RailEnquiry

The Supreme Court today sought the Bihar government's response to a plea to restrain it from recovering entry tax of Rs 23.65 crores from the Railways for years 2010-11 and 2011-12 under a separate state law.The Centre has contended that state government lacks the legislative competence to enact the law for levying entry tax as it violates the freedom of trade, commerce and intercourse guaranteed under the Constitution.A bench of justices D K Jain and Madan B Lokur issued notices to the state government and its Department of Commercial Taxes on a petition by Indian Railways questioning the enforcement of Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Act of 1993.The Centre has challenged the Patna High Court judgement directing it to pay the entire Entry Tax levied by the Bihar government on the High Speed Diesel (HSD) oil which the Railways supplies to the Rail Consuming Depot at Jamalpur near Munger.The Jamalpur Depot provides fuel to diesel locomotives plying on the Eastern corridor of the East-Central Railway.The Centre has challenged the April 16 decision of the high court, which had directed it to pay the entire amount of entry tax assessed, within four weeks to avoid coercive recovery of penalty imposed upon it.Appearing for the Centre, Additional Solicitor General (ASG) Mohan Jain and counsel A Ramesh submitted that the high court "erroneously" disposed of its writ petition without deciding whether the Railways comes within the ambit of the Act of 1993.The Centre has approached the high court, challenging the state government's bid to recover the disputed amount of the Entry tax from the Reserve Bank of India (RBI).The railways also disputed the levy of the Entry Tax on it contending that it is not a compensatory tax, which is to be deposited compulsorily in proportion to the benefits derived from the state in the course of trade and commerce.The state-run enterprise had said even if the Entry Tax is a compensatory tax, it cannot be levied on the Railways as no benefit is derived by the PSU from the state.The compensatory tax is levied if the state's resources are used in the course of trade and commerce.The Railways had said there is no link between the entry tax collected and the facilities extended to the trades, directly or indirectly as the HSD oil is moved into the state by it using its own resources - wagons, locomotives - which are owned and maintained by it and nowhere the state's resources are used.The Bihar government had written to the RBI on April 3 stating that if the Centre fails to deposit the entire amount of Entry tax in the Government treasury, then the bank may transfer the amount from the Centre to the State.It had written the letter to the RBI in pursuance of the recovery orders of January 10, 2012 and February 2, 2012 of the Joint Commissioner, Department of Commercial Taxes, Bihar Government, directing the Railways to pay the Entry tax for the assessment years of 2010-11 and 2011-12.