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TMI Blog2016 (1) TMI 1217X X X X Extracts X X X X X X X X Extracts X X X X ..... to their units outside the State to the extent it is used for manufacture of cement. 3. The question of law arising for consideration being common the writ applications have been heard together and are being disposed by a common order. 4. Learned Senior Counsel making the lead arguments submits that liability for entry tax arises under the Chhattisgarh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (hereinafter referred to as 'the Act'). The charge is based on entry of the goods into a local area for consumption, use or sale therein. The incidence of tax on limestone, an item mentioned in Schedule II, arises under Section 3 of the Act on the entry of the limestone into such local area for consumption, use or sale. Section 6 provides for the principles governing levy of entry tax and stipulates that entry tax shall not be payable unless entry of the goods specified in the Schedule is effected into the local area. There shall be a presumption that the goods which have entered the local area have been used, consumed or sold therein unless shown otherwise. 5. Section 4-A provides for entry tax at enhanced rates on certain goods consumed or used in such local area ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 142/2014 (Ambuja Cements Limited vs. State of Chhattisgarh & Ors). 8. The invalidity of the notifications is evident from the counter affidavit of the State that when clinker is stock transferred outside the State and used for manufacture of cement, the State loses revenue by way of sales tax to the extent of 15% which it would have earned if the clinker had been used for manufacture of cement within the State and sold. The State was therefore essentially trying to make up for loss of revenue. If the incidence of taxation at entry is exhausted by fixation of rate of entry tax at 10% for goods entering such local area capable of being used for manufacture of other goods including clinker in such local area. Reliance was placed on (1993) Supp (4) Supreme Court Cases 536 (Hotel Balaji vs. State of A.P) to contend that such an act on part of the State essentially would attract the liability for purchase tax on stock transfer of the clinker by the Petitioners to their units outside the State but not entry tax. 9. It was next submitted that List II of the VIIth Schedule in item 52 vested power in the State to frame laws to levy tax on entry of goods into a local area for consumption, u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han newspaper and subject to Entry 92-A of List I. The State has the power to frame different laws dependent on the nature of the transaction. The preamble of the Act states that it was enacted to levy a tax on the entry of goods into a local area for consumption, use or sale therein. Section 2(1) (b) defines entry tax as a tax on entry of goods into a local area for consumption, use or sale therein to be levied and payable in accordance with the provisions of the Act. Local area has been defined in Section 2(1) (d) as the area comprised within the limits of a local authority and the latter is defined in Section 2(1) (e) as an authority constituted under a law relating to local authority excluding Janpad Panchayat, Zilla Panchayat, Mandal Panchayat or such authority as may be specifically excluded by the State Government by notification. Taxable quantum is defined under Section 2(1) (j) of the Act as the aggregate of the taxable purchase value and the taxable market value. 14. Section 3 provides for the incidence of taxation on the entry of goods specified in Schedule II into a local area for consumption, use or sale. Limestone is to be found as an entry in Schedule II. Section 4- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all not be payable unless the entry of the goods is effected into the local area as may have been identified in Schedules II or III. Once the goods have entered into a local area, there is a presumption that it was for consumption, sale or use within the same unless the person concerned demonstrated otherwise. 17. The notification dated 29.9.1997 made classification with regard to different rate of entry tax at 10 % based on production of clinker from limestone within the local area as distinct from its use in a lime kiln. All limestone converted to clinker in a local area will form a class. The subsequent sub-classification of clinker for different rates of tax based on its end user stands vitiated for lack of authority to levy such tax under Section Section 4-A as the power stood exhausted. The sub-classification sought to be done based on the end user outside the local area is therefore clearly unsustainable in the law as having no nexus with the object to be achieved by levy of higher rate of entry tax. The well settled essential components for a valid classification was reiterated recently in (2015) 10 SCC 681 (Union of India v. N.S. Rathnam) as follows :- "14........in orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of cement which would have accrued by sales tax if the cement had been manufactured and sold in the State. The unsustainability of the contention on behalf of the State is evident from the observations in Hotel Balaji (supra) relied upon by the Petitioners observing as follows:- "33. ................What in effect the State says is this: "Raw material when purchased is taxable but I won't tax the raw material if you sell the goods manufactured out of such raw material within the State because I derive larger revenue there; I do not want to tax both the raw material and the manufactured goods, in the interest of trade and public. But if you dispose of the manufactured goods in some other manner, I will tax the purchase of raw material because there is no reason why I should forego the purchase tax due on raw material, when I am not getting any revenue from your method of disposal or despatch of manufactured products......" 21. Since we are not called upon to decide the nature of tax that the State can or may levy in the circumstances we refrain from expressing any opinion or discussion with regard to the same. 22. Resultantly, the notification dated 31.3.2010 and the con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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