2019 (9) TMI 953 - HC - VAT and Sales Tax

Demand of Entry Tax - machinery imported by the assessee during the A.Y. 2000-2001 but exported outside the country in the year 2004-2005 - HELD THAT - The levy of tax on entry of machinery (valued at more than 10 lacs) arose no sooner the assessee caused the entry of those goods into the local area Allahabad from outside that local area for use. Under the Old Act the subsequent Act of export of the machinery out of the country was wholly irrelevant and had no bearing on the tax liability that had otherwise arisen and got finally attached to the transaction upon causing entry of such machinery inside the local area for use. For the purposes of clarity it has to be stated that no provision of the nature contained in Section 4(6) of the Act (New Act) existed under the Old Act. The tax liability may arise in each unit/assessment year only with respect to taxable event/transaction completed therein. The same has to be assessed for that assessment year. Also it has to be discharged or recovered as the case may be with reference to that assessment year only. The legal basis of the claim raised by the assessee is found non-existent. There is nothing to doubt the existence of the tax liability and its crystallization at the end of the A.Y. 2000-01. It also did not get diluted or wiped out upon occurrence of export of the machinery in subsequent assessment year. Thus the factual and legal basis of the claim raised by the assessee having arisen more than three years after the close of the assessment year 2000-01 the same is wholly unfounded. The taxable event occurred in and tax liability arose upon the assessee having caused the entry of machinery for use in the local area Allahabad during the A.Y. 2000-01. It got crystallized on 31st March 2001. The event of subsequent export of machinery outside the country during the A.Y. 2004-05 had no bearing on the unit of assessment being the A.Y. 2000-01. Revision dismissed.

Summary

Issues Involved:
1. Application of Section 4 and its Explanation under the Old Act.
2. Coverage of machinery imported during A.Y. 2000-01 under Section 4 of the Old Act.
3. Liability of the assessee to pay entry tax under Section 4(6)(ii) of the New Act upon resale of goods in the course of export.

Detailed Analysis:

Issue 1: Application of Section 4 and its Explanation under the Old Act
The assessee argued that the machinery imported into Allahabad during A.Y. 2000-01 was non-taxable since it was brought from outside the country. However, the court found that under the Old Act, Section 4 clearly imposed entry tax on goods brought into a local area for consumption, use, or sale, regardless of whether the goods were imported from outside the country. The Supreme Court's decision in the case of State of Kerala vs. Fr. William Fernandez clarified that entry tax could be levied on imported goods once they entered the local area. Therefore, the Tribunal's application of Section 4 and its Explanation was correct.

Issue 2: Coverage of Machinery Imported During A.Y. 2000-01 under Section 4 of the Old Act
The court noted that the Old Act's schedule included machinery valued at more than ?10 lacs as taxable. The entry of such machinery into Allahabad for use during A.Y. 2000-01 triggered the tax liability. The subsequent export of machinery in A.Y. 2004-05 was irrelevant to the tax liability that had already crystallized in A.Y. 2000-01. The Old Act did not provide any provision for reversing the tax liability upon subsequent export of goods.

Issue 3: Liability of the Assessee to Pay Entry Tax under Section 4(6)(ii) of the New Act
The assessee relied on Section 4(6)(ii) of the New Act, which exempts goods sold in the course of export from entry tax. However, the court emphasized that each assessment year is a separate unit for tax assessment. The taxable event of entry of machinery into Allahabad took place and was completed in A.Y. 2000-01. The subsequent export of the machinery in A.Y. 2004-05 did not affect the tax liability that had already crystallized in A.Y. 2000-01. The New Act's provisions for tax reversal or exemption did not apply retroactively to events occurring in previous assessment years.

Conclusion:
The court concluded that the tax liability for the machinery imported during A.Y. 2000-01 was valid and crystallized by the end of that assessment year. The subsequent export of machinery in A.Y. 2004-05 had no bearing on the tax liability for A.Y. 2000-01. The revision filed by the assessee was dismissed, and the questions of law were answered against the assessee. The Tribunal's order affirming the assessment and demand of entry tax was upheld.