Entry Tax under the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1993 (hereinafter referred to as the Entry Tax Act). = the Appellant will approach the 40 Appellate Tribunal with all relevant materials in this behalf, and the Appellate Tribunal will render a finding as to how much of the demand of Entry Tax for the assessment years in question would have to be struck down, in that sales made by HPCL and BPCL to their retail consumers and to others are made outside the local area of Patna.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.3018 OF 2017
INDIAN OIL CORPORATION LIMITED …APPELLANT
VERSUS
STATE OF BIHAR & ANR. ...RESPONDENTS
WITH
SPECIAL LEAVE PETITION (CIVIL) NO.15875 OF 2017
SPECIAL LEAVE PETITION (CIVIL) NO.15893 OF 2017
SPECIAL LEAVE PETITION (CIVIL) NO.15896 OF 2017
SPECIAL LEAVE PETITION (CIVIL) NO.15899 OF 2017
SPECIAL LEAVE PETITION (CIVIL) NO.15900 OF 2017
SPECIAL LEAVE PETITION (CIVIL) NO.15926 OF 2017
SPECIAL LEAVE PETITION (CIVIL) NO.16192 OF 2017
J U D G M E N T
1
R.F. Nariman, J.
1. The present appeal and special leave petitions arise out
of demands made from the Appellant for payment of Entry Tax
under the Bihar Tax on Entry of Goods into Local Areas for
Consumption, Use or Sale Therein Act, 1993 (hereinafter
referred to as the Entry Tax Act).
2. The Appellant has its marketing division in the State of
Bihar with branches, inter alia, at Barauni and Patna. It is from
these branches that sales of petroleum products are effected.
The Corporation receives crude oil, which is imported from
outside the State of Bihar, which then enters Bihar, where the
Corporation has its oil refinery; and after undergoing certain
processes, crude oil is converted into petroleum products, like
High Speed Diesel, Petrol etc. The products manufactured in
the Bihar oil refinery are then sent to a branch in Patna, mainly
through a pipeline constructed specifically for this purpose.
Some part of these petroleum products, namely, High Speed
Diesel and Petrol are sold by the Appellant to two other oil
marketing companies (OMCs), namely, Bharat Petroleum
2
Corporation Ltd. (BPCL) and Hindustan Petroleum Corporation
Ltd. (HPCL), who then take the products from the depot of the
Corporation situated in Patna and thereafter sell the products to
their retail dealers or through their petroleum outlets. The
Appellants, apart from the sales made to these OMCs, also sell
the aforesaid petroleum products to local retailers and through
petroleum outlets in Patna. The Appellant pays Entry Tax at the
rate of 16% when the product enters the local area of Patna
and 24.5% VAT is paid and set off against the Entry Tax under
Section 3(2) second proviso of the Entry Tax Act for sales made
within the local area. The grievance of the Appellant in the
present appeals is that when a sale is made to the OMCs, after
payment of Entry Tax, VAT is not set off against the Entry Tax.
VAT is not actually paid by the Appellant by reason of a
notification dated 4th May, 2006 under the Bihar Value Added
Tax Act, 2005 (VAT Act), where, in case of petroleum products
sold by the Appellant to OMCs, the levy itself is at the point of
sale by the aforesaid OMCs to their retailers or directly to their
consumers, and this being the case, the set off of such VAT
paid, as claimed by the Appellant, was allowed until the year
3
2014. However, pursuant to certain audit objections raised by
the Accountant General, Bihar, the aforesaid set offs that were
allowed to the Appellant, were re-opened with effect from the
assessment year 2008-09, as a result of which set offs that
were allowed were now disallowed. The Entry Tax demand
arising from such disallowance for the assessment years 2008-
09 till 2014-15 amount to Rs.1,683.03 crores.
3. In Civil Appeal No.3018 of 2017, the impugned judgment
dated 22nd October, 2013 of the Patna High Court agreed with
the Advance Rulings Authority, and rejected the case of the
Appellant under Section 3(2) second proviso of the Entry Tax
Act, stating that the set off would not be allowable under the
aforesaid proviso.
