Kamalasanan v. State of Kerala — 1997 DIGILAW 100 (KER)

Judgment :- 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. 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. 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 enables the State to make law of tax on the entry of goods into a local area for consumption, use or sale therein. The Act squarely comes within the ambit of the said entry. The Act is nothing to do with the import or export across customs frontiers. The liability of the petitioners to pay customs duty arises under the Customs Act and the payment of customs duty will not absolve their liability to pay entry tax. The issue raised by the petitioners are covered by various decisions of this Court and the Supreme Court. 7. I have heard counsel for the petitioners and learned Advocate General. The Division Bench of this Court in Rajan v. State of Kerala (1995 (2) KLT 369) had considered the question of the legislative competency of the legislature and held that they have the authority to levy of tax upon goods entering into local areas. The question now raised in reference to imported cars from abroad does not make a difference. The levy being on the entry of motor vehicles into local area, the question of the origin of the vehicle does not make any difference. In Shakthikumar M. Sancheti v. State of Maharashtra (1995 KLJ (Tax Cases) 293) the Supreme Court held that the charge is on the entry of vehicle into a local area for use or sale and not on its purchase. So long as the levy is on the entry of the vehicle into a local area for use or sale therein it cannot be said to be invalid merely because the measure of levy has been provided to be on purchase value or the motor vehicle. The Supreme Court also held that tax levied under different legislations enacted in exercise of constitutional power are not rendered bad on assumption that it amounts to double taxation. The taxable event for entry tax is not same as for octroi. 8. In Sanjay Trading Co. The Supreme Court also held that tax levied under different legislations enacted in exercise of constitutional power are not rendered bad on assumption that it amounts to double taxation. The taxable event for entry tax is not same as for octroi. 8. In Sanjay Trading Co. v. Commissioner of Sales Tax ((1994) 93 STC 589) a Division Bench of Madhya Pradesh High Court dealing with the entry tax held that it is true that the State Legislature is competent to levy entry tax only in respect of goods brought into a local area for the purpose of consumption, use or sale. Even where words of wide and general import are used, it has to be presumed that the Legislature was using the words in regard to activity in respect of its competence to legislate and to no other. Therefore, even if the words importer is used in sub-s.(2) of S.3 of the Act, the word had been defined as the person bringing motor vehicles into local area. It will not he referable to a person who imports from abroad. 9. In State of Bihar v. Bihar Chamber of Commerce ((1996) 103 STC 1) dealing with the Bihar Tax on Entry of goods into local area while upholding the constitutional validity the Supreme Court held that the entry tax is not a tax on sale. It is a tax of entry of the goods into local area. 10. The entry tax imposed by various legislatures of the country like Bihar, Madhya Pradesh, Andhra Pradesh have been upheld by the High Courts and the Supreme Courts. The purport of the provisions of the entry tax is for imposing a tax on the entry of the goods of the vehicle. The preamble to the Act states that this is an Act provided for levy of tax on entry. Though the object is stated to be for offsetting the loss of sales tax or curb the evasion of sales tax, the entry tax is not to be equated with the sales tax which is a different form of tax. 11. In Sutleg Cotton Mills Ltd. v. C. I. T. Calcutta (AIR 1991 SC 218) the Supreme Court referred with the approval of the observation of Rowlatt, J. in The Cape Brandy Syndicate v. Commissioner of Inland Revenue ((1921) 12 Tax. 11. In Sutleg Cotton Mills Ltd. v. C. I. T. Calcutta (AIR 1991 SC 218) the Supreme Court referred with the approval of the observation of Rowlatt, J. in The Cape Brandy Syndicate v. Commissioner of Inland Revenue ((1921) 12 Tax. case 358) which is as follows: "there is no room for any intendment; there is no equity about a tax: there is no presumption as to tax; you read nothing in; you imply nothing, but you look fairly at what is said and at what is said clearly and that is the tax". 12. Therefore, in the light of the clear provisions of the law on the subject and in the light of the clear provisions of the liability imposing a levy of tax, a contention that when there is no loss of sales tax the entry tax cannot be made is sustainable. 13. The last contention of learned counsel for the petitioners is that the exemption granted under the proviso to S.3 of the Act the vehicles registered prior to fifteen months is not made available to imported vehicles on the same reasoning and therefore, it violates Art.14 of the Constitution of India cannot also be sustained. A Constitution Bench of the Supreme Court in Federation of Hotel & Restaurant v. Union of India (AIR 1990 SC 1637) dealing with the applicability of the provision of Art.14 of the Constitution of India in the taxing statute held as follows: "It is now well settled that though taxing laws are not outside Art.14, however, having regard to the wide variety of diverse economic criteria that go into the formulation of a fiscal policy legislature enjoys a wide latitude in the matter of selection of persons, subject matter, events, etc, for taxation. The tests of the vice of discrimination in a taxing law are, accordingly, less rigorous. In examining the allegations of a hostile, discriminatory treatment what is looked, into is not its phraseology, but the real effect of its provisions. A legislature does not, as an old saying goes, have to tax everything in order to be able to tax something. If there is equality and uniformity within each group law would not be discriminatory. In examining the allegations of a hostile, discriminatory treatment what is looked, into is not its phraseology, but