The Associated Cement Companies Ltd. Vs. State of M.P. and ors. - Court Judgment

U.L. Bhat, C.J.

1. In some of these writ petitions, provisions of Entry Tax Act, 1976 (for short the Act) are challenged as unconstitutional. In all the writ petitions, except M. P. No. 1520 of 1991, the notification dated 29-6-1990 of the State Government issued under Section 4-A (2) of the Act specifying local areas in goods for imposition of entry tax at the rate of 10% for limestone and levy and collection of such entry tax are challenged. In M. P. No. 1520 of 1991, levy of entry tax at similar rate on entry of limestone within a local area are challenged. In M. P. No. 1521 of 1991, similar levy of entry-tax into a local area is challenged- In some of the writ petitions, subsequent notification dated 2-2-1994 is challenged.

2. We have heard various counsel appearing for the petitioners and learned counsel appearing for the State.

3. Learned counsel for the petitioners have urged the following points for consideration :

(i) The impugned notifications relate to lime (stone) and not limestone and, therefore, the rate of tax imposed by the notifications cannot be applied to entry of limestone into local areas caused by the petitioners except petitioner in M. P. No. 1520 of 1991.

(ii) Section 4(1)(i) of the Act is unconstitutional.

(iii) Provision for levy of entry tax on limestone is beyond the legislative competence of the State.

(iv) The notifications are contrary to the provisions of Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957 and, therefore, beyond the competence of the State Government.

(v) The petitioners who quarry limestone do not acquire or obtain the same and cannot be taxed.

(vi) Petitioners are not dealers in limestone and hence entry tax cannot be levied.

(vii) The factory of the petitioners in M. P. No. 405 of 1991 cannot be regarded as a local area and since they are not causing entry of limestone into the factory premises, entry tax cannot be levied.

4. The Act has been enacted by the State Legislature to levy tax on entry of goods in lieu of octroi tax collected by local bodies, the main objective being to make transportation of goods trouble-free by abolition of Octroi Nakas. Entry tax is levied to compensate the local bodies for loss of octroi tax. There are three schedules appended to the Act. Schedule I relates to goods which are exempt from entry tax. They are goods specified in Entries 6, 41 and 42 of the said Schedule. Schedules II incorporates certain kinds of goods and prescribes rate of entry tax for entry of each type of goods. Schedule III is in three parts. Part 3 of Schedule III is a residuary provision for all goods other than those included in Schedules I and II and parts 1 and 2 of the third Schedule. The rates of tax are also prescribed. Limestone and copper with which we are concerned in these cases are not included in Schedules I or II or parts 1 and 2 of the third Schedule. Part 3 would apply to them. On these goods, the rate of tax is 1%.

5. Section 3 deals with incidence of taxation. Entry tax shall be levied, (a) on the entry in the course of business of a dealer of goods specified in Schedule II into each local area for consumption, use or sale therein, at the rates specified in the Schedule, (b) on the entry in the course of business of a dealer of goods specified in Schedule III into each local area for consumption in Schedule III into each local area for consumption or use of such goods as raw-material or incidental goods or as packing material or in the execution of works contracts, but not for sale and such tax shall be paid by every dealer liable to tax under the Sales Tax Act who has effected entry of such goods at the rates mentioned in Schedule III. The provisos contain certain exceptions.

6. Section 4 deals with the rate at which entry tax is to be charged. Entry tax payable by a dealer shall be charged on his taxable quantum relating to goods specified in Schedules II and III at the rates mentioned in the Schedule. 'Taxable quantum' as defined in Section 2(j) of the Act is the aggregate of the 'taxable purchase value' and the 'taxable market value.' These expressions are also defined in Section 2(i) and 2(h) respectively. 'Value of goods' is defined in Section 2(1). Sub-section (1) of Section 4 has provisos of which proviso (i) is relevant for our purpose. It states that entry tax payable in respect of goods specified in Schedule II (other than those specified at serial numbers 3, 13 and 14thereof) or Schedule III (other than limestone) which are consumed or used as rawmaterial for the manufacture of other goods,shall be half percent if the rate of tax specifiedin Schedule II or Schedule III exceeds halfpercent. This provision was introduced byM.P. Act No. 25 of 1981 with effect from1-6-1981. Limestone is taken out of the purview of the concession provided under thefirst proviso.

7. Section 4-A was incorporated by M.P. Act No. 67 of 1976 with effect from 31-12-1976. It reads thus:

'4-A. Provision for entry tax at enhanced rate on certain goods consumed or used in manufacture of other goods-

(1) The State Government may, by notification, specify the local area and areas the goods or goods which are used or consumed in such local area or areas mainly for the manufacture of other goods and may direct that (as from the date specified in the notification and in such manner as may be prescribed) the entry tax payable by a dealer under the Act shall be charged on his taxable quantum relating to such goods at a rate not exceeding ten percentum as may be specified in such notification notwithstanding anything to the provision contained in Section 4.

