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TMI Blog1995 (3) TMI 490X X X X Extracts X X X X X X X X Extracts X X X X ..... te to lime (stone) and not limestone and, therefore, the rate of tax imposed by the notifications cannot be applied to entry of limestone into local areas caused by the petitioners except petitioner in M. P. No. 1520 of 1991. (ii) Section 4(1)(i) of the Act is unconstitutional. (iii) Provision for levy of entry tax on limestone is beyond the legislative competence of the State. (iv) The notifications are contrary to the provisions of Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957 and, therefore, beyond the competence of the State Government. (v) The petitioners who quarry limestone do not acquire or obtain the same and cannot be taxed. (vi) Petitioners are not dealers in limestone and hence entry tax cannot be levied. (vii) The factory of the petitioners in M. P. No. 405 of 1991 cannot be regarded as a local area and since they are not causing entry of limestone into the factory premises, entry tax cannot be levied. 4. The Act has been enacted by the State Legislature to levy tax on entry of goods in lieu of octroi tax collected by local bodies, the main objective being to make transportation of goods trouble-free by abolition of Oct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e consumed or used as raw material for the manufacture of other goods, shall be half percent if the rate of tax specified in Schedule II or Schedule III exceeds half percent. This provision was introduced by M.P. Act No. 25 of 1981 with effect from 1-6-1981. Limestone is taken out of the purview of the concession provided under the first proviso. 7. Section 4-A was incorporated by M.P. Act No. 67 of 1976 with effect from 31-12-1976. It reads thus: 4-A. Provision for entry tax at enhanced rate on certain goods consumed or used in manufacture of other goods- (1) The State Government may, by notification, specify the local area and areas the goods or goods which are used or consumed in such local area or areas mainly for the manufacture of other goods and may direct that (as from the date specified in the notification and in such manner as may be prescribed) the entry tax payable by a dealer under the Act shall be charged on his taxable quantum relating to such goods at a rate not exceeding ten percentum as may be specified in such notification notwithstanding anything to the provision contained in Section 4. (2) On the issue of the notification under Sub-section (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not restricted to any period. This notification has been corrected by an erratum notification dated 10-3-1995 correcting the expression lime (stone) as limestone . It is contended for the petitioners who are causing entry of limestone that the notifications relate only to goods described as lime (stone) which is different from limestone which they are causing entry and, therefore, they cannot be required to pay any entry tax. 10. In the Shorter Oxford English Dictionary Vol. 1, Third Edition, the meaning of lime is given as follows : 2. Usually coupled with stone: Morter or cement used in building. 3. The alkaline earth which is the chief constituent of morter,; calcium oxide. It is obtained by calcining limestone (carbonate of lime), the heat driving off the carbonic acid and leaving a brittle white solid which is pure lime or quicklime. 4. the CALK of metals. B. Any alkaline earth. Limekiln is described as under: A kiln in which lime is made by calcining limestone. Lime-pit is described as under: A limestone quarry; a pit in which lime is burnt. Limestone is described as under: A rock which consists chiefly of carbonate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 14 of Schedule II which are excluded for the purpose of the proviso are iron and steel, paddy and pulses. Schedule III is in three parts. Part I prescribes 1.5% as the tax for goods specified in Entries 1 to 32, 32-A and 32-B of Part II of Schedule II and 7.75% for foreign and Indian Made foreign liquor. Part II specifies 0.5% as tax in respect of silver and gold ornaments of personal wear and 0.25% in respect of bullion and specie. All goods other than those included in Schedules I and II and parts' and II of Schedule III carry 1% tax under part III. Many other goods specified in Schedules II and III may be consumed or used as raw materials for manufacture of other goods. The intention of the proviso (i) to Section 4(1) of the Act is to offer concessional entry tax in respect of such goods which are so used. That is because any entry caused to be made after manufacture will again be subject to entry tax. Section 4-A contemplates provision for entry tax at enhanced rate on certain goods consumed and used for manufacture of any other goods. It is left to the Government to specify local area and the goods and the rates of tax subject to a limit of 10%. Limestone and copper hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt has no legislative powers. In V. Venugopala Ravi Varma Rajah v. Union of India, AIR 1969 SC 1094, the Court observed: Again tax laws are aimed at dealing with complex problems of infinite variety necessitating adjustment of several desparate elements. The Courts accordingly admit, subject to adherance to the fundamental principles of the doctrine of equality a larger play to