Arunoday Construction Co. (P) Ltd. and anr. Vs. State of Assam and ors. - Court Judgment

Excerpt:
- - , asbestos sheets). besides paying entry tax, the petitioners are also required to pay sales tax under the agst act as well as the cst act on the sales made in the course of inter-state and intra-state trade and commerce of their finished products, whereas the local manufacturers of goods, other than asbestos sheets, are exempted from the liability to pay entry tax if the sale of such goods, within the state of assam, is liable to pay of local sales tax. joshi, levy of entry tax on the raw materials used in manufacturing finished products, such as, asbestos sheets, on which sales tax is payable under the local sales tax law as well as central sales tax, has no nexus with the legislative object of the aet act, 2001, and is, thus, devoid of any rational. choudhury, learned additional..... i.a. ansari, j.1. as all these five writ petitions have raised identical questions of fact and law, these writ petitions have been heard together and are being disposed of by this common judgment and order.2. the petitioners herein are manufacturers of asbestos cement sheets. the main raw material required for manufacturing asbestos sheets is cement, which is, usually, imported into the state of assam by the petitioners from outside the state by making payment of four per cent of central sales tax on the strength of 'c' forms. the import of cement was subject to levy of sales tax at the rate of eight per cent under the assam general sales tax act, 1993 (in short, 'the agst act'), which has, now, been replaced by the assam value added tax act, 2005. thus, the petitioners pay taxes on the.....

Judgment:

I.A. Ansari, J.

1. As all these five writ petitions have raised identical questions of fact and law, these writ petitions have been heard together and are being disposed of by this common judgment and order.

2. The petitioners herein are manufacturers of asbestos cement sheets. The main raw material required for manufacturing asbestos sheets is cement, which is, usually, imported into the State of Assam by the petitioners from outside the State by making payment of four per cent of Central sales tax on the strength of 'C' forms. The import of cement was subject to levy of sales tax at the rate of eight per cent under the Assam General Sales Tax Act, 1993 (in short, 'the AGST Act'), which has, now, been replaced by the Assam Value Added Tax Act, 2005. Thus, the petitioners pay taxes on the inter-State sale and intra-State sales on the finished products under the AGST Act and also under the Central Sales Tax Act, 1956 (in short, 'the CST Act'). The chief grievance of the petitioners is that the petitioners are required to pay entry tax, under the Assam Entry Tax Act, 2001 (in short, 'the AET Act, 2001'), at the rate of eight per cent on the import of cement for use in the manufacturing process of their finished products, (i.e., asbestos sheets). Besides paying entry tax, the petitioners are also required to pay sales tax under the AGST Act as well as the CST Act on the sales made in the course of inter-State and intra-State trade and commerce of their finished products, whereas the local manufacturers of goods, other than asbestos sheets, are exempted from the liability to pay entry tax if the sale of such goods, within the State of Assam, is liable to pay of local sales tax. The imposition of entry tax on the imported cement for use in the manufacturing process of asbestos sheets, is, thus, according to the petitioners, discriminatory and also violative of not only the constitutional guarantees, but also of the scheme of the AET Act, 2001.

3. I have heard Mr. G.K. Joshi, learned Senior counsel, for the petitioners, and Mr. K.N. Choudhury, learned Additional Advocate-General, Assam, appearing on behalf of the State.

4. Referring to the statement of objects and reasons of the AET Act, 2001, Mr. Joshi submits that the entry tax is levied, in the present case, in order to mobilise additional resources by curbing loss of revenue arising out of import of goods from outside the State for own use and consumption inside the State.

5. Mr. Joshi points out that as per Section 5 of the AET Act, 2001, no entry tax is payable on the import of specified goods into a local area (i) if the specified goods are sold within the State; (ii) if such sale amounts to 'sale' within the meaning of Section 2(43) of the AGST Act, 1993; and (iii) if tax is payable on such sale under the local sales tax law. Thus, a registered dealer, importing specified goods from outside the State for the purpose of sale, is not required to bear, submits Mr. Joshi, the burden of entry tax at all, for, such a dealer pays taxes on such sale of the specified goods under the local sales tax law. Mr. Joshi further submits that the State cannot justify levy of entry tax on the import of specified goods, which are used for manufacturing specified goods and are, at the same time, liable to payment of levy under the provisions of the local sales tax laws. Mr. Joshi points out that the State does not suffer any loss of revenue, for, it gets more taxes within the State as compared to taxes realised on the sale of imported items in Assam.

