State of Kerala and Others Vs. Fr. William Fernandez Etc.
[Civil Appeal Nos.3381-3400 of 1998]
[T.C. (C) No. 149/2013]
[C.A. No. 3720-3722/2003]
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[C.A. No. 16163 of 2017@SLP(C) No.1101/2007]
ASHOK BHUSHAN, J.
Leave granted.
2. These appeals relate to entry tax levied on goods imported from different countries and brought into local area of a State. The legislative competence of the State Legislature to impose entry tax on the goods imported from outside the country entering into local area of the State is questioned. The State legislations are also questioned on the ground that the entry tax legislations do not contemplate levy of an entry tax on goods imported from outside the country. In this batch of appeals we are concerned only with entry tax legislations of States, namely, State of Orissa, State of Bihar, State of Kerala and State of Jharkhand, the relevant provisions of which statutes shall be noticed hereinafter.
3. A nineJudge constitution Bench in Jindal Stainless vs. State of Haryana and another, 2016 (11) Scale 1, had answered several questions pertaining to entry tax legislations of different States, which has largely settled various issues relating to entry tax. However, the issue pertaining to levibility of entry tax on the imported/foreign goods was left to be answered by regular Bench. Answering the reference following was stated in answer No.10: "The questions whether the entire State can be notified as a local area and whether entry tax can be levied on goods entering landmass of India from another country are left to be determined in appropriate proceedings." (emphasis by us)
4. As noted above this batch of appeals consists of appeals from the judgments of Orissa High Court, Patna High Court, Kerala High Court and Jharkhand High Court. Large number of appeals have been filed questioning the different judgments rendered by different High Courts. For deciding this batch of appeals it is sufficient to notice facts of few of the appeals of each State. The parties shall be referred to as described in the High Courts. State of Orissa
5. In the appeals arising out of the judgments of the High 7 Court of Orissa, most of the appeals have been filed against judgments dated 18.02.2008 and 09.10.2012. Judgments of different dates were also delivered by the Orissa High Court following its judgments dated 18.02.2008 and 09.10.2012. There are appeals containing different facts and grounds which shall separately be noticed.
6. With regard to judgment dated 18.02.2008 delivered in bunch of writ petitions, we take up Civil Appeal arising out of SLP(C)No.18405 of 2008 - M/s. Steel Authority of India Ltd. vs. State of Orissa & Anr. The State of Orissa enacted Orissa Entry Tax Act, 1999 (hereinafter referred to as "1999 Act") to provide for levy of tax on entry of the scheduled goods into a local area for consumption, use or sale therein and matters incidental thereto and connected therewith.
7. The Steel Authority of India, a public sector undertaking of Government of India filed the writ petition challenging the legality and constitutional validity of Orissa Entry Tax Act, 1999 and Orissa Entry Tax Rules, 2000 in so far as it seeks to levy and collect entry tax on imported goods including scheduled goods when brought into the mines premises of the writ petitioner No.1 Company at Purunapani, Kalta, Barsua in the District of Sundergarh and Bolani in the District Keonjhar.
The validity of the Act was challenged on various grounds including the ground that 1999 Act is ultra vires to the Constitution. It was further pleaded that provisions of 1999 Act do not provide for levying of tax on imported raw materials for its plants and machineries which is used/consumed at its factory for the manufacture of its finished products. The grounds were also raised that levy is not compensatory.
8. The writ petition was heard along with the bunch of writ petitions raising some similar and some different grounds. The Division Bench vide its judgment dated 18.02.2008 upheld the vires of 1999 Act. Civil Appeals arising out of SLP(C) Nos.1242412425 of 2008 - M/s. Simples Infrastructures Limited vs. State of Orissa & Ors. also needs to be noted:
9. The writ petitioner is a company which carries on business on works contract for construction of different types of civil and piling works outside at various places in the State of Orissa. While executing the aforesaid work the writ petitioner purchases Sand, Bricks and Cements chips and boulders for civil constructions and are transported from the petitioner's construction site, either inside or outside the State of Orissa for being used in the work. The writ petitioner was directed to file returns by the Entry Tax 9 Officer. Writ petitioner has challenged the constitutionality of Orissa Act, 1999 and prayed for restraining the respondent from realising any entry tax. The writ petition was also decided along with the bunch of writ petitions vide High Court's judgment dated 18.02.2008 as stated above.
10. Large number of civil appeals have been filed against the judgment dated 18.02.2008. It is not necessary to notice facts of different cases. The writ petitioners were using rawmaterial brought from different places including foreign countries, Coal was also used by the various writ petitioners and levy on it of entry tax was questioned therein. Several subsequent judgments were also delivered by the Orissa High Court following the judgment dated 18.02.2008 which have also been questioned in different appeals.
11. A subsequent judgment dated 9.10.2012 delivered by the Orissa High Court in Writ Petition No.15519 of 2010 and other connected writ petitions have given rise to large number of civil appeals. The leading writ petition in which judgment dated 09.10.2012 was delivered was writ petition No.15519 of 2010 Tata Steel Limited vs. State of Orissa & Ors. We now proceed to notice the facts and pleadings in the aforesaid writ petition. The writ petitioner, Tata Steel is company which has its branches, divisions across the State of Orissa. The writ petitioner carries on business in mining as well as manufacturing of FerroChrome and FerroManganese at different plants in the State of Orissa. For the ready reference the pleadings in paragraph 3 of the writ petition needs to be extracted which is to the following effect:
"3. That the relevant facts giving rise to the present writ application are inter alia are:
( a) The petitioner in order to carry out its manufacturing activity both inside the state of Orissa as well as in factories located outside the state imports various raw materials from outside India.
