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TMI Blog2020 (3) TMI 699X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the petitioners. In the said case, this court considered as to whether by enacting the Entry Tax Act, is there any discriminatory treatment and/or such levy is discriminatory? In the said context, this court while upholding the validity of the Entry Tax Act held that considering the Statement of Objects and Reasons in juxtaposition with the provisions of the Entry Tax Act, it cannot be said that the provisions of the Entry Tax Act and consequent levy of the entry tax on the specified goods are violative of Article 304 of the Constitution of India. This court further held that entry tax is not discriminatory between the goods so imported and goods so manufactured, produced in a local areas and the challenge to the constitutional validity of the Entry Tax Act and the levy of entry tax thereof fails - While upholding the validity of the provisions of the Entry Tax Act, it has been held by this court that when there is a reduction in the effective rate of sales tax under the erstwhile Gujarat Sales Tax Act, there will automatically be a corresponding reduction in the maximum rate of entry tax prescribed in the schedule so that the goods brought from out side the State are not dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s it prescribes a higher rate of entry tax vis- -vis the rate of tax provided in the notification dated 3rd October, 2012 issued under the provisions of the VAT Act, the consequential notices dated 23rd January, 2017 (Annexure 'B' collectively) also cannot be sustained. The impugned notification dated 15th February, 2010 (Annexure A) to the extent it prescribes a higher rate of entry tax vis- -vis the rate of tax provided in the notification dated 3rd October, 2012 issued under the provisions of the VAT Act is hereby held to be illegal and bad in law - petition allowed. - R/SPECIAL CIVIL APPLICATION NO. 6557 of 2017 - - - Dated:- 11-3-2020 - HONOURABLE MS. JUSTICE HARSHA DEVANI And HONOURABLE MS. JUSTICE SANGEETA K. VISHEN UCHIT N SHETH FOR THE PETITIONER GOVERNMENT PLEADER FOR THE RESPONDENT JUDGMENT ( PER : HONOURABLE MS. JUSTICE SANGEETA K. VISHEN ) 1. The present petition has been filed challenging the notification dated 15th February, 2010 issued by the State Government in exercise of powers conferred under sub-section (1A) of section 3 of the Gujarat Tax on Entry of Specified Goods into Local Areas Act, 2001 (hereinafter referred to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission of reply to the notice and for fixing of suitable date of hearing. 2.4 According to the petitioners, instead of considering the request of the petitioners for time to submit reply, the Deputy Commissioner of Commercial Tax issued a notice through email dated 25th March, 2017 rejecting the request of adjournment and further required the petitioners to deposit the amount towards the tax for entry of the goods into the State of Gujarat. It is further the case of the petitioners that the aforesaid e-mail notice dated 25th March, 2017 was followed by another e-mail dated 27th March, 2017 calling upon the petitioners to pay entry tax before 30th March, 2017, failing which coercive recovery would be initiated against the petitioners. 3. While referring to the provisions of the relevant legislations, it has been stated that the Entry Tax Act , has been enacted by the legislature of the State, providing for levy of entry tax on the specified goods. 3.1 The Gujarat Sales Tax Act, 1969 was replaced by the VAT Act with effect from 1st April, 2006 and simultaneously the Entry Tax Act was accordingly amended and reference to the Gujarat Sales Tax Act, 1969 was substituted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for a self contained mechanism coupled with the provision of adjustment of the rate of tax. It is submitted that when the Entry Tax Act was originally enacted, it by virtue of the explanation to the Schedule to the said Act, provided that if rate of sales tax is reduced by exemption notification then the rate of entry tax should also be correspondingly reduced. It is further submitted that the Gujarat Tax on Entry of Specified Goods into Local Areas (Amendment) Bill, 2006 was introduced whereby the Schedule to the said Bill provided for the specified goods indicating maximum rate of tax. The said amendment, was the result of the enactment of the VAT Act, replacing the erstwhile regime of Gujarat Sales Tax Act, 1969. It is submitted that initially, there was an exception carved out by virtue of the explanation to Schedule to the Entry Tax Act; however, after the amendment in the year 2006 in the VAT Act, the explanation was deleted. It is submitted that even if explanation is not forming part of the Schedule, it does not mean that the State Government has got unbridled powers to impose entry tax on the goods prescribing higher rate compared to the rate of tax provided under the VA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id provision empowers the State Government to specify goods for the purpose of the Entry Tax Act only to redress an inequitable situation or for sufficient and reasonable cause for removing discrimination between goods entering into the local areas from any place outside the State. However, in the present case, the continuance of notification imposing entry tax at the rate of four percent despite the fact that such goods are subjected to local VAT rate of 1%, the same is causing discrimination rather than redressing it. It is further submitted that levy of entry tax vide notification dated 15th February, 2010 at a higher rate than the rate prevailing in the State of Gujarat, frustrates the object and purpose of the entry tax and thus, the notification dated 15th February, 2010 issued by the State Government in its Finance Department, has been rendered illegal and bad in law. 5.4 Reliance has been placed on the judgment of this