(2) On the issue of the notification under Sub-section (1)-

(i) entry tax shall not be chargeable and payable on such goods at any rate mentioned in any other provision of this Act;

(ii) withdrawal shall not be made from the Consolidated Fund of the State of the proceeds of entry tax accruing under this section for credit to the Madhya Pradesh Octroi Compensation Fund under Section 17 notwithstanding the provisions of that section to the contrary.'

The provision empowers the State Government to specify the local area or areas and the goods which are used or consumed in such local area or areas mainly for manufacture of other goods. The State Government may direct that from the dates specified in the notification and in the prescribed manner, entry tax payable by a dealer shall be charged on his taxable quantum relating to such goods at a rate not exceeding 10%. There is non-obstante clause in relation to Section 4. On the issue of the notification, entry tax shall be chargeable and payable on the entry of the goods specified at the rate to be prescribed in the notification subject to a ceiling of 10% per annum and not at the rate prescribed in Section 4 of the Schedules to the Act. By virtue of the notifications impugned in this case, local areas have been specified in relation to entry of limestone and copper used as raw material in manufacture of other goods and the rate of tax is prescribed as 10%.

8. Thus it will be seen that the rate of tax for entry of these goods as raw material will be much more than the rate of tax for other goods specified in Schedules II and III. Naturally the petitioners who cause entry of limestone and copper are affected.

9. Point No. (i)

Notification dated 28-6-1990 prescribes all local areas in the State of M. P. as local areas for the purpose of the Act with reference to goods described as lime (stone) from 1-7-1990 to 31-3-1991 and the rate of tax is prescribed as 10%. By notification dated 21-11-1990, the expression 'lime (stone)' in the earlier notification has been corrected as 'limestone'. The period of imposition of entry tax expired on 31-3-1991. Again on 2-2-1994, the State Government issued notification under the Act specifying all local area in the State of M.P. as local areas for the purpose of the Act, in regard to goods described as 'lime (stone)' from the date of notification and specifying the rate of tax as 10%. This notification is not restricted to any period. This notification has been corrected by an erratum notification dated 10-3-1995 correcting the expression 'lime (stone)' as 'limestone'. It is contended for the petitioners who are causing entry of limestone that the notifications relate only to goods described as 'lime (stone)' which is different from 'limestone' which they are causing entry and, therefore, they cannot be required to pay any entry tax.

10. In the Shorter Oxford English Dictionary Vol. 1, Third Edition, the meaning of lime is given as follows :

'2. Usually coupled with stone: Morter or cement used in building.

3. The alkaline earth which is the chief constituent of morter,; calcium oxide. It is obtained by calcining limestone (carbonate of lime), the heat driving off the carbonic acid and leaving a brittle white solid which is pure lime or quicklime.

4. the CALK of metals. B. Any alkaline earth.' Limekiln is described as under:

'A kiln in which lime is made by calcininglimestone.' Lime-pit is described as under:

'A limestone quarry; a pit in which lime is burnt.' Limestone is described as under: 'A rock which consists chiefly of carbonate of lime and yields lime when burnt.'

In the commercial sense, lime is a product of limestone obtained by calcining the latter. However, the question is what commodity is covered by the impugned notifications, whether it is lime or limestone. Learned counsel for the petitioners would have it that lime can be obtained not only from limestone, but also from other articles like shells and the State Government intended to impose entry tax on lime obtained from limestone, and, therefore, described the goods as lime (stone). This view doe's not appear to be reasonable, particularly in the light of the erratum notification. The purpose of the notification is undoubtedly to impose tax on entry caused to be made of limestone and not of lime into a local area. The notification does not refer to lime made out of stone, but refers to lime (stone). It cannot be accepted that brackets were put with any specific object. In this connection, it is instructive to notice that what is excluded from Section 4(1) is limestone. We are of the opinion that the subject-matter of the notifications is limestone and not lime. Point answered accordingly.

11. Point No. (ii):

Some of the petitioners challenge the constitutionality of the exclusion of limestone from the operation of Section 4(1)(i) of the Act. Section 4 deals with the rate at which entry tax is to be charged. It shall be charged on the taxable quantum of the dealer relating to goods specified in Schedules II and III at the rates mentioned in the Schedule. We have already indicated that the rates for limestone and copper would come under Part 3 of Schedule III where the tax prescribed is 1%. Proviso 1 to Section 4(1) reads thus:

'Provided that notwithstanding anything contained in this sub-section and subject to such conditions and restrictions as may be prescribed:

(i) The entry tax payable in respect ofgoods specified in Schedule II (other thanthose specified at serial numbers 3, 13 and 14thereof) or Schedule 11 (other than limestone)which are consumed or used as raw materialfor the manufacture of other goods shall behalf percent if the rate of tax specified inSchedule II or Schedule III exceeds halfpercent. . . .'

