Indus Towers LTD. vs. The State Of Goa Through The Commissioner Of Commercial Taxes And Anr.
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The Petitioner, Indus Towers Ltd., challenged the constitutional validity of the Goa Tax on Entry of Goods Act, 2000. The Petitioner argued that the Act was beyond the legislative competence of the State and contravened Articles 14, 19(1)(g), 265, 301, and 304(a) of the Constitution. The Petitioner sought a refund of entry tax recovered by the State. The Petitioner contended that the Act discriminated against goods imported from outside Goa by not allowing set-off for taxes paid on such goods, unlike goods sourced within the State. The Petitioner also argued that declaring the entire State of Goa as a "local area" exceeded the State's legislative power under Entry 52, List II of the Seventh Schedule.
Held
The Court dismissed the Petition, holding that most of the contentions raised by the Petitioner had already been answered against them by the Nine Member Constitution Bench decision in Jindal Stainless Limited (supra). The Court found no qualitative difference between the arguments made in this case and those considered in previous judgments, including Hindustan National Glass & Industries Ltd. (supra), to which the Petitioner was a party. The Court rejected the argument that the entire State being declared a "local area" was beyond legislative competence, citing the decision in State of Kerala and ors. vs. Fr. William Fernandez and ors. (supra). Similarly, arguments based on alleged discrimination and absence of a level playing field were considered and rejected, aligning with the principles laid down in Jindal Stainless Ltd. (supra) and other relevant precedents. The Court noted that the Petitioner failed to demonstrate any material distinction between the impugned Goa Act and the Maharashtra Act considered in Hindustan National Glass & Industries Ltd. (supra). The Court also adopted the reasoning from related dismissed petitions.
Key Issues
1. Whether the Goa Tax on Entry of Goods Act, 2000, is beyond the legislative competence of the State Legislature under Entry 52, List II of the Seventh Schedule to the Constitution of India, by declaring the entire State of Goa as a "local area"? (Question of law) 2. Whether the Goa Tax on Entry of Goods Act, 2000, contravenes Article 14 of the Constitution by perpetuating hostile discrimination between goods sourced from within the State and those imported from outside the State or India, due to the absence of provisions for reduction/set-off of taxes paid on imported goods? 3. Whether the Goa Tax on Entry of Goods Act, 2000, contravenes Articles 19(1)(g), 301, and 304(a) of the Constitution by imposing a discriminatory tax burden on goods imported into Goa, leading to a situation of discriminatory double taxation? Petitioner's arguments: The Petitioner argued that the Act is unconstitutional for want of legislative competence as the entire State cannot be equated to a "local area" for the purpose of Entry 52, List II. They contended that the Act discriminates against imported goods by not providing adequate set-off for taxes paid, unlike local goods, violating Articles 14, 19(1)(g), 301, and 304(a). Reliance was placed on A.T.B. Mehtab Maji vs. State of Madras and Diamond Sugar Mills Ltd. vs. State of U.P. Respondents' arguments: The Respondents relied on the decisions in Jindal Stainless Limited and another vs State of Haryana and ors. and Hindustan National Glass & Industries Limited vs State of Maharashtra and Ors. to argue that the Petition should be dismissed.
Sections Cited
Entry 52, List II of the Seventh Schedule
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
ORAL JUDGMENT : (Per M.S. Sonak, J.)
Haryana and ors. - (2017) 12 SCC 1. Most of the contentions raised in this Petition stand answered against the Petitioner in the Nine Member Constitution Bench decision in Jindal Stainless Limited (supra). However, Mr Singbal submitted that the impugned Act perpetuates a hostile discrimination between goods sourced from within the State vis-a-vis those imported from outside the State and from outside India. Mr Singbal relied upon Articles 301 and 304 of the Constitution to submit that such discrimination is unconstitutional.
Mr Singbal further pointed out that the provisions of the impugned Act do not contemplate reduction/set off for taxes paid 24 /04/23
WP-210-13.DOC for goods imported from outside the State or even outside the Country. He submits that the limited relaxation provided under Section 3(3)(2) of the impugned Act is inapplicable to an ultimate consumer like the Petitioner who procures goods from outside Goa and is further not engaged in reselling of goods. Mr Singbal submits that, resultantly, the Petitioner is made to bear the costs of CST and entry tax, as opposed to an ultimate consumer, who procures goods within Goa and must only pay the Value Added Tax (VAT). Mr Singbal submits that this is a case of discriminatory double taxes, violating Articles 19(1)(g), 301 and 304 of the Constitution.
