HUNDAI ENGINEERING AND CONSTRUCTION LTD. V. THE COMMISSIONER OF TRADE TAX U.P. LUCKNOW

STRE/236/2006

AI Insights

The case involves Hundai Engineering And Construction Ltd., which imported machinery into Allahabad for a construction project during the assessment year 2000-01. The machinery was later exported to South Korea in 2004-05. The core legal issue was whether the entry tax imposed on the machinery upon its entry into Allahabad was valid, given that the machinery was eventually exported. The Trade Tax Tribunal had earlier affirmed the tax liability, which led to the filing of this revision. The court examined the applicability of the U.P. Tax on Entry of Goods Act, 2001 (Old Act) and the U.P. Tax On Entry of Goods Into Local Areas Act, 2007 (New Act), particularly focusing on the interpretation of Section 4 and its sub-sections regarding tax liability and exemptions.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 726681 (HC-ALLAHABAD)
• Appeal Type: Others
• Pronouncement Date: 16-09-2019
• Assessment Year: misc
• Other Referred Cases: Polestar Electronic (Pvt.) Ltd. Vs. Additional Commissioner, Sales Tax and Others, Director of Entry Tax and others Vs. Mahindra and Mahindra and another, State of Kerala and others Vs. Fr. William Fernandez
• Laws Referred To: U.P. Tax on Entry of Goods Act 2001, U.P. Tax On Entry of Goods Into Local Areas Act, 2007, Central Sales Tax Act, 1956
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: C S C
• Assessee Lawyers: K N KUMAR
• Keywords: Entry Tax; Export of goods; Machinery Import; Tax liability
• Section: 4(1); 4; 4(3); 4(6)(ii)

Judgement Text

"1 A.F.R. Court No. - 59 Case :- SALES/TRADE TAX REVISION No. - 236 of 2006 Revisionist :- Hundai Engineering And Construction Ltd. Opposite Party :- The Commissioner Of Trade Tax U.P. Lucknow Counsel for Revisionist :- K.N. Kumar Counsel for Opposite Party :- C.S.C. Hon'ble Saumitra Dayal Singh,J. 1. Heard Sri K.N. Kumar and Sri Vishnu Kesarwani, learned counsel for the assessee-revisionist and Sri B.K. Pandey, learned counsel for the State-respondent. 2. The present revision filed by the assessee arises from the order passed by the Trade Tax Tribunal, Allahabad dated 07.12.2005 in Second Appeal No.192 of 2003 for A.Y.2000-01 (Entry Tax). By that order, the Tribunal dismissed the appeal filed by the assessee and affirmed the assessment and demand of entry tax on machinery imported by the assessee during the A.Y. 2000-2001, but exported outside the country in the year 2004-2005. 3. Undisputed facts of the case are that the assessee is an engineering concern. It was awarded contract to construct a stay wired bridge over the river Yamuna, at Allahabad. For the purposes of executing that contract, the assessee imported into the country and the local area, Allahabad, machineries of value Rs.1,30,30,000/-, during the A.Y. 2000-01. The machinery thus imported were amenable to levy on entry tax under the U.P. Tax on Entry of Goods Act 2001 (hereinafter referred to as Old Act). The assessee, at the relevant time, also deposited entry tax on such machinery. Undisputedly, it made use of those machinery in execution of aforesaid contract awarded to it. After its successful completion, the assessee sold those machineries in the course of export trade to a purchaser at South Korea. 4. Though the revision was admitted without reference to any question of law, however, at the time of hearing the following questions of law 2 have been pressed: “(i) Whether under the facts and circumstances mentioned above, the learned Trade Tax Tribunal Bench, Allahabad was correct in applying Section 4, and read with the Explanation appended thereto (added by amending Act 10 of 2005)? (ii) Whether machinery imported from outside India during A.Y. 2000- 2001 are covered by Section 4 of the Old Act, as amended by the Act No. 10 of 2005? (iii) Whether under the facts and circumstances mentioned above, the Revisionist is not liable to pay entry tax under Section 4 (6) (ii) of the Entry Tax Act, 2007, since it re-sold the goods in the course of export out of the territory of India?” 5. In such facts, the assessee claimed that the entry of that machinery into the local area Allahabad during the assessment year 2000-01 was non-taxable, since the machineries had not been brought into the local area, Allahabad from within the country but from outside the country. That claim was rejected. During the pendency of the present revision, the U.P. Tax On Entry of Goods Into Local Areas Act, 2007 (hereinafter referred to as a New Act) was enforced. The assessee has thus relied on the provisions of Section 4(6)(ii) of the New Act to contend that in any case, upon export of the disputed machinery, no tax liability survived as sub-section 6 of Section 4 overrides the charging provisions under Section 4(1) and 4(3) of the New Act. 6. Also, it has been submitted, for the purposes of export of machinery, no time limit is prescribed under sub-clause (ii) of sub section 6 of Section 4 of the New Act. Therefore, the fact that the assessee exported the machinery later i.e. during the A.Y. 2004-05, was inconsequential to the claim made by the assessee. Reliance has been placed on a decision of a Supreme Court in the case of Polestar Electronic (Pvt.) Ltd. Vs. Additional Commissioner, Sales Tax and Others (1978) 1 SCC 636 to submit that in view of the clear language of the statute, effect must be given to it to declare the intention of the law giver. Plain and natural meaning must be given to the words used in Section 4 (6) of the New Act and no other or further meaning is to be 3 discovered. Further, it is not permissible to speculate as to what the legislature may have intended. Nor it is permissible to twist or bend the language of the statute to bring the subject to tax. In other words, it has been submitted, for the charge of tax to arise the transaction must naturally fall within the four corners of the charging section. No other submission was advanced. 