The intention underlying proviso-1 is to offer concessional rate of goods specified in Schedule II and all the goods specified in Schedule III other than limestone. Items 3, 13 and 14 of Schedule II which are excluded for the purpose of the proviso are iron and steel, paddy and pulses. Schedule III is in three parts. PartI prescribes 1.5% as the tax for goods specified in Entries 1 to 32, 32-A and 32-B of PartII of Schedule II and 7.75% for foreign and Indian Made foreign liquor. Part II specifies 0.5% as tax in respect of silver and gold ornaments of personal wear and 0.25% in respect of bullion and specie. All goods other than those included in Schedules I and II and parts' and II of Schedule III carry 1% tax under part III. Many other goods specified in Schedules II and III may be consumed or used as raw materials for manufacture of other goods. The intention of the proviso (i) to Section 4(1) of the Act is to offer concessional entry tax in respect of such goods which are so used. That is because any entry caused to be made after manufacture will again be subject to entry tax. Section 4-A contemplates provision for entry tax at enhanced rate on certain goods consumed and used for manufacture of any other goods. It is left to the Government to specify local area and the goods and the rates of tax subject to a limit of 10%. Limestone and copper have been specified under the impugned notifications. The result is that while a levy number of goods which are consumed or used as raw material for manufacture of other goods carry the ordinary rate of 1% under the Schedule and half percent under the proviso, entry of limestone and copper is taxable at the rate of 10%. This is said to constitute hostile discrimination. This contention is rebutted on behalf of the State.

12. There is always a presumption of constitutionality of a statutory provision and the burden is upon the petitioners to show that there has been clear transgression of the constitutional principles. In order to sustain the presumption the Court may take into consideration matters of common knowledge, matters of common report, history of the times and may assume every state of facts which can be conceived existing at the time of legislation; good faith and knowledge of the existing conditions on the part of the legislature are to be presumed. See Ramkrishna Dalmia v. Justice Tendolkar, AIR 1958 SC 538.

13. While taxation law must also pass the test of Art. 14, Courts have adopted a slightly different approach towards such laws. In Hiralal Ratan Lal v. S.T.O. Kanpur, AIR 1973 SC 1034, while considering the challenge against classification between processed or split pulses, the Court observed :

'Generally speaking the primary purpose of the levy of all taxes is to raise funds for public good. Which person should be taxed, what transaction should be taxed or what goods should be taxed, depends upon social, economic and administrative considerations.'

In International Cotton Corporation Pvt. Ltd. v. Commercial Tax Officer, Hubli, AIR 1958 SC 1604, Court upheld the concession given to a set of tax-payers on the following basis:

'A concession is not a matter of right, where the legislature taking into consideration the hardships caused to a certain set of tax payers gives them a certain concession, it does not mean that that action is bad as another set of tax-payers similarly situated may not have been given a similar concession. It would not be proper to strike down the provision of law giving concession to the former on the ground that the latter are not given such concession. Nor is it possible for this Court to direct that the latter set should be given a similar concession. That would mean legislation by this Court and this Court has no legislative powers.'

In V. Venugopala Ravi Varma Rajah v. Union of India, AIR 1969 SC 1094, the Court observed:

'Again tax laws are aimed at dealing with complex problems of infinite variety necessitating adjustment of several desparate elements. The Courts accordingly admit, subject to adherance to the fundamental principles of the doctrine of equality a larger play to legislative discretion in the matter of classification. The power to classify levy exercise so as to adjust the system of taxation in all proper and reasonable ways; the legislature may select persons, properties, transactions and objects, and apply different methods and even rates for tax, if the legislature does so reasonably, protection of the equality clause does not predicate a methmatically precise or logically complete or symmetrical classification; it is not a condition of the guarantee of equal protection that all transactions, properties objects or persons of the same genus must be affected by it or none at all.'

In Federation of Hotel and Restaurant v. Union of India, AIR 1990 SC 1637, the Supreme Court observed:

'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.'

