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TMI Blog2009 (11) TMI 821X X X X Extracts X X X X X X X X Extracts X X X X ..... BSARI J. As all these five writ petitions have raised identical questions of fact and law, these writ petitions have been heard together and are being disposed of by this common judgment and order. The petitioners herein are manufacturers of asbestos cement sheets. The main raw material required for manufacturing asbestos sheets is cement, which is, usually, imported into the State of Assam by the petitioners from outside the State by making payment of four per cent of Central sales tax on the strength of C forms. The import of cement was subject to levy of sales tax at the rate of eight per cent under the Assam General Sales Tax Act, 1993 (in short, the AGST Act ), which has, now, been replaced by the Assam Value Added Tax Act, 2005. Thus, the petitioners pay taxes on the inter-State sale and intra-State sales on the finished products under the AGST Act and also under the Central Sales Tax Act, 1956 (in short, the CST Act ). The chief grievance of the petitioners is that the petitioners are required to pay entry tax, under the Assam Entry Tax Act, 2001 (in short, the AET Act, 2001 ), at the rate of eight per cent on the import of cement for use in the manufacturing proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materials used in manufacturing finished products, such as, asbestos sheets, on which sales tax is payable under the local sales tax law as well as Central sales tax, has no nexus with the legislative object of the AET Act, 2001, and is, thus, devoid of any rational. The AET Act, 2001, is, therefore, according to Mr. Joshi, in violation of articles 265 and 14 of the Constitution of India. Since the benefit of section 5 of the AET Act, 2001, has not been extended to the petitioners, it is, according to Mr. Joshi, a clear case of arbitrariness and discrimination shown by the State Legislature towards persons, such as, the petitioners. Mr. Joshi also points out that under the AET Act, 2001, the manufacturers of cement based finished goods have been placed in the group of individuals and unregistered dealers, who are importing cement for their own use and not paying any tax at all under local sales tax laws or Central sales tax laws. Such classification, contends Mr. Joshi, has resulted into pronounced inequalities, though the petitioners are entitled to equal protection of law. Such classification, according to Mr. Joshi, has no nexus with the object sought to be achieved and the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the levy of entry tax serves twin purposes of compensating the loss of revenue of the State as well as bringing parity between the manufacturer, who buys cement locally, and the manufacturer, who buys cement from the outside the State. Mr. Choudhury submits that as the petitioners import cement for manufacturing asbestos sheets, the petitioners may not be liable to get themselves registered under rule 3(1) of the Assam Entry Tax Rules, but this does not absolve the petitioners from the liability of paying entry tax under the AET Act, 2001. The petitioners' liability to pay entry tax, contends Mr. Choudhury, is not dependant upon registration alone. Mr. Choudhury submits that levy of entry tax, on import of cement into a local area, has created a level playing field for all manufacturers. In the process, points out Mr. Choudhury, the State is tackling the diversion of trade also. The contention of the petitioners, according to Mr. Choudhury, is wholly misleading, for, the petitioners compare their status with that of the dealer or importer of cement for resale. The petitioners have to pay, points out Mr. Choudhury, entry tax on cement, which the petitioners import as a raw ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the petitioners have no right to raise objection in such matters of taxation. In support of this submission, Mr. Choudhury relies on the decision in Sri Krishna Das v. Town Area Committee, Chirgaon reported in [1990] 77 STC 395 (SC); [1990] 3 SCC 645. As regards the decisions referred to by Mr. Joshi, Mr. Choudhury submits that the same are distinguishable on facts and the same have no application to the facts of the present cases. Before dealing with the rival submissions made before me on behalf of the parties, let me take note of the relevant provisions of the Assam Entry Tax Act, 2001. Section 3 of the AET Act, 2001, which is the charging section, reads as under: 3. Levy of tax. (1) There shall be levied and collected an entry tax on the entry of goods specified in the Schedule into any local area for consumption, use or sale therein at such rate, not exceeding twenty per centum, as the State Government may, by notification, fix in this behalf and different rates may be fixed for different class or classes of specified goods and such tax shall be paid by every importer of such goods, whether he imports