As we know the Punjab Tax on Entry of Goods into Local Areas Act, 2000 was stayed by Punjab & Haryana High Court in Bhushan Power & Steel Limited vs State of Punjab in CWP 15378 of 2008. Thereafter a lot of writ petitions were filed challenging the said act on similar grounds as was in Bhushan Power & Steel case, whereby the Hon'ble High Court in CWP 18609 of 2011 passed the following order"
"Learned counsel for the petitioners placing reliance upon an order passed by this Court in C.M. No. 2467 of 2011 in C.W.P. No. 15378 of 2008 Bhushan Power & Steel Limited v. The State of Punjab and others, on 28.3.2011 submitted that as the petitioners in these writ petitions are also similarly placed, interim order in the same terms be passed in the present petitions.
Learned counsel for the State fairly submitted that the issue involved in the present petitions is identical to one which was under consideration before this Court in Bhushan Power & Steel Limited's case (supra).
Once it is not in dispute that the issues involved in the bunch of petitions and Bhushan Power & Steel Limited's case (supra) are similar, in our opinion the petitioners in the bunch of writ petitions deserve to be granted interim relief in terms of Bhushan Power & Steel Limeted's case (supra).
CWP Nos. 18609 of 2007,578,1670,3342,5537,6705,7099,11542,16081, 18991, 19001 of 2008,5362,9237,9906 and 10334, 15493, 21494 of 2010, 6064, 6066 and 6379 of 2011
"Learned counsel for the petitioners placing reliance upon an order passed by this Court in C.M. No. 2467 of 2011 in C.W.P. No. 15378 of 2008 Bhushan Power & Steel Limited v. The State of Punjab and others, on 28.3.2011 submitted that as the petitioners in these writ petitions are also similarly placed, interim order in the same terms be passed in the present petitions.
Learned counsel for the State fairly submitted that the issue involved in the present petitions is identical to one which was under consideration before this Court in Bhushan Power & Steel Limited's case (supra).
Once it is not in dispute that the issues involved in the bunch of petitions and Bhushan Power & Steel Limited's case (supra) are similar, in our opinion the petitioners in the bunch of writ petitions deserve to be granted interim relief in terms of Bhushan Power & Steel Limeted's case (supra).
CWP Nos. 18609 of 2007,578,1670,3342,5537,6705,7099,11542,16081, 18991, 19001 of 2008,5362,9237,9906 and 10334, 15493, 21494 of 2010, 6064, 6066 and 6379 of 2011
" Accordingly, as an interim measure, the petitioners in the bunch of writ petitions are entitled to the same relief as has been granted in Bhushan Power & Steel Limited's Case ( supra).
We are further of the view that to avoid multiplicity of litigation, the State Government may evolve an appropriate mechanism by way of issuing a general circular in terms of the interim order passed by this court to deal with all similarly placed persons, as far as possible on or before 30.04.2011."
In view of the above directions of the High Court the State Government issued a General Cirular No. N-1-2011/spl. 1-30 Dated 29th April,2011, whereby it evolved an appropriate mechanism to facilitate the extension of the applicability of the interim order of the Hon'ble High Court to "similarly placed persons" who have not filed any writ petitions in the Hon'ble Court, and who desire to avail of the relief afforded to the petitioner.
Such appropriate mechanism was submission of an affidavit and undertaking by similarly placed persons who dont want to pay entry tax in accordance with the stay granted by P&H HC in Bhushan Steel case(supra).
The relief in the above circular and in the CWP 18609 of 2011 is being granted to the Similarly placed persons who have not filed writ petition in the High Court but stand in the same footing as was the petitioner in Bhushan Power & Steel case.
The important term used in the abovesaid interim order of the High Court and in the General circular is "Similarly Placed Persons". Some arguement which recently has emerged out is that since the petitioner in Bhushan Power & Steel Limited case was a manufacturer, hence only the persons who are manufacturer and liable to pay entry tax are only "similarly placed Person" and only such persons can be granted relief from payment of entry tax under the general circular issued.
To understand the meaning of "Similarly Placed Persons" it is important to understand the grounds and issues on which entry tax was challenged by the petitioner in Bhushan Power & Steel case and consequently stayed by the High Court on such grounds. Any person having similar grounds and issues to challenge the Entry Tax in Punjab, will be treated as a similarly placed person.
Now lets see the Grounds and issues in the Bhushan Power & Steel case:
The main Ground on which entry tax in Punjab was challenged, was that in terms of the provisions of Section 3A of the Entry Tax Act, the petitioner was made to pay the tax under the aforesaid Act immediately when the goods entered into the State at the Information & Collection Centre. The levy was sought to be challenged on the ground that the State Legislature is not competent to enact the Entry Tax Act in terms of the powers conferred under Entry 52 of List II of Seventh Schedule of the Constitution of India.
