TMI Blog2019 (9) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, while upholding the constitutional validity of the Entry Tax Act, the Division Bench of this Court in the case of EAGLE CORPORATION PVT. LTD. VERSUS STATE OF GUJARAT AND OTHERS [ 2006 (10) TMI 395 - GUJARAT HIGH COURT] , upheld the vires of Entry Tax Act by observing that if the rate of sales tax on specified goods in the State of Gujarat is 12% and rate of sales tax payable by the importer in a particular state is 4% and if the 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%. The Division Bench has also further observed that, thus, 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% which puts such importer at par with the local persons and 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 - While holding that the levy of Entry Tax Act is not in violation of Article 304(a) of the Constitution of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act i.e. beyond 4%. Petition allowed. - R/SPECIAL CIVIL APPLICATION NO. 5656 of 2019 - - - Dated:- 21-8-2019 - MR J. B. PARDIWALA AND MR A. C. RAO, JJ. For The Petitioner (s) : MR UCHIT N SHETH (7336) For The Respondent (s) : MS MAITHILI MEHTA, AGP (1) ORAL JUDGMENT ( PER : HONOURABLE MR.JUSTICE A.C. RAO) 1.00. RULE , returnable forthwith. Ms.Maithili Mehta, learned AGP waives the service of notice of rule for and on behalf of the respondents. In the facts and circumstances of the case and with the consent of the learned advocates appearing for the respective parties, present petition is taken up for final hearing today. 2.00. In this petition, the petitioner has prayed for an appropriate writ, order and/or direction to quash and set aside levy of Entry Tax (hereinafter referred to as VAT for short) at the rate of 12.5% on the import / sale of Excavators within the State of Gujarat during the year 2006-07. The petitioner has also prayed for an appropriate writ, order and/or direction to quash and set aside the consequential orders passed by the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and purpose of the Entry Tax Act and also contrary to the legislative intention of enacting Entry Tax Act. 5.01. Mr.Uchit Sheth, learned advocate appearing on behalf of the petitioner has further submitted that in the speech and Statement by the Finance Minister and Object and Reasons of the Entry Tax Act and the purpose of incorporating Entry Tax Act was to prevent loss of Sales Tax revenue due to diversion of trade as a result of lower Sales Tax rates in other Sates as compared to State of Gujarat. It is submitted that entry tax was thus sought to be levied on import of goods from outside the State at the applicable rate of sales tax in the State of Gujarat. 5.02. Mr.Uchit Sheth, learned advocate appearing on behalf of the petitioner has further submitted that the legislative history of the Entry Tax Act as well as the amendments to the Entry Tax Act made from time to time show that a clear nexus is maintained between the Entry Tax rates and the applicable rates to the goods under the Sales Tax Act / VAT Act. 5.03. Mr.Uchit Sheth, learned advocate appearing on behalf of the petitioner has further submitted that only those motor v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of tax was 12.5%. It is submitted that therefore, maximum rate of Entry Tax for motor vehicle was correspondingly revised from 12% to 12.5%. While the specific entry for motor vehicles under the Sales Tax Act was dropped under the VAT Act, the specific entry for Excavators was retained in Entry 35 of the Notification issued under section 5(2) of the VAT Act and for which the rate of tax was 4%. This was so held by this Court in the case of State of Gujarat Versus Yanmaman Automac Pvt. Ltd, reported in (2016) 93 VST 423 (Gujarat) . It is submitted that thus, the amendment of the Entry Tax Act w.e.f. 1/4/2006 was only consequential to replacement of the Sales Tax Act by the VAT Act and only those motor vehicles were sought to be taxed under the Entry Tax Act which were earlier classifiable under Entry 128 of Schedule IIA to the Sales Tax Act and later on under residuary Entry 87 of Schedule II of the VAT Act attracting local rate of 12.5%. 