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Gauhati High Court · body

2006 DIGILAW 1113 (GAU)

Bhartia Associates (P. ) Ltd. v. State of Assam

2006-12-14

I.A.ANSARI

body2006
JUDGMENT I.A. Ansari, J. 1. The State Legislature of Assam enacted the Assam Entry Tax Act, 2001 (in short, 'the AET Act, 2001') with a view to levying tax on the entry of goods into any local area, in Assam, for consumption, use or sale therein, the local area having been defined, in the Act itself, as the area comprised within the limits of a local authority including any area which has been or may hereafter be included in the Municipal Corporation of Guwahati, constituted under the Guwahati Municipal Corporation Act, 1969 (Assam Act K of 1973) or in the Municipality or Town Committee constituted under the Assam Municipal Act, 1956 or any area comprised within a Gaon Panchayat or an Anchalik Panchayat consitiuted under Assam Panchayat Act of 1994. The entire State has, thus, been divided, under the AET Act, 2001, into local areas as aforesaid. The entry tax, under the AET Act, 2001, is a single point tax as the entry tax can be levied only at one stage. Once entry tax has been paid, or liability has been incurred, on the entry of any of the scheduled goods into any local area, the entry tax cannot be levied thereafter, though the goods, which have been so taxed, may be moved from one local area to another local area and so on irrespective of the fact whether the movement of the scheduled goods, out of a local area, is by way of stock transfer, inter-state sale or sale in the course of export or import. This Act, thus, covers not only the vehicles bringing goods into the state, but also vehicles carrying goods from one local area of the state to another local area. However, those, who pay entry tax on import of goods into a local area of the state, were, initially, exempted from payment of local sales tax, when the goods, so imported, become liable to pay local sales tax. This exemption has been withdrawn in respect of a specified mode of sale of goods and it is such withdrawal of exemption, which forms the subject-matter of challenge in the present set of writ petitions. 2. This exemption has been withdrawn in respect of a specified mode of sale of goods and it is such withdrawal of exemption, which forms the subject-matter of challenge in the present set of writ petitions. 2. The petitioners herein, who are largely contractors and importers of 'cement' into the state of Assam, for use in the execution of works contracts, have challenged the provisions of Section 5 of the AET Act, 2001, as amended by the Assam Entry Tax Act, 2002, whereby the benefit of exemption from payment of sales tax is excluded in respect of transactions, which fall under Sub-clauses (ii), (iii) and (iv) of Section 2(33) of the Assam General Sales Tax Act, 1993, ('the AGST Act, 1993'), on two grounds, namely, (i) imposition of entry tax on the use of property for execution of works contract is unconstitutional inasmuch as levy of entry tax is not compensatory and is in violation of Article 304(b) of the Constitution of India; and (ii) the classification made by Section 5. pursuant to the Assam Entry Tax Act, 2002, is in violation of Article 14 of the Constitution of India inasmuch as the said classification is unreasonable, arbitrary, irrational, unconstitutional and has no nexus with the objects sought to be achieved thereby. In short, the petitioners are aggrieved by exclusion of Clause (ii) of Section 2(33) of the AGST Act, 1993, for, the effect of this exclusion is that the import of goods, used in execution of works contract, is not exempted from payment of local sales tax, though such use of goods is deemed, in law, as a sale. The AGST Act, 1993, stands, it may noted, replaced by the Assam Value Added Tax Act, 2005. 3. I have heard Mr. G.K. Joshi and Dr. A.K. Saraf, learned senior counsel, for the petitioners. The other learned Counsel, appearing on behalf of the remaining petitioners, have adopted the submissions made by Mr. G.K. Joshi and Dr. A.K. Saraf. I have also heard Mr. K.N. Choudhury, learned Additional Advocate General, Assam, appearing on behalf of the respondents. 4. 3. I have heard Mr. G.K. Joshi and Dr. A.K. Saraf, learned senior counsel, for the petitioners. The other learned Counsel, appearing on behalf of the remaining petitioners, have adopted the submissions made by Mr. G.K. Joshi and Dr. A.K. Saraf. I have also heard Mr. K.N. Choudhury, learned Additional Advocate General, Assam, appearing on behalf of the respondents. 4. The submissions made on behalf of the petitioners proceed thus: (i) With a view to making transfer of property in goods, involved in the execution of works contract, a sale, though such transfer of property is, ordinarily, not treated as a sale, Clause (29A) has been inserted into Article366 of the Constitution of India by the Constitution (Forty-sixth) Amendment Act, 1982, the effect of the amendment being that Article 366(29A) of the Constitution of India, now, permits the state to impose tax not only when actual sale of goods takes place but also when there is a transfer of property in goods involved in the execution of a works contract. Thus, the amendment, so made, enables the state to impose sales tax on the transfer of property in goods, involved in the execution of works contract, by treating or deeming such a transaction as a sale, though such a transaction is, ordinarily, not a sale. In terms of such a change in the definition of tax on the sale or purchase of goods incorporated by Clause 29A of Article 366, Section 2(33) of the AGST Act, 1993, which contains the definition of the term 'sale', has also been amended. As per the amended definition of 'sale', in the AGST Act, 1993, transfer of property in goods involved in execution of works contract shall be deemed to be a sale and such a deemed shall be liable to payment of local sales tax. Thus, the transfer of property in goods, involved in the execution of a works contract, is not an actual sale; yet such a transfer has been made a deemed sale in order to- enable the state Government to impose sales tax under the AGST Act, 1993. Thus, the transfer of property in goods, involved in the execution of a works contract, is not an actual sale; yet such a transfer has been made a deemed sale in order to- enable the state Government to impose sales tax under the AGST Act, 1993. In the backdrop of these changes in the definition of 'sale' in the AGST Act, 1993, when the AET Act, 2001, is considered, it would transpire that Section 2(2) states that all expressions used, but not defined in this Act and defined in the Assam General Sales Tax Act, 1993 (Assam Act XII of 1993) shall have the same meanings assigned to them as in the AGST Act, 1993. (ii) Thus, when the AET Act, 2001, does not define sale and applies the meaning of the word sale, as given in Section 2(33) of the AGST Act, 1993, to the word sale occurring in the AET Act, 2001, it logically follows that a sale, contemplated under the AET Act, 2001, would include transfer of property in goods, involved in the execution of a works contract, for, transfer of property in goods, involved in the execution of a works contract, is also a sale, though it is not an actual sale. In the backdrop of these changes in the meaning of the word 'sale', when Section 5 of the AET Act, 2001, as the same stood before its amendment by the Assam Entry Tax (Amendment) Act. 2002], is considered, it clearly transpires that when a person, having paid entry tax, under