Madras High Court
M/S.Trichy Steel Rolling Mills vs The Commercial Tax Officer on 18 November, 2021
W.A.(MD)No.651 of 2007
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 18.11.2021
CORAM:
THE HONOURABLE MR.JUSTICE S.VAIDYANATHAN
and
THE HONOURABLE DR.JUSTICE G.JAYACHANDRAN
W.A.(MD)No.651 of 2007
M/s.Trichy Steel Rolling Mills,
Rep. by its Director K.Padmarajan,
No.73/8, Annamalai Nagar,
Trichy – 620 008. ... Appellant/
Petitioner
-vs-
The Commercial Tax Officer,
Woraiyur Assessment Circle,
Trichy. ... Respondent/
Respondent
PRAYER: Writ Appeal filed under Clause 15 of the Letters Patent, to set aside the
order passed in W.P.(MD)No.8821 of 2007, dated 30.10.2007, and allow the writ
appeal.
For Appellant : Mr.S.Rajasekar
For Respondent : Mr.S.P.Maharajan
Special Government Pleader
1/10
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W.A.(MD)No.651 of 2007
JUDGMENT
S.VAIDYANATHAN, J.
and
G.JAYACHANDRAN, J.
The appellant herein is a manufacturer of CTD & TMT bars at Trichy.
They used to purchase MS Ingots from outside the State for use as raw material
for manufacturing of CTD Bars. Till the enactment of Tamil Nadu Tax on Entry
of Goods into Local Areas Act, 2001 [hereinafter referred to as ''the Act''], the
appellant were paying 4% tax against ''C'' Form declaration for the inter-state
sales. After the Act came into force, for the goods purchased from outside, entry
tax has been levied and the said Act being in violation of Article 301 of the
Constitution, the same was challenged before this Court in a batch of Writ
Petitions, resulting in declaring the demand and collection of entry tax under the
Act as illegal, unauthorized and violative of Article 301 of the Constitution.
2.In view of the decision of the Division Bench of this Court in I.T.C. Ltd.,
Vs. State of Tamil Nadu and another reported in 2007 (7) VST 367 (Mad), the
appellant herein gave a representation dated 03.10.2007 to the respondent
requesting them to refund a sum of Rs.2,50,00,000/- [Rupees Two Crores and
Fifty Lakhs only] collected as entry tax hitherto under the Act. Since the request
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W.A.(MD)No.651 of 2007
was not considered by the respondent, the appellant filed W.P.(MD)No.8821 of
2007, seeking a Mandamus, directing the respondent to grant refund of entry tax
collected from the appellant for the period 2001-2002 in view of the decision
rendered by the Division Bench of this Court in I.T.C. Limited Vs. State of
Tamil Nadu [2007 (7) VST 367 (Mad)].
3.When the said writ petition was taken up for consideration, it was
brought to the notice of the learned Single Judge that the order of the Division
Bench of this Court rendered in I.T.C. Limited Vs. State of Tamil Nadu [2007
(7) VST 367 (Mad)] and they are clubbed with the batch of writ petitions arising
from few other States imposing entry on goods, similar to the Act and the same is
pending. Therefore, the learned Single Judge observed that the validity of the Act
is under challenge before the Hon'ble Supreme Court, therefore, the appellant has
to necessarily wait till the verdict is passed by the Hon'ble Supreme Court in the
S.L.P. preferred by the respondent. With the said observation, the Writ Petition
was dismissed.
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W.A.(MD)No.651 of 2007
4.Aggrieved by the order of dismissal, the appeal is filed on the ground that
this Court has held that levy of entry tax under the said Act is discriminatory and
violative of Article 304(a) of the Constitution. The S.L.P. preferred by the State
will not enure a right on the State to withhold the entry tax collected from the
appellant under law, which is declared as unconstitutional subsequently. Hence,
the respondent is liable to refund the tax collected without lawful authority.
5.The Writ Appeal was preferred in the year 2007, when the S.L.P.
preferred by the State against the judgment of the Division Bench of this Court
was pending before the Hon'ble Supreme Court. Now, after a lapse of 14 years,
when the matter is taken up for final hearing, it is brought to the notice of this
Court that the issue regarding imposition of entry tax by the States, vis-a-vis, the
freedom of Trade and Commerce, was considered by the Constitutional Bench of
the Hon'ble Supreme Court in the batch of Writ Petitions arising from various
High Courts and the Hon'ble Supreme Court in Jindal Stainless Limited and
another vs. State of Haryana and others reported in 2017 (12) SCC 1, has
answered the reference in the following terms:-
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W.A.(MD)No.651 of 2007
''1159.1. Taxes simpliciter are not within the
contemplation of Part XIII of the Constitution of India. The
word “free” used in Article 301 does not mean “free from
taxation”.
1159.2. Only such taxes as are discriminatory in
nature are prohibited by Article 304(a). It follows that levy of
a non-discriminatory tax would not constitute an infraction
of Article 301.
