WB Taxation Tribunal declared Section 5 & 6 of WB Finance Act, 2017 as ultra vires and unconstitutional

In a landmark ruling, the Hon’ble WB Taxation Tribunal held that the State of WB lacked legislative competence in enacting Section 5 & Section 6 of the WB Finance Act, 2017 on account of deletion of Entry 52 of List II of 7th Schedule by The Constitution 101st Act, 2017 w.e.f. 16.09.2016. The tribunal held that since the State lacked the legislative competence and therefore the State did not have plenary power to carry the amendments and revalidation of WB Entry Tax Act of 2012.

The West Bengal Tax on Entry of Goods into Local Area Act, 2012 (WB Entry Tax Act of 2012) was introduced w.e.f. 01.04.2012 in purported exercise of the power conferred under Article 246 read with Entry 52 of List II of the 7th Schedule of the COI. The subject matter of taxation under Entry Tax Act was only goods which were imported from outside the State of West Bengal. The vires of this Act was challenged before the Hon’ble Calcutta High Court, and the Single Bench of Hon’ble Calcutta High Court had struck down the aforesaid enactment vide judgement dated 24.06.2013 in the case of Tata Steel v. State of West Bengal MANU/WB/0151/2013. The enactment was struck down on the grounds of being violative of Article 301 and 304(a) of the COI. The verdict in Tata Steel (Supra) was challenged by the State before the Hon’ble DB of Calcutta High Court which is still pending.

When the verdict in Tata Steel (Supra) was pending before the Hon’ble Division Bench of Calcutta High Court, the Constitution 101st Amendment Act, 2016 came into force w.e.f. 16.09.2016, whereby the Parliament deleted Entry 52 from State List II of the 7th Schedule of the COI. Entry 52 stood as “52. Taxes on the entry of goods into a local area for consumption, use or sale therein.” before it stood deleted w.e.f. 16.09.2016. Furthermore, Section 19 of the Constitution 101st Amendment Act provided any law, which was in force, immediately before the commencement of 101st Amendment Act  would continue to be in force until amended or repealed by the Competent Legislature for a period of one year from such commencement, whichever is earlier. In other words, Section 19 empowered the States to legislate on the law which was in force immediately before the Commencement of Constitution 101st Amendment Act, 2016.

Meanwhile, the Hon’ble SC in Jindal Stainless Steel (2017) 12 SCC 1, held that Entry Tax does not violate Article 301 of the COI, however violation of Article 304(a) was left to be determined by the Regular Benches and the Jurisdictional High Courts.

The State of WB introduced WB Finance Act, 2017 (Amending Act of 2017) wherein vide Section 5 of the Finance Act, some amendments with retrospective effect were carried out in the WB Entry Tax Act and vide Section 6 of the Finance Act, 2017, the State purported to validate the WB Entry Tax Act.

The vires of the WB Finance Act, 2017 was challenged before the Hon’ble High Court of Calcutta. Since, the Verdict of Single Bench had already been pending before the High Court of Calcutta and with the new challenge to the Amending Act of 2017, joining the petitions queue, the Hon’ble High Court Calcutta directed the WBTT to decide on the challenge to the Amending Act of 2017.

After the Marathon Hearings conducted before the Hon’ble WBTT, it was held that:

  • WB Entry Tax Act, 2012 as was held ultra vires on 24.06.2013 was not in force on 16.09.2016, i.e., when Section 19 was introduced vide Constitution 101st Amendment Act.
  • Verdict of Hon’ble Single Bench in Tata Steel was not impliedly overruled with the judgement of Hon’ble SC in Jindal Stainless Steel (Supra)
  • With the deletion of Entry 52 of State List, State Legislature did not have the legislative competence to legislate on WB Entry Tax Act, 2012, as the said Entry stood deleted w.e.f. 16.09.2016.

Read the judgement of Hon’ble WBTT at: Entry Tax Judgement

Yuvraj is an advocate and has completed his B.A. LL.B(Hons) from RGNUL-Punjab. He is a practicing advocate and has been involved in matters pertaining to GST and other indirect taxes as well as Direct Tax. He is active in Writ Courts and has involvement in a few landmark judgments like Pitambra Books Pvt. Ltd. V. Union of India (W.P.C. No. 627 of 2020), and represented Sales Tax Bar Association (Delhi) to resolve GST issues and glitches.