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2019 DIGILAW 1115 (GAU)

Riangdo Veneers (P. ) Ltd. v. State of Assam

2019-09-27

UJJAL BHUYAN

body2019
ORDER : 1. This order will dispose of the above bunch of cases. 2. Heard Dr. Ashok Saraf, learned senior counsel, Mr. D. Saraf, Mr. A. Tiwari, Mr. I.H. Borbhuiyan and Mr. G. Khandelia, learned counsel for the petitioners. Also heard Mr. D. Mazumdar, learned senior counsel and Additional Advocate General, Assam, assisted by Mr. S. Dutta, learned standing counsel, Forest Department for the respondents. 3. Issue raised in all the writ petitions is the same, i.e., legality and correctness of notification dated 63.2017, issued by the Principal Secretary to the Government of Assam, Environment and Forest Department, enhancing levy on transportation of timber, non-timber forest produce and minor minerals entering Assam through inter-State boundaries from the neighbouring States. 4. Shorn of details, petitioners have processing units and factories in States other than Assam, mostly in the State of Meghalaya. 5. Finished products are sold within the State of Meghalaya and to various manufacturing units situated in other States including the State of Assam in the course of inter-State trade and commerce. 6. Consignments of sawn timber, etc., are transported to different States within the North-Eastern region through taxation checkposts set up by State of Assam. Earlier, an amount of Rs. 10 per truck was levied on forest produce entering into the State of Assam. Quantity of timber carried by a truck was not the determining factor for such levy as in all cases such levy was Rs. 10 per truck. 7. However, on 6.3.2017, Environment and Forest Department, Government of Assam issued the impugned notification enhancing the levy on transportation of timber, non-timber forest produce and minor minerals entering Assam through the inter-State boundaries from the neighbouring States. While enhancing the levy quite steeply for nontimber forest produce like stone, sand, earth and other minor minerals, rate of levy fixed is per truck basis. However, in case of timber, the rate of levy fixed is Rs. 600 per cubic metre. The notification mentions that enhancement of levy had the approval of the Cabinet dated 28.2.2017 and that it superseded all the earlier notifications issued in this regard. 8. Following issuance of the impugned notification, Forest Department issued instructions to its officials to collect the levy as per the impugned notification dated 6.3.2017. 9. 600 per cubic metre. The notification mentions that enhancement of levy had the approval of the Cabinet dated 28.2.2017 and that it superseded all the earlier notifications issued in this regard. 8. Following issuance of the impugned notification, Forest Department issued instructions to its officials to collect the levy as per the impugned notification dated 6.3.2017. 9. It is contended that such levy on transportation of timber, non-timber forest produce and minor minerals entering into Assam through the inter-State boundaries from the neighbouring States cannot discriminate between forest produce of the State and similar produce of a locality outside the State in favour of the former. This would amount to an unreasonable restriction adversely affecting freedom of trade, commerce and intercourse, besides being discriminatory. Challenge has been made on the touchstone of regulation 37 of the Assam Forest Regulations, 1891 and article 304(a) of the Constitution of India. It is in this backdrop that the present bunch of writ petitions came to be filed. 10. In WP(C) No. 3140/2017, this court vide order dated 31.5.2017 had issued notice and passed an interim order to the effect that respondents should not insist on the rates indicated in the impugned notification dated 6.3.2017. 11. Similar order came to be passed in all the writ petitions. 12. Respondent No. 1 has filed affidavit in WP(C) No. 953/2018. Stand taken in this affidavit is that enhancement of levy vide notification dated 6.3.2017 is a policy decision of the State which cannot be questioned by the petitioners. It is further stated that there is no legal flaw in the. impugned notification. The existing rate of Rs. 10 per truck was fixed in the year 1990. Enhancement has been made after almost three decades. Impugned notification was issued with the prior approval of the State Cabinet. Enhancement of levy has been done in the interest of revenue. Allegation of discrimination has been denied. It is further denied that regulation 37 of the Assam Forest Regulations, 1891, and article 304(a) of the Constitution of India have been violated as alleged by the petitioners. 13. Dr. Saraf, learned senior counsel leading the arguments on behalf of the petitioners, submits that impugned enhancement of levy is arbitrary. Earlier levy of Rs. 10 per truck could be justified and would not hit article 304(a) of the Constitution. Dr. 13. Dr. Saraf, learned senior counsel leading the arguments on behalf of the petitioners, submits that impugned enhancement of levy is arbitrary. Earlier levy of Rs. 10 per truck could be justified and would not hit article 304(a) of the Constitution. Dr. Saraf has extensively referred to regulation 37 of Assam Forest Regulations, 1891, and article 304(a) of the Constitution of India to contend that such enhancement of levy is discriminatory and, therefore, untenable. In this connection, Dr. Saraf has placed reliance on the following decisions (1) ATB Mehtab Majid v. State of Madras, AIR 1963 SC 928 . (2) State of UP v. Jaiprakash Associates Ltd., (2014) 4 SCC 720 ; and (3) Jindal Stainless Ltd. v. State of Haryana, (2017) 12 SCC 1 . 