B.P. Das, J.
1. All these Writ Petitions involve common question of law. They were, therefore, with the consent of Learned Counsel for the parties, heard together and are being disposed of by this Judgment.
2. The common question of law that arises for determination is whether levy of entry tax under the provisions of the Orissa Entry Tax Act, 1999 and the Rules made thereunder on different goods brought by the Union of India into the local areas of the State of Orissa is legal and valid?
3. The Union of India represented by different authorities of the Indian Railway have filed these Writ Petitions. The contentions of the Petitioners are that (i) the Railway is not liable to pay any entry tax on the goods/properties brought by the Railway into the local areas of the State as the Railway Administration is entitled to exemption on the properties of the Union from the State taxation under Article 285(1) of the Constitution of India; (ii) the State Legislature has no legislative competence to enact the Orissa Entry Tax Act, 1999 (hereinafter 'OET Act') purportedly under Entry 52 of List II of the Seventh Schedule to the Constitution of India and, therefore, cannot impose tax on entry of goods into the local areas of the State for consumption, use and sale therein and (iii) entry tax being a substitute of octroi, Section 184 of the Railways Act, 1989 protects the Railway properties from levy of entry tax.
4. Since the grounds taken and the question involved in all these Writ Petitions are common, for the sake of convenience, we briefly indicate the facts of W.P.(C) No. 5791/2002.
The Union of India represented by the General Manager, Central Organization, Railway Electrification, and its officers, (hereinafter called the Railway) have filed the Writ Petition with a prayer to quash the letter dated 19.7.2001. (Annexure-3) and further to issue an appropriate writ or direction declaring that the Petitioner-Railways are not exigible to entry tax as is being levied by the Opposite Parties and further to direct the Opposite Parties to refund the tax collected by them and paid by the Petitioners under protest.
The Commercial Tax Officer, Cuttack-III Circle, Jajpur Road, (O.P. No. 5) issued notices dated 4.7.2000 in Form-E-4 under Rule 10 (2) of the Orissa Entry Tax Rules, 1999 to the Depot Store Keeper, Railway Electrification, Dhanmandal, to the effect that entry tax to the extent of Rs. 69,136/- and Rs. 1,11,600/- for the months of 2/2000 and 3/2000 respectively was payable, vide Annexure 1. Similar notices were also issued from time to time for the subsequent periods. On 12.7.2000 Petitioner No. 4 - the Deputy Controller of Stores, Railway Electrification, Bhubaneswar, addressed a letter to the Commissioner of Commercial Taxes, Orissa, requesting him to exempt levy of entry tax on the goods meant for Railway electrification and Carriage Repair Workshop at Mancheswar, vide Annexure-2. Thereafter in response to the letter dated 30.5.2001 of the Divisional Railway Manager (Engg), South Eastern Railways, Bhubaneswar, regarding payment of entry tax on various railway materials, the Additional Commissioner of Commercial Taxes by letter dated 19.7.2001 (Annexure-3), which is sought to be quashed in this proceeding intimated that there was no impediment on the way of levy of Orissa Entry Tax on the Railway properties in the event such properties appear in the Schedule to O.E.T. Act, 1999 and enter into a local area inside the State of Orissa, and directed to make payment of the tax within 15 days of receipt of materials. The material part of the aforesaid letter is extracted hereunder for appreciation of the point at issue:
To clarify the matter further, I am directed to invite your kind attention to the rulings of the Hon'ble Supreme Court in case of Collector of Customs and Anr. v. State of West Bengal and Ors. (1999) 113-STC P. 167 (SC). The Hon'ble Court referring to the decision of the Constitution Bench consisting of nine Judges in Sea Customs Act AIR 1963 (SC) 1760 and a later Constitution Bench Judgment in the case of New Delhi Municipal Committee v. State of Punjab : AIR1997SC2847 upheld the view that the sale of goods by customs authority is liable to sales tax and such authorities would be a dealer under the Bengal Finance (Sales Tax) Act. Coming to such conclusion, the Hon'ble Supreme Court have referred with approval the following observation in the case of Sea Customs Act.
