IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 07.09.2007 CORAM THE HONOURABLE MR.JUSTICE D.MURUGESAN AND THE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA W.P.Nos.17424, 17425, 16825, 16826, 22414, 23198 to 23201 of 2003, 2597 of 2004 & 24476 of 2005 M/s Sony India Ltd., Chennai-6. .. Petitioner in WPs 17424 & 17425/2003 M/s.Nokia India, Private Ltd.,Chennai-6. ..Petitioner in WPs 16825 & 16826/03 Tvl.Trans Car India Pvt. Ltd., No.576, Anna Salai, Teynampet, Chennai-6. ..Petitioner in WP 22414/03 MPL Cars Limited, Nandanam, Chennai-600 035 ..Petitioner in WPs 23198 to 23201/03 Theni Glass House 14-b, Edamel Street, Theni-625531 ..Petitioner in WP 2597/04 Madanlal Proprietor Mahaveer Mirror Industries Chennai -2. ..Petitioner in WP 24476/05 -vs- The Commercial Tax Officer Egmore-II Assessment Circle Spur Tank Road, Chetpet Chennai 600 031. ..1st Respondent in WP 17425 & 17426/03 The Commercial Tax Officer, Anna Salai-III Assessment Circle, "Sire Manson", 621, Anna Salai, Cehnnai 600 006. ..1st Respondent in WP 16825 & 16826/03 https://hcservices.ecourts.gov.in/hcservices/ The Commercial Tax Officer, Nungambakkam Assessment Circle, Chennai. ..1st Respondent in WP 22414/03 The Commercial Tax Officer, T.Nagar (East) Assessment Circle, Chennai-600 017. ..1st Respondent in WPs 23198 to 23201/03. State of Tamil Nadu rep. by its Secretary to Commercial Taxes Department, Fort St. George, Chennai-9. Special Commissioner and Commissioner of Commercial Taxes, Commercial Taxes Department, Ezhilagam, Chennai. ..Respondents 1 and 2 in WPs 2597/04 and 24476/05. The State of Tamil Nadu represented by the Secretary to Government Department of Commercial Taxes and Religious Endowments Fort St.George Chennai 600 009 The Tamil Nadu Taxation Special Tribunal Chennai represented by its Registrar Singaravelar Maligai Rajaji Salai Chennai 600 001 .. Respondents 2 and 3 in WPs 17424,17425,16825, 16826, 22414 and 23198 to 23201/2003 The Commercial Tax Officer, Theni. ..3rd Respondent in WP 2597/04 The Commercial Tax Officer, Vepery, Chennai. ..3rd Respondent in WP 24476/05 WP Nos.17424 of 2003 and 17425 of 2003 Writ petitions filed U/Art.226 of the constitution of India prayed this Court to issue a writ of Certiorarified Mandamus to call for the records of the third respondent and quash the impugned common order of the third respondent dt.30.4.2003 passed in O.P.Nos.969 and 970 of 2002 respectively and declare that the provisions contained in Entry 14 (vi) of Part D of the first schedule to the TNGST, Act 1959, as classifiable under Entry 8 Part G of the first Schedule and https://hcservices.ecourts.gov.in/hcservices/ Entry 9 of Eleventh Schedule respectively to the said Act during the period from 27.3.2002 to 30.6.2002 and from 1.7.2002 respectively prescribing 20% rate of sales tax on sales of goods imported at Delhi and Mumbai and stock transferred and sold in Chennai, are violative of Articles 14,301 and 304 of the constitution of India and therefore void and unenforceable. WP Nos.16825 and 16826 of 2003 Writ Petitions filed U/Art.226 of the constitution of India prayed to issue a writ of Certiorarified Mandamus, to call for the records of the third respondent and quash the impugned Common Order of the third respondent dt. 27.5.2003 passed in O.P.No.564 and 565 of 2003 respectively, and thereby declare that the provisions contained in Entry 14 (vi) of Part D of the first Schedule to the TNGST Act 1959, as contained and classified in Entry 8 of Part G of the first schedule and Entry 9 of the Eleventh Schedule respectively to the said Act during the period from 27.3.2002 to 30.6.2002 and 1.7.2002 respectively prescribing 20% rate of sales tax on sales of imported handsets of cellular telephones stock transferred from New Delhi and sold in Chennai, are violative of Articles 14, 301 and 304 of the constitution of India, and therefore void and unenfroceable. WP No.22414 of 2003 Writ Petition filed U/Art.226 of the constitution of India prayed to issue a writ of Certiorarified Mandamus to call for the impugned proceedings of the third respondent passed in O.P.No.626 of 2003 dt. 18.6.2003 and to quash the same and thereby declaring serial No.9 of the Eleventh Schedule to the TNGST Act 1959 as introduced by the Tamil Nadu Act 22 of 2002 with effect from 1.7.2002 as ultra vires Articles 14, 265, 286, 301 and 304 (a) of the constitution of India. WP No.23198 & 23199 of 2003 Writ Petition filed U/Art 226 of the constutition of India to issue a writ of Declaration declaring that S1.No.8 of Part -G to the first Sechedule and Sl.No.9 of the Eleventh Schedule respectively to the TNGST ACt 1959, introduced by Tamil Nadu Act 18 of 2002 as it stood between 27.3.2002 