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2007 (1) TMI 516 - HC - VAT and Sales TaxConstitutional validity of the Bihar Entry Tax Act - levy and collection of tax on entry of goods into local areas for consumption, use or sale - direction of the Supreme Court in order in Jindal Stainless Limited v. State of Haryana 2006 (4) TMI 120-SUPREME COURT - amendments introduced in Patent Act, without the previous sanction of the President - violative of the proviso to article 304(b) - HELD THAT - It is noted that on November 5, 2001 and again on August 22, 2003 basic and major amendments were introduced in the Act. These included (i) the change in the definition of entry of goods , (ii) enlargement of the Schedule, and (iii) raising the maximum limit in the rate of entry tax from 5 to 20 per cent of the import value of goods. All these amendments were undeniably made without the previous sanction of the President. It is significant to note that Jyothi Home Industries 1986 (2) TMI 331 - KARNATAKA HIGH COURT also considered in detail the Supreme Court decision in Syed Ahmed Aga 1975 (5) TMI 88 - SUPREME COURT . The facts of the case and the nature of the amendments also appear to be very close to the case in hand. In light of all those decisions, I have no hesitation in coming to the conclusion that the amendments sought to be introduced in the Parent Act vide amending Act 10 of 2001, dated November 5, 2001 and the amending Act 9 of 2003, dated August 22, 2003 were bad and violative of article 304(b) of the Constitution for want of the Presidential sanction/assent. It is well-settled by a catena of decisions that only in case an Act is violative of article 301 of the Constitution, its validity is required to be tested with reference to article 304(b). The levy of the tax in its present form being compensatory in character, the need to satisfy the requirements of article 304(b) of the Constitution does not arise. Hence, I may summarise the conclusion as follows (i) The levy under the Parent Act of 1993, before its amendments, was not compensatory in character and was, therefore, violative of article 301 of the Constitution. (ii) The Parent Act of 1993, before its amendments, was nevertheless saved by virtue of article 304(b) of the Constitution and the decision in Bihar Chamber of Commerce 1996 (2) TMI 430 - SUPREME COURT to that extent remains subsisting till date. (iii) The amendments introduced in the Act by amending Acts 10 of 2001 and 9 of 2004 were bad because the former made the Act violative of article 304(a) of the Constitution and further because both the amendments were made without the previous sanction of the President. (iv) The introduction of imported goods within the definition of entry of goods was bad for being retrospective as also for want of the Presidential sanction/assent. (v) After the 2006 Amendment the levy under the Act acquired the nature of a compensatory tax and the Act in its present form is a valid piece of legislation. Thus, the two cases are fit to be allowed because they relate to the period 2001-2006. But I would refrain from making any order or direction in that regard since the matter is already pending before the Supreme Court. The two cases are thus disposed of as directed by the Supreme Court in Jindal Stainless Limited.
Issues Involved:
1. Constitutional validity of the Bihar Entry Tax Act, 1993. 2. Discrimination against goods imported from other States under the amended Act. 3. Validity of amendments made without the President's previous sanction. 4. Validity of the amendment including goods imported from other countries. 5. Compensatory nature of the levy after the 2006 amendment. 6. Requirement of compliance with Article 304(b) post-2006 amendment. Issue-wise Detailed Analysis: Issue No. 1(a): The Bihar Entry Tax Act, 1993, was initially held to be compensatory by the Supreme Court in Bihar Chamber of Commerce [1996] 103 STC 1. However, the Supreme Court in Jindal Stainless Ltd. [2006] 145 STC 544 overruled this, stating that the test of "some connection" used to determine compensatory tax was incorrect. The compensatory nature should be judged based on the "direct and immediate effect" on trade and commerce as per Atiabari Tea Co. Ltd. AIR 1961 SC 232 and Automobile Transport (Rajasthan) Ltd. AIR 1962 SC 1406. The State failed to provide data showing the levy as reimbursement for quantifiable benefits, leading to the conclusion that the levy was not compensatory till the 2006 amendment. Issue No. 1(b): Despite the levy being non-compensatory, Bihar Chamber of Commerce [1996] 103 STC 1 upheld the Act under Article 304(b) of the Constitution. This part of the decision remains undisturbed by Jindal Stainless Ltd. [2006] 145 STC 544. The Act was deemed a reasonable restriction in public interest, satisfying Article 304(b) requirements. Therefore, the Act before its amendments was valid under Article 304(b). Issue No. 2: The 2001 amendment to the definition of "entry of goods" excluded goods brought from within the State, discriminating against goods from other States, violating Articles 301 and 304(a). The Advocate-General argued that the provision of set-off against sales tax mitigated discrimination. However, this applied only to goods for resale, not those for consumption or use. Thus, the amendment introduced discrimination against goods imported for consumption or use. Issue No. 3: Amendments in 2001 and 2003, changing the definition of "entry of goods," expanding the Schedule, and increasing the tax rate, were made without the President's previous sanction, violating Article 304(b). The amendments substantively transformed the Act, necessitating Presidential sanction, as supported by decisions in Kaiser-I-Hind Pvt. Ltd. [2002] 8 SCC 182 and Jyothi Home Industries [1987] 64 STC 208. Issue No. 4: The amendment including goods imported from other countries was invalid for being retrospective and lacking Presidential sanction. The amendment created a new liability, not merely removing a lacuna, making it unfair and beyond legislative powers, as supported by D. Cawasji & Co. [1985] 58 STC 1 (SC). Issue No. 5: The 2006 amendment created the Bihar Trade Development Fund, declaring that entry tax proceeds would be used for trade, commerce, and industry development. This amendment aimed to make the levy compensatory. The Supreme Court's direction in Jindal Stainless Ltd. [2006] 7 SCC 271 required relevant data showing the levy as reimbursement for measurable benefits. The amendment's declarations and fund creation aligned with this requirement, making the levy compensatory post-2006. Issue No. 6: As per Automobile Transport (Rajasthan) Ltd. AIR 1962 SC 1406, compensatory taxes do not require compliance with Article 304(b). Post-2006 amendment, the levy being compensatory, Article 304(b) compliance is unnecessary. Conclusion: (i) The levy under the Parent Act of 1993 was not compensatory and violated Article 301. (ii) The Parent Act was valid under Article 304(b) as per Bihar Chamber of Commerce [1996] 103 STC 1. (iii) Amendments in 2001 and 2003 were invalid for violating Article 304(a) and lacking Presidential sanction. (iv) The amendment including imported goods was invalid for being retrospective and lacking Presidential sanction. (v) Post-2006 amendment, the levy became compensatory, making the Act valid. (vi) Post-2006 amendment, Article 304(b) compliance is unnecessary. The cases are allowed for the period 2001-2006, but no order is made since the matter is pending before the Supreme Court.
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