The High Court upheld the constitutional validity of the ...

Local Body Tax (Entry Tax) - Higher tax for imported goods upheld; not discriminatory under Article 304(a).

Case Laws     VAT / Sales Tax

September 27, 2024

The High Court upheld the constitutional validity of the Chhattisgarh Sthaniya Kshetra me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (Local Body Tax or Entry Tax Act), rejecting the challenge based on Articles 301, 304, and 14 of the Constitution. The Court held that the Act and notification prescribing higher rates on imported goods were not discriminatory under Article 304(a), as the power to impose differential tax rates is a plenary power of the State. The Court relied on the Supreme Court's judgment in Jindal's case, which held that a taxing statute's validity is to be tested only on the anvil of Article 304(a), without the need for public interest or reasonableness scrutiny under Article 304(b). The petitioners failed to establish that the legislation was a colourable exercise of power or fraud on legislative power. The Court also noted that the entire state cannot be declared a local area, and the definition clause in the Act is unambiguous. The argument of higher tax on imported goods violating Article 14 was rejected, citing the Supreme Court's ruling in Malwa Bus Service case that a difference in tax rates alone cannot be considered discriminatory. The petition was dismissed.

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