Case: Indian Oil Corporation Ltd. (Guwahati Refinery) Vs State of Assam and Ors.. Guwahati High Court
| Judges | Ranjan Gogoi and B.K. Sharma, JJ. |
| Issue | Sales Tax Act |
| Citation | (2009) 21 VST 76 (Gau) |
| Judgement Date | January 09, 2009 |
| Court | Guwahati High Court |
Judgment:
Ranjan Gogoi, J.
1. The validity of the Assam Entry Tax Act, 2008 and the Rules framed thereunder along with the provisions of the Assam Entry Tax (Amendment) Ordinance, 2008 have been questioned in this group of writ petitions. Consequently, all the writ petitions were heard together and are being answered by means of this common order.
2. Before adverting to the specific grounds of challenge as unfolded by the laborious arguments advanced on behalf of the contesting parties it will be useful to notice, though very briefly, the somewhat chequered history of the impugned legislation and the earlier challenges made before this Court as against the predecessor legislations.
3. The Assam Entry Tax Act, 2001 (hereinafter referred to as, "the Act of 2001") which is the predecessor legislation was brought into force with effect from October 1, 2001. The said Act which was enacted in exercise of powers under article 246 read with the entry 52 of List II of the Seventh Schedule to the Constitution of India had the following objects and reasons:
Statement of objects and reasons
It has come to the notice of the Government that many bulk consumers such as tea companies, oil companies, etc., take recourse to inter-State purchase of several items required for their own consumption with a view to availing benefit of lower rate of tax under the Central Sales Tax Act. This practice deprives the State of a substantial amount of revenue.
2. Further it is also observed that due to disparity in the rate of tax in different States, motor vehicles are purchased outside the State and then brought into the State for use.
3. In order to curb such losses of revenue and thereby mobilize additional resources, the Government have decided to levy tax on entry of selected items, including motor vehicles, which are imported into Assam from other States for own use and consumption:
The Bill seeks to achieve above objects.
4. The Act of 2001 underwent several amendments commencing with the first amendment made effective from October 19, 2001 and culminating in the second Amendment Act with effect from May 12, 2005. The salient features of the principal Act of 2001 read with the amendments effected from time to time may now be briefly noticed.
2. Definitions.-(1) In this Act, unless the context otherwise requires:
(a)...
(b) 'Entry of goods into a local area' with all its grammatical variations and cognate expressions means entry of the goods as specified in the Schedule into a local area from any place outside that local area including a place outside the State for consumption, use or sale therein:
(c) 'Entry tax' means a tax on the entry of goods into a local area for consumption, use or sale therein, levied and payable in accordance with the provisions of this Act;
(d) 'Importer' means a person who brings the goods as specified in the Schedule into a local area from any place outside that local area including a place outside the State for consumption, use or sale therein including for consumption or use of such goods in works contract;
(e) 'Local area' means the area comprised within the limits of a local authority including any area which has been or may hereafter be included in the Municipal Corporation of Guwahati, constituted under the Guwahati Municipal Corporation Act, 1969 (Assam Act 1 of 1973) or in the Municipality or Town Committee constituted under the Assam Municipal Act, 1956 (Assam Act 15 of 1957) or any area comprised within a Gaon Panchayat or an Anchalik Panchayat constituted under the Assam Panchayat Act of 1994 (Assam Act XVIII of 1994).
3. Levy of tax.- (1) There shall be levied and collected an entry tax on the entry of goods specified in the Schedule into any local area for consumption, use or sale therein at such rate, not exceeding twenty percentum, as the State Government may, by notification, fix in this behalf and different rates may be fixed for different class or classes of specified goods and such tax shall be paid by every importer of such goods, whether he imports such goods on his own account or on account of his principal or any other person or takes delivery or is entitled to take delivery of such goods on such entry.
