Photo of Mekhla Anand

Partner in the Tax Practice at New Delhi office of Cyril Amarchand Mangaldas. Mekhla leads the indirect tax practice and specialises in the areas of cross border structuring, turnkey contracts, mergers and acquisitions as well as tax litigation. She can be reached at

The constitution validity of Entry Tax has faced a series of challenges. It was hoped that once the constitutional bench took control of the matter, the controversy would be resolved once for all. However, even after the constitutionality of the levy of Entry Tax per se was upheld by the majority of a nine judge bench of the Hon’ble Supreme Court (SC) in the case of Jindal Stainless Steel v. State of Haryana, Civil Appeal No. 3453/2002 (Jindal Case), the impending disputes weren’t put to rest.

The SC in the Jindal Case opined that non-discriminatory taxes do not interfere in the free movement of goods across the territory of India and therefore levy of Entry Tax by states does not violate Article 301 of the Constitution of India. The SC also laid down certain touchstones to be considered while analysing whether a levy is discriminatory against goods coming from outside the state vis-a-vis goods produced locally in the said state.

However, it directed the respective benches to adjudicate the question of the constitutional validity of each state’s Entry Tax legislation. Accordingly, the bench left important ancillary issues, which are relevant for deciding the validity of state specific Entry Tax legislation, open for determination, namely: (a) whether states have the right to tax imports from outside India; and (b) whether the entire state can be notified as a ‘local area’.

Thus, instead of putting to rest the long-standing dispute on Entry Tax levy, the Jindal Case led to varied consequences for assessees across different states, since the High Courts took diverse positions while applying the order of the SC.

In light of the above observations of the SC, most High Courts resorted to passing interim orders directing the parties to adjourn any writ petitions pending before the High Court in relation to the constitutional validity of Entry Tax legislation. The parties were then at liberty to mention their matter before appropriate Supreme Court bench adjudicating the said legislation.

In the State of Himachal Pradesh (HP), on August 5th, 2014, the Hon’ble High Court passed an order disposing off around 1,500 cases relating to challenges to HP Entry Tax legislation. The said order provided that all these writ petitions would abide by the judgment of the SC in the Jindal Case, when pronounced, and the writ petitioners were at liberty to come back to the Hon’ble High Court, should the need arise. The Hon’ble High Court also directed the assessees to continue depositing a certain portion of their Entry Tax liability in cash and execute bank guarantees for the remaining portions.

However, post the order in the Jindal Case on November 11, 2016, the Hon’ble High Court of HP, through a non-speaking order dated November 15, 2016, disposed off a batch of writ petitions challenging the Entry Tax legislation in the state of HP by merely citing the decision of the SC in the Jindal Case.

Taking cue from the November 15, 2016 order of the Hon’ble High Court of HP, the Excise and Taxation Department (Department) of HP initiated recovery proceedings against the assessees by encashing bank guarantees provided as surety pending adjudication of the matters. The coercive recovery proceedings by the Department led to the Hon’ble High Court of HP being flooded with litigants contending that the question of constitutional validity of the Entry Tax Act of HP was still an open question.

Since matters in relation to the Entry Tax legislation of various states, including the state of HP[1], are pending adjudication before the SC, the Hon’ble High Court of HP collectively heard all the matters where the Department had issued encashment notices to the bankers of the assessees. In its order in the case of Procter & Gamble Home Products Limited v. Assistant Excise and Taxation Commissioner[2] the Hon’ble High Court of HP stayed coercive proceedings towards recovery of Entry Tax dues, till the final disposal of the matter by the SC.

The SC had commenced hearing this batch of Entry Tax matters prior to the summer break and is expected to continue hearing the matter on a regular basis once the SC convenes post the summer break. Therefore, the final fate of the chequered history of Entry Tax remains under judicial consideration.

The stay is an interim relief for the assessees but the final relief still appears to be a long wait. In the wake of the Goods and Services Tax (GST) and the pendency of final adjudication by the SC, some states have already introduced amnesty schemes under Entry Tax in order to ensure that the burden of Entry Tax disputes is not carried forward to the GST regime. It is ironic that while entry Tax will soon be subsumed in GST, rendering this entire discussion academic, the cost of this persistent litigation and the ever increasing tax burden continues to be a dark cloud hanging over the industry.

It is imperative that the SC resolves this issue at the earliest to settle all the past dues of the assessees.


[1] In the case of Reliance Jio Infocomm. Ltd. v. State of HP, SLP No. 8231/2015

[2] Writ Petition No. 552/2017

* The author was assisted by Abhilasha Singh, Senior Associate

The Hon’ble Supreme Court of India (SC), in the recent case of Steel Authorities of India Ltd.[i], considered the question of admissibility of an appeal, against an order of the Central Excise and Service Tax Appellate Tribunal (CESTAT), filed before the SC under Section 130E(b) of the Customs Act, 1962 (Customs Act).

The SC analysed the provisions pertaining to the appellate mechanism laid down under the Customs Act juxtaposed with the role of the SC and its appellate powers, as envisaged under the Constitution of India (Constitution). It concluded that the appellate powers of the SC in relation to appeals filed against orders of the CESTAT are no different from the said powers of SC in case of an appeal against a judgment/ order of the High Court (HC).

Interestingly however, the SC laid down a non-exhaustive list of conditions for determining the admissibility of appeals, against an order of the CESTAT filed before it. They were as follows:

Continue Reading Appeal to the Supreme Court: Rights of Admission Reserved

In the first concrete step towards implementing the much awaited Goods and Services Tax (“GST”) regime, the Model GST Law was released on June 14, 2016 (“Model”), even as the Government strives to pass the enabling Constitutional Amendments. Under the Model, Central/State GST shall be leviable on all intra-state supplies of goods and/or services and Integrated GST shall be leviable on all inter-state supplies of goods and/or services.

  1. A new Taxable Event:

As the GST regime is meant to subsume existing indirect taxes, concepts such as manufacture, provision of service, sale of goods, etc. shall be replaced by a single taxable event: supply of goods and/or services. The term “supply” has been defined to include all forms of supply of goods and/or services made or agreed to be made for a consideration by a person in the course or furtherance of business, importation of service, and supplies made or agreed to be made without consideration such as permanent transfer of business assets, etc. Interestingly, the definition also deems the supply of any branded service by an aggregator under a brand name owned by him to be a supply by the aggregator. This all pervasive definition of “supply” has to be complemented by seamless availability of input tax credit, which has been largely addressed by the Model.

However, note that the supply of goods by a registered person to a job-worker shall not be treated as supply of goods. A negative list has also been prescribed for transactions (e.g. transactions by Government, etc.) on which GST shall not apply.

Continue Reading A Step towards Belling the GST Cat