4. In the seven Special Leave Petitions before us by, a
common judgment dated 19th April, 2017, a Division Bench of
the Patna High Court framed five questions as follows:
“i) Whether the second proviso to Section 3(2) of
the Entry Tax Act is ultra vires to the Constitution?
(ii) Whether interest can be levied in the matter of
late payment of entry tax under the Entry Tax Act,
4
by virtue of the provisions of the Bihar Finance Act,
and, with the aid of Section 8 of the Entry Tax Act?
(iii) Whether entry tax is liable to be paid when the
goods only enter the local area and after such entry
is subjected to sell only without there being any use
of consumption of the goods in the local area?
(iv) Whether based on audit objection as
contemplated under the provisions of Section 33 of
the VAT Act, assessment can be re-opened with the
aid of Section 8 of the Entry Tax Act?
(v) Whether the assessment undertaken under
Section 33 of the VAT Act is permissible after a
period of four years in view of the provision of
Section 31 of the VAT Act?”
5. Questions 1, 3, 4 and 5 were answered against the
assessee, but question 2 was answered in its favour by stating
that since there was no substantive provision by which interest
could be levied, interest that was charged to the Appellant by
the assessment orders in question would have to be set aside.
6. Shri Arvind Datar, learned Senior Advocate appearing on
behalf of the Appellant, has referred in copious detail to various
provisions of the VAT Act, Rules made thereunder and Form
5
RT-1 made under the VAT Act. He also referred in detail to
various provisions of the Entry Tax Act. It is his case that the
Entry Tax Act in Bihar, unlike other Entry Tax Acts, was
essentially to ensure that VAT was collected under the VAT Act
in the State. According to him, the moment products contained
in Schedule IV of the said Act suffer tax, the scheme of the
Entry Tax Act is that a set off on such goods, which bear VAT, is
allowable. According to the learned counsel, Section 3(2)
second proviso should be construed in such a manner as would
accord with this object and set off, as claimed by the Appellant,
cannot, therefore, be denied to it. According to the learned
counsel, it is clear that this practice of allowing set off was
followed right up to 2014, showing that both the Government as
well as the assessee were clear that the provision had to be
worked in this fashion. The reason for retrospectively reopening
the assessments made from 2008-09 is due to an audit
objection raised only in the year 2014, after which the assessee
has so arranged its affairs that set off would be claimable and
has, in fact, been allowed by the authorities. According to the
learned counsel, the audit objection was itself only on the
6
footing that a 2006 amendment had changed the definition
contained in Section 2(1)(c) of the Entry Tax Act of the “entry of
goods” and it is for this reason that set off was disallowed, and
not the reasons given later by the State. According to the
learned counsel, what has to be seen is the overall picture qua
the goods under the Entry Tax Act and once it is clear that the
aforesaid goods suffer VAT, then a set off becomes payable.
According to the learned counsel, a large portion of
Rs.1,683.03 crores that is demanded relate to sales that are
made by HPCL and BPCL outside the local area of Patna,
which would, therefore, not attract Entry Tax at all. This has not
been segregated, and if segregated, the demand for the
assessment years in question would fall by at least Rs.1,000
crores. The Appellants were given no opportunity to
demonstrate this in detail, despite the fact that they were able
to give certificates by HPCL and BPCL for all the assessment
years in question that those companies had, in fact, effected
sales worth over a thousand crores outside the area of Patna.
7. According to Shri Datar, if this Court were to decide
against the appellant on the construction of Section 3(2) second
7
proviso, then, in any case, he would be liable to succeed, as
the said proviso should be read down to make it constitutionally
valid, as otherwise it would fall foul of Article 14 of the
Constitution of India. According to the learned counsel, the
same goods cannot bear different rates of tax which are
ultimately passed on to the consumers and this ex facie
discrimination would, therefore, make the proviso bad in law
requiring this Court to read it down, so that, at least so far the
Appellant is concerned, a set off would be granted. Also,
according to him, in any case, the matter should go back to the
Appellate Tribunal to determine as to how much of the sales
made by HPCL and BPCL would be outside the Patna area
and, therefore, not exigible to Entry Tax at all.
