Companies told to pay entry tax dues to states

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New Delhi | Published: March 12, 2016 12:04:12 AM

The CJI hinted at vacating its earlier order that allowed firms to deposit 50% of the entry tax amount payable on goods imported

OVER two dozen companies, including Vedanta Aluminium, Essar Steel, Tata Steel, Adani and others, will have to clear entire outstanding entry tax dues amounting to thousands of crores to states following the Supreme Court direction on Friday making it clear that states like Odisha cannot be made to suffer for lack of funds for infrastructure development.

A bench headed by Chief Justice TS Thakur, while hearing an appeal filed by Nalco seeking to restrain the Odisha government from resorting to coercive actions for recovery of penalty dues, asked state counsel Kirti Renu Misra to give details of outstanding liability against any company whose petition is pending before the apex court. It also said that if the details are not submitted to the court, then the Commissioner of Commercial Taxes should remain present before it on April 13, the next date of hearing.

The CJI also hinted at vacating its earlier order that allowed the companies to deposite as of now 50% of the entry tax amount said to be payable on goods imported by them for their plants and services in Odisha.

“We are inclined to vacate our order. This is a huge liability running into hundreds and thousands of crores…We are setting the bar higher and want 100% to be paid. We can’t deprive a state like Odisha of such benefits,” he observed.
The apex court had earlier in 2014 allowed companies to pay upto 50% of the tax demand.

Various petitions by Vedanta and others had challenged the levy of entry tax on imported goods under Orissa Entry Tax Act. The Act allows Orissa to impose a tax, not exceeding 12% of the purchase value, on entry of goods for consumption, use or sale in the state. The government levies different rates for different goods.

The companies had challenged the Orissa High Court judgement, upholding the levy. Corporates’ stand is that goods imported from outside India cannot be made eligible to entry tax, which a dealer is liable to pay on entry of goods into a local area for use, consumption or sale.  They claim that the power to impose a cross-state levy only lies with the Centre and states have no jurisdiction to levy tax on imports as the same is specifically barred by the Constitution.

In another batch of petitions, a five-judge constitution bench of the Supreme Court in 2010 had ruled that the validity of entry taxes levied by states would have to be decided by a larger bench due to conflicting judgements by various high courts, even as the Union government has said that it wants a goods and services tax to be imposed across the country to rationalise state levies such as entry tax.

While some high courts have held the entry tax to be unconstitutional, others have upheld it, leading to appeals and cross appeals by the states and companies to the apex court.

Orissa and Uttar Pradesh are among the states that have appealed to the apex court against high court verdicts that held the entry tax to be unconstitutional.

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