Gauhati High Court
Primus Imaging Pvt. Ltd. vs State Of Assam And Anr. on 17 November, 2006
Equivalent citations: (2007)1GLR757, (2007)9VST528(GAUHATI)
Author: I.A. Ansari
Bench: I.A. Ansari
JUDGMENT I.A. Ansari, J.
1. These writ petitions raise an issue of grave importance, and the issue is this whether the State is competent to levy entry tax on the goods imported into a local area from outside country ?
2. The Assam Entry Tax Act, 2001, (in short, 'the AET Act') was enacted by virtue of Entry 52 of List-II of the Seventh Schedule of the Constitution of India. The said AET Act provides for a levy of tax on the entry of goods into any local area for consumption, use or sale therein. Section 3 of the Act is the charging section, which reads as follows:
3. Levy of Tax. - (1) There shall be levied and collected an entry tax on the entry of the goods specified in the Schedule into any local area for consumption, use or sale therein at the rates shown against each item in the said Schedule and such tax shall be paid by every importer of such goods.
The entry tax payable by an importer under this Act shall be charged on the purchase value of the goods specified in the Schedule at the rates as shown in the said Schedule:
Provided that no such tax shall be payable on the entry of the goods which are meant or the exclusive use or consumption of the Defence Department of the Government of India:
Provided further that no entry tax shall be levied on the entry of the goods into any local area for consumption or use therein which are the exclusive property of the Union Government.
Provided also that no such tax shall be payable on the entry of such goods which are brought for the purpose of sale or use under the Assam Public Distribution of Articles Order, 1982.
Provided further more that no tax shall be levied under this section on the entry of Scheduled goods into a local area, if it is proved to the satisfaction of the assessing authority in such manner as may be prescribed, that such goods have already been subjected to entry tax or that the entry tax has been paid by the importer or any other person under the Act in respect of the same goods.
(3) The State Government may, by notification in the Official Gazette, grant exemption to any organization or undertaking of the Central Government or of the State Government in respect of such goods as may be specified in such notification, from payment of entry tax on entry of such goods into any local area for consumption or use therein provided that such goods are the exclusive property of such organization or undertaking.
(4) The State Government may, by notification in the Official Gazette, add to, delete, amend or otherwise modify the said Schedule and also may very the rates of tax of the goods specified in the Schedule and thereupon the said Schedule shall be deemed to have been amended accordingly.
(5) The State Government, if considers it necessary in the public interest so to do, may by notification in the Official Gazette, subject to such conditions and restrictions as it may impose, exempt any importer or class of importers, fully or partially from payment of entry tax on any specified good and the State Government also grant such exemption retrospectively:
Provided that the State Government may withdraw any such exemption at any time, as it may think fit and proper.
3. The words "entry of goods into a local area" is defined by Section 2(1)(b) of the AET Act as under:
2(1)(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:
Provided further that in the case of specified goods both old and new which are being imported into any local area for use therein for a specified period and are taken back after completion of there use, the purchase value shall be, Period of use of the specified goods in years X value of the specified goods/life of the specified goods in years.
4. It is Section 2(d), which defines the word "importer". The definition of the word "importer" reads as under:
2(d). "Importer" means a person who brings the goods as specified in the Schedule into a local area from any place outside that area including a place outside the State for consumption, use or sale therein including for consumption or use of such goods in works contract.
5. The writ petitioners run medical diagnostic clinics at Guwahati and these clinics imported sophisticated equipments from outside the country for these diagnostic clinics. Hospital equipments of all types including X-Ray, Ultrasound, Doppler and Scanning machine, other medical and diagnostic apparatus, parts and accessories thereof were all subjected to levy under the Act at the rate of eight paise in a rupee, vide Notification No. FTX. 146/2001/5, dated 8.1.2002, by insertion of Entry-3 to the list of taxable goods. The said entry was inserted in exercise of the powers contained under Section 3(4) of the AET Act. It is in these circumstances that the petitioners have not only challenged the vires of the Assam Entry Tax Act, 2001, but also the notification, dated 8.1.2002, aforementioned.
6. I have heard Dr. B.P. Todi and Mr. M.K. Choudhury, learned senior counsels, appearing for the petitioners, and Mr. K.N. Choudhury, learned Addl. Advocate General, Assam, for the respondents.
7. Dr. B.P. Todi and Mr. M.K. Choudhury, learned senior counsels, appearing on behalf of the petitioners, submit that in imposing entry tax on the goods imported from outside the country to the local area, the State has transgressed the specific prohibition imposed by the Constitution of India and such action of the State Government is in violation of Article 286(1)(b) of the Constitution of India. Dr. Todi also submits that the entries, in the list, are mere legislative heads and while enacting any legislation, they are subject to constitutional restrictions specifically imposed. Dr. Todi further submits that levy of entry tax, on the import of goods from outside the country, is beyond the legislative competence of the State 'and the same is liable to be' struck down.