7. Opposing the revision, learned Standing Counsel would submit, whether the case is examined, in the context of the language of the Old Act or in the context of the language under the New Act, (that has been enforced with full retrospective effect), the claim made by the assessee is wholly unfounded. With reference to the Old Act, it has been submitted, it was the clear scheme of the Old Act to impose entry tax upon entry being caused of taxable goods, into any local area, for their consumption, use or sale therein. There was neither any exemption granted to goods that had been imported from outside the country and thereafter brought into the local areas for such purpose, nor there was any scheme to grant remission from tax paid on such goods. In the admitted facts of the case, the assessee brought into the local area Allahabad, machinery that fell within the description of taxable goods under the schedule of the Old Act, for its own use. The requirements, for the charge of tax to arise, were thus fulfilled. Tax had been rightly imposed. 8. In the context of the New Act, learned Standing Counsel would submit though under that Act, sub-section 6 of Section 4, overrides Section 4 (1) and Section 4 (3), yet clearly, tax liability would continue to exist on such goods as may have been consumed, used or sold within the local area where such goods may have been brought from outside. Alternatively, in any case, once the assessee brought inside the local area Allahabad, machinery for use and it actually put to use such machinery during the A.Y.2000-01, the tax liability got crystallized at that point or in time. The fact that the machineries were exported outside the country after close of that assessment year, would have no bearing on the tax liability 4 for the A.Y. 2000-01. He has relied on the decision of the Supreme Court in the case of Director of Entry Tax and others Vs. Mahindra and Mahindra and another J.T. 2001 (5) S.C. 544. 9. Having heard learned counsel for the parties and having perused the record, in the first place, under the Old Act, the charging Section was contained in Section 4. It read as below: “4. Levy of Tax.- (1) There shall be levied and collected a tax on entry of any goods specified in the Schedule into a local area from any place outside that local area including a place outside the U.P./Uttaranchal for consumption, use or sale therein, at such rates not exceeding five per cent of the value of the goods as may be specified by the State Government by notification and different rates may be specified in respect of different goods or different classes of goods: Provided that the State Government may by notification amend the schedule and upon issue of any such notification, the schedule shall, subject to the provisions of sub-section (6), be deemed to be amended accordingly. (2) The tax levied under Sub-Section (1) shall be payable by a dealer who brings or causes to be brought into the local area such goods, whether on his account or on the account of his Principal or takes delivery or is entitled to take delivery of such goods on its entry into a local area. Explanation- Where the goods are taken delivery of on its entry into a local area or brought into a local area by a person other than a dealer, the dealer who takes delivery of the goods from such person shall be deemed to have brought or caused to have brought the goods into the local area. (3) No dealer who brings or causes to be brought any goods into a local area shall be liable to tax, if during the assessment year the aggregate value of such goods is less than one lakh rupees in the case of manufacturers and one lakh fifty thousand rupees in case of other dealers or such larger amount as the State Government may be notification, specie in that behalf either in respect of all dealers in any goods or in respect of a particular class of such dealers: Provided that provisions of this sub-section shall not apply in respect of value of the goods brought into a local area from outside Uttar Pradesh/Uttaranchal. (4) Notwithstanding anything contained in sub-section (1) or sub- section (2), no tax shall be levied on and collected from a dealer who brings or causes to be brought into a local area any goods in respect of which tax has been paid any other local area under the said sub-Sections. (5) No benefit under sub-section (4) shall be given to a dealer unless he furnishes, to the satisfaction of the assessing authority, such declaration or certificate obtained from the selling dealer in such form and manner and within such period as may be prescribed. (6) Every notification made under this Section shall, as soon as 5 may be after it is made, be laid before each house of the Stat Legislature/Assembly, while it is in session, for a total period of not less than fourteen days, extending in its one, session or more than one successive sessions and shall unless some later late is appointed take effect from the date of its publication in Gazette subject to such modifications or annulments as the two Houses of the Legislature/Assembly may during the said period agree to make, so however, that any such modification or annulment shall be without prejudice to the validity of anything previously done thereunder except that any imposition, assessment, levy or collection of tax or penalty shall be subject to the said modification or annulments.” 