the AET Act, 2001, becomes liable to pay, under the AGST Act, 1993, sales tax in respect of the goods, which he has imported into a local area, then, the amount of tax payable under the AGST Act, 1993, shall be reduced by the amount of entry tax already paid by such a person under the AET Act, 2001. In short, according to the pro-amended Section 5, if one pays entry tax, he would not be liable to pay local sales tax irrespective of the fact as to whether the goods are imported into a local area from outside the state or from another local area for sale by the importer or for being used in the execution of a works contract by the importer. (iii) With the help of the amendment made in Section 5, what the Government has, now, done is that it has excluded Clauses (ii), (iii) and (iv) of Section 2(33) of the AGST Act, 1993, from the purview of Section 5 of the AET Act, 2001, the effect of this amendment being that while local sales tax is not imposed on goods, which enter into a local area for sale and actually sold therein, this exemption has not been extended to those, who import goods into a local area for the purpose of use in the execution of the works contract, though there is no distinction left between actual sale and deemed sale. Denial of this exemption, according to the writ petitioners, is unreasonable, arbitrary, discriminatory, irrational and has no nexus with the object sought to be achieved inasmuch as the object of the AET Act, 2001, is to levy tax on the entry of goods in order to curb the evasion of local sales tax. In short, though the petitioners are charged sales tax, under the AGST Act, 1993, for using the goods imported by them into a local area in execution of their works contract on the ground that such use of goods amounts to sate, they are not given the benefit of exemption from payment of local sales tax even if they have paid entry tax on import of the goods, into the local area, for the purpose of use thereof in execution of a works contract; whereas, a person, who is, otherwise, required to pay local sales tax for the actual sale of the goods imported into a local area, has been granted exemption from payment of local sales tax on the ground that he has paid entry tax in respect of the goods so imported. There is, submit the writ petitioners, no reasonable basis for such classification and may, therefore, be interfered with. That apart, the imposition of entry tax on the use of property in execution of works contract is, contends the writ petitioners, unconstitutional inasmuch as levy of entry tax is not compensatory and is in violation of Article 304(b) of the Constitution of India. In support of these submissions, reliance has been placed on Jagannath Baksh Singh v. State of U.P. AIR 1962 SC 1563 ; Builders' Assn. In support of these submissions, reliance has been placed on Jagannath Baksh Singh v. State of U.P. AIR 1962 SC 1563 ; Builders' Assn. of India v. Union of India (1989) 2 SCC 645 ; R.K. Garg v. Union of India (1981) 4 SCC 675 ; Sri Krishna Das v. Town Area Committee (1990) 3 SCC 645 ; Federation of Hotel & Restaurant Association of India v. Union of India (1989) 3 SCC 634 and Shashikant Laxman Kale v. Union of India (1990) 4 SSC 366. 5. Controverting the submissions made on behalf of the petitioners, respondents submit, thus: It is for the Legislature to decide on what articles a tax shall be imposed and on whom the liability to make payment of such a tax shall fall. When the Legislature, in their wisdom, have decided not to extend the benefit of exemption from payment of local sales tax to those, who import goods into a local area of Assam for the purpose of use in execution of works contract and pay entry tax thereon, the Legislature has acted within its legislative competence and such a choice exercised by the Legislature cannot be interfered with as arbitrary. This apart, the classification made under the AET Act, 2001 between those, who pay sates tax on actual sale, and those, who pay sates tax on deemed sale, cannot be said to be an irrational classification and such classification cannot be interfered with, for, in the process of making this classification, persons, similarly situated, have not been left out nor have the persons, who are not similarly situated, have been grouped together. In support of his submissions, Mr. Choudhury has placed reliance on the decision in Geo Miller & Co. (P.) Ltd. and Ors. v. State of M.P. and Ors. (2004) 5 SCC 209 . 6. Let me, now, determine the correctness or otherwise of the rival submissions made before me on behalf of the parties to the writ petitions. 7. In order to appreciate the real controversy, in issue, in the present set of writ petitions, it is necessary to look into the background in which transfer of property in goods involved in the execution of a works contract came to be regarded as a sale and became subject of levy under the sates tax laws. In State of Madras v. Gannon Dunkerly Co. In State of Madras v. Gannon Dunkerly Co. Madras Ltd. AIR 1958 SC 560 , the Supreme Court held that a works contract is an indivisible contract and turnover of the goods, used in the execution of works contract, would not, therefore, be exigible to sales tax. With the pronouncement of the decision in Gannon Dunkerly Co. Madras Ltd. (supra), it became unconstitutional for the Governments - Central as well as States - to levy sates tax on the turnover of goods used in the execution of works contracts. In order to overcome this difficulty, Parliament amended, with the help of the Constitution (Forty-sixth) Amendment Act, 1982, Article366 by introducing clause 29A into Article 366. With the amendment, so made, the relevant provisions of Article 366, now, read as follows: 366. Definitions. - In this Constitution, unless the context otherwise requires, the following expressions have the meanings hereby respectively assigned to them, that is to say: (29A) 'tax on the sale or purchase of goods" includes: (a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (c) a tax on the delivery of goods on hire-purchase or any system of payment by installments; (d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer delivery or supply is made; 8. A careful reading of Sub-clause (b) of clause 29A of Article 366 clearly shows that levy is payable on the transfer of property in the goods involved in the execution of a works contract and such transfer, delivery or supply of goods shall be a deemed sale of those goods by the person making transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, supply or delivery is made. In short, thus, a transfer of property in goods, involved in the execution of a works contract, by the person making the transfer, delivery or supply and a purchase of the goods by the person to whom such transfer, delivery or supply is made shall be deemed to be a sale. The insertion of clause 29A of Article 366 is clearly aimed at enlarging the scope of tax on sale or purchase of goods, for, the amendment brings into tax net not only those transactions, which are, ordinarily, regarded as sale, but also those transactions which are not, ordinarily, treated as sale, such as, transfer of property in goods involved in the execution of the works contract. These aspects become clearly discernible if one refers to Builders Association of India v. Union of India (1989) 2 SCC 645 , wherein the Apex Court, while explaining the concept of sales tax on the sale or purchase of goods used in the execution of a works contract, observed and held as follows: 32. Before proceeding