Advocate Rajnish R. Singla
State of Uttarakhand must have mistaken the figures of E-Commerce and dreaming for higher revenues. Any way, they are going to tax everything until one’s last breath and thereafter too for funerals, so not surprised in their decision. That’s the governance, to tax, tax over tax, additional tax, entry tax, cess and so on without any end in tax system loot.
King William III also introduced the Window tax in England in 1696. Taxing families based on the number of windows in their houses.
State of Uttarakhand has imposed entry tax on e-commerce vide notifications No. 338/xxxvi(3)/2015/52(1)/2015 Dt. 17.11.2015, No. 1035/2015/22xxvii(8)/2008 Dt.10.12.2015, No.977/2015/22(120)/xxvii(8)/2008 Dt.10.12.2015. and No. 4495/Commissioner Tax Uttarakhand/Commercial Tax/Legal/2015-16 Dt.14.12.2015.
In order to discuss Entry Tax on e-commerce in Uttarakhand, it will be imperative to go through The Uttarakhand Tax on Entry of Goods into Local Areas Act, 2008. Interpretation of statutes, The Constitution of India.
Preamble of The Uttarakhand Tax on Entry of Goods into Local Areas Act, 2008 is as follows-
An Act to provide for levy and collection of tax on entry of goods into local areas for consumption, use or sale therein and for matters connected therewith or incidental thereto.
From the perusal of the Preamble of the Act it is clear that Act has been enacted for the levy and collection on entry of goods in to a local areas only, meaning there by with in local areas with in the state.
Now Coming to the Interpretation of statutes.
There are some settled principles of interpretation which are given below:
(i) The court must start with the presumption that the legislature did not make a mistake.
(ii) The court must adopt a construction which will carry out the obvious intention of the legislature.
(iii) If there is a defect or an omission in the words used by the legislature, the court would not go its aid to correct or make statute or read words into it which are not there, especially when the literal reading produce on intelligible result. Dadi Jagannadham v. Jammulu Ramulu (2001) 7 SCC 71.
A well-settled rule of interpretation in construing a taxing statute is that one must pay due regard to the strict letter of the law and not merely to the strict of the statute or the substance of the law. It is a rule firmly established that the “words of a taxing statute must never be stretched against the tax payer. If the language of the statute is clear and explicit, effect must be given to it, for in such a case the words best declare the intention of the lawgiver. It would not be right to refuse to place on the language of the statute the plain and natural meaning that 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 than what it says. It is not permissible to 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. Pole Star Electronics (Private) Limited v. Additional Commissioner of Sales Tax, 1979 UPTC 129 : (1987) 41 STC 409 (SC).
The elementary principle of interpreting any word while considering a statute is to gather the mens or sententia legis of the Legislature. Where the words are clear and there is no obscurity and the intention of the Legislature is clearly conveyed, there is no scope for the court to take upon itself the task of amending or altering the statutory provisions. Wherever the language is clear, the intention of the Legislature is to be gathered from the language used. While doing so what has been said in the statute and what has not been said has to be noted. A construction which requires for its support, addition or substitution of words which results in rejection of words has to be avoided. Grasim Industries vs. Collector of Customs (2002) 128 STC 349 (SC).
In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statute be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed, it cannot imply anything which is not expressed, it cannot import provisions in the statute so as to supply any assumed deficiency. Sales Tax Commissioner v. Modi Sugar Mills, AIR 1961 SC 1047.
Now Coming to The Constitution of India –
Article 19. Protection of certain rights regarding freedom of speech, etc-
(1) All citizens shall have the right-
(a) to freedom of speech and expression;
(b) to assemble peaceably and without arms;
(c) to from associations or unions;
(d) to move freely throughout the territory of India;
(e) to reside and settle in any part of the territory of India;
(g) to practice any profession, or to carry on any occupation, trade or business.
As per Article 19 (1) (g) of the Constitution of India, all citizens of India have a right to practice any profession, or to carry on any occupation, trade or business in any part of India.
Article 286.Restrictions as to imposition of tax on the sale or purchase of goods-
(1) No law of a State shall impose, or authorize the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place-
outside the State; or in the course of the 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 authorizes 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), sub-clause (d), sub-clause (b), sub-clause (29 A), of article 366, be subject to such restrictions and condition in regard to the system of levy, rate and other incidents of the tax as Parliament may by law specify.
