2016 (8) TMI 299 - HC - VAT and Sales Tax

Levy of entry tax Low Sulphur waxy residue brought from abroad low Sulphur fuel oil legislative competence of the state of Maharashtra revenue neutral exercise or not - Held that - so long as the import for consumption, use or sale within the local area attracts the levy, it is immaterial whether the goods originally arrived from outside the country or from another state within the country. The provisions of the Act read together as a whole so also harmoniously lead to the conclusion that the State is not denuded of its power to impose entry tax on the import of goods from outside the country. The words outside the State cannot be restricted in their application to the boundaries or territory of a State. That would mean entry tax is not leviable on goods imported from abroad but brought within the local area for consumption, use or sale therein though such a tax is leviable on the goods brought in from other States within the territory. The latter Act of bringing the goods from other parts of the country or from other States within the same country is also an import within the meaning of the Act. We cannot, therefore, restrict the definition of the words import and importer in the manner suggested by Mr.Dada. His second contention must, therefore, fail. - Constitutional validity upheld - Decided against the assessee. Revenue neutrality - it was contended that the purpose of entry tax is to neutralize difference between sales tax in the importing State and the sales tax in the originating State - Held that - proviso to Section 3 does not dilute or read down the definition of the terms entry of goods , import and importer , but it only clarifies that if the import is by the importer who has purchased the goods in another State or Union Territory of the country and in that area these goods when purchased attract general sales tax, then, the amount of such tax shall be reduced from the levy of entry tax. - Our conclusion is also reinforced by the language of sub-section (5) of section 3 which states that no tax shall be levied on the specified goods by the dealer registered under the Maharashtra Value Added Tax Act who brings such goods into any local area for the purpose of resale in the State or sale in the course of inter-state trade or commerce or export out of the territory of India. - Therefore, if they are imported from abroad but are not consumed, used or sold within the local areas after being brought in, then, the entry tax is not leviable. Therefore, we do not see any substance in the contentions based on the language of the second proviso to sub-section (1) of section 3 of the Maharashtra Entry Tax Act. - Argument of neutrality rejected - Decided against the assessee. Restriction on freedom of trade - violation of the mandate of Article 301 of the Constitution of India - Held that - We have not been shown anything from this judgment to enable us to hold that by mere levy of entry tax the mandate of Article 301 is violated. Further, the petitioners have not anywhere pleaded that even after the State amended the statutes and provided for a scheme of refund / rebate / set off, the so-called barrier still continues, or another barrier has been created. - Thus, merely on the strength of the judgment in the case of Eurotex Industries 2004 (1) TMI 651 - BOMBAY HIGH COURT it would not be possible to consider the question. - decided against the assessee. The petition does not aver in specific words that the petitioner registered themselves for the purposes of the Entry Tax Act and that being liable to pay the entry tax, they filed their returns-cum-challans. Thus, returns-cum-challans were to be verified and scrutinized for the purpose of amount of tax due from the petitionerimporter. Since the petitioner no. 1 is a registered importer that rule 8(1)(iii) would be the applicable rule. It is not open to the petitioner to raise the bar of limitation because the notice for assessment under the Entry Tax Act in Form No. 5 to the Entry Tax Rules was issued to the dealer-petitioner on 11th June 2013. A copy of that notice is termed by the petitioner No.1 itself as a show-cause notice. The notice is in Form No. 5 and must refer to the returns-cum-challans filed by the petitioner. However, if the order of assessment is carefully perused and though made in Form No. 9 it does not refer to the details of the return. Scope of the entry in the schedule - classification - Held that - When the entire Schedule was substituted retrospectively and there is also Entry No.12 which deals with furnace oil, including heavy furnace oil and residual furnace oil which is also included in petroleum fuel oil, then, NO ONE can enter into this factual controversy. It involved and included the product of the petitioners and if there is entry which takes care of it, then whether it is Entry No.12 or 13 should not be a matter of concern. The entries in the Schedule could describe the product as furnace oil and include therein heavy furnace oil and residual furnace oil, but to rule out any confusion or doubt even in relation to petroleum fuel oils so long as the description of a particular product or goods is of that category, then it would also include heavy furnace oil and residual furnace oil. Thus, no controversy. Unless the petitioners discharge their tax liability at their instance, no consideration to the plea of revenue neutrality appeal dismissed recovery of tax not stayed.