5.06. Mr.Uchit Sheth, learned advocate appearing on behalf of the petitioner has further submitted that thereafter, additional tax was introduced under section 7(1A) of the VAT Act w.e.f. 1/4/2008. It is submitted that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.09. Mr.Uchit Sheth, learned advocate appearing on behalf of the petitioner has further submitted that the entire legislative history of the Entry Tax Act as well as object and reasons behind the introduction as well as amendments of the Entry Tax Act establish that Entry Tax was always sought to be levied at the rates prescribed for such goods under the Sales Tax Act / VAT Act. It is submitted that, in other words, there is a nexus between the entry tax rates and local sales tax / VAT rates on similar goods. It is submitted that thus only those motor vehicles which were covered under Entry 128 of Schedule-IIA to the Sales Tax Act and which are now covered under residuary Entry 87 of Schedule-II to the VAT Act which attracted 12.5% tax from 1/4/2006 and which now attract 15% tax under the VAT Act would be covered under the entry of motor vehicles under the Entry Tax Act. 5.10. Mr.Uchit Sheth, learned advocate appearing on behalf of the petitioner has further submitted that the levy of entry tax at the rate of 12.5% on Excavators by treating them as falling under Entry for motor vehicles even though Excavators have always been covered by separate en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ble Supreme Court in the recent decision in the case of Jindal Stainless Ltd. Vs. State of Haryana, rendered in Civil Appeal No.3453 of 2002 and other connected matters has held that while Tax may not be a barrier to free trade and commerce under Article 301 of the Constitution of India, the power to levy tax on goods imported from outside the State is subject to the restrictions and conditions of Article 304(a) of the Constitution of India. It is submitted that in other words, Tax can be imposed on entry of goods from outside the State only if there is no discrimination between goods imported from outside the Sate and similar goods manufactured in the State. It is submitted that thus, levy of entry tax on Excavators at the rate of 12.5%%, even though the local VAT rate was 4%, would be violation of Article 304(a) of the Constitution of India even as per the law laid down by the Hon ble Supreme Court in the case of Jindal Stainless Ltd. (supra). 5.14. Mr.Uchit Sheth, learned advocate appearing on behalf of the petitioner has also relied upon the decision of this Court in the case of Tractors and Farm Equipment Ltd. Versus State of Gujarat, Special Civil Appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as decision of the Division Bench of this Court in the case of Reliance Entries Ltd. Vs. State of Gujarat, rendered in Special Civil Application No.11848 of 2005 , in support of her submission that Excavators is a moor vehicle and therefore, on entry / import of Excavators in the State of Gujarat Entry Tax is leviable at 12.5%. 7.02. Ms.Maithili Mehta, learned AGP appearing on behalf of the State has further submitted that even otherwise by levy of 12.5% Entry Tax on entry / import of Excavators in the State of Gujarat, petitioner is not likely to be affected. It is submitted that by way of Rule 15(7) read with section 11 of the Gujarat Value Added Tax Act, the petitioner can claim refund by way of Input Tax Credit i.e. whatever the amount of tax paid, such as Entry Tax etc. It is submitted that thus, the petitioner would not be affected in any manner. By making above submissions, it is requested to dismiss this petition. 8.00. Heard the learned advocates appearing on behalf of the respective parties at length. 8.01. At the outset, it is required to be noted that in this petition, the respective has chal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x applicable to the State of Gujarat and that to neighbouring States, diversion of trade has taken place and cases sales tax payments are avoided or evaded by various methods, in some cases resulting in the loss of sales tax revenue legitimately due to the State of Gujarat and with a view to compensating such loss of sales tax revenue, it was considered necessary to levy a tax on entry of certain specified goods purchased / manufactured outside the State and brought into the local areas of the State of Gujarat. 8.03. Before this High Court in the case of Eagle Corporation Pvt. Ltd (supra) constitutional validity of the Entry Tax Act was challenged and after considering the Statement and Objects of the Entry Tax, Preamble and the relevant provisions of the Act, while upholding the constitutional validity of the Entry Tax Act, the Division Bench of this Court in the case of Eagle Corporation Pvt. Ltd. (supra) in paragraph Nos.22 to 26 has observed and held as under :- 22. It is the contention on behalf of the petitioner that the levy of Entry Tax is only on importer of specified goods from other States into a local area in the State of Guj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 entrytax 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 vehicles mentioned at Serial No.1 in the Schedule, if such motor vehicles are registered in any other State or Union Territory of India under the Motor Vehicles Act for a period exceeding 15 months before their entry into the local area of the State. It is, thus, evident from the above that, if a person has genuinely purchased a motor vehicle for use in another State and subsequently for some reason if he is required to bring the said motor vehicle into the State of Gujarat after 15 months, then such a person is not require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods 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. 