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TMI Blog2006 (8) TMI 548X X X X Extracts X X X X X X X X Extracts X X X X ..... of articles 301 and 304 of the Constitution of India. In W. P. (T) Nos. 2937 of 2003, 3457 of 2004, 4128 of 2005 and 4199 of 2005 further declaration has been sought for that the petitioners in these writ petitions are not liable to pay entry tax on the entry of coal into the areas, situated within the State of Jharkhand, under the provisions of the Bihar Entry Tax Act, 1993, as adopted by the State of Jharkhand and amended vide Jharkhand Entry Tax (Amendment) Ordinance, 2001. In rest of the cases, a declaration has been sought for that the petitioners are not liable to pay entry tax on the entry of heavy earth moving machines, such as, dozers, dumpers, excavators, etc., into the local areas of the then State of Bihar and the present State of Jharkhand under the provisions of the Bihar Entry Tax Act, 1993, as adopted by the State of Jharkhand and amended vide Jharkhand Entry Tax (Amendment) Ordinance, 2001. For determination of the issue as to "whether the imposition of Bihar Entry Tax Act, 1993, as adopted by the State of Jharkhand and amended vide Jharkhand Entry Tax (Amendment) Ordinance, 2001, is violative of articles 301 and 304(a) of the Constitution of India or is sav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of such goods does not exceed 25 thousands in a year. ['Provided further that where an importer of Scheduled goods liable to pay tax under the Act, becomes liable to pay tax under the Bihar Finance Act, 1981 (Bihar Act 5 of 1981) by virtue of sale of such scheduled goods, his liability to pay tax under the Bihar Finance Act, 1981 shall stand reduced to the extent of tax paid under the Act.'] ['(3): The liability to pay tax on scheduled goods shall only be at the point of first entry into a local area and any subsequent entry or entries into any other local area or areas of the said scheduled goods shall not be subject to tax provided the subsequent importing dealer produces before the assessing officer the original copy of the cash memo, invoice, bill or challan issued to him by the dealer from whom he purchased or received the said scheduled goods, and files a true and complete declaration in the form and manner prescribed.']" The validity of the said Act fell for consideration before the Patna High Court in the case of Bihar Chamber of Commerce v. State of Bihar reported in [1995] 97 STC 538; [1995] 1 PLJR 716, wherein a division Bench of the Patna High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCC 136 overruled to that extent. The Constitution Bench of the Supreme Court referred to the case of Atiabari Tea Co. Ltd. v. State of Assam reported in AIR 1961 SC 232, wherein, it was held that taxing laws are not excluded from the operation of article 301, which means that tax laws can and do amount to restrictions on freedom of trade under Part XIII of the Constitution. However, it was held by the Supreme Court that the prohibition of restrictions on free trade is not an absolute one and restrictive trade can avoid invalidation, if it complies with article 304(a) or 304(b) of the Constitution of India. In the case of Automobile Transport (Rajasthan) Ltd. AIR 1962 SC 1406, the Supreme Court held that only such taxes, as directly and immediately restrict trade, would fall within the purview of article 301 and any restriction in the form of taxes imposed on the carriage of goods or their movement by the State Legislature can only be done after satisfying the requirements of article 304(b). The statute, i.e., the Assam Taxation (On Goods Carried By Roads and Inland Waterways) Act, 1954, which was challenged in the case of Atiabari Tea Co. Ltd. AIR 1961 SC 232, was held to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppl 1 SCC 673, was followed and applied by a Bench of two Judges in the case of Bihar Chamber of Commerce [1996] 103 STC 1 (SC); [1996] 9 SCC 136, which reiterated the position that "some connection" between the tax and the trading facilities, extended to dealers directly or indirectly, is sufficient to characterise it as compensatory tax. The five-Judge Constitution Bench of the Supreme Court in the case of Jindal Stainless Ltd. v. State of Haryana [2006] 145 STC 544 summed up the law, as laid down by the Supreme Court in the case of Atiabari Tea Co. Ltd. AIR 1961 SC 232 and Automobile Transport (Rajasthan) Ltd. AIR 1962 SC 1406 and the decision of seven-Judge Constitution Bench in the case of Automobile Transport (Rajasthan) Ltd. AIR 1962 SC 1406 was followed. The Constitution Bench, on an analysis of relevant provisions of Part XIII of the Constitution, analysed the scope of articles 301, 302 and 304 and held as follows: "Article 301 is binding upon the Union Legislature and the State Legislatures, but Parliament can get rid of the limitation imposed by article 301 by enacting a law under article 