to 30.6.2002 and Tamil Nadu Art.22 of 2002 with effect from 1.7.2002 respectively as abinitio and as Ultra Vires Articles 14, 265, 286,Part -XIII of the constitution of India. WP No.23200 and 23201 of 2003 Writ Petitions filed U/Art.226 of the constitution of India prayed to issue a writ of Certiorarified to call for the records on the file of the third respondent in O.P.813 land 814 dated 30.4.2003 respectively, and quash the proceedings of the third resopondent herein in OP 813 and 814l dt.30.4.2003 respectively. https://hcservices.ecourts.gov.in/hcservices/ WP No.2597 of 2004 Writ Petition filed U/Art. 226 of the constitution of India prayed to issue a writ of Certiorari calling for the records relating to the G.O.No.29, Commercial Tax dt. 27.3.2002 in so far as the Entry 8, Part G. of the first schedule to the TNGST Act with effect from 27.3.2002 in so far as the petitioner is concerned. WP No.24476 of 2005 Writ Petition filed U/Art.226 of the constitution of India prayed to issue a writ of Declaration declaring entry 8 part G, first schedule till 30.6.2002 and entry 9, Eleventh Schedule from 1.7.2002 by TNGST Act, as invalid, illegal and unconstitutional and violative of Art.14, 19(1)(g), 301 and 304 (a) of the constitution of India in so far as the petitioner is concerned. For Petitioners :: Mr.Arvind P.Datar Senior Counsel for Mr.R.Raghavan in W.P.Nos.17424 & 17425/03 Mr.K.J.Chandran in W.P.Nos.16825 & 16826/03 Mr.N.Murali in W.P.No.22414 of 2003 Mr.N.Saiprakash for Mr.N.Inbarajan in W.P.Nos.23198 to 23201/03 Mr.T.V.Lakshmanan in W.P.No.24476 of 2003 Mr.A.Thiyagarajan in W.P.No.2597 of 2004 For Respondents :: Mr.P.S.Raman in all WPs Additional Advocate General assisted by Mr.Haja Nazirudeen Special Govt. Pleader (T) ORDER D.MURUGESAN, J. These writ petitions in batch are taken up together for disposal, as they raise common questions. 2. M/s Sony India Limited, Chennai is the petitioner in W.P.Nos.17424 & 17425 of 2003. It is a registered dealer under the provisions of the Tamil Nadu General Sales Tax Act, 1959 (for short, 'TNGST Act') and is an assessee on the file of the Commercial Tax Officer, Egmore-II Assessment Circle, Chennai. According to the https://hcservices.ecourts.gov.in/hcservices/ petitioner, it is a fully owned subsidiary of M/s Sony Corporation of Japan and is engaged in the manufacture and sale of colour television sets, audio products and other consumer electronic products. It inter alia imports and sells LCD projectors, handy cameras, projection televisions, some models of car stereos and high-end audio systems. It imports the above goods from abroad at New Delhi and Mumbai and the imported goods are packed in accordance with the Weights and Measures Rules affixing MRP stickers, etc., and are despatched to a network of branch offices/warehouses located in various parts of India. 3. M/s Nokia India Private Limited, Chennai is the petitioner in W.P.Nos.16825 & 16826 of 2003. It is a registered dealer under the provisions of the TNGST Act and is an assessee on the file of the Commercial Tax Officer, Anna Salai-III Assessment Circle, Chennai. According to the petitioner, it is engaged in the business of importing and selling handsets of cellular phones from abroad at New Delhi and from New Delhi, the handsets are despatched to a network of branch offices/warehouses located in various parts of India. The handsets imported at Delhi are also stock transferred to the branch/warehouse of the petitioner at Chennai for sales within the State of Tamil Nadu. 4. According to M/s Sony India Limited and M/s Nokia India Private Limited, the goods classified under Entry 14(vi) and (viii) of Part-D of the First Schedule to the TNGST Act are liable for sales tax at the rate of 12% on first sales made inside the State of Tamil Nadu and only in case the imported goods classifiable under Entry 9 of the Eleventh Schedule are liable to tax at the rate of 20% on first sales inside the State of Tamil Nadu. On the basis of the clarification dated 21.7.2002 issued under Section 28-A of the TNGST Act by the Special Commissioner and Commissioner of Commercial Taxes, Chennai, if car audio systems, cordless phones, handy cameras, computer monitors and cellular phones are imported goods having foreign markings, then, when sold in Tamil Nadu, they will be liable for 20% sales tax under Entry 9 of the Eleventh Schedule to the Act. As the petitioners are liable to pay sales tax only at the rate of 12% in terms of Entry 14(vi) and (viii) of Part-D of the First Schedule, they had collected and paid sales tax at the rate of 12% on the goods imported from outside India at Delhi and Mumbai and stock transferred to Chennai and sold in Chennai and the demand for payment of differential tax had resulted in burden on consumers. 