Madras High Court
Sumitomo Corporation vs State Of Tamil Nadu And Ors. on 1 September, 1999
Equivalent citations: AIR2000MAD296, AIR 2000 MADRAS 296
Author: P. Sathasivam
Bench: P. Sathasivam
ORDER P. Sathasivam, J.
1. Aggrieved by the proceedings of the second respondent dated 27-9-1990 and their letter dated 1-12-1990, the petitioner-corporation has filed the above writ petition to quash those proceedings/letter and forbearing the respondents from levying any entry tax on the petitioner in respect of cars bearing Registration Nos. TN-01-B-0843 and TN-01-B-0344 under the provisions of the Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990.
2. The case of the petitioner is briefly stated hereunder: petitioner-Corporation is a company incorporated under the law of Japan and has its Head Office at Tokyo in Japan. It has regional offices in India and one such regional office is at Madras. For the purpose of its own use, it purchased two Japanese cars, both are MAZDA 929 four door station Waggon 2000 CC. cars. The cars were purchased in Japan and were imported to India. A customs clearance permit was issued by the Additional Chief Controller of Imports and Exports on 6-2-1990 and the same was issued under the Imports and Exports (Control) Act, 1947. The cars arrived on 17-3-1990 and bill of entry was filed on 26-3-1990. The cars were also cleared by paying a customs duty of Rs. 6,40,534 per car and in addition a bond for Rs. 2,04,173 was also executed.
3. It is stated that the Tamil Nadu Legislature has enacted the Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990 (Act 23 of 1990) (hereinafter referred to as 'the Act'), with a view to curb the evasion of sales tax on the sale of Motor Vehicles, which are purchased outside the State and brought into the State of Tamil Nadu. It was not the intention of the Legislature to impose an entry tax when a vehicle was brought into India from another country. The question of sales tax would not arise in such a case because there is no purchase of such a vehicle in another State which levies sales tax at a lower rate than levied by the State of Tamil Nadu.
4. In exercise of the powers conferred by Section 3(1) of the Act, the first respondent issued a notification on 20-2-1990. In which the rate of entry tax in respect of motor cars has been fixed at 5% of the purchase value of the Motor vehicle. The registering authority under the provisions of the Act will not register the motor vehicle unless entry tax has been paid and the chaian receipt has been produced. Since he was having some doubt as to whether tax would apply in the case of vehicles imported from other countries, the petitioner addressed a letter to the Joint Commissioner (Public Relations). Commercial Taxes Department, to the effect that the entry tax would not apply in the case of vehicles which have been Imported from another country. The letter was given to the Joint Commissioner on 26-5-1990. By a letter dated 15-6-1990 the secondd respondent issued clarification that in respect of motor vehicles imported from foreign countries directly and brought into Tamil Nadu by the importer/buyer, the liability to pay entry tax would not arise. On the basis of this clarification, the vehicles were registered. However, by letter dated 27-9-1990, the second respondent clarified that entry tax is also applicable on imported car as this falls within the scope of the provisions of the Entry Tax Act. Accordingly, directed the petitioner to remit the entry tax applicable at 5% as required under Section 3(1) of the Act immediately. The petitioner immediately made a representation to the second respondent on 10-10-1990 and the same was rejected. Aggrieved by the aforesaid action of the respondents and in the absence of any other remedy, the petitioner has filed the present writ petition.
5. On behalf of the respondents, the first respondent has filed the counter affidavit disputing the various averments made by the petitioner. It is stated that the intention of the Legislature was to impose the tax on entry of Motor Vehicles into the local area which are purchased outside the State and brought Into this State. It is therefore applicable to purchases within India in other States and also from abroad. The clarifications issued by the Joint Commissioner and referred to by the petitioner in paragraph 12 of the affidavit are purely executive instructions and therefore they do not violate Article 14 of the Constitution of India. It is further stated the entry tax would be imposable even in respect of vehicles which are purchased outside India and brought into Tamil Nadu. The taxable event will, therefore, include import from other countries for which the custom duty is also attracted on entry into local areas of a State in Tamil Nadu. Therefore, the contention of the petitioner that imposition of entry tax would amount to customs duty is not correct. The entry tax is not levied on a sale in the course of import. The taxable event under Section 3(1) is the entry of any motor vehicle into any local area of the State of Tamil Nadu for use or sale therein. There is no violation of Article 14 of the Constitution or any other provisions. On these averments, they prayed for the dismissal of the writ petition.
