IN THE CONTEXT OF WEST BENGAL ENTRY TAX
The nine judges bench of Honbl’le Supreme Court of India, vide its order dated 11th November, 2016 upholds the Constitutional validity of Entry Tax Act. This landmark judgement is delivered while disposing the case in the matter of M/s. Jindal Steel Limited Vs. State of Haryana. The verdict is favourable for states imposing entry tax on goods brought from other states or out of country for sale or self consumption. The decision has been taken by majority of judges where seven judges assented and two dissented.
In this article I have made an attempt to analyse the judgement in the context of West Bengal Entry Tax.
BACK GROUND AND FACT
The West Bengal Government reintroduced entry tax in the name of “Tax on Entry of Goods into Local Areas Act, 2012” (hereinafter known as “W. B. Entry Tax) wef 01.04.2012. As per the provision of Entry Tax Law a person or dealer is required to pay entry tax @1% on total invoice value for importing goods from outside state of West Bengal.
Some big companies such as Tata Steel, Hindalco and Bharti Airtel opposed the law and filed writ in Honb’le Calcutta High Court challenging the constitutional validity of the Act. The single judge bench of Honb’le Calcutta High Court struck down the law stating it as unconstitutional and ultravires.
Against the order of Calcutta High Court, West Bengal Govt. filed petition in divisional bench of Calcutta High Court and till date the matter is subjudice.
WHY W.B. ENTRY TAX WAS STRUCK DOWN?
The West Bengal Entry Tax has been struck down because of following reasons:-
| Observation of single bench of Honb’le Calcutta High Court |
| 1. Violation of Article 301 of Constitution of India
W.B. Entry Tax is in violation of Article 301 of the Constitution of India as it indented to restrict free trade, commerce and intercourse of goods imported from outside West Bengal. |
| 2. Violation of Article 304(a) of Constitution of India
W.B. Entry Tax is in violation of Article 304(a) of The Constitution of India because the law indented to make discrimination with goods brought from outside West Bengal. The specified goods on which entry tax is imposed are already subject to VAT in West Bengal. |
| 3. Violation of Article 304(b) of Constitution of India
W. B. Entry Tax is in violation of Article 304(b) of Constitution of India as it has not sanctioned by the Honb’le President of India. |
| 4. Compensatory Theory
The tax is not compensatory in nature as it is credited to consolidated fund of the state. The expenditure from this fund shall be used for the construction of dam, road, and other infrastructure which shall be used by all persons including dealers from whom entry tax is collected. Whereas according to compensatory theory of taxation, the tax amount must be used for the welfare of the community from whom tax is collected. |
ANALYSIS OF JUGEMENT OF HONB’LE SUPREME COURT OF INDIA
While deciding the case of M/s. Jindal Steel Limited Vs. State of Haryana majority of nine judges bench has upheld the constitutional validity of entry tax. The Honbl’le Supreme Court has stated that State Governments are very rights to levy tax on entry of goods in their respective states.
The observation of Supreme Court and its impact on West Bengal Entry Tax has been analysed as below:-
| Observation of Honb’le Supreme Court and its impact on W.B. Entry Tax |
| 1. Violation of Article 301 of Constitution of India
The Honbl’e Supreme Court of India has observed that the word “Free” does not mean “Free of Tax” and decided that states have power to frame their own law with respect to entry of goods into their respective territories. Impact – Favourable for the Govt. Of W.B. |
| 2. Violation of Article 304(a) of Constitution of India
The Honbl’e Supreme Court of India has observed that it is not clear whether there is any discrimination involved or not and so referred the case back to High Court of Haryana to decide and form an opinion in this matter. The Honb’le Supreme Court clarifies that if it is found that entry tax is intended to make discrimination between the goods imported and locally manufactured then it would be unconstitutional and liable to be struck down. Impact- Favourable for the dealers if it is proved that there is discrimination between goods imported and goods locally manufactured. |
| 3. Violation of Article 304(b) of Constitution of India
The Supreme Court clarifies that even entry tax has no sanction from the Hon’ble President it would not be unconstitutional. Impact- Favourable for the Govt. Of W.B. |
| 4. Compensatory Theory
The Honb’le Supreme Court of India has clearly stated that compensatory theory is no longer valid. The expenses made for the welfare of general public out of tax collected from levy of entry tax means the entry tax is compensatory in nature. There is no need to make special provisions for the welfare of trade bodies only. Impact – Favourable for the Govt. Of W.B. |
CONCLUSION
From the above discussion it is found that out of four grounds, three are in favour of West Bengal Government and one is doubtful.
We can conclude that there is 90% chance that Govt. Of West Bengal issue notice for the collection of due entry tax from the dealers who are not paying.
Sir, the entry tax, in WB was levied on goods imported from out side of West Bengal – imported in Weat Bengal, India from foreign or from Indian states.
Kindly advice in relation of this the fate of the entry tax’s legality
Sir,
The honorable supreme Court in its land mark judgment listed that a NON DISCRIMINATORY levy of tax under article 304(a) will not result in violation of Article 301.However, if such a levy is discriminatory in nature then it cannot be saved by article 304(a) and would amount to violation of Article 301.
As you have stated in context of West bengal, the honorable high court passed an order stating the levy of entry tax to be discriminatory. Hence if such pronouncement is not altered by the honorable court in future proceedings then would tantamount to violation of Article 301 and 304(a),and presidential assent under 304(b) can also not come for the rescue of Article 304(a).
Sir,
Enriched to read your valued articles. It is clear in West Bengal no entry tax is payable the product manufactured in the state of West Bengal, but leviable while import the same from out side the state. Thus it is clear violation of Articles 304(b).
In general it was not decided whether entry tax is leviable on import of any material from out side of India. Our major valued raw material are imported from out side of India? Whether the entry tax is leviable on that?
Regards.
S.N.Bhattacharya