The State Government countered the above plea by stating that the entry tax was levied under entry 54 of List II of Seventh Schedule to the Constitution of India and was levied as an advance tax under Punjab VAT Act, 2005.
Now lets see the Grounds and issues in the Bhushan Power & Steel case:
The main Ground on which entry tax in Punjab was challenged, was that in terms of the provisions of Section 3A of the Entry Tax Act, the petitioner was made to pay the tax under the aforesaid Act immediately when the goods entered into the State at the Information & Collection Centre. The levy was sought to be challenged on the ground that the State Legislature is not competent to enact the Entry Tax Act in terms of the powers conferred under Entry 52 of List II of Seventh Schedule of the Constitution of India.
The State Government countered the above plea by stating that the entry tax was levied under entry 54 of List II of Seventh Schedule to the Constitution of India and was levied as an advance tax under Punjab VAT Act, 2005.
This contention of the State was contested by the petitioners by further submitting that the plea that the amount of tax is being collected in the form of advance tax to be refunded later to the dealer will not be tenable in view of the judgment of a Division Bench of this Court in CWP No. 19355 of 2010 – KRBL Limited v State of Punjab and others, decided on 14.1.2011, wherein it was held that recovery can be effected only if it is within the competence of the State Legislature. It cannot be recovered initially providing the remedy of refund later on
Additional ground taken were that tax has not been levied under the charging section 3 but instead u/s 3-A which doesn’t even prescribe the taxable event i.e. it doesn’t even state that tax is to be imposed on entry of goods into local areas in view of entry 52 of list II. It simply prescribes levy of tax by StateGovernment in the manner and on the goods and at rates as may be specified.
It was also contended by the petitioners that definition of term “dealer” as provided for under Section 2(1)(c) of the Entry Tax Act provides that he should be a person, who deals in any scheduled goods. In similar line is the definition of “importer” as provided for under Section 2(1)(e) of the Entry Tax Act in terms of which he would be a person who brings scheduled goods into a local area. The term “scheduled goods” has been defined in Section 2(1)(k) to mean the goods specified in theSchedule appended to the Entry Tax Act. It was pointed out that there are no goods mentioned in the Schedule attached to the Entry Tax Act, Section 3, which provides for levy of tax on the entry of scheduled goods into a local area is, in fact, the charging section. However, the same can be said to be inoperative considering the fact that there are no goods specified in the Schedule.
The pleas of the petitioner were uphled finally and the Entry Tax Act was stayed by the High Court by holding as follows:
"The contention raised by learned counsel for the State to the effect that for the purpose the provisions of Section 3(1) of the Entry Tax Act should be referred to is apparently mis-conceived as the same runs contrary to the language of Section 3-A of the Entry Tax Act, which has overriding effect and discards the application of Section 3(1) of the Entry Tax Act. Under Section 3, the taxable event is entry of goods into a local area, which relates to Entry 52 List II of Seventh Schedule, for which in the absence of the tax being compensatory, the State Legislature was incompetent.
Further, contention of learned counsel for the State that levy is in terms of the powers derived by the State under Article 304(a) of the Constitution of India, prima facie, is also misconceived considering the fact that the State derives power to enact laws in terms of Article 245,246 and 286 of the Constitution of India. Part XIII of the Constitution provides for restriction on the legislative powers of the Union and State with regard to trade and commerce within the country.
Contention raised by learned counsel for the State that it is in the form of advance tax being collected, for which adjustment has been provided for under the VAT Act with a view to plug evasion of tax is also meritless. Even collection of advance tax had to be justified in terms of the provisions of Entry Tax Act providing for levy of substantive tax which could not be substantiated by learned counsel for the State, as he was not able to point out as to under which provision of the VAT ACT, tax could be levied on the entry of goods into the State. Without there being any taxable event of sale or purchase of goods taking place within the territorial jurisdiction of the State, claim that Section 3-A of the Entry Tax Act is merely a machinery provision providing for collection of advance VAT tax is prima facie meritless.
Argument raised by learned counsel for the State that in the reply the stand of the State is that the aforesaid levy is relatable to Entry 54 of List II if Seventh Schedule does not have any merit. A legislation is to be judged not merely by affidavits filed on behalf of the State, but by its provisions.
In view of our aforesaid discussion, we are of the prima facie view that though the Act proposes to levy entry tax, the same has not been justified as entry tax. The same cannot be held to be valid as advance collection of value-added tax in absence of a charging provision to that effect.