(b) That for importing the said goods from outside India, the petitioner has obtained has obtained necessary licenses and permissions from appropriate authorities.
(c) That the petitioner is registered under OVAT Act, CST Act and Orissa Entry Tax Act, 1999, and has been allotted TIN number by the Sales Tax Officers of the State.
The petitioner brings in various goods including scheduled goods for its plants, from within the state and also from outside the territory of India by way of import. The materials so purchased from various countries are duly supported by Bill of Entry and other documents which have duly been incorporated in the accounts of the petitioner company. A specimen copy of a few Commercial Bills/Bills of Entry representing import of materials is annexed hereto as Annexure1."
12. The writ petitioner pleads that Legislature never intended to levy entry tax on the value of the goods imported from outside the country by Entry Tax Act, 1999. Article 286(1)(b) prevents a State from levying Sales Tax so as not 11 to interfere with the Union's Legislative power with respect to the import and export across Customs Frontiers (Entry 41 of List I) and the duties of Customs including Export Duty (Entry 83 of List I).
13. The States never intended to levy entry tax on goods from outside the country. Referring to the definition of 'purchase value', it is submitted that the omission of "Customs Duty" in Section 2(j) was deliberate. It is impermissible for the State to enact a legislation purported to be under Entry 52 of List II, the incidence of which is on import of goods from outside India which is exclusively a matter for the Union under Entry 41 and 83 of List I.
14. Counteraffidavit was filed on behalf of the respondents justifying the entry tax. The State pleaded that levy of entry tax by the State is under Entry 52 of list II of the Seventh Schedule. The provision of Article 286 is available only in the case of sale of goods and not against the entry tax.
15. It is incorrect to suggest that the Legislature never intended to levy tax on imported goods coming from outside the country. The charge under Section 3 of the Orissa Act, 1999 would suggest that levy is on the basis of destination of scheduled goods. It is not the transaction of import which is sought to be levied with entry tax. The Division Bench vide its judgment dated 09.10.2012 dismissed all the writ petitions except writ petition No.7 of 2008 of M/s. IFGL Refractories. Civil Appeal No.32256 of 2013 - M/s. National Aluminium Company Limited vs. State of Orissa & Ors.
16. The writ petitioner is the public sector undertaking and is running three units, namely, Aluminium Refinery Plant at Damanjodi in the District of Koraput, Aluminium Smelter Plant at Angul in the District of Angul and Captive Thermal Power Plant at Angul. The writ petitioner in order to carry out its manufacturing/mining activity imports various material and equipments including spares from outside India. For importing the said goods from outside India, the petitioner has obtained necessary licences and permission from appropriate authorities.
The petitioner brings in various goods including scheduled goods for its business operation from within the State and also from outside the territory of India by way of import. The writ petitioner has filed the writ petition challenging the Orissa Entry Tax Act, 1999 and levibility of entry tax on petitioner. By a common judgment dated 09.10.2012 the writ petition has been dismissed. Aggrieved by which this appeal has been filed. Civil Appeal arising out of SLP(C) No.1426 of 2013 - Emami 13 Paper Mills Limited vs. State of Orissa & Ors.
17. The petitioner has set up a large scale industry for manufacture of Paper, paper Board and newsprint in Orissa in the Industrial Estate of Balgopalpur, District Balasore. The petitioner had entered into an agreement with Global Equipment and Machinery Sales Inc., Montgomeryville, Pennsylvania, United States of America and placed orders for a Paper Plant and other machineries to be supplied by the said company to the petitioner. The petitioner imported into India a disassembled paper manufacturing plant in knock down condition with spares.
The petitioner also imports other machineries from other countries and the said imported machineries and spare parts enter the Country through different ports and are cleared by the petitioner on payment of the import duty levied under the Customs Act, 1962. Once the said plants and machineries are unloaded and cleared upon payment of the Customs Duty the said plant and machineries are transported to the petitioner's factory at Balgopalpur, Orissa. Besides importing machinery from other countries the petitioner also has to purchase various machineries and spare parts from different manufacturers in other States in India.
The petitioner was called upon to submit a statement showing the names of the goods imported by the petitioner. The respondent further threatened to resort to coercive measures if the petitioner failed to make payment of the entry tax on the import of plant and machinery. The petitioner made ad hoc payment under protest. Petitioner protested against the levy of entry tax on the plant and machinery imported from USA. The petitioner filed a writ petition No. 13978 of 2008 Orissa Act, 1999 questioning the levy of entry tax on import from outside the country, the constitutional validity of the Orissa Act, 1999 was also challenged. Counteraffidavit and rejoinderaffidavits were filed to the writ petitions and vide judgment dated 9.10.2012 the High Court dismissed the writ petition. Civil Appeal arising out of SLP(C)No.11060 of 2013M/ s. IFGL Refractories vs. State of Orissa and ors.