10. Also, under the schedule to that Act, machinery valuing more than 10 lacs was clearly under taxable. Thus, the levy of tax on entry of machinery (valued at more than 10 lacs) arose, no sooner the assessee caused the entry of those goods into the local area Allahabad from outside that local area for use. Under the Old Act, the subsequent Act of export of the machinery out of the country, was wholly irrelevant and had no bearing on the tax liability that had otherwise arisen and got finally attached to the transaction upon causing entry of such machinery inside the local area, for use. For the purposes of clarity, it has to be stated that no provision of the nature contained in Section 4(6) of the Act (New Act) existed under the Old Act. 11. In so far as it has been contended that no liability of entry tax arose, since the machinery had been imported from outside the country, that question stands squarely decided against the assessee, by the Supreme Court in Civil Appeal nos. 3381-3400 of 1998, State of Kerala and others Vs. Fr. William Fernandez decided on 09.10.2017, laying down the following rule: \"144. In view of foregoing discussion, we arrive at the following CONCLUSIONS: (i) Orissa Entry Tax Act, 1999, Kerala Tax Act, 1994 and Bihar Tax on Entry of Goods in Local Area for Consumption, Use or Sale, 1993 (before its amendment by Bihar Act, 2003 and 2006) do not exclude levy of entry tax on the goods imported from any place outside territories of India into a local area for consumption, use or sale. (ii) All the Entry Tax Legislations questioned in these appeals are legislations which are within the legislative competence of the State 6 legislatures and do not intrude the legislative domain of Parliament as reserved in Entry 41 & Entry 83 of List I. (iii) The import of goods from any territory outside India comes to an end when the goods enter into the custom frontiers of India and are released for home consumption. (iv) After import of goods comes to an end the State legislature has full legislative competence to levy entry tax under Entry 52 List II. (v) The Original Package Theory as developed by the American Supreme Court in case of Brown vs. State of Maryland(supra) is not applicable in this country and the imported goods are not exempted from entry tax till it reaches to the factory premises/destination of its consumption, use or sale. (vi) Non inclusion of custom duty in the definition of purchase value in the statute of entry tax is not an indicator of the fact that legislature never intended to levy entry tax on imported goods. (vii) Entry tax legislation are fully covered by Entry 52 List II and the submission that essence of Entry 52 is octroi which can be levied only by local authorities and State has no legislative competence to impose entry tax under Entry 52 List II is fallacious. (viii) A plant imported in knocked out condition is fully covered with the definition of machinery and equipment under Part II of Schedule of the Orissa Act, 1999.” 12. In so far as, the New Act is concerned, Section 4 (1), (3) and (6) of that Act read as below: “Section 4. Levy of tax: (1) For the purpose of development of trade, commerce and industry in the State, there shall be levied and collected a tax on entry of goods specified in the Schedule into a local area for consumption, use or sale therein, from any place outside that local area, at such rate not exceeding five percent of the value of the goods as may be specified by the State Government by notification and different rates may be specified in respect of different goods or different classes of goods; Provided that the State Government may by notification amend the schedule and upon issue of any such notification, the Schedule shall, subject to the provisions of sub-section (10), be deemed to be amended accordingly. (3) The tax levied under sub-section (1) shall be payable by a dealer who brings or causes to be brought into the local area such goods, whether on his account or on the account of his principle or takes delivery or is entitled to take delivery of such goods on its entry into a local area. Provided that the State Government, may by notification, permit any Power Project Industrial Unit engaged in generation, transmission and distribution, having aggregate capital investment of Rs. One thousand crore or more to own the liability of payment of tax of other dealers on the entry of such goods into a local area from any 7 place outside that local area as are used and consumed by the said unit subject to such conditions as may be specified in the notification. (6) Notwithstanding anything contained in sub-section (1) or sub- section (3), no tax shall be levied on and collected from a dealer, who brings or causes to be brought into a local area any goods which are,- (i) Consigned without using them in the