ITC LIMITED Vs. STATE OF BIHAR

JUDGEMENT

(1.) Invoking the extraordinary jurisdiction of this Court, the petitioner has assailed the constitutional validity of the levy and collection of tax under the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1993 (for brevity 'the Act') on the basic foundation that the Division Bench of this Court in Indian Oil Corporation Ltd. & Anr. V/s. State of Bihar & Ors., 2007 10 VST 140 Patna while upholding the validity of the Act had only upheld the provisions after a particular year on the foundation that the entry tax levied after 29.8.2006 does not violate Article 301 of the Constitution of India as it has become compensatory in nature inasmuch as the proceeds thereof are being directly credited and appropriated to the Bihar Trade Development Fund created under the newly inserted Section 4 of the Act for exclusive use in the development of trade, commerce and industry in the State, but the validity of Section 4 of the Act was not considered in the light of the provisions contained in Article 266 of the Constitution of India which clearly postulates that ail revenues received by a State by way of tax or fees, etc. shall form part of the Consolidated Fund of the State as has been held in the case of State of H.P. & Ors. V/s. Shivalik Agro Poly Products & Ors., 2004 8 SCC 556, and, therefore, the present challenge is on a different ground. That apart, many other ancillary facets have been highlighted for the purpose of stay of demand of tax and also for collection of entry tax at a particular rate.

(2.) We have heard Mr. S. Ganesh, learned Senior Counsel along with Mr.Rohitabh Das, learned counsel for the petitioner and Mr. Lalit Kishore, learned Additional Advocate General III along with Mr.Satyabir Bharti, Junior Counsel to Additional Advocate General III, learned counsel for the State on the question of admission and grant of interim orders.

(3.) Before we advert to the submissions raised at the Bar, it is necessitous to have a brief resume of events in a chronological manner. The Act came into force on 25.02.1993. On 11.07.2001, the Act was amended by which the original Schedule was substituted by a new Schedule which included, inter alia, tobacco. On 25.07.2001, by Notification no. S.O. 92 dated 25.07.2001, the rate of tax on tobacco was prescribed at 5%. On 19.08.2003, the Act was further amended by the Amending Act 9 of 2003 by which the upper limit of the rate of tax was enhanced from 5% to 20%. On 22.08.2003, a notification was issued whereby the State Government enhanced the rate of entry tax on tobacco from 5% to 8%. A writ petition being C.W.J.C. No. 11394 of 2003 was filed by the petitioner challenging the constitutional validity of the Act. While admitting the said writ petition, this Court, as an interim measure, directed that there shall be no recovery of tax beyond 5% on tobacco. On 29.08.2006 the Act was amended by the Amendment Act 19 of 2006 which stipulated that the entry tax collected under the Act would be appropriated to the Trade Development Fund created thereunder and the said fund would be used exclusively for the development of trade, commerce and industry in the State of Bihar.