Entry Tax on Goods Vis-à-Vis Import of Goods

Introduction

One of the fiscal statutes operative in Maharashtra is
Maharashtra Tax on the Entry of the Goods into Local Areas Act, 2002. The Act
contemplates a levy of Entry Tax when the goods come into Maharashtra from
outside Maharashtra. The tax is leviable only on the goods which are specified
in the Schedule. 

One of the items covered by the schedule is low sulphur fuel
oil. The assessee M/s.Tata Power Company Limited imported above item
from foreign country and used the same in its electricity manufacturing activity.
The department levied Entry tax on the same.    

While the assessee had many contentions, the main argument of
the assessee was that Entry Tax cannot apply to goods imported from outside
India. Its contention was that the tax can apply only if the goods are imported
from outside Maharashtra but from any place within India.

The Tribunal confirmed the levy. Therefore, the matter was
taken to the Hon. Bombay High Court. The Hon. Bombay High Court has decided the
issue vide judgment reported in Tata Power Company Ltd. and
another vs. State of Maharashtra and ors. 95 VST 147 (Bom).  

The relevant statutory provisions as referred to in the
judgment are reproduced below for quick reference:

“2. Definitions:- (1) In this Act, unless the context
otherwise requires,–

(a) …..

(b) “entry of goods”, with all its grammatical
variations and cognate expressions means entry of goods into a local area from
any place outside the State, for consumption, use or sale therein;

(c) “General Sales Tax Act” means any Sales Tax Law
in force in any State which provides for the levy of taxes on the sale or
purchase of goods generally or on any specified goods expressly mentioned in
that behalf or any class of transactions expressly specified in that behalf;

(d) …..

(e) …..

(f) “import”, with all its grammatical variations
and cognate expressions means bringing or causing to be brought or receiving
any goods into a local area from a place outside the State;” 

“3. Levy of tax:– (1) There shall be levied and collected
a tax on the entry of the goods specified in column (2) of the Schedule, into
any local area for consumption, use or

sale therein, at the rates respectively specified against
each of them in column (3) thereof and different rates may be specified in respect
of different goods or different classes of goods or different categories of
persons in the local area. The tax shall be levied on the value of the goods as
defined in clause (n) of sub-section (1) of section 2. The State Government
may, by notification in the Official Gazette, from time to time, add, modify or
delete the entries in the said Schedule and on such notification being issued,
the Schedule shall stand amended accordingly:”

Important observations about arguments of the Petitioner
as noted by Hon. High Court are as under:

“30. In the additional written submissions, it is urged that
a tax on entry of goods into a local area is patently in violation of Article
301 and no further burden is required to be discharged by the petitioners. When
a tax falls within the inhibition of Article 301 and is not compensatory or
regulatory, then it can be saved only by taking recourse to Article 304. The
requirement thereof is not admittedly satisfied. Further, the impugned levy is
discriminatory. The Act cannot be saved by reading the impugned provisions
thereof together with the MVAT Act. That would not enable this Court to hold
that the same is Constitutional. Additionally it is submitted that if a levy is
held to be non-discriminatory and thus meets Article 304(a), still it must
satisfy the requirements of Article 304(b) as well. For all these reasons, it
is submitted that the impugned levy must be declared as unconstitutional and
ultra vires the above noted provisions or Articles of the Constitution of
India.

31. In support of his contentions, Mr. Dada has placed
reliance on a number of judgments and which can be taken in the order of his
submissions as follows:

1) Father William Fernandez vs. State of Kerala. 115 STC
591(Ker)

2) Primus Imaging Pvt. Ltd. vs. State of Assam. 9 VST 528
(Gauhati)

3) Batliboi & Co. vs. State of Maharashtra. 47 STC 321
(Bom).”

