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TMI Blog2012 (11) TMI 789X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; S. Pattanaik and N.K. Dash (WPC 5186, 5187 & 6982 of 2012) ---- M/s Bibeka Mohanty, S.K. Mishra, S.K. Jena, N.R. Mohanty, C.R. Dash, M.Roul & M. Wright (WP(C) 18577/2011, 3515/2008 &, 579/2010 ---- M/s Pranaya K. Harichandan CH.M.R. Mishra, B. Behera (WPC 3010 & 5101 of 2012) ---- M/s Subash Chandra Lal, Sumit Lal & Sujit Lal (WP(C) 7 & 13978 of 2008, & 5764 of 2007 ---- M/s Sidhartha Ray and S. Dey (WP(C) 7975 of 2011) ---- M/s S. Kanunga, CH.S. Mishra, R.N. Pattnaik, N.R. Mohanty, M/s Bibek Mohanty, S.K. Mishra, B.K. Sahool & M.Wright (WP(C) 5737 of 2010) For Opposite parties - Mr. A. Mohanty (Advocate General) and Mr. R.P. Kar S.K. Mishra, J. The following questions arise for determination in this bunch of writ petitions:- (i) Whether the entry tax under Orissa Entry Tax Act, 1999, can be levied and/or imposed on the value of the goods imported by the petitioners from outside the country ?, (ii) Whether such entry tax under the aforesaid Act can be levied and/or imposed on import of plant and machinery for establi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or purchase of goods, where such sale or purchase takes place in course of import of goods, into or export of the goods out of the territory of India [Article 286(i)(b)]. It is contended that Entry 52 of List-II of the Seventh Schedule, which provides for tax on entry of goods into the local area for consumption, use or sale, does not include any import made from outside the country and accordingly, the assessment of the taxing authority on the imports so made is contended to be illegal. 4. In course of hearing, the learned Senior Advocate Mr. S. Ganesh, appearing for one of the petitioners placed reliance on the reported cases of Tata Iron & Steel Company Ltd. Vs. State of Jharkhand and others, (2007) 6 VST 587 (Jharkh), FR. William Fernandez Vs. State of Kerala and others, (1999) 115 STC 591(Ker), Thressiamma L. Chirayil Vs. State of Kerala, (2007) 7 VST 293 (Ker) as well as the judgment rendered by the Full Bench of the Orissa Sales Tax Tribunal in the case of Hindustan Aeronautics Ltd. Koraput Vs. State of Orissa and contended that in all the above cases the various High Courts as well as the Sales Tax Tribunal of the State of Odisha has come to the conclusion that entry tax c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries, by letter dated 25.03.2006 the opposite party no.3 called upon the petitioner to submit a statement showing the name of goods imported by the petitioner from the USA. This fact is subject matter of W.P.No.12622 of 2006 and the same is pending consideration before this Court. The petitioner protested that it is not liable to pay entry tax on the plant and machinery brought from USA in course of import and, further, since the plant is not a schedule good, the same cannot be subjected to entry tax under Orissa Entry Tax Act, 1999. The opposite parties denied to give way bills and 'C' forms and perpetrated other type of harassment if the petitioner will not pay entry tax on the plant and machinery so imported from USA. The petitioner had no other alternative than to make ad hoc payment through challans towards Orissa Entry Tax under protest. The demand of entry tax on imported plant and machinery was not authorized by the Act and such demand was arbitrary and the petitioner is before this Court in W.P.(C) No.12622 of 2006, which was admitted by order dated 08.10.2006 and further direction was given that the petitioner should not be asked to pay any amount on entry tax in view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r satisfaction. Nearly 60% of the products manufactured are presently exported outside the country. For manufacture of refractory products, the petitioner from time to time requires imported raw materials, stores and spares, trading items and capital goods which are released by the custom authorities after the petitioner effects payment of duty levied thereon as per the provision of the Customs Act. Generally said imported items are received either at Kolkata Port or at Kolkata Airport wherefrom they are transported to the petitioner manufacturing facilities under way bills in the Orissa Sales Tax Rules/VAT Rules by opposite party no.3 For carrying manufacturing activity and production of item referred above, i.e. Ladle Shrouds, Sub entry Nozzels, Monoblock Stopper, Tundish Nozzle, Slide Gate Plates etc, some of the raw materials and ancillary goods are not available nor are they manufactured in India. Consequently, the petitioner has to import the same from different countries of the world on payment of the custom duty. These materials are Fused Silica, Lime stabilize Fused Zirconia, Fused Magnesia, Sintered Magnesia, Silicon Metal, Natural PVC, Refractory Glaze, Furfular