18. The writ petitioner has set up a factory at Sector 'B', Kalunga Industrial Estate as an 100% import substitution project. The petitioner commenced commercial production of special refractories and operating systems used by the producers of iron and steel. The petitioner has continually been expanding its production capacity by installing and erecting plant and machinery both indigenous and imported. For the manufacture of the refractory products, the petitioner requires imported raw materials, stores and spares, trading 15 items and capital goods. Petitioner imports various materials from different countries.
The materials are fused silica, lime stabilize fused zirconia, fused magnesia, sintered magnesia, silicon metal, natural PVC, refractory glaze, furfural alcolhol and micro silica. Generally, these goods are imported from either the Kolkata Port or the Kolkata Airport where from they are transported to the factory. Besides the raw materials imported from other countries, the petitioner also uses raw materials available in other States within the Union of India. The petitioner was under the bona fide belief that it was not required to pay entry tax on the goods imported from abroad. Further, the petitioner effected a payment under protest of Rs.37,08,682/towards entry tax. The petitioner filed writ petitioner No.7 of 2008 challenging the Entry Tax Act, 1999.
The writ petition was filed basically on the following three grounds: a. Entry tax is not leviable on goods imported from outside India as being violative of Article 286 read with Article 246 of the Constitution; b. Entry tax is not leviable on goods purchased from other States when the same goods are not manufactured within the State of Orissa in terms of Article 304(a) of the Constitution. c. In any case, the goods imported from outside India/purchased from other States by the petitioner are not specified in the schedule appended to the Act and therefore not exigible to entry tax.
19. The writ petition filed by the petitioner has been partly allowed by a common judgment dated 09.10.2012. The High Court although upheld the levy of entry tax on goods imported from outside the country but invalidated the levy of entry tax on certain goods purchased/imported by the petitioner which were not mentioned in the schedule appended to the 1999 Act. Aggrieved by the said judgment, this appeal has been filed. Transferred Case No.149 of 2013 - M/s. Paradeep Phosphates Ltd. vs. State of Orissa and ors.
20. The Transfer Petition (C) No.530 of 2012 was filed by the petitioner, M/s. Paradeep Phosphates Ltd. praying for the transfer of Writ Petition No.16541 of 2007 pending in the High Court of Orissa at Cuttack. The transfer petition was allowed by this Court on 23.07.2013 on which this T.C. No.149 of 2013 has been registered. The petitioner is engaged in manufacture of different types of chemical fertilizers like DAP, MOP, NPK. The petitioner has been importing raw materials through Paradeep Port wherein it has its Conveyor facility and the said raw materials are unloaded from the Ships and directly dispatched to petitioner's factory without using any infrastructure facility provided by the Government of Orissa. Petitioner has a plant at Paradeep under the Revenue District of Jagatsinghpur, Orissa.
The petitioner has an adjoining township at Paradeep. The petitioner constructed its own approach roads from the State Highway, developed the plant and township site. The petitioner procures about 98% of its raw materials from outside the country. Petitioner has been paying entry tax on imported scheduled goods 'under protest'. Petitioner filed writ petition No.16541 of 2007 challenging the notice for assessment and payment of entry tax. Petitioner also prayed for a writ of mandamus directing the State of Orissa not to impose levy of entry tax on the goods imported from outside the territory of India.
21. There are few other appeals which are different from the above mentioned common judgment of the Orissa High Court. Civil Appeal Nos.37203722 of 2003 - National Aluminium Co.Ltd. vs. State of Orissa & Ors.
22. The writ petitioner is a Government of India Undertaking, engaged in production of alumina and aluminium. It has its captive Bauxite Mines and Alumina refinery factory at Damanjodi in the District of Koraput. The major raw material is bauxite. Petitioner has set up its own Captive Power Plant at Angul near its Smelter Plant. For production of electricity, the basic raw material is coal, which obtained from Mahanadi Coal Fields. The petitioner filed Original Jurisdiction Case No.72 of 2001 challenging the validity of 1999 Act on several grounds. The Division Bench of the High Court vide its judgment dated 13.11.2002 declined to strike down the 1999 Act. However, while declining to strike down the 1999 Act following directions were issued:
"44. In the result, while declining to strike down the Orissa Entry Tax Act, 1999 as ultra vires, we direct that:
1. Unless the basic ingredients, i.e. Entry of Scheduled goods for the purpose of Consumption, Use or Sale into a local area of the State are satisfied, the provisions of the Orissa Entry Tax Act, 1999 shall not be attracted;
2. The goods which enter into local area/areas only for the purpose of transit will not be subject to Entry Tax; and
3. Every manufacture of scheduled goods under Section 26 shall collect by way of Entry Tax amount equal to the tax payable on the value of the finished products under Section 3 of the Act from the buying dealer either directly or through an intermediary only if the scheduled goods sold are intended for ENTRY into any local area of the State for the purpose of Consumption, Use or Sale."
23. Aggrieved by the said judgment, these civil appeals have been filed. Civil Appeals arising out of SLP(C) Nos.1674446 of 2013 - BRG Iron & Steel Co. Pvt. Ltd. vs. Joint Commissioner of Sales Tax, Angul, Orissa.
24. The petitioner company during the course of its business as required to purchase plants and parts of plants, machinery and parts & spares of all kinds of machinery for the purpose of setting up a manufacturing unit at Dhenkanal, Orissa. The petitioner was also required to purchase raw materials such as stainless steel and iron & steel goods. The company was also required to import and export goods particularly import of capital goods such as its plant and machinery from outside the country. The petitioner has been regularly filing return under the Orissa Entry Tax Act, 1999. However, vide letter dated 30.03.2010 entry tax was demanded.
