Tax Reduction u/s 4 of TN Entry Tax Act is Available Even for Tax Paid under TNVAT Act: Madras HC [Read Order]

In a recent ruling, the Madras High Court has ruled that the Section 4 of the Tamil Nadu Tax on Entry of Goods into Local Areas Act, 2001, grants reduction in the tax liability even for the tax paid under the Tamil Nadu Value Added Tax ( TNVAT ) Act, 2006.

Justices Dr. Anita Sumanth and G. Arul Murugan, in the matter of Shri Baalaaji Steel Rolling Mill (the petitioner) has directed the The Assistant Commissioner (CT) to set off the entry tax paid in full against tax, surcharge and additional tax under TNVAT Act.

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The issue arose on the grounds that the Section 4 of the TN Entry Tax explicitly only allows the General Sales Tax Act and additional sales tax under the Tamil Nadu Additional Sales Tax Act, 1970.

The Section 4 states as follows:

“(1) Where an importer of any scheduled goods liable to pay tax under this Act, being a dealer in scheduled goods becomes liable to pay tax under the General Sales Tax Act and additional sales tax under the Tamil Nadu Additional Sales Tax Act, 1970 (Tamil Nadu Act 14 of 1970), by virtue of the sale of such scheduled goods, then his liability under those Acts shall be reduced to the extent of tax paid under this Act.

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(2)Where an importer who, not being a dealer in scheduled goods, had purchased the scheduled goods for his own use or consumption in any Union Territory, or any other State, then his liability under this Act, shall, subject to such conditions as may be prescribed, be reduced to the extent of the amount of tax-paid, if any, under the law relating to General Sales Tax as may be in force in that Union Territory or State.”

Thus from the reading of the above provision, it is very clear that the act only allows the tax reduction to the mentioned acts. However, the bench noted the circular of the Commercial Taxes Department submitted by the government advocate.

The circular was issued on 3rd October 2007 referencing the Judgment of the High Court of Madras in WA 1320, 1321/06 and Writ Petition 12553/02 filed by Tvl.ITC Limited, dated 22.3.2007. In this referenced judgment, the Madras High Court held that “the levy of entry tax on the goods imported from other States to the State of Tamil Nadu and from other countries is not compensatory in nature and the Act is violative of Article 301 of the Constitution.” Thus, the High Court in this ITC Limited’s matter has set aside the levy and quashed the demand notices.

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Aggrieved by the ruling of the Madras High Court in the ITC matter mentioned above, the Government filed the SLP before the Supreme Court. However, pending Supreme Court orders on the stay prayer, and in view of the further individual Writ Petitions filed by the dealers being disposed of by the Madras High Court following the decision rendered in the ITC Limited Case, the department issued instructions in respect of Entry Tax on Goods, which among the instructions, the instruction based on the issue in this matter is concerned is quoted below:

“Set off of entry tax paid may be allowed in full against tax, surcharge and additional tax under TNGST/TNVAT Acts.”

The High Court, considering the notification issued, quashed the impugned orders and directed the respondent to give effect to the provisions of Section 4 of the Entry Tax Act in full. 

To Read the full text of the Order CLICK HERE

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