Alchoh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way bills by the opposite party no.3 would remain unhindered. In the same manner, the petitioner has also paid huge sum amounting to almost Rs. 20,00,000/- towards entry tax. The petitioner claims that it is not liable to pay such entry tax and necessary directions be passed for refunding the tax already collected from it. 8. In all the cases, a common defence has been taken by the State of Odisha. It is submitted by the State that the Orissa Entry Tax Act, 1999 is a destination based tax, which is enacted within the field of legislation envisaged in Entry 52 of List II of Seventh Schedule to the Constitution and tax is exigible on entry of goods into the local areas for consumption, use or sale therein. The place of origin of goods has no impact on the levy. Against the contention of the petitioners that entry tax is not leviable on goods imported from outside the country, inasmuch as, it is hit by Article 286 of the Constitution, on behalf of the State Government learned Advocate General submits that the challenge is untenable on the face of the said Article, which contemplates rider "tax on sale or purchase of goods" which "takes place in course of import into the territory o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that looking to the "pith and substance" and "aspect" of levy, both the imposts are different and distinct and there is no overlapping. It is further brought to the notice of the Court that the order passed by this Court in Reliance Industries Limited Vs. State of Orissa, (2008) 16 VST 85 (Ori) has been stayed by the Supreme Court by order dated 30.10.2009 in I.A. No. 327-651 in SLP "C" No.14454-14778 of 2008. It is further submitted that the decision rendered by the Sales Tax Tribunal in Hindustan Aeronautics Ltd case is under challenge before this Court in STREV Nos.34 and 35 of 2011. Hence, such findings recorded by the Tribunal has not become final and is not applicable to the case. As far as the plant is concerned, learned Advocate General submits that whether such plant is scheduled good or not is the subject matter for adjudication by the statutory authorities. 9. Thus, to reiterate the questions framed in all these cases for adjudication by this Court are as follows:-. I. Whether the imposition of tax on goods purchased from outside the country is ultra vires the Constitution? II. Whether the interpretation of the provisions of Orissa Entry Tax Act, 1999 itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plied to the legislative field contained in Entry 54 of List II of the Seventh Schedule of the Constitution. This aspect arose before the Kerala High Court in Fr. William Fernandez Vs. State of Kerala, (1999) 115 STC 591 (Ker) and has been answered against the petitioner though on a different aspect, the Kerala High Court has come to the conclusion that entry tax on goods imported from outside the country is not within the ambit of the Kerala's Act. It is apt to quote the exact word used by the Kerala High Court with regard to the constitutionality of entry tax in respect of Article 286 of the Constitution. "12. It was urged that the limitations in Article 286 have not been surmounted and as such the Act is applicable to the appellants, who had imported vehicles from abroad. These submissions seem to us to be untenable. We do not agree that there are any limitations upon the State's power to legislate, which is covered by item 52 of List II of the Seventh Schedule of the Constitution as has been correctly held. Tax is due upon entry of goods into the local areas. .....xxx" 11. So far as the scope of imposition of entry tax on goods imported from outside the country is concerned, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant Entries of the Seventh Schedule of the Constitution. Entry 83 of List I of the Seventh Schedule reads as follows:- "83. Duties of customs including export duties." However, Entry 52 of List II of VII Schedule of the Constitution reads as follows:- "52. Taxes on the entry of goods into a local area for consumption, use or sale therein". Taking recourse to Article 246 of the Constitution, it is urged on behalf of the petitioners that the State legislature cannot infringe the legislative power of the Parliament and levy of entry tax imposed on imported goods is directly in conflict with the exclusive legislative power of the Union of India. Article 246 of the Constitution reads as follows: " 246. Subject-matter of laws made by Parliament and by the Legislatures of States.