Gujarat High Court quashes Levy of Entry Tax @15% on Tractors is illegal, discriminatory & ultra vires to Constitution.
In a recent ruling, the division bench of the Gujarat High Court quashed the levy of 15% of Entry Tax on Tractors by saying that the same is “illegal, discriminatory & Ultravires to Constitution.”
The bench comprising Justice M.R.Shah and Justice B.M. Karia was hearing a petition filed by the Tractors And Farm Equipment Ltd, questioning the levy of 15% of Entry Tax on tractors by treating them under the head “motor vehicles”.
The petitioners urged that the levy is illegal, unconstitutional and contrary to the scheme and object and purpose of the Entry Tax Act and also contrary to the legislative intention of enacting Entry Tax Act. According to the petitioners, the levy is illegal since under the VAT Act, the Tractors are covered by a separate entry for which the applicable rate of tax is 5% only.
The bench noticed that in Eagle Corporation Pvt. Ltd, the same Court upheld the vires of Entry Tax Act by observing that if the rate of sales tax on specified goods in the State of Gujarat is 12% and rate of sales tax payable by the importer in a particular state is 4% and if the importer in fact pays sales-tax and/or central sales-tax at the rate of 4%, then, in that case, while importing the specified goods into the State of Gujarat/local area, such an importer is required to pay the entry tax at the rate of 8%.In that case, it was also observed that the provisions of the Entry Tax Act are aimed at achieving level playing field so as to obviate any chance of discrimination. It is further observed that when there is a reduction in the effective rate of sales tax under the Gujarat Sales Tax Act, there will be automatic corresponding reduction in the maximum rate of entry tax prescribed in the schedule, so that the goods brought from outside the State are not discriminated against the goods manufactured within the State, from the point of view of ultimate burden of tax.
Referring to the recent decision of the Apex Court in Jindal Stainless Ltd., the bench noted that the levy of 15% entry tax on tractors is discriminatory since the VAT Act and Sales Tax Acts prescribes only 5% on the same.
Allowing the petition, the bench noted that “If the importer like the petitioners are required to pay entry tax higher than VAT levied on sale of goods in the State of Gujarat, in that case, such importers would be at a disadvantageous position and there shall not be “level playing field” which was the aim / goal for introducing the entry tax under the Entry Tax Act. Therefore, any levy of tax beyond the VAT required to be paid by the local dealer, shall be discriminatory and directly in violation of Article 304(a) of the Constitution of India.”
Allowing the petition, the bench noted that “the entire legislative history of the Entry Tax Act as well as object and reasons behind the introduction as well as amendments of the Entry Tax Act establish that Entry Tax was always sought to be levied at the rates prescribed for such goods under the Sales Tax Act / VAT Act. In other words,there is a nexus between the Entry Tax rates and local Sales Tax / VAT rates on similar goods. Thus only those motor vehicles which were covered under Entry 128 of Schedule-IIA to the Sales Tax Act and which are now covered under residuary Entry 87 of Schedule-II to the VAT Act which attract 15% tax under the VAT Act would be covered under the entry of motor vehicles under the Entry Tax Act. Levy of entry tax at the rate of 15% on Tractors by treating them as falling under Entry for motor vehicles even though Tractors have always been covered by separate entry under the Sales Tax Act and the VAT Act and for which rate of tax under the VAT Act is 5%, therefore is dehors the scheme of the Entry Tax Act as countenanced by the legislative history as well as objects of the Entry Tax Act.”
Read the full text of the Judgment below.
