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TMI Blog2017 (2) TMI 350X X X X Extracts X X X X X X X X Extracts X X X X ..... Gujarat. 3.00. For the sake of convenience, facts in Special Civil Application No. 1560 of 2016 are narrated and considered and the said Special Civil Application be treated and considered as lead matter. 4.00. Facts leading to the present Special Civil Application, in nutshell are as under :- 4.01. That Tractors and Farm Equipments Ltd. - petitioners of Special Civil Application No. 1560 of 2016 is engaged in the manufacture of Tractors. The petitioners have manufacturing unit in Madurai and Banglore. That the depots of the petitioners are located in various States of the country including the State of Gujarat. 4.02. That the petitioners are duly registered under the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as "the VAT Act". That on sale of Tractors within the State of Gujarat, the State Government levies entry tax on import / entry of Tractors into the State of Gujarat under the provisions of the Gujarat Tax on Entry of Specified Goods into the Local Areas Act, 2001 (hereinafter referred to as "Entry Tax Act"). That the entry tax has been levied at the rate of 15% under Entry 1 of Schedule to the entry Tax Act. That the appropriate authority has, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Tax Act / VAT Act. 6.03. Mr.Uchit Sheth, learned advocate appearing on behalf of the petitioners has further submitted that only those motor vehicles which were falling under Entry 128(1) of the Sales Tax Act attracting 12% Sales Tax rate and which now attract 15% tax rate under the VAT Act are covered under Entry 1 of the Schedule to the Entry Tax Act. 6.04. Mr.Uchit Sheth, learned advocate appearing on behalf of the petitioners has further submitted that Tractors were always covered by a separate entry under the Sales Tax Act as well as under the VAT Act for which the applicable rate of tax under the Sales Tax Act was 4% and the applicable rate of tax under the VAT Act now is 4%+1% additional tax. It is submitted that thus, levy of Entry Tax at the rate of 15% on Tractors by considering them as motor vehicles under the Entry Tax Act is dehors the objects and scheme of the Entry Tax Act and contrary to the legislative intention, bad and illegal. 6.05. Mr.Uchit Sheth, learned advocate appearing on behalf of the petitioners has further submitted that in the original Schedule to the Entry Tax Act, there was specific column containing reference to the relevant entry in the Gujar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was 15%. Correspondingly the Schedule to the Entry Tax Act was amended. It is submitted that in the Statement of Object and reasons of amending Act it was again noted that the purpose of the Entry Tax Act was not to levy additional tax but to provide "level playing field" between the goods entering into the local areas from any place outside the Stat and the goods manufactured or produced in the State. It is submitted that it was further noted that the entry tax rates are having direct linkage with the VAT rates on the same goods and hence change in the VAT rates necessitated change in the Entry Tax Act. Thereafter it was observed that to obviate the need to maintain the Entry Tax Act consequent to change in the VAT rates it was considered necessary to revise the maximum rates of tax on specified goods as mentioned in the Schedule. 6.07. Mr.Uchit Sheth, learned advocate appearing on behalf of the petitioners has further submitted that maximum rate of Entry Tax in respect of motor vehicles was revised to 20% while the notification rate at which the Entry Tax was actually payable was revised to 15% i.e. again equal to the applicable rate of VAT to motor vehicles covered under resid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners has further submitted that the levy of entry tax on Tractors in excess of 5% has been exempted subsequently by notification dated 12/5/2016. It is submitted that the legislative history and the objects and reasons of the Entry Tax Act as enumerated hereinabove shows that the Tractors are not excisable to Entry Tax and hence question of "exemption" does not arise. 6.12. Mr.Uchit Sheth, learned advocate appearing on behalf of the petitioners has further submitted that subsequent exemption notification only shows that the Government realized that levy of Entry Tax on Tractors at the rate of 15% by treating them as motor vehicles even though the local VAT rate on tractors is 5% was contrary to the object and scheme of the Entry Tax Act and such interpretation would make the levy of the Entry Tax vulnerable under Article 304(a) of the Constitution of India. It is submitted that the subsequent exemption notification therefore reinforces the submission on behalf of the petitioners that the Entry Tax was never intended to be levied on Tractors under Entry for "motor vehicles". 6.13. Mr.Uchit Sheth, learned advocate appearing on behalf of the petitioners has further submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4(a) of the Constitution of India. It is submitted that in other words, Tax can be imposed on entry of goods from outside the State only if there is no discrimination between goods imported from outside the Sate and similar goods manufactured in the State. It is submitted that thus, levy of entry tax on tractors at the rate of 15%% even though the local VAT rate is 5% would be violation of Article 304(a) of the Constitution of India even as per the law laid down by the Hon'ble Supreme Court in the case of Jindal Stainless Ltd. (supra). 