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You are here: HomeHighlightsEntry Tax - Scope of Local Area - Constitutional Validity - Vires under Article 245, 246, 304(a) read with Entry 52 of List-II of the Seventh Schedule to the Constitution of India - The petitioner has prayed that certain issues with regard to (1) treatin

Entry Tax - Scope of Local Area - Constitutional Validity - Vires under Article 245, 246, 304(a) read with Entry 52 of List-II of the Seventh Schedule to the Constitution of India - The petitioner has prayed that certain issues with regard to (1) treatin

[2017] 64 NTN DX 111

[ALLAHABAD HIGH COURT]

Hon'ble Amreshwar Pratap Sahi and Hon'ble Vivek Chaudhary, JJ.

Misc. Bench No. - 14839 of 2017

Jeevani Fuels Pvt.Ltd.Thru. Director Pawan Kumar Jeewani

Vs.

State of U.P. Thru. Secy. Tax & Registration & Ors.

Date of Decision          :     10th July, 2017

For the Petitioner        :     Shri Shikhar Anand, Advocate and

                                          Shri Aloke Kumar, Advocate

For the Respondent     :     C.S.C.

Entry Tax - Scope of Local Area -  Constitutional Validity - Vires under  Article 245, 246, 304(a) read with Entry 52 of List-II of the Seventh Schedule to the Constitution of India - The petitioner has prayed that certain issues with regard to (1) treating the entire State as a single unit of local area, (2)  levy of entry tax on the goods which are directly imported from other countries and brought in a particular State, (3) provision for giving adjustment of other taxes like VAT, incentives etc. paid by the indigenous manufacturers and in some States to certain categories of manufacturers amounting thereby a discrimination under Section 304; were left open vide Apex Court vide the judgment dated 21.03.2017 in Civil Appeal Nos. 997-998 of 2004 - State of U.P. and others Vs. M/S  I.O.C. - The challenge under this Writ Petition is to the vires of the Entry Tax 2007 as applicable in U.P. - The argument raised is that the question of treating the entire State as a single unit of local area was left open by the nine judge Constitutional Bench while answering the questions referred by regular bench of Apex Court - Whether  levy of Entry tax is justified under Uttar Pradesh Tax on Entry of Goods into Local Areas Act, 2007 being intra vires (constitutionally valid) , on entry of goods from one local area to another one, as defined under the said Act, in contrast to the predication to conceive whole of State as a single local area? Held -- Yes - Uttar Pradesh Tax on Entry of Goods into Local Areas Act, 2007 Section 2(d).

 

"It is evident .................  that the expression "local area" has been constitutionally understood in various judgments and therefore the issue now which is required to be examined is that if the whole State is to be declared a single local area, then imposition of any tax would tantamount to imposing tax on goods in the course of inter trade and commerce which is beyond the competence of the State."

 

"We have not been able to gather from 9 Judges reference order or the judgment of Apex Court dated 21.3.2017 that the issue of testing the vires of the Act once again has been left open by the Apex Court to be decided afresh. Consequently, we do not find any reason to allow the said argument being raised before us."

 

"It is this issue which had engaged the Apex Court and the issue having been raised before the Apex Court and there being no indication of having struck down the 2007 Act as ultra vires, the position that emerges is that the vires of the 2007 Act has been considered by the Apex Court. The petitioner therefore cannot now be permitted to again pray for striking down of the 2007 Act as invalid and void as being ultra vires. There vires of the 2007 Act stand tested before the Apex Court."

Decision in favour of revenue.

Cases referred:

Jindal Stainless Ltd. And Anr. v. State of Haryana and Ors. - [2006] 30 NTN DX 78; [2016 (11) SCALE 1]..........................................................114

State of U.P. and others Vs. Indian Oil Corporation Limited, Civil Appeal Nos. 997-998 of 2004..........................................................................112

JUDGEMENT

Hon'ble Amreshwar Pratap Sahi,J.

Hon'ble Vivek Chaudhary,J.

Heard the learned counsel for the petitioner and the learned Standing Counsel for the State. The challenge is to the vires of the Entry Tax 2007 as applicable in U.P.

The argument raised is that the question of treating the entire State as a single unit of local area was left open to be raised as is evident from a perusal of the judgment of the Apex Court dated 21.03.2017 rendered in Civil Appeal Nos. 997-998 of 2004 - State of U.P. and others Vs. Indian Oil Corporation Limited, copy of which was annexed as Annexure-2 to the writ petition.

Learned counsel for the petitioner submits that in view of the observations made in the said judgment while interpreting the 9 Judges Bench decision, it is evident that the appellants were given liberty to raise the said issues before the High Court concerned. The ratio as emphasized by the learned counsel for the petitioner is extracted hereinunder :

"It is in the aforesaid background, reference was made to Nine Judges' Bench, as indicated at the outset of this order.

We may also mention at this stage that when the matters were argued before the Nine Judges' Bench, certain other aspects were also argued. Primarily, three kinds of issues were taken by the assessees which are to the following effect:

(1) Whether the entire State can be treated as 'local area' for the purposes of entry tax?

(2) Whether entry tax can be levied on the goods which are directly imported from other countries and brought in a particular State?.