- (1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List-I in the Seventh Schedule (In this Constitution referred as to the "Union List"). (2) xxx xxx xxx xxx (3) Subject to clauses (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to be taken out of the customs and brought to the mass of goods in the country. xxx" 14. In J.V. Gokal & Co. Pvt. Ltd. Vs. Assistant Collector of Sales Tax (Inspection), (1960) 11 STC 186 (SC), the Supreme Court has held as follows:- " What does the phrase " in the course of the import of the goods into the territory of India" convey ? The crucial words of the phrase are "import" and "in the course of ". The term "import" signifies etymologically "to bring in". To import goods into the territory of India therefore means to bring into the territory of India goods from abroad. The words "course means "progress from point to point". The course of import, therefore, starts from one point and ends at another. It starts when the goods cross the customs barrier in a foreign country and ends when they cross the customs barrier in the importing Country." Having taken note of the ruling of the Supreme Court in the aforesaid two cases, this Court comes to the conclusion that when the goods imported out of the country, the incident of import ends the moment it crosses the custom barriers. It is also brought to the notice of this Court that in Gulabdas Jagannath Vs. The State of Rajas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax cannot be levied under the Act pursuant to Entry 52 of List II since the custom duty is levied on the imported goods under Entry 83 of List I. Entry 62 of List II of the Seventh Schedule reads as follows:- " 62. Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling." The taxable event of the Act is entry of goods into local area whereas custom duty on import of goods into territory of India. When the former is a subject matter of legislation by the State in Entry 52 of List II of the Seventh Schedule, the latter relates to Entry 83 of List I of the Seventh Schedule. There is no overlapping in the exercise of legislative power. Since imposition of custom duty ends once the goods cross the custom barriers, the custom duty is levied prior to crossing of barriers. But, in the context of levy of entry tax under the Act, it is levied on the entry of the scheduled goods into the local area. Taxable events in respect of the levies, viz., "custom duty" and "entry tax" are different and distinct and there is no overlapping. Thus, there is no conflict between legislative power under Entry 83 of List I and Entry 52 of List II. The ratio decided in Godfr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitution provides for taxes on entry of goods into a local area for consumption, use or sale therein. Thus, the incidence of levy of tax as per Entry 52 is entry of goods into a local area. There is nothing in that entry to suggest that legislature intended to exclude levy of tax on the imports from other country. 18. This problem can also be seen from another angle. The Act is a tax in lieu of octroi incident of which are similar to that of entry tax. When the levy of octroi on imported goods was upheld by different courts, there is no reason why entry tax on the imported goods cannot be upheld. Now, it is seen that prior to introduction of the Act, the levy of octroi was invoked by virtue of powers conferred on the municipality and other local bodies under Section 131 (1) (kk) of the Odisha Municipal Act, 1950. However, on passing of the Act, the octroi has been abolished. Clause (3) of the Statement and objects and reasons as appended to the Tax provides that the bill further seeks for abolition of octroi duty levied and collected under the Odisha Municipal Act, 1950 by repealing clause (kk) of subsection (1) of Section 131. By virtue of Section 41, such clause (kk), as descr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipal or customer or takes delivery or is entitled to take delivery of such goods on such entry: Provided that no tax shall be levied under this Act on the entry of scheduled goods into a local area if it is proved to the satisfaction of the assessing authority that such goods have already been subjected to entry tax or that the entry tax has been paid by any other person or dealer under this Act. Explanation.- Whether the goods are taken delivery of on their entry into a local area or brought into the local area by a person other than a dealer, the dealer who takes delivery of the goods from such person or makes carriage of the goods shall be deemed to have brought or caused to have brought the goods into the local area. (3) Notwithstanding anything contained in sub-sections (1) and (2), but subject to the provisions of this Act, there shall be levied and collected a tax on the entry of any motor vehicle into any local area for use or sale therein which is liable for registration in the State of Orissa under the Motor Vehicles Act, 1988 (59 of 1988), and rate of tax shall be at such rate or rates as may be specified by the State Government by notification on the purchase value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the purchase value does not include customs duty, the legislature intended that the goods imported from outside the country are not to be subjected to the entry tax. 26. The Supreme Court in Govind Saran Ganga Saran Vs. Commissioner of Sales Tax, (1985) 60 STC 1 (SC) has laid down that the levy of tax to be operative four elements are to be provided. (i) Character of imposition known by its nature, which prescribes the taxable event attracting levy, (ii) Clear indication of the person on whom levy is imposed and who is obliged to pay the tax, (iii) The rate of tax at which the tax is imposed, (iv) The measure or value to which the rate will be applied for computing the tax liability. 