5. Aggrieved by the clarification dated 21.7.2002, they approached the Tamil Nadu Taxation Special Tribunal by filing O.P.Nos.969 & 970 of 2002 & 564 & 565 of 2004 praying to declare the provisions contained in Entry 14(vi) of Part-D of the First Schedule to the TNGST Act as classifiable under Entry 8 of Part-G of the First Schedule to the said Act during the period from 27.3.2002 to 30.6.2002 and as classifiable under Entry 9 of Eleventh Schedule of the said Act with effect from 1.7.2002 prescribing 20% rate of sales tax on the sale of respective imported goods from Delhi/Mumbai and stock transferred and sold in Chennai are violative of Articles 14, 301 and 304 of the Constitution of India and void and unenforceable. https://hcservices.ecourts.gov.in/hcservices/ By orders dated 30.4.2003 and 27.5.2003, the Taxation Tribunal upheld the provisions of levy of higher rates of sales tax at 20%. Challenging the said orders, they have filed the above writ petitions seeking to set aside the orders of the Taxation Tribunal and for a consequential declaration to declare the impugned provisions ultra vires of the Constitution. 6. M/s Trans Car India Private Limited, Chennai is the petitioner in W.P.No.22414 of 2003. It is a registered dealer under the provisions of the TNGST Act and also under the Central Sales Tax Act, 1956 (for short, 'CST Act') and is an assessee on the file of the Commercial Tax Officer, Nungambakkam Assessment Circle, Chennai. According to the petitioner, it is carrying on the business as authorised dealers for sale of Mercedes Benz cars within the State of Tamil Nadu. It is effecting inter-State purchase of Benz cars and spare parts from M/s DAIMLERCHRYSLER India P.Ltd., Pune and has paid 4% CST and also issued 'C' declaration form to avail the concessional rate of tax. As the petitioner had effected first sale of Benz cars and the spares within the State, it has paid 12% tax and 5% surcharge. In addition to the above, it also paid 13% entry tax under the provisions of the Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990 (for short, 'Entry Tax Act'). In terms of Entry 9 of the Eleventh Schedule of the TNGST Act for levy of 20% sales tax on the sale of imported motorcars, the business premises of the petitioner was inspected by the officials of Enforcement Wing on 3.5.2003 and 7.5.2003. On the ground that the inter-State purchase of cars and spares would attract tax under Entry 9 of Eleventh Schedule to the TNGST Act at the rate of 20%, they collected the differential rate of tax from the petitioner. On the ground that the petitioner would be compelled to pay tax under Entry 9 of Eleventh Schedule to the TNGST Act, it approached the Taxation Tribunal in O.P.No.626 of 2003 questioning the levy of 20% sales tax on the ground of violation of Part XIII of the Constitution of India, more particularly, Articles 301 and 304(a) of the Constitution of India. However, the challenge was negatived by the Taxation Tribunal vide order dated 18.6.2003. Hence the above writ petition seeking to declare the impugned provisions ultra vires of the Constitution. 7. M/s MPL Cars Limited is the petitioner in W.P.Nos.23198 to 23201 of 2003. It is a registered dealer under the provisions of the TNGST Act and CST Act and is an assessee on the file of the Commercial Tax Officer, T.Nagar (East) Assessment Circle, Chennai. According to the petitioner, it is carrying on the business as authorised dealers of M/s Ford India Private Limited and selling Ford cars from the year 1996. Initially the petitioner used to effect purchase of Ford cars from the Nasik factory and thereafter, sales were made from the Chennai stockyard. From December, 2001 onwards, the petitioner also began to effect sale of Ford Mandeo cars, which are manufactured in Ford Werks AG, Belgium. M/s Ford India Private Limited used to import the cars from Belgium and effect high sea sales to the petitioner before the goods could reach the Indian shores. On the goods arriving at Mumbai port, M/s Ford India Private Limited used to clear the goods previously sold on high sea sale basis to the petitioner and despatch the goods to Tamil Nadu, for https://hcservices.ecourts.gov.in/hcservices/ which the petitioner used to pay 13% entry tax. However, the petitioner did not collect any sales tax but set off the entry tax paid previously against the sales tax liability. On and from 27.3.2002, the petitioner also collected and paid sales tax under the TNGST Act at the rate of 12%. Though the petitioner had been collecting 20% sales tax from the customers, it used to pay to the department only 7% namely, the difference between the