such goods on his own account or on account of his principal or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales tax, so long as the importer sells goods in the form in which he has imported the specified goods. In the present case, what is imported from outside the State or from one local area to another local area is cement to be used as a raw material in the manufacturing process of asbestos sheets. If the asbestos sheets can be regarded as a commodity same as cement, no entry tax can be levied if such locally manufactured asbestos sheets are sold within the State of Assam and sales tax is paid thereon, for, exemption of entry tax is in respect of entry of only such goods, which are sold in the form in which the goods have entered into a local area and such sale is subject to local sales tax laws. If, however, such an asbestos sheet is regarded as a commodity commercially different from its raw material, i.e., cement, the entry of cement into a local area cannot be exempted from payment of entry tax, for, in such a case, import of cement is for the purpose of use or consumption in the local area. So long as such a distinction between those, who are liable to pay entry tax, and those, who are not so liable can be discerned from the provisions of section 5, levy of entry tax on the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein . The word consumption is used both in its popular sense and in its economic sense. The word consumption , in its primary sense, means utilisation of an article in a manner, which destroys the article or wastes the article or amounts to use of the article. The meaning of the word consumption fell for consideration in Anwar Khan Mehboob Co. v. State of Bombay [1960] 11 STC 698 (SC); AIR 1961 SC 213. The facts of the case, in Anwar Khan Mehboob Co. [1960] 11 STC 698 (SC); AIR 1961 SC 213, were, in brief, thus: Tobacco was purchased and in the State of Bombay, stem and dust were removed from the tobacco. The assessees' contention was that removal of stem and dust from tobacco did not amount to consumption of tobacco. While construing the word consumption , which earlier existed in the Explanation to article 286(1)(A), as the same stood prior to its deletion by the Constitution Sixth (Amendment) Act, 1954, Constitution Bench, in Anwar Khan Mehboob Co. [1960] 11 STC 698 (SC); AIR 1961 SC 213 observed thus (page 702 of STC): 9....The act of consumption with which people are most familiar occurs when they eat, or drink or smoke. Thus, we speak of people ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arn being consumed in weaving; of woven cloth being consumed in the making of wearing apparel. The final product the wearing apparel is ultimately consumed by men, women and children in using it as dress. In the absence of any words to limit the connotation of the word 'consumption' to the final act of consumption, it will be proper to think that the Constitution-makers used the word to connote any kind of user which is ordinarily spoken of as consumption of the particular commodity. 10.. Reverting to the instance of cotton, mentioned above, it will be proper to hold that when raw cotton is delivered in State A for being ginned in that State, it is delivered for consumption in State A; when ginned cotton is delivered in State B for being spun into yarn, it is delivered for consumption in State B; when yarn is delivered in State C for being woven into cloth in that State, it is delivered for consumption in State C; when woven cloth is delivered in State D for being made by tailor in that State into wearing apparel there is delivery of cloth for consumption in State D; and finally when wearing apparel is delivered in State E for being sold as dress in that State, it is de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the Explanation to article 286(1)(a) a view which he had earlier indicated at page 110(2) of the report. We are not aware of any case where such use of a commodity has been held not to amount to consumption. (1)See at page 249 of [1953] 4 STC. (2)See at page 247 of [1953] 4 STC. 11.. It must therefore be held on the facts of this case that when tobacco was delivered in the State of Bombay for the purpose of changing it into a commercially different article, viz., bidi patti, the delivery was for the purpose of consumption. The purchases in this case therefore fall within the meaning of Explanation to article 286(1)(a) and must be held to have taken place inside the State of Bombay. The Constitution Bench, in Anwar Khan Mehboob Co. [1960] 11 STC 698 (SC); AIR 1961 SC 213, held that when tobacco was delivered in the State of Bombay for the purpose of changing it into a commercially different article, namely, bidi patti, the delivery was for the purpose of consumption , for, conversion of a commodity into a different commercial commodity by subjecting it to some processing is nothing, but consumption . In short, what can be safely gathered from the