27. Charging Section 3 is the prime purpose of taxing legislation and the other three components are subservient of main purpose of levy. The charging section shall control the other three components including the measure of levy and not vice versa. The measure of levy cannot be used to interpret the nature and scope of charging section. This view has been expressed in the case of Tamil Nadu Kalyana Mandapam Association Vs. Union of India, (2004) 135 STC 480 (SC). At paragraph-44 the Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is inclusive of the customs duty. The purchase value, which includes other kinds of levy such as insurance, excise duty, countervailing duty, sales tax, value added tax, turnover tax. Even on top of it the clause "all other charges incidental to the purchase of such goods" would take within its sweep any other duties including the customs duty as well. 30. In Garware Nylons Ltd. Vs. Pimpri Chinchwad Mahanagar, 1995 (77) ELT 22 (SC), the Supreme Court considered the question whether custom duty is included while determining the value for charging of octroi, and held that octroi is leviable on imported goods and the custom duty shall form part of the value of the goods. In doing so, the Supreme Court has relied upon the reported case of Shroff and Co. Vs. Municipal Corporation of Greater Bombay, (1989) Supp. 1 SCC 347. In that case, the Supreme Court has held that octroi duty is leviable on imported goods and the countervailing duty will form part of value for purpose of levy. Thus, the argument of the petitioners that since customs duty is not specifically mentioned in the definition of purchase value in Section 2(j) of the Act, it will give rise to the inference that legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is a taxing statute. 35. The Supreme Court in Federation of Hotels and Restaurants Association Vs. Union of India, (1989) 74 STC 102(SC) has applied the principle of pith and substance to interpretation of the statute and laid down that the true nature and character of the legislation must be determined with respect to the question of power of legislature. The consequence and effect of the legislation are not same thing as the legislative subject matter. The true nature and character of the legislation but not the ultimate result that matters. 36. Thus, on the basis of the discussions resorted to above, this Court comes to the conclusion that the argument advanced by learned counsel for the petitioners that entry tax is not leviable on the goods imported through buyers is attractive but is without substance. 37. The next question that requires adjudication is, whether the plant, which has been brought into local area of Balgopalpur in knock down condition, is leviable with entry tax or not. This question is to be decided in the writ petition filed by M/s Emami Paper Mills Vs. State of Orissa (W.P.(c) No.13978 of 2008). The learned counsel for the petitioner, in this case, has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he raw materials described in the 4th sub-paragraph of paragraph-6, at page-9, like Mag Alumina Spinel, Zircon sand/Flour, Bauxite (Rotary Kiln/Calcined), Tabular Alumina, Brown Fused Alumina, While Fused Alumina, Reactive Alumina, Dead Burn Magnesia, Silicon Carbide, Borax, Allu Metal, Carbon Black are not included in the Ist schedule. Therefore, they are not liable for entry tax. Accordingly, this question is decided in favour of the petitioner. Thus, on the basis of aforesaid discussion, this Court comes to the conclusion that the imposition of tax on goods purchased from outside the country does not violate the ban imposed under Article 246 of the Constitution to enact law from Entry 52 of List II of Seventh Schedule. It is further held that the provisions of Orissa Entry Tax Act itself do not reveal the intention of the legislator not to tax goods, which has been purchased from outside the country. The paper plant, which is brought in a knock down condition by Emami Paper Mills, comes within the definition of machinery and is liable for entry tax. Lastly, the various raw materials and spares, as described in the case of IFGL Refractories Ltd. Vs. State of Orissa, are not liab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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