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