ARV Update - Recent Entry Tax Judgment passed by Calcutta High COurt
CA Vikram Khaitan
Dear All,
Post the decision of Hon’ble Supreme Court passed in the case of Entry Tax wherein the constitutional validity of Entry Tax was upheld by the 9-member bench by 7-2 majority, the Department were pressing upon the assesses to start paying the Entry Tax as they believed that the State Government has won the case before Hon’ble Supreme Court.
We had challenged the coercive measure taken up by the Department before the Hon’ble High Court. The Hon’ble Court was pleased to hold that –
“It has been brought to the notice of this Bench that, a Constitution Bench of the Supreme Court in a decision of recent origin dated November 11, 2016 passed in C.A. No. 3453 of 2002 (Jindal Stainless Limited & Anr.-vs-State of Haryana & Ors.) has interpreted various provisions of the Constitution and, inter alia, upheld the validity of entry tax. However, whether the State legislations including the 2012 Act are discriminatory or not, has been left for decision of the individual Benches. It is also reported that final decision is awaited.
In that view of the matter, hearing of the writ petition stands adjourned sine die with liberty to the parties to mention it after the appropriate Bench of the Supreme Court decides the appeal before it pertaining to the 2012 Act.
Pending hearing of this writ petition, the respondents may proceed for assessment and issue demand notice, but no coercive action for realization of any demand shall be taken by the respondents without the leave of the Court.”
The Order is enclosed herewith for your information.
The aforesaid order clearly implies that no coercive steps can be taken by the Department in respect of recovery of Entry Tax till the matter is decided by the Hon’ble Supreme Court.
Thanks & Regards,
CA Vikram Khaitan
Partner – Indirect Taxation
ARVG & Associates, Chartered Accountants
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D: +91-33-4064 4076; M: +91-98315 86568
Email: vik...@arvsolutions.co.in / in...@arvsolutions.co.in
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From: foru...@googlegroups.com [mailto:foru...@googlegroups.com] On Behalf Of CA Vikram Khaitan/ARV Group
Sent: 12 November 2016 13:40
Cc: info /ARVSOLUTIONS <in...@arvsolutions.co.in>
Subject: ARV Update - Entry Tax Judgment passed by Supreme Court and its impact on West Bengal Entry Tax Act
Dear All,
Please find enclosed herewith the landmark judgment of Hon’ble Supreme Court passed in the case of Entry Tax wherein the constitutional validity of Entry Tax has been upheld by the 9-member bench by 7-2 majority.
The key highlights of the judgment is stated here-in-below –
(a) Tax simpliciter cannot be a restriction per-se in terms with Part XIII of the Constitution of India;
(b) Discriminatory Taxes are violative of Article 304(a), hence violates Article 301 as well – such taxes cannot even be saved by Article 304(b) [i.e. Presidential Assent]
(c) State Legislature in exercise of its taxing power can grant exemption\set off to locally produced and manufactured goods only to a limited extent based on intelligible differentia that is not in nature of general\unspecified exemption. Exemption in general terms for unlimited period cannot be approved.
(d) Article 304(a) [i.e. Discrimination] and Article 304(b) [i.e. Presidential Assent] have to be read disjunctively;
(e) The theory of ‘Compensatory Taxes’ as elucidated in Atiabari, Automobile Transport and Jindal Cases are all over-ruled; and
(f) A tax on entry of goods into local area is permissible although similar goods are not produced within the taxing state.
The question whether the levies in the Entry Tax enacted in Different States satisfies the test of Article 304(a) i.e. discriminatory in nature is left to be decided by the regular benches hearing the matter.
Impact of the judgment of 9 Member Bench of the Hon’ble Supreme Court on the levy of Entry Tax enacted in the State of West Bengal
The Hon’ble Calcutta High Court held the levy of Entry Tax vide Order dated 24-06-2013 as unconstitutional on the following premises:
(a) The state has failed to discharge the burden of showing that the levy is compensatory in nature and hence is ultra-vires of Article 301 of Constitution of India;
(b) The levy does not fulfill the parameters of compensatory nature as laid down by the Supreme Court in the case of Jindal Stainless Ltd. v. State of Haryana [(2006) 145 STC 544 (SC) i.e. the levy is not based on the principle of ‘pay for the value’;
(c) Since the levy is ultra-vires of Article 301 of Constitution of India, the same can only be saved on fulfillment of Article 304(a) [i.e. non-discriminatory levy] & Article 304(b) [i.e. Prior-Presidential Assent]; &
(d) The levy is violative of Article 304 (b) of Constitution of India, since it had failed to obtain Presidential Assent and hence is unconstitutional.
