Summary
Manufacturers of beer and IMFL who sold their goods to State Government liquor warehouses, from which retailers took supply, were held liable to entry tax under Section 3 of the M.P. Entry Tax Act, 1976 for 2007-08. Although the warehouse model involved two independent transactions and not a mere supervisory role of the State, the manufacturers, being dealers under the VAT Act, had caused the entry of the goods into the local area by their sale to the warehouse; and the absence of a notification under Section 3B did not bar assessment and collection under Section 14.
Issues
- Whether the appellant manufacturers caused to be effected the entry of beer and IMFL into the local area within Section 3(1)(a) read with Sections 2(1)(aa), 2(1)(b) and 2(3) of the M.P. Entry Tax Act, 1976, so as to be liable to entry tax for 01.04.2007 to 31.03.2008.
- Whether the State Government warehouse merely supervised sales by the manufacturers to retailers, or whether the canalised supply involved two independent sales (manufacturer to warehouse and warehouse to retailer).
- Whether entry tax on IMFL and beer could be levied and collected under Section 14 without a notification under Section 3B of the Act.
Provisions considered
- Section 3(1)(a) read with Sections 2(1)(aa), 2(1)(b) and 2(3), Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (M.P. Entry Tax Act)Entry tax is levied on the entry, in the course of a dealer's business, of Schedule II goods into a local area for consumption, use or sale, payable by every dealer liable under the VAT Act who has effected such entry; by Section 2(3) 'has effected entry' includes 'has caused to be effected entry'. Reading 'cause' as 'occasion' or 'be the immediate cause of', the manufacturers' sale to the warehouse occasioned the entry of the goods into the local area, so the levy on them was justified even though the warehouse was also a dealer. (¶¶ 7, 8, 11, 28, 29, 30, 31)
- Section 3B (inserted by Amendment Act No. 9 of 2007) and Section 14, Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (M.P. Entry Tax Act)Section 3B, empowering the State to notify a special manner and competent authority for collecting entry tax on IMFL and beer, is an enabling machinery provision; its non-obstante clause overrides only a contrary provision, and in the absence of a notification nothing in Section 14 (which vests assessment and collection in the VAT authorities) is contrary to it. The charging provision remains Section 3(1), and the tax could be recovered under the general machinery of Section 14. (¶¶ 10, 11, 32, 33, 34)
- Section 2(i) 'dealer' (with Explanation II), Section 2(m) 'goods' and Section 2(u) 'sale', Madhya Pradesh VAT Act, 2002It was undisputed that the appellants were dealers under the VAT Act as it then stood; the appellants' argument that the State warehouse, which sells or at least distributes the goods, was also a dealer under Explanation II made no difference to their own liability. (¶¶ 12, 13, 14, 18, 31)
- Sections 5(2) and 5(3), Central Sales Tax Act, 1956Precedents on sales in the course of import and export through canalising agencies (K. Gopinathan Nair, Azad Coach Builders, Coffee Board) were applied by analogy: unless the intermediary is a mere name lender, back-to-back transactions through an independent canalising agency are two separate sales; and 'occasion' means 'to cause' or 'be the immediate cause of'. (¶¶ 24, 25, 26, 27, 29, 30)
Held
- Under the State's canalised model for supply of beer and IMFL (demand notes from retailers, NOC to manufacturers, storage in departmental godowns, retailers depositing the ex-godown price plus 5 per cent with the warehouse, and the warehouse remitting the balance to the manufacturer), there were two independent transactions, one between the manufacturers and the State warehouse and the other between the warehouse and the retailers; the State's contention that its role was purely supervisory and that the warehouses did not purchase from the manufacturers could not be accepted. (¶¶ 22, 23, 25, 27)
- That finding did not resolve the matter in the manufacturers' favour: the incidence of entry tax under Section 3(1)(a) falls on a dealer who has effected, or by Section 2(3) has caused to be effected, the entry of Schedule II goods into a local area. 'Cause' means to occasion or be the immediate cause of, and the manufacturers, by their sale to the warehouse, occasioned the entry of the goods into the local area for consumption, use or sale. Being admittedly dealers under the VAT Act, they were liable to entry tax, which they could always pass on; that the State warehouse was also a dealer made no difference. (¶¶ 28, 29, 30, 31)
- The absence of a notification under Section 3B of the Entry Tax Act does not prevent levy of entry tax on IMFL and beer: Section 3B is an enabling, machinery provision, and its non-obstante clause can override Section 14 only where a contrary provision exists, which it does not until a notification is issued; the State may therefore assess and collect the tax under the general machinery in Section 14, the charging section being Section 3(1). (¶¶ 32, 33, 34)
- Bhagatram Rajeevkumar, which concerned whether entry tax could be levied on goods such as sugar on which no sales tax was leviable, had no relevance to the present controversy. (¶ 35)
Result
Civil appeals dismissed; High Court's judgment upholding the levy of entry tax on the manufacturers for 01.04.2007 to 31.03.2008 affirmed; no order as to costs.