Calcutta, Oct. 3: Differences in interpreting a Calcutta High Court order on collection of entry tax have led to a tussle between some companies and the state government.
Lawyers representing companies such as Amul, GlaxoSmithKline Pharmaceuticals Limited, Dabur and Britannia today alleged that government officials were putting pressure on them to pay entry tax.
The companies stopped paying the tax after a single-judge bench of Calcutta High Court struck down the West Bengal Entry of Goods into Local Areas Act, 2012, on June 24.
The lawyers said the act became invalid after the single-judge bench held the legislation ultra vires. Following the verdict, the state government moved a division bench, which did not stay the single- judge bench order.
Companies such as Tata Steel, Airtel, Godrej and Whirlpool have also become parties to the case against the state government.
“As it was termed ultra vires by the single bench and was not stayed by the division bench, the act is dead. The companies cannot be forced to pay entry tax based on a dead act,” lawyer Bodhayan Bhattacharya told a news conference.
In an attempt to shore up revenues, the entry tax was imposed from April 1, 2012, and around Rs 1,380 crore was generated through it in the last financial year.
But collections have dipped since July this year after the order of the single-judge bench. The collections have dropped from an average of Rs 130 crore a month to Rs 50-60 crore.
The lawyers alleged that commercial tax officials were calling up the companies’ representatives and telling them to deposit the entry tax dues.
“An interim order of the division bench of Chief Justice Arun Mishra and Justice Joymalya Bagchi says the state can continue the assessment (amount) of tax but it does not allow the state to realise it,” said Kumarjit Das, another advocate.
But finance department officials said the interim order of the division bench was being misinterpreted.
“I think the entire issue is being misinterpreted by the lawyers of the companies,” said Vinod Kumar, the commercial tax commissioner.
Sources in the finance department said officials believed that as the division bench had accepted the case for hearing, it implied that the single-judge bench order had been stayed.
“This is the reason why we can collect the entry tax…. We are calling up people and asking them to pay the tax, which many of the companies have not deposited since July,” an official said.
He, however, added that the commercial tax directorate was not sending demand notices to companies not paying the tax.
Tax directorate officials said the entry tax was important for the cash-strapped Bengal government and they were under pressure to raise revenues.
According to an official, this year, Rs 500 crore will be spent additionally because of the launch of projects such as Kanyashree and Yuvashree. Club doles have also increased.
Advocate Bikash Ranjan Bhattacharyya, who is not associated with the case, said as the division bench did not stay the single-bench order, the state could not collect the entry tax.
“As no stay order on the single-bench order has been issued, it can be said that the judgment of the single bench prevails,” he said.