local area to any place outside the State; or (ii) sold or resold either in the course of inter-state trade or commerce or in the course of export out of the territory of India; Explanation- Section 3, Section 5 and Section 6 A of the Central Sales Tax Act, 1956 shall apply for the purpose of determining whether or not any goods has been sold by a dealer in the course of inter-state trade or commerce or in the course of export out of the territory of India: Provided that where at the time of entry of goods into a local area, the quantity or value of goods to be sold within such local area for the purpose of being taken outside the State without consumption, use or sale in such local area, is not ascertainable, the dealer shall pay the amount of tax on the value of total quantity of goods and after the goods are consigned or sold outside or in the course of, export, the dealer may claim refund or adjustment of the amount so paid as tax in the month in which such goods are transferred outside the State or sold in the course of inter-State trade or commerce or the course of export, in respect of such goods, in the manner provided in Section 5 of this act.” 13. In the context of the New Act, it is seen, each assessment year is a separate and independent unit of assessment of entry tax liability. As principle applicable to taxing statutes it was recognised in the context of the Income Tax Act in P.M. Mohd. Meerakhan v. CIT, (1969) 2 SCC 25, wherein it was held: \"8 … Under the Income Tax Act for the purpose of assessment each year is a self-contained unit and in the case of a trading adventure the 14. profits have to be computed in the manner provided by the statute … ” 14. Same principle is applicable in this case case as well. Thus tax liability may arise in each unit/assessment year only with respect to taxable event/transaction completed therein. The same has to be assessed for that assessment year. Also, it has to be discharged or recovered, as the case may be, with reference to that assessment year only. 15. Of its own, neither that taxable event nor the tax liability arising thereon continue, cascade or escape or telescope into the following year. 8 Unless specifically provided by the legislature or necessarily implied, subsequent facts or events arising in preceding or succeeding assessment years, have no bearing on either the taxable event or the consequent tax liability that may arise during any assessment unit/year. Such legislature intent and necessary intendment do not exist. For that reason, the subsequent event of export of machinery during the A.Y. 2004-05 (after it had been made use of during A.Y. 2000-01), would not have any bearing on the taxing event that arose in the year 2000-01 and stood completed in that year itself. 16. Moreover, the scheme of the New Act is very clear. Provisions granting reversal of entry tax liability and exemption from entry tax liability are separately provided for under the New Act. Thus, for any liability that may have arisen and which the statute intended to reverse has been specifically provided for by means of Section 5 of the New Act. At present such claim/s do not exist. Such claim/s, if any, having not been raised before the Tribunal, are not being dealt with here. 17. In so far as sub-section 4 (6) of the Act are concerned, it is true that the legislature provided separate conditions under Section 4(6)(i) and (ii) for the levy of tax in different circumstances. Further, it is also true that the condition of 'non-use' of the goods was not a statutory pre-condition under sub-clause 2 of sub-section 6 of Section 4 of the Act. Yet, that difference in legislative intent would remain extraneous and therefore irrelevant to the claim made by the assessee, in this case. It is so, because here the taxing event (entry of machinery into the local area Allahabad), took place and stood completed and concluded during the A.Y. 2000-01 itself. 18. The subsequent event of sale or re-sale of the machinery by way of export sale was unconnected to that taxing event. In any case, it took place much after close of the A.Y. 2000-01. Therefore, that separate event/transaction had no bearing on the taxable event that stood irreversibly concluded. Therefore, the consequent tax liability remained 9 unaffected by the subsequent export of the machinery. 19. Thus, the legal basis of the claim raised by the assessee is found non-existent. There is nothing to doubt the existence of the tax liability and its crystallization at the end of the A.Y. 2000-01. It also did not get diluted or wiped out upon occurrence of export of the machinery, in subsequent assessment year. 20. In view of the above, questions of law raised by the assessee are answered thus: the factual and legal basis of the claim raised by the assessee having arisen more than three years after the close of the assessment year 2000-01, the same is wholly unfounded. The taxable event occurred in and tax liability arose upon the assessee having caused the entry of machinery for use in the local area Allahabad, during the A.Y. 2000-01. It got crystallized on 31st March, 2001. The event of subsequent export of machinery outside the country during the A.Y. 2004-05, had no bearing on the unit of assessment being the A.Y. 2000-01. 21. In view of the above, there is no merit in the revision. It is accordingly, dismissed. Costs easy. Dt. 16.9.2019 Meenu "