2009 (9) TMI 911 - HC - VAT and Sales Tax

Constitutional validity of Chhattisgarh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 to declare the Entry Tax (Amendment) Act, 2001, whereby maximum limit of tax imposable under section 4A has been enhanced from 10 per cent to 50 per cent, as also notification issued under section 3(2), 4A under section 10 of the Act of 1976 from time to time challenged Held that - The constitutional validity of the Act of 1976 has been upheld and fresh challenge to the constitutional validity of the Act of 1976 is not maintainable, in view of the law declared under article 141 of the Constitution in Bhagatram Rajeev Kumar 1994 (11) TMI 337 - SUPREME COURT OF INDIA , The notifications issued by the State Government from time to time under sections 3(2), 4A and section 10 of the Act of 1976, vide annexure P6, and other notifications impugned by the petitioners in the connected petitions, are valid law and the same are in consonance with the provisions of the Act of 1976. Appeal dismsissed.

Summary

Issues Involved:
1. Constitutional validity of the Chhattisgarh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 ("the Act of 1976").
2. Validity of the Entry Tax (Amendment) Act, 2001.
3. Validity of notifications issued under sections 3(2), 4A, and 10 of the Act of 1976.
4. Refund of taxes collected under the Act of 1976.

Detailed Analysis:

1. Constitutional Validity of the Act of 1976:
The petitioners challenged the Act of 1976, claiming it violated Articles 301 and 304 of the Constitution of India as it impeded the free flow of trade and commerce. They argued that the tax was not compensatory and did not align with the doctrine of the working test established by the Supreme Court in Automobile Transport's case (AIR 1962 SC 1406). The petitioners contended that the tax was merely for revenue augmentation and thus violated Article 301.

Court's Analysis:
The court referred to the background of similar challenges to entry tax laws in other states, such as the M.P. Entry Tax Act, 1976, which had been upheld by the M.P. High Court and affirmed by the Supreme Court in Bhagatram Rajeev Kumar (1995) and Bihar Chamber of Commerce (1996). The court noted that the Supreme Court in Jindal Stainless Ltd. (2006) had overruled the "some connection" theory propounded in Bhagatram Rajeev Kumar but did not entirely overrule the decision upholding the validity of the M.P. Entry Tax Act, 1976.

The court concluded that the constitutional validity of the Act of 1976 had already been upheld by the Supreme Court in Bhagatram Rajeev Kumar, and the larger Bench in Jindal Stainless Ltd. did not overrule this decision in its entirety. Therefore, fresh challenges to the Act of 1976 were not maintainable under Article 141 of the Constitution.

2. Validity of the Entry Tax (Amendment) Act, 2001:
The petitioners challenged the Amendment Act, 2001, which increased the maximum limit of entry tax from 10% to 50%, arguing that it suffered from excessive delegation and was discriminatory.

Court's Analysis:
The court referred to the principles established by the Supreme Court regarding delegation of legislative powers and the need for legislative guidance. The court found that the Amendment Act, 2001, provided sufficient guidance through its Statement of Objects and Reasons, and the maximum permissible limit for entry tax was clearly defined. The notifications issued under the amended section 4A were subject to legislative scrutiny, ensuring checks and balances.

The court upheld the validity of the Amendment Act, 2001, rejecting the challenge on the grounds of excessive delegation and discrimination.

3. Validity of Notifications Issued Under Sections 3(2), 4A, and 10 of the Act of 1976:
The petitioners argued that the notifications issued under these sections imposed discriminatory rates of entry tax based on the origin of goods, violating Articles 301 and 304(a) of the Constitution.

Court's Analysis:
The court examined the justification provided by the State for imposing different rates of entry tax on goods brought from outside the State. The State argued that higher rates were imposed to ensure a level playing field for all taxpayers and to account for differences in VAT payments. The court found this justification reasonable and in line with the objectives of the Act.

The court referred to previous judgments, including those of the M.P. High Court, which had upheld similar notifications. The court concluded that the notifications did not violate Articles 14, 19, or 301 of the Constitution and were valid.

4. Refund of Taxes Collected Under the Act of 1976:
The petitioners sought a refund of taxes collected under the Act of 1976, arguing that the tax was unconstitutional.

Court's Analysis:
Given that the court upheld the constitutional validity of the Act of 1976, the Amendment Act, 2001, and the notifications issued under the Act, the request for a refund of taxes was not justified. The court dismissed the petitions, affirming the legality of the taxes collected under the Act.

Conclusion:
- The constitutional validity of the Act of 1976 is upheld.
- The Amendment Act, 2001, is a valid law.
- The notifications issued under sections 3(2), 4A, and 10 of the Act of 1976 are valid and in accordance with the Act.
- The petitions are dismissed, and no order for costs is made.