302. Similarly, a law made by the State Legislature in compliance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curement of prior sanction of the President before introduction of the Bill." The five-Judge Constitution Bench of the Supreme Court observed that the concept of "compensatory tax" is not there in the Constitution but is judicially evolved in the case of Automobile Transport (Rajasthan) Ltd. AIR 1962 SC 1406 as a part of regulatory charge. Consequently, the court will have to go into the concepts and doctrine of taxing powers vis-a-vis regulatory powers, particularly when the concept of "compensatory tax" was judicially crafted as an exception to article 301 in the case of Automobile Transport (Rajasthan) Ltd. AIR 1962 SC 1406. In order to lay down the parameter of "compensatory tax", the Supreme Court discussed the concept of taxing powers and held that a tax is levied as a part of common burden. The basis of tax is the ability or the capacity of the tax-payers to pay. On the other hand, a fee is based on the "principle of equivalence", which is the converse of the "principle of ability" to pay. In the case of a fee or compensatory tax, the "principle of equivalence" applies. The main basis of a fee or compensator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sanction is required for such legislation. The Supreme Court after analysing the scope of articles 301, 302, 303 and 304 of the Constitution concluded that the doctrine of "direct and immediate effect" of the impugned law on trade and commerce under article 301, as propounded in the case of Atiabari Tea Co. Ltd. AIR 1961 SC 232, and the working test, enunciated in the case of Automobile Transport (Rajasthan) Ltd. AIR 1962 SC 1406, for deciding whether a tax is compensatory or not, vide paragraph 19 of the report, will continue to apply and the test of "some connection" indicated in paragraph 8 of the judgment in the case of Bhagatram Rajeev Kumar [1995] 96 STC 654 (SC); [1995] Suppl 1 SCC 673 as followed by the Supreme Court in the case of Bihar Chamber of Commerce [1996] 103 STC 1; [1996] 9 SCC 136 was held to be not a good law to the above extent. Learned Advocate-General while fairly conceded that the judgment rendered by the Supreme Court in the case of Bihar Chamber of Commerce [1996] 103 STC 1; [1996] 9 SCC 136, so far as the question relating to compensatory tax is concerned, has been overruled by the five-Judge Constitution Bench of the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of Jharkhand and modified vide Jharkhand Tax on Entry of Goods into Local Areas for Consumption, Use or Sale thereof (Amendment) Ordinance, 2001, satisfies the test of compensatory tax, so as to come within the protection under article 304(b) of the Constitution of India" has been decided by a division Bench of this court in the case of Tata Iron & Steel Company Ltd. [W. P. (T) No. 5354 of 2004], has been allowed on August 14, 2006]. Having noticed the relevant facts, as pleaded by the parties, the court held that the Bihar Entry Tax Act, 1993 is not compensatory in nature, falling under article 304(a) of the Constitution of India. So far as the question "whether the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1993 as adopted by the State of Jharkhand and modified vide Jharkhand Tax on Entry of Goods into Local Areas for Consumption, Use or Sale thereof (Amendment) Ordinance, 2001, is saved by virtue of the provisions, contained in article 304(b) of the Constitution or not", in the case of Tata Iron & Steel Company Ltd(1) [W. P. (T) No. 5354 of 2004], having noticed the rival contention of the parties, the division Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance 2 of 2002), is also not saved by the provisions, contained in article 304(b) of the Constitution of India." In regard to the Jharkhand Taxes on Entry of Goods into Local Areas for Consumption, Use or Sale thereof (Amendment) Ordinance, 2001, it was contended on behalf of the petitioners that section 2(c) of the Bihar Entry Tax Act, 1993, as adopted by the State of Jharkhand and amended vide Jharkhand Tax on Entry of Goods into Local Areas for Consumption, Use or Sale thereof (Amendment) Ordinance, 2001, altered the basic scheme and structure of imposition of entry tax by giving complete immunity in respect of the goods entering into one local area from another local area but imposes entry tax on goods which are imported from outside the State into the local area, as the substantial alteration requires the assent of the President of India under the proviso to article 304(b) of the Constitution, which was not obtained. Learned counsel for the petitioners further submitted that the Schedule which has been introduced under the Bihar Entry Tax Act, 1993, was amended by Jharkhand Entry Tax Ordinance, 2001 and various articles, which were not there in the earlier Schedule of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 81 entry