Summary

Issues Involved:
1. Constitutionality of the Maharashtra Entry Tax Act, 2002.
2. Legislative competence of the State of Maharashtra to levy entry tax.
3. Applicability of entry tax on goods imported from abroad.
4. Discrimination and non-compensatory nature of the entry tax.
5. Limitation period for assessment under the Maharashtra Entry Tax Act.
6. Applicability of Schedule Entries for levying entry tax.

Detailed Analysis:

Constitutionality of the Maharashtra Entry Tax Act, 2002:
The petitioners challenged the constitutional validity of the Maharashtra Entry Tax Act, 2002, on the grounds that it violated Articles 14, 19(1)(g), 301, 304, and 286 of the Constitution of India. The court referred to a previous judgment which declared the levy of entry tax on furnace oil and low sulphur waxy residue oil as unconstitutional due to its discriminatory nature and non-compensatory character. The court noted that the State had amended the law to provide set-offs, thereby addressing the discriminatory aspect but maintained that the non-compensatory nature of the tax remained unchallenged and thus, the levy remained unconstitutional.

Legislative Competence of the State of Maharashtra to Levy Entry Tax:
The petitioners argued that the State of Maharashtra lacked the legislative competence to levy entry tax on goods imported from abroad. The court referred to the definitions under the Maharashtra Entry Tax Act and concluded that the term "import" includes bringing goods into a local area from outside the State, which encompasses goods imported from abroad. The court held that the State Legislature is competent to levy entry tax on such imports, as it falls under Entry 52 of List II of the VII Schedule to the Constitution of India.

Applicability of Entry Tax on Goods Imported from Abroad:
The court examined the definitions of "import" and "entry of goods" under the Maharashtra Entry Tax Act and concluded that the entry tax applies to goods imported from abroad for consumption, use, or sale within the local area. The court rejected the petitioners' argument that the term "outside the State" should be interpreted to exclude goods imported from outside the country. The court held that the legislative intent and the language of the Act clearly cover such imports.

Discrimination and Non-Compensatory Nature of the Entry Tax:
The petitioners contended that the entry tax created a discriminatory tax barrier between goods imported from outside Maharashtra and those procured locally, violating Article 301 of the Constitution. The court referred to the previous judgment which held that the absence of set-offs for entry tax on imported goods created a discriminatory tax burden. However, the court noted that the State had amended the law to provide set-offs, thereby removing the discriminatory aspect. The court held that the petitioners failed to demonstrate any new discriminatory impact post-amendment.

Limitation Period for Assessment under the Maharashtra Entry Tax Act:
The petitioners argued that the assessment orders were time-barred under Rule 8 of the Maharashtra Entry Tax Rules, which prescribes a three-month period for assessment. The court examined Section 6 of the Maharashtra Entry Tax Act, which incorporates the assessment provisions of the Maharashtra Value Added Tax (MVAT) Act. The court held that the MVAT Act's provisions on limitation for assessment apply to entry tax assessments, and the assessments in question were completed within the prescribed period under the MVAT Act. Therefore, the assessments were not time-barred.

Applicability of Schedule Entries for Levying Entry Tax:
The petitioners contended that their imported goods did not fall under any specific Schedule Entry of the Maharashtra Entry Tax Act, and thus, the tax levy was unauthorized. The court examined the relevant Schedule Entries and concluded that the goods in question, including low sulphur waxy residue and low sulphur furnace oil, were covered under Entry 12 ("Furnace oil including heavy furnace oil and residual furnace oil") and Entry 13 ("Petroleum fuel oils including heavy furnace oil and residual furnace oil"). The court held that the levy of entry tax on these goods was valid and authorized under the Schedule Entries.

Conclusion:
The court dismissed the writ petition and appeals, upholding the constitutionality and applicability of the Maharashtra Entry Tax Act, 2002, to goods imported from abroad. The court found no merit in the petitioners' arguments regarding legislative competence, discrimination, non-compensatory nature, limitation period, and applicability of Schedule Entries. The court also granted a 12-week stay on coercive recovery measures to allow the petitioners time to comply with the judgment.