the real effect of its provisions. A legislature does not, as an old saying goes, have to tax everything in order to be able to tax something. If there is equality and uniformity within each group law would not be discriminatory. Decisions of this Court on the matter have permitted the legislatures to exercise an extremely wide discretion in classifying items for tax purposes, so long as it refrains from clear and hostile dismination against particular persons or classes. But, with all this latitude certain irreducible desiderata of equality shall govern classifications for differential treatment in taxation laws as well. The classification must be rational and based on some qualities and characteristics which are to be found in all the persons grouped together and absent in the others left out of the class. But this alone is not sufficient. Differential must have a rational nexus with the object sought to be achieved by the law. The State, in the exercise of its Government power, has, of necessity, to make laws operating differently in relation to different groups or class of persons to attain certain ends and must, therefore, possess the power to distinguish and classify persons or things. It is also recognised that no precise or set formula or doctrinaire tests or. precise scientific principles of exclusion or inclusion are to be applied. The test could only be one of palpable arbitrariness applied in the context of the felt needs of the times and societal exigencies informed by experience". 14. In R.K. Garg v. Union of India ((1981) 4 SCC 675) the Supreme Court while laying down principles to judge the constitutionality of legislation on the basis of Art.14 of the Constitution of India held as follows: "the Court must while examining the constitutional validity of a legislation in economic matters "be resilient, not rigid, forward looking, not static, liberal, not verbal". It must defer to legislative judgment in matters relating to social and economic policies and must not interfere, unless the exercise of legislative judgment appears to be palpably arbitrary". It must defer to legislative judgment in matters relating to social and economic policies and must not interfere, unless the exercise of legislative judgment appears to be palpably arbitrary". The Supreme Court in the case of State of Bihar v. Bihar Chamber of Commerce, referred above, dealing with the provision for exemption of tax held that the power to grant exemption has consistently been upheld by the Supreme Court in a number of decisions commencing from P.J. Irani v. State of Madras ((1962) 2 SCR 169). Such a provision is common feature in all the taxing enactments and many other enactments. 15. In Jaika Automobiles (P) Ltd. v. State ((1994) 92 STC 248) on the exemption granted in an entry tax matter a Division Bench of the Bombay High Court held that there is no arbitrariness. In that case also, there was a classification between 15 months old vehicle and the new vehicle. It was held that the classification had anexus with the object of the Act, and also itis a matter of policy decision. By this provision, the Government has specifically granted exemption to vehicles registered prior to 15 months or more, in any union Territory or any other State in India. This is a policy decision of the State to grant exemption in reference to such vehicles. They have consciously excluded the vehicles. The non-inclusion of a vehicle purchased or registered outside the State would not enable the petitioners to claim exemption for the imported vehicle. Accepting the arguments of the petitioners on the ground of discrimination would only mean quashing of this exemption on the ground of hostile discrimination. But the petitioners would not be in apposition to claim any relief on that score. It is seen that the provision of exemption as held by the Supreme Court is the scheme of the legislation in many of the enactments and it is the policy decision of the State. The vehicles registered in India under the provisions of the M.V. Act constituted a different and definite class than the vehicles imported from abroad. There is no comparison between these two classes of vehicle so as to claim any equality of treatment. The contention of learned counsel for the petitioners that the expression importer should be incorporated to mean an importer from outside the country also cannot be sustained. There is no comparison between these two classes of vehicle so as to claim any equality of treatment. The contention of learned counsel for the petitioners that the expression importer should be incorporated to mean an importer from outside the country also cannot be sustained. The Supreme Court in Union of India v. Deoki Nandan Aggarwal (AIR 1992 SC 96) while dealing with the power of the court and while interpreting the statute held as follows: "It is not the duty of the court either to enlarge the scope of the legislation or the intention of the legislature when the language of the provision is plain and unambiguous. The Court cannot rewrite, recast or reframe the legislation for the very good reason that it has no power to legislate. The power to legislate has not been conferred on the courts. The Court cannot add words to a statute or read words into it which are not there. Assuming there is a defect or an omission in the words used by the legislature the Court could not go to its aid to correct or make up the deficiency. Courts shall decide what the law is and not what it should be. The Court of course adopts a construction which will carry out the obvious intention of the legislature but could not legislate itself. But to invoke judicial activism to set at naught legislative judgment is subversive of the constitutional harmony and comity of instrumentalities". 16. The definition clause as well as the charging section is very clear. The legislature has consciously granted an exemption in favour of particular class of vehicles and I do not find any discrimination or arbitrariness in the said exemption or the denial of the same benefit to the petitioners' vehicle. For all these reasons I do not find any sustainable grounds in the petitions. Hence, the Original Petitions are dismissed.