A two-judge bench of the Supreme Court, on Tuesday upheld the levy of Entry Tax on goods imported from any place outside territories of India into a local area for consumption, use or sale under the Orissa Entry Tax Act, 1999, Kerala Tax Act, 1994 and Bihar Tax on Entry of Goods in Local Area for Consumption, Use or Sale, 1993 (before its amendment by Bihar Act, 2003 and 2006).
A bench comprising Justices A K Sikri and Ashok Bhushan was hearing a group of litigations where the petitioners challenged 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.
In November 2016, a nine-judge Constitution bench in the case of Jindal Stainless vs. State of Haryana and another, had answered several questions pertaining to entry tax legislations of different States, which has largely settled various issues relating to entry tax. However, the question in the present case was confined to levibility of entry tax on the imported/foreign goods.
Before the Apex Court, the petitioners contended that while interpreting these statutes using literal rule, the goods entering into local area from any place outside the local area or outside the State are to be charged with entry tax. Their specific contention as that foreign territory would be a place which is not only outside the local area but also outside the State and therefore, the levy is not sustainable.
Citing a plethora of decisions, the bench overruled the above contentions and ruled that “It is well known rule of statutory interpretation that by process of interpretation the provision cannot be rewritten nor any word can be introduced. The expression “any place” before the words “outside the State” is also indicative of vide extent. The words ‘any place’ cannot be limited to a place within the territory of India when no such indication is discernible from the provisions of the Act.”
While examining the legislative intent behind the provision, the bench noted that under Entry 52 of List II of Seventh Schedule of the Constitution, State legislature can make legislations on ‘taxes on the entries of goods into a local area for consumption, use or sale therein’. “Legislation is thus concerned only with entry of goods into a local area for consumption, use or sale. The origin of goods has no relevance with regard to chargeability of entry tax,” the bench said.
It was thus, observed that the charging provisions under the impugned statutes, which provides for levy of entry tax is on entry of the scheduled goods into a local area for consumption, use or sale are clear and unambiguous.
“Any goods which are entering into a local area of a State whether coming from another local area of State, any other State or outside the country, the charging event is same for all goods entering into local area. We, thus, are of the clear view that charging Section is clear, unambiguous and the provisions cannot be read to mean that the imported goods coming from outside the country are excluded from charge of entry tax. No such indication is discernible from any provision of the Act. Charging event is complete as and when goods enter into local area for use, sale or consumption irrespective of its origin. We, thus, are of the view that definition clause, Section 2(d) read with Section 3 does not exclude the charging of the entry tax on goods entering into local area for consumption, use or sale from outside the country.”
In view of the above findings, the bench arrived at the following contentions.
(i) Orissa Entry Tax Act, 1999, Kerala Tax Act, 1994 and Bihar Tax on Entry of Goods in Local Area for Consumption, Use or Sale, 1993 (before its amendment by Bihar Act, 2003 and 2006) do not exclude levy of entry tax on the goods imported from any place outside territories of India into a local area for consumption, use or sale.
(ii) All the Entry Tax Legislations questioned in these appeals are legislations which are within the legislative competence of the State legislatures and do not intrude the legislative domain of Parliament as reserved in Entry 41 & Entry 83 of List I.
(iii) The import of goods from any territory outside India comes to an end when the goods enter into the custom frontiers of India and are released for home consumption.
(iv) After import of goods comes to an end the State legislature has full legislative competence to levy entry tax under Entry 52 List II.
(v) The Original Package Theory as developed by the American Supreme Court in case of Brown vs. State of Maryland(supra) is not applicable in this country and the imported goods are not exempted from entry tax till it reaches to the factory premises/destination of its consumption, use or sale.
(vi) Non inclusion of custom duty in the definition of purchase value in the statute of entry tax is not an indicator of the fact that legislature never intended to levy entry tax on imported goods.
(vii) Entry tax legislation are fully covered by Entry 52 List II and the submission that essence of Entry 52 is octroi which can be levied only by local authorities and State has no legislative competence to impose entry tax under Entry 52 List II is fallacious.
(viii) A plant imported in knocked out condition is fully covered with the definition of machinery and equipment under Part II of Schedule of the Orissa Act, 1999.
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