The Entry Tax Act:
The central dispute revolves around the constitutional validity of the West Bengal Tax on Entry of Goods into Local Areas Act, 2012 (‘WB Entry Tax Act’). The preamble of the Act indicated that the purpose of this levy was to provide for a compensatory Entry Tax Fund to finance the facilitation of trade, commerce, and industry within the state.
Post its inception, the constitutional validity of the WB Entry Tax Act was challenged before the Calcutta High Court in cases including Bharati Airtel Ltd v. State of West Bengal, WP No. 464 of 2012 and Tata Steel Ltd. v. State of West Bengal, WP NO. 11407 (W) of 2012, wherein on 24.06.2013 the Ld. Single Judge struck down the Act, finding that it was not compensatory in nature and was violative of the constitutional guarantee of free trade and commerce across India under Article 301 of the Constitution of India.
The legal scenario changed drastically in 2016 when the nine-judge bench of the Supreme Court in Jindal Stainless Ltd. v. State of Haryana, 2017 (12) SCC 1 set aside the five-decades-old compensatory tax test. A new test was laid down, i.e. that such taxes should not be discriminatory in nature. This shifted the burden of proof from the government to the assessee to prove that the tax was discriminatory in nature.
Sensing an opportunity, the West Bengal Government retrospectively amended the 2012 Act, through West Bengal Finance Act, 2017 (‘2017 Amendment’), seeking to validate the entry tax regime. These retrospective amendments were put to challenge before the West Bengal Taxation Tribunal. The Tribunal vide order dated 25.03.2022 struck down the 2017 amendment on the basis that the State had no legislative competency to enact laws with respect to entry tax as on the date of amendment, 06.03.2017, i.e. post inception of the GST regime.
However, on 30.01.2025 the Division Bench of the Calcutta High Court reversed this decision in the case of Pepsico India Holdings Pvt. Ltd v. The State of West Bengal, 2025 SCC OnLine Cal 884 and also set aside the 2013 Single Judge Order, holding that the 2012 Act as amended by the 2017 Amendment should be tested under the correct constitutional principles established in the case of Jindal Stainless (supra). The Court stated that a law could not be invalidated based on overruled precedents. The Calcutta High Court further clarified that the 2012 Act was never obliterated by the 2013 ruling due to interim stay orders, which allowed the tax assessments to continue and preserved the laws operation in interim.
Immediately thereafter, multiple parties have approached the Hon’ble Supreme Court challenging the Pepsico (supra) order. The Bench comprising of Justice J.B Pardiwala and Justice R. Mahadevan issued notice on 17.04.2025, directing that no coercive action be taken against the petitioners pending hearing of the matter.
The Settlement Scheme:
In an effort to settle the vast multitude of disputes pending before different forums and to grant relief to both the taxpayers as well as the State’s Revenue Collection, the West Bengal Government has introduced ‘The West Bengal Sales Tax (Settlement of Dispute) (Amendment) Act, 2025’ which amended the West Bengal Sales Tax (Settlement of Dispute) Act, 1999 (‘Scheme’) and subsequently issued Notification No. 1235- F.T dated 29.07.2025 and Notification No. 1250-F.T., dated 30.07.2025 whereby the Amendment Act would be operative from 18.07.2025, with the last date for submission of applications for settlement being 30.09.2025.
Under this scheme, taxpayers can settle their disputed entry tax liability by paying 75% of the disputed tax, while being granted full waiver of tax and penalty. The application has to be filed via the State’s portal using prescribed forms. The scheme covers disputes pending as of 31.03.2025, for periods ending on or before 30.06.2017.
What next?
One extremely important aspect to be noted is that availment of the Scheme has been made subject to the withdrawal of any related litigation or pending proceedings, through obtaining Court’s permission to participate in the Scheme.
As a result, the Supreme Court has been seeing a wave of request of taxpayers seeking to withdraw their appeals in order to avail the benefit from the Scheme. On 12.09.2025, noting the high volume of withdrawal appeals, the Apex court promptly adjourned the matter to 26.09.2025, to allow the interested parties to file formal application of withdrawal.
The Supreme Court’s handling of matter following the Scheme’s introduction demonstrates the judicial pragmatism in addressing mass litigation. At the same time, the numerous parties before the Supreme Court now face a pressing dilemma of mitigating their liabilities under the Scheme or stick to their guns by continuing to litigate the matter before the Supreme Court. Moreover, the taxpayers are further burdened by the approaching deadline of 30th September 2025 to make this strategic decisions.
Those taxpayers currently battling these choices also need to take cognizance of the time required to file formal withdrawal applications with respect to their pending litigations within such time period. While there are some murmurs about extension of this timeline; however, nothing has been conveyed officially and cannot be taken for granted. In this case, time is very much of the essence.
[The authors are Associate Partner, Principal Associate and Associate respectively, in Indirect Tax practice at Lakshmikumaran & Sridharan Attorneys, New Delhi]