14. The impugned statutory provision has to be looked at from the perspective of the principles referred to above. The tax rates in respect of entry of goods are specified in Schedule II. The proviso to Section 4(1) prescribes the concessional rate of tax for entry of many of the goods specified in Schedule II and of the goods specified in Schedule III other than limestone. Limestone which is a mineral is treated differently from other minerals. But then the concession provided by the proviso the Section 4(i) is not general in its application. It is only in respect of specified goods which are consumed or used as raw material for the manufacture of other goods. This concession is offered since the entry of the finished goods itself is a separate taxable event. Limestone is treated differently because it is the main raw-material in the production of cement and it is beyond dispute that there are quite a large number of cement factories in the State. This feature relating to limestone distinguishes it from the other minerals which may fall within the ambit of Schedule HI. Treating limestone which is used as raw material in the manufacture of cement which is a wide-spread activity in the State cannot be regarded as an unreasonable classification or a classification having no nexus with the object sought to be achieved. It is also to be noticed that within the sub-group relating to limestone, no further classification has been attempted. In these circumstances, we are unable to hold that the exclusion of the limestone from the operation of the concession offends the equality clause of the Constitution. Point answered accordingly.

15. Point No. (iii):

The petitioners contend that the provision for levy of entry tax on limestone is beyond the legislative competence of the State. Entry 54, List I Seventh Schedule to the Constitution reads thus:

'Regulation of mines and mineral development to the extent to which such regulation and development under the control of Union is declared by Parliament by law to be expedient in the public interest.'

In exercise of the legislative power under this entry, the Mines and Minerals (Regulation and Development) Act, 1957 (for short the 1957 Act) has been enacted to provide for regulation of mines and the development of minerals under the control of the Union. Section 2 of the Act 1957 declares that it is expedient in public interest that the Union should take under its control the regulation of mines and development of minerals to the extent as provided in the Act. That contains provisions relating to general restrictions on undertaking prospecting and mining operations, procedure for obtaining prospective licenses or mining licenses in respect of minerals vested in the Government, power to make rules for regulating grant of prospecting licenses and mining licenses, special powers of the Central Government to undertake mining and prospective operations, regarding development of minerals and other incidental and ancillary provisions. There is no dispute that limestone and copper are minerals for purposes of the Act. According to the petitioners, the field is occupied by Parliamentary legislation enacted under Entry 54 of List I of Seventh Schedule of the Constitution and, therefore, the State has no legislative competence to provide for imposition of entry tax on these minerals.

16. The background of the State legislation has been explained by the learned counsel for the petitioners. The M.P. Karadhan Adhiniyam 1982 provided for imposition of mineral area development cess. This Court held the imposition to be beyond the legislative competence of the State in Hiralal Rameshwar Prasad v. State of M. P., 1986 MPLJ 514 approved by the Supreme Court in Orissa Cement Limited v. State of Orissa, AIR 1991 SC 1676. Thereafter M. P. Upkar Adhiniyam was amended by the M. P. Act of 1981 to provide for levy of Upkar on minerals. This provision was struck down by this Court in M. P. Lime Manufacturers' Association v. State of M. P., AIR 1989 MP 264 and the Special Leave Petition filed against the decision was dismissed. The attempt of the State to justify the imposition of cess and upkar under entries 23, 49 and 50 of List II of Seventh Schedule of the Constitution failed. According to the learned counsel for the petitioners, having failed in these two attempts, Section 4(1)(i) of the Act has been amended and the impugned notifications have been issued to impose tax on minerals which is beyond the legislative competence of the State.

17. Learned counsel for the petitioners placed reliance on the decision in India Cement Limited v. State of Tamil Nadu, AIR 1990 SC 85. In that case, the Madras Panchayat Act was amended to provide for collection of local cess at the rate of 45 paise per rupee on land revenue payable to the Government in respect of any land. Land Revenue was defined as public revenue due on land including water-cess, royalty, lease amount or other sum payable to the Government in respect of land held directly from the Government. The appellant in the case had to pay royalty to the Government according to the rate provided in second Schedule to the 1957 Act. The Supreme Court held that the imposition of cess on royalty on minerals' cannot be sustained either under Entry 49, or Entry 50 or Entry 45 of the List II of the Seventh Schedule, though widest amplitude should be given to the language of entries. Where entries overlap or appear to be conflicting to each other, the Court has to find true intent and the purpose and to examine a particular legislation in its pith and substance to determine whether it fits in one or the other of the lists. The lists are designed to define and delimit the respective areas of respective competence of the Union and States. Supreme Court indicated that cess means a tax and the expression is generally used as the levy for some administrative expense which the name indicates. When levied as an increment to an existing tax, the validity of the cess must be judged in the same way as the validity of the tax to which it is an increment. Royalty on mineral rights is a tax and as such a cess on royalty being a tax on royalty is beyond the competence of the State Legislature because Section 9 of the Central Act covers the field and the State Legislature is denuded of its competence under Entry 23 of List II of Seventh Schedule of the Constitution. The cess on royalty cannot be sustained under Entry 49 of List II as being a tax on land since royalty on mineral rights is not a tax on land but a payment for the user of land. Entry 23 of List II relates to 'Regulation of mines and Mineral Development subject to the provisions of List I with respect to regulation and development under the control of the Union. 'Thus, the State Legislature was denuded of power to legislate in regard to the matter of royalty or such some royalty.

