Supreme Court takes up LG’s appeal against Rajasthan HC Decision upholding Entry Tax on Stock Transfers [Read Judgement]
The Court has granted time to the Rajasthan Commercial Taxes Department to file its vakalatnama and counter affidavit
The Supreme Court granted four weeks’ time to file vakalatnama and counter affidavit in the Special Leave Petitions. Rajasthan High Court’s judgment of dismissing its Sales Tax Revision Petitions and upheld the levy of entry tax under Section 3 of the Rajasthan Tax on Entry of Goods into Local Areas Act, 1999 read with Rule 12(3) of the 1999 Rules was challenged.
LG Electronics India Pvt. Ltd., the appellant filed four Sales Tax Revision Petitions before the Rajasthan High Court, all arising out of assessment proceedings initiated by the Commercial Taxes Anti-Evasion Wing. During a survey, authorities found that LG had brought goods from other States into Rajasthan and retained them for more than six months before transferring them outside the State by way of stock transfer.
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The Assessing Officer issued notice and passed an order demanding entry tax along with interest and penalty on the reasoning that continuation of goods beyond six months rendered them taxable under the applicable provisions. Aggrieved, LG filed appeals before the Deputy Commissioner (Appeals-II), Jaipur, which affirmed that the goods which remained in Rajasthan beyond six months would attract entry tax. Later, LG thereafter filed revision petitions before the Rajasthan High Court.
Through Narendra Singhvi and Srishti Agarwal, the appellant argued that entry tax under Section 3 of the Rajasthan Tax on Entry of Goods into Local Areas Act, 1999 is leviable only when goods brought into a local area are consumed, used, or sold within the State. Accordingly, goods merely stored temporarily in Rajasthan but eventually stock-transferred outside cannot be subjected to tax, even if the transfer takes place after six months.
They asserted that Rule 12(3) of the Rajasthan Entry Tax Rules, 1999 which permits deduction only if goods exit the State within a period of six months was contrary to Section 3 and therefore cannot restrict the statutory charging provision.
The Deputy Commissioner partly upheld the assessment, holding that the six-month limit contained in Rule 12(3) was applicable and binding. The authority ruled that goods stock-transferred out of the State only after the expiry of six months could not be excluded while computing taxable value. Consequently, entry tax was held to be leviable on such goods, and the demand was sustained to that extent.
The Rajasthan High Court Bench of Justice Ashok Kumar Jain held that Section 3 of the Act is the charging provision and Rule 12(3) does not expand or contradict it, but merely operationalizes the levy by fixing a reasonable timeframe to identify non-taxable stock transfers. The Court emphasized that LG had not challenged the constitutional validity of Rule 12(3), and therefore, the Rule had to be applied as it stands.
The Court found no substantial question of law in the revision petitions, observing that the Tax Board had correctly applied the statutory provisions to undisputed facts. Accordingly, all four revision petitions were dismissed on 21 May 2025.
The Supreme Court noted that service on the sole respondent was complete. Counsel appearing for the respondent sought time to file vakalatnama and counter affidavit and 4 weeks were allowed for the same. The matter is expected to list after that.
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