In the circumstances, in our opinion, the petitioner is certainly entitled to the interim relief in line with what has been granted by Hon'ble the Supreme Court in cases pertaining to entry tax from different States. The interim order similar to what has been passed in the appeal filed by the State of Haryana challenging the judgment of this court declaring the Haryana Act to be ultra vires can very well be granted to the petitioner in the present case. The text thereof is as under;
"It is pointed out that the levy of Entry tax has been struck down by the Punjab and Haryana High Court. In the circumstances, as of today, we cannot direct the assesses to pay the taxes under the Act, which is held to be unconstitutional. However, each and every assesses in this group of cases will file the Returns within a period of four weeks from today. The assessing officer will vet the Returns and pass assessment orders in accordance with law. However, there will be no recovery of tax till further orders of this court, subject to each and every assesses in this group of cases giving an undertaking to the State and to this court that, in the event of their ultimately losing the matter, they shall pay the amount due with interest at the rate that may be fixed by this court at the time of final hearing of the matters. The said undertaking will be given with in four weeks. It is also made clear that in cases where assessments have been completed, may be under the Act which has been struck down by the High Court, it would be open to the assesses to consider fling of appeals before the Appellate Authority, if so advised, but, if they choose to file the same, it shall be done within six weeks from today. If an appeal is filed, the Appellate Authority will not insist upon making pre-deposit. The idea behind this order is that the court would like to know the amount(s) due."
Considering the fact that in the Entry Tax Act in question, the collection of tax is at ICC barrier and there is no Provision for filing of returns of framing of assessments, we direct that information regarding entry of all the goods into the state of Punjab shall be furnished at the point of entry in the State of Punjab so that the same could be compiled to enable the State to recover the amount of tax due from the concerned persons in case of dismissal of the writ petition. However, they shall file an undertaking to the State and also in the Court that in the event of the writ petitions being dismissed they shall be liable to pay the amount of tax due alongwith interest at such rate, as may be fixed by this Court at the time of final disposal of the matter. The undertaking shall be furnished within four weeks. It is made clear that this order will not affect the liabilities of the petitioner under the relevant provisions of the VAT Act."
Similarly Placed Person includes every person liable to pay entry tax: Entry Tax Act was challenged initially on the ground of incompetence of the State Government to levy entry tax under entry 52 of list II of seventh Schedule to the Constitution of India, however the same ground was not contested and the entry tax was justified by State Government as advance tax of VAT which plea also was dismissed by High court.
The grounds which were taken by petitioners in Bhushan Power & Steel case could be taken by any person whether he is a manufacturer or a trader or any other person who imports the goods into State of Punjab and has been made liable to pay entry tax under the said Act.
Additional ground taken were that tax has not been levied under the charging section 3 but instead u/s 3-A which doesn’t even prescribe the taxable event i.e. it doesn’t even state that tax is to be imposed on entry of goods into local areas in view of entry 52 of list II. It simply prescribes levy of tax by StateGovernment in the manner and on the goods and at rates as may be specified.
It was also contended by the petitioners that definition of term “dealer” as provided for under Section 2(1)(c) of the Entry Tax Act provides that he should be a person, who deals in any scheduled goods. In similar line is the definition of “importer” as provided for under Section 2(1)(e) of the Entry Tax Act in terms of which he would be a person who brings scheduled goods into a local area. The term “scheduled goods” has been defined in Section 2(1)(k) to mean the goods specified in theSchedule appended to the Entry Tax Act. It was pointed out that there are no goods mentioned in the Schedule attached to the Entry Tax Act, Section 3, which provides for levy of tax on the entry of scheduled goods into a local area is, in fact, the charging section. However, the same can be said to be inoperative considering the fact that there are no goods specified in the Schedule.
The pleas of the petitioner were uphled finally and the Entry Tax Act was stayed by the High Court by holding as follows:
"The contention raised by learned counsel for the State to the effect that for the purpose the provisions of Section 3(1) of the Entry Tax Act should be referred to is apparently mis-conceived as the same runs contrary to the language of Section 3-A of the Entry Tax Act, which has overriding effect and discards the application of Section 3(1) of the Entry Tax Act. Under Section 3, the taxable event is entry of goods into a local area, which relates to Entry 52 List II of Seventh Schedule, for which in the absence of the tax being compensatory, the State Legislature was incompetent.
Further, contention of learned counsel for the State that levy is in terms of the powers derived by the State under Article 304(a) of the Constitution of India, prima facie, is also misconceived considering the fact that the State derives power to enact laws in terms of Article 245,246 and 286 of the Constitution of India. Part XIII of the Constitution provides for restriction on the legislative powers of the Union and State with regard to trade and commerce within the country.