14. Mr A Tiwari, learned counsel for the petitioners while supporting the arguments of Dr. Saraf additionally argues that after introduction of GST, issuance of impugned notification is illegal. On this count alone, impugned notification is liable to be set aside. 15. Responding to such submissions, Mr. Mazumdar, learned Additional Advocate General submits that levy itself is not under challenge; what is under challenge is the enhancement of levy. Regarding assailment of enhancement of levy in the context of regulation 37 and article 304(a), he submits that no materials have been placed on record by the petitioners. No facts have been pleaded to make out a case of discrimination. A case of discrimination has to be made out. It has to be pleaded that in the State of Assam this is the levy and, therefore, imposition of enhanced levy on similar goods brought from outside the State of Assam is discriminatory. This is absent in all the cases. However, Mr. Mazumdar fairly submits that office of the Principal Chief Conservator of Forests and Head of Forest Force, Assam had written to the Additional Chief Secretary to the Government of Assam, Environment and Forest Department vide letter dated 5.7.2017, requesting for re-examination and revision of the rates of levies to mitigate the hardship faced by the stake-holders. 16. Submissions made by learned counsel for the parties have been considered. Also perused relevant materials on record as well as the judgments cited at the Bar. 17. 16. Submissions made by learned counsel for the parties have been considered. Also perused relevant materials on record as well as the judgments cited at the Bar. 17. At the outset, it would be apposite to advert to the impugned notification dated 6.3.2017, relevant portion of which is extracted hereunder “No. FRE-118/2014/201 The Governor of Assam is hereby pleased to publish the enhancement of Levy for transportation of Timber, Non- Timber Forest Produce (NTFP) and Minor Minerals entering Assam through Inter-State boundaries from the neighbouring States as below: Sl. No. Commodity on which levy is to be realised on entering through inter-State boundaries Rate of levy fixed against the commodity 1. Timber Rs. 600 per Cubic metre 2. Non-Timber Forest Produce (NTFP) Rs. 300 per truck 3. Stone Rs. 500 per truck 4. Sand Rs. 500 per truck 5. Earth Rs. 100 per truck 6. Other minor minerals Rs. 500 per truck 18. As already noted above, by the impugned notification, the levies on transportation of timber, non-timber forest produce and minor minerals entering Assam through inter-State boundaries from neighbouring States have been enhanced. In other words, there was already a levy, which has now been enhanced by the impugned notification. 19. Before entering into the rival contentions, it would be apposite to refer to certain relevant provisions. The first provision to be noted is regulation 37 of Assam Forest Regulations, 1891, which deals with power to impose duty on forest produce. Now, forest produce is defined in regulation 3(4). Regulation 37 is extracted hereunder “37. Power to impose duty on forest produce. — (1) The Central Government may levy a duty in such manner, at such places and at such rates as it may prescribe by notification in the Official Gazette, on all forest produce which is brought into the territories to which this regulation extends from any place beyond those territories. (2) In every case in which such duty directed to be levied ad valorem, the Central Government may, by like notification, determine the manner in which the value is to be ascertained. (2) In every case in which such duty directed to be levied ad valorem, the Central Government may, by like notification, determine the manner in which the value is to be ascertained. (3) Until provision to the contrary is made by the Parliament the State Government may continue to levy on forest produce brought into the territories to which this regulation extends from any place in the State beyond those territories any duty which it was levying immediately before the commencement of the Constitution: Provided that nothing in this sub-section authorises the levy of any duty which as between forest-produce of the State and similar produce of a locality outside the State discriminates in favour of the former, or which, in the case of forest produce of localities outside the State discriminates between forest produce of one locality and similar forest produce of another locality.” 20. Thus, it can be seen that the State Government has been empowered to levy any duty on forest produce brought into the territories covered by the regulations, which it was levying immediately before commencement of the Constitution. As per the proviso, nothing in sub-section (3) authorizes levy of any duty which as between forest produce of the State and similar produce of a locality outside the State discriminates in favour of the former or discriminates between forest produce of one locality and similar forest produce of another locality. Therefore, though the State Government is empowered to levy duty on forest produce brought within the State from outside, it has to ensure that such levy does not favour forest produce of the State or discriminates against forest produce brought from outside the State. 