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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 ..... ven 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. To levy Entry Tax at 15% on import of Tractors into the State of Gujarat by treating them as “motor vehicles” even though local VAT Tax on Tractors is 5%, would be contrary to the object and scheme of the Entry Tax Act, State of Gujarat has come out with a notification dated 12/5/2016 by which levy of entry tax on Tractor in excess of 5% has been exempted. However, once levy of entry tax on Tractors beyond / above 5% is held to be illegal, discriminatory and violative of Article 304(a) of the Constitution of India and contrary to the object and purpose of enactment of Entry Tax Act, there is no question of exemption. Once levy itself is held to be illegal, unconstitutional and/or contrary to the objects and purpose of Entry Tax Act, there is no question of first to pay such a tax and thereafter to get refund by way of Input Tax Credit. Why should importers be forced to first pay Entry Tax wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been levied at the rate of 15% under Entry 1 of Schedule to the entry Tax Act. That the appropriate authority has, therefore, while framing the Assessment Orders has levied entry tax at the rate of 15% on the import / entry of the Tractors into the State of Gujarat. That penalty has also been imposed at the rate of 20% under section 17(1) of the Entry Tax Act. 4.03. It is the case on behalf of the petitioners that to levy entry tax on import / entry of Tractors into the State of Gujarat at the rate of 15% is unconstitutional, illegal and contrary to the objects and purpose for which Entry Tax Act has been enacted and therefore, the petitioners have preferred the present Special Civil Application challenging levy of entry tax on import / entry on Tractors into the State of Gujarat at the rate of 15% treating the same as motor vehicles and/or at the rate at which the entry tax is being levied with respect to motor vehicles. 5.00. Mr.Uchit Sheth, learned advocate has appeared on behalf of the petitioners and Ms.Maithili Mehta, learned Assistant Government Pleader has appeared on behalf of the respondents State of Gujarat and others. 6.00. Mr.Uchit Sheth, learned advoca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that 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, 1969 (hereinafter referred to as the Sales Tax Act ). It is submitted that 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. It is submitted that 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%. It is submitted that thus, the Tractors were never sought to be included in the Schedule of specified goods contained in the Entry Tax Act. Thereafter when the Sales Tax was replaced by the VAT Tax Act, 2003 and consequential change was made in the Entry Tax Act w.e.f. 1/4/2006. It is submitted that since there was no specific entry for motor vehicles under the VAT Act, reference to Schedule entry of Sales tax Act was removed in the new Schedule. Motor Vehicles which we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 residuary entry 87 of Schedule II to the VAT Act. 6.08. Mr.Uchit Sheth, learned advocate appearing on behalf of the petitioners has further submitted that thereafter from 1/4/2016 new Schedule entries were introduced under the VAT Act for Luxury Cars, luxury SUVs and luxury two wheelers (Entry 49C of Schedule-II of the VAT Act) and for motor vehicles (except school buses, college buses, passenger buses and goods carrier trucks sold to companies, firms . (Entry 80A of Schedule II of the VAT Act) for which the rate of tax was stipulated at 17.5%+2.5% additional tax. Correspondingly the rate notification under the Entry Tax was also amended and the entry tax rates in respect of such goods was revised to 20%. It is submitted that in this very notification a new entry was introduced for e-commerce transactions wherein the rate stipulated was at such rate including the rate of additional tax applicable under the Gujarat Value Added Tax Act, 2003 on sale or purchase of such goods. 6.09. Mr.Uchit Sheth, learned advocate appearing on beha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 submitted that the levy of entry tax at the rate of 15% on tractors by considering them as motor vehicles even though the rate of tax for tractors under the VAT Act is 5% is clearly violating Article 304(a) of the Constitution of India. 6.14. Mr.Uchit Sheth, learned advocate appearing on behalf of the petitioners has further submitted that Article 304(a) of the Constitution of India provides that the Legislature of a State may by law impose on goods imported from other States or Union territories any tax to which similar goods manufactured or produced in that State are subject, so however, not to discriminate between goods so imported and goods so manufactured or produced. It is submitted that when the constitutional validity of the Entry Tax Was challenged before this Court in the case of Eagle Corporation Vs. State of Gujarat, reported in (2007) 6 VST 56 (Guj.) inter-alia on the ground that it is violative of Article 304(a) of the Constitution of India, this Court upheld the constitutional validity of the Entry Tax Act by h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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% on tractors even though the local VAT rate on tractors is undisputedly 5%, is contrary to the statement of the State Government before this Court on the basis of which the constitutional validity of Entry Tax Act was upheld. It is submitted that therefore, levy of Entry Tax at the rate of 15% treating as motor vehicles or considering at par with motor vehicles is absolutely illegal and in violation of Article 304(a) of the Constitution of India. 6.17. Mr.Uchit Sheth, learned advocate appearing on behalf of the petitioners has further submitted that the rate of VAT on Tractors in the State of Tamilnadu, where the petitioners have a manufacturing unit is 5%. It is submitted that rate of VAT on tractors in the State of Karnataka where the petitioners have another unit is 5.5%. It is submitted that the rate of VAT on Tractors in the State of Punjab where the petitioner has manufacturing unit is 5.5%+0.55% surcharge. It is submitted that thus, the object of the Entry Tax Act was to prevent the loss of revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % 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 Added Tax Act, the petitioners can claim refund by way of Input Tax Credit i.e. whatever the amount of tax paid, such as Entry Tax etc. It is submitted that thus, the petitioners would not be affected in any manner. By making above submissions, it is requested to dismiss both these petitions. 8.00. Heard the learned advocates appearing on behalf of the respective parties at length. 8.01. At the outset, it is required to be noted that in both these petitions, the respective petitioners have challenged levy of entry tax at the rate of 15% on entry / import of Tractors into the State of Gujarat, inter-alia on the grounds that the same is discriminatory, in violation of Article 304(a) of the Constitution of India and contrary to the objects and purpose of enactment of Entry Tax Act under which Entry Tax is levied. 