18. But the position is entirely different in the present case. The State does not trace its legislative competence to Entry 23 of List II of the Seventh Schedule of the Constitution. The State Act has been enacted under Entry 52 of List II which reads thus:

'Taxes on the entry of goods into a local area for consumption, use or sale therein.'

Tax on entry of minerals into a local area for, consumption, use or sale therein cannot, by any stretch of imagination, fall under the activity of regulation of mines and mineral development. Entry tax does not stand on the same footing as mineral area development cess contemplated by the M.P. Karadhan Adhiniyam 1982 or Upkar covered by M. P. Upkar Adhiniyam 1981, nor is it a tax on mineral right covered by Entry 50 of List II in which case also, it will be subject to limitation imposed by Parliament by law relating to mineral development. The Act of 1957 does contain limitation on imposition of tax on mineral rights but entry-tax is not a tax on mineral right and, therefore, is not covered by the limitations imposed by the Act of 1957. The decision in India Cement Limited, AIR 1990 SC 85 is not applicable to the present case; so also is the position regarding the decisions in Orissa Cement Limited, AIR 1991 SC 1676 and Synthetics and Chemicals Limited v. State of U. P., AIR 1990 SC 1927.

19. We are supported in this view by the decision of the Supreme Court in the State of U.P. v. Synthetics and Chemicals Limited, (1991) 4 SCC 139, where the Supreme Court sustained the vires of the provisions of the U. P. Sales of Motor Spirit, Diesel Oil and Alcohol Taxation Act, 1939 providing for levy of tax at the point of first purchase of alcohol in the State under Entry 54 of List II of Seventh Schedule. The Court observed :

'. . . .Subject to the overriding power ofParliament in respect of what falls underEntry 92-A and the provisions of Article 286the State has full legislative competence inlevying taxes on the sale or purchase of goodsother than newspapers. The power to taxunder Entry 54 of List II being a specificpower, it cannot be cut down or in anymanner fettered by the general power ofcontrol exercised by Parliament by legislationon a matter falling under Entry 52 of List 1relating to an industry, the control of whichby the Union is declared by Parliament by lawto be expedient in the public interest, readwith Entry 33 of List III dealing with tradeand commerce in, and the production, supplyand distribution of the products of any suchcontrolled industry, and imported goods ofthe same kind as such products, and otherarticles mentioned in Entry 33. The impugnedprovision of the Uttar Pradesh Sales of MotorSpirit, Diesel Oil and Alcohol Taxation (Amendment) Act, 1976 levying tax at the point offirst purchase of alcohol in the State isundoubtedly an impost falling in pith andsubstance under Entry 54 of List II. In theabsence of any fetter on the legislative powerand in the absence of any valid challengeagainst the provision as a colourable piece oflegislation, the impugned legislative remainsunimpeachable.'

The Court further observed:--

'It is significant that the taxing power of the State on a matter falling within its competence under this entry, mainly, sale or purchase of goods (other than newspapers) is subject to the taxing power of Parliament under Entry 92-A of List I, and other provisions of the Constitution, plenary and unlimited, and untrammelled by the supervisory or regulatory power of Parliament under Entry 52 of List I read with its concurrent power under Entry 33 of List III. This is the crucial distinction between the wide taxing powers of the State under Entry 54 of List II and its conditional or restricted taxing power, for example, over mineral rights mentioned in Entry 50 of that list which was considered in India Cement Limited v. State of T.N., AIR 1990 SC 85.

The Court also observed :

'The power of regulation and control is separate and distinct from the power of taxation. Legislative exercise of regulation or control referable to Entry 52 of List I or Entry 8 of List II is distinct and different from a taxing power attributable to Entry 54 of List II or Entry 92-A or 92-B of List I. The power to levy taxes on sale or purchase or consignment is referable to these entries, and subject to the other provisions of the Constitution, the taxing power of the State is not cut down by the general legislative control vested in Parliament and referable to the general topic of legislation.'

