2003 (4) TMI 537 - AT - VAT and Sales Tax

Issues Involved:
1. Validity of Serial No. 8 of Part G to the First Schedule introduced by Tamil Nadu Act No. 18 of 2002.
2. Validity of Serial No. 9 of the Eleventh Schedule to the Tamil Nadu General Sales Tax Act, 1959, introduced by Tamil Nadu Act No. 22 of 2002.
3. Alleged discrimination under Articles 14, 265, 286, 301, and 304(a) of the Constitution of India.
4. Applicability of Part XIII of the Constitution of India to imported goods.

Issue-wise Detailed Analysis:

1. Validity of Serial No. 8 of Part G to the First Schedule introduced by Tamil Nadu Act No. 18 of 2002:
The petitioners challenged the imposition of a 20% tax on cars imported from outside India but sold within the state, as introduced by Tamil Nadu Act No. 18 of 2002. They argued that this provision was ultra vires Articles 14, 265, 286, 301, and 304(a) of the Constitution of India. The court noted that the petitioner, an authorized dealer of Ford cars, imported Ford Mondeo cars from Belgium and paid entry tax upon their arrival in Tamil Nadu. The court held that the imposition of the tax was valid and within the legislative competence of the State, as the tax was levied on goods entering the state for consumption, use, or sale therein.

2. Validity of Serial No. 9 of the Eleventh Schedule to the Tamil Nadu General Sales Tax Act, 1959, introduced by Tamil Nadu Act No. 22 of 2002:
The petitioners also challenged the introduction of Serial No. 9 of the Eleventh Schedule, which imposed a 20% tax on the sales of imported motor cars. The court upheld the validity of this provision, stating that the State Legislature had the authority to impose such a tax, and it was not discriminatory as it applied uniformly to all imported cars sold within the state.

3. Alleged discrimination under Articles 14, 265, 286, 301, and 304(a) of the Constitution of India:
The petitioners argued that the tax provisions discriminated against imported cars compared to locally assembled cars like Hyundai Sonata and Honda Accord, which were taxed at a lower rate of 12%. The court rejected this argument, stating that the differentiation was based on the fact that Ford Mondeo cars were fully imported, whereas other cars were assembled in India from semi-knocked down (SKD) kits. The court held that such a classification was reasonable and did not violate Article 14 of the Constitution, as fully imported goods could be taxed differently from those assembled locally.

4. Applicability of Part XIII of the Constitution of India to imported goods:
The petitioners contended that once imported goods entered the domestic market, they should be treated as part of inter-State trade and commerce, thus invoking the protections under Part XIII of the Constitution. The court referred to the Supreme Court's decisions in Atiabari Tea Co. Ltd. v. State of Assam and Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan, which clarified that Article 301 applies to inter-State and intra-State trade within India and does not cover imported goods. The court concluded that the provisions under Part XIII of the Constitution could not be applied to goods imported from foreign countries.

Conclusion:
The court dismissed all the original petitions, upholding the validity of the tax provisions introduced by Tamil Nadu Acts Nos. 18 of 2002 and 22 of 2002. It ruled that the State Legislature had the authority to impose the taxes, and the classification between fully imported and locally assembled goods was reasonable and did not violate the constitutional provisions cited by the petitioners. The court emphasized that Part XIII of the Constitution deals with trade, commerce, and intercourse within the territory of India and does not extend to imported goods.

← Previous Next →