6. According to Mr. Joshi, levy of entry tax on the raw materials used in manufacturing finished products, such as, asbestos sheets, on which sales tax is payable under the local sales tax law as well as Central sales tax, has no nexus with the legislative object of the AET Act, 2001, and is, thus, devoid of any rational. The AET Act, 2001, is, therefore, according to Mr. Joshi, in violation of Articles 265 and 14 of the Constitution of India.

7. Since the benefit of Section 5 of the AET Act, 2001, has not been extended to the petitioners, it is, according to Mr. Joshi, a clear case of arbitrariness and discrimination shown by the State Legislature towards persons, such as, the petitioners. Mr. Joshi also points out that under the AET Act, 2001, the manufacturers of cement based finished goods have been placed in the group of individuals and unregistered dealers, who are importing cement for their own use and not paying any tax at all under local sales tax laws or Central sales tax laws. Such classification, contends Mr. Joshi, has resulted into pronounced inequalities, though the petitioners are entitled to equal protection of law. Such classification, according to Mr. Joshi, has no nexus with the object sought to be achieved and the same is palpably arbitrary. In support of his submissions, Mr. Joshi relies on Ajay Hasia v. Khalid Mujib Sehravardi : (1981)ILLJ103SC , D.S. Nakara v. Union of India : (1983)ILLJ104SC , Last India Tobacco Co. v. State of Andhra Pradesh : [1963]1SCR404 , Shri Sitaram Sugar Co. Ltd. v. Union of India : [1990]1SCR909 , Federation of Hotel & Restaurant Association of India v. Union of India : [1989]178ITR97(SC) , Gannon Dunkerley & Co. v. State of Rajasthan : (1993)1SCC364 , Ramana Dayaram Shetty v. International Airport Authority : (1979)IILLJ217SC and Comptroller and Auditor General of India, Gian Prakash v. K.S. Jagannathan : [1986]2SCR17 .

8. Mr. Joshi, learned Senior counsel, has further contended that the levy of entry tax, on the import of cement for use in manufacturing finished goods for sale, is contrary to, and inconsistent with, the public policy of the State and, hence, such levy is liable to be declared illegal. Imposition of entry tax, on the cement, used as a raw material in manufacturing cement based finished goods is, argues Mr. Joshi, violative of the provisions of Article 19(1)(g) of the Constitution of India inasmuch as such manufacturers, contends Mr. Joshi, shall be compelled to close down their business in the face of stiff competition from the manufacturers of similar products, located outside the State. It is the submission of Mr. Joshi that levy of entry tax on the manufacturers of the cement based finished goods, within the State, is violative of the provisions of Article 301 of the Constitution of India too inasmuch as such levy is, according to Mr. Joshi, not regulatory and/or compensatory. It is also submitted by Mr. Joshi that by imposing entry tax, the State has cast heavy burden of levy on the local manufacturers of cement based finished products without showing any justification whatsoever. Hence, the impugned levy is, contends Mr. Joshi, liable to be declared ultra vires and illegal.

9. It is reiterated by Mr. Joshi that the levy of entry tax on the import of cement in the hands of the petitioners, who are manufacturers of cement based products, is not contemplated within the AET Act, 2001, as expressed in the Statement of Object and Reasons of this enactment.

10. Controverting the submissions made by Mr. Joshi, Mr. K.N. Choudhury, learned Additional Advocate-General, submits that the levy of entry tax serves twin purposes of compensating the loss of revenue of the State as well as bringing parity between the manufacturer, who buys cement locally, and the manufacturer, who buys cement from the outside the State. Mr. Choudhury submits that as the petitioners import cement for manufacturing asbestos sheets, the petitioners may not be liable to get themselves registered under Rule 3(1) of the Assam Entry Tax Rules, but this does not absolve the petitioners from the liability of paying entry tax under the AET Act, 2001. The petitioners' liability to pay entry tax, contends Mr. Choudhury, is not dependant upon registration alone. Mr. Choudhury submits that levy of entry tax, on import of cement into a local area, has created a level playing field for all manufacturers. In the process, points out Mr. Choudhury, the State is tackling the diversion of trade also. The contention of the petitioners, according to Mr. Choudhury, is wholly misleading, for, the petitioners compare their status with that of the dealer or importer of cement for resale. The petitioners have to pay, points out Mr. Choudhury, entry tax on cement, which the petitioners import as a raw material for use in the manufacturing process of asbestos sheets, and they have to pay local sales tax on the sale of asbestos sheet, which is a finished product. Therefore, the petitioners' contention that the petitioners are sought to be discriminated is wholly misconceived and legally not tenable; so submits Mr. Choudhury.