21. As per article 301, trade, commerce and intercourse throughout the territory of India shall be free. Article 304 which is an exception to Article 301 deals with restrictions on trade, commerce and intercourse amongst States. Article 304 reads as under “304. Restrictions on trade, commerce and intercourse among States. 21. As per article 301, trade, commerce and intercourse throughout the territory of India shall be free. Article 304 which is an exception to Article 301 deals with restrictions on trade, commerce and intercourse amongst States. Article 304 reads as under “304. Restrictions on trade, commerce and intercourse among States. — Notwithstanding anything in article 301 or article 303, the Legislature of a State may by law— (a) impose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced; and (b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public Interest: Provided that no Bill or amendment for the purposes of clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President.” 22. Under clause (a) of article 304, Legislature of a State may make law imposing any tax on goods imported from other States or Union Territories to which similar goods manufactured or produced in that State are subject; however, such imposition of tax should not discriminate between goods so imported and goods so manufactured or produced. 23. In ATB Mehtab Majid (supra), Supreme Court held that similarity contemplated by article 304(a) is in the nature of the quality and kind of the goods and not with respect to whether they were subject of a tax already or not. In the facts of that case it was held that any discrimination against imported hides or skins purchased or tanned outside the State would contravene the provisions of article 304(a) of the Constitution. 24. Question before the Supreme Court in Jaiprakash Associates (supra) was whether grant of rebate of tax by the State Government by issuing notification in exercise of its powers under section 5 of the Uttar Pradesh Trade Tax Act, 1948, discriminated between the goods imported from neighbouring States and goods manufactured in the State of Uttar Pradesh, thus, contravening the constitutional provisions namely, articles 301 and 304(a). In this connection, Supreme Court held as under “29. Article 304(a) of the Constitution is an exception to article 301 of the Constitution of India. In this connection, Supreme Court held as under “29. Article 304(a) of the Constitution is an exception to article 301 of the Constitution of India. Article 304(a) does not prevent levy of tax on goods; what is prohibited is such levy of tax on goods as would result in discrimination between goods imported from other States and similar goods manufactured or produced within the State. The object is to prevent imported goods being discriminated against by imposing a higher tax thereon than on local goods. What article 304(a) demands is that the rate of taxation on local as well as imported goods must be the same. This is designed to discourage States from creating State barriers or fiscal barriers at the boundaries. 30. Article 304(a) of the Constitution empowers the State to levy tax, with an intent that Part XIII of the Constitution does not affect the power of taxation given under Part XII of the Constitution. It is to preserve and protect the broad object of article 301 of the Constitution, article 304(a) only limits the power of the State Legislature from imposing such taxes that would discriminate between imported goods and domestic goods and restrict free movement of goods between States. 35. The Principle of ‘non-discriminatory tax’ as provided in article 304(a) of the Constitution of India is a sine qua non to free movement of goods between nations/States in several jurisdictions and also in International trade and policy. Discrimination as explained under World Trade Organization (“WTO”) jurisprudence is spoken of in terms of effect and intention behind such discrimination. Intent is referred to as ‘aim’ or ‘motive’ or ‘purpose’ of such discrimination and the other factor commonly associated with discrimination is ‘effect’ that is whether a measure has a discriminatory effect (also known as the disparate impact) against imports (as explained in the famous case of Japan v. Alcohol, panel report). WTO members are free to choose any system of taxation they deem appropriate provided that they do not impose on foreign products taxes in excess of those imposed on like products. The effect of tax should not be such that two like goods are given discriminatory treatment. 36. At the same time, it cannot be doubted that rising of protective walls may be justified in International trade. The effect of tax should not be such that two like goods are given discriminatory treatment. 