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1999 Supreme(Mad) 893
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE P. SATHASIVAM
Messrs Sumitomo Corporation - Appellant
Versus
State of Tamil Nadu and Others - Respondents
W. P. No. 498 of 1991 and W. M. P. No. 12942 of 1995
Decided On : 01 September 1999
The Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990 is constitutional and the entry tax levied under the Act is valid.
Headnote:
ENTRY TAX - TAMIL NADU TAX ON ENTRY OF MOTOR VEHICLES INTO LOCAL AREAS ACT, 1990 - SECTION 3(1), 4(2) - CONSTITUTIONALITY - ARTICLE 14, 286 - VALIDITY OF TAX ON IMPORTED VEHICLES - COURT HELD THAT THE ACT IS CONSTITUTIONAL AND THE TAX IS VALID.
Fact of the Case:
The petitioner, a Japanese corporation, imported two cars from Japan and sought to register them in Tamil Nadu. The authorities demanded entry tax under the Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990 (Act 23 of 1990). The petitioner challenged the validity of the tax, arguing that it violated Articles 14 and 286 of the Constitution.
Finding of the Court:
The court held that the Act was constitutional and the tax was valid. It held that the object of the Act was to curb the evasion of sales tax on motor vehicles purchased outside the State and brought into Tamil Nadu. The court also held that the tax was not a customs duty, but an entry tax levied on the entry of motor vehicles into the State.
Issues: 1. Whether the Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990 is constitutional? 2. Whether the entry tax levied under the Act is valid?
Ratio Decidendi: 1. The court held that the Act was constitutional because it was a reasonable exercise of the State's power to levy taxes. The court also held that the tax did not violate Article 14 of the Constitution because it was not discriminatory. 2. The court held that the entry tax was valid because it was not a customs duty. The court also held that the tax was not a ban on the sale or purchase of goods, but an entry tax levied on the entry of motor vehicles into the State.
Final Decision: The court dismissed the petition and upheld the validity of the Act and the entry tax.
The Order of the Court was as follows :
Aggrieved by the proceedings of the second respondent dated 27-9-1990 and their letter dated 1-12-1990, the petitioner-corporation has filed the above writ petition to quash those proceedings/letter and forbearing the respondents from levying any entry tax on the petitioner in respect of cars bearing Registration Nos. TN-01-B-0843and TN-01-B-0344 under the provisions of the Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990.
2. The case of the petitioner is briefly stated hereunder : petitioner-Corporation is a company incorporated under the law of Japan and has its Head Office at Tokyo in Japan. It has regional offices in India and one such regional office is at Madras. For the purpose of its own use, it purchased two Japanese cars, both are MAZDA 929 four door station Waggon 2000 CC. cars. The cars were purchased in Japan and were imported to India. A customs clearance permit was issued by the Additional Chief Controller of Imports and Exports on 6-2-1990 and the same was issued under the Imports and Exports (Control) Act, 1947. The cars arrived on 17-3-1990 and bill of entry was filed on 26-3-1990. The cars were also cleared by paying a customs duty of Rs. 6, 40, 534 per car and in addition a bond for Rs. 2, 04, 173 was also executed.
3. It is stated that the Tamil Nadu Legislature has enacted the Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990 (Act 23 of 1990) (hereinafter referred to as 'the Act'), with a view to curb the evasion of sales tax on the sale of Motor Vehicles, which are purchased outside the State and brought into the State of Tamil Nadu. It was not the intention of the Legislature to impose an entry tax when a vehicle was brought into India from another country. The question of sales tax would not arise in such a case because there is no purchase of such a vehicle in another State which levies sales tax at a lower rate than levied by the State of Tamil Nadu.
4. In exercise of the powers conferred by Section 3(1) of the Act, the first respondent issued a notification on 20-2-1990, in which the rate of entry tax in respect of motor cars has been fixed at 5% of the purchase value of the Motor vehicle. The registering authority under the provisions of the Act will not register the motor vehicle unless entry tax has been paid and the chalan receipt has been produced. Since he was having some doubt as to whether tax would apply in the case of vehicles imported from other countries, the petitioner addressed a letter to the Joint Commissioner (Public Relations), Commercial Taxes Department, to the effect that the entry tax would not apply in the case of vehicles which have been imported from another country. The letter was given to the Joint Commissioner on 26-5-1990. By a letter dated 15-6-1990 the secondd respondent issued clarification that in respect of motor vehicles imported from foreign countries directly and brought into Tamil Nadu by the importer/buyer, the liability to pay entry tax would not arise. On the basis of this clarification, the vehicles were registered. However, by letter dated 27-9-1990, the second respondent clarified that entry tax is also applicable on imported car as this falls within the scope of the provisions of the Entry Tax Act. Accordingly, directed the petitioner to remit the entry tax applicable at 5% as required under Section 3(1) of the Act immediately. The petitioner immdiately made a representation to the second respondent on 10-10-1990 and the same was rejected. Aggrieved by the aforesaid action of the respondents and in the absence of any other remedy, the petitioner has filed the present writ petition.
5. On behalf of the respondents, the first respondent has filed the counter affidavit disputing the various averments made by the petitioner. It is stated that the intention of the Legislature was to impose the tax on entry of Motor Vehicles into the local area which are purchased outside the