Mr Singbal submitted that the entry tax legislations in Gujarat, Andhra Pradesh, and Karnataka had made specific provisions to provide for a level playing field quo local goods and goods imported from outside the State by equally allowing a reduction/set off for both VAD, as well as CST paid under the Madras – AIR 1963 SC 928 to submit that if the tax burden on goods imported from another State is higher than the tax burden on the goods sourced from within the State, then such a levy must be struck down under Articles 301 and 304 of the Constitution. 24 /04/23
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Mr Singbal submitted that the declaration of the entire State of Goa as a "local area" renders the impugned Act unconstitutional and beyond the legislative competence of the State Legislature. He referred to Entry 52, List II of the Seventh Schedule, which enables the States to levy "taxes on the entry of goods into a local area for consumption, use or sale therein". He submits that the language used in this entry unmistakably indicates that the levy must be on the entry of goods into a "local area" as opposed to a "State", but from reference to "local area", it is clear that the entire State cannot be equated to a local area. He relies on Diamond Sugar Mills Ltd. vs. State of U.P. - (1961) 3 SCR 242 and Shaktikumar M. Sancheti vs. State of Maharashtra – (1995) 1 SCC 351 in support of these contentions.
Based upon the above submissions, Mr Singbal submits that the impugned Act is beyond the legislative competence of the State under Entry 52, List II of the Seventh Schedule to the Constitution.
For all the above reasons, Mr Singbal submits that the impugned Act and the levy thereunder may be declared unconstitutional, and the amounts paid by the Petitioner may be refunded to the Petitioner.
The learned Additional Government Advocate relied upon Jindal Stainless Ltd. (supra) and Hindusthan National Glass & 24 /04/23
WP-210-13.DOC Industries Limited vs State of Maharashtra and Ors. - (2019) 3 Bom CR 625. Accordingly, he submitted that the present Petition deserves to be dismissed based on these two decisions.
The rival contentions now fall for our determination.
Most of the contentions raised in this Petition stand answered against the Petitioner given the Nine Member Constitution Bench decision. Therefore, most of the arguments based upon legislative competence or the alleged infringement of Articles 301 and 304 of the Constitution must be turned down.
Mr Singbal tried to distinguish the above decisions by urging that the present dispute arises out of separate legislation that was not considered before the Principal Bench of the Bombay High Court. Further, he submitted that the Division Bench in Hindustan National Glass & Industries Ltd. (supra) failed to appreciate the law in Jindal Stainless Ltd. (supra) that there has to be equalisation of tax burden for local and imported goods and an exemption/set off cannot be of an ultimate nature to discriminate the imported goods brought in the State of of Goa.
Now, the Petitioner has failed to disclose that it was the Petitioner in Writ Petition No.1813/2013, which is one of the Petitions in the common judgment and order reported in Hindustan National Glass & Industries Ltd. (supra). Mr Singbal 24 /04/23
WP-210-13.DOC also did not show the difference, if any, between the legislative provisions in Maharashtra which were considered by the Principal Bench and the provisions of the impugned Act. Merely submitting that the Principal Bench was not considering the challenge to the Goa Act, the decision in Hindustan National Glass & Industries Ltd. (supra), to which the Petitioner was a party, cannot be distinguished. Ultimately, it is the principles laid down in the said decision which are important. By applying such principles, the argument based upon the entire State being declared as a local area, or the argument based upon the discrimination, will have to be rejected. There is no qualitative difference between the arguments made before the Principal Bench and the arguments made in this matter.