8. Controverting the submissions made on behalf of the petitioners, learned Additional Advocate General has submitted that the legislation of entry tax is by virtue of Entry 52 of List II of the Seventh Schedule and this entry is aimed at imposing entry tax on the entry of goods into a local area for consumption, use or sale therein and does not make any distinction, in this regard, between the goods, which are imported from outside country, and the goods, which are imported into the State by virtue of sale or purchase, which takes place by way of inter-State trade or commerce. Such a levy is not impermissible in law.
9. Before entering into the merit of the above submissions made on behalf of the petitioners, it is necessary to take note of what Article 286 of the Constitution of India contains. This Article 286 provides as under:
286. Restrictions as to imposition of tax on the sale or purchase of goods. -
(1) No law of a State shall impose, or authorize to imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place -
(a) outside the State; or
(b) in the course of import of the goods into, or export of the goods out of, the territory of India.
(2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in Clause (1).
(3) Any law of a State shall, in so far as it imposes, or authorize the imposition of-
(a) a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce; or
(b) a tax on the sale or purchase of goods, being a tax of the nature referred to in Sub-clause (b), Sub-clause (c) or Sub-clause (d) of Clause 29A of Article 366.
10. By Entry 54 of List II of the Seventh Schedule to the Constitution of India, the Constitution empowers the State to impose tax on sale or purchase of goods, other than newspapers; but the Constitution gives exclusive legislative jurisdiction to the Union to levy tax on import and export by virtue of Entry 92 (a) of List I of the said Schedule. Article 286 imposes limitations upon the powers of the State to enact sales tax legislation in respect of goods, which are imported into, or exported out of, the territory of India by laying down that no tax shall be imposed on sale or purchase, which takes place outside the State, and no tax shall be imposed on sale or purchase, which takes place in the course of import into, and export out of, the territory of India. Clause (1)(b) of Article 286 prevents a State from levying a sales tax on sale in the course of import into/or export out of, the territory of India so as not to interfere with legislative powers of the Union with respect to import and export across the customs frontier (Entry 41 of List I) and customs duties including export duties (Entry 83 of List-I). Article 286, thus, aims at ensuring that the sales tax imposed by a State does not interfere with the import of goods into, or export of goods out of, the territory of India.
11. The Apex Court has clarified, in State of Travancore Cochin v. Skanmugha Vilas Cashewnut Factory AIR 1954 SC 453 that Article 286 aims at preventing double taxation of the foreign trade of the country, which is of immense importance to the nation's economy. The double taxation, sought to be avoided, are imposition of excise duty by the Central Government and the imposition of sales tax by the State Government. Such double taxation is avoided by exempting the sales, which take place as export or import, from the levy of sales tax by the States.
12. From a reading of Article 286 of the Constitution, it becomes clear that this article does not permit States to levy tax on the sale or purchase of goods, which takes place in the course of import into, or export out of the territory of India. The restriction, imposed on the State, is, thus, in respect of levy of tax on the sale or purchase of goods, which takes place in the course of import into, or export out of, the territory of India. The power to levy sales tax is derived from Entry 54 of List II of the Seventh Schedule to the Constitution of India; whereas the power to levy entry tax is derived by Entry 52 of the List II of the, Seventh Schedule to the Constitution. Under Entry 54, the point of levy is purchase or sale; but under Entry 52, the point of levy is the point of entry into a local area. Therefore, taxable event under the Entry Tax Act is entry of specific goods into a local area for consumption, use or sale therein. Viewed thus, it is clear that levy of tax on sale or purchase, on the one hand, and the levy of tax on entry of goods into a local area, on the other, are covered by different entries in the Constitution and the incidence of taxation in both the cases is different. The restriction, imposed by Article 286(1)(b) of the Constitution, is in respect of the levy of tax on sale or purchase of goods and not as regards entry of the goods into a local area for consumption, use or sale therein and, hence, the contention of the petitioners that levy of entry tax on goods imported from outside the State is hit by Article 286(1)(b) of the Constitution of India has no force and is misconceived. This aspect of the law can be examined from yet another angle. Article 286(1)(a) of the Constitution imposes restriction on the power of the State to levy tax on sale and purchase, where such sale or purchase takes place outside the State. Section 4 of the Central Sales Tax Act provides as to when a sale or purchase of goods takes place outside the State. Section 3 of the Central Sales Tax Act provides as to when a sale or purchase of goods can be said to have taken place in the course of inter-State trade or commerce. There is no dispute that the State has no power to levy tax, when the sale or purchase of goods takes place in the course of inter-State trade or commerce. When the goods enter into a local area from outside the State pursuant to a sale, the same amounts to an inter-State sale and purchase and the State has no power to impose levy on such sale or purchase. If the contention of the petitioners is accepted, then, the State cannot have any power to levy entry tax, on the entry of the goods into any local area from outside the State, which may be brought into the State by virtue of sale and purchase thereof and the same thereby will also be hit by Article 286(1)(a) of the Constitution of India. But since the restrictions, imposed by Article 286, are only on the levy of tax on the sale and purchase of goods, the State is competent, to levy entry tax by virtue of Entry 52 of List II of the Seventh Schedule to the Constitution of India on the goods imported into any local area from outside the State for use, consumption or sale therein.