20. The challenge against the Act on some other grounds was repelled by this Court in Sanjay Trading Company v. Commissioner of Sales Tax, (1994) 93 STC 589 and this decision has been affirmed by Supreme Court in Bhagatram Rajeev Kumar v. Commissioner of Sales Tax, Madhya Pradesh, (1995) 96 STC 654. We may refer to statement of law at page 658;

'The concept of compensatory nature of tax has been widened and if there is substantial or even some link between the tax and the facilities extended to such dealers directly or indirectly the levy cannot be impugned as invalid. The stand of the State that the revenue earned is being made over to the local bodies to compensate them for the loss caused, makes the impost compensatory in nature, as augmentation of their finance would enable them to provide municipal services more efficiently, which would help or cause free-flow of trade and commerce, because of which the impost has to he regarded as compensatory in nature, in view of what has been stated in aforesaid decisions, more particularly in Hansa Corporation's case', (1981) 1 SCR 823: (AIR 1981 SC 463).

21. Viewing the present controversy in the light of the above principles, it is clear that the State legislation in relation to entry tax falls squarely within Entry 52 of List II in pith and substance, though the industry is controlled within the ambit of Entry 54 of List I. Entry Tax Act is not a colourable piece of legislation as the Legislative purpose is only to compensate the local bodies for loss of octroi and the same has been consistently upheld by Courts. We, therefore, repel the contention of want of legislative competence. Point answered accordingly.

22. Point No. (iv) :

By virtue of the power conferred by Section 4-A of the Act, the State Government issued notification dated 28-6-1990 specifying local areas, goods, period during which entry tax is payable and the rate of tax. Item No. 1 describes local areas as all local areas in the State, goods as lime (stone), the period as 1-7-1990 to 31-3-1991 and the rate of tax as 10%. By notification dated 2-2-1994, the same local areas, goods and rate of tax were specified and the tax was made payable with effect from the date of notification without fixing any time limit. These notifications are challenged as violative of First Proviso to Section 9(i).

23. Section 9 deals with the amendment of Schedules II and III and read thus:

'(1) The State Government may, by notification, amend rate of entry tax specified in Schedule II and Schedule III and thereupon each of the said Schedules shall stand amended accordingly;

Provided that the rate of entry tax shall not be increased by more than twenty five per cent the aggregate of the rate specified in the Schedule at the commencement of this Act:

Provided further that no notification shall be issued under this section without giving in the 'Gazette' such previous notice as the State Government may consider reasonable, if its intention to issue such notification.

(2) Every notification issued under subsection (1) shall, as so on as may be, after it is issued, be laid on the table of the Legislative Assembly.'

24. Section 4 lays down that entry tax payable shall be at the rates mentioned in Schedules II and III. By virtue of Section 9, State Government is empowered to amend the rate of entry tax specified in Schedules II and III. On the issue of appropriate notification by the State Government, the Schedules shall stand amended. The first proviso limits the power of the State Government to increase the rate of entry tax to 25% in the aggregate of the rates specified at the commencement of the Act. The second proviso requires previous notice to be given in the Gazette. The contention of the petitioners is that the limitation under the First Proviso applies not merely to the increase made in the rate of tax provided in Schedules II and III and referred to in Section 4, but also to the rate of tax which may be imposed under Section 4-A(1) of the Act. The rate of tax on limestone and copper before the earlier of the notifications was only 1%. It could be increased under Section 9 but subject to the limit of more than 25% of the original rate. The rate fixed for limestone under the notifications issued under Section 4-A is 10% which is beyond the limit prescribed in first proviso to Section 9. It is thus that the notification are challenged as beyond the competence of the State Government.

25. The argument can be seen to be fallacious on an examination of the Scheme of the Act. Section 3(1) relates to incidence of taxation in relation to the goods specified in Schedules II and III, the liability to pay tax being on every dealer who has effected entry of such goods. Section 4 relates to the rate at which entry tax is to be charged by referring to the goods and the rates specified in Schedules II and III with certain concessions offered under the provisos. Section 6 deals with principles governing levy of entry tax on dealer or person, local goods are dealt with in Section 7. Section 7-A deals with composition. Section 8 deals with penalty for failure to fulfil responsibility or obligation undertaken. Section 9 empowers the State Government to amend the rate of tax specified in Schedules II and III. State Government has power of exemption under Section 10. Section 11 deals with burden of proof. Section 12 deals with rate at which entry tax to be charged on goods under Section 3(2). Sub-section (2) of Section deals with levy of entry tax on entry of goods specified in Schedules II and III caused to be made by persons to whom the provisions of Sub-section (1) do not apply, as may be notified by the State Government. Section 12 enables the Government to specify entry tax on the value of such goods at such rate not exceeding twenty per cent, as the State Government may specify. Section 13 renders certain provisions of Sales Tax Act applicable to entry tax. Section 14 relates to assessment and collection of entry tax. Section 20 deals with the rule making power.

