Madras High Court
Tai Industries Ltd vs The State Of Tamilnadu on 15 April, 2025
Author: Mohammed Shaffiq
Bench: Mohammed Shaffiq
W.A.No.474 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 15.04.2025
CORAM :
THE HON'BLE MR.K.R.SHRIRAM, CHIEF JUSTICE
AND
THE HON'BLE MR.JUSTICE MOHAMMED SHAFFIQ
W.A.No.474 of 2021
and C.M.P.No.1877 of 2021
Tai Industries Ltd.,
rep. by it Power of Attorney Holder R.Ramesh,
6th Cross Street,
Now at No.40/140, Kanchi Natarajan Street,
Vasudevan Nagar, Ashok Nagar,
Chennai-600 083
Now at:
No.52/41, 1 st Main Road,
New Colony, Chrompet,
Chennai-600 044. .. Appellant
vs
1.The State of Tamilnadu,
rep. by its Secretary to the Government,
Commercial Taxes Department,
Fort St. George, Chennai-600 009.
2.The Commercial Tax Officer,
Saligramam Assessment Circle,
Chennai-600 083.
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W.A.No.474 of 2021
3.The Union of India,
rep. by its Secretary,
Department of Trade and Commerce,
Parliament Street,
New Delhi. .. Respondents
Prayer: Appeal filed under Clause 15 of the Letters Patent against the
order dated 19.05.2020 passed by the learned Single Judge in
W.P.No.35865 of 2004.
For Appellant : Mr.V.Sundareswaran
For Respondents : Mr.Haja Nazurudeen
Addl. Advocate-General
assisted by
Mr.TNC Kaushik
Addl. Government Pleader
for respondent Nos.1 and 2
: Mr.G.Babu
Sr. Panel Counsel
for respondent No.3
JUDGMENT
(Delivered by the Hon'ble Chief Justice)
Appellant has filed this appeal impugning an order and judgment
pronounced on 19 th May, 2020 by a learned Single Judge of this Court.
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2. At the outset, appellant's counsel stated that he was restricting his
prayer now only to the second part of the original prayer made in the
petition i.e., “ ... the Tamil Nadu General Sales Tax (Fourth Amendment)
Act, 1959 (Act 18 of 2022) dated 26.05.2022, w.e.f. 01.04.2022 inserting
the imported goods from the Government of Kingdom of Bhutan dated
28.02.1995 as item (8) of Part G to the First Schedule which was
consequently substituted by Tamil Nadu General Sales Tax (Seventh
Amendment) Act, (Act 22 of 2002) inserting Section 3(2-C) and Eleventh
Schedule (Item 9) to the Tamil Nadu General Sales Tax Act, 1959 date
26.05.2022 w.e.f. 01.07.2022 ... in any event as not applicable to the
petitioner in view of the Agreement on Trade and Commerce between the
Government of Kingdom of Bhutan and the 3rd respondent Union of India
dated 28.02.1995”.
3. Appellant is a dealer having its office at Calcutta. Appellant is
registered with the Commercial Tax Officer, Saligramam Assessment Circle,
Chennai, i.e., second respondent. Appellant states that it has been
importing from the Kingdom of Bhutan food products like Sherbet, which
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falls under Part B, Item 4(vi) of the First Schedule and do not fall under
Parts D and E of the First Schedule, along with other goods such as mixed
fruit juice, orange juice, etc.
4. Shri Sundareswaran submitted that appellant imports goods into
Calcutta and from there the goods are moved to be sold in Tamil Nadu.
Shri Sundareswaran submitted that the goods are imported free of duty as
per the agreement on Trade and Commerce between the Government of
Kingdom of Bhutan and the Government of the Republic of India. Shri
Sundareswaran submitted that appellant would fall under Section 3(2-C) of
the Tamil Nadu General Sales Tax (Seventh Amendment) Act, 2002.