of goods shall mean entry of goods into local areas from any place outside the State for consumption, use or sale therein. Section 3(1). There shall be levied and collected a tax on entry of scheduled goods into a local area for consumption, use or sale therein at such rate not exceeding 5 per centum of the import value of such goods as may be specified by the State Government in a notification published in a official gazette subject to such conditions as may be prescribed: Section 3(1). There shall be levied and collected a tax on entry of scheduled goods into a local area for consumption, use or sale therein at such rate not exceeding 5 per centum of the import value of such goods as may be specified by the State Government in a notification published in a official gazette subject to such conditions as may be prescribed: Provided different rates for different scheduled goods and different local areas may be specified by the State Government. Provided different rates for different scheduled goods and different local areas may be specified by the State Government. (2) The tax leviable under this Act shall be paid by every dealer liable to pay tax under Bihar Finance A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed. (*) Provided that no tax shall be levied and collected in respect of any motor vehicle which was registered in any other State or Union Territory under the Motor Vehicles Act, 1988 for a period of fifteen months or more before the date on which it is registered in the State under that Act. (4) . . . Section 4 stands deleted. (*) Note: -- (*) have been deleted/inserted by/in Jharkhand Tax on Entry of Goods into Local Areas for Consumption, Use or Sale thereof (Amendment) Ordinance, 2001. Earlier Schedule Amended Schedule 1. Motor vehicles. 1. Tobacco. (*) 2. Tobacco products (excluding biris). 2. Tobacco products (excluding biris) 3. Indian-made foreign liquor. 3. Indian-made foreign liquor. 4. Vegetable and hydrogenated oil. 4. Vegetable and hydrogenated oil. 5. Cement. 5. Cement. 6. Crude oil. 6. Crude oil. 7. Motor vehicles. 8. Emulsion paints. (*) 9. Sanitary fittings. (*) 10. Air conditioner, air cooler and air circular.(*) 11. Marble, chips, tiles, granite stones, ceramic and glassed tiles. (*) 12. Electrical fittings. (*) 13. Coal. (*) 14. Iron and steel. (*) 15. Steel plastic and PBC pipe. (*) 16. Bitumen. (*) Note: -- (*) have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of the Act, including the amendment made therein, is ultra vires. In view of such findings, already given, no separate declaration is required to be given in the present case. The petitioners of W. P. (T) Nos. 2937 of 2003, 3457 of 2004, 4128 of 2005 and 4199 of 2005 have also raised the question of imposing entry tax on "imported coal". According to them, section 3 is not applicable in their case, who import coal from outside the country. It was also submitted that item No. 13 of the Schedule, which deals with "coal" is different from "imported coal". Another ground was taken that the coal having not been originally included in the Schedule attached to the Bihar Entry Tax Act, 1993, its inclusion by the State of Jharkhand vide Jharkhand Tax on Entry of Goods into Local Areas for Consumption, Use or Sale thereof (Amendment) Ordinance, 2001, by amending the Schedule, is illegal and ultra 1. Reported in [2007] 6 vst 587 (jharkh). vires, no Presidential assent having been obtained before imposing restriction on coal. Different submissions were made by the parties. However, such submissions are not required to be discussed, as the issue has already be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contention of the petitioners that such excavators and road rollers are suitable for use on the 1. Reported in [2007] 6 vst 587 (jharkh). roads. It was submitted that the dozers, excavators, road rollers, etc., which are being used by the companies, who have approached this court, are being used only within their factories/mines/premises and are not being used on the roads. It was further submitted that the Central Motor Vehicles Rules, 1989, as was framed under the Motor Vehicles Act, 1988, has been amended vide notification dated July 28, 2000 and an Explanation under rule 92(2) has been added, which provides that for the purpose of said rule "motor vehicles" include construction equipment vehicles. Under the said notification, rule 2(ca) defines what is the construction equipment vehicle, such as, rubber tyred, rubber padded or steel drum wheel mounted, selfpropelled, excavator, etc., but the Explanation to rule 2(ca) makes it clear that a construction equipment vehicle shall be a non-transport vehicle, driving on the road of which is incidental to the main off-highway function and for a short duration at a speed not exceeding 50 kilometres per hour, but such vehicle ..... X X X X Extracts X X X X X X X X Extracts X X X X
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