State Government can levy higher sales tax on imported goods

Exchange Rate for imported goods is Rs 74.03 Per Pound Sterling and Rs 51.22 Per Yen-Exchange Rate for export is Rs 72.45 Per Pound Sterling and Rs 49.94 Per Yen-Customs Non-Tariff Notification No.128 Sensex slips further and closes at 8773 100 per cent EOUs allowed to export non-basmati rice-DGFT Notification No.59 Customs duty of 5 per cent imposed on import of Pig Iron, spiegeleisen, semi-finished products, flat products & long products Import of Crude Soyabean Oil subjected to 20 per cent customs duty- no change in import duty on refined soyabean oil-Customs Tariff Notification No.122 Time-limit for filing refund of service tax extended to 6 months-Service Tax Notification No.32 Rahul Bajaj asks Industry to prepare for the worst Tariff Value for import of Brass Scrap is 3525 and for poppy seeds 5206-Customs Non-Tariff Notification No. 127 CBEC clarifies the entire amount of duty paid by the manufacturer, as shown in the invoice would be available as credit irrespective of the fact that subsequent to clearance of the goods, the price is reduced by way of discount or otherwise-Central Excise Circular No.877 Mandavariya (Kishangarh), District Ajmer notified for Unloading of imported goods and loading of export goods-Customs Non-Tariff Notification No.117 SC Ruling-the entitlement of benefit in terms of Section 32AB, Section 80HH and Section 80I of the Income Tax Act- conversion of Jumbo rolls of photographic films into small flats and rolls in the desired sizes amounted to manufacture/production-AIT-2008-413-SC SC Ruling-Whether any "gift" arose in terms of Section 2(xii) of the Gift-tax Act, 1958 on the allotment of rights issue by the appellant company to its shareholders vide Board's Resolution- Whether there was any element of "gift" as defined under Section 2(xii) in the appellant issuing Bonus shares in the ratio of 1:23-AIT-2008-412-SC DEPB benefit allowed on export of cement and steel-DGFT PN 108 exports of cement in all types and forms and primary steel products eligible for export incentives under Focus Market Scheme-DGFT Notification No.58 Import of Marble Tiles-DGFT Notification No.57 Clarification on setting up Duty Free Shops approved by FIPB-Customs Circular No.19 HC Ruling-Income Tax-"reserves" arising out of the acquisition of the business of Tata Cellular Limited could never have the character of "income" in the hands of the petitioners-pre-requisite condition contained in proviso to section 147 to enable the re-assessment to be opened after period of 4 years have elapsed have not been met-AIT-2008-410-HC HC Ruling-Central Excise- valuation of the goods for the purpose of excise duty and whether excise duty was chargeable under Section 4 or Section 4A of the Central Excise Act 1944-while construing rule 3, who are excluded are only the institutional or industrial consumers as explained in Rule 2A and the industrial or institutional consumers in terms of the proviso to rule 2(p) for the purpose of chapter-II are the same-If the person who purchase the prepacked commodity not directly from the manufacturer or packers, they are consumers and the declaration will be of no effect-AIT-2008-408-HC Government considering imposition of import duty on steel Bad News for Consulting Engineers- whether turnkey contract can be vivisected?- The conclusion in Daelim case on the point, prima facie, being not in accordance with law, matter goes to Larger Bench-AIT-2008-405-CESTAT Larger Bench of CESTAT rules Credit is admissible on an input service relating to the business-AIT-2008-407-CESTAT credit of the service tax paid on the outdoor catering (canteen) service is admissible as input service under Rule 2(l) of the Cenvat Credit Rules, 2004-AIT-2008-406-CESTAT The payment for use of "services for MTNL/other companies via the interconnect/port/access/toll by the assessee would not fall within the purview of payments as provided for under section 194J of the Act, so as to be eligible for tax deduction at source-The interconnect charges/port access charges cannot be regarded as fees for technical services-AIT-2008-404-HC Computation of Value under Section 14 for Levy of Export Duty - Customs Circular No. 18 Advance Ruling- Whether the service fee paid by the applicant to Intertek Testing Management Limited UK under Global Management Service Agreement is taxable as "Royalties & Fee for Technical Services" as per the provisions of Article 13 of DTAA between India & UK? 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State Government can levy higher sales tax on imported goods

AIT News Network

CHENNAI. The High Court vide a significant ruling AIT-2007-331-HC affecting the Business strategy of importers has decided against the bunch of importers of LCD projectors, handy cameras, projection televisions, some models of car stereos and high-end audio systems, handsets of cellular phones , Motor Cars by ruling that the State can levy sales tax on imported goods at a rate higher than the rate of sales tax on indigenous goods as imported goods form a distinct and separate class by themselves.

The Issues:

Whether the imported goods, on sufferance of customs duty and subsequently cleared from the customs frontiers, would lose its character as foreign goods for the purpose of levy of sales tax under the provisions of the TNGST Act?
(ii) Whether the levy of 20% sales tax on imported goods by the amended provision as against the levy of 12% sales tax for the goods manufactured in India would be discriminatory in the wake of Articles 301 to 304 of the Constitution?

The Ruling:

The power to levy customs duty, which vests with Central Government, cannot in any way curtail the power of the State Government to levy sales tax. Of course, it is not the argument of the respective learned counsel that the State has no such power, as the question is only the levy of higher rate of sales tax. Even though the imported goods once cleared from customs they get mingled with other goods, it is common knowledge that such goods cleared from customs do not lose their identity as foreign goods. Imported goods shall form a distinct and separate class by themselves. The principles of doctrine of classification are well accepted by the Courts in our country. Article 14 of the Constitution of India though forbids class legislation, but it does not forbid reasonable classification for the purpose of legislation. However, such reasonable or permissible classification must fulfill two conditions namely, (i) that the classification must be founded on an intelligible differentia which distinguished persons or things that are grouped together from others left out of the group and (ii) that the differentia must have a rational relation to the object sought to be achieved by the statute in question. The classification may be founded on different bases, namely, according to the objects or the like. If a higher rate of sales tax is imposed by the State keeping in view of the inherent complexity of physical adjustment of diverse elements, such decision to levy higher rate of sales tax should be considered to be one of larger discretion available to the legislature in the matter of classification.
Part XIII of the Constitution would not be applicable to imported goods. That apart, the impugned amendment Act fixing higher rate of tax for imported goods is on intelligible differentia and on the basis of reasonable classification and therefore we do not find any reason to hold that either the impugned Act is violative of Article 14 or the imposition of higher rate of sales tax for imported goods would in any way amount to restriction of trade under Part XIII of the Constitution of India. Equally the submission as to the impugned Act requires the assent of the President under Article 304(b) also cannot be accepted. Further, as the classification is reasonable, the submission as to the restriction for levy of tax on sale or purchase of goods based on Article 286(3) is also not available to the petitioners.

The Issue:

(iii) Whether by virtue of the Agreement (GATT), the State would be competent to bring the goods imported and levy higher rates of sales tax and in such circumstances, whether such enactment would require the assent of the President under Article 304(b) of the Constitution of India?

The Ruling:

Merely because the GATT agreement recognises the relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, etc., that will not in any way curtail the State Government to identify the imported goods as separate class and to levy higher rate of sales tax so long as the power of the State Government to levy sales tax even on imported goods is not questioned

(Click here for full text of ruling AIT-2007-331-HC)