IMPORTANT POINT
Section 7(5) of the Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976, has to be construed to mean that the presumption contained therein is rebuttable and the penalty of ten times the amount of entry tax stipulated therein is only the maximum amount which could be levied and the assessing authority has the discretion to levy lesser amount.

JUDGMENT

Kirpal, J.-The common question of law which arises in these appeals by special leave relates to the validity of Section 7(5) of The Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (hereinafter referred to for the sake of convenience, "the Entry Tax Act"). The said provision having been successfully challenged by the respondent before the Madhya Pradesh High Court, the State of Madhya Pradesh has filed the present appeals.

2. The facts, which are relevant for deciding the point in issue lie within a very narrow compass. The respondents are stated to be engaged in sale and purchase of various articles as raw material, some of which are brought into the local areas. They manufacture the finished goods which are sold in local areas in which they are manufactured and, subsequently, are sold outside the local area. The respondents are all registered dealers both under the Central and the State Sales Tax Act and it is the provisions of that act which are applied for assessment and recovery of entry tax.

3. The Entry Tax Act was enacted with the object of levying tax on the goods brought into the local area for consumption, use or sale therein. Section 3 is the charging section and sub-section (1)(a) and (b) which are relevant are as follows :

"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 as (raw material or incidental goods) or as packing material or in the execution of works contracts but not for sale therein;

and such tax shall be paid by every dealer liable to tax under the Sales Tax Act who has effected entry of such goods:

(Provided that no tax under this sub-section shall be levied :-

(i) ...............

(ii) ..............

(iiii) .............

(iv) ..............

(v) ..............."

4. Sub-sections (1), (2) and (5) of Section 7 of the Entry Tax Act which are relevant for the determination of the controversy in issue, as amended from time to time, read as follows:

"7. Registered dealers to issue bill etc. stating that goods sold are local goods-

(1) Every registered dealer who, in the course of his business, manufacturers, produces or grows any goods specified in Schedule II in a local area in such manner that the goods become local goods in relation to that local area, shall, on the sale of such local goods to any other registered dealer, issue to him a bill, invoice or cash memo specifically stating in such manner as may be prescribed, that the goods being sold are local goods in relation to such local area and that no entry tax has been paid on such goods.

(2) Where the goods mentioned in sub-section (1) are purchased and sold in course of their business by a chain of registered dealers, the selling registered dealer shall issue a bill or invoice or cash memo, containing the statement referred to in sub-section (1);

Provided that where the goods are purchased by a registered dealer who effects the entry of such goods into a local area other than the local area in relation to which such goods are local goods, it shall not be necessary for him to make the statement referred to in sub-section (1).

(3) ..............

(4) ..............

(5) Where a registered dealer referred to in sub-section (1) or sub-section (2) has, in the course of his business, sold local goods to other registered dealers and has failed to make the statement referred to in sub-section (1) (............), it shall be presumed that he has facilitated the evasion of entry tax on the local goods so sold and accordingly he shall be liable to pay penalty equal to (ten times) the amount of entry tax pay