further it is necessary to understand what Sub-clause (b) of Clause (29A) of Article 366 of the Constitution means. Article 366 is the definition clause of the Constitution. It says that in the constitution unless the context otherwise requires, the expressions defined in that article have the meanings respectively assigned to them in that article. The expression 'goods' is defined in Clause (12) of Article 366 of the Constitution as including all materials, commodities and articles. It is true that in State of Madras v. Gannon Dunkerley &, Co. (Madras) Ltd., this Court held that a works contract was an indivisible contract and the turnover of the goods used in the execution of the works contract could not, therefore, become exigible to sales tax. It was in order to overcome the effect of the said decision Parliament amended Article366 by introducing Sub-clause (b) of Clause (29A). (Madras) Ltd., this Court held that a works contract was an indivisible contract and the turnover of the goods used in the execution of the works contract could not, therefore, become exigible to sales tax. It was in order to overcome the effect of the said decision Parliament amended Article366 by introducing Sub-clause (b) of Clause (29A). Sub-clause (b) of Clause (29A) states that "tax on the sale or purchase of goods" includes among other things a tax on the transfer of property in the goods (whether as goods or in some other form) involved in the execution of a works contract. It does not say that a tax on the sale or purchase of goods included a tax on the amount paid for the execution of a works contract. It refers to a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract. The emphasis is on the transfer of property in goods (whether as goods or in some other form;. The latter part of Clause (29A) of Article 366 of the Constitution makes the position very clear. While referring to the transfer, delivery or supply of any goods that takes place as per Sub-clauses (a) to (f) of Clause (29A), the latter part of Clause (29A) says that "such transfer, delivery or supply of any goods" shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made. Hence, a transfer of property in goods under Sub-clause (b) of Clause (29A) is deemed to be a sale of the goods involved in the execution of a works contract by the person making the transfer and a purchase of those goods by the person to whom such transfer is made. Hence, a transfer of property in goods under Sub-clause (b) of Clause (29A) is deemed to be a sale of the goods involved in the execution of a works contract by the person making the transfer and a purchase of those goods by the person to whom such transfer is made. The object of the new definition introduced in Clause (29A) of Article 366 of the Constitution is, therefore, to enlarge the scope of tax on sale or purchase of goods' wherever it occurs in the Constitution so that it may include within its scope the transfer, delivery or supply of goods that may take place under any of the transactions referred to in Sub-clauses (a) to (f) thereof wherever such transfer, delivery or supply becomes subject to levy of sales tax. So construed the expression 'tax on the sale or purchase of goods' in entry 54 of the State List, therefore, includes a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract also. The tax leviable by virtue of Sub-clause (b) of Clause (29A) of Article 366 of the Constitution thus becomes subject to the same discipline to which any levy under entry 54 of the state List is made subject to under the Constitution. The position is the same when we look at Article 286 of the Constitution. Clause (1) of Article 286 says that no law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place - (a) outside the state; or (b) in the course of the import of the goods into, or export of the goods out of, the territory of India. Here again we have to read the expression 'a tax on the sale or purchase of goods' found in Article 286 as including the transfer of goods referred to in Sub-clause (b) of Clause (29A) of Article 366 which is deemed to be a sale of goods and the tax leviable thereon would be subject to the terms of Clause (1) of Article286. Similarly the restrictions mentioned in Clause (2) of Article 286 of the Constitution which says that Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in Clause (1) of Article 286 would also be attracted to a transfer of goods contemplated under Article 366(29A)(b). Similarly Clause (3) of Article286 is also applicable to a tax on a transfer of property referred to in Sub-clause (b) of Clause (29A) of Article 366. Clause (3) of Article 286 consists of two partis. Sub-clause (a) of Clause (3) of Article 286 deals with a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-state trade or commerce, which is generally applicable to all sales including the transfer, supply or delivery of goods which are deemed to be sales under Clause (29A) of Article 366 of the Constitution. If any declared goods which are referred to in Section 14 of the Central Sales Tax Act, 1956 are involved in such transfer, supply or delivery, which is referred to in Clause (29A) of Article 366, the sales tax law of a State which provides for levy of sales tax thereon will have to comply with the restrictions mentioned in Section 15 of the Central Sales Tax Act, 1956. Clause (b) is an additional provision which empowers Parliament to impose any additional restrictions or conditions in regard to the levy of sales tax on transactions which will be deemed to be sales under Sub-clause (b) or Sub-clause (c) or Sub-clause (d) of Clause (29A) of Article 366 of the Constitution. We do not find much substance in the contention urged on behalf of the States that since Sub-clause (b) of Clause (3) of Article 286 of the Constitution refers only to the transactions referred to in Sub-clauses (b), (c) and (d) of Clause (29A) of Article 366, the transactions referred to under those three sub-clauses would not be subject to any other restrictions set out in Clause (1) or Clause (2) or Sub-clause (a) of Clause (3) of Article 286 of the Constitution. It may be that by virtue of Sub-clause (b) of Clause (3) of Article 286 it is open to Parliament to impose some other restrictions or conditions which are not generally applicable to all kinds of sales. It may be that by virtue of Sub-clause (b) of Clause (3) of Article 286 it is open to Parliament to impose some other restrictions or conditions which are not generally applicable to all kinds of sales. That however cannot make the other parts of Article 286 inapplicable to the transactions which was deemed to be sales under Article 366(29A) of the Constitution. We are of the view that all transfers, deliveries and supplies of goods referred to in Clauses (a) to (f) of Clause (29A) of Article 366 of the Constitution are subject to the restrictions and conditions mentioned in Clause (1), Clause (2) and Sub-clause (a) of Clause (3) of Article 286 of the Constitution and the transfers and deliveries that take place under Sub-clauses (b), (c) and (d) of Clause (29A) of Article 366 of the Constitution are subject to an additional restriction mentioned in Sub-clause (b) of Article 286(3) of the Constitution. 