While dismissing the petitions filed by seven private telecommunication companies challenging imposition of entry tax by the government in Kashmir, the High Court today imposed a fine of Rs 10 lakh each on the petitioners directing them to pay the entry tax to the state government.
On December 24, last year the Court had reserved the order after hearing hectic arguments from parties for two consecutive days. Today, in his order Justice Muzaffar Hussain Attar dismissed these writ petitions, upholding the state’s plea that the equipment brought in by these companies were being used for commercial purposes and should be subjected to entry tax.
The state government had contested the petitions pleading the Entry Tax Act was a regulatory measure to prevent evasion of sales tax by unfair traders. The state government will now realise Rs 459 crore as entry tax from these telecommunication companies for the period of last five years.
Seven companies, on which the court has imposed a fine of Rs 10 lakh each are Bharti Airtel, Idea Cellular, Reliance Communications, Tata Services, Viom Networks, Bharti Infratel and Dishnet Communication.
The fine imposed on these companies shall be spent on welfare of orphans in the state, the court directed. The telecommunication companies had filed separate writ petitions before the High Court had challenged the constitutionality of J&K Entry Tax Act on the ground that it violates Article 301 of the Constitution of India.
The telecommunication companies have already deposited Rs 100 crore with the high court as entry tax as bank guarantees which the state can now encash. The state was represented by Advocate General M I Qadri while the petitioners were represented by Zafar A Shah and D S Thakur.
Shah while arguing the matter had said that imposition of entry taxes on these companies saying it is violation of free movement trade. “It is against the constitution. The equipment being imported by these companies in the state is for creation of infrastructure and not for sale. Therefore, it gives impetus to free flow of trade and the state legislature cannot do so,” Shah had told JK News.
On the other side, the government was represented by Supreme Court lawyer M L Verma who pleaded that the government’s imposition of taxes on equipment being imported by telecommunication companies in Kashmir at Lakhanpore is to prevent tax evasion under Sales Tax Act.
Mohammad Ishaq Qadri, Advocate General had pleaded the government stand arguing that these companies were using goods imported in the state for commercial purposes and not for any personal use. “They are offering services to our people but in turn they are earning out of these services. The regulatory taxes can be imposed on these companies,” Qadri quoted advocate Verma pleading before the court.
He had also submitted before the court that in case these companies are exempted from entry taxes, the government is bound to loose hundreds of crores annually. “In year 2000, these companies had imported equipment worth around Rs 22 crores and government tax due on this equipment was round about one crore rupees. These companies owe us around 120 crores of rupees as taxes. So we will fight this case tooth and nail,” Qadri claimed.
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