A division bench of the Supreme Court, while upholding the Orissa Entry Tax Act, 1999, has held that the industrial townships are “local areas” for the purpose of levy of Entry Tax.
Entry 52 of List II of of the Seventh Schedule to the Constitution authorizes State Legislatures to levy entry tax: “taxes on the entry of goods into a localarea for consumption, use or sale therein.
The State of Orissa enacted the Orissa Entry Tax Act, 1999 which defined the local area so as to include industrial townships among other areas3 including areas within the industrial township constituted under Section 4 of the Orissa Municipal Act, 1950, thereby subjecting goods entering into such areas, to entry tax.
The petitioners, M/s. OCL India Ltd. and Steel Authority of India Ltd. impugned the Orissa Act especially the levy of entry tax. SAIL contended that imposition of entry tax violates Article 301 of the Constitution.
Justice S. Ravindra Bhat Justice Uday Umesh Lalitand Justice J.B. Pardiwala observed that “the object of the levy, i.e., entry tax, is the regulation of entry of goods in a regular area for consumption, i.e., manufacture, use or sale. There is no dispute that entry of goods into an industrial area or estate is for their use for manufacturing or for processing or for the purposes of their delivery as their ultimate point of destination, i.e. for the purpose of their “consumption, use or sale” within that area. It could even be that the goods enter within the industrial area or estate, as the ultimate point of destination for their use. In any case, the levy would be attracted because the incidence is the entry into the local area.”
Upholding the impugned legislations, the Court held that “The Court is of the opinion that the argument – made by counsel that the levy could not be retrospective, in the facts of this case, is insubstantial. The earlier effort to tax the assessee by demand led to petitions which quashed them – where the legal regime was that some compensatory element had to be disclosed. With the object of curing this defect, the fresh law was enacted by the State of U.P., with retrospective effect which on the application of principles enunciated by this Court, in Sri Prithvi Cotton Mills v. Baroda Borough Municipality & Ors.24, is valid.”
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