9. From the observations made in Builders Association of India (supra), it becomes abundantly clear, if I may repeat, that in Gannon Dunkerly Co. Madras Ltd. (supra), the Apex Court held that turnover of the goods, used in the execution of the works contract, was not exigible to sales tax, for, a works contract is an indivisible contract. With the pronouncement of this decision, the Governments - both Central as well as States - were unable to levy sales tax on the turnover of the goods used in the execution of a works contract. By inserting Clause 29A to Article 366, it became constitutionally possible for the Government to impose sales tax on the transfer of property, in the goods involved in the execution of a works contract, by deeming such a transfer of property, in the goods, as a sale. 10. In terms of the amendment of Article 366, the expression 'a tax on sale or purchase of goods', occurring in Entry 54 of the State List, now, includes a tax on the transfer of property in goods involved in the execution of a works contract. Under Entry 54, therefore, it is, now, possible for the state to impose sales tax not only on actual sale or purchase of goods, but also on the transfer of property in goods involved in the execution of a works contract by deeming such a transfer of property in goods too as a sale. Under Entry 54, therefore, it is, now, possible for the state to impose sales tax not only on actual sale or purchase of goods, but also on the transfer of property in goods involved in the execution of a works contract by deeming such a transfer of property in goods too as a sale. Viewed thus, it is clear that with the amendment of Article 366, both actual sale as well as deemed sale fall within the same genre. 11. No wonder, therefore, that in terms of the amendment of Article 366, the definition of 'sale', contained in Section 2(33) of the AGST Act, 1993, has also been amended making transfer of property, in the goods, involved in the execution of works contract, a sale. With the amendment so made. Section 2(33) reads as follows: 2(33). "sale" with all the grammatical variations and cognate expressions means any transfer of property in goods by any person for cash, deferred, payment or other valuable consideration, and includes: (i) any transfer otherwise than in pursuance of a contract of property in any goods for cash, deferred payment or other valuable consideration; (ii) any transfer of property in goods (whether as goods or in some ' other form) involved in the execution of a works-contract; (iii) any delivery of goods on hire purchase or any system of payment by installments or under a financial lease; (iv) any transfer of the use of any goods under an operating lease; (v) any supply of goods by an unincorporated association or a body of persons to a member thereof for cash, deferred payment or other valuable consideration; (vi) any supply, by way of or as part of any service or in any other manner whatsoever of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service is for cash, deferred payment or other valuable consideration; 12. The AET Act, 2001, it may, now, be recalled, has been enacted by the state Legislature of Assam with a view to levying tax on the entry of goods into any local area, in Assam, for consumption, use or sale therein. This piece of legislation has been enacted by virtue of powers under Article 246(3)read with Entry 52 of the state List. This piece of legislation has been enacted by virtue of powers under Article 246(3)read with Entry 52 of the state List. In order to appreciate the scheme of taxation, embodied in the AET Act, 2001, one may take note of the Preamble and also of the Statement of objects and reasons of the Act, which read as follows: PREAMBLE: Whereas it is expedient to provide for an imposition of a tax on the entry of goods into any local area in Assam for consumption, use or sale therein and for matters connected therewith. STATEMENT OF OBJECTS AND REASONS It has come to the notice of the Government that many bulk consumers such as tea companies, oil companies etc., take recourse to inter state purchase several items required for their own consumption with a view to availing benefit of lower rate of tax under the Central Sales Tax Act. This practice deprives the state of a substantial amount of revenue. 2. Further it is observed that due to disparity in the rate of tax in different States, motor vehicles are purchased outside the state and then brought into the state for use. 3. In order to curb such losses of revenue and thereby mobilize additional; resources, the Govt. has decided to levy tax on entry of selected items, including motor vehicles, which are imported into Assam from other states for own use and consumption. This Bill seeks to achieve above objects. 13. A careful reading of the Preamble and the Statements of objects and reasons of the impugned Act shows that this Act has been enacted with a view to arresting evasion of sales tax, i.e., the tax leviable under the AGST Act, 1993. In other words, when the state found that the transactions, which were, otherwise, amenable to payment of local sales tax, were escaping payment of local sales tax, it decided to levy entry tax on the very entry of the goods into any local area of the state from outside the state or from another local area. The Legislature, therefore, introduced levy of entry tax with the help of the AET Act, 2001. 14. The Legislature, therefore, introduced levy of entry tax with the help of the AET Act, 2001. 14. Section 3 of the AET Act, 2001, is the charging section and this section provides that tax shall be leviable upon entry of the goods, specified in the Schedule to the Act, into any local area for consumption, use or sale therein at the rate shown against each item in the Schedule and such tax shall be paid by every importer of such goods. 15. When Section 3 is read, in the light of what the Preamble and also the Statements of objects and reasons of the impugned Act reflect, it becomes abundantly clear that entry tax is leviable on the entry of goods into a local area from another local area or from outside the state if such entry is for the purpose of consumption, use or sale therein. The question, now, is as to whether the word sale, which occurs in Section 3, means only transfer of property in the goods or the word 'sale', appearing in Section 3, includes the concept of deemed sale as conveyed by clause 29A of Article 366 and Section 2(33) of the AGST Act, 1993. While considering this aspect of the case, it may be noted that Section 2(2) reads as follows : . 2. All expressions used but not defined in this Act and defined in ['the Assam Value Added Tax Act, 2003 (Assam Act No. VIII of 2005] shall have the same meanings assigned to them in that Law. 16. From what have been indicated above, it becomes transparent that all expressions used in the AET Act, 2001, but not defined in the said Act, shall have the same meaning as assigned to them under the AGST Act, 1993, or the Assam Value Added Tax Act, 2003. Thus, the AET Act, 2001, does not define sale, but makes it clear that a transaction, which is defined as sale in the AGST Act, 1993, shall be treated as sale for the purpose of the AET Act, 2001. Viewed thus, it is clear that the definition of sale, contained in Section 2(33) of the AGST Act, 1993, shall, unless, otherwise, indicated, be applicable to the AET Act, 2001, too. Viewed thus, it is clear that the definition of sale, contained in Section 2(33) of the AGST Act, 1993, shall, unless, otherwise, indicated, be applicable to the AET Act, 2001, too. To be more precise, under Section 3 of the AET Act, 2001, when the goods enter into any local area for the purpose of actual sale or for the purpose of being used in the execution of a works contract, such entry would be exigible not only to entry tax, but also to local sales tax. The question, now, is if the amendment of Section 5 has made, as alleged by the writ petitioners, any discrimination in levying local sales tax on these two types of sale therein irrespective of the fact whether there is an actual sale by transfer of property in goods or there is a deemed sale by way of use of the goods in execution of a works contract. 