Advocate Rajnish R. Singla

In order to discuss Whether entry tax imposed on gold vide Notification No. 24/2016/22(120)/XXVII(8)/2008 on dated 21.03.2016 “Gold in any from brought into the State from outside the States, excluding the Gold brought for sale, in the same form or after refining or after manufacturing of jewellery from it at the rate of 0.2 percent of the value of goods” is legally valid ? following provisions are relevant.

1 – 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.”

As per “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 and not from out side the state.

2 – Section 4 of Uttarakhand Entry Tax Act, 2008 is as follows-

Levy of tax  (1) For the purpose of development of trade, commerce and industry in the State, there shall be levied and collected a tax on entry of goods specified in the Schedule into a local area for consumption, use or sale therein, from any place outside that local area, at such rate not exceeding five percent of the value of the goods as may be specified by the State Government by notification and different rates may be specified in respect of different goods or different classes of goods;

Provided that the State Government may by notification amend the Schedule and upon issue of any such notification, the Schedule shall, subject to the provisions of subsection (10), be deemed to be amended accordingly.

(2) The tax levied under sub-section (1) shall be continued to be levied till such time as is required to improve infra-structure within the State such as power, road, market condition etc. with a view to facilitate better market conditions for trade, commerce and industry.

(3) The tax levied under sub-section (1) shall be payable by a dealer who brings or causes to be brought into the local area such goods, whether on his account or on the account of his principal or takes delivery or is entitled to take delivery of such goods on its entry into a local area:

Provided that the State Government may by notification, permit any Power Project Industrial Unit engaged in generation, transmission and distribution of power, having aggregate capital investment of rupees one thousand crore or more to own the liability of payment of tax of other dealers on the entry of such goods into a local area from any place out side that local area as are used and consumed by the said unit subject to such conditions as may be specified in the notification. Explanation :-Where the goods are taken delivery of on its entry into a local area or brought into a local area by a person other than a dealer, the dealer who takes delivery of the goods from such person shall be deemed to have brought or caused to have brought the goods into the local area.

(4) The State Government may by notification remit the amount of tax to the extent necessary to ensure that effective rates of tax on entry of goods into a local area, from any place out side the local area for consumption or use in a Power Project Industrial Unit, do not exceed the respective rates applicable as on the date of commencement of State Energy Policy subject to the conditions as may be notified in such notifications.

(5) No dealer who brings or causes to be brought any goods into a local area shall be liable to tax, if during the assessment year the aggregate value of such goods is less than five lakh rupees or such larger amount as the State Government may by notification specify in that behalf either in respect of all dealers in any goods or in respect of a particular class of such dealers: Provided that the provisions of this sub-section, shall not apply in respect of value of the goods brought into a local area from outside Uttarakhand.

(6) Notwithstanding anything contained in sub-section (1) or sub-section (3), no tax shall be levied on and collected from a dealer who brings or causes to be brought into a local area any goods which are sold by him within the local area for the purpose of being taken out of that area and are actually taken out: Provided that where at the time of entry of any goods into a local area, the quantity or value of goods to be sold within such local area for the purpose of being taken outside the local area without consumption, use or sale in such local area is not ascertainable, the dealer shall pay amount of tax on the value of total quantity of goods and after the goods are sold within the local area for the purpose of being taken outside such local area and are actually taken out, the dealer may claim refund of the amount paid as tax in respect of such goods, in the manner provided in section 5 of this Act: Provided further that the burden of proving the fact that any goods after entry into a local area were sold for the purpose of being taken outside the local area for consumption, use or sale outside such area and were actually taken outside such local area shall lie on the dealer selling the goods.

(7) Where a single consignment of goods, partially meant for consumption, use or sale within a local area and partially meant for transfer to any place outside such local area, is brought or received by a dealer into such local area and where value of the goods to be consumed, used or sold in the local area is not ascertainable, the dealer shall pay tax on the value of all goods of the consignment and shall, after any  goods are transferred as aforesaid, may claim refund of the amount, paid as tax in respect of goods so transferred in the manner provided in section 5 of this Act: Provided that the burden of proving the fact that any goods, after bringing or receiving into a local area, has been transferred outside such local area without consumption, use or sale therein shall lie on the dealer claiming refund.