11. Disputing the petitioners' grievances relating to violation of Article 14 of the Constitution of India, Mr. Choudhury submits that in order to get the benefit of exemption under the impugned Act, the goods should be sold in the same form in which it is imported, i.e., cement should be sold as cement only. Mr. Choudhury submits that since the AET Act, 2001, does not provide for any exemption in respect of specified goods used as raw materials for manufacturing other goods, the petitioners cannot claim the benefit of Section 5 for the simple reason that they import cement and sell asbestos sheets. Imposition of entry tax on cement, according to Mr. Choudhury, does not add to tax element of asbestos sheets. The State Legislature was, contends Mr. Choudhury, aware of this aspect of the matter and has accordingly enacted the law providing for set-off in the case of sale of goods in the form it is imported, but not in the case of specified goods imported from outside the State into a local area for use as raw materials for some other finished products, such as, asbestos sheets.

12. As regards the petitioners' grievance of hostile discrimination, Mr. Choudhury submits that such grievances are without any legal foundation, for, after introduction of uniform rate of tax, points out Mr. Choudhury, cement is taxable at 12 per cent in all the States of the country and, hence, a manufacturer of cement based product, in any State, has to procure the raw material, i.e., cement, paying sales tax at 12 per cent. In the case of the present petitioner too, points out Mr. Choudhury, the petitioners, while importing cement from outside the State, are required to pay Central sales tax at four cent and entry tax at eight per cent and, thus, the total tax element is 12 per cent. Hence, the allegation of discrimination is, reiterates Mr. Choudhury, without any valid basis. Mr. Choudhury further submits that it is for the Legislature or the taxing authorities to determine the question of need, the policy to select the goods or services for taxation and the petitioners have no right to raise objection in such matters of taxation. In support of this submission, Mr. Choudhury relies on the decision in Sri Krishna Das v. Town Area Committee, Chirgaon reported in : [1990]183ITR401(SC) .

13. As regards the decisions referred to by Mr. Joshi, Mr. Choudhury submits that the same are distinguishable on facts and the same have no application to the facts of the present cases.

14. Before dealing with the rival submissions made before me on behalf of the parties, let me take note of the relevant provisions of the Assam Entry Tax Act, 2001. Section 3 of the AET Act, 2001, which is the charging section, reads as under:

3. Levy of tax.--(1) There shall be levied and collected an entry tax on the entry of goods specified in the Schedule into any local area for consumption, use or sale therein at such rate, not exceeding twenty per centum, as the State Government may, by notification, fix in this behalf and different rates may be fixed for different class or classes of specified goods and such tax shall be paid by every importer of such goods, whether he imports such goods on his own account or on account of his principal or any other person or takes delivery or is entitled to take delivery of such goods on such entry;

(2) The entry tax payable by an importer under this Act shall be charged on the purchase value of the goods specified in the Schedule at the rates as may be fixed by the State Government by notification in the Official Gazette.

15. From a bare reading of Section 3, it becomes clear that entry tax is leviable on the entry of the specified goods into a local area for consumption, use or sale therein. The taxable event is, thus, 'entry' of such goods into a local area for the purposes mentioned hereinbefore, i.e., for consumption, use or sale.

16. Turning to Section 5 of the AET Act, it may be noted that Section 5, as substituted with effect from May 9, 2002, reads as under:

5. Exemption from tax.--Notwithstanding anything contained in Section 3 and Section 4, and subject to production of documentary proof, no tax under this Act shall be levied in respect of specified goods which are also subject to levy of tax under the provisions of the Assam Value Added Tax Act, 2003 (Assam Act No. VIII of 2005)

(i) if the sales of such specified goods are made inside the State by the importer are sales within the meaning of Clause (43) of Section 2 of the said Act, expecting sales falling under Sub-clauses (ii), (iii) and (iv) of the said clause and if he is liable to pay tax on such sales as a registered dealer under the Assam Value Added Tax Act, 2003 (Assam Act No. VIII of 2005);

(ii) if the sales of such specified goods are made by the importer in the course of inter-State trade or commerce or in the course of export out of the territory of India or such goods are otherwise despatched outside the State by way of stock transfer and if he is a registered dealer under the Central Sales Tax Act, 1956 (Central Act 74 of 1956).