17. My quest for an answer to the question, posed above, brings me to Section 5 of the AET Act, 2001. This section grants exemption from payment of entry tax by an importer of goods into a local area for sale therein. Section 5, as the same stood before, it underwent amendment by the AET (Second) Amendment Act, 2002 (which is under challenge in these writ petitions) read as follows: 5. Reduction in tax liability - Where an importer who has paid tax under the Act becomes liable to pay tax under the Assam General Sales Tax Act, 1993 (Assam Act No. XII of 1993') in respect of the same goods then the amount of tax payable under the Assam General Sales Tax Act, 1993 (Assam Act XII of 1993) shall be reduced by the amount of tax paid under this Act. 18. With the amendment, which Section 5 has undergone with effect from 9.5.2002, Section 5, now, reads as follows: 5. Exemption from tax. 18. With the amendment, which Section 5 has undergone with effect from 9.5.2002, Section 5, now, reads as follows: 5. Exemption from tax. - Notwithstanding anything contained in Section 3and Section 4, and subject to production of documentary proof, no tax under this Act shall be levied in respect of specified goods which are also subject to levy of tax under the provisions of the Assam General Sales Tax Act, 1993: (i) if the sales of such specified goods inside the state, made by the importer are sales within the meaning of Clause (33) of Section 2 of the said Act, excepting sales falling under Sub-clause (ii), (iii) and (iv) of the said clause and if he is liable to pay tax on such sales as a registered dealer under the Assam General Sales Tax Act, 1993; (ii) if the sales of such specified goods are made by the importer in the course of interstate trade or commerce or in the course of export out of the territory of India or such goods are otherwise dispatched outside the state by way of such transfer and if he is a registered dealer under the Central Sales Tax Act, 1956. 19. What unamended Section 5 indicated was that when an importer, who has paid entry tax, becomes liable to pay local sales tax, then, the amount of tax payable under the local sales tax law shall be reduced by the amount of entry tax already paid under the AET Act, 2001. This was consistent with the object, which the AET Act, 2001, sought to achieve, for, the AET Act, 2001, as already indicated hereinabove, aimed at imposing entry tax on those goods, which, otherwise, escaped imposition of local sales tax. 20. However, with the amendment of Section 5, what has happened is that henceforth, while ascertaining if an importer is entitled to exemption from payment of local sales tax, entry tax paid by the importer on the import of goods, which are utilized in execution of a works contract, will not be taken into account, for, Section 5(i) specifically excludes Sub-clauses (ii), (iii) and (iv) of clause 33 of Section 2 of the AGST Act, 1993, from the purview of the definition of 'sale' under the AET Act, 2001. It is the exclusion of the transactions, falling under Sub-clauses (ii), (iii) and (iv) of Section2(33) of the AGST Act, 1993, by the amendment of Section 5 of the AET Act, 2001, which is under challenge in the present set of writ petitions on the ground that Section 5 makes a discrimination between actual sale and deemed sale, though both types of transactions amount to sale within the meaning of sale under the sales tax laws. The classification between actual sale and deemed sale, while granting exemption from payment of local sales tax, is, according to the petitioners, a hostile discrimination and has no rational nexus with the object sought to be achieved by the AET Act, 2001, for, the object is to arrest evasion of local sales tax and when entry tax has been paid by an importer, he shall not be made to pay local sales tax too merely for the reason that he has imported the goods for being used in the execution of works contract and not for sale, though no distinction under the local sales tax law exists between the said two types of sale. The distinction, so drawn, is, according to the petitioners, discriminatory and violative of Article 14 of the Constitution of India. 21. While considering the question of discrimination, which has been raised in the present set of writ petitions, it needs to be noted that a taxing statute is also a law within the meaning of Article 13 of the Constitution and, hence, validity of a provision of a taxing statute can be challenged not only on the ground of lack or absence of legislative competence, but also on the ground of violation of the Fundamental Rights guaranteed under Part-Ill of the Constitution of India. Though it is entirely for the Legislature to select the subject on which a tax shall be imposed and the class of persons, who shall be made liable to pay a particular tax, the fact remains that even a taxing statute cannot be discriminatory, while selecting the subject on which tax can be imposed or the class of persons, who shall be made liable to pay such a tax. Article 14 does not prohibit, let us remember, class legislation; but it certainly prohibits similar treatment to two dissimilarly situated persons or dissimilar treatment to two similarly situated persons. Article 14 does not prohibit, let us remember, class legislation; but it certainly prohibits similar treatment to two dissimilarly situated persons or dissimilar treatment to two similarly situated persons. A taxing statute can be held to be violative of Article 14 if it imposes a levy on two dissimilarly situated groups of people or when the taxing statute, while imposing a levy, treats two similarly situated groups of people differently, for, such a levy would lead to obvious inequality. A Legislature is competent to classify persons or properties into different categories and tax them differently; but this is possible only when the classification made by the Legislature is rational and reasonable. A rational and reasonable classification is one, which includes all similarly situated persons and treats them alike. Necessarily, therefore, a reasonable and rational classification would not exclude one, who is similarly situated with the one, who stands included in such a classification. In order to ascertain if a person is similarly situated as against the person, who is said to have been discriminated, imperative it is that one looks beyond the classification and determine the rationale and objective behind such an enactment. If the rationale and objective is sustainable, classification cannot be interfered with. In Jagannath Baksh Singh v. State of U.P. AIR 1962 SC 1563 , the Constitution Bench, speaking through PB Gajendragadkar, J, observed and held as follows: A taxing statute can be held to contravene Article 14 if it purports to impose on the same class of property similarly situated an incidence of taxation which leads to obvious inequality. There is no doubt that it is for the Legislature to decide on what objects to levy what rate of tax and it is not for the courts to consider whether some other objects should have been taxed or whether a different rate should have been prescribed for the tax. It is also true that the Legislature is competent to classify persons or properties into different categories and tax them differently, and if the classification thus made is rational, the taxing statute cannot be challenged merely because different rates of taxation are prescribed for different categories of persons or objects. It is also true that the Legislature is competent to classify persons or properties into different categories and tax them differently, and if the classification thus made is rational, the taxing statute cannot be challenged merely because different rates of taxation are prescribed for different categories of persons or objects. But, if in its operation, any taxing statute is found to contravene Article 14, it would be open to courts to strike it down as denying to the citizens the equality before the law guaranteed by Article 14. 