The judgment was delivered by the High Court on 09.10.2012 in Writ Petition No.15519 of 2010 holding that levy of entry tax on imported goods was within the purview of Orissa Act, 1999. An order dated 20.10.2010 has been passed by the Joint Commission of Sales Tax holding the petitioner liable to pay entry tax on the imported goods besides penalty. Petitioner has directly come to this Court against the assessment order passed by the Joint Commissioner of Sales Tax dated 20.10.2012. Civil Appeal arising out of SLP(C)No.36486 of 2010 - M/s. Bajrangbali Alloys Pvt. Ltd. vs. Commissioner, Sales Tax & Anr.
25. The petitioner carries on the business of manufacturing and sale of M.S. Ingots and M.S. Rod ITMT Bars) at Manguli in the District of Cuttack. The petitioner directly imports goods 20 brought from outside the country into the local area. Petitioner filed Writ Petition No.16650 of 2010. In the writ petition, petitioner has attacked the correctness of the assessment order dated 23.02.2010 on the ground that assessment order under Section 9C of the 1999 Act has been made by way of Orissa Entry Tax (Amendment) Act, 2005 which came into force with effect from 19.05.2005. The writ petition has been dismissed by the Division Bench by its judgment dated 08.11.2010 on the ground that the petitioner is at liberty to seek its alternative remedy by filing an appeal within a period of two weeks, the writ petition was disposed of.
CIVIL APPEALS OF STATE OF KERALA
26. The civil appeals relating to State of Kerala have been filed both by State of Kerala as well as by its officers. State of Kerala has filed appeals against judgment dated 06.01.1998 and several others subsequent judgments following the judgment dated 06.01.1998. Another judgment has been passed by High Court of Kerala on 18.12.2006. There is one writ petition filed by a company. It is sufficient to notice facts of few cases to decide the group of cases relating to Kerala. 21 Civil Appeal Nos. 33813400 of 1998 State Of Kerala & Ors Vs. FR. William Fernandez & Ors.
27. The State is in appeal against the Division Bench judgment dated 06.01.1998 of Kerala High Court delivered in a batch of writ appeals including Writ Petition No. 770/1997; Father William Fernandez & Ors. vs State of Kerala & Ors. The various petitioners imported motor vehicles from abroad after obtaining custom clearance and payment of custom duties and thereafter brought the vehicles in the State of Kerala. Some of the petitioners have also got their vehicles registered under the Motor Vehicles Act which have been given notice demanding entry tax under Kerala Tax on Entry of Goods into Local Areas Act, 1994 (hereinafter referred to as '1994 Act').
The writ petition was heard by learned Single Judge who vide its common judgment dated 20.2.1997 dismissed all the writ petitions holding that entry tax can be collected from the owners of the vehicles who brought them from abroad before granting them registration in the State for consumption, use or sale. Writ Appeals were filed against judgment dated 20.2.1997 which have been decided vide common judgment dated 06.01.1998. Although, the Division Bench held that there is no limitation upon the State's powers to legislate under Entry 52 List II of the VIIth Schedule of the Constitution but in case 22 of goods, brought from abroad their entry into local area is outside the scope of 1994 Act, which Act is confined only to those goods brought from outside the State, that would not include the outside borders of the country. The Division Bench declared that vehicles bought from outside the country are not liable to pay entry tax. Civil Appeal No. 6178 of 2010 State of Kerala & Ors. vs. Idea Cellular Ltd.
28. This appeal has been filed against the judgment dated 18.12.2006 of Division Bench of Kerala High Court by which judgment a bunch of writ petitions have been decided holding that the levy of entry tax under 1994, Act as discriminatory and violative of Article 14, 301 and 304 of the Constitution of India. The Division Bench followed the earlier Division Bench judgment of the Kerala High Court in Father William Fernandez case decided on 06.01.1998. Writ petition was filed by various assesses challenging the constitutional validity of 1994, Act and also questioning the entry tax on goods brought from outside the State or and goods brought from outside the country to the State of Kerala.
The Division Bench held that levy of entry tax on goods imported from other States to the State of Kerala and from abroad is not compensatory in nature and such demand is illegal, unauthorised and violative of 23 Article 301. Application for intervention has also been filed by various petitioners which applicants have also been heard. State has filed other appeals questioning subsequent judgments which have followed judgment dated 06.01.1998 and 18.12.2006. Writ Petition (C) No. 574 of 2003 Parisons Agrotech Private Ltd. & Anr vs. State of Kerala & Ors.
29. This writ petition has been filed under Article 32 of the Constitution praying for declaration that 1994, Act is ultra vires and unconstitutional and the Act also does not apply to the entry of goods imported in India from foreign country. The petitioner company is engaged in the import of crude palmolin, refining the same to make it edible and thereafter selling of palmolin oil. The petitioner imports crude palmolin oil in bulk from Malaysia, Indonesia and Singapore. Purchase of crude by the petitioner is in the course of import from foreign countries and imported through Cochin Port within the State of Kerala.
