The Supreme Court on Friday referred to a larger bench the issue related to state governments imposing entry tax on goods coming into their territories. The entry tax proceeds are estimated at over Rs 30,000 crore a year at present.
The long-drawn legal battle between the government and the traders on this impost is now going to be heard by a seven-judge constitutional bench.
At least 2,000 petitions filed by state governments and companies all over the country are pending before the apex court.
A five-judge bench headed by Justice S H Kapadia referred the matter to a larger bench after high courts across the country viewed the tax matter differently and gave conflicting judgements on the issue. The bench has requested the Chief Justice of India to constitute a larger bench to decide the issue. Companies belonging to the Reliance-Anil Dhirubhai Ambani Group, apart from Reliance Industries Ltd, Procter and Gamble Co, ITC Ltd, Gillette India Ltd, and NTPC Ltd have challenged various high court decisions upholding the state government?s right to levy tax on raw materials and packaging goods used in the manufacture of the finished products at rates higher than those prescribed under the Entry Tax Act.
The high courts have upheld the validity of the respective state legislations on the grounds that the levy, being ?compensatory in nature?, was immune from the challenge.
But according to the companies, as the tax in question is ad valorem in nature, it cannot be compensatory because there can be no relation between the levy based on the value of goods coming into the state for consumption or use and the trading facilities purportedly proposed to be provided to traders. Since its inception in 2001, the imposition of entry tax has been mired in controversy with the traders vehemently opposing it. Earlier, a bench headed by Justice Arijit Pasayat (retired) had referred the matter to a five-judge bench.