2016 (10) TMI 84 - HC - VAT and Sales Tax

Levy and collection of Entry tax - transaction using E-commerce portal - business of providing logistics and delivery services to various individual buyers - goods purchased meant for personal use and not for re-sale - CST - Bihar Tax on Entry of Goods into Local Areas for consumption Use or Sale Therein Act 1993 - Bihar Tax on Entry of Goods into Local Areas for Consumption Use or Sale Therein (Amendment) Act 2001 - conduct of trade commerce and intercourse as contained in Chapter XIII of the Constitution of India - whether tax can be levied on entry of goods in local areas? Held that - no tax can be levied on entry of goods into local areas in terms of the impugned provisions over the transactions made on e-commerce portals for personal use or consumption of individual consumer. The impugned provisions of the Bihar Finance Act 2015 (Bihar Act 9 of 2015) amending the Bihar Tax on Entry of Goods into Local Areas for Consumption Use or Sale Therein Act 1993 and the Rules made thereunder and Notifications S.O. 176 & 18 both dated 20.01.2016 are declared as ultra vires to the Constitution and are accordingly quashed. The impugned provisions as contained in Entry of Goods into Local Areas for Consumption Use or Sale Therein Act 1993 held to be discriminatory and violative of Article 304(a) of the Constitution of India read with Article 303 of Constitution of India. Petition allowed - decided in favor of petitioner.

Issues Involved:
1. Levy and collection of entry tax on goods brought into Bihar for individual consumers via e-commerce.
2. Discrimination against goods brought in through e-commerce compared to locally sold goods.
3. Validity of amendments to the Bihar Tax on Entry of Goods into Local Areas Act, 1993, under the Bihar Finance Act, 2015.
4. Constitutional validity concerning Articles 14, 19(1)(g), 301, and 304(a) of the Constitution of India.

Detailed Analysis:

1. Levy and Collection of Entry Tax on Goods via E-commerce:
The petitioners, engaged in logistics and delivery for Flipkart Internet Pvt. Ltd., challenged the levy and collection of entry tax on goods brought into Bihar for individual consumers via e-commerce. The petitioners argued that the goods purchased for personal use or consumption were already taxed under CST before entering Bihar, and the additional entry tax imposed by Bihar was a colorable exercise of power, effectively functioning as a sales tax, which the state cannot levy on inter-state transactions.

2. Discrimination Against Goods Brought in Through E-commerce:
The petitioners contended that the entry tax on goods brought into Bihar through e-commerce transactions was discriminatory compared to goods brought in for resale or manufacturing. Dr. Saraf illustrated various scenarios showing that goods purchased through e-commerce faced a higher tax burden due to the lack of set-off provisions available to local dealers. This discrimination was argued to violate Articles 14, 19(1)(g), and 304(a) of the Constitution, as it created a fiscal barrier against inter-state trade.

3. Validity of Amendments to the Bihar Tax on Entry of Goods into Local Areas Act, 1993:
The amendments introduced by the Bihar Finance Act, 2015, aimed to levy entry tax on goods brought into Bihar via e-commerce. The petitioners argued that these amendments were discriminatory and violated constitutional provisions. The court noted that the amendments led to a higher tax burden on goods brought in for personal use via e-commerce compared to locally sold goods, which was discriminatory.

4. Constitutional Validity Concerning Articles 14, 19(1)(g), 301, and 304(a):
The court examined the constitutional scheme under Articles 301 to 304, which guarantee freedom of trade, commerce, and intercourse throughout India, subject to certain restrictions. The court reiterated that while regulatory measures and compensatory taxes are permissible, they must not be discriminatory. The court found that the impugned provisions created a fiscal barrier and discriminated against goods brought in from other states via e-commerce, violating Article 304(a).

Judgment:
The court held that the impugned provisions of the Bihar Finance Act, 2015, amending the Bihar Tax on Entry of Goods into Local Areas Act, 1993, were ultra vires the Constitution. The amendments were found to be discriminatory and violative of Article 304(a) as they imposed a higher tax burden on goods brought in via e-commerce compared to locally sold goods. Consequently, the court quashed the amendments and declared that no tax could be levied on entry of goods into local areas for personal use or consumption via e-commerce transactions.

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