court in the case of Tractors and Farm Equipment Ltd. vs. State of Gujarat, Special Civil Application No.1560 of 2016, to submit that the issue involved in the present petition is no longer res integra. In the said case, the State Government had sought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the constitution bench of the Apex Court in the case of Jindal Stainless Ltd. Anr. vs. State of Haryana Ors. reported in (2017)12 SCC 1. It is submitted that the Apex Court, recognized the power of the State Government to grant exemption exercised as a part of the sovereign power to levy taxes and held that the same cannot be taken away as it is otherwise competent to impose taxes and duties. While placing heavy reliance to the answers to the reference and more particularly, to the answers at paragraphs 1159.1 and 1159.2, it is submitted that the Apex Court has categorically held that tax which is discriminatory in nature is prohibited by Article 304(a) of the Constitution of India. It is thus submitted that the levy of non-discriminatory tax would not constitute an infraction of Article 301 of the Constitution of India. By referring to answer at paragraph number 1159.8, it is submitted that the Apex Court, has categorically observed that only exemption in the nature of incentives, set-offs granted to a specified class of dealers for a limited period of time in a non-hostile fashion, with a view to developing economically backward areas, would not be violative of Article 304(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 142 of 2010. 5.10 Similarly, reliance has been placed on the following judgments to contend that the delegated legislation cannot go beyond the parent Act:- 1. Indian Express Newspapers (Bombay) Private Ltd. Ors. vs. Union of India Ors. AIR 1986 SC 515(1) 2. Western India Theatres Ltd. vs. Municipal Corporation of the City of Poona AIR 1959 SC 586 3. Bhawani Cotton Mills Ltd. vs. The State of Punjab Anr. 20 STC 290 (SC) 5.11 While concluding, it is submitted that the notification dated 15th February, 2010 is beyond the scope/powers granted under sub-section (1A) of Section 3 of the Entry Tax Act. The power of the State Government to issue notification arises only when there is an inequitable situation. However, in the present case, there was no such occasion available to the State Government and thus, the notification dated 15th February, 2010, is clearly discriminatory, illegal and against the provisions of the Entry Tax Act, VAT Act and ultra vires the provisions of the Article 304(a) of the Constitution of India and deserves to be quashed and set-aside. 6. Per contra Mr. Trupesh Kathiriya, learned Assistant Government Pleader submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been issued by the State Government under the provisions of the VAT Act. 6.3 Lastly it is urged that the notification dated 15th February, 2010 cannot be said to be discriminatory or against the provisions of the Act and thus, the petition being bereft of any merits deserves to be dismissed. 7. No further and other submissions have been made by the learned advocates for the respective parties. 8. An issue which arises for the consideration of this court in the captioned petition is as to whether continuation of entry tax at the rate of 4% contained in the notification dated 15th February, 2010 issued by the State Government after the issuance of the amended notification dated 3rd October, 2012 under the provisions of VAT Act, whereby the rate of tax has been reduced to 1%, is valid and in sync with the provisions of the Entry Tax Act read with the provisions of the VAT Act. 9. At the outset it is required to be mentioned that the State Government is not in a position to dispute the proposition that it is incumbent on the part of the State Government to make sure that the link is maintained between the rate of tax under the VAT Act vis- -vis the rate of tax levied under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly, the Entry Tax Act was amended whereby, the reference to the Gujarat Sales Tax Act, 1969 was replaced by the VAT Act. By virtue of the said amendment, sub-section (3) of section 4 came to be substituted which after amendment, provides that where an importer of specified goods liable to pay tax under the Entry Tax Act being a dealer in the specified goods becomes liable to pay tax under the VAT Act by virtue of the sale of such specified goods then his liability under the VAT Act shall be reduced to the extent of tax paid under the Entry Tax Act. The Schedule to the Entry Tax Act was also substituted; however, the explanation to the erstwhile Schedule was not forming part of the substituted Schedule. 13. Subsequently, in the year 2008, the Entry Tax Act was further amended whereby, sub-section (1A) came to be introduced in Section 3. Sub-section (1A) contemplates that subject to such conditions as it may imposed, the State Government may if it is necessary so to do in the public interest to redress an inequitable situation or for sufficient and reasonable cause for removing discrimination between the goods entering into the local area from any place outside the State, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsonance with the object of the entry tax, that is, providing a level playing field. 