17. From a careful reading of Section 5, it becomes clear that exemption from payment of entry tax has been granted subject to three conditions, namely, (i) if the specified goods, on its entry into a local area, is sold within the State of Assam, (ii) the sale of such imported goods is in the form in which the goods have been imported and (iii) tax is payable on such sale under the local sales tax laws. The legislative intent is obviously not to burden the importer of specified goods with both kinds of levy, namely, entry tax as well as local sales tax, so long as the importer sells goods in the form in which he has imported the specified goods. In the present case, what is imported from outside the State or from one local area to another local area is cement to be used as a raw material in the manufacturing process of asbestos sheets. If the asbestos sheets can be regarded as a commodity same as cement, no entry tax can be levied if such locally manufactured asbestos sheets are sold within the State of Assam and sales tax is paid thereon, for, exemption of entry tax is in respect of entry of only such goods, which are sold in the form in which the goods have entered into a local area and such sale is subject to local sales tax laws. If, however, such an asbestos sheet is regarded as a commodity commercially different from its raw material, i.e., cement, the entry of cement into a local area cannot be exempted from payment of entry tax, for, in such a case, import of cement is for the purpose of use or consumption in the local area. So long as such a distinction between those, who are liable to pay entry tax, and those, who are not so liable can be discerned from the provisions of Section 5, levy of entry tax on the petitioners cannot be said to be illegal nor can Section 5 be regarded as a piece of legislation, which is beyond the competence of the Legislature, for, it is for the Legislature to grant or not to grant exemption from payment of a particular levy and so long as not granting of such an exemption is shown to be discriminatory or arbitrary, no interference with such a levy will be possible.

18. Before proceeding further, it may also be pointed out that in fiscal statutes, one must have regard to the letter of the law and not to the spirit of the law. No tax can be imposed by inference or analogy and one has simply to go to the enactment itself to ascertain whether the tax, in question, is really a tax, which the statute imposes. It is not the function of the court to attribute to the words, used in a taxing statute, a strange or unnatural meaning. If the language of the provisions of a statute is plain, simple and unambiguous, the same cannot be interpreted with reference to the intention of the Legislature. In Cape Brandy Syndicate v. Commissioner of Inland Revenue reported in [1921] 12 Tax Cases 358, Rowlatt, J. observed, thus:

In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.

19. The principle, propounded in Cape Brandy Syndicate [1921] 12 Tax Cases 358, was approved and adopted by the apex court in several decisions, some of these decisions being A.V. Fernandez v. State of Kerala reported in [[1957] 8 STC 561[, Commissioner of Income-tax v. Provident Investment Co. reported in : [1957]32ITR190(SC) , Commissioner of Income-tax v. Ajax Products Ltd. reported in [[1965] 55 LTR 741[, Commissioner of Income-tax v. B.M. Kharwar reported in [[1969] 72 LTR 603[ and Commissioner of Income-tax v. Vegetable Products Ltd. reported in [[1973] 88 LTR 192[.

20. Let me, now, deal with Mr. Joshi's submission that levy of entry tax on the import of cement meant for use of the same in the manufacturing process of asbestos sheets is not contemplated under the impugned provisions of the AET Act, 2001. While considering this submission made on behalf of the petitioners, it is necessary to ascertain the meaning and effect of the words 'for consumption, use or sale therein'. The word 'consumption' is used both in its popular sense and in its economic sense. The word 'consumption', in its primary sense, means utilisation of an article in a manner, which destroys the article or wastes the article or amounts to use of the article.

21. The meaning of the word 'consumption' fell for consideration in Anwar Khan Mehboob Co. v. State of Bombay : [1961]1SCR709 . The facts of the case, in Anwar Khan Mehboob Co. : [1961]1SCR709 , were, in brief, thus : Tobacco was purchased and in the State of Bombay, stem and dust were removed from the tobacco. The assessees' contention was that removal of stem and dust from tobacco did not amount to 'consumption' of tobacco. While construing the word 'consumption', which earlier existed in the Explanation to Article 286(1)(A), as the same stood prior to its deletion by the Constitution Sixth (Amendment) Act, 1954, Constitution Bench, in Anwar Khan Mehboob Co. : [1961]1SCR709 observed thus (page 702 of STC):