26. The provisions of the Act clearly reveal two legislative schemes in the matter of imposition of entry tax. One Scheme which may be regarded as the normal scheme is comprised in Sections 3, 4, 9 and related sections. The second scheme is the one comprised in Sections 3, 4-A and 12. The normal scheme deals with goods specified in Schedule II and III subject to the exactions and concessions provided under the statutory provisions for which rates of tax are prescribed in Schedules II and III subject to power of the State Government under Section 9 to modify the rates which is subject to the limitation contained in the proviso. Section 4-A takes certain local areas and certain goods from outside the purview of the rates specified in Schedules II and III subject to the amendatory power of the State Government. Section 12 takes certain categories of persons dealt with under Section 3(2) outside the purview of the rate of tax specified in Schedules II and III, subject to the mandatory power of the, State Government. The limitation introduced on the power of the State Government under first proviso to Section 9(1) relates only to the rates of tax specified in Schedule II and III which in turn are applicable only in cases not governed by Sections 4-A and 12. By the alternative scheme contemplated under Section 4-A and Section 12, entries of certain goods in certain areas or entry caused to be made by persons falling under certain categories are excluded from the operation of the rates of tax specified in Schedules II and III and, therefore, must necessarily be outside the purview of Section 9. Rates of tax contemplated under Sections 4-A and 12 are prescribed by the State Government by notifications issued under those sections and not by notifications issued under Section 9(1) of the Act. Necessarily the limitation introduced on the power of the State Government by the first proviso to Section 9(1) can apply only to the exercise of power under Section 9(1) and not to he power under Sections 4A and. 12. The rates of tax originally specified in the Schedules ranged from 1/4% to 7 3/4%. Under Section 9, the State Government can increases the rate of tax from time to time subject to limit of 25% in the aggregate. Necessarily, in regard to a variety of goods, 10% would far exceed this limit. Nevertheless, the legislature under Section 4-A imposed a distinct ceiling of 20% on the entry of goods covered by those provisions. This supports our view that the first proviso to Section 9(1) has no application to the notifications contemplated under Section 4-A or 12. We, therefore, reject the contention that the impugned notifications being violative of the first proviso to Section 9(1) of the Act are beyond the competence of the State Government the point is answered accordingly.

27. Point Nos. (v) and (vi):

By the notifications issued under Section 4-A, entry tax is payable by a dealer under the Act 'on his taxable quantum relating to such goods.' 'Taxable quantum' is defined in Section 2(j) of the Act as follows:

' Taxable quantum' in relation to a dealer means the aggregate of the taxable purchase value and the taxable market value.' 'Taxable market value' is defined in Section 2(h) of the Act as follows:

' 'taxable market value' in relation to goods specified in Schedule II or Schedule III means the market value thereof excluding the market value of those goods to which Clauses (iv) to (vii) of the first proviso to Sub-section (1) of Section 3 apply.' 'Taxable purchase value' is defined in Section 2(i) of the Act as follows:

''Taxable purchase value' in relation to goods specified in Schedule II or Schedule III means the purchase value thereof excluding the purchase value of those goods to which clauses (iv) to (vii) of the first proviso to subsection (1) of Section 33 apply.' 'Value of goods' is defined in Section 2(1) as follows: ' 'value of goods' in relation to a dealer or any person who has effected entry of goods into a local area shall mean the purchase price of such goods as defined in Clause (kk) of Section 2 of the Sales Tax Act and shall include excise duty and/or additional excise duty and/or customs duty, if levied under the Central Excise and Salt-Act, 1944 (No. 1 of 1944), the Additional Dutie of Excise (Goods of Special Importance) Act, 1957 (No. 58 of 1957) or the Customs Act, 1962 (No. 52 of 1962), as the case may be or the market value of such goods if. they have been acquired or obtained otherwise than by way of purchase.'

28. It is contended by the petitioners since they have not purchased the goods i.e. limestone or copper, the purchase price formula is inapplicable and since they have not acquired or obtained the goods otherwise, the market value formula is not applicable and necessarily in relation to the entry of these goods caused to be made by the licensees of mines like the petitioners, the definition of value of goods is inapplicable and hence it must be held entry tax is not payable. That is because, it is contended, such persons are outside the framework of the Act.

29. This argument ignores the scheme of Section 3 of the Act. Clauses (a) and (b) of Sub-section (1) of Section 3 deal with entry of goods specified in Schedule II arid III into a local area and require such entry to be 'in the course of business of a dealer.' The person required to pay entry tax must be a dealer for the purpose of Section 3(1). The petitioners have no case that they are not dealers. Section 3(1) does not require that the persons sought to be fastened with tax liability should be dealers of the particular goods of which an entry is caused to be made.