By majority, the Constitution Bench answered the reference which was necessitated due to conflicting opinions, in the following terms. “11.59. 1. Taxes simpliciter are not within the contemplation of Part XIII of the Constitution of India. The word 'Free' used in Article 301 does not mean "free from taxation". 11.59. 2. Only such taxes as are discriminatory in nature are prohibited by Article 304(a). It follows that levy of a non- discriminatory tax would not constitute an infraction of Article 301. 1159. 3. Clauses (a) and (b) of Article 304 have to be read disjunctively. 24 /04/23
WP-210-13.DOC 1159. 4. A levy that violates 304(a) cannot be saved even if the procedure under Article 304(b)or the proviso there under is satisfied. 1159. 5. The compensatory tax theory evolved in Automobile Transport case and subsequently modified in Jindal Stainless Ltd. (2) v. State of Haryana, (2006) 7 SCC 241 case has no juristic basis and is therefore rejected. 1159. 6. Decisions of this Court in Atiabari Tea Co. Ltd. v. State of Assam- AIR 1961 SC 232, Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan, AIR 1962 SC 1406 and Jindal cases (supra) and all other judgments that follow these pronouncements are to the extent of such reliance over ruled. 1159. 7. A tax on entry of goods into a local area for use, sale or consumption therein is permissible although similar goods are not produced within the taxing State. 1159. 8. Article 304(a) frowns upon discrimination (of a hostile nature in the protectionist sense) and not on mere differentiation. Therefore, incentives, set-offs etc. granted to a specified class of dealers for a limited period of time in a non-hostile fashion with a view to developing economically backward areas would not violate Article 304(a). The question whether the levies in the present case indeed satisfy this test is left to be determined by the regular benches hearing the matters. 1160. States are well within their right to design their fiscal legislations to ensure that the tax burden on goods imported from other States and goods produced within the State fall equally. Such measures if taken would not contravene Articles 304(a) of the Constitution. The question whether the levies in the present case indeed satisfy this test is left to be determined by the regular benches hearing the matters. 24 /04/23
WP-210-13.DOC 1161. The questions whether the entire State can be notified as a local area and whether entry tax can be levied on goods entering the landmass of India from another country are left open to be determined in appropriate proceedings."
The Hon'ble Supreme Court left open the two questions referred to in paragraphs 1160 and 1161 of Jindal Stainless Ltd (supra). Accordingly, the Petitioner has raised the said two questions in the present Petition. These two questions were also raised in Writ Petitions No. 471/2007 and 417/2014. Further, these two questions were also raised in Writ Petitions No.541/2010 and 542/2010. 17. The argument, based upon the local area and the consequent effect upon the legislative competence of the State, additionally stands answered by the decision of the Division Bench of this Court in Hindustan National Glass & Industries Limited (supra). The Division Bench in paragraphs 62, 63, 64, 65, 66, 67, and 70, has dealt with this issue and answered the same against the Petitioner and favouring the State. The said paragraphs are now transcribed below for the convenience of reference :
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It is contended by petitioners that Entry tax cannot be levied only on goods coming from outside State by defining the entire State as a local area. In support of the submission, Petitioner had relied upon the decisions in the case of Thressiamma L. Chiravil v. State of Kerala – (2007) 7 VST 293 (Ker), ITC Ltd. vs. State of Tamil Nadu – [2007] 7 VST 367 (Mad), Bharat Earth Movers Ltd -vs- State of Karnataka- 2007 8 VST 69 Kar, Jaiprakash Associates Ltd 24 /04/23
WP-210-13.DOC v. State of Arunachal Pradesh-2009 SCC OnLine Gau 569, L & T Case Equipment v. State of Karnataka, (2010) 27 VST 447 in view of the decision in the case of Jindal (supra) the Fernandez – 2017 SCC OnLine SC 1291, the Apex Court has rejected the submission that entry tax legislation is not covered by Entry 52 of List II of the Seventh Schedule to the Constitution. It was observed that entry tax legislation must be given a broad/wide meaning and cannot be confined in the manner suggested. In each local area if the State levied tax on the entry of goods from another local area in the State, it would be required to grant a set off to the extent of VAT /entry tax already paid in the other local area. This would result in a duplication of administration and taxation, which the State chose to do away with by levying entry tax on the first entry of the goods into a local area in the State.
