2020 (5) TMI 390 - HC - VAT and Sales Tax

Levy of Entry Tax - entry of goods in to Railway area - the assessment was finalized by the Assessing Authority levying Entry Tax with interest and penalty as per Annexure RA/4 order, which was sought to be challenged by filing an appeal before the Deputy Commissioner (Appeals) - specific contention raised by the Applicant was that the place to which the goods were brought by the Applicant / Assessee, was part of the Railway land which was not a local area as defined under Section 2(d) of the Chhattisgarh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976. HELD THAT - Section 6 of the said Act dealing with the principles governing levy of Entry Tax on dealer or person under sub-section (1) (a), that Entry Tax shall not be payable unless the dealer or such person effects entry of goods specified in Schedule II or Schedule III into a 'local area'. Under Section 6 (1) (b), it is stated that where any such goods are consumed, used or sold in a local area by the dealer or such person, it shall be presumed, until the contrary is proved by him, that such goods had entered into that local area for consumption, use or sale there - There is no dispute with regard to the fact that the goods brought by the Applicant herein are scheduled goods (i.e. either Schedule II or III) and the dispute is only with regard to the place to which the goods are brought, contending that the place being a land belonging to the Railways, it is not a 'local area'. Section 131 of the Orissa Municipal Act, 1950 refers to the power of the Municipality to impose taxes including Octroi Duty on the goods brought within the limits of the Municipal area. The significant thing to be noted, as held by the Apex Court, was that Octroi Duty could fall within the ambit of Section 184 (1) as a tax in aid of the fund or any local authority; which will not apply to the tax of Entry Tax leviable under Section 3(1) of the said Act of 1999 (which tax is imposed and collect by the State Government). It was also observed that the words any tax in Section 184 of the Railways Act, 1989 was required to be read in the context of Article 285 of the Constitution of India and to be understood as any tax on property or income as a direct tax. The Railways/licensor had clearly alerted the Applicant / Assessee that it would be for the Applicant / licensee to satisfy the various charges / fees as mentioned therein in respect of the use of the said plot plus local taxes, such as all Municipal rights and taxes, if any to the Government as and when demanded; besides the liability to satisfy the occupation fees, whenever enhanced by the Railways with retrospective effect. Application dismissed.

Summary

Issues Involved:
1. Correctness and sustainability of the order passed by the Chhattisgarh Commercial Tax Tribunal.
2. Whether the entry of goods into Railway area is liable to Entry Tax.
3. Applicability of the Supreme Court judgment in Senior Divisional Mechanical Engineer vs. State of Orissa.
4. Validity of reopening concluded assessments based on subsequent Supreme Court rulings.

Detailed Analysis:

1. Correctness and Sustainability of the Tribunal's Order:
The appeals challenge the Tribunal's rejection of the application for reference under Section 55(2)(b) of the Chhattisgarh Value Added Tax Act, 2005. The Tribunal dismissed the appeal based on the Supreme Court judgment in Senior Divisional Mechanical Engineer vs. State of Orissa, which upheld the imposition of Entry Tax on goods brought into Railway areas, treating them as 'local areas'. The Tribunal's decision was also influenced by the Commissioner’s circular dated 16.05.2011, instructing the levy of Entry Tax on goods entering Railway areas.

2. Liability of Entry Tax on Goods Entering Railway Area:
The Applicant argued that the goods brought into the Railway land, where the factory is set up, should not attract Entry Tax as Railway land does not qualify as a 'local area' under Section 2(d) of the Chhattisgarh Entry Tax Act, 1976. However, the Tribunal and the subsequent judgment dismissed this contention, holding that the Railway area falls within the local limits of the Municipality of Dongargarh, thereby making it a 'local area' subject to Entry Tax.

3. Applicability of the Supreme Court Judgment:
The Applicant contended that the Supreme Court's decision in Senior Divisional Mechanical Engineer vs. State of Orissa was based on different facts and should not apply to their case. The Supreme Court had addressed the constitutional validity of Entry Tax in the context of Article 285 and Section 184 of the Railways Act, 1989, which was not directly relevant to the Applicant's situation. Despite this, the Tribunal relied on this judgment, leading to the rejection of the Applicant's appeal.

4. Validity of Reopening Concluded Assessments:
The Applicant argued that the assessment should not be reopened based on a subsequent Supreme Court ruling, citing the decision in Dy. Commissioner of Income Tax vs. Simplex Concrete Piles (India) Ltd. The Supreme Court had held that subsequent legal reversals do not justify reopening finalized assessments. However, the Tribunal did not entertain this argument, and the High Court upheld this stance, stating that new questions not raised before the Tribunal cannot be considered.

Conclusion:
The High Court dismissed the applications, affirming the Tribunal's decision. It concluded that the Railway area falls within the 'local area' definition, making the goods liable for Entry Tax. The reopening of assessments based on subsequent Supreme Court rulings was deemed valid, and new questions not previously raised before the Tribunal were not entertained. The Applicant's agreement to pay local taxes as per the license agreement with the Railways further weakened their case.