30. In Sanjay Trading Company v. Commissioner of Sales Tax (1994) 93 STC 589, this Court repelled the challenge on the Entry Tax Act levelled on certain grounds. This Court held that the words 'liable to tax under the Sales Tax Act' qualify the expression 'dealer' and do not qualify the expression 'goods'. The attempt in Section 3 is to identify the dealer who is liable to pay entry tax. He is the dealer who has effected entry of the goods provided he is liable to tax under the Sales Tax Act. The Supreme Court in Bhagatram Rajeev Kumar v. Commr. of Sales Tax, (1995) 96 STC 654 has affirmed the above decision indicating that the provision in Section 3 fixing a person from whom tax shall be realised is a part of machinery provision and cannot control the main or substantive part of the section. The Supreme Court observed that:

'the expression 'liable to tax' has been used to identify the person who shall pay the entry tax ... The intention is to levy tax only when the goods are brought inside the State by a dealer carrying on business whose turnover is not less than Rs. 1,000/- annually and not by any other person. In other words, the tax is leviable on all goods specified in Schedule II brought for consumption, use or sale; but it shall be realised only from those persons who are dealers registered under the Sales Tax Act and liable to pay tax. The expression 'liability to tax' is determinative of the person from whom the tax shall be realised and not of the goods which could be subjected the levy.'

See also Shaktikumar M. Sancheti v. State of Maharashtra (1995) 96 STC 659.

31. Definition of 'value of goods' in Section 2(1) defines value of goods in two ways. It means purchase price of goods were goods are purchased and market value of goods where they are not purchased but are acquired or obtained otherwise than by purchase. The meaning of the word 'acquire' is given as follows in shorter Oxford English Dictionary on Historical Principles, Volume I:

'1. To gain, or get as one's own 'by one's own exertions or qualities). 2. To receive, to come into possession of.'

The meaning of 'obtain' is given in the came Dictionary (Volume II) as follows :--

'1. To procure or gain, as the result of purpose and effort; hence generally, to acquire, get. 2. To gain, win (a battle or other contest). 3. To gain the day, prevail; to succeed, proper. 4. To attain to, get as far as, reach gain. 5 To hold to possess; to occupy. 6. To prevail to be in force or in vogue; to held goods have place, subsist, exist.'

Reading the words 'acquired' and 'obtained' in the context to which they have been used in Section 2(1) on the basis of the light thrown by the dictionary meaning it is clear that acquisition or obtaining can by any means other than purchase. Mining leaseholders operate the mines paying royalty and thereby acquire or obtain limestone or copper. The transaction may not amount purchase of the minerals, but there can be no doubt that thereby they acquire or obtain the minerals contrary contentions of the petitioners cannot stand. The contention that petitioners, not being dealers in minerals are outside the framework of the Act is also unsustainable. The points are answered accordingly.

32. Point No. (vii) :

Petitioners in M.P. No. 405/91 contend that they are lifting minerals from the mine area to their factory and thus the tax is on entry of goods into the factory, and that factory cannot be a local area, therefore, they are not liable to pay entry tax. It is admitted by the learned counsel for the petitioners that the factory is situated within the limits of Bunnor Panchayat; it so, the factory is situated within a local area. Undoubtedly the petitioners cause entry of minerals into Bunnor local area in which the factory is situated. Taxable event is the entry of goods into the local area in which the factory is situated. Learned counsel for the petitioners place reliance on Bhopal Sugar Industries v. State of U. P., AIR 1979 SC 537. In that case, the Supreme Court invalidated Sugarcane Cess Validation Act and quashed a notification levying cess on sugarcane brought into a factory. 'Local Area', it was held, is an area administered by a local body and the like and that levy of cess on entry of sugarcane into the premises of the factory is not valid. The notifications impugned in that case imposed cess on entry of sugarcane during a crushing season in the area comprised within 'such of the factories in which the total quantity of cane entering for consumption, use or sale to the factory during such reason exceeded 10 lack munds See also Diamond Sugar Mills Ltd. v. State of M. P., AIR 1961 SC 652 and Shakti Kumar's case (1995) 96 STC 659. In the present case, no entry tax has been levied on entry of goods into the premises of a factory. It is sought to be levied on entry of goods in a local area inside which the factories are situated. This contention must necessarily fail.

33. Many of the aforesaid a contentions raised with reference to limestone have also been raised with reference to copper and for the reasons indicated, these contentions must also fail.

34. In the result, the petitions are dismiss ed with costs. Advocate fees Rs. 500/- in eachcase.