We may in this connection contrast Sales Tax which is also imposed with reference to goods sold where the taxable event is the Act of Sale. Therefore, though both Excise Duty and Sales Tax are levied with reference to goods, the two are very different imposts, in one case the imposition is on the Act of manufacture of production while in the other it is on the act of sale. In neither case, therefore, can it be said that the Excise Duty or Sale Tax is a tax directly on the goods for in that event they will really become the same tax.
Thus applying the ratio of the above ruling it can be safely said that levy of Entry Tax is not directly on the property of the Government of India or the property of Indian Railway. This is a levy on the event of entry of goods to a local area in the State of Orissa for which the constitutional immunity is not available.
5. Shri Bijoy Pal, Learned Senior Counsel appearing for the Petitioners Railway, drew our attention to Article 285 of the Constitution of India dealing with the exemption of properties of the Union of India from taxation, which is extracted hereunder-
285. (1) The property of the Union shall, save in so far as Parliament may by law otherwise provide, be exempt from all taxes imposed by a State or by any authority within a State.
(2) Nothing in Clause (1) shall, until Parliament by law otherwise provides, prevent any authority within a State from levying any tax on any property of the Union to which such property was immediately before the commencement of this Constitution liable or treated as liable, so long as that tax continues to be levied in that State.
According to Shri Pal, Entry 52 of List Il-State List in the Seventh Schedule to the Constitution empowered the Legislature of any State to make laws for such State with respect to taxes on the entry of goods into a local area for consumption, use or sale therein and accordingly various State Legislatures enacted Municipal Acts, Corporation Acts and empowered the local bodies, municipalities and similar bodies to levy and collect entry tax and/or octroi duty and such enactments were passed by the State Legislatures. So far as Orissa is concerned, Section 131(1)(kk) of the Orissa Municipal Act, 1950, which came into the statute book by Orissa Act 3 of 1954, contained similar provisions in terms of Entry 52 of the List-II of the Seventh Schedule and empowered the Municipalities to impose within the limits of the municipal areas the tax and fees or any of them which included the octroi on goods brought within the limits of the municipal areas for consumption, use or sale therein. Shri Pal further submitted that the question of amenability of the Railway properties to imposition of octroi duty or entry tax came up for decision before the Supreme Court in Union of India v. The City Municipal Council, Beliary : [1979]1SCR573 , and interpreting the provisions of Clauses (1) and (2) of Article 285 and Clause (1) of Article 372 of the Constitution, the Court ruled that the property of the Union is exempt from all taxes imposed by a State or by any authority within a State under Clause (1) of Article 285 unless the claim can be supported sustained within the four corners of Clause (2).
Then Learned Counsel for the Petitioners submitted that the question whether sales tax as distinguished from octroi or entry tax could be levied on the Union property came up for consideration before the Supreme Court in In re, Sea Customs Act (1878), Section 20(2) : AIR 1963 SC 1760, as well as in Collector of Customs v. State of West Bengal (1999) 113 STC 167 and though the question whether under Article 285 of the Constitution exemption could be granted to the Union in respect of sales tax in different States of India was dealt with in the aforesaid decisions, the question of leviability of octroi and entry tax was concluded in Bellary Municipal Council case (supra). It was further brought to the notice of this Court that the Orissa Legislature enacted Orissa Entry Tax Act, 1999 (Orissa Act 11 of 1999) to provide for the levy and collection of tax on the entry of goods into the local areas of the State of Orissa for consumption, use or sale therein and matters incidental thereto and connected therewith. Now the contention of the Learned Counsel for the Petitioners was that the entry tax, which replaced the octroi duty, could not be legally imposed in view of the concluded position of law stated in Bellary Municipal Council case (supra).