sales tax rate at 20% and entry tax rate at 13%. By the introduction of Tamil Nadu Act 22 of 2002, the petitioner is made liable to pay 20% sales tax on the cars sold by it in Tamil Nadu. Questioning the said levy, the petitioner approached the Tamil Nadu Taxation Special Tribunal by filing O.P.Nos.813 & 814 of 2002 praying to declare the provisions contained in Entry 14(vi) of Part-D of the First Schedule to the TNGST Act as classifiable under Entry 8 of Part-G of the First Schedule to the said Act during the period from 27.3.2002 to 30.6.2002, introduced by Tamil Nadu Act No.18 of 2002, and as classifiable under Entry 9 of Eleventh Schedule of the said Act with effect from 1.7.2002, introduced by Tamil Nadu Act No.22 of 2002, prescribing 20% rate of sales tax on the sale of cars in Chennai are ultra vires of Articles 14, 265, 286 and Part XIII of the Constitution of India. By order dated 30.4.2003, the Taxation Tribunal upheld the provisions of levy of higher rates of sales tax at 20%. Challenging the said order, the above writ petitions have been filed seeking to set aside the order of the Taxation Tribunal and for a consequential declaration to declare the impugned provisions ultra vires of the Constitution. 8. The petitioner in W.P.No.24476 of 2005 is the proprietor of M/s Mahaveer Mirror Industries, Chennai and is an assessee under the provisions of the TNGST Act on the file of the Commercial Tax Officer, Vepery, Chennai. According to the petitioner, he is carrying on the business in glass and mirrors, fibre boards of different types including medium density fibre board. He imports goods from outside India and sell them in the local market. According to him, medium density fibre boards and pre-laminated/veneered medium density fibre boards are taxable only at the rate of 8% from 1.4.99 to 26.3.2002 and 10% from 27.3.2002 under item 20 Part-C of the First Schedule of the TNGST Act. As the goods covered under Entry 8, Part-G of the First Schedule upto 30.6.2002 and Entry 9 of the Eleventh Schedule from 1.7.2002 under the impugned provisions are taxable at a higher rate of sales tax and the medium density fibre board which is taxable at 10% under Part-C of First Schedule has been included along with those imported goods, the petitioner has filed the above writ petition seeking to declare the impugned provisions invalid, illegal, unconstitutional and ultra vires of the Constitution. 9. M/s Theni Glass House, Theni is the petitioner in W.P.No.2597 of 2004 and is an assessee under the provisions of the TNGST Act on the file of the Commercial Tax Officer, Theni. According to the petitioner, during the course of business, it is importing medium density fibre boards from foreign countries and reselling all kinds of glasses and plywoods. On similar grounds, the petitioner seeks to quash the impugned Government Order in G.O.Ms.No.29 Commercial Taxes dated 27.3.2002 so far as the levy of sales tax at 20% on the goods https://hcservices.ecourts.gov.in/hcservices/ imported by the petitioner is unconstitutional and illegal. 10. Mr.Arvind P.Datar, learned senior counsel appearing for the petitioner in W.P.Nos.17424 and 17425 of 2003 has submitted that once the goods reached the customs frontiers, they are assessed for customs duty and thereafter bill of entry is filed. After payment of customs duty, the goods are cleared and are removed from the port and stored in warehouses. Once the goods are cleared from port on payment of customs duty, they lose the character of imported goods. After clearance and storage of the goods in the warehouse, the petitioner effects stock transfer from the warehouse to the State of Tamil Nadu for sale. According to the learned senior counsel, for the purpose of levy of sales tax, the goods should suffer tax as classified under Entry 14(vi) and (viii) of Part-D of First Schedule of the TNGST Act at the rate of 12% only. Only such of those imported goods falling under Part-D of the First Schedule classified under Entry 9 of Eleventh Schedule are liable to tax at the rate of 20% on the first sales inside the State of Tamil Nadu. He would further submit that inasmuch as the goods are stock transferred from Delhi to Tamil Nadu, they are goods lying in India and are not goods in the course of import into India. It is his further contention that inasmuch as Entry 9 of Eleventh Schedule does not spell out clearly the connotation of the term of 'imported goods', by a clarification dated 21.7.2002 issued under Section 28-A of the TNGST Act by the Special Commissioner and Commissioner of Commercial Taxes, the goods imported by the petitioner cannot be taxed at the rate of 20%, as those goods should suffer 12% sales tax as per Entry 14(vi) and (viii) of Part-D of the First Schedule. 