2018 Supreme(All) 535

ALLAHABAD HIGH COURT
BEFORE : DILIP B. BHOSALE, C.J. AND MANOJ KUMAR GUPTA, J.
INDIAN OIL CORPORATION LTD. ....Petitioner
Versus
STATE OF U.P. AND OTHERS ....Respondents
(Civil Misc. Writ Petition Nos. 25730, 28302, 28300, 28301, 28433, 28403, 28562, 28561, 28558, 28579, 28572, 28560, 28477, 26263, 24826, 24953, 25174, 25175, 25184, 25283, 25288, 25294, 25355, 25617, 25628, 25632, 25656, 25785, 25790, 25811, 25923, 25948, 25970, 28615, 28617, 28619, 28622, 28660, 28677, 28644, 28643, 28639, 28825, 28823, 28805, 28826, 28824, 28818, 28817, 28625, 28147, 28924, 28922, 28932, 28929, 29010, 28992, 29227, 29249, 29285, 29286, 29306, 29642, 29574, 29572, 29589, 29588, 29606, 29586, 29621, 29620, 29768, 29770, 29773, 29758, 30124, 30833, 31735, 35451, 35606, 35672, 39097 and 50769 of 2017, decided on 4th May, 2018)

Headnote:(A) Constitution of India, 1950—Entry 52, List II, Article 366 (28)—Entry Tax—Legislature policy—Collection of taxes by State and not by local bodies on entry of goods into a local area—Legislative competence of State Legislature to enact a law for—Whether a tax is collected as a general tax or as local tax is to be a matter of legislative policy—State has all legislative competence to levy such tax. [Para 66]

       (B) U.P. Tax on Entry of Goods into Local Areas Act, 2007—Sections 3 and 4—‘Entry of goods’ and ‘local area’—State as a whole cannot be treated as ‘local area’ for purposes of entry of goods.

        [Para 57]

       (C) Constitution of India, 1950—Article 266—U.P. Tax on Entry of Goods into Local Areas Act, 2007—Section 14(2)—Entry tax levied and collected under Act would be credited to Uttar Pradesh Trade Development Fund and would exclusively be utilized for facilitating trade, commerce and industries—Whether violates Constitutional mandate of Article 266—Held proceeds of tax were required to be deposited in a separate fund and not Consolidated Fund of State not in violation of Article 266 of Constitution. [Paras 70 and 73]

       (D) U.P. Tax on Entry of Goods into Local Areas Act, 2007—Section 2(d)—Local area—Definition of—Inclusion of ‘Cantonment’—Investment with power to enact law providing for local self-Government, delimitation and other matters connected with administration of cantonment area—Held, does not mean that a cantonment area is beyond bounds of State in which that cantonment lies—It continues to be territory of State in respect of which State legislature has power to frame laws in respect of items enumerated in List II of Constitution of India—Hence contention that by including a cantonment within definition of local area State legislature has encroached upon field reserved for Union rejected. [Para 78]

       (E) U.P. Tax on Entry of Goods into Local Areas Act, 2007—Sections 2(d), 14, 4(3A)—Local area—Definition of—Whether entire State could be treated as one local area—Held definition of local area under Act does not treat entire State as one local area—Further provisions of Act particularly Section 2 (c), Section 4(6), Section4(3A), Section 6, Section 12 and Section 14 does not have effect of treating entire State as one local area. [Paras 86 to 94]

       (F) U.P. Tax on Entry of Goods into Local Areas Act, 2007—Sections 4 (1) and 15—Whether suffer from vice of excessive delegation of power—Legislature has not only provided sufficient guidelines to delegate by prescribing upper limit at which tax could be imposed—however a further check by providing that notification issued shall be subject to approval of State Legislature—Legislature has reserved with it power to annul notification or to approve subject to such modification as it may agree—Thus power conferred upon State Government is hedged with adequate check and balances which would keep State Government within bounds intended by legislature—There is no scope for delegate exceeding limits however where it does legislature would step in by annulling notification or modifying it in such manner as it may consider proper. [Para 100]

       (G) U.P. Tax on Entry of Goods into Local Areas Act, 2007—Section 7—Whether by grant of exemption under Section 7 State Government could make a hostile discrimination between goods or class of goods or class of dealers—Held exemption under Section 7 could be issued only where State Government was satisfied that it was expedient to grant such exemption in public interest—Notification issued under Section 7 pre-supposes a considered decision by State Government having regard to market conditions, availability of goods or such other factors it considers expedient in public interest—Notification had to be in respect ‘any goods’ or ‘class of goods’ or ‘class of dealers’—Thus permitting reasonable classification and three is no hostile discrimination between goods or class of goods or class of dealers. [Para 104]