The next argument of Shri Pal for the Petitioners was that on the face of the specific provisions made in Section 184 of the Railways Act, 1989, there could not be any demand against the Petitioners. Section 184(1) of the Railways Act, 1989 runs thus:
184. Taxation on railways by local authorities.-
(1) Notwithstanding anything to the contrary contained in any other law, a railway administration shall not be liable to pay any tax in aid of the funds of any local authority unless the Central Government, by notifications, declares the railway administration to be liable to pay the tax specified in such notification.
It was further contended that as per the Statement of Objects and Reasons appended to the Orissa Entry Tax Bill, 1999, entry tax was proposed to be levied on every dealer in scheduled goods or any person who brings or causes to be brought into the local area, the scheduled goods at such rate as may be prescribed by the Government not exceeding 12 per centum of the purchase value of the goods, which, according to the Petitioners, is a levy in the aid of the funds of local authority and in lieu of octroi.
The sum and substance of the argument of the Learned Counsel for the Petitioners was that the Railway was not liable to pay the entry tax under the O.E.T. Act and the Rules made thereunder as the Railway, which is Union as understood under Article 285 of the Constitution, became the owner of the goods much prior to it crossing the Orissa border and became the property of the Petitioners. In order to substantiate his argument, Learned Counsel for the Petitioners relied upon the following observations made by the Supreme Court in Bellary Municipal Council case (supra) appearing in paragraph 7 of the Judgment:
The property of the Union is exempt from all taxes imposed by a State or by any authority within a State. But the Parliament may by law provide otherwise and then any tax on the property of the Union can be imposed and levied in accordance with the said law. But then an exception has been carved out in Clause (2). The exception is not meant for levying any tax on such property by any State; but it is merely for the benefit of any authority including the local authority like the municipal Council in question. Clause (1) cannot prevent such authority from levying any tax on any property of the Union if such property was exigible to such tax immediately before the commencement of the Constitution. The local authority, however, can reap advantage of this exception only under two conditions namely (1) that it is 'that tax' which is being continued to be levied and no other; (2) that the local authority in 'that State' is claiming to continue the levy of the tax. In other words, the nature, type and the property on which the tax was being levied prior to the commencement of the Constitution must be the same as also the local authority must be the local authority of the same State to which it belonged before the commencement of the Constitution. On fulfillment of these two conditions it is authorized to levy the tax on the Union property under Clause (2). As in the case of Clause (1) it lies within the power of the Parliament to make a law withdrawing the exemption of the imposition of the tax on the property of the Union, so in the case of Clause (2) it is open to the Parliament to enact a law and finish the right of the local authority within a State to claim any tax on any property of the Union, a right it derived under Clause (2). That is to say, in both the cases the ultimate power lies with the Parliament.
Learned Counsel for the Petitioners relying upon the Judgments referred to in the foregoing paragraph made a prayer to declare that the Petitioners are not exigible to entry tax as being levied by the Opposite Parties and paid by the Petitioners under protest and further to hold that the contentions of the Opposite Parties in the letter dated 19.7.2001 (Annexure-3) are not applicable to the case of entry tax and are not relevant to the issue/dispute raised-and further to hold that the Opposite Parties are not entitled to collect entry tax in respect of the properties of the Petitioners entering the local areas of the State of Orissa as prohibited under the provisions of the Constitution of India as well as the Railways Act, 1989 and to refund the entry tax collected by the Opposite Parties and paid by the Petitioners under protest.
Learned Counsel for the Petitioners, apart from taking the aforesaid grounds, drew our attention to the Statements of Object and Reasons and submitted that octroi tax had been substituted as entry tax by virtue of the O.E.T. Act and as per Section 36 of the O.E.T. Act, each local authority shall be paid every year such sum as may be determined by the State Govt. from out of the collected tax under the O.E.T. Act. According to the Petitioners, entry tax is in aid of the funds of local authority and it is only an extension of the octroi tax for which the bar in Section 184 of the Railways Act is total because the Railway Administration shall not be liable to pay any tax in aid of the funds of any local authority unless the Central Govt. by notification declares the Railway Administration to be liable to pay the tax specified in such notification.