observations m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... production of goods with higher utility. In B. Raghurama Shetty [1981] 47 STC 369 (SC); [1981] 2 SCC 564, the assessees' contention was that paddy and rice are same commodity and it cannot be said that when they produce rice by milling paddy, it amounted to consumption of paddy. However, turning down this contention, the assessees were held to consume paddy, when the purchased paddy was converted by them into rice, for, rice is commercially a commodity different from paddy. The word use is also of vital importance. I may also point out that the words use and consumption are neither synonymous nor are they to be understood as carrying the same meaning. In Mafatlal Industries Ltd. v. Nadiad Nagar Palika reported in [2000] 118 STC 494 (SC); [2000] 3 SCC 1, the Supreme Court held that the words use and consumption involve conversion of a commodity into a commercially different commodity by subjecting it to some process. From the meaning, which has been attributed to the words consumption and use by various authoritative pronouncements of the Supreme Court, it becomes clear that whenever an article is used in a manufacturing process to produce an article differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the content and reach of article 14 must not be confused with the doctrine of classification. Unfortunately, in the early stages of the evolution of our constitutional law, article 14 came to be identified with the doctrine of classification because the view taken was that that article forbids discrimination and there would be no discrimination where the classification making the differentia fulfils two conditions, namely, (i) that the classification is founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group; and (ii) that that differentia has a rational relation to the object sought to be achieved by the impugned legislative or executive action. In D.S. Nakara v. Union of India [1983] 1 SCC 305, the apex court clarified the scope of article 14 as under: The decisions clearly lay down that though article 14 forbids class legislation, it does not forbid reasonable classification for the purpose of legislation. In order, however, to pass the test of permissible classification, two conditions must be fulfilled, viz., (i) that the classification must be founded on an intelligible differentia wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons or objects it will tax, and that a statute is not open to attack on the ground that it taxes some persons or objects and not others. It is only when within the range of its selection, the law operates unequally, and that cannot be justified on the basis of any valid classification, that it would be violative of article 14. In Federation of Hotel Restaurant Association of India v. Union of India reported in [1989] 74 STC 102; [1989] 3 SCC 634, the apex court held that the tests of vice of discrimination of taxing statute are less rigorous and having regard to the wide variety of diverse economic criteria that involve in the formulation of fiscal policy, Legislature enjoys a wide latitude in the matter of selection of persons, subject-matter, events, etc., for taxation. The apex court's observations, in this regard, at para 46, as under (at page 126 of 74 STC): It is now well-settled that though taxing laws are not outside article 14, however, having regard to the wide variety of diverse economic criteria that go into the formulation of a fiscal policy, Legislature enjoys a wide latitude in the matter of selection of persons, subject-matter, events, etc., for tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thers, it cannot be said to be discriminatory. In the case at hand, it was really for the State Legislature of Assam, to decide whom to give exemption from payment of entry tax or whom not to give. In the case at hand, it is clear from what have been discussed above that the impugned Act seeks to avoid imposition of entry tax on those, who pay local sales tax on the sale of imported goods into any local area of Assam. The exemption granted under section 5 makes no distinction in this regard. What the petitioners are doing is that they sell asbestos sheet as finished product, produced or manufactured by them, out of the consumption of cement, imported into a local area, as a raw material. When cement is so consumed, it is liable to levy of entry tax. Since such consumption does not amount to sale within the meaning of local sales tax laws, the petitioners pay local sales tax only when they sell their finished product, i.e., asbestos sheets in Assam. Thus, those, who import cement for the purpose of sale and sell cement in the form of cement, they are entitled to exemption from entry tax. This class stands on a footing different altogether from those, such as, the petitioners, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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