13. In view of what have been pointed out above, there is no merit in the contention advanced, on behalf of the petitioners, that the State has no power to levy entry tax on the goods imported into any local area from outside the State even if such entry is for the purpose of use, consumption or sale in the local area.
14. However, while reading the definition of "entry of goods into a local area" as provided by Clause 2(1)(b) of the Assam Entry Tax Act, 2001, it is of paramount importance to note that the expression "entry of goods into a local area" means entry of goods, as specified in the Schedule, into any local area from any place outside that local area including a place outside the State. It is plain that the words "including a place outside the State" do not mean to convey outside the country. No wonder, therefore, that while dealing with the word "purchase value" in Section 2(1)(h) of the Act, no reference has been made to customs and other duties that an importer has to pay for clearance of the goods.
15. Coupled with the above, it is worth noticing that a plain reading of Section 2(1) makes it clear that although insurance, excise duty, freight charges, etc., have to be taken into consideration for determination of purchase price, no reference has been made to the customs duty that one has to pay for import of the goods. Similarly, the term importer, as defined in Section 2(1)(d) of the AET Act, does not take, within its sweep, a person importing goods from outside the country. Obviously, the Legislature had consciously used the words "including a place outside the State", for, they did not mean to convey outside the country since the distinction between the two is so obvious that the distinction between the two could not have escaped the notice of the law-makers. A Division Bench of Kerala High Court, in Fr. Willam Fernandez v. State of Kerala and Ors. (1999) 115 STC 591 held that the words "from any place outside the State" will not mean outside the country and abroad.
16. It is well settled principle of interpretation of taxing statutes that in interpreting an enactment, the court has to go, normally, by its language and words used therein and if any particular word is open to more than one interpretation, then, the court has to choose that meaning, which would represent the true legislative intent. In Tarulata Shyam v. CIT and Ors. the Apex Court has clarified the law, in this regard, thus:
To us, there appears no justification to depart from the normal rule of construction according to which the intention of the Legislature is primarily to be gathered from the words used in the statute. It will be well to recall the words of Rowlatt, J, in Cape Brandy Syndicate v. IRC at. p. 71, that "in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." Once it is shown that the case of the assessee comes within the letter of law, he must be taxed, however, great the hardship may appear to the judicial mind to be.
17. In Polestar Electronic (P.) Ltd. v. Additional Commissioner, Sales Tax, , the Apex Court held that if the language of a statute is clear and explicit, effect must be given to it, for, in such a case, the words best declare the intention of the law-giver. It would not be right to refuse to place on the language of the statute the plain and natural meaning, which it must bear, on the ground that it produces a consequence, which could not have been intended by the Legislature. It is only from the language of the statute that the intention of the Legislature must be gathered, for, the Legislature means no more and no less that what it says. It is not permissible for the court to speculate as to what the Legislature must have intended and, then, to twist or bend the language of the statute to make it accord with the presumed intention of the Legislature.
18. In Muralilal Mahabir Prasad v. B.R. Vad 37 STC 77, the Apex Court observed as under:
The principle is variously expressed by saying that in fiscal statutes one must have regard to the letter of the law and not to the spirit of the law, that the subject cannot be taxed by inference or analogy, that in taxing Act there is no governing principle to look at and one has simply to go on the Act itself to see whether the tax claimed is that which the statute imposes, that while construing taxing Acts it is not the function of the court to give to the words used a strained and unnatural meaning and that the subject can be taxed only if the revenue satisfies the court that the case falls strictly within the provisions of the law.
19. The Apex Court further held, in Muralilal Mahabir Prasad (supra), that equitable construction may be admissible in relation to other statutes, but such an interpretation is not permissible to a charging or taxing provision of a statute.
20. In the present case, the language of Section 3 read with Section 2(1)(b) of the Act is very clear that the Assam Entry Tax Act, 2001, provides for levy of entry tax on entry of specific goods into a local area from another local area or from outside the State only and the same does not provide for levy of entry tax into local area from outside the country and, hence, no entry tax can be levied on entry of specified goods into a local area imported from outside the country. In short, no entry tax can be imposed by the State on the goods imported into a local area from outside the country. In fact, such is not the legislative intent, for, Section 3 read with Section 2(1)(6) of the AET excludes goods brought into a local area, in Assam from outside the country in the course of import of such goods into the territory of India. In the case at hand, as the entry of the specified goods into a local area of the State is in the course of import into the territory of India, such import is not subject to levy of entry tax under the AET Act.
21. Because of what have been discussed and pointed out above, the imposition of entry tax on the goods, in question, cannot be sustained and is, therefore, set aside and quashed. The respondents are directed not to insist on payment of entry tax by the present petitioners.
22. With the above observations and directions, this writ petition shall stand disposed of.
23. No order as to costs.