Office of the

                                                                                                         Commissioner of Sales Tax,

                                                                                                         Maharashtra State, Mumbai,

                                                                                                         8th floor, Vikrikar Bhavan,

                                                                                                         Mazgaon, Mumbai-400 010.

 

TRADE CIRCULAR

 

To

 

……………………………………

 

……………………………………

 

No. ET-2004/16/Adm-12          

                                  Mumbai, dt. 6th July, 2005

15 T of 2005

 

                             Sub:- Supreme Court judgment in the case of M/s.

                                       Eurotex Industries and M/s. Tata Power Co. Pvt. Ltd.

 

 

Gentlemen/Sir/Madam,

 

         In order to mobilise additional resources and to ensure equitable tax burden to the extent possible on consumption of the same goods in the state, some states levy entry tax on the goods imported from outside the respective states into the local areas in the state for consumption or use therein.  There is a difference in the rates of sales tax/motor spirit tax on some of petroleum goods in the State of Maharashtra and in the neighbouring states, with the result that the consumers and dealers in the State purchase these commodities from the neighbouring states, thereby causing a considerable loss of revenue to the State Government.  Almost all the neighbouring states have introduced entry tax on the import of goods in the respective local areas of the concerned state. 

 

2.            2.                As a measure of prevention of loss of revenue, the Government of Maharashtra promulgated the Maharashtra Tax on the Entry of Goods into Local Areas Ordinance, 2002 (Ordinance No. XI of 2002). This Ordinance has now been converted into an Act (Maharashtra Act IV of 2003).

 

3.            3.                M/s. Eurotex Industries and M/s. Tata Power Co. Pvt. Ltd. filed Writ Petitions (Writ Petition No.6986/2002 and Writ Petition No.429 of 2003) in the Bombay High Court challenging the validity of certain provisions of the Maharashtra Tax on Entry of Goods into Local Areas Act, 2002.  The Act was challenged primarily on the ground that the set off provided on these goods u/s.42 of the then Bombay Sales Tax Act, read with Rule 41D & 44D of the Bombay Sales Tax Rules, 1959, is not provided for Entry Tax paid under the Entry Tax Act.  The said Writ Petitions came to be decided by the common judgment and final order dated 16.1.2004 by the Bombay High Court, holding therein that Entry No.13 of the Schedule of the Maharashtra Sales Tax on Entry of Goods into Local Areas Act, 2002, in so far as it purports to levy tax on ‘furnace oil’ and ‘low Sulphur waxy residue oil,’ is unauthorized and unconstitutional, and observing that the said Entry Tax on ‘furnace oil and low Sulphur waxy residue oil’ create imbalance between the imported and local goods.

 

4.            4.                Following the judgment of the Bombay High Court, the amendment is carried out in Section 42 of the Bombay Sales Tax Act and Rule 41D and Rule 44D of the Bombay Sales Tax Rules, whereby a similar set off is provided on Entry Tax paid by the claimant-dealer on import of goods under the Maharashtra Tax on Entry of Goods Into Local Areas Act, 2002, retrospectively w.e.f. 1.10.2002.  The Government has, however, challenged the judgment of the Bombay High Court by way of Special Leave Petitions in the Supreme Court as the Government wanted to fight out this petition even after the amendment to the Bombay Sales Tax Act and the Bombay Sales Tax Rules, on certain principles so far as the broader propositions of law are concerned and accordingly, the prayer was made to the Hon. Supreme Court to decide the petition on merit.

 

5.            5.                The Special Leave Petitions (S.L.P. Nos.7468-7469 of 2004) was taken up for admission hearing before the Supreme Court on 25.10.2004 and at that time, the respondent M/s. Eurotex Industries and Export Ltd. and M/s. Tata Power Co. Ltd. pointed out to the Court that an amendment to Section 42 of the Bombay Sales Tax Act and amendments to Rules 41D and 44D of the Bombay Sales Tax Rules, wherein a similar set off of entry tax paid is provided, have been made, and in view of the above amendment, the Special Leave Petitions filed by the Government were dismissed as infrutuous .

 

6.            6.                The Supreme Court pronounced the judgment that in view of the amendments to section 42 of to the Bombay Sales Tax Act, and Rules 41D and 44D of the Bombay Sales Tax Rules, the Special Leave Petition does not survive.  The Court, however, conceded to the Government’s request and observed that the order of the Bombay High Court shall not be used as a precedent in any other matter.

 

7.            7.                In view of the above Supreme Court judgment the following facts emerge :-

 

(a)        (a)   The Hon. Supreme Court categorically observed that the Bombay High Court judgment shall not be used as a precedent in any other case.

(b)        (b)   All the concerned shall take a note that in view of the Supreme Court judgment, the provisions of Entry Tax Act are applicable as it stood in the Statue prior to the aforesaid judgement of the Bombay High Court.  Needless to state that in view of the retrospective amendment carried out in the Bombay Sales Tax Act and the Bombay Sales Tax Rules, the dealers would be entitled for the set off of taxes paid under the Entry Tax Act except on Motor Spirits. The dealers are also entitled to set off of entry tax paid as per Rule 51(1)(c) of the Maharashtra Value Added Tax Rules, 2005.

 

8.              This circular is clarificatory in nature and cannot be used for legal   interpretation of law. If any dealer has any doubt in the matter, he may refer the same to this office.

 

9.             You are requested to bring the contents of this Circular to the notice of the members of your Association.    

                                                                              

  

                                                                                                                     (B.C Khatua)

                                                                                 Commissioner of Sales Tax,

                                                                                             Maharashtra State, Mumbai.