The said sale & purchase in the course of import is exempted from the levy of tax under Article 286 of the Constitution of India read with Section 5(2) of the Central Sales Tax Act, 1956. The respondent directed the first petitioner to remit the entry tax of purchase price of crude palmolin imported by the petitioner. Petitioner has also relied on Division Bench judgment of the Kerala High Court 24 delivered in bunch of writ appeals including Writ Appeal 770 of 1997 against which SLP/Civil Appeal has been filed being CA 3381 - 3400 of 1998 and is pending. Civil Appeals relating to State of Bihar Civil Appeal arising out of SLP(C) No. 26543 of 2008 M/s ITC Ltd. vs. State of Bihar
30. This appeal has been filed against Division Bench judgment of Patna High Court dated 27.08.2008 by which the writ petition has been disposed of in terms of Para 69 Page 70 of the earlier decision in the case of M/s Indian Oil Corporation Ltd. (dated 09.1.2007 reported in 2007 10 BST 140 Patna). The petitioner is a company engaged in the business of manufacturing and selling of cigarettes and smoking mixtures. Company carrying on business of manufacturing paper, paper board, packaging materials and printing, thereon for said purpose Company has factories at different places all over the country including in Munger in the State of Bihar. For manufacturing of cigarettes smoking mixtures, the company causes entry of tobacco and other raw materials purchased from outside the State of Bihar into the local area of Munger.
The State of Bihar has enacted the Bihar Tax on Entry of Goods into Local Areas Act 1993(hereinafter referred to as 1993, Act). The 1993, Act has been amended by Bihar Act, 9 of 2003, 25 Bihar Act, 11 of 2003 and Bihar Act 19 of 2006. By Bihar Act 11 of 2003, an explanation has been added to the effect that entry of goods into local area for consumption, use or sale therein from any place outside the territory of India shall also be deemed to be an entry of goods for the purposes of the Act. Petitioner challenged the vires of the Act, as amended in 2003. Petitioner prayed for direction to remove, withdraw and cancel the collection of entry tax under the impugned Act. Civil Appeal arising out of SLP(C) No. 11646 of 2009VST Distribution Storage v.The State of Bihar & Ors.
31. This appeal has been filed against judgment dated 28.08.2008 by which judgment the writ petition filed by the appellant has been disposed of in terms of the para 69 of the Division Bench judgment of Patna High Court, M/s Indian Oil Corporation Ltd. (supra). Civil Appeal arising out of SLP(C) No. 7356 of 2010 ITC Ltd vs State of Bihar
32. This appeal has been filed against judgment and order dated 15.02.2010 of the Division Bench of the Patna High Court by which writ petition filed by the petitioner has been dismissed. Petitioner has challenged the constitutional validity of 1993, Act thereby challenging the Section 4 of 1993, Act as inserted by Amendment Act 19 of 2006. It was 26 prayed that Amendment Act be declared as ultra vires to the power of State Legislature.
Petitioner has also challenged the demand notice dated 20.6.2009 issued by Joint Commissioner, Commercial Tax Bhagalpur and demand notice dated 03.07.2009 under the Amendment Act, 19 of 2006. It was noticed in the writ petition that in view of the judgment dated 09.01.2007 of the Patna High Court in Indian Oil Corporation Ltd. (supra) after the amendment by amending Act, 19 of 2006 the entry tax sought to be levied with effect from 29.08.2006, has become compensatory and constitutionally valid. Civil Appeal of State of Jharkhand Civil Appeal arising out of SLP (C) 1101 OF 2007State of Jharkhand & Ors.v.Tata Iron & SteelCo. Ltd.
33. State of Jharkhand filed an appeal against the Division Bench judgment dated 14.08.2006 delivered in Writ Petition(T) No. 5354 of 2004, Tata Iron & Steel Co. Ltd. Jamshedpur, Sinhbhumi vs. State of Jharkhand. The petitioner is engaged in manufacturing the iron & steel products by its integrated steel plant at Jamshedpur in the State of Jharkhand. For the purpose of manufacturing activities, company is importing coal from Australia and Newzealand in pursuant to several foreign contracts executed with foreign parties which comes to Haldia and Paradeep Ports in India and from there said coal is transported either by rail or road to Jamshedpur in the State of Jharkhand. 1993, Act was adopted in the State of Jharkhand after its creation from 15.11.2000.
A Notification dated 23.03.2002 was issued under Sub section 1 of Section 2 by adding 10 new items to the schedule. Notification dated 23.03.2002 was issued levying the entry tax on imported coal. A memorandum was issued by Commissioner of Commercial Tax. Petitioner prayed for quashing a part of the Notification dated 23.3.2002 by which entry tax was sought to be levied by the State of Jharkhand on imported coal and other consequential reliefs have been claimed.
34. The Division Bench vide its judgment and order dated 14.08.2006 allowed the writ petition holding that provisions of 1993, Act as adopted by the State of Jharkhand do not satisfy the requirement of Article 301 read with Article 304. State Aggrieved by the said judgment have come up in the appeal. This appeal was heard by this Court on 29.08.2017 by which proceeding the impugned judgment of the Jharkhand of High Court which rested on the Compensatory Theory has been set aside. It is useful to quote the last two paras of the proceeding dated 29.08.2017 which is to the following effect:
"We need not comment upon this argument. Suffice is to state that insofar as the impugned judgment which is rested on the compensatory theory stands set aside, if any rights accrue in favour of the respondent/assessee or the respondent has any right to challenge the levy on the aforesaid ground which was taken before the High Court it would be open to the respondent/asseesee to pursue the same. The respondent/assessee had also raised the contention that coal was imported on which no entry tax was paid. On this aspect, we have heard the arguments and the judgment is reserved."