As per Article 286, State government cannot impose tax on sale or purchase during imports or exports, or tax on sale outside the state. It means that State government can impose sales tax only on sale within the state and not on the entry of goods in to the state.
Article 301. Freedom of trade, commerce and intercourse- Subject to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free.
As per Article 301, imposition of entry tax is a hindrance to movement of goods from one state to another and hence is violative of Article 301 of Constitution which mentioned that trade, commerce and intercourse throughout the territory of India shall be free.
Article 304. Restrictions on trade, commerce and intercourse among States-
Notwithstanding anything in article 301 or article 303, the Legislature of a State may by law-
impose on goods imported from other States [or the Union territories]any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced; and impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest: provided that no bill or amendment for the purposes of clause(b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President.
As per Article 304, no bill can be introduced in the Legislature of a State without the previous sanction of the President, if that amounts to restriction on the freedom of trade, commerce or intercourse with or within the State. And tax on entry of goods in to the local areas amounts to restriction.
In taxing Stautes 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 about a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. Baidyanath Ayurved Bhawan (Pvt.) Ltd., Jhansi V/S The Excise Commissioner, U.P., AIR 1971 SC 378.
Seventh Schedule (Article 246) List II – State List
Entry No. 52.Taxes on the entry of goods into local area for consumption, use or sale therein.
It is crystal clear that point of taxation is Entry of goods into lacal area and not E-Commerce and secondly it is under state list, which means that is into the local areas with in the state only.
It is trite that what cannot be done directly cannot be done indirectly. Sangram Singh P Gaekwad V/ S Santadevi P Gaekwad (2005) 57 SCL. 476 (SC),
Now Coming to the Doctrine of “unconstitutional conditions”-
The doctrine of “unconstitutional condition’ means any stipulation imposed upon the grant of governmental privilege which is effect requires the recipient of the privilege to relinquish some constitutional right. The major requirement of the doctrine is that the person complaining of the condition must demonstrate that it is unreasonable in the special sense that it takes away or abridges the exercise of a right protected by an explicit provision of the constitution. Ahmadabad St. Xavier’s College Society v. State of Gujarat, AIR 1974 Sc 1389. Also see L.A.U. cum Revenue Divnl. Officer v. Mekala Pandu, AIR 2004 AP 250, 266.
Article 13 of The Constitution of India is as follows-
1. All laws in force in the territory of India immediately before the commencement of this Constitution, in so far as they are inconsistent with the provisions of this Part, shall, to the extent of such inconsistency, be void.
2. The State shall not make any law which takes away or abridge the rights conferred by this Part and any law made in contravention of this clause shall, to the extent of the contravention, be void.
3. In this article, unless the context otherwise requires,-
(a) “law” includes any Ordinance, order, bye- law, rule, regulation, notification, custom or usage having in the territory of India the force of law;
(b) “ laws in force” includes laws passed or made by a Legislature or other competent authority in the territory of India before the commencement of this Constitution and not previously repealed, notwithstanding that any such law or any part thereof may not be then in operation either at all or in particular areas.
4. Nothing in this article shall apply to any amendment of this Constitution made under article 368.
“Where a law purports to authorized the imposition of restrictions on a fundamental right in language wide enough to cover restrictions both within and without the limits of constitutionally permissible legislative action affecting such right, it is not possible to uphold it even so far as it may be applied within the constitutional limits as it is not severable. So long as the possibility of its being applied to purposes not sanctioned by the Constitution cannot be ruled out it must be held to be wholly unconstitutional and void. Ramesh Thappar v. State of Madras, AIR 1950 SC124;
A Legal maxim of natural justice is- Dura lex sed led which means “the law is hard but it is the law”.
It is evident from the above legal position that to practice any profession, or to carry on any occupation, trade or business. Thus is well covered under Article 19. Protection of certain rights regarding freedom of speech, etc. As enshrined in the Constitution of India.Therefore, sequel to the above discussion it is very much clear that levy and collection of tax on entry of goods into a local areas is ultra virus and void ab-initio.
The days are not far away when there will be a Birth Tax on birth, Breathing Tax on breathing and Funeral tax on funeral in the State of Uttarakhand, after all “There is a price of every thing”.
President Ronald Regan during his first inaugural address in 1981 stated – Government is not the solution to our problem; Government is the problem.