9....The act of consumption with which people are most familiar occurs when they eat, or drink or smoke. Thus, we speak of people consuming bread, or fish or meat or vegetables, when they eat these articles of food; we speak of people consuming tea or coffee or water or wine, when they drink these articles; we speak of people consuming cigars or cigarettes or bidis, when they smoke these. The production of wealth, as economists put it, consists in the creation of utilities'. Consumption consists in the act of taking such advantage of the commodities and services produced as constitutes the 'utilisation' thereof. For each commodity, there is ordinarily what is generally considered to be the final act of consumption. For some commodities, there may be even more than one kind of final consumption. Thus grapes may be 'finally consumed' by eating them as fruits; they may also be consumed by drinking the wine prepared from 'grapes'. Again, the final act of consumption may in some cases be spread over a considerable period of time. Books, articles of furniture, paintings may be mentioned as examples. It may even happen in such cases that after one consumer has performed part of the final act of consumption, another portion of the final act of consumption may be performed by his heir or successor-in-interest, a transferee, or even one who has obtained possession by wrongful means. But the fact that there is for each commodity what may be considered ordinarily to be the final act of consumption, should not make us forget that in reaching the stage at which this final act of consumption takes place the commodity may pass through different stages of production and for such different stages, there would exist one or more intermediate acts of consumption. Thus, the final act of consumption of cotton may be considered to be the use as wearing apparel of the cloth produced from it. But before cotton has become a wearing apparel, it passes through the hands of different producers, each of whom adds some utility to the commodity received by him. There is first the act of ginning; ginned cotton is spun into yarn by the spinner; the spun yarn is woven into cloth by the weaver; the woven cloth is made into wearing apparel by the tailor. At each of these stages distinct utilities are produced and what is produced is at the next stage consumed. It is usual and correct to speak of raw cotton being consumed in ginning; of ginned cotton being consumed in spinning; of spun yarn being consumed in weaving; of woven cloth being consumed in the making of wearing apparel. The final product the wearing apparel is ultimately consumed by men, women and children in using it as dress. In the absence of any words to limit the connotation of the word 'consumption' to the final act of consumption, it will be proper to think that the Constitution-makers used the word to connote any kind of user which is ordinarily spoken of as consumption of the particular commodity.

10. Reverting to the instance of cotton, mentioned above, it will be proper to hold that when raw cotton is delivered in State A for being ginned in that State, it is delivered for consumption in State A; when ginned cotton is delivered in State B for being spun into yarn, it is delivered for consumption in State B; when yarn is delivered in State C for being woven into cloth in that State, it is delivered for consumption in State C; when woven cloth is delivered in State D for being made by tailor in that State into wearing apparel there is delivery of cloth for consumption in State D; and finally when wearing apparel is delivered in State E for being sold as dress in that State, it is delivery of wearing apparel for consumption in State E. Except at the final stage of consumption which consists in using the finished commodity as an article of clothing, there will be noticed at each stage of production the bringing into existence of a commercial commodity different from what was received by the producers. This conversion of a commodity into a different commercial commodity by subjecting it to some processing, is consumption within the meaning of the Explanation to Article 286 no less than the final act of user when no distinct commodity is being brought into existence but what was brought into existence is being used up. At one stage of the argument what Mr. Pathak appeared to insist was that there must be destruction of the substance of the thing before the thing can be said to be consumed. That takes us nowhere, because we have still to find out what is meant by destruction of the substance. It may well be said that when a commodity is converted into a commercially different commodity its former identity is destroyed and so there is destruction of the substance, to satisfy the test suggested by the learned Counsel. We think it unnecessary however to enter into a discussion of what amounts to destruction', as even without deciding, whether there was destruction or not, we think it proper and reasonable to say that whenever a commodity is so dealt with as to change it into another commercial commodity there is consumption of the first commodity within the meaning of the Explanation to Article 286. This aspect of consumption was pointed out by Das, J. (as he then was), in State of Travancore-Cochin v. Shanmugha Vilas Cashew-Nut Factory : [1954]1SCR53 of the report. The purchase there was of raw cashew-nuts. Discussing the question whether the delivery of these nuts in Travancore was for the purpose of consumption in that State, Das, J., observed:

The raw cashew-nuts, after they reach the respondents, are put through a process and new articles of commerce, namely, cashew-nut oil and edible cashew-nut kernels, are obtained. It follows, therefore, that the raw cashew-nut is consumed by the respondents in the sense I have mentioned.