In Jaika Automobiles vs State of Maharashtra – 1992 Mah LJ 1658, this Court in paragraph No.23 has observed as follows :
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Ground (d) Submission of the Petitioner is that there is in the field a tax in the nature of octroi duty imposed under the various municipal laws made under entry 542, List II and hence impost referable to that very entry amounts to double taxation and hence is bad in law. The submission is wholly misconceived. In the first place, there is neither constitutional nor statutory bar in express terms prohibiting levy of double taxes. Article 265 of the Constitution only mandates that, "no tax shall be levied or collected except by authority of law". Upon same object and person, separate taxes can be imposed for different purposes by the same authority or by different authorities. Last word on the topic can be found in recent decision of the 24 /04/23
WP-210-13.DOC Supreme Court in the case of Sri Krishna Das v. Town Area Committee (1990) 183 ITR 401 SC, wherein it is observed: "Double taxation, in the strict legal sense means taxing the same property or subject-matter twice, for the same purpose, for the same period and in the same territory. To constitute double taxation, the two or more taxes must have been (1) levied on the same property or subject matter, (2) by the same Government or authority, (3) during the same taxing period, and (4) for the same purpose". Octroi duty and entry tax are imposed by the different authorities and for entirely two different purposes. Former is for augmenting the resources of the local body and the latter is for compensating the loss of revenue of the State on account of diversion of transaction of sale and purchase of vehicles to the neighbouring States or Union Territories due to difference in the rates of sales tax. Goods taxable are not the same, though some may be common, eg., vehicle brought in the local area after 15 months of its registration under the MV Act in areas outside the State. Thus, there is no taxation of the same goods twice by the same authority and/or for the same purpose and hence there is no "double taxation"
The Supreme Court, in the case of Shaktikumar Sancheti Vs. State of Maharashtra – (1995) 1 SCC 351, has observed that :- "Feeble attempt was made to submit that the tax being in addition to octroi realised by the local body it amounted to double taxation. The taxable event for entry tax is not same as octroi". 24 /04/23
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By way of amendment carried out in W.P. No.1813 of 2013, the Petitioner has alleged that levy of Entry Taxes under the Maharashtra Tax on Entry of Goods into Local Areas Act, 2002, is discriminatory, unconstitutional inasmuch as it differentiates between importers, who have no liability under the Maharashtra Value Added Tax Act, 2002 and those who are registered under MVAT Act and have VAT liability. The respondent's contention is that persons importing goods into a local area for their own use do not pay VAT in the State of Maharashtra. By levying entry tax at a rate that does not exceed the rate specified under the MVAT Act, such persons are placed in the same position as a person who procures those goods from within the State. This is in keeping with the rationale and purpose of providing a level playing field and ensuring there is no disparity in the rate of tax payable in respect of goods brought into a local area of the State and those already in such local area by virtue of being manufactured or produced there. The Petitioner's submission regarding the grant of exemptions and set off ignore the fact that the proviso to Section 3(5) of the Entry Tax Act clarifies that dealers who are registered under the MVAT Act and are importing goods into a local area covered by the Entry Tax Act for the purpose of resale or export are liable to pay entry tax if the goods are not resold and are dealt with in any other manner. Notably, such registered dealers would; be liable to pay VAT or Central Sales Tax to the Revenue at the time of the resale since the MVAT Act and Central Sales Tax Act also apply to the local areas within the State covered by the Entry Tax Act. Such importers are, accordingly, placed on the same footing as other dealers who sell or buy; goods within the State. Instead of levying entry tax on such dealers and then granting a set-off, the Legislature has opted to grant a conditional exemption under Section 3(5) of the MVAT Act. The grant of such an exemption is neither discriminatory nor unconstitutional. 24 /04/23
WP-210-13.DOC The Petitioner's submissions further ignore the fact that the grant of set-off or exemptions to dealers who are registered within the State and importing goods into a local area covered by the Entry Tax Act has the same effect as grant of set-off to a dealer who purchases such goods domestically within a local area of the State. The purpose of a set off is to obviate any cascading effect of tax on the ultimate consumer. The set off under rule 52 is available to prevent the cascading effect of multi point taxation scheme which stops at the stage of consumer. The final consumer is not entitled to any set-off and has to sustain the burden of tax ultimately. Therefore, where the importer is itself the ultimate consumer of the goods imported into the local area and is not using them to manufacture further goods for sale, there is no question of granting set off in respect of the goods purchased. An importer consumer cannot be compared with an importer- manufacturer registered under MVAT Act and therefore eligible for set-off under Rule 52 of the MVAT Rules. Further the MVAT Act and Rules framed thereunder do not provide for any set off to a person who is the ultimate consumer not registered under the Act. The Petitioner in this case is a final consumer and hence he is not entitled for any set-off nor for exemption from payment of entry tax under Section 3(5) of the Entry Tax Act. These provisions are neither discriminatory nor unconstitutional inasmuch as the different class of importers under the Entry Tax Act that the Petitioner refers to is similar to the different class of purchasers recognized under the MVAT Act viz., final consumers and persons who are purchasing for the purpose of reselling the goods.
Under Entry 52 of List II of Seventh Schedule appended to the Constitution, the State is empowered to levy and collect entry tax on the entry of the goods into local areas. Further, the imposition of tax on sale or purchase of goods is 24 /04/23
WP-210-13.DOC permissible under entry 54 of List II. Entry 52 and Entry 54 are two separate fields of legislations. Incidence of tax under these two entries is also independent. Merely because the rate of tax under both the taxing statutes is the same, it cannot be said that the State is levying VAT in the garb of Entry Tax. The State having taken a conscious decision to avoid discrimination has decided not to levy Entry tax in excess of VAT applicable on similar goods.