6. A counter affidavit has been filed on behalf of O.P. No. 4 - the Commissioner of Sales Tax, Orissa, and O.P. No. 5-the Commercial Tax Officer, Cuttack-III Circle, Jajpur Road. The Revenue has taken the stand that the question of law raised by the Petitioner has been concluded in favour of the Revenue in In re, Sea Customs Act (1878), Section 20(2) (supra), wherein it was held that customs duty was not a tax on the property of the Union and as a corollary entry tax was to be held as not a 'tax' on the property of the Union and as such Article 285 of the Constitution of India is not at all attracted in this case. In support of the stand taken by the Opposite Parties, Shri Ashok Mohanty, Learned Senior Standing Counsel of the Commercial Taxes Department, relied upon a decision of the Karnataka High Court in Union of India v. State of Karnataka (2002) 126 STC 501, which followed the decisions in In re, Sea Customs Act (1878), Section 20(2) (supra) and Collector of Customs v. State of West Bengal (supra). Learned Counsel for the Revenue strongly refuted the argument advanced by the Learned Counsel for the Petitioners that the entry tax was a replacement of the octroi and as it is in aid of funds for the local authority, imposition of same on the properties of the Union is hit by Section 184 of the Railways Act.
7. After hearing the rival contentions advanced by the Learned Counsel for the parties, the following points arise for decision of this Court:
(1) Whether Section 184 of the Railways Act, 1989 is a total bar on collection of entry tax as it is a substitute of octroi? and
(2) Whether entry tax is leviable on the properties of the Union in view of the provisions in Article 285 of the Constitution of India?
8. Point No. (1):
Admittedly, octroi was collected by the local authority and the said collection of octroi is no more in vogue in Orissa. The object of enacting the Orissa Entry Tax Act, 1999, as would appear from the Statement of Objects and Reasons appended to the Orissa Entry Tax Bill, 1999, are as follows:
The Bill seeks to provide for the levy of a tax on entry of goods into a local area for consumption, use or sale therein as enjoined under Entry 52 of the List II of the Seventh Schedule to the Constitution of India. The tax is proposed to be levied on every dealer in scheduled goods or any person who brings or causes to be brought into a local area the scheduled goods at such rates as may be prescribed by Government not exceeding twelve percentum of the purchase value of such goods.
2. The Bill also seeks to make provisions, inter alia, for furnishing of periodical returns, appointment of taxing authorities, assessments, appeals, revision, maintenance of accounts, composition of offences, refund, recovery, assignment of proceeds including other enforcement provisions and the provisions to empower the State Government to make rules for carrying out the purposes of the Bill after enactment.
3. The Bill further seeks for abolition of octroi duty levied and collected under The Orissa Municipal Act, 1950 by repealing Clause (kk) of Sub-section (1) of Section 131 thereof.
The above Statement of Objects and Reasons makes it crystal clear that the Bill so introduced before the Orissa Legislative Assembly was to provide for the levy of a tax on entry of goods into the local areas of the State of Orissa as well as for abolition of octroi duty levied and collected under the Orissa Municipal Act, 1950 by Clause (kk) of Sub-section (1) of Section 131 thereof, which was repealed on the commencement of the Orissa Entry Tax Act, 1999. Now we must make it very clear that octroi duty was collected by the local bodies taking aid of Section 131 of the Orissa Municipal Act and the Orissa Entry Tax Act, 1999 was enacted deriving legislative power from Entry 52 of List II of the Seventh Schedule to the Constitution of India. In order to examine the correctness of the contention of the Petitioners that entry tax is, hit by Articles 285 and 289 of the Constitution of India, it would be profitable to reproduce also Article 289 of the Constitution:
289. Exemption of property and income of a State from Union taxation-
(1) The property and income of a State shall be exempt from Union taxation.
(2) Nothing in Clause (1) shall prevent the Union from imposing or authorizing the imposition of, any tax to such extent, if any, as Parliament may by law provide in respect of a trade or business of any kind carried on by, or on behalf of, the Government of a State, or any operations connected therewith, or any property used or occupied for the purposes of such trade or business, or any income accruing or arising in connection therewith.
