trade and commerce, it cannot be treated as restrictive law and even if it is one, it can be cured by compliance with the proviso to article 304(b). Though we propose to advert to the precedents that may be relevant for the pointed attack on var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said articles but it is not limited by any other provisions of the Constitution outside Part XIII. That is why it seems to us that article 301, read in its proper context and subject to the limitations prescribed by the other relevant articles in Part XIII, must be regarded as imposing a constitutional limitation on the legislative power of Parliament and the Legislatures of the States. What entries in the legislative Lists will attract the provisions of article 301 is another matter; that will depend upon the content of the freedom guaranteed; but wherever it is held that article 301 applies, the legislative competence of the Legislature in question will have to be judged in the light of the relevant articles of Part XIII; this position appears to us to be inescapable. Let us now revert to article 301 and ascertain the width and amplitude of its scope. On a careful examination of the relevant provisions of Part XIII as a whole as well as the principle of economic unity which it is intended to safeguard by making the said provisions, the conclusion appears to us to be inevitable that the content of freedom provided for by article 301 . . . certainly includes movement of trade wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itution, . . . (and) that the relevant articles in Part XIII apply only to legislation in respect of the entries relating to trade and commerce in any of the Lists of the Seventh Schedule. But we must advert here to one exception which we have already indicated in an earlier part of this judgment. Such regulatory measures as do not impede the freedom of trade, commerce and intercourse and compensatory taxes for the use of trading facilities are not hit by the freedom declared by article 301. They are excluded from the purview of the provisions of Part XIII of the Constitution for the simple reason that they do not hamper trade, commerce and intercourse but rather facilitate them . Justice Koka Subba Rao (as he then was) in a separate opinion concurred with the majority and summarized the following principles that are to be applied while testing a law under challenge as violating article 301 of the Constitution: (1) Article 301 declares a right of free movement of trade without any obstructions by way of barriers, inter-State or intra-State, or other impediments operating as such barriers; (2) the said freedom is not impeded, but, on the other hand, promoted, by regulations creat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be reasonable for the purpose for which they are enacted. The presumption is in favour of the constitutionality of enactment. However, when it is shown that an Act invades the freedom of trade, it is necessary to enquire whether the State has proved that the restrictions imposed by way of taxation are reasonable and in public interest within the meaning of article 304(b). It was also held that a law passed under article 304(b) can be made to have retrospective effect. In Jindal Stainless Ltd. [2006] 145 STC 544 (SC); [2006] 7 SCC 241, the law was summarized by the unanimous Constitution Bench as under (pages 568 and 569 in 145 STC): Article 301 is binding upon the Union Legislature and the State Legislatures, but Parliament can get rid of the limitation imposed by article 301 by enacting a law under article 302. Similarly, a law made by the State Legislature in compliance with the conditions imposed by article 304 shall not be hit by article 301. Article 301 thus provides for freedom of inter-State as well as intra-State trade and commerce subject to other provisions of Part XIII and correspondingly it imposes a general limitation on the legislative powers which limitation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitutional validity of the impugned Act under three sub-headings, namely, the discriminatory protectionism, impact of article 304(b) and compensatory tax. Discriminatory protectionism Article 304(a) empowers the State to impose any tax on the goods imported from other States, notwithstanding anything in article 301 or 303 of the Constitution. This power is subject to the condition that similar goods manufactured or produced in that State are also subjected to tax, so as not to discriminate between the goods imported and goods manufactured or produced in the State. Indeed, article 304(a) prohibits discriminatory protectionism in that a State cannot exempt the goods manufactured or produced in the State and impose a tax on similar goods imported from other States. Article 304(a) thus immunizes a State law imposing tax from the mischief of article 301 which guarantees free trade, commerce and intercourse. The counsel for the petitioners, in support of their plea that the levy under the impugned Act is discriminatory, made the following contentions: (1) the State is not imposing any entry tax on similar motor vehicles which are not imported from other States; (2) under the Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01] 7 SCC 231; AIR 2001 SC 3435). That the State has wide discretion in selecting the persons or objects to tax is too well-settled. Equally