(3) In some statutes enacted by certain States, there was a provision for giving adjustment of other taxes like VAT, incentives etc. paid by the indigenous manufacturers and it was contended by the assessees that whether the benefits given to certain categories of manufacturers would amount to discrimination under Section 304.

The Nine Judges' Bench while answering the reference deemed it appropriate to leave these questions to be agitated before the regular Bench. That is how these matters are posted before this Bench and it is agreed that the aforesaid issues are the main issues to be decided.

During the hearing of arguments, counsel for both sides submitted that since the main challenge in the writ petitions, which were filed by the writ petitioners before the High Court, was predicated on the law laid down by the Constitution Bench in 'Atiabari Tea Co. Ltd. (supra), the High Court essentially confined its discussion only on "compensatory tax theory", as propounded in the aforesaid judgment so the High Courts looked at the issue by only keeping in mind the principle propounded in the aforesaid judgment and decided as to whether the tax imposed by a particular statute is compensatory in nature or not. Thus, when other issues are to be dealt with, as indicated above, we find that in many cases there is no adequate factual foundation and there is no discussion in the impugned judgments as well. It is also agreed by counsel for both the sides that in the absence thereof, it may not be possible for this Court to decide these issues.

According to us, in the aforesaid scenario, appropriate course of action would be to permit the appellants to file fresh petitions by May 31, 2017, raising the aforesaid issues with necessary factual background or any other constitutional/statutory issue which arises for consideration.

All these appeals/writ petition are, accordingly, disposed of with the aforesaid liberty granted to the appellants. The interim orders which were passed by this Court and which are continued in these appeals shall continue till May 31, 2017. It will be open to the appellants to seek interim orders. We make it clear that the High Courts shall deal with the interim prayers of stay on their own merits without being influenced by the fact that the stay order was passed in these cases or has been extended by this Court as aforesaid. The High Courts, at that time, shall also consider the import and effect of the reference answered by the Nine Judges' Bench.

There are many applicants who have filed applications for intervention in some of the petitions, those applications for intervention are dismissed giving them liberty to file substantive writ petitions in the High Courts on the same lines as given to others.

Some of the intervenors who had filed writ petitions in the High Courts but the High Court did not entertain those petitions directing them to intervene in these matters. They are also given liberty.

T.P.(C) No. 307 of 2017

T.P.(C) No. 291 of 2017

The transfer petitions stand dismissed. The High Court may proceed with the matter in accordance with law and in the light of the judgment passed in 'Jindal Stainless Ltd. And Anr. v. State of Haryana and Ors.' - [2006] 30 NTN DX 78; [2016 (11) SCALE 1]."

Having perused with the same what we find that the relief prayed for by the present petitioner is as follows:

"(i) Issue a suitable writ, order or direction declaring the Uttar Pradesh Tax on Entry of Goods into Local Areas Act, 2007 as invalid, void and unconstitutional being beyond the legislative competence of the State Legislature and ultra vires Article 245, 246, 304(a) read with entry 52 of List-II of the Seventh Schedule to the Constitution, as the same do not fall within the scope of Entry 52 of List-II of the Seventh Schedule to the Constitution;

(ii) Issue a suitable writ, order or direction in the nature of mandamus commanding the respondents, their agents and servants from enforcing the provisions of Uttar Pradesh Tax on Entry of Goods into Local Areas Act, 2007 against the petitioners;

(iii) Issue a suitable writ, order or direction in the nature of mandamus commanding the respondents to refund the amounts paid by the petitioner towards the entry tax together with interest;

(iv) Issue a suitable writ, order or direction as this Hon'ble Court may deem fit and proper under the facts and circumstances of the case.

(v) Award the costs of the petition to the petitioner."

The very first relief is for declaring the 2007 Act as unconstitutional being beyond the legislative competent of the State Legislature and ultra vires the provisions of Articles referred to in the prayer clause read with Entry 52 of List-II of the Seventh Schedule to the Constitution.

Having considered the submissions raised, we have not been able to gather from 9 Judges reference order or the judgment of Apex Court dated 21.3.2017 that the issue of testing the vires of the Act once again has been left open by the Apex Court to be decided afresh. Consequently, we do not find any reason to allow the said argument being raised before us.

Learned counsel for petitioner has urged that while implementing the Act it is evident that the expression "local area" has been constitutionally understood in various judgments and therefore the issue now which is required to be examined is that if the whole State is to be declared a single local area, then imposition of any tax would tantamount to imposing tax on goods in the course of inter trade and commerce which is beyond the competence of the State.

It is this issue which had engaged the Apex Court and the issue having been raised before the Apex Court and there being no indication of having struck down the 2007 Act as ultra vires, the position that emerges is that the vires of the 2007 Act has been considered by the Apex Court. The petitioner therefore cannot now be permitted to again pray for striking down of the 2007 Act as invalid and void as being ultra vires. There vires of the 2007 Act stand tested before the Apex Court.

We therefore cannot reopen the aforesaid issue and in view of the reliefs prayed for in the present Writ Petition as quoted herein above there is no scope for entertaining the present Writ Petition.

The Writ Petition is accordingly rejected.

 

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