(3) Nothing in Clause (2) shall apply to any trade or business, or to any class of trade or business, which Parliament may by law declare to be incidental to the ordinary functions of Government.
A conjoint reading of both Articles 285 and 289 implies that the provisions prohibit imposition of taxes directly on income or on property but there is no embargo on imposition of tax, which may indirectly affect the income, or the property of the Union of India. In this case entry tax cannot be called a tax directly imposed on the income or property of the Union as the taxable event under the O.E.T. Act is on the entry of scheduled goods into a local area and not on the goods itself.
In this regard we may refer to the 9-Judge Constitution Bench decision of the Supreme Court in In re, Sea Customs Act (1878), Section 20(2) (supra) the relevant part of which appearing in paragraph 16 reads as follows:.We are therefore of opinion reading Article 289 and its complementary Article 285 together that the intention of the Constitution-makers was that Article 285 would exempt all property of the Union from all taxes on property levied by a State or by any authority within the State while Article 289 contemplates that all property of the States would be exempt from all taxes on property which may be leviable by the Union. Both the Articles in our opinion are concerned with taxes directly either on income or on property and not with taxes which may indirectly affect income or property....
So, in this case the taxable event is the entry of goods into the local areas of the State for the purpose of use, consumption or sale therein. In other words, the levy is on the entry of goods into the local areas and not directly on the property or the goods itself.
The Judgment in In re, Sea Customs Act (1878), Section 20(2) (supra) was affirmed by another 9-Judge Constitution Bench of the Supreme Court in New Delhi Municipal Committee v. State of Punjab, etc. etc. : AIR1997SC2847 . The decision referred to by the Learned Counsel for the Railway in Union of India v. Ranchi Municipal Corporation, Ranchi (1996) 7 SCC 542, holding that the demand of service charges made by the Municipality from the Union of India was ultra vires of the power of the Municipality as the Railway was protected under Section 184 of the Railways Act and Article 285 of the Constitution, is of no help to the Railway because the tax levied in the present case is not by the local authority but by the State and is an indirect tax in which the taxable event is on the entry of goods.
We also rely upon the decision in Union of India v. State of Karnataka (2002) 126 STC 501, and further after going through all these decisions, the irresistible conclusion is that the entry tax by no stretch of imagination can be held to be the substitute of octroi duty, so also it cannot be called as a tax in aid of the funds of local authority. Therefore, Section 184(1) of the Railways Act, 1989 prohibiting levy of tax in aid of funds of local authority cannot be made applicable for claiming exemption by the Railway against levy of entry tax.
9. Point No. (2):
Our discussion in the foregoing paragraph on point No. (1) also makes it clear that in view of the decision of the Apex Court in In re, Sea Customs Act (1878), Section 20(2) (supra), which was later on affirmed by a 9-Judge Constitution Bench of the said Court as well as taking into consideration the Judgment rendered by the Karnataka High Court in Union of India v. State of Karnataka (supra), it is clear that there is no embargo on the part of the State to impose an indirect tax which is not in contravention of any provision of the Constitution of India. The provisions in Article 285 of the Constitution of India are no bar for levy of tax on entry of goods into the local areas of the State of Orissa for consumption, use or sale therein effected by the Railway.
10. In view of the determination of Point Nos. (1) and (2) in the aforesaid manner, the common question of law involved in all these Writ Petitions also gets automatically resolved. There is no legal bar to the levy of entry tax under the provisions of the Orissa Entry Tax Act, 1999 and the Rules made thereunder on different goods brought by the Union of India into the local areas of the State of Orissa. Therefore, the Writ Petitions filed by the Railway being misconceived are dismissed. Consequently, the interim orders passed in the Writ Petitions stand vacated. The Opposite Parties are now free to proceed with the assessment/recovery of the demanded tax in accordance with law.
We make no order as to cost.
A.K. Samantaray, J.
I agree.