Das, J., here proceeded on the view that using a commodity so as to turn it into a different commercial article amounts to consumption within the meaning of the Explanation to Article 286(1)(a)--a view which he had earlier indicated at page 110 See at page 247 of [1953] 4 STC of the report. We are not aware of any case where such use of a commodity has been held not to amount to consumption.

11. It must therefore be held on the facts of this case that when tobacco was delivered in the State of Bombay for the purpose of changing it into a commercially different article, viz., bidi patti, the delivery was for the purpose of consumption. The purchases in this case therefore fall within the meaning of Explanation to Article 286(1)(a) and must be held to have taken place inside the State of Bombay.

22. The Constitution Bench, in Anwar Khan Mehboob Co. : [1961]1SCR709 , held that when tobacco was delivered in the State of Bombay for the purpose of changing it into a commercially different article, namely, bidi patti, the delivery was for the purpose of 'consumption', for, conversion of a commodity into a different commercial commodity by subjecting it to some processing is nothing, but 'consumption'.

23. In short, what can be safely gathered from the observations made in Anwar Khan Mehboob Co. : [1961]1SCR709 is that when a commodity is converted into a commercially different commodity, it amounts to 'consumption' of the former commodity, for, there is destruction of the substance, which is converted into a commercially different commodity. In Anwar Khan Mehboob Co. [1960] 11 STC 698 (SC) : AIR 1961 SC 213, the apex court made it clear that whenever a commodity is so dealt with as to change it to another commodity, there is consumption of the first commodity.

24. In State of Karnataka v. B. Raghurama Shetty reported in : [1981]3SCR280 , the apex court pointed out that 'consumption', in its true economic sense, does not mean only use of goods in the production of consumers' goods or final utilisation of the consumers goods by consumers involving activities like eating of foods, drinking of beverages, wearing of clothes or using of an automobile by an owner for the domestic purposes. The apex court also pointed out, in B. Raghurama Shetty : [1981]3SCR280 , that a manufacturer also consumes commodities, which are, ordinarily, called raw materials, when he produces semi-finished goods, which have to undergo further process of production before they can be transformed into consumers' goods. At every such intermediate stage of production, points out the Supreme Court, in B. Raghurama Shetty : [1981]3SCR280 , some utility or value is added to the goods, which are used as raw material and at every such stage, the raw materials are consumed. The relevant observations, made by the apex court, in B. Raghurama Shetty : [1981]3SCR280 , are reproduced hereinbelow (page 372 of STC):

9. At every stage of production, it is obvious there is consumption of goods even though at the end of it there may not be final consumption of goods but only production of goods with higher utility, which may be used in further productive processes.

25. From what have been observed in B. Raghurama Shetty : [1981]3SCR280 , it is abundantly clear that when a raw material is used in a manufacturing process for production of finished or semifinished goods, it would amount to 'consumption' of the raw material and that 'consumption' does not necessarily imply final consumption of goods, but would also include production of goods with higher utility.

26. In B. Raghurama Shetty [1981] 47 STC 369 (SC) : [1981] 2 SCC 564, the assessees' contention was that paddy and rice are same commodity and it cannot be said that when they produce rice by milling paddy, it amounted to consumption of paddy. However, turning down this contention, the assessees were held to consume paddy, when the purchased paddy was converted by them into rice, for, rice is commercially a commodity different from paddy. The word 'use' is also of vital importance. I may also point out that the words 'use' and 'consumption' are neither synonymous nor are they to be understood as carrying the same meaning. In Mafatlal Industries Ltd. v. Nadiad Nagar Palika reported in : 2000(117)ELT290(SC) , the Supreme Court held that the words 'use' and 'consumption' involve conversion of a commodity into a commercially different commodity by subjecting it to some process.

27. From the meaning, which has been attributed to the words 'consumption' and 'use' by various authoritative pronouncements of the Supreme Court, it becomes clear that whenever an article is used in a manufacturing process to produce an article different from the one, which has been processed through, the article, which has been so used in the manufacturing process, shall be taken to have been consumed and the product, which comes out, is the finished product. It is, therefore, clear that in the manufacturing process of asbestos sheets, cement has been consumed by the petitioners, for, an asbestos sheet is a commodity, which is commercially different from the raw material, i.e., cement. Since the cement, imported as raw material, for the purpose of manufacturing asbestos sheets, is consumed by the petitioners, it logically follows that upon import of cement into a local area in Assam, the petitioners do consume the cement in their manufacturing process. Situated thus, it is clear that the levy of entry tax, in the present case, is on the import of cement into a local area for the purpose of consumption therein. Such consumption falls within the meaning of the word 'consumption', which occurs in Section 3, and, hence, the impugned levy cannot be said to be not sustainable.

