HIGH COURT OF JUDICATURE CHHATTISGARH - BILASPUR.
(Division Bench)
WRIT PETITION NO. 2098 OF 2002
Navdeep Industries
...Petitioner
- Versus-
State of Chhattisgarh & others
...Respondent
! Present Petitioner by Mr. V.G. Tamaskar, Advocate.
^ Respondent No.1 / State by Mr. N.K. Agrawal,
Dy. Advocate General with Mr. Ashish Shukla,
Govt. Advocate.
Respondent No.2 by Mr. R.R. Sinha, Advocate.
CORAM HON'BLE SHRI A.K. PATNAIK, C.J.
& HON'BLE SHRI V.K. SHRIVASTAVA,
Dated: 29-03-2005
: O R D E R
(29th March 2005)
The following order of the Court was passed by
A.K. Patnaik, C.J.
The petitioner is a Small Scale Industry
registered with Directorate of Industries, Punjab, and
manufactures engineering items including drill rods in
the State of Punjab and has been supplying such drill
rods to South Eastern Coalfields/respondent No.2 in
Madhya Pradesh, now Chhattisgarh, since 1972. The
case of the petitioner in the writ petition is that no
entry tax was payable on such entry of drill rods into
the State of Chhattisgarh under the Chhattisgarh
Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam,
1976 ( for short “the Act, 1976”). But by the
Chhattisgarh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar
(Sanshodhan) Adhiniyam, 2002, the Act 1976 was amended
so as to include “drill rod” in Schedule III of the Act
1976. As a consequence, entry of drill rod
manufactured outside the State of Chhattisgarh has
become liable to entry tax @ 10% on taxable quantum.
The petitioner has prayed for declaring the said
amendment in so far as it includes “drill rod” in
Schedule III of the Act 1976 as ultra vires the
Constitution.
(2) Mr. V.G. Tamaskar, learned counsel for the
petitioner submitted that while entry tax is payable on
drill rods manufactured by the petitioner outside the
State of Chhattisgarh and supplied to respondent No.2
in the State of Chhattisgarh, no such entry tax is
payable on drill rods manufactured by a local industry
located at Korba in the State of Chhattisgarh. He
submitted that the impugned amendment is, therefore,
discriminatory and violative of Article 304 (a) of the
Constitution of India which prohibits the legislature
of a State to discriminate between the goods imported
and goods manufactured inside the State while imposing
taxes. In support of this contention, he cited the
decision of the Supreme Court in the case of Shree
Mahavir Oil Mills and Another Vs. State of Jammu &
Kashmir and others, reported in (1996) 11 Supreme Court
Cases-39 in which the Supreme Court has held that
exemption from tax under the Jammu & Kashmir General
Sales Tax, 1962 on edible oil produced and sold within
the State of Jammu & Kashmir when such edible oil
produced outside the State of Jammu and Kashmir was
liable to tax under the said Act was discriminatory and
violative of Article 304 (a) of the Constitution of
India.
(3) Mr. N.K. Agrawal, learned Dy. Advocate General for
the State of Chhattisgarh on the other hand relying on
the averments in paragraph 8 of the return filed by
respondent, submitted that drill rods produced by the
local industry namely Mining Machine Tools in Korba may
not be liable for entry tax when the drill rods
produced by it are consumed and used in the local area
of Korba; but will be liable to entry tax if the drill
rods produced by it are consumed and used in local area
of Bilaspur to South Eastern Coalfields Ltd. He
submitted that the contention that the local industry
at Korba namely Mining Machine Tools is not liable for
entry tax on drill rods supplied to South Eastern
Coalfields Ltd. in Chhattisgarh is, therefore,
factually not correct. In support of the aforesaid
submission, he relied on the provisions of the Act
1976.
(4) Clauses (d) and (e) of Section 2 and the
relevant portion of Section 3 of the Act 1976 are
quoted hereunder:
“2. Definitions.- (1) In this Act unless the
context otherwise requires, –
(d) `local area’ means the area comprised
within the limits of a local authority;
(e) `local authority’ means as authority
constituted under a law relating to local
authority but shall not include a Janapada
Panchayat, a Zila Panchayat, a Mandal
Panchayat or such other local authority as
the State Government may, notification,
specify;
3. Incidence of taxation.- (1) There shall
be levied an entry tax, –
(a) on the entry in the course of business of a dealer
of goods specified in Schedule II, into each local area
for consumption, use or sale therein; and
(b) on the entry in the course of business of a dealer
of goods specified in Schedule III, into each local
area for consumption or use of such goods but not for
sale therein;
and such tax shall be paid by every dealer
liable to tax under the Vanijyik Kar
Adhiniyam, who has effected entry of such
goods;
(5) It will be clear on plain reading of Section 3
(1)(b) of the Act 1976 that entry tax is to be levied
on the entry in the course of business of a dealer of
goods specified in Schedule III, into each “local area”
for consumption or use of such goods but not for sale
therein. The expression “local area” has been defined
in Section 2 (d) of the Act 1976 to mean the area
comprised within the limits of a local authority and
the expression “local authority” has been defined in
Section 2 (e) of the Act 1976 to mean the authority
constituted under a law relating to local authority.
