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2006 (10) TMI 395 - HC - VAT and Sales TaxLevy of Entry Tax - Seeks to challenge the provisions of the Gujarat Tax on Entry of Specified Goods into Local Areas (Entry Tax Act) - violative of articles 301 and 304 of the Constitution of India - transportation and travel services to passengers in the State of Gujarat - HELD THAT - On a fair reading of the provisions of article 304(a) and 304(b), if the levy of tax is found to be non-discriminatory, in that case, previous sanction of the President is not required. If the contention on behalf of the petitioner is accepted, then there is no purpose in enacting article 304(a) and 304(b) separately. If the argument is correct then what is mentioned in article 304(b) could have been mentioned in article 304(a) itself and both would not have been worded separately. Under the circumstances, the contention on behalf of the petitioner, that even if the levy of tax is found to be non-discriminatory in that case too it is to be established that the same is in the public interest and that it requires previous sanction of the President, cannot be accepted. Considering the various provisions of the Statement of Objects, settled legal provision and facts stated hereinabove, it cannot be said that the provisions of the Act and the levy of the entry tax on the specified goods are violative of article 304 of the Constitution of India. We hold that, levy of entry tax is neither discriminatory between the goods so imported and goods so manufactured or produced in a local areas and the challenge to the constitutional validity of the Gujarat Tax on Entry of Specified Goods into Local Areas Act, 2001 (Entry Tax Act) and the levy of entry tax therefore fails. The petition deserves dismissal and it is accordingly dismissed. Rule is discharged. However, there shall be no order as to costs.
Issues Involved:
1. Constitutionality of the Gujarat Tax on Entry of Specified Goods for the Local Areas Act, 2001 (Entry Tax Act) under Articles 301 and 304 of the Constitution of India. 2. Whether the Entry Tax Act is discriminatory against importers from other states compared to local dealers. 3. Whether the Entry Tax Act hampers the free flow of trade and commerce across state boundaries. 4. Whether the Entry Tax Act requires the previous sanction of the President under Article 304(b) of the Constitution. Detailed Analysis: 1. Constitutionality of the Entry Tax Act under Articles 301 and 304 of the Constitution of India: The petitioner challenged the Entry Tax Act as ultra vires the Constitution, arguing that it violates Articles 301 and 304 by impeding free trade and commerce. The petitioner contended that the Act is not a compensatory tax, as defined by the Supreme Court in Jindal Stainless Ltd. v. State of Haryana, which requires quantifiable and measurable benefits to the taxpayers. The State, however, argued that the Act is non-discriminatory and falls within the exceptions provided under Article 304(a), which allows the imposition of taxes on imported goods if similar taxes are levied on locally produced goods. 2. Discrimination Against Importers from Other States: The petitioner argued that the Entry Tax Act discriminates against importers from other states by imposing a tax on them while not taxing local dealers bringing goods from one local area to another within the state. The State countered that the Act provides for a reduction in tax liability under Section 4, ensuring that the overall tax burden on importers is equivalent to that on local dealers. The court found that the Act's provisions aim to create a level playing field, thereby eliminating any discrimination between importers and local dealers. 3. Free Flow of Trade and Commerce: The petitioner claimed that the Entry Tax Act hampers the free flow of trade, violating Article 301 of the Constitution. The State argued that the tax is non-discriminatory and necessary to compensate for revenue losses due to trade diversion to neighboring states with lower sales tax rates. The court held that the Act does not impede free trade as it ensures that importers and local dealers are subject to similar tax burdens, thus maintaining the free flow of trade and commerce. 4. Requirement of Previous Sanction of the President under Article 304(b): The petitioner contended that even if the tax is non-discriminatory, it still requires the previous sanction of the President under Article 304(b). The court rejected this argument, stating that Articles 304(a) and 304(b) are to be construed separately. If a tax is non-discriminatory, it does not require the President's sanction. The court emphasized that the Act is non-discriminatory and thus does not need to comply with Article 304(b). Conclusion: The court dismissed the petition, upholding the constitutionality of the Entry Tax Act. It ruled that the Act is neither discriminatory nor does it impede the free flow of trade and commerce. The court found that the Act ensures a level playing field between importers and local dealers, thereby complying with Article 304(a) of the Constitution. The requirement of the President's sanction under Article 304(b) was deemed unnecessary as the tax was found to be non-discriminatory. The petition was dismissed with no order as to costs.
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