35. Thus in the present appeal, we have permitted the assessee to raise the only issue as to whether on imported coal entry tax could be levied.
36. We have heard large number of learned counsel for the writ petitioners including Shri Arvind P. Datar, Shri A.K. Ganguli, Shri S.K.Bagaria, Shri Jagdeep Dhankar, Dr. G.C. Bharuka, Shri Ashok Kumar Panda, Senior Advocates. Shri Rakesh Dwivedi, Senior Advocate has been heard on behalf of the State of Orissa and State of Bihar. Shri V.Giri, Senior Advocate has appeared on behalf of the State of Kerala. Shri Ajit Kumar Sinha, Senior Advocate has also been heard.
Submissions
37. The following are the substances of submissions raised by different learned counsel for writ petitioners relating to State of Orissa attacking the provisions of 1999, Act:
i. The legislature has not created any chargeability for levy of entry tax on goods imported from outside the country in Orissa Entry Tax Act, 1999. Entry of goods has been defined in Section 2(d) which contemplates entry of goods into a local area from any place
(i) outside that local area or
(ii) any place outside the State. The provision does not contemplate goods entering from any place outside the country. Putting a literal interpretation of the 1999, Act, it is clear that legislature never intended to cover the goods imported from outside the country. It is submitted that wherever legislature intended to impose entry tax on the imported goods coming from outside the country, the entry tax legislation specifically mentioned so in the legislation. The reference has been made to the provisions of the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Act, 1993 (as Amended by Bihar Act 11 of 2003 and 19 of 2006) wherein an explanation and a new Section 2(c) to the following effect was inserted:"
(iii) into a local area from any place outside the territory of India."
Further in Uttar Pradesh Tax on Entry of Goods into Local Area Act, 2007 under Section 2(1)(c) following is specifically provided for "(iii) into a local area from any place outside the territory of India." Similar is the provision of Section 2(1)(c) of Uttarakhand Tax on Entry of Goods into Local Areas Act, 2009 and further Section 2(1)(h) of the West Bengal Tax on Entry of Goods into Local Area Act, 2012 where any place outside India is specifically mentioned.
ii. It is only Parliament which is empowered to make any law with regard to trade & commerce with foreign countries as well as with regard to levy of duties of customs thereon. Entry 41 covers "trade & commerce with foreign countries, import and export across custom frontiers; definition of custom frontiers" 'Entry 83 of List I covers "duties of custom including export duties".
Entire field connected or related to trade & commerce with foreign countries is within the exclusive domain of the Union and beyond the legislative competence of the State Legislature. Entry 52 of List II can have no application in respect of goods, imported from 31 outside India which continues to be imported goods in the course of import. The import movement in respect of imports continues till the goods reach the factory, which movement is an integral and inexplicable part of the import movement.
From the above single taxing event and single import movement, the State Legislature cannot carve out any taxing event by seeking to term it as a tax from entry into local area for consumption, use or sale therein. The entry tax legislation imposing entry tax on the imported goods is thus beyond the competence of State Legislation. Article 286(1)(b) of the Constitution excludes the taxing power of the State in respect of goods in the course of import.
iii. The goods imported by actual users for their captive consumption and own use continues to remain in the course of import and continues to retain the character of imported goods. The Doctrine of Unbroken Package evolved by American Courts do supports the petitioners' case. The judgment of the US Supreme Court in Brown versus Maryland 6 L.Ed. 678 which laid down that the constitutional prohibition of State to tax the goods imported 32 survives even after they have landed and cleared from custom, after payment of duties the protection continues till they are sold by importer, is still good law and has been followed subsequently.
iv. The impugned entry tax is not an entry under Entry 52 of List II of the VIIth Schedule of the Constitution. The tax covered by Entry 52 is nothing but the levy that is known as octroi, which is a tax levied by a local self authority on the entry of goods into the area administered by such local government. The expression 'local area' in Entry 52 signifies that tax in this entry is a local tax. The local authority into whose local area, the goods enters for consumption, use or sale therein can levy and collect the said tax. The tax refers to in Entry 49 of Provincial List under the Government of India Act, 1935 and Entry 52 of List II under the Constitution is 'octroi', which have been prior thereto, was levied by and for the benefit of local authorities and usurpation of this levy by State would thus be beyond the legislative power of the State under Entry 52.
v. The imported machineries which are imported in completely knocked out condition are not covered by Schedule of 1999, Act. A plant imported in knocked out condition is neither machinery nor equipment and is not covered by Part II of Schedule. Hence, no entry tax could have been levied on imported plants which are received in knocked out condition. vi. Section 4 Of Bihar Act 1993 as inserted by Bihar Act 19 of 2006 is violative of Article 266 of the Constitution of India.
38. Shri Rakesh Dwivedi, learned senior counsel appearing for the State of Orissa and Bihar has refuted the above submissions. He submits that Section 3 of 1999, Act covers tax on imported goods. The definition section has two phrases (i) from any place outside that local area, (ii) or any place outside the State. Both the phrases on a plain and literal consideration would include the goods which are entering from outside the country. Foreign territory would be a place which is not only outside the local area but also outside the State.
