SC refuses to stay recovery of Vedanta entry tax dues

Written by Indu Bhan | Indu Bhan | New Delhi | Updated: Oct 26 2012, 06:51am hrs
In a setback to Vedanta Aluminium (VAL), the Supreme Court has refused to stay recovery of the Anil Agarwal group firms entry tax dues of around R130 crore on goods imported for its alumina refinery and smelter plant in Orissa between 2008 and 2012.

A bench headed by Justice RM Lodha refused to stay the Orissa High Court order that upheld the states decision to tax the import of capital goods under the provisions of the Orissa Entry Tax, 1999. There cannot be blanket ban on recovery, the apex court said while posting the matter for hearing on October 29.

VAL senior counsel CA Sundaram, wants interim protection, argued the apex court had already stayed such recovery in another case of Sterlite Energy.

Challenging imposition of entry tax on imported goods in Orissa, VAL said that goods imported from outside India could not be exigible for entry tax which a dealer is liable to pay on the event of entry of goods into a local area for use, consumption or sale.

VAL, which is setting up an alumina refinery at Lanjigarh (Kalahandi district) and an aluminium smelter plant in Jharsuhuda with captive power plants in the state, had been procuring capital goods comprising plant, machinery and equipment from domestic manufacturers. Besides, it also imports such goods from the US, Canada, Germany, China, Australia, Italy, France, South Africa and Spain.

VAL, a subsidiary of the London Stock Exchange listed-Vedanta Resources Plc, said that it had been paying tax on goods, procured from domestic manufacturers, brought into the state. Till July 2007, it had paid around R17 crore towards entry tax on goods procured indigeneously and more than R20 crore on the imported goods.

While the company claimed that it was advised against paying entry tax on imported goods, it had moved the HC apprehending that the revenue authorities might resort to other penal action.

Import of goods from abroad through an Indian port and then transport of goods to a factory within a state where such goods are intended to be used is all part of the transaction of import of goods and cannot be taxed under the 1999 Act, the petition said, adding that the state has no jurisdiction to levy tax on imports as the same is specifically barred by the Constitution.

According to VAL, customs duty is covered under Entry 83 of List I of the Seventh schedule to the Constitution and, therefore, clearly within the domain of Parliament.