Now with the principle of compensatory tax has been overruled by the Hon’ble 9-member bench of Supreme Court, the aforesaid decision of Hon’ble Calcutta High Court does not hold goods.
Now the broad principle which needs to be observed by the Regular Benches is whether the tax in West Bengal is discriminatory or not.
The Levy of Entry Tax in West Bengal is imposed on intra as well as inter State movement of goods, however, there is a blanket exemption on intra-state movement of goods. Hence, there is no levy of Entry Tax on intra-state movement of goods.
In our view, the levy of Entry Tax in the State of West Bengal would not pass the acid test of discrimination in as much as the Hon’ble Supreme Court has categorically stated that “State Legislature in exercise of its taxing power can grant exemption\set off to locally produced and manufactured goods only to a limited extent based on intelligible differentia which is not in nature of general\unspecified exemption”. There is blanket, unlimited and unspecified exemption provided by the State of West Bengal on the intra-state movement of goods, which may contradict the guidelines laid down by the Hon’ble Supreme Court. Further, the levy of Entry Tax in West Bengal does not have any Presidential Assent making it further vulnerable to the principles laid down by the Hon’ble Supreme Court.
We shall keep you updated in this regard.
Thanks & Regards,
CA Vikram Khaitan
Partner – Indirect Taxation
ARVG & Associates, Chartered Accountants
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D: +91-33-4064 4076; M: +91-98315 86568
Email: vik...@arvsolutions.co.in / in...@arvsolutions.co.in
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From: Vikram Khaitan
Date: Friday, 11 November 2016 at 12:10
Cc: info /ARVSOLUTIONS
Subject: Re: ARV Update - Landmark Entry Tax case hearing - Judgment of Hon'ble Supreme Court
Dear All,
The Hon’ble Supreme Court today has upheld the validity of Entry Tax. It has been held that the constitutional validity of individual State Entry Tax Acts would be decided by the Divisional Bench of Supreme Court.
The Hon’ble Supreme Court has further held that the States are well within their power of legislate payment of Entry Tax and further, there is no requirement of obtaining Presidential Assent under Article 304(b). The Article 304(a) and 304(b) has also been held to read disjunctively. The compensatory tax theory elucidated by the 7 member bench of Hon’ble Supreme Court in the case of Atiabari as well as Rajasthan Automobile has also been overruled.
In case you require any further clarification, feel free to get in touch with us.
Thanks & Regards,
CA Vikram Khaitan
Partner – Indirect Taxation
ARVG & Associates, Chartered Accountants
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D: +91-33-4064 4076; M: +91-98315 86568
Email: vik...@arvsolutions.co.in / in...@arvsolutions.co.in
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From: Vikram Khaitan
Date: Thursday, 10 November 2016 at 18:44
Cc: info /ARVSOLUTIONS
Subject: Re: ARV Update - Landmark Entry Tax case hearing - Judgment of Hon'ble Supreme Court scheduled TOMORROW
Dear All,
The historic judgment of Supreme Court on the validity of Entry Tax is scheduled to be pronounced by the 9 member bench of Supreme Court tomorrow i.e. 11-11-2016.
We will keep you updated in this regard.
Thanks & Regards,
CA Vikram Khaitan
Partner – Indirect Taxation
ARVG & Associates, Chartered Accountants
------------------------------------------------------------
D: +91-33-4064 4076; M: +91-98315 86568
Email: vik...@arvsolutions.co.in / in...@arvsolutions.co.in
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From: Vikram Khaitan
Date: Thursday, 21 July 2016 at 12:32
Cc: info /ARVSOLUTIONS
Subject: ARV Update - Landmark Entry Tax case hearing - Question of Law Formuated
Dear All,
Further to the trailing mail, please note that the Chief Justice led Bench has formulated the following broad questions of law, yesterday, that would aid in settling the constitutional validity of levy of Entry Tax:
(a) Can the levy of tax per se constitute an infraction of Article 301 of the Constitution?
(b) Does a tax which is ‘compensatory’ in nature violate Article 301 of the Constitution?
(c) If the answer to the above question is in the negative, what are the tests to determine if the tax / levy is compensatory in nature?
(d) Is Entry Tax levied by States violative of Article 301 of the Constitution?