Contention raised by learned counsel for the State that it is in the form of advance tax being collected, for which adjustment has been provided for under the VAT Act with a view to plug evasion of tax is also meritless. Even collection of advance tax had to be justified in terms of the provisions of Entry Tax Act providing for levy of substantive tax which could not be substantiated by learned counsel for the State, as he was not able to point out as to under which provision of the VAT ACT, tax could be levied on the entry of goods into the State. Without there being any taxable event of sale or purchase of goods taking place within the territorial jurisdiction of the State, claim that Section 3-A of the Entry Tax Act is merely a machinery provision providing for collection of advance VAT tax is prima facie meritless.
Argument raised by learned counsel for the State that in the reply the stand of the State is that the aforesaid levy is relatable to Entry 54 of List II if Seventh Schedule does not have any merit. A legislation is to be judged not merely by affidavits filed on behalf of the State, but by its provisions.
In view of our aforesaid discussion, we are of the prima facie view that though the Act proposes to levy entry tax, the same has not been justified as entry tax. The same cannot be held to be valid as advance collection of value-added tax in absence of a charging provision to that effect.
In the circumstances, in our opinion, the petitioner is certainly entitled to the interim relief in line with what has been granted by Hon'ble the Supreme Court in cases pertaining to entry tax from different States. The interim order similar to what has been passed in the appeal filed by the State of Haryana challenging the judgment of this court declaring the Haryana Act to be ultra vires can very well be granted to the petitioner in the present case. The text thereof is as under;
"It is pointed out that the levy of Entry tax has been struck down by the Punjab and Haryana High Court. In the circumstances, as of today, we cannot direct the assesses to pay the taxes under the Act, which is held to be unconstitutional. However, each and every assesses in this group of cases will file the Returns within a period of four weeks from today. The assessing officer will vet the Returns and pass assessment orders in accordance with law. However, there will be no recovery of tax till further orders of this court, subject to each and every assesses in this group of cases giving an undertaking to the State and to this court that, in the event of their ultimately losing the matter, they shall pay the amount due with interest at the rate that may be fixed by this court at the time of final hearing of the matters. The said undertaking will be given with in four weeks. It is also made clear that in cases where assessments have been completed, may be under the Act which has been struck down by the High Court, it would be open to the assesses to consider fling of appeals before the Appellate Authority, if so advised, but, if they choose to file the same, it shall be done within six weeks from today. If an appeal is filed, the Appellate Authority will not insist upon making pre-deposit. The idea behind this order is that the court would like to know the amount(s) due."
Considering the fact that in the Entry Tax Act in question, the collection of tax is at ICC barrier and there is no Provision for filing of returns of framing of assessments, we direct that information regarding entry of all the goods into the state of Punjab shall be furnished at the point of entry in the State of Punjab so that the same could be compiled to enable the State to recover the amount of tax due from the concerned persons in case of dismissal of the writ petition. However, they shall file an undertaking to the State and also in the Court that in the event of the writ petitions being dismissed they shall be liable to pay the amount of tax due alongwith interest at such rate, as may be fixed by this Court at the time of final disposal of the matter. The undertaking shall be furnished within four weeks. It is made clear that this order will not affect the liabilities of the petitioner under the relevant provisions of the VAT Act."
Similarly Placed Person includes every person liable to pay entry tax: Entry Tax Act was challenged initially on the ground of incompetence of the State Government to levy entry tax under entry 52 of list II of seventh Schedule to the Constitution of India, however the same ground was not contested and the entry tax was justified by State Government as advance tax of VAT which plea also was dismissed by High court.
The grounds which were taken by petitioners in Bhushan Power & Steel case could be taken by any person whether he is a manufacturer or a trader or any other person who imports the goods into State of Punjab and has been made liable to pay entry tax under the said Act.
The Petitioner in the said case challenged the Entry Tax Act not just because he was manufacturer but on the ground that the entry tax was violative of Article 301 of Constitution and on the ground that even if entry tax was an advance collection of VAT, the allowance of Input Tax Credit of the entry tax paid was conditional one u/s 13A of Punjab VAT Act, 2005 and such advance collection of VAT is not tenable in view of the judgment of Division Bench of Punjab & Haryana High Court in C.W.P. No. 19355 of 2010 KRBL Limited v. The State of Punjab and others, decided on 14.1.2011, wherein it was held that recovery can be effected only if it is within the competence of the State Legislature. It cannot be recovered initially providing for remedy of refund later on.
Thus the expression Similarly Placed Person should be interpreted as including every person who is made liable to pay entry tax under the Punjab Tax on Entry of Goods into Local Areas act, 2000 irrespective of the fact whether he is a manufacturer, trader, works contractor or else.
Thus the expression Similarly Placed Person should be interpreted as including every person who is made liable to pay entry tax under the Punjab Tax on Entry of Goods into Local Areas act, 2000 irrespective of the fact whether he is a manufacturer, trader, works contractor or else.
Please note that above are personal views only and donot reprsent any settled position of law.
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