6. In the light of the above pleadings, I have heard. Mr. Vijay Narayan, learned counsel for the petitioner and Mr. A. Chandrasekaran learned Government Advocate (Taxes) for the respondents.
7. Mr. Vijay Narayan, learned counsel for the petitioner after taking me through the entire provisions of the Act and the Rules made thereunder would contend that the objecl and provisions of the Act never Intended to cover the Motor Vehicles Imported from foreign countries. Such tax on the imported motor vehicle would amount to customs duty, which cannot be claimed by the Legislature and Parliament alone is competent to any such matters to enact legislation on customs duty. In any event proviso to Section 3(1) and Section 4(2) cannot be sustained, since it violates Articles 14.
8. On the other hand the learned Government Advocate, after taking me through various averments in the counter affidavit has contended that in view of the charging section, namely, Section 3 even the vehicles imported from foreign countries are liable to pay entry tax when it entes the State of Tamil Nadu. Article 14 would not attract and the impugned registration made by the State of Tamil Nadu has nothing to do with the customs duty or import of motor vehicles. He also contended that in view of the Division Bench decision of this Court reported in R. Gandhi v. Union of India, , the petition is liable to be dismissed.
9. I have carefully considered the rival submissions.
10. Before considering the submissions, it is better to refer the Statement of Objects and Reasons attached to the Bill introduced in the Legislative Assembly in respect of the Act as well as relevant provisions.
"Object and Reasons, in order to curb the evasion of sales tax on the sale of motor vehicles which are purchased outside the State and brought into this State, the Government have decided to levy tax on entry of motor vehicles into local areas of this State either for use of sale therein which is liable for registration in the State under the Motor Vehicles Act, 1988 (Central Act LIX of 1988). It has also been decided not to levy the tax in respect of vehicles registered in the Union Territory or in other States fifteen months prior to registration in the State and necessary provisions has been provided for. In the case of delears, entry tax shall be leviable on the entry of motor vehicles and the tax paid by them shall be adjusted with the tax payable by them under the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act I of 1959]."
Section 2(d) "entry of motor vehicle into a local area" with all its grammatical variations and cognate expressions, means entry of motor vehicle into a local area from any place outside the State for use or sale therein."
Section 2(g) : "importer" means a person who brings a motor vehicle into a local area from any place outside the State for use of sale therein, and who owns the vehicle at the time of its entry into the local area."
Section 2(1) : "Motor vehicle" means a motor vehicle as defined in Clause (28) of Section 2 of the Motor Vehicles Act, 1988".
Section 3 : Levy of Tax-- (1) Subject to the provisions of this Act, there shall be levied and collected a tax on the entry of any motor vehicles into any local area from use of sale therein which is liable for registration, or for the assignment of a new registration mark, in the State under the Motor Vehicles Act, 1988 (Central Act 59 of 1988). The rate of tax shall be at such rate or rates, not exceeding twenty per cent, as may be fixed by the Government by notification, on the purchase value of the motor vehicles.
Provided that in respect of any motor vehicle which was registered in any Union Territory or any other State under the law relating to Motor Vehicle" :--
(a) before the 10th September, 1996. no tax shall be levied and collected, if the owner of such vehicle applies for the assignment of a new registration mark in this State after a period of fifteen months from the date of its registration.
(b) On or after 10th September, 1996, no tax shall be levied and collected, if the owner of such vehicle applies for the assignment of a new registration mark in this State after a period of eighteen months from the date of its registration.
Explanation-- For the purpose of this proviso, the expression, 'law relating to mo. tor vehicle' means the Motor Vehicles Act, 1939 or the Motor Vehicles Act. 1988, as the case may be.
(2) The lax shall be payable by an importer in such manner and within such time as may be prescribed.