22. I have already pointed out above, while discussing the effect of the amendment of Article 366 by insertion of Clause (b) of clause 29A thereto and the consequential amendment made in the definition of sale in Section 2(33) of the AGST Act, that a tax on sale or purchase of goods would include, within its sweep, transfer of property in goods used in the execution of works contract. Thus, with the amendments, as indicated hereinbefore, both actual and deemed sale fall within the same genre. If both the transactions of sale, i.e., actual sale, as contemplated in Section 2(33)(i) of the AGST Act, and a deemed sale, as envisaged by Section 2(33)(ii) of the AGST Act, are of the same genre, then, what could have been the rationale and objective in making a distinction between the two, is the question, which the present writ petitioners have raised for determination by this Court, for, by the AET (Second) Amendment Act, 2002, what has been done is that while payment of entry tax exempts from payment of local sales tax those persons, who have actually sold goods by importing the same into a local area of the state from outside the state or from another local area of the state, no such exemption is extended to those, who pay local sales tax on the goods, which they import, into a local area, for use in the execution of works contract. 23. While considering the above aspect of the matter, it may be emphasised that Article 14 does not forbid reasonable classification of persons, objects and transactions by the Legislature for the purpose of attaining specific ends. 23. While considering the above aspect of the matter, it may be emphasised that Article 14 does not forbid reasonable classification of persons, objects and transactions by the Legislature for the purpose of attaining specific ends. What is, however, necessary to pass the test of permissible classification, under Article 14, is that the classification must not be arbitrary, artificial or evasive, but must be based on some real and substantial distinction bearing a just and reasonable relation to the object sought to be achieved by the Legislature by making such a classification. Reference made by Dr. Saraf to the case of R.K. Garg (supra) cannot, therefore, be said to be misplaced, wherein the Apex Court has observed and held thus: That takes us to the principal question arising in the writ petitions namely, whether the provisions of the Act are violative of Article 14 of the Constitution. The true scope and ambit of Article 14 has been the subject-matter of discussion in numerous decisions of this Court and the propositions applicable to cases arising under that Article have been repeated so many times during the last thirty years that they now sound platitudinous. The latest and most complete exposition of the propositions relating to the applicability of Article 14 as emerging from "the avalanche of cases which have flooded this Court" since the commencement of the constitution is to be found in the judgment of one of us (Chandrachud, J., as he then was) in. In re. The Special Courts Bill, 19.78. It not only contains a lucid statement of the propositions arising under Article 14, but being a decision given by a Bench of seven Judges of this Court, it is binding upon us. That decision sets out several propositions delineating the true scope and ambit of Article 14 but not all of them are relevant for purpose and hence we shall refer only to those which have a direct bearing on the issue before us. They clearly recognise that classification can be made for the purpose of legislation but lay down that, 1. That decision sets out several propositions delineating the true scope and ambit of Article 14 but not all of them are relevant for purpose and hence we shall refer only to those which have a direct bearing on the issue before us. They clearly recognise that classification can be made for the purpose of legislation but lay down that, 1. The classification must not be arbitrary but must be rational, that is to say, it must not only be based on some qualities or characteristics which are to be found in all the persons grouped together and not in others who are left out but those qualities or characteristics must have a reasonable relation to the object of the legislation. In order to pass the test, two conditions must be fulfilled, namely, (1) that the classification must be founded on an intelligible differentia which distinguishes those that are grouped together from others and (2) that differentia must have a rational relation to the object sought to be achieved by the Act. 2. The differentia which is the basis of the classification and the object of the Act are distinct things and what is necessary is that there must be a nexus between them. In short, while Article 14 forbids class discrimination by conferring privileges or imposing liabilities upon persons arbitrarily selected out of a large number of other persons similarly situated in relation to the privileges sought to be conferred or the liabilities proposed to be imposed, it does not forbid classification for the purpose of legislation, provided such classification is not arbitrary in the sense above mentioned. It is clear that Article 14 does not forbid reasonable classification of persons, objects and transactions by the Legislature for the purpose of attaining specific ends. What is necessary in order to pass the test of permissible classification under Article 14 is that the classification must not be "arbitrary, artificial or evasive" but must be based on some real and substantial distinction bearing a just and reasonable relation to the object sought to be achieved by the Legislature. The question to which we must therefore address ourselves is whether the classification made by the Act in the present case satisfies the aforesaid test or it is arbitrary and irrational and hence violative of the equal protection clause in Article 14. 24. The question to which we must therefore address ourselves is whether the classification made by the Act in the present case satisfies the aforesaid test or it is arbitrary and irrational and hence violative of the equal protection clause in Article 14. 