2009 (11) TMI 821 - HC - VAT and Sales Tax

Imposition of entry tax on the imported cement for use in the manufacturing process of asbestos sheets - whether discriminatory and also violative of not only the constitutional guarantees, but also of the scheme of the AET Act, 2001 as stated by petitioner? Held that - Levy of entry tax under the AET Act, 2001, on import of cement into a local area for the purpose of its consumption in the manufacturing process of asbestos sheets cannot be interfered with on grounds of discrimination, arbitrariness or violation of any constitutional guarantees. This apart, the levy of entry tax on cement has been imposed with prior sanction of the President in terms of the proviso to article 304(b) of the Constitution of India. Viewed thus, it is abundantly clear that the challenge to the levy of entry tax on cement by the present set of writ petitioners has no substance and cannot be sustained. W.P. dismissed.

Issues Involved:
1. Imposition of Entry Tax on Imported Cement
2. Discrimination and Violation of Constitutional Guarantees
3. Nexus with Legislative Object
4. Violation of Articles 14 and 19(1)(g) of the Constitution
5. Legality of Classification under AET Act, 2001

Issue-wise Detailed Analysis:

1. Imposition of Entry Tax on Imported Cement:
The petitioners, manufacturers of asbestos cement sheets, contended that the imposition of entry tax under the Assam Entry Tax Act, 2001 (AET Act, 2001) on imported cement used in manufacturing is discriminatory. They argued that local manufacturers of other goods are exempt from entry tax if the sale of such goods within Assam is liable to local sales tax. The court examined Section 3 of the AET Act, 2001, which levies entry tax on goods entering a local area for consumption, use, or sale. It was determined that the import of cement for manufacturing asbestos sheets constitutes "consumption" under the Act, thus justifying the levy of entry tax.

2. Discrimination and Violation of Constitutional Guarantees:
The petitioners argued that the entry tax on imported cement is discriminatory and violates Articles 14 and 19(1)(g) of the Constitution. They claimed that the tax burden on them was arbitrary and that local manufacturers of other goods were not subjected to similar taxes. The court found that the classification made by the Legislature was not discriminatory. It was reasoned that those who import cement for resale and those who import cement for manufacturing are distinct classes. The former is exempt from entry tax if they pay local sales tax on the resale of cement, while the latter, like the petitioners, consume the cement in manufacturing and thus are liable for entry tax.

3. Nexus with Legislative Object:
The petitioners contended that the levy of entry tax on raw materials used in manufacturing finished products has no nexus with the legislative object of the AET Act, 2001. The court held that the legislative intent was to avoid double taxation on the same goods and to ensure that goods consumed in manufacturing processes are taxed appropriately. The court emphasized that the legislative object was to mobilize additional resources by curbing revenue loss from imported goods for consumption within the state.

4. Violation of Articles 14 and 19(1)(g) of the Constitution:
The petitioners argued that the entry tax violated Articles 14 and 19(1)(g) of the Constitution by imposing an unequal tax burden on them compared to other manufacturers. The court held that the classification under the AET Act, 2001, was based on an intelligible differentia with a rational nexus to the legislative object. It was determined that the tax did not violate Article 14 as it applied uniformly within each classified group. The court also found no violation of Article 19(1)(g), as the tax was not arbitrary and did not impose an unreasonable restriction on the petitioners' right to practice any profession or carry on any occupation, trade, or business.

5. Legality of Classification under AET Act, 2001:
The petitioners claimed that the classification under the AET Act, 2001, was arbitrary and lacked a rational basis. The court held that the classification was reasonable and based on the purpose of the goods' import-whether for resale or for consumption in manufacturing. The court referenced several Supreme Court judgments to support the view that taxing statutes can classify goods and persons for taxation purposes as long as the classification is reasonable and not arbitrary. The court concluded that the classification in the AET Act, 2001, did not violate constitutional principles and was within the Legislature's competence.

Conclusion:
The court dismissed the writ petitions, upholding the imposition of entry tax on imported cement used in manufacturing asbestos sheets. It found that the levy was justified, non-discriminatory, and in line with the legislative object of the AET Act, 2001. The court also vacated any interim directions and ruled that there would be no order as to costs.

← Previous Next →