well-settled is the proposition that a statute is not open to attack on the ground that the law taxes some persons or objects and not others. In East India Tobacco Company v. State of Andhra Pradesh [1962] 13 STC 529 (SC); AIR 1962 SC 1733, the Supreme Court while quoting with approval the following statement of law from Willis on Constitutional Law , held that A State does not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably. . . . The Supreme Court held that, it is only when within the range of its selection, the law operates unequally, and that cannot be justified on the basis of any valid classification, that it would be violative of article 14 . In Murthy Match Works v. Assistant Collector of Central Excise [1974] 4 SCC 428; AIR 1974 SC 497, the principles to test the validity of differential fiscal treatment of goods and things for the purpose of taxation were summarized. It is beneficial to quote the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Officer [1973] 31 STC 178 (SC); [1973] 1 SCC 216, levy of sales tax on dal splits or processed foodgrains was challenged as discriminatory. It was argued that the classification of dal into independent commodity of split and unsplit pulses or processed or unprocessed pulses is irrational classification. Rejecting the plea, a Constitution Bench held that, the use to which those goods can be put is a reasonable classification. In Kerala Hotel Restaurant Association v. State of Kerala [1990] 77 STC 253 (SC); [1990] 2 SCC 502, the Supreme Court was dealing with the levy of sales tax under the Kerala Hotels Act on cooked food served in the luxury hotels but not on the food served in ordinary hotels. The court observed that, reasonableness of the classification has to be decided with reference to the realities of life and not in the abstract and indicated that, a discernible dissimilarity between those grouped together and those excluded is a pragmatic test, if there be a rational nexus of such classification with the object to be achieved . A blurred and blinkered perception is misplaced in evaluating the validity of classification. We may now examine the issues of discri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, seem to be under the impression that the entry tax is not collected on the motor vehicles produced and manufactured in the State of Andhra Pradesh. This is an argument which ignores the plain language of article 304(a) and section 3 of the Act. Article 304(a) itself empowers the State by law to impose tax on goods imported from other States. Any law made under section 304(a) can only be with reference to the tax which can be imposed on the goods imported from the other States and not on the goods manufactured or produced in the State of Andhra Pradesh. Section 3 is very clear that the levy and collection shall be on the entry of any motor vehicle and not on the manufacture, production or sale of such motor vehicles in the State. The levy of VAT in the State is regulated and governed by the VAT Act whereas, the impugned Act is intended to levy entry tax on motor vehicles entering into any local area and which are imported. This is clear from a combined reading of sections 2(d), (g), (h), 3(1) and 4(2) of the impugned Act. The levy is on the entry of the motor vehicles when an importer other than the dealer causes entry of motor vehicle into a local area for use or sale therein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of International Tourist Corporation v. State of Haryana [1981] 2 SCC 318; [1981] SCC (Tax) 103; AIR 1981 SC 774. Coming to the power of the State in legislating taxation law, the court should bear in mind that the State has a wide discretion in selecting the persons or objects it will tax and thus a statute is not open to attack on the ground that it taxes some persons or objects and not others. It is also well-settled that a very wide latitude is available to the Legislature in the matter of classification of objects, persons and things for the purpose of taxation. . . Sustaining the classification between inter-State and intra-State contract carriages subjected to different rates of quarterly tax, the Supreme Court observed as under (para 9 of SCC): . . . The tax levied under the legislative power found in entry 56 or 57 of List II of the Seventh Schedule is primarily a tax, though it may be compensatory and/or regulatory in nature and, therefore, while testing the constitutional validity of a taxing statute it may not be safe to rely upon the hypothetical factors as against the wisdom of the Legislature. In regard to measure of road user both the sides can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te, and the evil which it has sought to remedy. The facts stated in the Preamble and the Statement of Objects and Reasons appended to any legislation are evidence of the legislative judgment (State of Gujarat v. Mirzapur Moti Kureshi Kassab Jamat [2005] 8 SCC 534). It may be reiterated that the Statement of Objects and Reasons appended to the Bill when the impugned Act was enacted would show that the Legislature took cognizance of the fact that the motor vehicles were purchased at low cost in neighbouring States and brought and used in this State. On the other hand, the motor vehicles produced, manufactured and sold in Andhra Pradesh have to necessarily pay the VAT/sales tax at the prescribed rate. Therefore, the