39. The State Legislature is fully competent to levy entry tax under Entry 52 List II. The legislative field as included in Entry 52 List II has nothing to do with Entry 41 and Entry 83 of List
I. Under the Indian Constitution, the distribution 34 of powers with regard to tax has been done in a mutually exclusive manner in great detail and there is no overlapping in taxing power of the State and the Union. Duty of custom in Entry 83 List II is on import or export. The prohibition contained under Article 286 on the State Legislature are in reference to sale of goods and has nothing to do with entry tax on entry of goods for consumption, use or sale. Article 286 as well as Central Sales Tax, 1956 has no relevance with regard to Entry 52 List II.
40. The word 'import' means to bring in. The word 'imported goods' are defined in Customs Act, 1962. The above definitions clearly indicate that ones the goods have been cleared for home consumption then they ceased to be imported goods. The importation happens before clearance for home consumption and after clearance the character as import ceases. The Doctrine of Unbroken Package as evolved by the US Supreme Court is not attracted in this country.
The judgment of the US Supreme Court in Brown versus State of Maryland, 6 LED 678 has been discredited even in USA. In the subsequent judgments of US Supreme Court, the judgment of Brown vs. State of Maryland has been considerably diluted. The Federal Court as well as this Court has specifically held that the judgment of US Supreme 35 Court in Brown vs. State of Maryland is not applicable in this country.
41. The submissions raised by one learned counsel of the petitioners that entry tax is not covered by Entry 52 List II is wholly fallacious. In the Constitution of India, there is clear demarcation of taxing power of Union and the State. When by Entry 52 List II, entry of goods in the local area for consumption, use or sale has been specifically provided the said entry has to be given its full meaning and content.
42. Learned counsel appearing for the writ petitioners in the State of Bihar in civil appeal arising out of judgment of Patna High Court as well as Jharkhand High Court has also adopted the above submissions raised on behalf of the petitioners. In reply thereto, learned counsel for the State of Bihar and Jharkhand has reiterated the same submissions as noted above.
43. Shri V. Giri, learned senior counsel appearing on behalf of the State of Kerala adopting the submission of Shri Rakesh Dwivedi contends that the judgment of Kerala High Court holding that entry tax cannot be levied on imported motor vehicles is fallacious. It is submitted that definition clause and charging section in the 1994, Act are clear enough to include goods entering from any place outside the State for 36 consumption, use or sale therein including outside territory of India. Learned counsel appearing for the respondent in civil appeals of State of Kerala has reiterated the submissions raised on behalf of the writ petitioners in appeals arising out of judgment of Orissa High Court.
44. From the submission raised by learned counsel for the parties and material on record following issues arise for consideration in this batch of appeals:i. Whether Section 2(d) read with Section 3 of Orissa Entry Tax Act, 1999, Section 2(d) read with Section 2(d) of Kerala Act, 1994 and Bihar Act, 1993 (before its amendment in 2003), never intended to levy any entry tax on the goods, entering into local area of State from any place outside the territory of India.
ii. Whether Entry Tax Legislations in question intrude into exclusive legislative domain of Parliament as reserved under Entry 41 and Entry 83 List I.
iii. Whether levy of entry tax on goods imported from outside territory of India is legislation trenching the field of "import and export", "duties of custom" reserved to Parliament.
iv. Whether the importation of goods, imported from a territory outside the India continues till the goods 37 reach in the premises/factory of the importer, during which period State at no point of time is legislative competence to impose any tax.
v. Whether doctrine of unbroken package as evolved by the American Court are to apply with regard to imported goods of the petitioners prohibiting the State from levying any tax till the goods are first sold/dealt by the importer.
vi. Whether in the definition of purchase value as contained in Entry Tax Legislations in question, noninclusion of custom duty is indicator of fact that the legislature never intended to levy entry tax on imported goods.
vii. Whether Entry Tax Legislations are not covered by Entry 52 List II since the Entry 52 is in essence entry of levying octroi which can be levied only by local authorities and the State has no legislative competence to impose entry tax under Entry 52 List II.
viii. Whether a plant, imported in knocked out condition is covered by the Part II of the Schedule of Orissa Act, 1999.
45. Before we proceed to consider the various issues as noted 38 above, it is relevant to notice the statutory provisions relating to entry tax applicable in the above mentioned States.
46. The Orissa Entry Tax Act, 1999 (hereinafter referred to as "Orissa Act, 1999") was enacted to provide for the levy and collection of tax on the entry of goods into a local area for consumption, use or sale therein and matters incidental thereto and connected therewith. Section 2 contains definitions. Section 2(d) defines "entry of goods", Section 2(e) defines "importer", Section 2(f) defines "local area" as follows :
"2. In this Act, unless the context otherwise requires,
xxx xxx xxx
(d) "Entry of goods" with all its grammatical variations and cognate expressions, means entry of goods into a local area from any place that local area or any place outside the State for consumption, use or sale therein;
(e) "Importer" means a dealer or any other person who in any capacity brings or causes to be brought any scheduled goods into a 1mal area for consumption, use or sale therein;
(f) "Local area" means the areas within the limits of any
(i) Municipal Corporation,
(ii) Municipality,
(iii) Notified Area Council,
(iv) Grama Panchayat, and
(v) Other loca1 authority by whatever name called, constituted or continued in any law for the time being in force and shall also include an Orissa Act industrial township constituted under section 4 of the Orissa 23 of 1930, Municipal Act, 1950;"
47. Section 3 relates to levy of tax. Section 3 subsection (1) is as follows:
"3.Levy of Tax.