6.16. Mr.Uchit Sheth, learned advocate appearing on behalf of the petitioners has further submitted that the levy of entry tax at the rate of 15% on tractors, even though local VAT rate on tractor is 5%, is contrary to Statement of the State Government through learned Advocate General before this Court in the case of Eagle Corporation Pvt. Ltd. (supra). It is submitted that in the said case, the State of Gujarat through the learned Advocate General had specifically submitted before this Court that levy of Entry Tax would never exceed the sales tax rate on similar goods in the State. It is submitted that therefore, levy of Entry Tax at the rate of 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the Hon'ble Supreme Court in the case of Natvar Parikh and Company Vs. State of Karnataka, reported in 2005(7) SCC 364 as well as decision of the Division Bench of this Court in the case of Reliance Entries Ltd. Vs. State of Gujarat, rendered in Special Civil Application No.11848 of 2005, in support of her submission that "Tractor" is a "moor vehicle" and therefore, on entry / import of Tractors in the State of Gujarat Entry Tax is leviable at 15%. 7.03. Now, so far as reliance upon the Government Resolution dated 12/5/2016 by which the rate of tax between 15% and 5% is exempted, it is submitted by Ms.Maithili Mehta, learned AGP appearing on behalf of the State that the said Government Resolution would have a prospective applicability and therefore, the petitioners would be liable to pay 15% tax for the period prior to the said Government Resolution. 7.04. Ms.Maithili Mehta, learned AGP appearing on behalf of the State has further submitted that even otherwise by levy of 15% Entry Tax on entry / import of Tractors in the State of Gujarat, petitioners are not likely to be affected. It is submitted that by way of Rule 15(7) read with section 11 of the Gujarat Value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom any place outside the State, but not outside the territory of the Union of India for consumption, use or sale therein and for the matters connected therewith or incidental thereto." Thus, the statement and objects of the Entry Tax Act make it clear that due to the difference in the rate of Sales Tax applicable to the State of Gujarat and that to neighbouring States, diversion of trade has taken place and cases sales tax payments are avoided or evaded by various methods, in some cases resulting in the loss of sales tax revenue legitimately due to the State of Gujarat and with a view to compensating such loss of sales tax revenue, it was considered necessary to levy a tax on entry of certain specified goods purchased / manufactured outside the State and brought into the local areas of the State of Gujarat. 8.03. Before this High Court in the case of Eagle Corporation Pvt. Ltd (supra) constitutional validity of the Entry Tax Act was challenged and after considering the Statement and Objects of the Entry Tax, Preamble and the relevant provisions of the Act, while upholding the constitutional validity of the Entry Tax Act, the Division Bench of this Court in the case of Eagle Cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and rate of sales-tax payable by the importer in a particular State is 4%, and if an importer in fact pays sales-tax and/or central sales-tax at the rate of 4%, then, in that case, while importing the specified goods into the State of Gujarat/local area, such an importer is required to pay the entry tax at the rate of 8%. It is required to be noted that, so far as the liability of sales-tax on local person is concerned, it is 12 per cent. Thus, when an importer who has paid 4% of sales-tax in a particular State while importing the goods in the State of Gujarat is required to pay Entry Tax at 8 per cent which puts such importer at par with the local persons. Thus, when there is no discrimination at all in view of juxtapose effect of the two Acts, levy of entry-tax would be non-discriminatory. It is also required to be noted that, as per Section 12 of the Act, no tax shall be levied and/or collected in respect of the motor vehicles mentioned at Serial No.1 in the Schedule, if such motor vehicles are registered in any other State or Union Territory of India under the Motor Vehicles Act for a period exceeding 15 months before their entry into the local area of the State. It is, thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case, the contention on behalf of the petitioner, that levy of entry tax is discriminatory, is required to be rejected. It is also to be noted at this stage that as per Section 304(a) discrimination is required to be considered between goods so imported and goods so manufactured or produced. It is undisputed that on payment of Entry Tax as a reduced liability does not put the importer at a position worse in comparison to local producer, dealer or manufacturer. If no Entry Tax is levied then the importer would steal a march over the local person and he would be in a dominating position to the extent of the Tax difference. 