11. Mr.K.J.Chandran, learned counsel appearing for the petitioner in W.P.Nos.16825 and 16826 of 2003 has adopted the arguments of Mr.Datar. Similarly, Mr.N.Murali, learned counsel appearing for the petitioner in W.P.No.22414 of 2003 also adopted the arguments of Mr.Datar. 12. Mr.N.Saiprakash, learned counsel appearing for the petitioner in W.P.Nos.23198 to 23201 of 2003 has submitted that Entry 8 of Part-G of the First Schedule to the TNGST Act was applicable for the period from 27.3.2002 to 30.6.2002. On and after 1.7.2002, the Eleventh Schedule is made applicable. He would contend that the finding of the Taxation Tribunal that protection under Part XIII of the Constitution of India for free trade is not available to the imported goods is contrary to law. He would also submit that in any case when there is a discrimination in the tax pattern as to the restrictions in the enactment, the assent of the President under Article 304-B of the Constitution of India for such enactment is necessary. 13. Mr.T.V.Lakshmanan, learned counsel appearing for the petitioner in W.P.No.24476 of 2005, in addition to the above submission of Mr.N.Saiprakash, has also placed reliance on certain clauses of the General Agreement on Tariffs and Trade, 1994, shortly known as (GATT) and submitted that there cannot be a different rate of sales tax for the goods manufactured and sold within India in a https://hcservices.ecourts.gov.in/hcservices/ particular State or manufactured in one State and sold in another State and the goods imported and sold in India. According to the learned counsel, the discrimination in the tax structure would amount to infringement of the right under Part XIII of the Constitution and, particularly, the freedom of trade, commerce and intercourse enunciated under Article 301 of the Constitution of India. 14. Mr.A.Thiyagarajan, learned counsel appearing for the petitioner in W.P.No.2597 of 2004 has submitted that while the power of the State Legislature to levy tax cannot be disputed, it cannot impose two different rates of tax for the goods sold within the State, as the same would amount to discrimination. He would also submit that once the goods suffer customs duty and are cleared from the port, they lose the character of imported goods and therefore, it cannot be differently treated with the goods manufactured in India. He would draw our attention to Article 286(3) of the Constitution relating to the restrictions as to the levy of tax on the sale or purchase of goods in the State. 15. Refuting the above submissions, Mr.P.S.Raman, learned Additional Advocate General appearing for the State has submitted that the right of the State to levy sales tax on the sale or purchase of goods within the State of Tamil Nadu is covered by Entry 54 of List II of the Seventh Schedule read with Articles 245 and 246 of the Constitution of India and such power includes a power to levy tax on the goods based on 'intelligible differentia and reasonable classification'. He would also submit that so far as the contentions as to the infringement of Articles 301 to 304 of Part XIII of the Constitution of India are concerned, those Articles are intended to ensure that no State Government would discriminate so as to impede goods of other States a free movement to any other State and they are not intended as protection for free movement of foreign goods. So far as the submission as to the India's Trade obligation under GATT is concerned, he would submit that those obligations should be only taken note of as India's obligation under the treaty and if no conflicts with any municipal law, the latter law alone will prevail. 16. On consideration of the sum and substance of the pleadings and the rival contentions, the following points arise for our consideration: (i) 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? (iii) Whether by virtue of the Agreement (GATT), the State would be competent to bring the goods https://hcservices.ecourts.gov.in/hcservices/ 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? 17.Point Nos.(i)&(ii): In order to drive home the above points, Mr.Arvind P.Datar, learned senior counsel would firstly rely upon the judgment of the Andhra Pradesh High Court in Minerals and Metals Trading Corporation v. State of Andhra Pradesh (1998) Vol.110 STC 394 (AP) and submit that once an assessment is made and on filing of the bill of entry the goods are cleared, the goods get mingled with the general mass of goods and merchandise of the country and the goods get the eligibility to be declared as local goods after clearance. The same will be the position even if the goods are not physically removed from the port