8.02. While considering the challenge to the levy of Entry Tax on Tractors at the rate of 15%, legislative intent of Entry Tax Act and the Statement and Objects of the Entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged 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 Corporation Pvt. Ltd. (supra) in paragraph Nos.22 to 26 has observed and held as under :- 22. It is the contention on behalf of the petitioner that the levy of Entry Tax is only on importer of specified goods from other States into a local area in the State of Gujarat and the same is discriminatory as there is no such tax on local dealers bringing specified goods from one local area to another local area in the State. It is further submitted that there is a clear discrimination between importers and local dealers and therefore it violates Article 304(a) of the Constitution. It is also the contention on behalf of the petitioner that it might be that as the entry tax is levied on an importer in Gujarat he is liable to pay the same, while the seller in another State enjoys sales-tax exemption which could deprive the importer of the exemption. It is his further contention that the discrimination is required to be considered qua each Act/tax diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned 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, evident from the above that, if a person has genuinely purchased a motor vehicle for use in another State and subsequently for some reason if he is required to bring the said motor vehicle into the State of Gujarat after 15 months, then such a person is not required to pay the entry tax. Thus, on a fair reading of the provisions of the Act and the object of levy of Entry Tax, it cannot be said that such a levy is discriminatory between the importer of the specified goods from other States into a local area in the State of Gujarat, and the local dealers bringing specified goods from one local area into another local area in the State. The local dealers, bringing specified goods from one local area to another local area in the State, are, otherwise, paying the salestax at 12%. Thus, as stated hereinabove, on payment of Entry Tax by the importer, after deduction of sales-tax and/or C.S.T. already paid in another State, such an importer woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction 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. Coming to another contention raised on behalf of the petitioner that in a particular State there might be exemption from payment of sales-tax and now while bringing the specified goods into State of Gujarat an importer will be required to pay the Entry Tax and to that extent an importer would be at a disadvantageous position, it is required to be noted, first of all, that there is no such foundation and/or pleading in the petition. The validity of an Act is required to be considered on an appropriate pleading and is not required to be considered on hypothesis. 25. So far as the next contention on behalf of the petitioner that two Clauses of Article 304 of the Constitution are conjunctive and not in the alternative and therefore even if the levy of tax is found to be nondiscriminatory, in that case also the conditions imposed under Article 304(b) of the Constitution are also required to be complied with inasmuch as before levy o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Sancheti And Another Vs. State of Maharashtra And Others,[supra]. The learned counsel appearing on behalf of the petitioner has tried to submit that the constitutional validity of the said Act has been upheld on another ground. However, it is required to be noted that this Court is bound by the decision of the Hon'ble Supreme Court and it is not in dispute that similar provisions of the Act and the levy of Entry Tax have been upheld by the Hon'ble Supreme Court in the aforesaid Judgment. Under the circumstances, this Court cannot take a different view and is bound by the decision of the Hon'ble Supreme Court. Thus, in the aforesaid decision, the Division Bench of this Court upheld the vires of Entry Tax Act by observing that if the rate of sales tax on specified goods in the State of Gujarat is 12% and rate of sales tax payable by the importer in a particular state is 4% and if the importer in fact pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved 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. (1) Tax on import of goods from others States would be justified only if similar goods manufactured or produced in the state are taxed and (2) 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. It is further observed that, that does not however detract from the proposition that levy of taxes on goods imported from other States is constitutionally permissible so long as the State legislatures abide by the limitations placed on the exercise of that power. 8.06. In concluding para 807, it is held by the Hon'ble Supreme Court that only such taxes which are discriminatory in nature are prohibited by Article 304(a) of the Constitution of India. 8.07. Considering the law laid down by the Hon'ble Supreme Court in the aforesaid decision in the case of Jindal Stainless Ltd. (supra) and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Thereafter when the Sales Tax was replaced by the VAT Tax Act, consequential change was made in the Entry Tax Act w.e.f. 1/4/2006. Since there was no specific entry for motor vehicles under the VAT Act, reference to Schedule entry of Sales tax Act was removed in the new Schedule. Motor Vehicles which were falling under Entry 128 of the Sales Tax Act would now fall under residuary entry 87 of Schedule II of the VAT Act for which the stipulated rate of tax was 12.5%. Therefore, maximum rate of entry tax for motor vehicle was correspondingly revised from 12% to 12.5%. While the specific entry for motor vehicles under the Sales Tax Act was dropped under the vat Act, the specific entry for Tractors was retained in Entry 77 of Schedule-II of the VAT Act for which the rate of tax continued to be 4%. Thus, the amendment of the entry Tax Act w.e.f. 1/4/2006 was only consequential to replacement of the Sales Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 though local VAT Tax on Tractors is 5%, would be contrary to the object and scheme of the Entry Tax Act, State of Gujarat has come out with a notification dated 12/5/2016 by which levy of entry tax on Tractor in excess of 5% has been exempted. However, once levy of entry tax on Tractors beyond / above 5% is held to be illegal, discriminatory and violative of Article 304(a) of the Constitution of India and contrary to the object and purpose of enactment of Entry Tax Act, there is no question of exemption. Exemption would come into play where such tax is leviable / payable but for some reason State Government think it proper to grant exemption. In any case, the State Government had realised that there is no justification to levy entry tax at 15% i.e. above 5% on Tractors considering them as motor vehicles. 8.12. Now, so far as submission on behalf of the State that levy of 15% entry tax on Tractors, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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