classification is based on intelligible differentia, viz., the motor vehicles imported into local area and those motor vehicles manufactured and produced-both these vehicles cannot certainly be grouped alike. Therefore, if imported motor vehicles are taxed under the Act, the same does not contravene article 14 of the Constitution of India (Ayurveda Pharmacy v. State of Tamil Nadu [1989] 2 SCC 285 and State of U.P. v. Deepak Fertilizers Petrochemical Corporation Ltd. [200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate is allowed to pick and choose the objects, persons, methods and even rates for taxation if it is reasonable (East India Tobacco [1962] 13 STC 529 (SC); AIR 1962 SC 1733 and Karnataka Bank Ltd. v. State of A.P. [2008] 12 VST 459 (SC); [2008] 2 SCC 254). It can even classify goods depending on the use to which they are put to (Hira Lal Rattan Lal v. Sales Tax Officer [1973] 31 STC 178 (SC) and Tata Cummins Ltd. v. State of Jharkhand [2006] 148 STC 199 (SC); [2006] 6 SCC 336) and so long as the tax is on entry of vehicle into local areas for use or sale therein, it cannot be said to be invalid merely because the measure of levy has been provided to be the purchase value of the motor vehicle (Shaktikumar M. Sancheti [1995] 96 STC 659 (SC); [1995] 1 SCC 351). If the measure of tax for the levy is different for two classes of commodities, the same cannot be treated as discriminatory fiscal legislation as long as it is not obnoxious and does not suffer any constitutional embargo. The very wide latitude in classification for taxation is conceded to the State to enable it to function in a practical way. Article 304(a) bars imposition of tax on imported goods unless the goods manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 136 (SC); AIR 1970 SC 1742, a Bench of five learned judges of this court observed dealing with the Punjab General Sales Tax Act that when a taxing State was not imposing rates of tax on imported goods different from rates of tax on goods manufactured or produced, article 304 had no application. So long as the rate was the same, article 304 was satisfied. In the instant appeal before us the tax was at the same rate. It cannot be said to be higher in respect of imported goods. When the rate is applied the resulting tax might be somewhat higher but that did not contravene the equality clause contemplated by article 304 of the Constitution. . . The effect of an imposition of tax might work differently upon different dealers, namely, those who use imported tanned goods and those who purchase these locally and tan these locally and then sell in the course of inter-State sales. But that effect cannot be said to be arising directly, or as an immediate effect of the imposition of the tax. Therefore there cannot be any question of violation of article 304(a) of the Constitution. In Video Electronics [1990] 77 STC 82 (SC); [1990] 3 SCC 87; AIR 1990 SC 820, the notification of the U.P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere are often backward areas which can be developed only if some special incentives are granted. If the incentives in the form of subsidies or grant are given to any part or unit of a State so that it may come out of its limping or infancy to compete as equals with others, that, in our opinion, does not and cannot contravene the spirit and the letter of Part XIII of the Constitution. However, this is permissible only if there is a valid reason, that is to say, if there are justifiable and rational reasons for differentiation. If there is none, it will amount to hostile discrimination. . . Even otherwise as per section 4, when the importer of a motor vehicle becomes liable to pay sales tax, the entire amount paid by him towards entry tax would be given set off, which means in the illustration we have given, no sales tax is payable. The intention of the legislation is to arrest tax evasion and, therefore, they have taken abundant caution in defining purchase value so that the importer does not resort to inflating invoice by including all items of expenditure and then claim various exemptions under the State law or other laws. Therefore, the submission on this ground cannot be acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osing tax does not directly or immediately restrict inter-State trade and commerce, a further enquiry under article 304(b) as to whether it imposes a reasonable restriction may not be necessary. Article 304(a) and (b) as mentioned supra deals with two different topics. If a law is referable to article 304(a) and it is found that the levy is non-discriminatory, in our considered opinion, a further enquiry as to whether such law is impacted by article 304(b) is uncalled for. Further examination as to whether the tax levy is compensatory in nature also may not be necessary, especially in regard to a State law coming under entry 54 levying tax on entry of goods. This view is supported by the judgment of the Supreme Court in Jaiprakash Associates [2009] 21 VST 1 (SC) wherein it was observed that Atiabari AIR 1961 SC 232, Kheyrbari Tea Co. Ltd. v. State of Assam AIR 1964 SC 925 and Jindal Stainless Ltd. [2006] 145 STC 544 (SC); [2006] 7 SCC 241, did not relate to entry tax . The approach as far as levy in the just mentioned cases is conceptually and textually different from entry tax cases. Thus, the levy of compensatory tax which is exempt from the