23. Now, on perusal of plethora of provisions of the Act, it is evident that they are aimed at achieving level-playing field so as to obviate any chance of discrimination. When there is a reduction in the effective rate of sales-tax under the Gujarat Sales-Tax Act, automatically there will be corresponding reduction in the maximum rate of Entry Tax prescribed in the Schedule so that the goods brought from outside the State are not discriminated against the goods being manufactured within the State, from the point of view of ultimate burden of tax. 24. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in that case too it is to be established that the same is in the public interest and that it requires previous sanction of the President, cannot be accepted. 26. As stated hereinabove, the learned counsel appearing on behalf of the petitioner has mainly relied upon the recent decision of the Hon'ble Supreme Court in the case of Jindal Stainless (supra). However, it is required to be noted that the decision of the Hon'ble Supreme Court in the case of Jindal Stainless (supra) is with regard to tax being compensatory in nature dealing with Article 301 of the Constitution of India. As stated above, considering the recent decision, the State Government has given up their stand that levy of entry tax is compensatory in nature and is compensatory tax. Therefore, the decision relied upon by the learned counsel appearing on behalf of the petitioner would not be of any assistance to the petitioner. On the contrary, the constitutional validity of similar provisions relating to levy of Entry Tax being Maharashtra Tax on Entry of Motor Vehicles Into Local Areas Act, 1987 with the same objects and reasons has been upheld by the Hon'ble Supreme Court in the case of Shaktikumar M. Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld so as to obviate any chance of discrimination. It is further observed that when there is a reduction in the effective rate of sales tax under the Gujarat Sales Tax Act, there will be automatic corresponding reduction in the maximum rate of entry tax prescribed in the schedule, so that the goods brought from outside the State are not discriminated against the goods manufactured within the State, from the point of view of ultimate burden of tax. 8.05. In the recent judgement, Nine Hon'ble Judges Bench of the Hon'ble Supreme Court in the case of Jindal Stainless Ltd. (supra) while considering the applicability / effect of Article 304(a) of the Constitution of India, has observed and held that, State legislation cannot in the matter of levying taxes discriminate between the goods imported from the other States and those manufactured or produced within the State, while levying such a tax. It is further observed and held that the effect of Article 304(a), therefore, is that while levy of taxes on goods imported from others States and Union territories is clearly recognised as constitutionally permissible, the exercise of such power is subject to the two restrictive conditions i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... violation of Article 304(a) of the Constitution of India. 8.09. The aforesaid question is also required to be considered from another angle. In the present case entry tax at the rate of 15% on Tractors is levied considering them as "motor vehicles" under Entry 1 of the Schedule to the Entry Tax Act. However, it is required to be noted that right from the beginning, the rate of Entry Tax had direct connection with the rate of sales tax under the Sales Tax Act. In the original Schedule to the Entry Tax Act, there was specific column containing reference to the relevant entry in the Gujarat Sales Tax Act. In respect of the first entry relating to motor vehicles, reference was made to Entry 128 of Schedule-IIA to the Sales Tax Act and maximum rate of entry tax was stipulated at 12% which was equal to the rate applicable to motor vehicles classifiable under Entry 128 of Schedule IIA of the Sales Tax Act. At that time there was a separate entry for Tractors contained in Entry 178 of Schedule IIA to the Sales Tax Act for which the applicable rate of sales tax was 4%. Thus, the Tractors were never sought to be included in the Schedule of specified goods contained in the Entry Tax Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behind the introduction as well as amendments of the Entry Tax Act establish that Entry Tax was always sought to be levied at the rates prescribed for such goods under the Sales Tax Act / VAT Act. In other words, there is a nexus between the Entry Tax rates and local Sales Tax / VAT rates on similar goods. Thus only those motor vehicles which were covered under Entry 128 of Schedule-IIA to the sSles Tax Act and which are now covered under residuary Entry 87 of Schedule-II to the VAT Act which attract 15% tax under the VAT Act would be covered under the entry of motor vehicles under the Entry Tax Act. Levy of entry tax at the rate of 15% on Tractors by treating them as falling under Entry for motor vehicles even though Tractors have always been covered by separate entry under the Sales Tax Act and the VAT Act and for which rate of tax under the VAT Act is 5%, therefore is dehors the scheme of the Entry Tax Act as countenanced by the legislative history as well as objects of the Entry Tax Act. 8.11. At this stage it is required to be noted that having realized that to levy Entry Tax at 15% on import of Tractors into the State of Gujarat by treating them as "motor vehicles" even thou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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