The Supreme Court on Friday refused to stay recovery of entry tax dues amounting to more than R350 crore, payable on goods imported by companies for their plants and services in Orissa between 2008 and 2012. Companies including Vedanta Aluminium and Tata Steel have been slapped notices over these dues.
A bench headed by Justice HL Dattu, while issuing notice to the state government, refused to grant interim stay against the Orissa High Court’s order that upheld the state’s decision to tax the import of capital goods under the provisions of the Orissa Entry Tax Rules, 1999. However, the state government said it will not take any coercive action against the firms.
Big companies, such as Vedanta Aluminium, Essar Steel, Tata Steel, Adani, Bharti Telemedia, Hindalco and MSP Metallics have challenged the levy. Vedanta is allegedly liable to pay entry tax dues of around R153 crore.
VAL senior counsel Harish Salve argued that the firm doesn’t need any interim protection as the apex court had already stayed such recovery in case of Sterlite Energy.
According to these companies, raw materials and consumables such as coal and alumina, where the sale takes place during the course of import or outside the territory of India and customs duty is paid, imposition of entry tax on such goods under the Act is arbitrary and ultra vires of the Constitution.
Customs duty is covered under Entry 83 of List I of the Seventh schedule to the Constitution and is, therefore, clearly within the domain of Parliament. The companies said that capital goods are not covered under the 1999 Act as these goods are not for consumption, use or sale.
Vedanta said that goods imported from outside India cannot be made eligible to entry tax, which a dealer is liable to pay on the event of entry of goods into a local area for use, consumption or sale. VAL, which is setting up an alumina refinery at Lanjigarh (Kalahandi district) and an aluminium smelter plant in Jharsuhuda with captive power plants in the state, had been procuring capital goods comprising plant, machinery and equipment from domestic manufacturers. Besides, it imports such goods from the US, Canada and Germany, among others.