Similarly about arguments of State Government, the Hon. High
Court observed as under:

“36. Mr. Sonpal then relied upon the language of the
Maharashtra Entry Tax Act to submit that the legal challenge also has no basis.
He would submit that what this Court is dealing with in the present matter is
an entry tax. That is a subject dealt with by Entry 52 of List II of the VIIth
Schedule to the Constitution of India. Emphasising the language of this entry
Mr. Sonpal would submit that it provides for a tax on the entry of goods into a
local area for consumption, use or sale therein. Mr. Sonpal submits that mere
entry of the goods into a local area is not the taxable event. The taxable
event is entry of the goods into a local area for consumption, use or sale
therein. It is only in that event that liability to pay the tax arises and not
otherwise. The import of goods into the local area is not prohibited. It is their
consumption, use or sale therein which attracts the tax. Mr. Sonpal submits
that the petitioners do not dispute that import simpliciter does not attract
the levy. Accepting Mr. Dada’s contentions would be doing violence to the plain
language of the statute. Once the levy is on the entry of goods specified in
Column (II) of the Schedule to the Maharashtra Entry Tax Act into any local
area for consumption, use or sale therein, then, it is not permissible to
dilute the rigour of the provisions in that behalf. Mr. Sonpal submits that the
three provisos to sub-section (1) of section 3 would clarify that the
rate of tax to be specified by the Government in respect of any commodity shall
not exceed the rate specified for that commodity under the MVAT Act and the tax
payable by the importer under the Maharashtra Entry Tax Act shall be reduced by
the amount of tax paid, if any, under the law relating to general sales tax in
force in the Union Territory or the State in which the goods are purchased by
the importer. Therefore, if the goods attract the above tax in the State in
which they are purchased and thereafter they are imported into a local area,
then, and to that extent, the liability to pay the entry tax is reduced.
Lastly, Mr. Sonpal would submit that no tax is leviable or can be collected on
specified goods entering into a local area for the purpose of such process as
may be prescribed, if after such processing these goods are sent out of the
State. Mr. Sonpal relies upon the explanation to this sub-section and
thereafter sub-sections (2), (3), (4) and (5) of section 3 to submit that there
is no liability to pay entry tax in the event the goods are brought for the
purpose set out in sub-section (5) of section 3. He also relies upon the provisos
to sub-section (5) of section 3 in that regard.”

After noting the arguments as above, the Hon. High Court came
to a conclusion that no distinction can be made for the goods coming from out
of India or from any place within India. In other words, so far as goods are coming
from outside the State of Maharashtra, the entry tax would apply. The Hon. High
Court observed as under about validity of levy on the imported goods. 

“85. Following it and applying it even to cases of octroi or
entry tax, the Hon’ble Supreme Court held conclusively that entry tax is a tax
on the entry of goods into any local area for consumption, use or sale therein.
So long as the levy is of this nature, it is wholly irrelevant as to from where
the goods have been brought. The statute’s provisions must be given their plain
and clear meaning. In other words, if the act of bringing in the goods is
termed as an import and this is also defined, and if the particular act
complained of falls within the definition, then there is no escape from the
levy. It is in this context that we must look at section 3 of the Act which
also has been reproduced by us above. We are not in agreement with Mr. Dada
that only those goods which have been brought within the local area from a
place outside the State of Maharashtra but within the territory of India will
attract the levy and not those goods which enter the local area after being
imported from abroad. The argument of Mr. Dada is that the expression
“outside the State” cannot mean outside the territory of India. We do
not find any support for such an argument. The reported decisions seem to hold
otherwise. Even otherwise, it is difficult to appreciate the implications of
this argument. It would lead to needless complexity and incongruous and
inconsistent results. For instance, if goods are imported into the port of
Mumbai, and used in Mumbai, then, according to Mr. Dada’s formulation, such
goods are not covered by the levy and entry tax is not attracted. But what
might happen if the goods were imported into Kandla, Vishakapatnam or Kolkata,
for instance, and transshipped from there, across other states, and then
brought into Mumbai? Such an entry or bringing in would be, even on Mr. Dada’s
formulation, subject to the levy, for the goods would be brought in from within
the territory of India though from outside the State of Maharashtra. It surely
cannot be suggested that all foreign imports are, by definition, exempt from
the levy of all local entry taxes. What, therefore, Mr. Dada’s argument amounts
to is saying that the local entry tax levy is not attracted where the port of
entry from abroad is within the state itself; but if the port of foreign import
is outside the state, then the entry tax levy is attracted. If this be so, then
it is a self-defeating argument and clearly shows that the mere importation
from abroad is not a reason to deny the levy of the local entry tax. We find
nothing in any judgment or the statute to support the proposition that the
situs of the port of foreign importation within the state furnishes any point
of exemption or escape from the local levy of entry tax.”

Conclusion