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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 ..... ucts 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 process of their finished products, (i.e., asbestos sheets). Besides paying entry tax, the petitioners are also required to pay sales tax under the AGST Act as well as the CST Act on the sales made in the course of inter-State and intra-State trade and commerce of their finished products, whereas the local manufacturers of goods, other than asbestos sheets, are exempted from the liability to pay entry tax if the sale of such goods, within the State of Assam, is liable to pay of local sales tax. The imposition of entry tax on the imported cement for use in the manufacturing process of asbestos sheets, is, thus, according to the petitioners, discriminatory and also violative of not only the constitutional guarantees, but also of the scheme of the AET Act, 2001. I have heard Mr. G.K. Joshi, learned Senior counsel, for the petitioners, and Mr. K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 same is palpably arbitrary. In support of his submissions, Mr. Joshi relies on Ajay Hasia v. Khalid Mujib Sehravardi [1981] 1 SCC 722, D.S. Nakara v. Union of India [1983] 1 SCC 305, East India Tobacco Co. v. State of Andhra Pradesh [1962] 13 STC 529 (SC), Shri Sitaram Sugar Co. Ltd. v. Union of India [1990] 3 SCC 223, Federation of Hotel & Restaurant Association of India v. Union of India [1989] 74 STC 102 (SC); [1989] 3 SCC 634, Gannon Dunkerley & Co. v. State of Rajasthan [1993] 88 STC 204 (SC); [1993] 1 SCC 364, Ramana Dayaram Shetty v. International Airport Authority [1979] 3 SCC 489 and Comptroller and Auditor General of India, Gian Prakash v. K.S. Jagannathan [1986] 2 SCC 679. Mr. Joshi, learned Senior counsel, has further contended that the levy of entry tax, on the import of cement for use in manufacturing finished goods for sale, is co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 material for use in the manufacturing process of asbestos sheets, and they have to pay local sales tax on the sale of asbestos sheet, which is a finished product. Therefore, the petitioners' contention that the petitioners are sought to be discriminated is wholly misconceived and legally not tenable; so submits Mr. Choudhury. Disputing the petitioners' grievances relating to violation of article 14 of the Constitution of India, Mr. Choudhury submits that in order to get the benefit of exemption under the impugned Act, the goods should be sold in the same form in which it is imported, i.e., cement should be sold as cement only. Mr. Choudhury submits that since the AET Act, 2001, does not provide for any exemption in respect of specified goods used as raw materials for manufacturing other goods, the petitioners cannot claim the benefit of section 5 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 any other person or takes delivery or is entitled to take delivery of such goods on such entry; (2) The entry tax payable by an importer under this Act shall be charged on the purchase value of the goods specified in the Schedule at the rates as may be fixed by the State Government by notification in the Official Gazette." From a bare reading of section 3, it becomes clear that entry tax is leviable on the entry of the specified goods into a local area for consumption, use or sale therein. The taxable event is, thus, "entry" of such goods into a local area for the purposes mentioned hereinbefore, i.e., for consumption, use or sale. Turning to section 5 of the AET Act, it may be noted that section 5, as substituted with effect from May 9, 2002, reads as under: "5. Exemption from tax.-Notwithstanding anything contained in section 3 and section 4, and subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 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 petitioners cannot be said to be illegal nor can section 5 be regarded as a piece of legislation, which is beyond the competence of the Legislature, for, it is for the Legislature to grant or not to grant exemption from payment of a particular levy and so long as not granting of such an exemption is shown to be discriminatory or arbitrary, no interference with such a levy will be possible. Before proceeding further, it may also be pointed out that in fiscal statutes, one must have regard to the letter of the law and not to the spirit of the law. No tax can be imposed by inference or analogy and one has simply to go to the enactment itself to ascertain whether the tax, in question, is really a tax, which the statute imposes. It is not the function of the court to attribute to the words, used in a taxing statute, a strange or unnatural meaning. If the language of the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 consuming bread, or fish or meat or vegetables, when they eat these articles of food; we speak of people consuming tea or coffee or water or wine, when they drink these articles; we speak of people consuming cigars or cigarettes or bidis, when they smoke these. The production of wealth, as economists put it, consists in the creation of 'utilities'. Consumption consists in the act of taking such advantage of the commodities and services produced as constitutes the 'utilisation' thereof. For each commodity, there is ordinarily what is generally considered to be the final act of consumption. For some commodities, there may be even more than one kind of final consumption. Thus grapes may be 'finally consumed' by eating them as fruits; they may also be consumed by drinking the wine prepared from 'grapes'. Again, the final act of consumption may in some ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 delivery of wearing apparel for consumption in State E. Except at the final stage of consumption which consists in using the finished commodity as