applicability of Part XIII of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the right and the effect of the restriction upon the exercise of that right . The court scrutiny of restrictions imposed by a law cannot be on subjective standards in deciding their reasonableness (State of Madras v. V. G. Row AIR 1952 SC 196). The general notion of reasonableness or hardship is unsuitable. The test of reasonableness is to be viewed in the context of the issues which faced the Legislature (Dalmia Cement (Bharat) Limited v. Union of India [1996] 10 SCC 104). The court has to keep in mind two rules of construction, namely, to lean towards constitutionality of the law and to construe the enactment by examining the object and purpose of the Act, and the mischief it seeks to prevent (Vrajilal Manilal and Co. v. State of Madhya Pradesh AIR 1970 SC 129). The restrictions on the freedom of trade may not be hurdles at one point of time and may prohibitively curtail the enjoyment of the right during another time. The need of the society and the constitutional requirement of protecting the people are relevant while deciding the reasonableness of restrictions imposed by law. There must be a direct and proximate nexus or a reasonable connection between the restrictions impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for judging the reasonableness of restrictions. The Statement of Objects and Reasons appended to the Bill while introducing the impugned Act read as under: It is observed that proper tax is not being realized by the State on all the Motor Vehicles which are being used in Andhra Pradesh. Many vehicles are purchased at low tax in the neighbouring States and brought and used in the State. Since no sales took place within our State the Government is not getting any revenue on such vehicles. To overcome such problem, neighbouring States like, Tamil Nadu and Kerala have introduced entry tax on motor vehicles and in Karnataka it is being levied on all the commodities except 35 specified items. Entry tax was introduced in our State in the year 1987 on textiles, tobacco and sugar and it was subsequently withdrawn from April 1, 1990. It is decided to levy entry tax on motor vehicles only to arrest tax evasion. The rate of tax on the local sales on motor vehicles is increased from four per cent to eight per cent on the first sales and entry tax is levied at the rate of eight per cent. Entry tax is not leviable if the motor vehicles suffer tax under local Sales Tax Act. The levy of entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving been subjected to a low tax rate in the neighbouring States, and thereby escape the taxation under Sales Tax Act. By levying tax, it cannot be said that the movement is impeded or obstructed. Unless and until it is shown that these things happen by reason of levy, there is no violation of article 301. There is no dispute that the construction equipment, which is allegedly owned by the petitioners, is taxable under the VAT Act under residuary entry of Schedule V which, at the relevant time, was 12.5 per cent. It is nobody's case that the tax levied on the petitioner's vehicles under the impugned Act is in excess of the scheduled rate under the Sales Tax/VAT Act nor it is shown that such tax has direct and immediate effect on trade. It is assumed that the Legislature understands and appreciates the needs of the people and that the laws made by them manifests the legislative experience and are considered to be reasonable for which they are enacted (Khyerbari [1964] 5 SCR 975; AIR 1964 SC 925). The petitioners have failed to demonstrate that the levy has direct and immediate effect on the entry of imported motor vehicles. Unless the test is satisfied, a tax levied under a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 1950 was void, because the provisions of the proviso to article 304 were attracted and the Act was passed without complying with the requirements of the proviso. In Malwa Bus Service (Private) Limited [1983] 3 SCC 237; AIR 1983 SC 634, a bus operator assailed 1980 Amendment to the Punjab Motor Vehicles Taxation Act, 1924 (the Punjab Act) contending that the Act imposes unreasonable restrictions on the freedom of trade. One of the contentions was that the increase of tax on stage carriages renders the business of the bus operator uneconomical and is unreasonable restriction. The plea was negatived observing as under: . . . The mere fact that a tax falls more heavily on certain goods or persons may not result in its invalidity. As observed by this court in Khandige Sham Bhat v. Agricultural Income-tax Officer [1963] 48 ITR 21 (SC); AIR 1963 SC 591) in respect of taxation laws, the power of Legislature to classify goods, things or persons are necessarily wide and flexible so as to enable it to adjust its system of taxation in all proper and reasonable ways. The courts lean more readily in favour of upholding the constitutionality of a taxing law in view of the complexities i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioners have not complained that the import of transport vehicles-which are as of now not available in the State of Andhra Pradesh-is totally prohibited. Nor is it their grievance that levy of entry tax has deterred them from importing the motor vehicles from other States. The entry tax on the motor vehicles is in public interest and nondiscriminatory. If levy