The main legal point established in the judgment is that the State has the legislative competence to levy entry tax on motor vehicles entering the local area, and that the tax is not a tax on sale but on the entry of goods. The judgment also reaffirmed the wide latitude of legislative discretion in taxation matters and the validity of exemption provisions under Art.14 of the Constitution of India.

P. Shanmugham

All these Original Petitions raise a common question of law, namely, whether motor vehicles imported from aboard are liable to pay entry tax.

2. The vires of the Kerala Tax On Entry of Motor Vehicles Into Local areas Act, 1994 came up for consideration before a Division Bench of this Court in Raj an v. State of Kerala (1995 (2) KLT369). The Division Bench repelled the challenge to the various provisions of the Act and held that the State is competent to impose tax for entry of goods into local area and the same is not violative of Arts.301 and 304 of the Constitution of India. In the light of the Division Bench judgment a very little scope is left for the challenge of the Act.

3. All these petitioners are owners of the vehicles who have brought them into the State of Kerala after paying custom duty to the Central Government. According to learned counsel for the petitioners the intendment of the legislature and object of the Act is to compensate the evasion of sales tax on motor vehicles purchased from outside the State. Therefore, the entry tax is differential to sales-tax in the sense that the said tax is imposed to compensate the loss of sales tax from the vehicles brought from outside the State. Petitioners have not purchased the vehicle outside the State, but outside the country, where there was no sales tax. Under those circumstances the question of compensating the loss of sales tax would not arise.

4. It is further contended that the State has no jurisdiction or authority to impose tax on sales and purchases which are taken place in the course of import of goods into the territory of India as per Art.286 (1)(b) of the Constitution of India. It is further submitted that sub-s.(2) of S.3 of the Act enables the levy of tax on an importer. The 'importer' has been defined as a person who brings a motor vehicle into a local area from any place outside the State. Item 41 of List I to Seventh Schedule deals with import and export across customs frontiers and therefore, the State has no jurisdiction to levy tax on the import of the vehicle from foreign country. According to learned counsel the definition of the word 'importer' has to be read down as to mean an importer within the State of India and not from outside. Yet another submission is that the proviso to sub-s.(1) of S.3 of the Act exempts levy of entry tax to a motor vehicle which was registered for a period of 15 months or more. Such a concession or exemption is not made available to the vehicle imported from foreign country. It is a clear discrimination and violation of Art.14 of the Constitution of India.

5. On behalf of the State, a counter affidavit has been filed. It is stated that the object of the introduction of the legislation is to compensate the loss of revenue by consumers who avoid payment of sales tax on the vehicles by purchasing it from outside the State either within India or from outside India. The law is intended to avoid any loss of legitimate sales tax revenue in the State. The charge under S.3 of the Act is on the entry of goods in the local area for use or sale therein and not on its purchase. Therefore, the contention that the goods had been purchased from outside the State and there is no sale liable for tax is not sustainable. According to them, the issue had been covered by the judgment of the Supreme court in Shaktikumar M. Sancheti v. State of Maharashtra (1995 KLJ (Tax cases) 293).

6. Learned Advocate General appearing on behalf of the State submitted that this is an Act to provide for levy of tax on the entry of motor vehicles into local area for use or sale therein. The Act is nothing to do with the sale or purchase of the vehicle in a foreign country. The entry of the motor vehicles into local area has been defined under S.2(d) of the Act which means entry of motor vehicle into a local area from any place outside the State for use or sale therein. Item 5 2 of the State List in the Seventh Schedule to the Constitution