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TMI Blog2004 (5) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... gnihotri and Anil K. Pandey, Advocates, for the respondents. P.P. Rao, Senior Advocate (Kavin Gulati, S.K. Chauhan and G. Balaji Iyer, Advocaes, with him) for the appellants. R.P. Gupta, Advocate, for the intervenors. -------------------------------------------------- The judgment of the Court was delivered by S. RAJENDRA BABU, C.J.I.-The appellants are dealers registered under the M.P. General Sales Tax Act, 1958 and were also assessed to the entry tax during the period from January 1, 1986 to December 11, 1986 under the Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (hereinafter referred to as "the M.P. Entry Tax Act"). The appellants are carrying on the business of execution of works contract. Before the authorities below, it was the appellants' contention that since the goods were brought for purpose of works contract and they have been subjected to sales tax under the Sales Tax Act, the appellants were not liable to pay the entry tax on goods. The appellants had unsuccessfully challenged the assessment of tax before the Appellate Deputy Commissioner of Sales Tax and the Board of Revenue and thereupon appellants preferred Misc. Petition No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not automatically bring article 301 into play. 7.. In fact the concept of "compensatory taxes" was propounded in the Automobile Transport case [1963] 1 SCR 491. By virtue of this, taxes, which would otherwise interfere with the unfettered freedoms under article 301, will be protected from becoming unconstitutional if they are compensatory. 8.. Thus, the reliance placed by the appellants on the observations made in the Atiabari case [1961] 1 SCR 809 and the Rajasthan Automobile case [1963] 1 SCR 491 that taxation may impede the movement of goods from one barrier to the other and accordingly submitting that the M.P. Entry Tax Act, 1976 is hit by article 301 is not properly founded. 9.. In fact, section 3 of the said Act was under challenge in the case of Bhagatram Rajeev Kumar v. Commissioner of Sales Tax, M.P. [1995] 96 STC 654 (SC). (1995) Supp. 1 SCC 673. A three-Judge Bench of this Court, found that the levy of tax under the M.P. Entry Tax Act, 1976 was constitutional, since the nature of revenue earned was compensatory, as it was handed over to the local bodies to compensate them for the loss caused. 10. In the present case too, the respondents have reiterated that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1976 does not permit levy of any entry tax on the entry in the course of a business of a dealer of goods specified in Schedule III into a local area for consumption or use of such goods in the execution of works contracts, as these amount to "sale". They contend that owing to the 46th Amendment transfer of property in goods involved in the execution of a works contract amounts to "sale". 15.. The relevant part of section 3 of the M.P. Entry Tax Act is reproduced herein: "Section 3. Incidence of taxation.-(1) There shall be levied an entry tax- (a).................. (b) on the entry in the course of business of a dealer of goods specified in Schedule III, into each local area for consumption or use of such goods as raw material or incidental goods or as packing material or in the execution of works contracts but not for sale therein……….." (emphasis supplied) 16.. The relevant portion of article 366 of the Constitution is as follows: "Article 366: In this Constitution, unless the context otherwise requires, the following expressions have the meanings hereby respectively assigned to them, that is to say- .............. (29A) 'tax on the sale or purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en that the said meaning cannot be imported for the purposes of entry 52 of List II. 25.. On the other hand, it is evident that the M.P. General Sales Tax Act, 1958 has been enacted in relation to entry 54 of List II, and it indeed includes transfer of goods in the execution of works contract within the definition of "sale" as required by article 366(29A). However the M.P. Entry Tax Act has specifically excluded the definitions of "goods" and "sale " which is utilised in the M.P. General Sales Tax Act. Section 2(2) of the M.P. Entry Tax Act, 1976 reads as under: "Section 2(2): All those expressions, other than expressions 'goods' and 'sale' which are used but are not defined in this Act and are defined in the Sales Tax Act shall have the meanings assigned to them in that Act." (Emphasis supplied) 26.. The exclusion is justifiable considering the fact that the M.P. Entry Tax Act, 1976 has been enacted by virtue of entry 52 of List II of the Seventh Schedule. It need not be circumscribed by the definition provided in article 366(29A). 27.. Article 366(29A) does not define the term "sale", but enlarges its scope by including transfer of goods in the execution of works contract wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal definition as provided in article 366(29A) must be imported. However, even though the Act does not define "sale" it does provide a negative definition by clearly leaving out "execution of works contract" from the definition of "sale". Thus, there is no ambiguity at least with regard to "execution of works contract". It cannot be said to be a "sale" for the purposes of the M.P. Entry Tax Act, 1976. 33.. The appellants further contend that under section 3(1)(b) of the Entry Tax Act, 1976, the goods specified in Schedule III if are imported from outside the State for consumption are completely exempted by virtue of exception (vi) to proviso attached to section 3(1)(b). The relevant proviso is extracted herein: "(vi) in respect of goods specified in Schedule III imported from outside the State for consumption or use as (raw material or incidental goods) or as packing materials or in the execution of works contract but which have been disposed of in any other manner." (Emphasis supplied) 34.. The appellants submit that a plain reading of section 3 would indicate that all those goods falling in Schedule III which are imported from outside the State for consumption are not subject ..... 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