is not imposed on the imported vehicles, there is likelihood of locally manufactured and produced goods suffering from decline in sales. If all the vehicles produced and manufactured in the State of Andhra Pradesh remain unsold, and everybody starts buying the motor vehicles in the neighbouring States where the taxes are low, public good would be a casualty. The impugned Act is intended to avoid such a situation and Legislature is always competent to meet such a situation by plugging the revenue loss. As is clear from the object of law, the vehicles imported and used in the State of Andhra Pradesh are not paying any tax resulting in revenue loss, whereas the motor vehicles purchased and used in the State of Andhra Pradesh are chargeable to the local tax and by reason of the taxes being at low rates in the neighbouring S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort AIR 1962 SC 1406, in Bhagatram Rajeev Kumar v. Commissioner of Sales Tax [1995] 96 STC 654 (SC); [1995] Supp (1) SCC 673 and State of Bihar v. Bihar Chamber of Commerce [1996] 103 STC 1 (SC); [1996] 9 SCC 136 a view was taken that, so as to characterize as compensatory tax, it would suffice to establish some connection between the tax and the trade facilities extended to dealers directly and indirectly. A Constitution Bench in Jindal Stainless Ltd. v. State of Haryana [2006] 145 STC 544 (SC); [2006] 7 SCC 241; AIR 2006 SC 2550 expressly overruled these two decisions and reiterated the Automobile Transport AIR 1962 SC 1406 working test. The basis of a tax is the ability or capacity of the taxpayer whereas the principle of equivalence applies in the case of compensatory tax. It is based on the principle of pay for the value . It is a levy in the hybrid nature between fees and tax and, therefore, even though it incidentally brings revenue to the Government, it need not be an essential ingredient of compensatory tax. The Government levies compensatory tax as a charge for offering trading facilities. It adds the value of trade and commerce. In the case of tax, however, there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayer(s). We would revert to pleadings and other material, if any, to see whether the State has discharged the burden. The counter of the CCT alleged as follows: It is submitted that the levy of entry tax in the present case is compensatory in nature and therefore no previous sanction of the President has been obtained. The local bodies have been taking up lot of programmes relating to laying of roads, upkeeping of roads, installation of street lights, supply of water, sanitation programs, cleanliness schemes, etc., within their local areas. They need huge funds for implementing all these schemes. There has been a resource crunch. For several reasons the local bodies especially in villages are not able to generate their own resources to meet the growing expenditure on account of provisions of various amenities and facilities. The local bodies, therefore, need funding by the State Government. The State Government has to provide substantial funds to these bodies to enable them to discharge their statutory obligation. It is submitted that well laid roads would help and ensure free flow of trade and commerce, establishment of market yards, water ways and other amenities for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce with the proviso to article 304(b). Recording a finding that no material was placed before the court to show that the impugned levy had the effect of impeding the free flow of intra and inter-State trade and commerce, their Lordships also held that the restriction, if any, cannot be said to be unreasonable since the rate of tax is less. It was further held that post-enactment assent accorded by the President would be sufficient compliance with the proviso to article 304(b). In Jaika Automobiles [1994] 92 STC 248 (Bom) to which a reference has already been made supra, the Nagpur Bench of the Bombay High Court upheld the validity of the Maharashtra Act whose provisions are in pari materia with various sections of the impugned Act. Ground (c) therein was concerned with the impingement of free trade right under article 301. The Division Bench of the Bombay High Court, having regard to the fact that no material was placed by the complainants as to how the levy of entry tax on motor vehicles affected the free flow of trade, commerce and intercourse, did not accept the plea that there is violation of article 301 as the levy does not directly and immediately restrict the inter-State tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied with. We may now briefly refer to the decisions submitted by Sri S. Dwaraknath on behalf of the petitioners. In Eurotex Industries and Exports Ltd. v. State of Maharashtra [2004] 135 STC 25 (Bom), the Bombay High Court nullified entry 13 to the Schedule to the Maharashtra Tax on Entry of Goods into Local Areas Act, 2002 which taxed furnace oil and low sulphur waxy residue oil on the ground that similar goods produced in Maharashtra were exempted from payment of sales tax. In Tata Iron Steel Company Ltd. v. State of Jharkhand [2007] 6 VST 587 (Jhark) and Central Coalfields Ltd. v. State of Jharkhand [2007] 6 VST 614 (Jhark), the Jharkhand High Court declared the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1993 as adopted by the State of Jharkhand vide the