legislative discretion in the matter of classification. The power to classify levy exercise so as to adjust the system of taxation in all proper and reasonable ways; the legislature may select persons, properties, transactions and objects, and apply different methods and even rates for tax, if the legislature does so reasonably, protection of the equality clause does not predicate a methmatically precise or logically complete or symmetrical classification; it is not a condition of the guarantee of equal protection that all transactions, properties objects or persons of the same genus must be affected by it or none at all. In Federation of Hotel and Restaurant v. Union of India, AIR 1990 SC 1637, the Supreme Court observed: It is now well settled that though taxing laws are not outside A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the provision for levy of entry tax on limestone is beyond the legislative competence of the State. Entry 54, List I Seventh Schedule to the Constitution reads thus: Regulation of mines and mineral development to the extent to which such regulation and development under the control of Union is declared by Parliament by law to be expedient in the public interest. In exercise of the legislative power under this entry, the Mines and Minerals (Regulation and Development) Act, 1957 (for short the 1957 Act) has been enacted to provide for regulation of mines and the development of minerals under the control of the Union. Section 2 of the Act 1957 declares that it is expedient in public interest that the Union should take under its control the regulation of mines and development of minerals to the extent as provided in the Act. That contains provisions relating to general restrictions on undertaking prospecting and mining operations, procedure for obtaining prospective licenses or mining licenses in respect of minerals vested in the Government, power to make rules for regulating grant of prospecting licenses and mining licenses, special powers of the Central Government to unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er under Entry 49, or Entry 50 or Entry 45 of the List II of the Seventh Schedule, though widest amplitude should be given to the language of entries. Where entries overlap or appear to be conflicting to each other, the Court has to find true intent and the purpose and to examine a particular legislation in its pith and substance to determine whether it fits in one or the other of the lists. The lists are designed to define and delimit the respective areas of respective competence of the Union and States. Supreme Court indicated that cess means a tax and the expression is generally used as the levy for some administrative expense which the name indicates. When levied as an increment to an existing tax, the validity of the cess must be judged in the same way as the validity of the tax to which it is an increment. Royalty on mineral rights is a tax and as such a cess on royalty being a tax on royalty is beyond the competence of the State Legislature because Section 9 of the Central Act covers the field and the State Legislature is denuded of its competence under Entry 23 of List II of Seventh Schedule of the Constitution. The cess on royalty cannot be sustained under Entry 49 of List ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levying taxes on the sale or purchase of goods other than newspapers. The power to tax under Entry 54 of List II being a specific power, it cannot be cut down or in any manner fettered by the general power of control exercised by Parliament by legislation on a matter falling under Entry 52 of List 1 relating to an industry, the control of which by the Union is declared by Parliament by law to be expedient in the public interest, read with Entry 33 of List III dealing with trade and commerce in, and the production, supply and distribution of the products of any such controlled industry, and imported goods of the same kind as such products, and other articles mentioned in Entry 33. The impugned provision of the Uttar Pradesh Sales of Motor Spirit, Diesel Oil and Alcohol Taxation (Amendment) Act, 1976 levying tax at the point of first purchase of alcohol in the State is undoubtedly an impost falling in pith and substance under Entry 54 of List II. In the absence of any fetter on the legislative power and in the absence of any valid challenge against the provision as a colourable piece of legislation, the impugned legislative remains unimpeachable. The Court further observed:-- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at has been stated in aforesaid decisions, more particularly in Hansa Corporation's case , (1981) 1 SCR 823: (AIR 1981 SC 463). 21. Viewing the present controversy in the light of the above principles, it is clear that the State legislation in relation to entry tax falls squarely within Entry 52 of List II in pith and substance, though the industry is controlled within the ambit of Entry 54 of List I. Entry Tax Act is not a colourable piece of legislation as the Legislative purpose is only to compensate the local bodies for loss of octroi and the same has been consistently upheld by Courts. We, therefore, repel the contention of want of legislative competence. Point answered accordingly. 