28. In view of what has been discussed above, it becomes abundantly clear that in the face of the plain meaning of Section 3 of the AET Act, contention of the petitioners that the levy of entry tax on the raw material imported into a local area for manufacturing the finished product has no nexus with the legislative object of the AET Act, 2001, has no substance and must fail.

29. Let me, now, come to the second submission of Mr. Joshi that the levy of entry tax on raw materials, used in manufacturing the finished products, namely, asbestos sheets is violative of Articles 14 and 19(1)(g) of the Constitution of India inasmuch as the sale of the finished product, namely, asbestos sheets, is subject to levy of local sales tax as well as Central sales tax. In order to determine the correctness of this submission, one has to ascertain if the classification made in the AET Act, 2001, is based on an intelligible differentia and whether the same has rational nexus with the object sought to be achieved. While considering this aspect of the case, I may point out that the apex court, in Ajay Hasia v. Khalid Mujib Sehravardi reported in : (1981)ILLJ103SC , held as under:.The true scope and ambit of Article 14 has been the subject-matter of numerous decisions and it is not necessary to make any detailed reference to them. It is sufficient to state that the content and reach of Article 14 must not be confused with the doctrine of classification. Unfortunately, in the early stages of the evolution of our constitutional law, Article 14 came to be identified with the doctrine of classification because the view taken was that that article forbids discrimination and there would be no discrimination where the classification making the differentia fulfils two conditions, namely, (i) that the classification is founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group; and (ii) that that differentia has a rational relation to the object sought to be achieved by the impugned legislative or executive action.

30. In D.S. Nakara v. Union of India : (1983)ILLJ104SC , the apex court clarified the scope of Article 14 as under:

The decisions clearly lay down that though Article 14 forbids class legislation, it does not forbid reasonable classification for the purpose of legislation. In order, however, to pass the test of permissible classification, two conditions must be fulfilled, viz., (i) that the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from those that are left out of the group; and (ii) that that differentia must have a rational relation to the objects sought to be achieved by the statute in question See Ram Krishna Dalmia v. Justice S.R. Tendolkar : [1959]1SCR279 . The classification may be founded on differential basis according to objects sought to be achieved but what is implicit in it is that there ought to be nexus, i.e., causal connection between the basis of classification and object of the statute under consideration. It is equally well-settled by the decisions of this Court that Article 14 condemns discrimination not only by a substantive law but also by a law of procedure.

31. From the observations made in Ajay Hasia [1981] 1 SCC 722 and D.S. Nakara [1983] 1 SCC 305, it is clear that when the classification is founded on an intelligible differentia, which distinguishes persons or things from a group, which is altogether different from those, which are left out of the group, and such differentia has a rational relation to the object sought to be achieved, then, such classification cannot be regarded as discriminatory.

32. In the case at hand, the classification made by the Legislature cannot be said to be discriminatory, for, the goods carried into a local area for sale, consumption or use therein is not the same as the sale of a product, which is an outcome of 'use' or 'consumption' of the goods, which have been imported into a local area from another local area or from outside the State. Thus, when a person imports cement into a local area in Assam and sells such cement for the purpose of consumption, use or sale therein, his import is subject to payment of entry tax. Similarly, when the present petitioners import cement into the State of Assam and use or consume such cement in their manufacturing process, they must also be held liable to pay entry tax.

33. It is not in dispute that the taxation laws must also pass the test of Article 14. However, a taxing statute cannot be challenged on the ground that it taxes some person and not others. In East India Tobacco Company v. State of Andhra Pradesh reported in : [1963]1SCR404 , it was held as under (page 530):.in deciding whether a taxation law is discriminatory or not it is necessary to bear in mind that the State has a wide discretion in selecting the persons or objects it will tax, and that a statute is not open to attack on the ground that it taxes some persons or objects and not others. It is only when within the range of its selection, the law operates unequally, and that cannot be justified on the basis of any valid classification, that it would be violative of Article 14.