Jharkhand Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Thereof (Amendment) Ordinance, 2001 as ultra vires holding that the levy does not constitute reasonable restriction, that the levy is not in the nature of compensatory tax and that the levy violates articles 301 and 304 of the Constitution. In State of Assam v. Chhotabhai Jethabhai Patel Tobacco Product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f trade, that the petitioners have not demonstrated any impediment by such levy, and that having regard to the object of the enactment it is reasonable for the State to levy entry tax on motor vehicles to plug the leakage of revenue. We have also recorded a conclusion that the levy being nondiscriminatory is permissible under article 304(a) and does not require compliance with the proviso under article 304(b) as it is not at all attracted. As adverted to in the succeeding paragraphs, there is yet another reason The charging section in Maharashtra Act and the charging section in the impugned Act are in pari materia, though not ipsissima verba. For ready reference, we quote both the provisions as below: The Maharashtra Tax on Entry of Motor Vehicles into Local Areas Act, 1987 (As quoted in Shaktikumar M. Sancheti [1995] 96 STC 659 (SC); [1995] 1 SCC 351) 3. Incidence of tax .-(1) Subject to the provisions of this Act and Rules made thereunder, there shall be levied and collected a tax on the purchase value of a motor vehicle an entry of which is effected into a local area for use or sale therein and which is liable for registration in the State under the Motor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales tax liability under the relevant Act to the extent of tax paid under the Entry Tax Act. The Maharashtra Act was upheld in Jaika Automobiles [1994] 92 STC 248 (Bom). The Supreme Court in Shaktikumar M. Sancheti [1995] 96 STC 659 (SC); [1995] 1 SCC 351 affirmed the decision of the Nagpur Bench upholding the Maharashtra Act. Thus, the legislation made by the State of Maharashtra under the same entry in the State List has been interpreted and upheld by the Supreme Court in the appeal against the decision of the Bombay High Court. Is there, then, any scope for taking a different view ignoring the decision of the Supreme Court upholding in pari materia legislation. It is nobody's case that a decision of the Supreme Court is not binding on the High Court. An attempt is however made by the petitioners that Shaktikumar M. Sancheti [1995] 96 STC 659 (SC); [1995] 1 SCC 351 does not consider the effect of the embargo imposed by article 301 read with article 304 of the Constitution. They would, therefore, suggest that this court must either ignore Shaktikumar M. Sancheti [1995] 96 STC 659 (SC); [1995] 1 SCC 351 or consider it as not laying down any contra law to deny the reliefs to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCR 499; AIR 1966 SC 249. That case arose under the C.P. and Berar Municipalities Act, 1922. The right of a Municipality governed by that Act to levy under section 66(1)(b) a tax on bales of cotton ginned at the prescribed rate was challenged by a tax-payer. This court held that levy of tax on cotton ginned by the taxpayer in excess of the amount prescribed by article 276 of the Constitution was invalid, and since the Municipality had no authority to levy the tax in excess of the rate permitted by the Constitution the assessment proceeding levying tax in excess of the permissible limit were invalid, and a suit for refund of tax in excess of the amount permitted by article 276 was maintainable. The decision was binding on the High Court and the High Court could not ignore it because they thought that 'relevant provisions were not brought to the notice of the court'. In Director of Settlements, A.P. v. M.R. Appa Rao [2002] 4 SCC 638, the Supreme Court after referring to B.M. Lakhani [1970] 2 SCC 267; AIR 1970 SC 1002 explained the scope of article 141 of the Constitution as follows. . . . What is binding is the ratio of the decision and not any finding of facts. It is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Pratap Singh [2005] 3 SCC 551 would not govern the interpretation of the provisions of the Probation of Offenders Act, the Supreme Court rejected the submissions. It was held: It can be noticed from Ramji Missar AIR 1963 SC 1088 and Pratap Singh [2005] 3 SCC 551 that the object and purpose of the Probation of Offenders Act, 1958 for applying the relevant provisions to the accused are different and cannot be said in pari materia with the Juvenile Justice Act, 1986 and the Juvenile Justice (Care and Protection of Children) Act, 2000. The court would not construe a section of a statute with reference to that of another statute unless the latter is in pari materia with the former. Therefore, a decision made on a provision of a different statute will be of no relevance unless underlying objects of the two statutes are in pari materia. The decision interpreting various provisions of one statute will not have the binding force while interpreting the provisions of another statute. Section 6 of the Act has been construed by a 4-Judge Bench of this court in Ramji Missar AIR 1963 SC 1088 and that will have the binding force while interpreting the same section in same statute and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cember 31, 1999 fixing the rate of entry tax on motor vehicles at 12 per cent. The