2003 (1) TMI 676 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to exhibit P4 notice demanding entry tax on imported marble slabs, reliance on exemption notification S.R.O. No. 590 of 1996, modification by S.R.O. No. 949 of 2002 withdrawing exemption, validity of exhibit P5 notification, discrimination against dealers of specified goods, advance payment of sales tax through entry tax.

Analysis:

1. The petitioner contested exhibit P4 notice demanding entry tax on marble slabs imported to Kerala, arguing exemption under S.R.O. No. 590 of 1996 for registered dealers under sales tax acts. However, S.R.O. No. 949 of 2002 modified the exemption, withdrawing it for specified goods like marble slabs. The petitioner challenged the validity of exhibit P5 notification, alleging arbitrariness and violation of Article 14 of the Constitution of India. The court noted the withdrawal of exemption under exhibit P5 and examined the legality of the modified notification.

2. Section 4 of the Entry Tax Act establishes that entry tax payment is akin to advance sales tax for registered dealers. The tax paid at the check-post reduces the sales tax liability upon resale of the imported goods. The court clarified that entry tax payment acts as an advance towards sales tax, and any excess payment can be adjusted or refunded during sales tax assessment. The petitioner's grievance against the entry tax determination was deemed temporary, as it directly offsets the sales tax liability upon subsequent sale of the goods.

3. The petitioner raised concerns about discrimination following the withdrawal of exemption for specified goods under S.R.O. No. 949 of 2002. The court analyzed the classification of goods and dealers under the exemption notifications. It concluded that the collection of entry tax at the check-post ensures accountability and prevents tax evasion. The differentiation in treatment for various classes of goods and importers was found to align with the legislative intent to maintain tax compliance and accountability.

4. Ultimately, the court dismissed the original petition, upholding the legality of the entry tax demand and the modified exemption notification. It emphasized the purpose of entry tax as an advance sales tax mechanism for accountability and deterrence of tax evasion. The judgment highlighted the interplay between entry tax payment, sales tax liability, and the regulatory objectives of the Entry Tax Act in ensuring tax compliance by dealers importing goods into Kerala.