Appellant's goods are covered by the Eleventh Schedule. Shri
Sundareswaran submitted that Eleventh Schedule, Serial No.9 provides that
for imported cigarettes, medium density fibre boards, textiles and other
items falling in Parts D and E of the First Schedule, at the point of first sale,
tax at the rate of 20% is levied. Counsel submitted that so far as non-
imported goods covered under Eleventh Schedule, Parts D and E of the
First Schedule are concerned, tax at the rate of 12% or 16% is levied at the
point of first sale. Counsel submitted that this is discrimination because
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imported goods tax at the rate of 20% is levied, whereas for local goods tax
at the rate of 12% or 16% is levied and appellant is deprived of a level
playing field. The only submission of counsel for appellant is that in view
of Article-I read with Article-V of the said Trade agreement, for goods
imported by appellant, tax cannot be levied at a differential rate.
5. Article-I and Article-V of the Trade agreement read as under:
ARTICLE-I
There shall, as heretofore, be free trade and commerce between the
territories of the Government of the Kingdom of Bhutan and the
Government of the Republic of India.
ARTICLE-V
All exports and imports of Bhutan to and from countries other than
India will be free from and not subject to customs duties and trade
restrictions of the Government of the Republic of India. The
procedure for such exports and imports and the documentation
which are detailed in the Protocol to this Agreement, may be
modified by mutual agreement from time to time.
6. Article-I provides that there shall be free trade and commerce
between the two countries. Article-V provides that all exports and imports
of Bhutan to and from countries other than India will be free from and not
subject to customs duties and trade restrictions of the Government of the
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Republic of India. In effect, Article-V applies only to those goods which
come from outside India or leave Indian territories and would not apply to
those goods which are consumed within India. This is clear from the
Protocol to the Agreement on Trade and Commerce relied by appellant and
it says that the following shall be exit/entry points in India for the imports
into and exports from Bhutan for the duration of the agreement:
1. Jaigaon - (road route)
2. Chamurchi - (road route)
3. Ulta Pani - (road route)
4. Hathisar (Gaylegphug) - (road route)
5. Darranga - (road route)
6. Calcutta - (air & sea port)
7. Haldia - (sea port)
8. Dhubri - (riverine route)
9. Raxaul - (road/rail route)
10. Panitanki - (road route)
11. Changrabandh - (road route)
12. New Delhi - (air route)
7. Therefore, appellant's submission relying on Article-V itself falls
flat. Relying on the Protocol with reference to Article-I, appellant submitted
that the goods includes sale of lottery also. We do not have any
disagreement on that, but only feel that it has no applicability at all to the
case at hand.
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8. Counsel for appellant then placed reliance on a judgment of the
Apex Court in the case of State of Kerala and others v. Fr. William
Fernandez and other1 . Paragraph 125 of the said judgment reads as
under:
“125. In view of the foregoing discussions, we conclude that goods
imported after having been released from customs barriers are not
immune from any kind of State taxation, which falls equally on other
similar goods and the submission of the learned counsel for the
petitioner that immunity from State taxation shall continue till it
reaches in the premises where it is to be taken for consumption, sale
and use cannot be accepted.”
9. It is quite clear from the said judgment that the goods imported
after having been released from customs barriers are not immune from any
kind of State taxation. In fact, this judgment therefore clearly says that the
States are free to levy taxes on goods imported into the State.
10. Counsel thereafter relied upon Article 304 of the Constitution of
India to suggest that this kind of differential rates cannot be levied.
11. Article 304 of the Constitution of India is of no help because that
applies only to goods imported from other States or Union Territories and
1 (2021) 11 SCC 705
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not to goods imported from outside India.
12. In these circumstances, the appeal is dismissed. There shall be no
order as to costs. Consequently, interim application is closed.
(K.R.SHRIRAM, C.J.) (MOHAMMED SHAFFIQ, J.)
15.04.2025
Index : Yes/No
NC : Yes/No
bbr
To
1.The Secretary to the Government,
State of Tamilnadu,
Commercial Taxes Department,
Fort St. George, Chennai-600 009.
2.The Commercial Tax Officer,
Saligramam Assessment Circle,
Chennai-600 083.
3.The Secretary,
Union of India,
Department of Trade and Commerce,
Parliament Street,
New Delhi.
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THE HON'BLE CHIEF JUSTICE
AND
MOHAMMED SHAFFIQ,J.
bbr
15.04.2025
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