2008 (6) TMI 554 - HC - VAT and Sales Tax

Entry tax - whether the machinery was brought to the local area from outside the State of Uttarakhand and U.P.? Held that - In the facts and circumstances of the case taking into consideration the fact that the U.P. Tax on Entry of Goods Act 2000 has been declared ultra vires by the Division Bench of the Allahabad High Court and it has also been held that the entry tax is not a compensatory tax . Therefore the writ petition is liable to be allowed. The impugned circular dated September 14 2000 is liable to be quashed. The writ petition is allowed. The respondents are restrained by a writ of mandamus not to realise the entry tax from the petitioner in respect of machines imported from outside the country for the assessment year 2000-01 and 2001-02. The circular dated September 14 2000 issued by the Commissioner of Trade Tax U.P. Lucknow which is impugned in this writ petition (annexure No. 2) is accordingly quashed.

Summary

Issues:
Challenge to levy of entry tax on imported machines in industrial area. Validity of circular dated September 14, 2000. Compensatory nature of entry tax.

Analysis:
The writ petition challenged the imposition of entry tax on machines imported from outside the country for the assessment years 2000-01 and 2001-02, installed in an industrial area in Khatima. The petitioner argued that a similar issue had been addressed by the Allahabad High Court in a previous case, where the entry tax had been declared ultra vires and void. The Division Bench of the Allahabad High Court had held that there was no evidence to prove that the entry tax was compensatory in nature, providing additional benefits to scheduled trades. The State failed to provide any data or material to support the compensatory nature of the tax. The State's argument that the tax was justified due to the machinery being brought from outside the State was not accepted, as there was no evidence to show that the tax provided any specific or additional services.

The Division Bench of the Allahabad High Court had already declared the U.P. Tax on Entry of Goods Act, 2000 as violative of constitutional provisions and ultra vires. Given this precedent and the lack of evidence supporting the compensatory nature of the tax, the High Court found in favor of the petitioner. The impugned circular dated September 14, 2000 was quashed, and the respondents were restrained from realizing entry tax on the imported machines. The court held that since the entry tax was not compensatory in nature, the writ petition was allowed, and costs were awarded to the petitioner.