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SUPREME COURT OF INDIA
Kuldip Singh, R.M. Sahai and B.L. Hansaria, JJ.
Civil Appeal Nos. 2317, 2319, 2336, 2337-39, 5742 and 6295-6301 of 1994
Decided On: 25.11.1994
Bhagatram Rajeev Kumar Appellants
Vs.
Commissioner of Sales Tax, M.P. and Ors. Respondent
Madhya Pradesh Sthaniya Kshetra Me Mai Ke Pravesh Par Kar Adhiniyam, 1976 - Section 3(1)(a) - Constitution of India,1950 - Article 301 - Challenge - whether entry tax on goods such as sugar on which no sales tax is leviable could be subjected to levy under Section 3(1)(a) of Madhya Pradesh Sthaniya Kshetra Me Mai Ke Pravesh Par Kar Adhiniyam - Even though legislative competence of State Legislature was principal attack on validity of levy in High Court but main thrust of challenge in this Court has been on nature of levy its ambit and whether it impedes free flow of trade and commerce in violation of Article 301 of Constitution of India - Since there is no dispute on facts and appellants who are dealers registered under Sales Tax Act of State have brought goods such as sugar which are specified in Schedule of Act from outside State for consumption use or sale inside State it is appropriate to extract Section 3 of Entry Tax Act to appreciate rival submissions - Incidence of taxation - There shall be levied an entry tax on entry in course of business of a dealer of goods specified in Schedule into each local area for consumption use or sale therein and on entry in course of business of a dealer of goods specified in Schedule into each local are a for consumption or use of such goods as raw material or incidental goods or as packing material or in execution of works contracts but not for sale therein and such tax shall be paid by every dealer liable to tax under Sales Tax Act who has effected entry of such goods - Held, Appellants claim to be dealers of sugar which is specified in Schedule - Tax being on entry of goods taxing event was complete once sugar was brought into local are by a dealer in course of business for consumption use or sale therein - This could not be diluted or negatived by subjecting it to another condition that such goods should have been liable to tax under Sales Tax Act - That would be misreading of Section 3 - Charge or incidence of tax is different from realisation of it - A levy may be valid and good and yet it may remain ineffective if there is no machinery provision - But provision for realisation of tax from dealer who effects entry of goods does not make it a condition for levy of tax - Tax under Section 3 is on bringing of goods inside local area by a dealer for consumption use or sale therein irrespective of whether sales tax is payable on it or not - Therefore sugar on which no sales tax is leviable because additional excise duty is payable would not be beyond taxing net - Even submission on Article 301 of Constitution is not well-founded - Article came up for interpretation by this Court in Atiabari Tea Co Ltd v State of Assam and Ors and Automobile Transport Ltd v - State of Rajasthan and Ors - A combined reading of two decisions indicate that so long as a tax is regulatory and compensatory it is not within mischief of Article 301 - In counter affidavit filed on behalf of State which was not disputed nature of levy has been demonstrated to be compensatory - Appellants did not dispute figure furnished by State - It is settled by now that if the tax is compensatory then it is immune from challenge under Article 301 See Khyerbair Tea Co Ltd and Anr v - State of Assam and State of Karnataka and Anr v M/s Hansa Corporation - Submission of senior counsel that compensation is that which facilitates trade only does not appear to be sound - Concept of compensatory nature of tax has been widened and if there is substantial or even some link between tax and facilities extended to such dealers directly or indirectly levy cannot be impugned as invalid - Stand of State that revenue earned is being made over to local bodies to compensate them for loss caused makes impost compensatory in nature as augmentation of their finance would enable them to provide municipal services more efficiently which would help or ease free flow of trade and commerce because of which impost has to be regarded as compensatory in nature in view of what has been stated in aforesaid decisions more particularly in Hansa Corporations case - Appeals Dismissed
JUDGMENT
R.M.Shai, J.
1. The question that arises for consideration in these appeals, directed against the judgment and order of the Madhya Pradesh High Court, is whether entry tax on goods such as sugar on which no sales tax is leviable, could be subjected to levy under Section 3(1)(a) of the Madhya Pradesh Sthaniya Kshetra Me Mai Ke Pravesh Par Kar Adhiniyam, 1976 (hereinafter referred to as Entry Tax Act).
2. Even though legislative competence of the State Legislature was the principal attack on the validity of the levy in the High Court but the main thrust of challenge in this Court has been on the nature of levy, its ambit and whether it impedes free flow of trade and commerce in violation of Article 301 of the Constitution of India. Since there is no dispute on facts and the appellants who are dealers registered under the Sales Tax Act of the State have brought goods such as sugar which are specified in Schedule II of the Act from outside the State for consumption, use or sale inside the State, it is appropriate to extract Section 3 of the Entry Tax Act to appreciate the rival submissions :
"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 are a 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..."
3. The levy was described in substance to be purchase tax leviable under the Sales Tax Act. But it appears to have been prompted by the latter part of the Section which identifies the person who shall be responsible for paying the tax. The Section is in two parts - one, levying the tax and other fixing the person from whom it shall be realised. The latter is more a part of machinery provision. It cannot control the main or the substantive part of the Section. The taxable event is the entry of goods in a local area of the State by a dealer in course of business and not its purchase. To characterise it as purchase tax is ignoring the nature of levy.
4. Nor there is any merit in the submission that the language of the Section is vague and discriminatory and it would result in excluding those dealers who were not registered under the Sales Tax Act. Registration under the Sales Tax Act is provided for every dealer whose turnover is Rs. 1,000 per year. Therefore, no dealer except of course hypothetically can be excluded from operation of the Section. The apprehension that it may exclude some dealer is not well founded. Even assuming for a moment it to be so it does not render.the levy bad. If the legislature advertently or inadvertently omits to levy tax on any class of persons that by itself cannot result in invalidating the levy unless it is found to be discriminatory. Dealers with turnover of Rs. 1,000 per annum can be considered to be class of small dealers. Excluding such class of dealers is neither arbitrary nor discriminatory.
5. Reliance was placed on the expression liable to tax used in the Section and it was urged that the liability being co-related with entry of goods the only reasonable construction of the Section was to restrict the levy on those goods on which the dealer was liable to pay tax under the Sales Tax Act. The submission was elaborated by relying on provisions of (The) Additional Duties of Excise Act, 1957 and it was urged that sugar was one of the goods on which additional excise duty is leviable. Therefore, no sales tax can be levied on it. Consequently, the dealer being not liable to pay tax on such goods no entry tax could be levied on it. A bare reading of the Section indicates that the tax is attracted und
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