Goods And Service Tax India

Having noted the position in Gujarat, where the Gujarat High Court upheld the constitutional validity of the Entry Tax Act in Eagle Corporation Pvt Ltd vs State of Gujarat and Others, I will examine the status of the Entry Tax Act in Jharkhand.

Tata Iron & Steel Co Ltd was aggrieved by a demand for entry tax on coal imported by them and challenged the levy. The Jharkhand High Court, in Tata Iron & Steel Co Ltd vs State of Jharkhand and Others, has held that:

a) The State government is not authorised to levy entry tax on imported goods as contended by TISCO.

b) The Court did not accept the argument of TISCO that coal is a raw material in production of steel and held that it is fuel consumed in the manufacture of steel.

c) The Court accepted the contention of TISCO that Sec 3 [charging section] of the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1993 is ultra vires on the ground that it violates article 301 of the Constitution of India and is not saved by article 304(b) of the Constitution.

Article 301 of the Constitution imposes restriction on the legislative powers of States to ensure freedom of trade and commerce throughout India. Article 304(b) authorises the State Government to impose reasonable restrictions on freedom of trade and commerce in public interest. However, to use this power the State Legislature must obtain prior sanction of the President before the bill or amendment to an enactment is introduced in the State Legislature. Thus the restrictions must be reasonable and prior sanction of the President must be obtained.

The Jharkhand High Court held that the Entry Tax Act had failed to satisfy the requirements of article 301 read with article 304(b) of the Constitution of India and Sec 3 of the Entry Tax Act is ultra vires.

This decision was delivered on 14 Aug 2006 and was applied in Central Coalfields Ltd vs State of Jharkhand and Others decided on 23 Aug 2006.