2016 (5) TMI 828 - HC - VAT and Sales Tax

Whether the Entry Tax under the provisions of the Chhattisgarh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam 1976 can be levied upon the goods brought into railway area where the petitioners are carrying on their trade and business - Held that - submission of petitioners that they are not liable for payment of entry tax is liable to be rejected as Article 285 of the Constitution of India only applies if the property is of the Union of India and the tax is directly imposed. Here entry tax has been imposed under the Act of 1976 on the entry of goods into the local area for consumption use or sale by the petitioners who are said to be dealers under the Act of 1976. By applying the decision of Supreme Court in the case of Senior Divisional Mechanical Engineer v. State of Orissa and others the mandate under Article 285 of the Constitution of India does not extend to the taxes leviable for entry of goods into the local area and entry tax cannot be called as a tax directly imposed upon the income or property of the Union as taxable event under the Orissa Entry Tax Act 1999 is on the entry of scheduled goods into the local area and not on the goods itself. Therefore the petitioners are not exempted from payment of entry tax by virtue of the provisions contained in sub-section (1) of Section 184 of the Railways Act 1989. - Decided against the petitioner

Summary

Issues:
Whether Entry Tax can be levied on goods brought into railway area where petitioners are conducting business.

Analysis:
The petitioners, a registered society and business owners in a railway area, challenged the imposition of Entry Tax under the Chhattisgarh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976. They argued that they are exempt from Entry Tax as their shops are within the railway area. The State contended that Entry Tax is applicable when goods enter a local area for consumption, use, or sale, and does not fall under the Railways Act exemptions. The petitioners invoked Article 285 of the Constitution of India, claiming exemption from state taxes on Union property.

The court examined the definitions in the Railways Act, 1989, and Article 285 of the Constitution. It cited a Supreme Court ruling that Entry Tax is not a direct tax on Union property, and the taxable event is the entry of goods into the local area. The court emphasized the distinction between direct taxes on property or income and indirect taxes like Entry Tax. It held that Article 285 does not apply to Entry Tax and rejected the petitioners' argument based on the Railways Act.

The court referred to a case where the Supreme Court clarified that taxes on the entry of goods into a local area are not considered direct taxes on Union property. It highlighted that Entry Tax is imposed on goods entering the local area, not on the property itself. The court reiterated that Article 285 does not cover indirect taxes like Entry Tax. It dismissed the petition but allowed the petitioners to pursue statutory remedies available under the law.

In conclusion, the court ruled that Entry Tax can be levied on goods entering a local area, even if the business is conducted within a railway area. The judgment clarified the application of Article 285 and the Railways Act in relation to Entry Tax, emphasizing the distinction between direct and indirect taxes. The court upheld the imposition of Entry Tax and dismissed the petition, while granting the petitioners the option to seek alternative legal remedies.