LexM/S. GEO MILLER AND CO. PVT. LTD. AND ORS. versus STATE OF M.P. AND ORS.
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) MIS. GEO MILLER AND CO. PVT. LTD. AND ORS. A v. STATE OF M.P. AND ORS. MAY 5, 2004 B [S. RAJENDRA BABU, CJ. AND G.P. MATHUR, J.] Constitution of India-Articles 301, 304 (b) and 366 (29-A); Entries 52 and 54 of List 11 to Seventh Schedule-M P. Enlly Tax Act, 1976- Sections 2 (2) and 3 (1) (b)-Levy of Enlly Tax on goods brought ji·om C another State for use in works contract-Constitutional validity of-Held, the Act is constitutionally valid-The Act is compensato1y in nature and does not impede ji-ee flow of trade, commerce and intercourse-Act specifically excludes 'execution of works contract' ji-0111 the definition of 'sale'-M P. Sales Tax Act, 1958. D Appellants-assessees are carrying on business of execution of works contract and are registered dealers ·under the M.P. General Sales Tax Act, 1958. The appellants challenged the assessment of Entry Tax on goods brought for purpose of works contract under the Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar E Adhiniyam, 1976 (M.P. Entry Tax Act, 1976) before the Revenue on the ground that the goods are subjected to sales tax under the Sales Tax Act. The Revenue rejected the contention of the respondents. The High Court dismissed the appeal of the appellants. In appeal to the Court, the appellants contended that the M.P. F Entry Tax Act, 1976 is violative of Article 301 of the Constitution of India since it impedes movement of goods from one barrier to the other; that the Act is unconstitutional since the conditions laid down under Article 304(b) of the Constitution of India have not been complied with; that Section 3(1 )(b) of the Act does not permit levy of G any entry tax on goods consumed or used in works contract as these amount to 'sale' by virtue of Article 366(29A); that the term 'sale' in. Entry 52 of List II and Entry 54 of List II of the Constitution of India are the same except deriving from the expression 'tax on the sale or purchase of goods' as defined in Article 366(29-A) of the Constitution H 27 28 SUPREME COURT REPORTS [2004] SUPP. 2 S.C.R. A of India; that the M.P. Entry Tax Act does not provide a definition of 'sale' and hence the definition as provided in Article 366(29-A) must be imported; and that by virtue of exception (vi) to proviso to section 3(1)(b) of the Entry Tax Act, the goods specified in Schedule III to the Act and imported from outside the State for consumption, are completely B exempted from tax. c Respondent-Revenue contended that the Entry Tax imposed is compensatory in nature since the revenue is passed over to the local bodies to compensate them for the loss incurred due to abolition of octroi. Dismissing the appeals, the Court HELD: I.I. Only such restrictions or impediments which directly or immediately impede the free flow of trade, commerce and intercourse D fall within the prohibition of Article 301 of the Constitutilfn of India. Not all taxes, whether or not their impact on trade is immediate or mediate, direct or remote should be governed by Article 301. The mere fact that Entry Tax is imposed under the M.P. Entry 'Tax Act, 1976 does not automatically bring Article 301 into play. Taxes which would otherwise E interfere with the unfettered freedom under Article 301 will be protected from becoming unconstitutional if they are compensatory. The M.P. Entry Tax Act is compensatory in nature and it is not open to challenge under Article 301 of the Constitution of India and there is no need to venture into the argument based on Article 304(b). Accordingly, the F constitutionality of the Entry Tax Act is upheld. 131-G-H; 32-A-B, GI Atiahari Tea Co. l1J. v. The S1a1e of Assam & Ors., 1196111 SCR 809; Automobile Transporl (Rajaslhan) ltd. v. The Stale of Rajasthan & Ors, 1196311 SCR 491 State of Kera/av. A.B. Abdul Kadir & Ors., 119691 2 SCC 363 and Mis Bhagalram Rajeevkumar v. Commissioner of Sales G Tax, MP. & Ors .. 119951 Supp. 1 sec 673, referred to. 1.2. The appellants effected entry of goods specified in Schedule Ill of the Act in the local area for use in execution of works contract. Hence, they are liable to ta:1. as per Section 3(1)(b) of the Act. The Act makes H a clear distinction between 'sale' and 'execution of works contract' and GEO MILLER AND CO. PVT. LTD. v. STATE 29 specifically excludes the latter from the purview of the former. The Act A has specifically excluded the definition of 'goods' and 'sale' which is utilised in the M.P
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