latter notification reads as under: Notification G.O. Ms. No. 917, Revenue (CT. II) Department, dated December 31, 1999 In exercise of the powers conferred under section 12 of the Andhra Pradesh Tax on Entry of Motor Vehicles into Local Areas Act, 1996, and in supersession of orders issued in G.O. Ms. No. 636, Revenue (CT. II) Department dated August 2, 1996, the Governor of Andhra Pradesh hereby specifies that, with effect from the 1st day of January, 2000 tax shall be levied and collected under the said Act at the rates specified in column (3) of the table given below on the entry of motor vehicles specified in corresponding entries in column (2) thereof. Sl. No. Category of motor vehicles Rate of tax 1. Motor cars, motor taxi cabs Twelve per cent 2. Jeeps Twelve per cent 3. Motor cycles and motor scooters, motorettes Twelve per cent 4. Three wheele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking of it . To the same effect is the dicta of the Supreme Court in State of Karnataka v. Krishnaji Srinivas Kulkarni [1994] 2 SCC 558 and Vikram Singh Junior High School v. District Magistrate (Fin. Rev.) [2002] 9 SCC 509. State of West Bengal v. Jindal India Ltd. [2000] 9 SCC 369, is a case which considered the validity of demand under section 14(3) of the Taxes on Entry of Goods into Calcutta Metropolitan Area Act, 1972. In a challenge before the West Bengal Taxation Tribunal, the demand was quashed, taking a view that the demand under section 14(3) would not have been issued in view of the assessee's declaration under section 13 of the said Act; section 14(3) did not authorize reopening of the case; and steps to recover short-levied tax can be taken only under section 17. The question was whether reopening under section 14(3) is illegal. The Supreme Court held that, section 17(1) contemplates reopening of assessments when there has been a short-levy by reason of inadvertence, error or misconstruction on the part of the prescribed authority or by reason of mis-statement of the dealer, as to quantity, description or value, or for any other reason. In our view, the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such does not empower the Government to fix the rate of entry tax, the notification in question is not vitiated or rendered illegal by mention of section 12 instead of section 3. Therefore, we reiterate that the submission is misconceived. Yet another submission made by some of the counsel is about the rate at which entry tax was collected. The rate of tax fixed by the Government should not exceed the rates specified for motor vehicles in the First Schedule to the APGST Act. At the relevant time, it was 12 per cent. The rate of tax fixed by the Government under the notification vide G.O. Ms. No. 917, dated December 31, 1998 is 12 per cent. As per entry 1 of Schedule I, the rate of sales tax on motor vehicles including motor cars, motor taxi-cabs, motor cycles and motor cycle combinations, motor scooters, motorettes, motor omnibuses, motor vans, motor lorries and chassis of motor vehicles, was reduced to 12 per cent with effect from January 1, 2000 though for the period earlier to it, it was 16 per cent. Sri S. Dwaraknath brought to our notice that in some of the cases, entry tax was collected at 12.5 per cent. The VAT Act came into force with effect from April 1, 2005. As the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... five cubic centimetres. The main part defines motor vehicle or vehicle as to mean, anyioi mechanically propelled vehicle adapted for use upon the roads . Under the inclusive part, even a chassis to which a body has not been attached and trailer also are the motor vehicles. The exclusive part excludes three types of vehicles, namely, a vehicle running upon fixed rails, a vehicle of a special type adapted for use only in a factory or any other enclosed premises and a vehicle having less than four wheels fitted with engine capacity of not exceeding twenty-five cubic centimeters. The crucial aspect of the definition is that a vehicle should be mechanically propelled and it should be adapted for use upon the roads. There is no dispute that the vehicles purchased by the petitioners are mechanically propelled. They, however, allege that they are not adapted for use upon the roads. According to them, they are specialized vehicles designed and manufactured only for construction, earth moving, mining and industrial activity and are always carried from place to place on trucks. They are also used only in enclosed premises. These are disputed questions of fact and wherever there is doubt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ept for use in a public place in a State, the liability is attracted. Under the impugned Act, however, the liability is attracted the moment the vehicle enters the local area in the State either for use or sale. When once a vehicle is adapted for use on the roads as defined in section 2(28) of the MV Act, it is mandatory under section 39 thereof, that it shall be registered to be driven in any public place. Therefore, the Legislature seems to have made a vehicle liable for registration in the State, the target for levy of entry tax by way of abundant caution. If the owner of a motor vehicle is merely passing through the State of Andhra Pradesh to another State where it is intended to be used, the vehicle is not liable for registration in Andhra Pradesh. In such an