1994 (2) TMI 284 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether dealers in sugar, tobacco, or iron and steel are covered by section 3 of the Entry Tax Act.
2. Whether the levy of entry tax on first purchase outside the State is hit by article 286(3) of the Constitution.
3. Whether the levy of entry tax amounts to consignment tax and offends entry 92-A of List I of the Seventh Schedule to the Constitution.
4. Whether the scheme of levy of entry tax discriminates between goods manufactured inside the State and goods imported from outside the State, thereby offending articles 301 and 304 of the Constitution.

Summary:

Issue 1: Coverage of Dealers by Section 3 of the Entry Tax Act
The petitioners argued that dealers in sugar, tobacco, or iron and steel are not covered by section 3 of the Entry Tax Act, which is the charging section. The court analyzed section 3 and concluded that the goods specified in Schedule II, including iron and steel, cotton fabrics, sugar, and tobacco, are subject to entry tax when they enter a local area for consumption, use, or sale. The court held that dealers in these goods are liable to pay entry tax provided they are liable to pay tax under the Sales Tax Act. The contention that these goods are exempt from entry tax was rejected.

Issue 2: Levy of Entry Tax on First Purchase Outside the State
The petitioners contended that the levy of entry tax on first purchase outside the State is hit by article 286(3) of the Constitution and section 15 of the Central Sales Tax Act, 1956. The court examined the relevant constitutional provisions and the Central Sales Tax Act, concluding that the entry tax is a tax on the entry of goods into a local area for consumption, use, or sale, and not a purchase tax. Therefore, article 286(3) and section 15 are not applicable to this legislation.

Issue 3: Levy of Entry Tax as Consignment Tax
The petitioners argued that the levy of entry tax amounts to a consignment tax and offends entry 92-A of List I of the Seventh Schedule to the Constitution. The court held that entry tax is distinct from consignment tax and is levied on the entry of goods into a local area for specific purposes. Therefore, the contention that it offends entry 92-A was found to be untenable.

Issue 4: Discrimination Between Goods Manufactured Inside and Outside the State
The petitioners contended that the scheme of levy of entry tax discriminates between goods manufactured inside the State and goods imported from outside the State, thereby offending articles 301 and 304 of the Constitution. The court analyzed articles 301 and 304, concluding that entry tax is compensatory in nature, intended to compensate municipalities for the loss of octroi revenue. The court found that the tax does not discriminate between goods manufactured within the State and those imported from outside. Therefore, articles 301 and 304 are not attracted.

Conclusion:
The court dismissed the writ petitions, upholding the validity of the Entry Tax Act and rejecting the challenges raised by the petitioners. The court awarded costs of Rs. 1,000 in each of the writ petitions.