In a recent ruling, the Madras High Court ruled that the entry tax on imported vehicles must not exceed the sales tax or value-added tax ( VAT ) imposed on goods manufactured within the state.
Hindustan Motors Ltd., the petitioner challenged the entry tax levied under the Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990. The petitioner submitted that the entry tax was discriminatory compared to the local sales tax/VAT on goods manufactured within Tamil Nadu from April 1, 1992, to March 31, 1998.
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The petitioner claimed that this disparity violated Articles 301 and 304(a) of the Indian Constitution as the entry tax on imported goods was higher than the sales tax on locally produced goods. The petitioners referred to the rulings of the Apex court such as the Jindal Stainless Ltd. v. State of Haryana case, along with other relevant judgments from the Madras High Court, and prayed for refunds for the excess entry tax paid.
On the other hand, the respondent’s representative Haja Nazirudeen (Additional Advocate General) acknowledged that the revenue cannot charge an entry tax higher than the sales tax on similar locally manufactured goods.
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The bench comprising Chief Justice, Sanjay V. Gangapurwala and Justice D. Bharatha Chakravarthy observed both side’s arguments. The court held that the entry tax could not exceed the Sales Tax/VAT on goods manufactured within the state. Regarding the refund, the court observed that in some cases, the excess entry tax paid by the petitioners was quantified in the assessment orders, but the Assessing Officer had forfeited the amount.
The court explained the concept of unjust enrichment is applicable under the Central Excise Act, 1944, but not applicable to the Tamil Nadu Tax on Entry of Motor Vehicles into the Local Areas Act, 1990. The court accepted the petitioner counsel’s reference to the Apex Court ruling interpreting the provisions of the Haryana Local Entry Tax and similar other provisions.
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Therefore, the court ruled that the petitioners could apply for a refund of the excess tax paid over the local sales tax. The concerned authority was directed to review and decide on the refund application within three months of its filing. The writ petitions were disposed of and connected miscellaneous petitions were closed.
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