Article 286 comes into operation only when there is imposition of tax on sale or purchase of goods and not when tax is sought to be imposed on entry of the goods into local areas within the State, as in the present case. Article 304(a) does not fetter the States from ensuring an equality in the rate of tax levied on goods that are imported from other states and goods manufactured or produced within the State. Since, under the Entry Tax Act and MVAT Act, the rate of tax on specified goods which are imported into the local areas in the State of Maharashtra is brought at par with the rate on similar goods manufactured or produced in the State of Maharashtra, there is no infirmity in the provisions of the Entry Tax Act whether as alleged or at all. There is no unfair or arbitrary classification whether as alleged or at all. 68. ... 69. …
The Act in no way makes any discrimination against the local purchases and importers much less any hostile discrimination. The importers are given input tax credit of Entry Tax Paid to the Government against the VAT liability and balance is payable or refundable as the case may be.
Hence tax burden of Entry Tax not borne by the dealers who purchase locally within the State who get set off of the input tax credit u/s 48 r/w 52, is balanced in case of persons who suffer entry tax by making provisions in the MVAT Act that 24 /04/23
WP-210-13.DOC the entry tax can be adjusted against the MVAT liability thus in effect the dealers who import from other State or Country are at par with local manufacturers who purchase from local dealers so far as burden of tax is concerned since in effect there is no entry tax at all when rebate or set off or ITC is granted for the same. Further as per the second proviso any local sales tax paid by the importer on the goods that are imported is also available for reduction from the entry tax payable under the Act. Thus the rebate is provided in second proviso of the Act that the tax payable by the importer under this Act shall be reduced by amount of tax paid, if any, under the law relating to General Sales Tax in force in the U.T. or the State in which the goods are purchased by the importer in effect takes care of the ground that the dealers who import goods are discriminated vis a vis the dealer who procure the goods from local sources."
The Division Bench has relied, inter alia, on the State of Kerala and ors. vs. Fr. William Fernandez and ors – (2021) 11 SCC 705, in which the contention based upon such legislations being beyond legislative competence of the State under Entry 52, List II of the Seventh Schedule, was rejected.
The Petitioner had failed to disclose that it had instituted Writ Petition No.1813/2013 before Principal Bench, which was dismissed by the common judgment and order reported in Hindustan National Glass & Industries Ltd. (supra). Mr Singbal also did not show the difference, if any, between the legislative provisions in Maharashtra, which the Principal Bench was concerned with, and the provisions of the impugned Act. 24 /04/23
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By merely submitting that the Principal Bench had not considered the provisions of the Goa Act, the decision in Hindustan National Glass & Industries Ltd. (supra), to which the Petitioner was a party, cannot be distinguished. Ultimately, it is the principles laid down in the said decision which are important. By applying such principles, the argument based upon the entire State being declared as a local area, or the argument based upon the alleged discrimination, will have to be rejected. There is no qualitative difference between the arguments made before the Principal Bench and the arguments made in this matter.
Most of the decisions relied upon by the Petitioner have been considered in Jindal Stainless Ltd. (supra). Further, the Division Bench in Hindusthan National Glass & Industries Ltd. (supra) relied ors. - (2021) 11 SCC 705 in which the contention based upon such legislations being beyond the legislative competence of the State under Entry 52, List II of the Seventh Schedule, was squarely rejected.
The pleadings in this Petition on the aspect of discrimination or absence of a level playing field are also quite sketchy and speculative. In any case, all such contentions have been considered and rejected in the decisions referred to earlier. 24 /04/23
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Incidentally, this Petition was tagged to Writ Petition No.541/2010. However, the said Petition is dismissed by a separate judgement and order. Therefore, this Petition will have to be dismissed for the reasons indicated in the said Judgment and Order.
Thus, having regard to the decision of the Constitution Bench in Jindal Stainless Ltd. (supra), Fr. William Fernandez and ors (supra), and Hindustan National Glass & Industries Ltd. (supra), and by following the reasoning therein, we dismiss this Petition. Further, we adopt the reasoning in the separate Judgments and Orders dated 24th April 2023 in Writ Petitions No. 471/2007, No.417/2014, 541/2010 and 542/2010 for disposing of this Petition.
Accordingly, this Petition is liable to be dismissed and is, hereby, dismissed. Interim order, if any, is vacated.
The rule is discharged. There shall be no order for costs. VALMIKI SA MENEZES, J. M. S. SONAK, J. 24 /04/23 SANTOSH S MHAMAL SANTOSH S MHAMAL Date: 2023.04.28 11:56:44 +05'30'
Reproduced from the public record of the Bombay High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.