2017 (1) TMI 1559 - HC - VAT and Sales Tax

Levy of Entry tax - whether in respect of the vehicles which have been sold by the petitioner or whether in respect of the vehicles, which have been sold from Indore dealers to various persons and in respect of the same vehicles the Entry Tax has already been paid can be subjected to payment of entry tax again on selling of second hand vehicles, in spite of the fact that there is no change of local area or without causing entry from one local area into another local area? - Held that - In the present case, petitioner being a dealer in Indore purchases goods from Maruti Udyog Ltd. Haryana and at that point of time, entry tax is paid when the vehicle is brought to Indore and it is sold at Indore and thereafter, the vehicle again re-sold to the petitioner i.e. Maruti True Value . There is no change in respect of local area i.e. Indore where vehicle owner has sold the vehicle to the petitioner - entry tax has already been paid in respect of the vehicles, which have been sold to the persons who are residing at Indore, this Court is of the considered opinion that the respondents cannot charge the tax upon the goods which have already entered in local area and in respect of which the entry tax has already been paid. This Court is of the considered opinion that the entry tax assessed vide order dated 29.07.2014 for assessment year 2011-12 to the extent, the entry tax has been charged upon the vehicles purchased from unregistered dealer/persons without there being any entry area is bad in law - petition allowed.

Summary

Issues:
Interpretation of Entry Tax Act, 1976 regarding the levy of entry tax on goods sold within a local area after the tax has already been paid upon their initial entry.

Analysis:
The petitioner, a registered company under the Companies Act, 1956, challenged a final assessment order charging Entry Tax for the period 01.04.2011 to 31.03.2012 on vehicles sold within the local area of Indore, despite the tax already being paid upon their initial entry. The petitioner, an authorized selling agent of Maruti Suzuki India Ltd., engaged in the purchase/exchange of old/used vehicles under the brand "Maruti True Value." The dispute centered on whether entry tax could be charged again on vehicles sold within the same local area, even if tax had been paid upon their initial entry.

The petitioner argued that the entry tax had already been paid upon the goods' initial entry into the local area of Madhya Pradesh and, therefore, charging the tax again upon subsequent sales was unjust. The State, however, relied on Section 3 of the Entry Tax Act, emphasizing the lack of proof of tax payment upon initial entry and justifying the additional tax on vehicles sold by the petitioner.

The Court examined the provisions of the Entry Tax Act, emphasizing that the tax was intended for goods entering a local area for consumption, use, or sale. It noted that the tax was introduced to replace Octroi and was levied under Entry 52 of List 2 of the 7th Schedule to the Constitution of India. The Court concluded that charging entry tax again on vehicles already sold within the local area, where tax had been paid upon initial entry, was unwarranted.

The Court further analyzed the provisos of Section 3(1) of the Entry Tax Act, highlighting that the tax liability could only arise if the seller had caused the entry of goods into a local area from another area. Since all sellers were residents of Indore, and no new entry was made before the vehicles were sold to the petitioner, the Court deemed the additional tax unjustifiable.

Consequently, the Court allowed the writ petitions, quashed the impugned order, and directed the respondents to refund the amount recovered from the petitioner within 90 days, with interest at 12% if the refund was delayed. The judgment emphasized that the respondents could not charge entry tax again on goods already sold within the local area where tax had been paid upon their initial entry.