HC slaps ` 10 lakh fine each on seven telecom companies

Author Rashid Paul - Tuesday, 07 02 2012 10:13

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‘Money realized shall be spent on welfare of orphans’
Srinagar, Feb 06: The Jammu and Kashmir High Court Monday imposed a fine of Rs 10 lakh each on seven major telecommunication companies and directed them to pay the entry tax on their equipment as demanded by the state government.
Dismissing a bunch of writ petitions filed by the telecommunication companies, Justice Muzaffar Hussain Attar upheld the state's plea that the equipment brought in by them was being used for commercial purposes and should be subjected to entry tax.
The court also imposed a fine of Rs 10 lakh each on the seven companies which included Bharti Airtel, Idea Cellular, Reliance Communications, Tata Services and Dishnet Communication.
The fine imposed on these companies shall be spent on welfare of orphans in the state, it said.
The telecommunication companies had filed seven writ petitions challenging the constitutionality of the J&K Entry Tax Act on the ground that it violates Article 301 of the Constitution of India. They said the Act violated the Article of free movement of trade and services.
The telecom companies contended that they import goods into Jammu and Kashmir for creating infrastructure for providing telecom and mobile services in the state. “Since the equipment imported is not meant for sale, therefore entry tax should not be charged on it,” they opined.
However, while refuting the arguments of telecom companies, the counsels representing government submitted that J&K Entry Tax Act was both a charging and remedial act and also a regulatory measure to prevent menace of tax evasion.
“The constitutional validity of Act (Entry Tax Act) cannot be questioned. It was protected
under the constitution,” they submitted.
They argued that the cellular and telecom companies operating in J&K were not directly and immediately affected by the operation of the Act. “Being rich companies, they were in a position to pay the tax. The legislature had the power to pass the law because J&K Legislature enjoys more powers under the Constitution of India unlike other states,” the government counsels submitted while defending the constitutional validity of Act said.
After hearing the arguments in December the case was reserved for final judgement for today.
The court while declaring the judgment today said that the “determined taxes are the revenue of the state spent on social sectors like health, education and others. The non-payment of this tax has affected the people. Their compensation in absolute terms cannot be ascertained. The petitioners by investing the tax money in their own business activities have benefited themselves at the cost of public welfare and common good.”
Justice Attar in his 29-page judgment said that the J&K Entry Tax Act 2000 is a valid legislation. It is a regulatory measure aimed at preventing tax evasion and does not offend the constitution.
“In order to inculcate respect for laws, the petitioners are saddled with cost of rupees ten lakhs each and this amount be spend by the J&K government on orphaned children,” the judgement read.
The state government will now realise Rs 459 crore as entry tax from these telecommunication companies for a period of last five years.