event, the levy under the Act is not attracted. If the entry of motor vehicle is for use or sale in the State of Andhra Pradesh, the tax can be levied. Deviating for awhile, we may refer to rule 2(ca) of the CMV Rules, which defines construction equipment vehicle , as quoted hereunder: 'Construction equipment vehicle' means rubber tyred (including pneumatic tyred), rubber padded or steel drum wheel mounted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h an engine capacity of 25 cubic centimetres. Interpreting the definition of motor vehicle , the Supreme Court held that the dumpers and rockers are registerable under the MV Act but are not taxable under taxation Act as long as they are working within the enclosed premises of the owner. The relevant observations are as follows: The question would then arise, are dumpers, rockers and tractors suitable or fit for use on roads? It is not denied that these vehicles are on pneumatic wheels and can be moved about from place to place with mechanical power. The word 'vehicle' itself connotes that it is a contrivance which moves. A vehicle which merely moves from one place to another need not necessarily be a 'motor vehicle' within the meaning of section 2(18) of the Act. It may move on iron flats made into a chain such as a caterpillar vehicle or a military tank. Both move from one place to another but are not suitable for use on roads. It is not that they cannot move on the roads but that they are not adapted, made fit or suitable for use on roads. They would, if used, dig and damage the roads. . . Where a vehicle is adapted for use upon roads and though it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Explanation to item 34, where a motor vehicle is mounted, fitted or fixed with any weight lifting or earth moving equipment, then such equipment shall not be taken into account for the purpose of levy. Construing the phrase adapted for use upon roads in item 34, the Supreme Court held: A close reading of the definition of 'motor vehicle' in item 34 reveals that the striking ingredient thereof is that it should have been 'adapted for use upon roads'. Merely because the areas on which such heavy-movers traverse might sometimes include roads also is not enough to hold that they were 'adapted for use upon roads'. Such use of the heavy-mover on the road may only be ancillary or incidental to the main use of it. Emphasis in the definition must be on the words 'use upon road' as those words would denote the principal or dominant use and not where it may move incidentally. In Biju Joseph v. State of Kerala [1998] 6 KTR 1 (Ker), a question arose whether excavators and road rollers are motor vehicles under section 2(28) of the MV Act exigible to tax under the Kerala Taxation on Entry of Motor Vehicles into Local Areas Act. A learned single j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not suitable for use on roads. Whether or not it moves on the roads if it is suitable to move on the roads, it is a motor vehicle; (v) Merely because a motor vehicle is put to a specific use, such as being confined to enclosed premises will not render the same to be a different kind of vehicle. The steering system, rear lights, direction indicators, rear view mirror, front screen viper, horns, brakes, parking brakes, etc., are some of the factors which may have to be considered before drawing appropriate inferences; and (vi) The question whether any motor vehicle has entered into local area to attract tax under the Entry Tax Act ordinarily will have to be dealt within order passed in the course of assessment. There are various categories and types of mechanically propelled vehicles involved in these cases. On an analysis, with the assistance of the Special Counsel for CT, we may group these vehicles into three categories. The first category of the vehicles are those described as track mounted or chain mounted. In W.P. Nos. 21260, 21316 of 2007, 11216 of 2008, 7970, 21096, 25856 of 2009, 6231, 10922, 11276, 12155, 12213, 12246, 12355, 12358, 14378, 14404, 14410, 150 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at section 3 of the impugned Act does not suffer from any of the infirmities canvassed by the petitioners. The Act is constitutionally valid and within the competence of the State Legislature. The question whether the vehicles purchased and imported by the petitioners are motor vehicles or not, in view of our conclusions on Part VIII supra, has to be decided at the stage of assessment by the competent officer. Therefore, we deem it appropriate to set aside the impugned assessment orders and remit them to the respective assessing officers. Keeping in view the principles laid down by the Supreme Court as summarized in this judgment, they shall now proceed to consider the contentions on this question alone, if necessary by obtaining an opinion from any Gazetted Officer of the Department of Transport. This exercise shall be completed within a period of eight weeks from the date of receipt of a copy of this Order, whereafter it shall be open to the petitioners to avail of the alternative remedy provided under the impugned Act read with the provisions of the VAT Act. We also give liberty to the petitioners to claim refund of tax over and above 12 per cent if it is paid by any of the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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