(8) Where tax, in respect of entry of any goods into a local area, is payable and has been so paid by the agent, the principal shall not be liable for payment of tax and likewise where tax, in respect of entry of any goods into a local area, is payable and has been so paid by the principal, the agent shall not be liable for payment of tax.  (9) Where in respect of any-

(1) purchased scheduled goods-

(a) value of such goods is not ascertainable or value of such goods, as declared by the dealer or the person in- charge of the goods, as the case may be, is not verifiable on account of non-availability or non-production of any document; or

(b) any document produced in support of purchase price or transport charges and other charges, is not worthy of credence; or

 (2) scheduled goods, acquired or obtained otherwise than by way of purchase, value of such goods disclosed by the person in-charge of the goods or the dealer, as the case may be, does not appear to be reasonable and worthy of credence, then the whole-sale price, in the open market in a local area in which such goods are being brought, reasonably determined by the assessing authority, after affording reasonable opportunity of being heard to the person in-charge of the goods or the dealer, as the case may be, shall be deemed to be, the value of goods, and for this purpose in reference to clause (i), the assessing authority shall assume that goods have been acquired or obtained otherwise than by way of purchase.

(10) Every notification made under this section shall, as soon as may be after it is made, be laid before the State Legislature, while it is in session, for a total period of not less than fourteen days, extending in its one session or more than one successive sessions and shall unless some later date is appointed take effect from the date of its publication in Gazette subject to such modifications or annulments as the Legislature may during the said period agree to make, so however, that any such modification or annulment shall be without prejudice to the validity of anything previously done there under except that any imposition, assessment, levy or collection of tax or penalty shall be subject to the said modification or annulment.

As per section 4 of the Entry Tax Act, 2008 tax shall be shall be levied and collected on entry of goods specified in the Schedule into a local area for consumption, use or sale therein only.  But state government through the above said notification has levied tax on refining of gold which is not permissible under the law/ Act.

3- The Schedule of the Entry Tax Act, 2008 had 22 entries in it, which has been amended vide Notification No. 09/2015/22(110)/XXVII(8)/08 dated 02/01/2016 and following three new entries have been added as follows.

 23- Auto engine and auto parts,

 24- Zinc Metal,

25- Gold, Silver, Platinum and other precious metals.

As per the entries of the schedule of the Entry tax Act, 2008 tax may be levied on Sr. No. 25 Gold, Silver, Platinum and other precious metals. Whereas Sate levied tax on Gold in any from brought into the State from outside the States, excluding the Gold brought for sale, in the same form or after refining or after manufacturing of jewellery from it at the rate of 0.2 percent of the value of goods. This entry is not present in the Schedule.  Therefore tax levied vide Notification No. 24/2016/22(120)/XXVII(8)/2008  is not legally valid.

4- The Article 286 of The Constitution of India is as follows-

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 purchased outside the country.

5- The Article 301 of The Constitution of India is as follows

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 in movement of goods from one state to another and hence is violative of Article 301 of Constitution, which guaranteed that trade, commerce and intercourse throughout the territory of India shall be free.

6- The Article 304 of The Constitution of India is as follows

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-

(a) 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  (b) 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.  Tax on entry of goods in to the local areas amounts to restriction. Therefore, previous sanction of the President is necessary but in the present case as per RTI reply no such previous sanction of the President has been obtained by the state government.

7- The Seventh Schedule of The Constitution of India is as follows 

List –II State List-

Entry No. 52- Taxes on the entry of goods into a local area for consumption, use or sale therein.

As per Entry No.52 of List-II State List of Seventh Schedule of the Constitution OF India Taxes on the entry of goods into a local area for consumption, use or sale therein is a State subject and State may levy taxes on the entry tax on local areas only not on the goods coming out of the State.

Conclusion;  It is evident from the above legal position and sequel to the above discussion that entry tax levied vide notification no. 24/2016/22(120)/XXVII(8)/2008 is not valid legally.

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