The Court would reconvene today for further hearing and might continue to formulate additional questions of law.
We will keep you updated in this regard.
Thanks & Regards,
CA Vikram Khaitan
Partner – Indirect Taxation
ARVG & Associates, Chartered Accountants
------------------------------------------------------------
D: +91-33-4064 4076; M: +91-98315 86568
Email: vik...@arvsolutions.co.in / in...@arvsolutions.co.in
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From: Vikram Khaitan
Date: Monday, 18 July 2016 at 10:47
Cc: info /ARVSOLUTIONS
Subject: ARV Update - Landmark Entry Tax case hearing begins today before 9 member bench of Supreme Court
Dear All,
This is with reference to trailing update on Entry Tax hearing scheduled to come up before 9-member bench of Supreme Court in the week commencing 18th July, 2016.
The 9-member bench Supreme Court will begin the hearing today headed by Chief Justice T.S Thakur to decide the interplay between Articles 301 and 304 of the Constitution of India.
The composition of the bench headed by Chief Justice T. S. Thakur is as follows –
(i) Justice A. K. Sikri
(ii) Justice S. A. Bobde
(iii) Justice Shiva Kirti Singh
(iv) Justice N. V. Ramana
(v) Justice R. Banumathi
(vi) Justice A. M. Khanwilkar
(vii) Justice Dr. D. Y. Chandrachud
(viii) Justice Ashok Bhus
As per the Order of Supreme Court, Sr. Advocate and former Solicitor General of India Harish Salve is the lead counsel for a batch of petitions. Several other legal luminaries are also expected to appear in the matter including Sr. Advocates Abhishek Manu Singhvi, P. Chidambaram, Arvind Datar, N. Venkataraman etc.
Sr. Advocate Rakesh Dwivedi is expected to lead for the States and defend validity of Entry Tax. The Supreme Court has strictly ordered “no adjournments” to be sought by any of the counsels on the dates fixed for hearing.
We will keep you updated in this regard.
Thanks & Regards,
CA Vikram Khaitan
Partner – Indirect Taxation
ARVG & Associates, Chartered Accountants
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D: +91-33-4070 4006; M: +91-98315 86568
Email: vik...@arvsolutions.co.in / in...@arvsolutions.co.in
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From: Vikram Khaitan
Date: Thursday, 19 May 2016 at 11:18
Cc: info /ARVSOLUTIONS
Subject: ARV Update - Entry Tax - Question of Law - 9 member Bench of Supreme Court to hear the matter in July 2016
Dear All,
Earlier the Hon’ble Supreme Court of India in the case of Jindal Stainless Ltd.& Anr vs State Of Haryana & Ors vide Order dated 16 April, 2010 had sought to place the issue of determination of principle behind constitutionality of Entry Tax before the Hon'ble Chief Justice of India for constituting a suitable larger Bench for reconsideration of the landmark judgments of this Court in the case of Atiabari Tea Co. and Automobile Transport (Rajasthan) Ltd.
Some of the further aspects that was needed to be considered by larger Bench of this Court was Interplay/interrelationship between Article 304(a) and Article 304(b), significance of the word "and" between Article 304(a) and 304(b), Whether the impugned taxation law to be valid under Article 304(a) must also fulfil the conditions mentioned in Article 304(b), including Presidential assent etc.
The Supreme Court vide order dated 11-05-2016 [Order enclosed herewith] in the case of M/s. Vedanta Aluminium Ltd. vs. State of Orissa & Ors. has directed that the papers shall be placed before the Hon'ble Chief Justice for constituting an appropriate Bench to hear the main appeals/petitions in the month of July 2016.
A comprehensive compilation of submission on each one of the questions that have been referred for determination by the larger Bench will be filed by the Petitioners and Learned counsel for the State Governments are similarly free to have the decisions relied upon by the States to be included in the common Compilation.
None of the counsel shall be permitted to seek any adjournment on the dates fixed for hearing. No further notice regarding this need be issued by the Registry. The Registry shall club all the connected matters and list them for final hearing before the larger Bench in the week commencing 18th July, 2016.
We will keep you updated in this regard.
Thanks & Regards,
CA Vikram Khaitan
Partner – Indirect Taxation
ARVG & Associates, Chartered Accountants
------------------------------------------------------------
D: +91-33- 6500 0572 / 4070 4006; M: +91-98315 86568
Email: vik...@arvsolutions.co.in / in...@arvsolutions.co.in
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