24. In the case of Federation of Hotel and Restaurant Association of India (supra), the Apex Court has further clarified that a reasonable classification is one, which includes all who are similarly situated, and none who are not and that in order to ascertain whether persons are similarly placed, one must look beyond the classification and to the purpose of law. 25. Broadly in tune with the decision, in Federation of Hotel and Restaurant Association of India (supra), that in order to determine if the classification made is reasonable, the courts shall look beyond the classification and to the purpose of the law, the Apex Court, in Sashikant Laxman Kale (supra), has pointed out that a court, while determining a question of reasonable classification, must look beyond the ostensible classification and at the real purpose of the law in order to determine the reasonableness of the classification. The Apex Court, in Sashikant Laxman Kale (supra), has further indicated the manner in which the purpose or object of a legislation can be determined. The relevant observations, made in Sashikant Laxman Kale (supra), are reproduced hereinbelow: 25. It is first necessary to discern the true purpose or object of the impugned enactment because it is only with reference to the true object of the enactment that the existence of a rational nexus of the differentia on which the classification is based, with the object sought to be achieved by the enactment, can be examined to test the validity of the classification. In Francis Bennion's Statutory Interpretation (1984 edn.), the distinction between the legislative intention and the purpose or object of the legislation has been succinctly summarised at p. 237 as under: The distinction between the purpose or object of an enactment and the legislative intention governing it is that the former relates to the mischief to which the enactment is directed and its remedy, while the latter relates to the legal meaning of the enactment. 16. There is thus a clear distinction between the two. 16. There is thus a clear distinction between the two. While the purpose or object of the legislation is to provide a remedy for the malady, the legislative intention relates to the meaning or exposition of the remedy as enacted. While dealing with the validity of a classification, the rational nexus of the differentia on which the classification 'is based has to exist with the purpose or object of the legislation, so determined. The question next is of the manner in which the purpose or object of the enactment has to be determined and the material which can be used for this exercise. 17. For determining the purpose or object of the legislation, it is permissible to look into the circumstances which prevailed at the time when the law was passed and which necessitated the passing of that law. For the limited purpose of appreciating the background and the antecedent factual matrix leading to the legislation, it is permissible to look into the Statement of Objects and Reasons of the Bill which actuated the step to provide a remedy for the then existing malady. In A. Thangal Kunju Musaliar v. M. Venkitachalam Potti, the Statement of Objects and Reasons was used for judging the reasonableness of a classification made in an enactment to see if it infringed or was contrary to the Constitution. In that decision for determining the question, even affidavit on behalf of the state of "the circumstances which prevailed at the time when the law there under consideration had been passed and which necessitated the passing of that law" was relied on. It was reiterated in State of West Bengal v. Union of India, that the Statement of Objects and Reasons accompanying a Bill, when introduced in Parliament, can be used for the limited purpose of understanding the background and the antecedent state of affairs leading up to the legislation'. Similarly, in Pannalal Binjraj v. Union of India a challenge to the validity of classification was repelled placing reliance on an affidavit filed on behalf of the Central Board of Revenue disclosing the true object of enacting the impugned provision in the Income Tax Act. 26. Similarly, in Pannalal Binjraj v. Union of India a challenge to the validity of classification was repelled placing reliance on an affidavit filed on behalf of the Central Board of Revenue disclosing the true object of enacting the impugned provision in the Income Tax Act. 26. From what have been observed in Sashikant Laxman Kale (supra), it becomes abundantly clear that while determining the validity of a classification, the court has to determine the rational nexus of the differentia on which the classification is based and the rational nexus would obviously warrant the court to determine the purpose or object with which the legislation has been made. From the decision in Sashikant Laxman Kale (supra), it is also clear that for the purpose of determining the purpose or object of a legislation, it is permissible to look into the statement of objects and reasons of the Bill, which actuated the stale to provide a remedy by making the classification. 27. I have already indicated above that the object of the AET Act, 2001, is to realize sales tax from those transactions, which, otherwise, used to escape payment of sales tax. If the object was to arrest evasion of sales tax due to the State under the AGST Act, 1993, it logically follows that one, who pays local sales tax, shall not be liable to pay entry tax. What has, however, happened, in the present case, is that with the amendment of Section 5 by the AET Act, 2002, while those, who import goods into a local area for sale therein, are exempted from payment of sales tax on the ground that they have paid entry tax, those, who import goods into a local area for using the same in execution of works contract, are hot granted such exemption. The classification made between the two groups of people does not result into achieving the object with which the AET Act, 2001, has been enacted, for, when the object is not to impose sales tax on those, who pay entry tax, and when the object is to arrest evasion of sales tax, there is no reason as to why one, who has already paid entry tax, shall be made to pay local sales tax even when by making payment of entry tax, he has served the object of the Act. 28. 28. With regard to the above, it is worth noticing that the state Government has contended that those transfer of property in goods, which are involved in the execution of works contract and come within the purview of deemed sale, fall in a category different from the ones, which fall within the meaning of actual sale. Thus, a distinction is, now, sought to be drawn by the state between a person, who imports goods into the state of Assam and sells the same inside the. state of Assam, and a person, who imports goods for using the same in execution of his works contract. The object of the AET Act, 2001, was never to tax those, who pay sales tax in respect of transactions, which are covered under the AGST Act, 1993. When Article 366(29A) has removed tin-distinction between actual and deemed sale and when the object of the AET Act, 2001, is not to impose entry tax on those, who pay sales tax. the distinction so drawn by the state cannot but be held to be discriminatory. Situated thus, I find considerable force in the submissions, made on behalf of the petitioners, that the classification sought to be made by the impugned amendment is not based on any intelligible differentia and has no rational or reasonable nexus with the object, which is sought to be achieved by such classification. It is well settled, if I may reiterate, that for sustaining a classification made by a statute, those, who are similarly situated, must be put together as against those, who are dissimilarly situated. When the distinction between actual sale and deemed sale has been removed and when the object of the AET Act, 2001, is not to impose local sales tax on those, who pay entry tax, the persons, who pay entry tax for importing goods into a local area and use the same in their works contract, cannot be made to pay local sales tax too by segregating them from those, who import goods, into a local area, for the purpose of sale therein. 