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TMI Blog2001 (7) TMI 1300X X X X Extracts X X X X X X X X Extracts X X X X ..... However, Entry 52 of List-II of the Seventh Schedule to the Constitution permits a tax by the Slate Legislature on entry of goods into a local area for consumption, use or sale therein. Acting under this entry the U. P. Government issued Ordinance No. 21 of 1999 which came into force on 1-11-99 vide Notification dated 31-10-1999, copy of which has been annexed as Annexure-3 to the petition. Under Section 4 (1) of this Ordinance tax was levied on the entry of any goods specified in the Schedule into a local area within U. P. Under Section 4 (2) the Entry Tax was payable by a dealer who brings into a local any area and such goods. Under Section 5, every dealer is to get himself registered under the Trade Tax Act and Section 6 provides for penalty. By Notification dated 31-10-99 the Governor of U. P. imposed levy of Entry Tax on sugar at 2%. True copy of the Notification is annexed as Annexure-1 to the petition. However, soon after the promulgation of the Ordinance the State Government decided not to impose the same, and hence the Commissioner, Trade Tax issued a circular dated 18-9-99 conveying the decision of the Cabinet that the collection of Entry Tax will be deferred til ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to in sub-section (1) is lost of destroyed after its delivery by the manufacturers and before its entry into the local area, it shall direct that the tax paid in respect of such goods shall be refunded to the person who had paid the tax under sub-section (1): Provided that no claim for such refund shall be entertained after the expiry of six months from the date of the loss or distribution of the goods. (5) The provisions of Section 5 shall not apply to a person making payment of the tax under sub-section (1) and such person shall not be assessed or required to submit under this Act. Rule 7 inserted by U. P. Tax on-Entry of Goods (Amendment) Rules, 2001 read as follows:- 7. Realisation and deposit of tax by the manufacturer.- The manufacturers in Uttar Pradesh responsible for selling, supplying or otherwise dispatching the goods notified by the State Government under Section 4-A to any dealer in Uttar Pradesh shall:- (a) Realise the amount of tax payable on the value of goods through a demand draft in the name of concerned Assessing Authority and shall deposit the same into the Government Treasury before the expiry of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of India (AIR 1999 SC 2596) of 1999 (6) 418 , where it was held that Service Tax can only be imposed on the person rendering the service and not the customer. In paragraph 31 of the petition it is alleged that simply because the sugar traders agitated and did not want to pay the entry tax directly to the Trade Tax Department this was not a valid ground for the State Government to make the sugar factories liable to collect the tax from the traders by way of demand drafts. It is alleged that placing this burden regarding entry tax on the sugar manufacturer is an unreasonable condition imposed on the sugar factories and is violative of Article 19 (1) (g) of the Constitution of India and it also conflicts with Rule 6. The petitioners have relied on the decision of the Supreme Court in State of Bihar and others v. Bihar Chamber of Commerce (1996-9 SCC 136) wherein it was held that 'what attracts levy under Entry-52 is the entry of the goods into a local area for consumption or for use or for sale within that local area. In paragraph 33 of the petition the petitioners have also alleged that the Notification dated 31-10-99 was issued when the U. P. Ordinance No. 21 of 1999 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voidance. Hence it was necessary to provide for an effective mechanism to collect the Entry Tax. 5. A rejoinder affidavit has also been filed and we have perused the same. 6. A perusal of Section 4-A shows that the stand of the Government appears to be correct. Section 4-A appears to be only a convenient device for collecting the Entry Tax which continues to be imposed on the dealer and not on the manufacturer. What Section 4-A has done is to provide for payment of the Entry Tax by the dealer to the manufacturer. The Legislature in its wisdom may have thought that this could facilitate the collection of the Entry Tax regarding which the authorities may be having some difficulties. It is settled law that the motive of Legislation cannot be seen. The doctrine of colourable legisla tion only relates to Legislative competence and not to the motive of the law. Moreover, merely, because of some hardship which the sugar manufacturer has to face, this does not mean that the Act is beyond Legislative competence. There are similar provisions in various Taxing Institutes, which have been held to be valid by the Court e. g. . Section 8-D of U. P. Trade Tax Act, provisions for deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are lost or destroyed after its delivery by the manufacturer and before its entry into the local area, the concerned authority shall direct that the tax paid in respect of such goods shall be refunded to the person who had paid the tax under sub-section (1). Sub section (4) of Section 4-A thus protects the person who had paid the tax in the contingencies of the goods being lost or destroyed after delivery by the manufacturer and before entry into the local area. This provision make it clear that what is being imposed is Entry Tax and in case the goods never entered the local area the tax has to be refunded. Sri Sudhir Chandra learned senior Counsel for the petitioner submitted that often there is a great delay in refund by the Tax authorities. We are aware of this situation and we are of the opinion that tax refunds whenever a per son is entitled to the same must be made promptly. Hence whenever the authority concerned receives an application that goods are lost for destroyed after delivery by manufacturer and before entering into a local area it must decide this application very expeditiously not later than two months of the receipt of the application. If the authority is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urers of sugar have no nexus or connection with the taxable event. For this contention he relied on the decision of the Supreme Court in Laghu Udyog Bharti v. Union of India (supra ). In that case the Government had framed rules that not only would the service tax payable by the contractor be collected from them by the contractee (i. e. the person receiving the services and paying for them), but he shall also be responsible for filing returns and also subjected to penalties. The Supreme Court held that this was not valid. We have carefully considered the above decision. In our opinion this decision is clearly distinguishable. It may be noticed that in Laghu Udyog Bharties case (supra) what was challenged was the validity of the rules and not some section of the Parent Act itself. The Supreme Court in that case was not concerned with the validity of any Provision of the Act. After interpreting Sections 65 to 71 of the Parent Act the Supreme Court was of the opinion that the rules were in violation of the provisions of the Act. In that case the Supreme Court was not concerned with the Constitutional validity of any provision of the Act itself. On the other hand, in the present c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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