22. Point No. (iv) : By virtue of the power conferred by Section 4-A of the Act, the State Government issued notification dated 28-6-1990 specifying local areas, goods, period during which entry tax is payable and the rate of tax. Item No. 1 describes local areas as all local areas in the State, goods as lime (stone), the period as 1-7-1990 to 31-3-1991 and the rate of tax as 10%. By notification dated 2-2-1994, the same local areas, goods and rate of tax were specified and the tax wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. Section 3(1) relates to incidence of taxation in relation to the goods specified in Schedules II and III, the liability to pay tax being on every dealer who has effected entry of such goods. Section 4 relates to the rate at which entry tax is to be charged by referring to the goods and the rates specified in Schedules II and III with certain concessions offered under the provisos. Section 6 deals with principles governing levy of entry tax on dealer or person, local goods are dealt with in Section 7. Section 7-A deals with composition. Section 8 deals with penalty for failure to fulfil responsibility or obligation undertaken. Section 9 empowers the State Government to amend the rate of tax specified in Schedules II and III. State Government has power of exemption under Section 10. Section 11 deals with burden of proof. Section 12 deals with rate at which entry tax to be charged on goods under Section 3(2). Sub-section (2) of Section deals with levy of entry tax on entry of goods specified in Schedules II and III caused to be made by persons to whom the provisions of Sub-section (1) do not apply, as may be notified by the State Government. Section 12 enables the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edules ranged from 1/4% to 7 3/4%. Under Section 9, the State Government can increases the rate of tax from time to time subject to limit of 25% in the aggregate. Necessarily, in regard to a variety of goods, 10% would far exceed this limit. Nevertheless, the legislature under Section 4-A imposed a distinct ceiling of 20% on the entry of goods covered by those provisions. This supports our view that the first proviso to Section 9(1) has no application to the notifications contemplated under Section 4-A or 12. We, therefore, reject the contention that the impugned notifications being violative of the first proviso to Section 9(1) of the Act are beyond the competence of the State Government the point is answered accordingly. 27. Point Nos. (v) and (vi): By the notifications issued under Section 4-A, entry tax is payable by a dealer under the Act on his taxable quantum relating to such goods. Taxable quantum is defined in Section 2(j) of the Act as follows: Taxable quantum' in relation to a dealer means the aggregate of the taxable purchase value and the taxable market value. Taxable market value is defined in Section 2(h) of the Act as follows: ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods of which an entry is caused to be made. 30. In Sanjay Trading Company v. Commissioner of Sales Tax (1994) 93 STC 589, this Court repelled the challenge on the Entry Tax Act levelled on certain grounds. This Court held that the words liable to tax under the Sales Tax Act qualify the expression dealer and do not qualify the expression goods . The attempt in Section 3 is to identify the dealer who is liable to pay entry tax. He is the dealer who has effected entry of the goods provided he is liable to tax under the Sales Tax Act. The Supreme Court in Bhagatram Rajeev Kumar v. Commr. of Sales Tax, (1995) 96 STC 654 has affirmed the above decision indicating that the provision in Section 3 fixing a person from whom tax shall be realised is a part of machinery provision and cannot control the main or substantive part of the section. The Supreme Court observed that: the expression 'liable to tax' has been used to identify the person who shall pay the entry tax ... The intention is to levy tax only when the goods are brought inside the State by a dealer carrying on business whose turnover is not less than ₹ 1,000/- annually and not by any other person. In ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... area, therefore, they are not liable to pay entry tax. It is admitted by the learned counsel for the petitioners that the factory is situated within the limits of Bunnor Panchayat; it so, the factory is situated within a local area. Undoubtedly the petitioners cause entry of minerals into Bunnor local area in which the factory is situated. Taxable event is the entry of goods into the local area in which the factory is situated. Learned counsel for the petitioners place reliance on Bhopal Sugar Industries v. State of U. P., AIR 1979 SC 537. In that case, the Supreme Court invalidated Sugarcane Cess Validation Act and quashed a notification levying cess on sugarcane brought into a factory. 'Local Area', it was held, is an area administered by a local body and the like and that levy of cess on entry of sugarcane into the premises of the factory is not valid. The notifications impugned in that case imposed cess on entry of sugarcane during a crushing season in the area comprised within such of the factories in which the total quantity of cane entering for consumption, use or sale to the factory during such reason exceeded 10 lack munds See also Diamond Sugar Mills Ltd. v. Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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