1159.3. Clauses (a) and (b) of Article 304 have to be
read disjunctively.
1159.4. A levy that violates Article 304(a) cannot be
saved even if the procedure under Article 304(b) or the
proviso thereunder is satisfied.
1159.5. The Compensatory Tax Theory evolved in
Automobile Transport case [Automobile Transport
(Rajasthan) Ltd. v. State of Rajasthan, AIR 1962 SC 1406 :
(1963) 1 SCR 491] and subsequently modified in Jindal case
[Jindal Stainless Ltd. (2) v. State of Haryana, (2006) 7 SCC
241] has no juristic basis and is therefore rejected.
1159.6. The decisions of this Court in Atiabari
[Atiabari Tea Co. Ltd. v. State of Assam, AIR 1961 SC 232 :
(1961) 1 SCR 809] , Automobile Transport [Automobile
Transport (Rajasthan) Ltd. v. State of Rajasthan, AIR 1962
SC 1406 : (1963) 1 SCR 491] and Jindal [Jindal Stainless
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W.A.(MD)No.651 of 2007
Ltd. (2) v. State of Haryana, (2006) 7 SCC 241] cases and all
other judgments that follow these pronouncements are to the
extent of such reliance overruled.
1159.7. A tax on entry of goods into a local area for
use, sale or consumption therein is permissible although
similar goods are not produced within the taxing State.
1159.8. Article 304(a) frowns upon discrimination (of
a hostile nature in the protectionist sense) and not on mere
differentiation. Therefore, incentives, set-offs, etc. 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 violate Article 304(a). The
question whether the levies in the present case indeed satisfy
this test is left to be determined by the regular Benches
hearing the matters.
1160. States are well within their right to design their
fiscal legislations to ensure that the tax burden on goods
imported from other States and goods produced within the
State fall equally. Such measures if taken would not
contravene Article 304(a) of the Constitution. The question
whether the levies in the present case indeed satisfy this test
is left to be determined by the regular Benches hearing the
matters.
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W.A.(MD)No.651 of 2007
1161. The questions whether the entire State can be
notified as a local area and whether entry tax can be levied
on goods entering the landmass of India from another
country are left open to be determined in appropriate
proceedings.''
6.Following the said judgment, the Hon'ble Supreme Court in The State of
Tamil Nadu and others vs. I.T.C. Limited and another [S.L.P.(C)Nos.
15082-15085 of 2007], reversed the judgment of the Division Bench of this Court
rendered in I.T.C. Limited Vs. State of Tamil Nadu [2007 (7) VST 367 (Mad)],
vide order dated 23.08.2017 and has passed the following order:-
''In the light of the judgment of a Nine Judge Bench in
the case of Jindal Stainless Steel vs. State of Haryana
reported in 2016 (11) SCALE 1, the impugned judgment of
the High Court is set aside and it is held that the Tamil Nadu
Entry Tax Act is a valid enactment. However, it is made
clear that insofar as period from 27.03.2002 to 01.04.2007 is
concerned, the State of Tamil Nadu shall not realise the entry
tax from the respondent(s) with regard to Tobacco product as
for this period levy is found to be discriminatory in nature
qua the aforesaid product.''
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W.A.(MD)No.651 of 2007
7.The learned counsel appearing for the appellant submitted that pursuant
to the judgment of the Constitutional Bench of the Hon'ble Supreme Court, batch
of writ petitions are pending before the Principal Bench challenging the entry tax
in respect of various categories of goods and therefore, the matter may be listed
after the disposal of batch of writ petitions pending since 2005.
8.This Court is of the view that the said request is untenable. As on date,
the legal position is that the Hon'ble Supreme Court has upheld the validity of the
Act. As pointed out by the learned Single Judge in the impugned order, if at all
there is any right for the appellant herein to seek for refund of the tax already
paid, such right will arise only after the disposal of the issue whether the Ingots
purchased by the appellant from outside the State, is liable for entry tax and
whether there is any discrimination in classification of the goods. Without a
declaration regarding the legality of imposing entry tax for Ingots is held to be
unconstitutional, refund of tax already collected will not arise. Writ Petition filed
for a Mandamus, seeking refund of entry tax, is premature and to be dismissed.
Therefore, reserving the liberty to the appellant to seek for refund, in case any
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W.A.(MD)No.651 of 2007
favourable decision is rendered by the Division Bench in the pending batch of
Writ Petitions, this Writ Appeal is dismissed. No costs.
[S.V.N., J.] [G.J., J.]
Index : Yes / No 18.11.2021
To
The Commercial Tax Officer,
Woraiyur Assessment Circle,
Trichy.
https://www.mhc.tn.gov.in/judis
W.A.(MD)No.651 of 2007
S.VAIDYANATHAN, J.
and
G.JAYACHANDRAN, J.
smn2
W.A.(MD)No.651 of 2007
18.11.2021
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