11. Section 18 enables the Government to make rules for carrying out the purposes of the Act. We are not concerned with the other provisions of the Act and Rules. By pointing out the object and reasons, as well as the provisions of the Act, it is stated that the impugned Act ever intended to levy entry tax in respect of the motor vehicles which were imported from foreign countries. No doubt the petitioner purchased two Japanese cars in Japan and were imported to India for their personal use. It is also stated that the cars were cleared by paying customs duty of Rs. 6,40,534 per car. It is also stated that in addition to the said amount a bond for Rs. 2,04,173 was also executed. There is no dispute with regard to the special customs duty in view of Entry 41 and 92 in List I. Parliament alone is competent to enact legislation. As rightly contended by the learned Government Advocate, in the impugned Act, the State Government has not done anything with regard to import of vehicle from foreign country and interfere with the payment of customs duty, No doubt, the main object of the Act is to curb the evasion on sales tax of motor vehicles, which are purchased, outside the Slate and brought into the State of Tamil Nadu. the Government have decided to levy tax on entry of motor vehicles into local areas of the State either for use or sale therein, which is liable for registration in the State under the Motor Vehicles Act, 1988. A perusal of the entire Act makes it clear that the intention of the legislature was to impose the tax on entry of motor vehicles into the local area, which are purchased outside the State and brought into the State. Whether the motor vehicle purchased outside the State or in any foreign country, whenever the vehicle enters the local area of this State, the same is liable to pay entry tax. It is therefore, applicable to purchases within India in other States and also from foreign countries. In other words, the present claim of entry tax has nothing to do with the import of motor vehicles from foreign countries and payment of custom duty. In order to curb the evasion of sales tax on the sale of motor vehicles from which are purchased out of the State and brought into the State, the said enactment was made and tax on the entry of motor vehicle into the local areas of this State, either for use or sale therein, which is. liable for registration in the State under the Motor Vehicles Act, 1988 or impose tax under Section 3 (1) of the Act, the charging Section, which is very clear and the State Legislature alone is competent to enact the impugned Act. Accordingly, I reject the contra made by the learned counsel for the petitioner.
12. Regarding the contention that Section 3 (1) proviso and Section 4 (2) are hit by Article 14 of the Constitution, it is seen from these provisions that the Government have decided not to levy tax in respect of vehicles registered in any Union Territory or in any other State, 15 months prior to registration in the State and necessary provision has been provided for in the proviso to Section 3 (1) of the Act. In the case of dealers, entry tax shall be leviable on the entry of motor vehicles and the tax paid by them shall be adjusted from the tax payable by them under the Tamil Nadu General Sales Tax Act. 1959. Therefore, no violation of Article 14 of the Constitution, as contended by the learned Government Advocate. The entry tax would be impossable even in respect of vehicles which are purchased outside India and brought into this State. The contention that imposition of tax amounts to levying customs duty cannot be accepted. The taxable event under the Act is entry of motor vehicles purchased outside the State into local area of Tamil Nadu State, either for use or sale therein. Accordingly, the State Legislature is competent to enact the impugned Act.
13. The contention that the impugned Act is violative of Article 286 of the Constitution is also liable to be rejected. Article 286 imposes a ban on the levy of tax on the sale or purchase of goods, while such sale or purchase taxable in the event of import of such goods into the territory of India. The entry tax cannot be levied on a sale in the course of import. As stated earlier, the taxable event under Section 3 (1) is the entry of any motor vehicle into any area of the State of Tamil Nadu for use or sale therein. The ban under Article 286(2) is only on the sale or purchase which occasions such import, whereas the tax under Section 3 (1) is on the entry of motor vehicle into any local area. Hence the contra arguments made by the learned counsel for the petitioner cannot be accepted. The decision of this Court reported in R. Gandhi v. Union of India, , is an answer to the constitutionality of the impugned Act. Hence it is unnecessary to discuss the same further, in the light of the binding decision of this Court.
14. Under these circumstances, I hold that the impugned Act will apply on the entry of any motor vehicle into the local area of this State whether by way of import from foreign countries or by purchase from other States and, Union Territories. Accordingly, there is no merit in the writ petition and the same is dismissed. No costs. Consequently, W.M.P. Nos. 769 of 1991 and 12942 of 1995 are closed.