34. In Federation of Hotel & Restaurant Association of India v. Union of India reported in : [1989]178ITR97(SC) , the apex court held that the tests of vice of discrimination of taxing statute are less rigorous and having regard to the wide variety of diverse economic criteria that involve in the formulation of fiscal policy, Legislature enjoys a wide latitude in the matter of selection of persons, subject-matter, events, etc., for taxation. The apex court's observations, in this regard, at para 46, as under (at page 126 of 74 STC):

It is now well-settled that though taxing laws are not outside Article 14, however, having regard to the wide variety of diverse economic criteria that go into the formulation of a fiscal policy, Legislature enjoys a wide latitude in the matter of selection of persons, subject-matter, events, etc., for taxation. The tests of the vice of discrimination in a taxing law are, accordingly, less rigorous. In examining the allegations of a hostile, discriminatory treatment, what is looked into is not its phraseology, but the real effect of its provisions. A Legislature does not, as an old saying goes, have to tax everything in order to be able to tax something. If there is equality and uniformity within each group, the law would not be discriminatory. Decisions of this Court on the matter have permitted the Legislatures to exercise an extremely wide discretion in classifying items for tax purposes, so long as it refrains from clear and hostile discrimination against particular persons or classes.

35. From what have been discussed above, it is clear that in order to hold any provision of an enactment violative of Article 14, it must be shown that the enactment makes a distinction between the similarly situated persons or similarly situated persons are being treated unequally. It is really for the Legislature to decide whom to give exemption from payment of a levy or whom not to give. Unless it is shown that while granting such exemption, similarly situated persons have been treated unequally or that a distinction is being made between two similarly situated persons, the grant of exemption to a particular class of people from payment of a levy cannot be questioned on the anvil of Article 14 or Article 19(1)(g). Reference, in this regard, may be made to Sri Krishna Das v. Town Area Committee, Chirgaon, reported in : [1990]183ITR401(SC) , wherein the apex court has held as under (at pages 404 and 405 of STC):

31. The contention that the tax is discriminatory in view of the exemptions granted to some of the products and to those that enter town area committee by rail or motor transport is equally untenable. It is for the Legislature or the taxing authority to determine the question of need, the policy and to select the goods or services for taxation. The courts cannot review these decisions....It is only where there is abuse of its powers and transgression of the legislative function in levying a tax, it may be corrected by the judiciary and not otherwise. Taxes may be and often are oppressive, unjust, and even unnecessary but this can constitute no reason for judicial interference. When taxes are levied on certain articles or services, and not on others, it cannot be said to be discriminatory.

36. In the case at hand, it was really for the State Legislature of Assam, to decide whom to give exemption from payment of entry tax or whom not to give. In the case at hand, it is clear from what have been discussed above that the impugned Act seeks to avoid imposition of entry tax on those, who pay local sales tax on the sale of imported goods into any local area of Assam. The exemption granted under Section 5 makes no distinction in this regard. What the petitioners are doing is that they sell asbestos sheet as finished product, produced or manufactured by them, out of the consumption of cement, imported into a local area, as a raw material. When cement is so consumed, it is liable to levy of entry tax. Since such consumption does not amount to sale within the meaning of local sales tax laws, the petitioners pay local sales tax only when they sell their finished product, i.e., asbestos sheets in Assam. Thus, those, who import cement for the purpose of sale and sell cement in the form of cement, they are entitled to exemption from entry tax. This class stands on a footing different altogether from those, such as, the petitioners, who import cement for consumption in their manufacturing process and, then, sell their finished product, i.e., asbestos sheets in the market. There was no impediment and there is no impediment, on the part of the Legislature, to subject such sale to local sales tax laws.

37. What emerges from the above discussion is that levy of entry tax under the AET Act, 2001, on import of cement into a local area for the purpose of its consumption in the manufacturing process of asbestos sheets cannot be interfered with on grounds of discrimination, arbitrariness or violation of any constitutional guarantees. This apart, the levy of entry tax on cement has been imposed with prior sanction of the President in terms of the proviso to Article 304(b) of the Constitution of India. Viewed thus, it is abundantly clear that the challenge to the levy of entry tax on cement by the present set of writ petitioners has no substance and cannot be sustained.

38. In the result and for the reasons discussed above, these writ petitions fail and the same shall accordingly stand dismissed. The interim directions, if any, passed in any of these writ petitions, shall accordingly stand vacated.

39. With the above observations and directions, these writ petitions shall stand disposed of.

No order as to costs.