(1) There shall be levied and collected a tax on entry of the scheduled goods into a local area for consumption, use or sale therein at such rate not exceeding twelve percentum of the purchase value of such goods from such date as may be specified by the State Government and different dates and different rates may be specified for different goods and local areas subject to such conditions as may be prescribed." The Orissa Act, 1999 has been amended from time to time.
48. The Kerala Tax on Entry of Goods into Local Areas Act, 1994 (hereinafter referred to as 'Kerala Act, 1994) was enacted to provide for levy of tax on the entry of goods into the local area for consumption, use or sale therein. Section (2)(d) defines 'entry of goods', Section 2(g) defines 'importer', Section 2(h) defines 'local area' and 2(n) defines 'purchase value' are as follows:
"2.(d) "entry of goods into a local area" with all its grammatical variations and cognate expressions, means entry of (Substituted by Act 23 of 1996 w.e.f. 2971996.) goods into a local area from any place outside the State for use (Inserted by Act 12 of 2003 w.e.f. 142003.) consumption or sale therein;
(g) "Importer" means a person who brings or cause to be brought any goods whether for himself or on behalf of his principal or any other person, into a local area, from any place outside the State for use, consumption, or sales therein or who owns the goods at the time of entry into the local area.
(h) "Local area" means the area of jurisdiction of a local authority;
(n) "purchase value" means the value of the goods as ascertained from the original invoice and includes insurance, excise duties, countervailing duties, sales tax, transport fee, freight charges and all other charges incidentally levied on the purchase of goods and in the case of a motor vehicle includes the value of accessories fitted to the vehicle;
Provided that, where the purchase value of the goods is not ascertainable on account of nonavailability or nonproduction of the original invoice or when the invoice produced is proved to be false or if the goods are acquired or obtained otherwise than by way of purchase, then the purchase value shall be the value or price at, which the goods of like kind or quality is sold or is capable of being sold, in open market"
49. Section 3 is a charging Section which is as follows: "Section 3 Levy of Tax Substituted by Act 23 of 1996 w.e.f. 2971996.)
(1) Subject to the provisions of this Act, tax shall be levied and collected a tax on the entry of any goods into any local area for consumption, use or sale therein. (Inserted by Act 10 of 2005.) The Tax on such goods shall be at such rate or rates as may be fixed by Government by notification, on the purchase value of goods not exceeding the tax payable for the goods as per the (Substituted by Act 23 of 1996 w.e.f. 2971996.)
[Schedule to the Kerala General Sales Tax Act, 1963 or the Kerala Value Added Tax Act, 2003. Provided that no tax shall be levied and collected in respect of any motor vehicle which was registered in any Union Territory or any other State under the provisions of Motor Vehicles Act, 1988 (Central Act, 59 of 1988), prior to a period of fifteen months or more from the date on which it is registered in the State: Provided further that no tax shall be levied and collected in respect of any (Substituted by Act 23 of 1996 w.e.f. 2971996.) goods which is the property of the Central Government or which is used exclusively for purposes relating to the defence of India.
(2) The tax shall be payable by the importer in such manner and within such time as may be prescribed."
50. Bihar Act, 1993 also defines entry of goods in Section 2(c), importer in Section 2(d), import value in Section 2(e) and local area has been defined in Section 2(f) which are as follows:
"2(d) "Importer" means a dealer or any other person who is any capacity effects or causes to be effected t he entry of any scheduled goods into a local area for consumption, use or sale therein." (e) "Import Value" means the value of scheduled goods as ascertained from the purchase invoice/bills and includes insurance charges, [import duty, marine insurance charges, landing and whatfage and port charges] excise duties, countervailing duties, sales tax, transport charges, freight charges and all other charges incidental to the import of scheduled goods:
Provided that where the purchase invoice/bills are not produced or when the invoice/bills produced are proved to be false or if, the scheduled good are acquired or obtained otherwise than by way of purchase the import value shall be the value price at which the scheduled goods of like kind or quality is sold or capable of being sold in open market.
(f) "Local Areas" means the areas within the limits of a-
(i) Municipal Corporation;
(ii) Municipality;
(iii) Notified Area Committee;
(iv) Cantonment Board;
(v) Town Board;
(vi) Mines Board;
(vii) Municipal Board;
(viii) Gram Panchayat;
(ix) Any other local authority by whatever nomenclature called, constituted or continued in any law for the time being in force."
51. Section 3 is a charging Section. Section subsection (1) is as follows:
"3. Charge of Tax-
"(I) There shall be levied and collected a tax on entry of scheduled goods into a local area for consumption, use or sale therein for the purpose of development of trade, commerce and industry in the State, at such rate, not exceeding twenty percent, of the import value of such goods, as may be specified by the State Government in a notification published in a official gazette subject to such conditions as may be prescribed:
Provided different rates for different scheduled goods may be specified by the State Government.
Provided further, that if an importer claims that he imported goods notified under subsection (1) not for the purpose of consumption, use or sale, the burden of proving that the import was for purposes other than for consumption, use or sale shall be on importer importing such goods and making such claim."