36. At the same time, it cannot be doubted that rising of protective walls may be justified in International trade. The Government can and has been providing such protectionist measures all these years to encourage the growth and establishment of industries in the country and to protect them from competition from foreign manufacturers. But unlike the International trade policies and the commerce clause in United States Constitution, our Constitution provides for regulating Inter-State trade and commerce. The Parliament can take all protective measures under article 302 of the Constitution of India as may be required in public Interest. But there are certain obvious differences between the powers conferred to the Parliament under article 302 and State Legislature under article 304(a) of the Constitution. The powers given to the State Legislature are not unrestricted and are bound to function within limitations stipulated under article 304(a) of the Constitution of India. The powers even under article 304(b) are to be exercised sparingly and after fulfilling all the conditions of article 304 of the Constitution of India. The power conferred under article 304(a) although an exception to article 301 of the Constitution, but is not a blanket power intended to be conferred to the State Legislature. ********* 38. Article 304(a) ensures only equal rate of tax for incoming goods. So if such goods are taxed at a higher rate or where they are taxed at any rate when indigenous goods enjoy concessional rate of tax, article 304(a) is attracted. They are simple cases of hostile discrimination. Therefore, whether a particular tax is discriminatory within the meaning of this clause, the effect of the tax on the flow of goods from outside the taxing State has to be taken into consideration and, if the overall effects of rebate of tax is such that they fall within the meaning concessional rate of tax. A detailed discussion on the effects and scope of rebate is done in the following paragraphs under the head Issue 2 in the judgment. ********* 46. Article 304(a) is a provision that deals with taxation. It places goods imported from sister States on a par with similar goods manufactured or produced within the State in regard to State taxation in the allocated field. ********* 46. Article 304(a) is a provision that deals with taxation. It places goods imported from sister States on a par with similar goods manufactured or produced within the State in regard to State taxation in the allocated field. The object of article 304(a) was to limit the power of taxation by States so as to prevent discrimination against imported goods by imposing taxes on such goods as a higher rate than is borne by indigenous goods. The tax referred to in article 304(a) is a ‘tax on goods’.” 25. Therefore, in the aforesaid judgment, Supreme Court has made it abundantly clear that goods imported from other States or Union Territories must be placed at par with similar goods manufactured or produced within the State, vis-a-vis, tax or levy on such goods. 26. If there was any confusion on this point, Supreme Court in Jindal Stainless Ltd. (supra), categorically held that a levy that violates article 304(a) cannot be saved even if the procedure under article 304(b) or the proviso thereunder is satisfied. Clauses (a) and (b) of article 304 have to be read disjunctively. 27. Though the legal issues as extracted and discussed above are well-settled, those have to be applied on facts which are pleaded. Petitioners would have to show what is the rate of levy in the neighbouring States and in the State of Assam; how enhancement of levy by the impugned notification would discriminate against the goods manufactured or produced by them outside the State of Assam and which are transported into the State of Assam through the inter-State boundaries. In the absence of such facts, any adjudication would be on presumption. However, in this regard the letter issued from the office of the Principal Chief Conservator of Forests and Head of Forest Force, Assam, dated 5.7.2017, requesting the State Government to re-examine and revise the rates of levy, as produced by Mr Mazumdar may be taken note of. 28. Therefore, having regard to the above and on a thorough consideration of the materials on record, court is of the view that the matter is required to be relooked by the Environment and Forest Department, Government of Assam, taking note of the discussions made above. 28. Therefore, having regard to the above and on a thorough consideration of the materials on record, court is of the view that the matter is required to be relooked by the Environment and Forest Department, Government of Assam, taking note of the discussions made above. Let the impugned notification dated 6.3.2017 be looked into afresh by the Government of Assam in the Environment and Forest Department, keeping in mind the legal and constitutional requirements as well as views expressed by the departmental authorities, whereafter, an appropriate decision may be taken. Let such decision be taken within a period of 4 months from the date of receipt of a certified copy of this order. During this period, restraint orders passed by this court to the effect that respondents would not insist on the rates indicated in the impugned notification dated 6.3.2017 would hold the field. 29. All the writ petitions are disposed of.