       (H) U.P. Tax on Entry of Goods into Local Areas Act, 2007—Section 15—Power to remove difficulties—Whether power conferred under Section 15 is unfettered and uncanalised and State Government could exercise power discriminately and arbitrarily—Power under Section 15 could be exercised if any difficulty arises in giving effect to provisions of Act—Thus existence of a difficulty arising in giving effect to provisions of Act is a condition precedent to exercise of power and existence of condition if challenged has to be established as an objective fact—Where appropriate Government succeeds in establishing existence of difficulty as an objective fact it still has to establish that order issued is—(i) not inconsistent with provisions of Act—and (ii) measures provided thereby would result in removal of difficulty—In case Order issued is inconsistent with any provision of Act it would render Order vulnerable and so would be case where measures sought to be enforced do not remedy difficulty—Legislature has diligently put these restrictions to ensure that power under Section 15 is not used in a colourable manner as a substitute to rule making power. [Para 114]

       (I) U.P. Tax on Entry of Goods into Local Areas Act, 2007—Section 6—Entry Tax—Rebate on—Whether discriminatory—Giving rebate on clinker by Notification—Clinker is not produced in State—Hence there is no discrimination between goods imported with goods manufactured or produced in State—Article 304 (a) of Constitution of India not at attracted—As Article 304 (a) frowns upon discrimination between goods imported from other States with similar goods manufactured or produced in State—Further entry tax was levied at a uniform rate both on cement manufactured within State and that brought from outside State—There was no exemption or set off notification resulting in any discrimination between cement imported from outside and that manufactured within State—Held impost was absolutely non-discriminating and fully passing muster of Article 304(a). [Paras 116, 118, 119, 120 and 136]

       (J) U.P. Tax on Entry of Goods into Local Areas Act, 2007—Section 4—Notification issued by State Government under Section 4 specifying goods on which entry tax would be levied—Plea that State had selectively excluded other goods from preview of entry tax legislation thus making hostile discrimination—Propriety—Exemption notifications in respect of which it was alleged that it had resulted in discrimination found to be constitutionally valid—Provision of Act providing for grant of exemptions, set offs or rebate are not ipso facto arbitrary or discriminatory—However notification issued in exercise of such power may in a given case result in discrimination—For that validity of notification has to be specifically challenged—On fact that in petitions there is absolutely no pleading regarding any discrimination under Article 14 or Article 304 (a) of Constitution—Contention that provisions of Act relating to rebate, exemption and set off were discriminatory or violative of Article 14 or Article 304 (a) rejected. [Para 146]

       (K) Constitution of India, 1950—Entry 52 List II, Entry 41 read with Entry 83 of List I—U.P. Tax on Entry of Goods into Local Areas Act, 2007—Section 4—Petitioner Corporation which is paying custom duty on import of crude oil which is a subject covered by Union List—Entry tax on import of crude oil—Validity—Petitioner Corporation after receiving crude oil at Vadinar Port in VLCC stores same at storage tanks located at port—These storage tanks are bonded warehouses where crude oil is stored without payment of custom duty—However before same is removed from storage tanks for further transportation to Mathura Refinery through underground pipelines, it pays custom duty at custom barrier at Vadinar Port—This practice is being adopted since year 2005—Once crude oil crosses custom barrier at Vadinar Port upon payment of custom duty it becomes part of land mass—It enters State of U.P. and local area where Mathura Refinery is situated as part of land mass—Held as soon as crude oil enters local area taxable event takes place and liability to pay entry tax comes into existence. [Paras 149, 153 and 160]

       (L) U.P. Tax on Entry of Goods into Local Areas Act, 2007—Section 2 (h) proviso (iv), 4—Proviso (iv) to Section 2 (h) treats wholesale price of goods in a local area as value of goods for purpose of imposition of tax—Whether dehors provisions of Section 4—Entry tax is levied on value of goods—Under purview of Section 2 (h) value of goods is actual purchase price ascertainable from original purchase invoice or bill, and includes certain other charges like transportation cost etc.—It thus represents value of goods at time of entry into a local area which is taxable event—Proviso is an exception to main provision—Held proviso (iv) to Section 2 cannot be declared invalid. [Paras 177 and 180]

       (M) U.P. Tax on Entry of Goods into Local Areas Act, 2007—Section 12—Manufacturer—Realisation of tax—Plea that Section 12 mandates collection of entry tax even before taxable event takes place and is thus beyond legislative competence of State legislature—Propriety—Section 12 was only a machinery provision to facilitate collection of tax and prevent its evasion—It was neither illegal nor arbitrary nor resulted in shifting liability of person who in fact was liable under Act nor taxable event—Further contention in this regard is now of academic importance only, Act itself having been repealed since 1.7.2017. [Paras 187 and 188]

       Result: Petitions Dismissed.