2001 (12) TMI 857 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutionality of the Haryana Local Area Development Tax Ordinance, 2000, and the Haryana Local Area Development Tax Act, 2000.
2. Competence of the State Legislature to enact the Entry Tax Act.
3. Violation of Articles 14, 19(1)(a) and (g), 286, 301, and 304 of the Constitution of India.
4. Validity of the exemption notifications dated May 5, 2000.

Issue-wise Analysis:

1. Constitutionality of the Haryana Local Area Development Tax Ordinance, 2000, and the Haryana Local Area Development Tax Act, 2000:
The petitioners challenged the constitutionality of the Ordinance and the Entry Tax Act, arguing that the State Legislature was not competent to enact such laws and that the provisions were violative of several constitutional articles. The court noted that the Ordinance had been replaced by the Entry Tax Act, making the challenge to the Ordinance academic. The court held that the Entry Tax Act was within the legislative competence of the State under Entry 52 of List II of the Seventh Schedule of the Constitution, which allows the State to levy taxes on the entry of goods into a local area for consumption, use, or sale therein.

2. Competence of the State Legislature to enact the Entry Tax Act:
The petitioners argued that the Entry Tax Act was a colorable piece of legislation and beyond the legislative competence of the State. They contended that the tax was, in reality, a sales tax on transactions involving the import and export of goods, which falls under the exclusive domain of the Parliament. The court rejected this argument, stating that the tax was levied on the entry of goods into a local area for consumption or use therein, and not on the sale or purchase of goods. The court emphasized that the impugned legislation fell within the ambit of Entry 52 of List II and was not a tax on consignment of goods or sales tax.

3. Violation of Articles 14, 19(1)(a) and (g), 286, 301, and 304 of the Constitution of India:
- Article 301 and 304: The petitioners argued that the entry tax was a restriction on the free flow of trade, commerce, and intercourse throughout the territory of India and was discriminatory against goods imported from other States. The court held that the entry tax was compensatory in nature, intended to compensate local bodies for the loss caused by the abolition of octroi. The court stated that compensatory taxes do not fall within the purview of restrictions contemplated by Article 301 and need not comply with Article 304(b).
- Article 14: The petitioners contended that the entry tax was discriminatory as it exempted goods on which sales tax had been paid within the State. The court rejected this argument, stating that the deductions and exemptions provided under Sections 5 and 11 of the Entry Tax Act were uniformly applicable to all importers and did not lead to discrimination.
- Article 19(1)(a) and (g): The court dismissed the argument that the entry tax violated the petitioners' fundamental rights to freedom of speech and expression and to carry on business, stating that the levy of entry tax did not affect these rights.

4. Validity of the exemption notifications dated May 5, 2000:
The petitioners argued that the exemption notifications were arbitrary and discriminatory. The court held that Section 11 of the Entry Tax Act, which empowered the State Government to grant exemptions, did not suffer from the vice of excessive delegation. The court stated that the power to grant exemptions was to be exercised in public interest and that the notifications aimed to provide impetus to the Information Technology industry. The court also noted that the petitioners could approach the Government to seek exemption for similar goods.

Conclusion:
The court dismissed the writ petitions, upholding the constitutionality of the Haryana Local Area Development Tax Ordinance, 2000, and the Haryana Local Area Development Tax Act, 2000. The court found that the impugned legislation was within the legislative competence of the State, did not violate Articles 14, 19(1)(a) and (g), 286, 301, and 304 of the Constitution, and that the exemption notifications were not arbitrary or discriminatory.