(4) The State Government may, by notification in the Official Gazette, add to, delete, amend or otherwise modify the said Schedule and also may vary the rates of tax of the goods specified in the Schedule and thereupon the said Schedule shall be deemed to have been amended accordingly, [deleted by Assam Entry Tax (Second Amendment) Act, 2005 with effect from May 12, 2005]
5. Exemption from tax.-Notwithstanding anything contained in Section 3 and Section 4, and subject to production of documentary proof, no tax under this Act shall be levied in respect of the specified goods which are also subject to levy of taxes under the provisions of the Assam Value Added Tax Act, 2003-
(i) if the sale of such specified goods inside the State, made by an importer are sales within the meaning of Clause (43) of Section 2 of the said Act, excepting sales falling under Sub-clauses (ii), (iii) and (iv) of the said clause and if he is liable to pay tax on such sales as a registered dealer under the Assam Value Added Tax Act, 2003;
(ii) if the sale of such specified goods is made by the importer in the course of inter-State trade or commerce or in the course of export out of the territory of India or such goods are otherwise dispatched outside the State by way of stock transfer and if he is registered dealer under the Central Sales Tax Act, 1956.
8A. Subject to such condition as may be prescribed such sum of the proceeds of the tax as may be determined by the State Government shall be spent by the State Government for the purpose of development of trading facilities, maintenance of roads and other infrastructures in the local area." [introduced by the Assam Entry Tax (Second Amendment) Act, 2005 with effect from May 12, 2005].
5. The provisions of the Act of 2001 as well as the amendments made thereto along with the several notifications issued under Section 3(4) of the Act of 2001, as it then existed, came to be challenged before this Court in a series of writ petitions, i.e., W. P. (C) No. 4774 of 2005 and other connected cases. By judgment and order dated November 17, 2006 [ITC Limited v. State of Assam [2007] 9 VST 250 (Gau)] a learned single judge of this Court allowed the writ petitions by holding the impugned levy to be violative of article 301 read with article 304 (b) of the Constitution and further answered the specific point raised with regard to Section 3(4) of the Act by holding the said provision of the Act of 2001 to be suffering from the vice of excessive delegation. Aggrieved, the State preferred appeals in each of the writ petitions disposed of by the learned single judge, the lead case being Writ Appeal No. 462 of 2006. Several writ petitions raising the same questions were also filed by persons and entities who had not participated in the cases before the learned single judge. A Division Bench of this Court hearing the aforesaid writ appeals and writ petitions identified the following to be the core issues for determination in the cases under consideration [State of Assam v. Chhotabhai Jethabhai Patel Tobacco Products Co. Ltd. [2008] 15 VST 70 (Gaui)]:
(i) Whether impugned levy is discriminatory and violative of article 304 (a) of the Constitution?
(ii) Whether entry tax on the goods imposes restriction on its movement and hence violative of article 301 and whether requirements of article 304(b) have, therefore, to be complied with?
(iii) Whether impugned levy is compensatory in nature?
(iv) Whether subsequent amendments to the principal Act require Presidential sanction under article 304(b), although the Presidential sanction was granted prior to enactment of the principal Act?
(v) Whether Section 3(4) of the impugned Act, as it stood till May 12, 2005, suffers from vice of excessive delegation of legislative functions?
(vi) Whether omission of Section 3(4) in the impugned Act, by the Second Amendment Act, with effect from May 12, 2005, saves the actions taken under the said provisions of law, prior to May 12, 2005?
(vii) Whether the judgment passed would have prospective effect?
(viii) Whether refund of tax paid is permissible?
6. By judgment and order dated August 30, 20071 the Division Bench answered the questions arising in the writ petitions in the following manner:
(1) The Act of 2001 prior to its amendment made with effect from October 19, 2001 was held to be discriminatory but such defect was held to have been cured by the amendment of Sections 2(b) and (d) made with effect from the said date, i.e., October 19, 2001.
(2) The Division Bench held that the entry tax imposed by the Act of 2001 is not compensatory in nature and that the same imposes restrictions on the free trade and commerce guaranteed by article 301 of the Constitution.
(3) The Division Bench further held that the levy not being compensatory in nature, though the principal Act was enacted with prior Presidential sanction the subsequent amendments thereof did not have prior sanction of the President and, therefore, were violative of article 304 (b) of the Constitution.
(4) The Division Bench also held that Section 3(4) of the Act of 2001 did not suffer from the vice of excessive delegation. However, with the omission of the aforesaid Section 3(4) with effect from May 12, 2005 by the Second Amendment, while the collection of tax already made would not be affected all pending proceedings would become null and void.
(5) The judgment of the Division Bench, it was held, would be prospective in operation. However, insofar as refund is concerned the Division Bench was of the view that the question of refund should be kept open for decision by the authority. Accordingly, the direction for refund as made by the learned single judge stood modified. In view of the findings reached, the Division Bench...
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