2013 (9) TMI 868 - HC - VAT and Sales Tax

Constitutionality of provisions - determination of entry tax - Clause (iv) of the proviso to Section 2 (h) of U.P. Tax on Entry of Goods into Local Areas Act, 2007 - Tax on market value - provisional assessment was made against the petitioner for stock transfer of cement - Held that - provisions of Section 2 (h) (iv) and Section 4 (g) are not ultra vires of the Act. These are machinery provisions to find out the value of goods at the time of entry of goods in the State - assessment order is subject to appeal and that the petitioner can challenge the order on all the grounds, which are available to it, and to lead credible and relevant evidence to establish that the value of the goods at the time of entry into the State is not the whole sale value, which was being found by the Assessing Authority to be the value on the basis of such material, which may be produced by the petitioner before the Assessing Authority - Decided against assessee.

Issues Involved:

1. Validity of clause (iv) of the proviso to Section 2 (h) of U.P. Tax on Entry of Goods into Local Areas Act, 2007.
2. Validity of the assessment order dated 14.2.2013.
3. Legislative competence of the State Government under Entry 52, List II of the 7th Schedule of the Constitution of India.
4. Violation of Article 14 of the Constitution of India.
5. Determination of the value of goods for the purpose of entry tax.

Issue-wise Detailed Analysis:

1. Validity of clause (iv) of the proviso to Section 2 (h) of U.P. Tax on Entry of Goods into Local Areas Act, 2007:

The petitioner challenged the validity of clause (iv) of the proviso to Section 2 (h) of the Act, arguing it was beyond the legislative competence of the State and violated the Constitution. The Court referenced a previous judgment (ITC Limited vs. State of UP) which upheld the constitutional validity of the Act, stating, "The levy of entry tax under the Act, therefore, does not violate the freedom of trade, commerce and intercourse guaranteed under Art.301 of the Constitution of India." The Court found that the grounds raised in the current petition were not decided in the previous judgment, thus allowing the challenge.

2. Validity of the assessment order dated 14.2.2013:

The petitioner sought to quash the assessment order imposing entry tax on the market value of goods. The Court examined whether the assessment was based on a valid interpretation of the Act. It was noted that the Assessing Authority used the wholesale price to determine the value of goods for stock transfer, which was contested by the petitioner. The Court agreed that the value at the time of entry into the State should be considered, not the subsequent wholesale price.

3. Legislative competence of the State Government under Entry 52, List II of the 7th Schedule of the Constitution of India:

The petitioner argued that the provisions were beyond the legislative competence of the State. The Court, referencing previous judgments, upheld the State's competence, stating, "The State of U.P. did not lack legislative competence in enacting U.P. Tax on Entry of Goods into Local Areas Act, 2007." The provisions were found to be within the legislative powers granted to the State.

4. Violation of Article 14 of the Constitution of India:

The petitioner claimed the provisions violated Article 14, which guarantees equality before the law. The Court did not find the provisions discriminatory or unreasonable, stating, "The levy under the Act, 2007 is also not discriminatory, unreasonable or against public interest." Thus, the provisions were upheld as not violating Article 14.

5. Determination of the value of goods for the purpose of entry tax:

The core issue was whether the wholesale price could be used to determine the value of goods for entry tax purposes. The Court referenced the Supreme Court's judgments in State of Karnataka vs. M/s Hansa Corporation and State of Rajasthan vs. Rajasthan Chemists Association, concluding that "the value of the goods at the time of entry has to be taken into consideration for charging it for tax and not any other value whether it be whole sale price or retail price of such goods, at a point later than its entry into the State." The assessment based on wholesale price was found inappropriate if it did not reflect the value at the time of entry.

Conclusion:

The Court dismissed the writ petition, upholding the provisions of Section 2 (h) (iv) and Section 4 (g) as valid machinery provisions. It emphasized that the assessment order is subject to appeal, and the petitioner can present evidence to challenge the value determined by the Assessing Authority. The judgment reinforced the need for the value of goods to be assessed at the time of entry into the State, aligning with the principles laid out in relevant case law.

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