17. The validity of the Entry Tax Act was challenged before this court in the case of Eagle Corporation vs. State of Gujarat reported in (2007)6 VST 560 (Guj.), on which heavy reliance has been placed by the learned advocate for the petitioners. In the said case, this court considered as to whether by enacting the Entry Tax Act, is there any discriminatory treatment and/or such levy is discriminatory? In the said context, this court while upholding the validity of the Entry Tax Act held that considering the Statement of Objects and Reasons in juxtaposition with the provisions of the Entry Tax Act, it cannot be said that the provisions of the Entry Tax Act and consequent levy of the entry tax on the specified goods are violative of Article 304 of the Constitution of India. This court further held that entry tax is not discriminatory between the goods so imported and goods so manufactured, produced in a local areas and the challenge to the constitutional validity of the Entry Tax Act and the levy of entry tax thereof fails. Paragraphs 22, 23 and 28 of the aforesaid judgment, relevant extracts wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 a plethora of the provisions of the Act, it is evident that they are aimed at achieving level playing filed 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, there will automatically be a 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. Hence, it is well settled proposition of law that reading the provisions of the Act of 2001 with the provisions of the local Sales Tax Act viz. VAT Act, it is abundantly clear that the provisions of the Act of 2001 are aimed at achieving a level playing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate of Gujarat (supra), this court while deciding the validity of the action on the part of the State Government imposing tax on entry at the rate of 15% on Tractors, held that as per the Statement of Objects and Reasons, the purpose of the Entry Tax Act was not to levy additional tax but to provide a level playing field between the goods entering into the local areas from any place outside the State and the goods manufactured or produced in the State. While determining the action of the State Government, this court, considered the principles laid down by the Apex Court in the case of Jindal Stainless Limited vs. State of Haryana (supra). This court has, further held that the entry tax rates are having a direct linkage with the rates prescribed under the VAT Act on the same goods and hence, change in the rates prescribed under the VAT Act necessitates change in the rates of tax under the Entry Tax Act. Paragraph 8.08 and relevant extract of paragraph 8.10 of the said judgment read thus: - 8.08. It is required to be noted and as averred by the petitioners, rate of tax on Tractors in the exporting states namely state of Tamilnadu, State of Karnataka and State of Punjab and Hary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tution but, the availability of such power for taxing goods imported from other States or the Union Territories is clearly recognized by Article 304(a). The expression may by law impose is certainly not a restriction on the power to tax. That does not, however, mean that the power to tax goods imported from other States or the Union Territories is unqualified or unrestricted. There are, in our opinion, two restrictions on that power. The words to which similar goods manufactured or produced in that State are subject impose the first restriction on the power of the State Legislature to levy any such tax. These words would imply that a tax on import of goods from other States will be justified only if similar goods manufactured or produced in the State are also taxed. The second restriction comes from the expression so, however, as not to discriminate between goods so imported and goods so manufactured or produced:. The State Legislature cannot in the matter of levying taxes discriminate between goods imported from other States and those manufactured or produced within the State levying such a tax. The net effect of Article 304(a) therefore is that while levy of taxes on goods i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecific words of clause (a) of subsection (2) of section 5: Subject to such conditions as it may impose; in the public interest; exempt any specified class of sales or purchases; by any specified dealer or specified class of dealers Accordingly State Government is empowered to exempt any class of goods or even exempt any specified dealer or specified class of dealers under section 5(2)(a) of the VAT Act. It may do so with or without any such condition as it may impose in the public interest. 13. Accordingly by Notification No.(GHN:23) VAT- 2012_S.5(2)(36)-TH dated 3rd October 2012, Rate under VAT Act was exempted to the extent it exceeds 1%. Thus, in absence of any special circumstances pointed out by the State Government either in its affidavit or during the course of the submissions made by the learned Assistant Government Pleader, it can be safely concluded that neither there exist any circumstances for redressal of an inequitable situation nor was there any sufficient and reasonable cause which weighed with the State Government for removing the discrimination between the goods entering into the local areas from any place outside the Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of the VAT Act, the consequential notices dated 23rd January, 2017 (Annexure 'B' collectively) also cannot be sustained. 23. A contention has been raised by the respondent to the effect that sub-clause (iii) of clause (a) of sub-section (1) of section 11 entitles the registered dealer to claim tax credit equal to the amount of tax paid by a purchasing dealer under the Entry Tax Act and that any excess amount is refundable to the dealer as per the provisions of section 37 of the VAT Act and hence, any excess amount of entry tax paid would be refunded if found eligible as per the provisions of the VAT Act. It is also contended that legitimate tax calculated would not be discriminatory as also the dealer would be eligible to excess tax paid. The said contention does not merit acceptance inasmuch as, as discussed hereinabove, the action of the State Government continuing with the prescription of the higher rate of entry tax vide notification dated 15th February, 2010, have been held to be illegal and bad in law, there arises no question of asking the petitioner to make the payment and then seek refund of the tax amount under the provisions of the VAT Act. 24. In v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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