23. 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 corresponding reduction in the maximum rate of Entry Tax prescribed in the Schedule so that the goods brought from outside the State are not discriminated against the goods being manufactured within the State, from the point of view of ultimate burden of tax. 24. Coming to another contention raised on behalf of the petitioner that in a particular State there might be exemption from payment of sales-tax and now while bringing the specified goods into State of Gujarat an importer will be requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned 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, the constitutional validity of similar provisions relating to levy of Entry Tax being Maharashtra Tax on Entry of Motor Vehicles Into Local Areas Act, 1987 with the same objects and reasons has been upheld by the Hon'ble Supreme Court in the case of Shaktikumar M. Sancheti And Another Vs. State of Maharashtra And Others,[supra]. The learned counsel appearing on behalf of the petitioner has tried to submit that the constitutional validity of the said Act h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tax Act, 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 not discriminated against the goods manufactured within the State, from the point of view of ultimate burden of tax. 8.05. In the recent judgement, Nine Hon ble Judges Bench of the Hon'ble Supreme Court in the case of Jindal Stainless Ltd. (supra) while considering the applicability / effect of Article 304(a) of the Constitution of India, has observed and held that, State legislation cannot in the matter of levying taxes discriminate between the goods imported from the other States and those manufactured or produced within the State, while levying such a tax. It is further observed and held that the effect of Article 304(a), therefore, is that while levy of taxes on goods imported from others States and Union territories is clearly recognised as constitutionally permissible, the exercise of such power is subject to the two restrictive conditions i.e. (1) Tax on import of goods from others States would be justified only if similar goods manufactured or produced in the state are taxed and (2) S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the present case entry tax at the rate of 12.5% on Excavators is levied considering them as motor vehicles under Entry 1 of the Schedule to the Entry Tax Act. However, it is required to be noted that right from the beginning, the rate of Entry Tax had direct connection with the rate of sales tax under the Sales Tax Act. In the original Schedule to the Entry Tax Act, there was specific column containing reference to the relevant entry in the Gujarat Sales Tax Act. In respect of the first entry relating to motor vehicles, reference was made to Entry 128 of Schedule-IIA to the Sales Tax Act and maximum rate of entry tax was stipulated at 12% which was equal to the rate applicable to motor vehicles classifiable under Entry 128 of Schedule IIA of the Sales Tax Act. At that time there was a separate entry for earth moving equipment which included Excavators, contained in Entry 98A of Schedule IIA to the Sales Tax Act for which the applicable rate of sales tax was 8%. Thus, the Excavators were never sought to be included in the Schedule of specified goods contained in the Entry Tax Act. Thereafter when the Sales Tax was replaced by the VAT Tax Act, consequential change was made in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons behind the introduction as well as amendments of the Entry Tax Act establish that Entry Tax was always sought to be levied at the rates prescribed for such goods under the Sales Tax Act / VAT Act. In other words, there is a nexus between the Entry Tax rates and local Sales Tax / VAT rates on similar goods. Thus, only those motor vehicles which were covered under Entry 128 of Schedule-IIA to the Sales Tax Act and which are now covered under residuary Entry 87 of Schedule-II to the VAT Act which attract 15% tax under the VAT Act would be covered under the entry of motor vehicles under the Entry Tax Act. Levy of entry tax at the rate of 12.5% on Excavators by treating them as falling under Entry for motor vehicles even though Excavators have always been covered by separate entry under the Sales Tax Act and the VAT Act during the relevant period and for which rate of tax under the VAT Act is 4%, therefore is dehors the scheme of the Entry Tax Act as countenanced by the legislative history as well as objects of the Entry Tax Act. 8.11. Now, so far as submission on behalf of the State that levy of 12.5% entry tax on Excavators, the petitioner is not likely to be affe ..... 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