an article of clothing, there will be noticed at each stage of production the bringing into existence of a commercial commodity different from what was received by the producers. This conversion of a commodity into a different commercial commodity by subjecting it to some processing, is consumption within the meaning of the Explanation to article 286 no less than the final act of user when no distinct commodity is being brought into existence but what was brought into existence is being used up. At one stage of the argument what Mr. Pathak appeared to insist was that there must be destruction of the substance of the thing before the thing can be said to be consumed. That takes us nowhere, because we have still to find out what is meant by destr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 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 made in Anwar Khan Mehboob Co. [1960] 11 STC 698 (SC); AIR 1961 SC 213 is that when a commodity is converted into a commercially different commodity, it amounts to "consumption" of the former commodity, for, there is destruction of the substance, which is converted into a commercially different commodity. In Anwar Khan Mehboob Co. [1960] 11 STC 698 (SC); AIR 1961 SC 213, the apex court made it clear that whenever a commodity is so dealt with as to change it to another commodity, there is consumption of the first commodity. In State of Karnataka v. B. Raghurama Shetty reported in [1981] 47 STC 369 (SC); [1981] 2 SCC 564, the apex court pointed out that "consumption ", in its true economic sense, does not mean only use of goods in the production of consumers' goods or final utilisation of the consumers' goods by consumers involving activities like eating of foods, drinking of beverages, wea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 different from the one, which has been processed through, the article, which has been so used in the manufacturing process, shall be taken to have been consumed and the product, which comes out, is the finished product. It is, therefore, clear that in the manufacturing process of asbestos sheets, cement has been consumed by the petitioners, for, an asbestos sheet is a commodity, which is commercially different from the raw material, i.e., cement. Since the cement, imported as raw material, for the purpose of manufacturing asbestos sheets, is consumed by the petitioners, it logically follows that upon import of cement into a local area in Assam, the petitioners do consume the cement in their manufacturing process. Situated thus, it is clear that the levy of entry tax, in the present case, is on the import of cement into a local area for the purpose of consumption therein. Such consumption falls within the mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 which distinguishes persons or things that are grouped together from those that are left out of the group; and (ii) that that differentia must have a rational relation to the objects sought to be achieved by the statute in question See Ram Krishna Dalmia v. Justice S.R. Tendolkar AIR 1958 SC 538. The classification may be founded on differential basis according to objects sought to be achieved but what is implicit in it is that there ought to be nexus, i.e., causal connection between the basis of classification and object of the statute under consideration. It is equally well-settled by the decisions of this court that article 14 condemns discrimination not only by a substantive law but also by a law of procedure." From the observations made in Ajay Hasia [1981] 1 SCC 722 and D.S. Nakara [1983] 1 SCC 305, it is clear that when the classification is founded on an intelligible differentia, which distinguishes pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 taxation. The tests of the vice of discrimination in a taxing law are, accordingly, less rigorous. In examining the allegations of a hostile, discriminatory treatment, what is looked into is not its phraseology, but the real effect of its provisions. A Legislature does not, as an old saying goes, have to tax everything in order to be able to tax something. If there is equality and uniformity within each group, the law would not be discriminatory. Decisions of this court on the matter have permitted the Legislatures to exercise an extremely wide discretion in classifying items for tax purposes, so long as it refrains from clear and hostile discrimination against particular persons or classes." From what have been discussed above, it is clear that in order to hold any provision of an enactment violative of article 14, it must be shown that the enactment makes a distinction between the similarly situated persons or similarly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bestos 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, who import cement for consumption in their manufacturing process and, then, sell their finished product, i.e., asbestos sheets in the market. There was no impediment and there is no impediment, on the part of the Legislature, to subject such sale to local sales tax laws. What emerges from the above discussion is that levy of entry tax under the AET Act, 2001, on import of cement into a local area for the purpose of its consumption in the manufacturing process of asbestos sheets cannot be interfered with on grounds of discrimination, arbitrariness or violation of any constitutional guarantees. This apart, the levy of entry tax on cement has been imposed with prior sanction of the President in terms of the proviso to article 304(b) of the Constitution of India. Viewed thus, it is abundantly clear that the challenge to the levy of entry tax on cement by the present set of writ petitioners has no substance and cannot be sustained. &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X
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