29. While considering the present writ petitions, it may be noted that in order to sustain imposition of a tax, three essential conditions have to be satisfied. 29. While considering the present writ petitions, it may be noted that in order to sustain imposition of a tax, three essential conditions have to be satisfied. First, the imposition of tax must be within the competence of the Legislature imposing it; secondly, the tax imposed must be for public purpose and, thirdly, the levy shall not violate the rights guaranteed by Part III of the Constitution, for, a taxing statute is also subject to Article 14, though larger discretion is granted to the Legislature for the purpose of making classification in taxing statute. As already indicated above, the object of the AET Act, 2001, is to arrest evasion of local sales tax. It is certainly not to tax twice over a person, who has already paid local sales tax. The unamended Section 5 of the AET Act was, thus, in tune with the object of the impugned Act, for, Section 5 did not make any distinction between those, who are covered by Section 2(33)(i) of the AGST Act, 1993, and those, who fall under Section 2(33)(ii) of the AGST Act, 1993. While the object of the Act still remains not to impose local sales tax on those, who fall under Section 2(33)(ii), the amendment, in question, seeks to impose tax on those, who are covered by Section 2(33)(ii). Thus, though the object sought to be achieved by the enactment has not changed, the amendment, in question, seeks to achieve what the enactment never intended to achieve. Hence, the impugned amendment, if allowed to continue, would defeat the object with which the AET Act, 2001, was enacted. Had the legislative intendment was to impose entry tax irrespective of the fact as to whether local sales tax has been paid or not, the Legislature would have been free not to impose sales tax on those, who fall under Section 2(33) (ii), and tax those, whose cases fall under Section 2(33)(ii); but when the object of the enactment is not to realize sales tax from those, who pay entry tax, not granting of exemption from payment of sales tax to those, who pay sales tax for importing the goods for being used in execution of works contract has to be held as discriminatory. In other words, had the entry tax been payable irrespective of the factum of payment of local sales tax, the Legislature would have still been free not to tax those, who fall under Section2(33)(i), and tax those, whose case fall under Section 2(33) (ii); but when the object of the Act is not to realize sales tax from those, who pay entry tax, imposition of sales tax on those, who fall under Section 2(33)(ii), cannot be justified. 30. As already indicated above, the state relies on the decision of the Apex Court, in Geo Milter & Co. (supra), for imposing tax on those, who fall under Section 2(33)(ii) of the AGST Act, 1993. While considering the decision in Geo Miller & Co. (supra), it needs to be noted that a decision is an authority for what it actually decides and not what can be deduced therefrom. The glaringly noticeable and distinctive features of the case in Geo Miller & Co. (supra) cannot be ignored. In Geo Miller & Co. (supra), which arose out of the imposition of entry tax under the MP Entry Tax Act, 1976, the question raised was whether entry tax could have been imposed upon the goo's, which were meant for use in the execution of works contract, when the said Act had been enacted for the purpose of levy of entry lax on consumption or use, but not for sale thereof. The assessee contention, in Geo Miller & Co. (supra), was that since the definition of the word 'sale', occurring in Article 366(29A), includes transfer of property in goods, in execution of works contract, the same meaning should be adopted in the MP Entry Tax Act, 1956. Rejecting this contention, the Apex Court pointed out that MP Entry Tax Act had specifically excluded the definition of "goods" and "sale", which occur in MP Sales Tax Act, and, hence, imposition of sales tax on goods used in execution of works contract cannot be said to be outside the purview of the MP Entry Tax Act, 1976. In the case at hand, however, entry tax has been imposed not merely on consumption or use of the goods, but also when the goods are imported into a local area for the purpose of sale therein. In the case at hand, however, entry tax has been imposed not merely on consumption or use of the goods, but also when the goods are imported into a local area for the purpose of sale therein. Thus, no distinction is left between actual sale and deemed sale, particularly, when the object of the AET Act, 2001, is not to impose sales tax on those, who pay entry tax, and since the petitioners pay entry tax for import of goods used in execution of works contract, they cannot be saddled with the liability to pay local sales tax too. More importantly, in Geo Miller & Co. (supra), the issue was not that there is a class of people, who do not pay local sales tax, though they are, otherwise, liable to pay local sales tax; whereas in the case at hand, basic case of the petitioners is that while they pay entry tax, sales tax is also imposed on them despite the fact that the object of the Act remains not to impose local sales tax on those, who pay entry tax. This is, according to the petitioners, is palpably discriminatory. The State respondents have not been able to explain as to how this classification can be said to be rational. 31. What logically follows from the above discussion is that the amendment of Section 5, by virtue of the impugned AET (Second) Amendment Act, 2002, is not sustainable in law and must, therefore, be interfered with. 32. In the result and for the reasons discussed above, these writ petitions succeed. The amendment to Section 5 made by the impugned AET (Second) Amendment Act, 2002, is hereby set aside and quashed. The State respondents shall exempt the petitioners from making payment of local sales tax, on the goods imported by them into a local area from another local area or from outside the state of Assam for the purpose of use thereof in execution of their work contracts, to the extent that the petitioners pay entry tax on import of such goods to the local area. 33. Before parting with this set of writ petition, it may be pointed out that in ITC Ltd. and Ors. 33. Before parting with this set of writ petition, it may be pointed out that in ITC Ltd. and Ors. v. State of Assam and Ors., decided on 17.11.2006, this Court has held that so far as levy of entry tax, under the AET Act, 2001, on goods other than those in respect whereof President's sanction under proviso to Article 304(b) was obtained, is violative of Article 304(b) of the Constitution of India and, hence, ultra vires. These goods on which entry tax is payable include cement. Hence, if cement is imported into any local area of the state from another local area or from outside the State, entry tax is leviable on such import of cement if the import is for consumption, use or sale. Logically, therefore, if the cement, so imported, is used in execution of works contract, entry tax would be payable; however, if entry tax is paid, the importer, in such a case, would not be liable to pay, as held above, focal sales tax. 34. With the above observations and directions, these writ petitions shall stand disposed of. 35. No order as to costs.