The result is that on the entry in the course of
business of a dealer of goods specified in Schedule III
into each local area for consumption or use of such
goods but not for sale therein, such goods will be
liable to entry tax under Section 3 (1) (b) of the Act
1976. Hence, the contention of Mr. V.G. Tamaskar,
learned counsel for the petitioner that the goods
manufactured in the State of Chhattisgarh would not be
liable to entry tax under Section 3 (1) (b) of the Act,
is not correct. The goods manufactured and supplied
within the same local area for consumption or use, are
not liable for entry tax under Section 3 (1) (b) of
the Act 1976, but if such goods manufactured in one
local area, comes within another local area for use or
consumption therein, they would be liable for entry tax
under Section 3 (1) (b) of the Act 1976. This would
mean that the goods manufactured in the local area of
Korba would be liable for entry tax if it enters into
the local area other than the local area of Korba. This
being the provision of the Act 1976, there is no
discrimination in including the drill rods in Schedule
III of the Act 1976 by the impugned amendment.
(6) Mr. V.G. Tamaskar, learned counsel for the
petitioner next submitted that although several items
of goods are supplied to the South Eastern Coalfields
Limited/respondent No.2 within the State of
Chhattisgarh, only drill rods have been picked and
chosen by the impugned amendment to be included in
Schedule III of the Act 1976 so as to make the same
liable to entry tax @ 10% of the taxable quantum and
therefore the impugned amendment is discriminatory and
violative of Article 14 of the Constitution.
(7) Mr. N.K. Agrawal, learned Deputy Advocate General
for the State, on the other hand, submitted that before
the impugned amendment all goods other than the goods
specified in Schedule I and II were included in
Schedule III and were taxable @ 1% of the taxable
quantum and, therefore, drill rod, which was not
included in Schedule I and II of the Act 1976, was also
liable to entry tax @ 1% of the taxable quantum, but by
the impugned amendment the drill rod along with Cane
Basket and P.V.C. Casing Pipe have been made liable to
entry tax @ 10% of the taxable quantum and the
impugned amendment was not violative of Article 14 of
the Constitution.
(8) In the case of M/s. East India Tobacco Co. Vs.
State of Andhra Pradesh and another reported in AIR
1962 SC 1733, the Supreme Court has held:
“It is not in dispute that taxation laws
must also pass the test of Art. 14. That has
been laid down recently by this Court in
Kunnathat Thatunni Moopil Nair Vs. State of
Kerala, AIR 1961 SC 552. But in deciding
whether a taxation law is discriminatory or
not it is necessary to bear in mind that the
State has a wide discretion in selecting the
persons or objects it will tax, and that a
statute is not open to attack on the ground
that it taxes some persons on objects and not
others. It is only when within the range of
its selection, the law operates unequally and
that cannot be justified on the basis of any
valid classification, that it would violative
of Art.14. The following statement of the law
in Willis on “Constitutional Law” page 587,
would correctly represent the position with
reference to taxing statutes under our
Constitution:-
“A State does not have to tax everything
in order to tax something. It is allowed to
pick and choose districts, objects, persons,
methods and even rates for taxation if it does
so reasonably ……The Supreme Court has been
practical and has permitted a very wide
latitude in classification for taxation”.
(9) Hence, it was open to the State legislature of the
State of Chhattisgarh to choose Cane Basket, Drill Rod,
P.V.C. Casing Pipe for levying of higher rate of tax @
10% of the taxable quantum and the fact that the
legislature has not subjected the other goods supplied
to the South Eastern Coalfields Limited within the
State of Chhattisgarh to entry tax @ 10% on the
taxable quantum is no ground to hold that the impugned
amendment is discriminatory or violative of Article 14
of the Constitution of India. The drill rod has been
treated as a class of goods for levying entry tax @ 10%
of the taxable quantum. Hence, entry of drill rods by
whomsoever into the local area is liable to tax @ 10%
on the taxable quantum without any discrimination. The
impugned amendment cannot, therefore, be struck down as
discriminatory and violative of Article 14 of the
Constitution of India.
(10) No other contention having been raised before us
by Mr. V.G. Tamaskar, learned counsel for the
petitioner, we hold that this writ petition has no
merit and is liable to be dismissed and accordingly we
dismiss the same. Considering, however, the facts of
the case, the parties shall bear their own costs.
CHIEF JUSTICE J U D G E
29-03-2005 29-03-2005