8. Shri S. Ganesh, learned Senior Advocate, appearing on
behalf of the Revenue, has countered each of these
submissions. According to the learned counsel, a plain reading
of Section 3(2) second proviso of the Entry Tax Act would make
it clear that the provision is assessee based and not goods
based. According to the learned counsel, none of the conditions
of the second proviso have been met by the Appellant and only
8
if the said provision is completely rewritten, can the Appellant
be given relief. Re-writing of the aforesaid provision, being a
legislative function, would, therefore, be outside the judiciary’s
ken. According to the learned counsel, in any case, VAT and
Entry Tax are separate taxes levied under separate Entries of
List II of the Seventh Schedule. The granting of set off is a
matter of indulgence and cannot be claimed as a matter of
right. It is of essence that the same person should have paid
both Entry Tax and VAT to claim set off. In the present case,
the Appellant admittedly pays only Entry Tax and no VAT as
there is no levy on the Appellant when it sells oil to other OMCs.
According to the learned counsel, Article 14 of the Constitution
cannot be invoked in the present case for the reason that there
is no clear and hostile discrimination, which is the requirement
of several judgments of this Court, before Article 14 can be
used to strike down tax legislation. In any event, according to
the learned counsel, striking down the second proviso would
only result in no set off being claimable at all and would be
counterproductive. The learned counsel made a fervent plea
that interest by way of restitution, at least, should be given to
9
the Government since the Writ Petitions that were filed in 2014
resulted in stay orders which have continued till date, making it
impossible for the State to recover interest on the demands
made. He cited a number of judgments to support all these
propositions.
9. Having heard learned counsel for both the parties, it is
necessary to set out some of the provisions of the two Acts in
question. Since we are directly concerned with the Bihar Entry
Tax Act, the following provisions need to be adverted to:
“2. Definitions.– (1) In this Act unless the context
otherwise requires,–
(c) “Entry of goods”, with all its grammatical
variations and cognate expressions, means, entry of
goods:
(i) into a local area from any place outside such
area,
(ii) into a local area from any place outside the
State,
(iii) into a local area from any place outside the
territory of India, for consumption, use or sale
therein.
Provided that in case of such goods which are liable
to tax under Section–12(1) of the Bihar Finance Act,
1981, entry of goods shall mean entry of goods into
local area from any place outside the State for
consumption, use or sale therein.
Explanation– Entry of goods into a local area for
consumption, use or sale therein from any place
10
outside the territory of India shall also be deemed to
be an entry of goods for the purposes of this Act.
3. Charge of Tax– (I) There shall be levied and
collected a tax on entry of scheduled goods into a
local area for consumption, use or sale therein for
the purpose of development of trade, commerce
and industry in the State, at such rate, not
exceeding twenty percent, of the import value of
such goods, as may be specified by the State
Government in a notification published in a official
gazette subject to such conditions as may be
prescribed:
Provided different rates for different scheduled
goods may be specified by the State Government.
Provided further, that if an importer claims that he
imported goods notified under sub-section (1) not
for the purpose of consumption, use or sale, the
burden of proving that the import was for purposes
other than for consumption, use or sale shall be on
importer importing such goods and making such
claim.
Provided further, that if an importer claims that he
imported goods notified under sub-section (1) not
for the purpose of consumption, use or sale, the
burden of providing that the import was for purposes
other than for consumption, use or sale, shall be on
importer importing such goods and making such
claim.
(IA) The tax under sub-section (1) shall be
continued to be levied till such time as is required to
improve infrastructure within the State such as
power, road, market condition etc. with a view to
facilitate better market condition for trade,
commerce and industry and to bring it to the level
of, National average.
11
(2) The tax leviable under this Act shall be paid by
every dealer liable to pay tax under Bihar Value
Added Tax Act, 2005 or any other person who
brings or causes to be brought into the local areas
such scheduled goods whether on his own account
or on account of his principal or takes delivery or is
entitled to take delivery of such goods on such
entry:
Provided no tax shall be leviable in respect of entry
of such scheduled goods effected by a person other
than the dealer if, the value of such goods does not
exceed one thousand in a year.
Provided further that where an importer of
Scheduled goods liable to pay tax under the Act,
incurs tax liability, at the rate specified under
Section 14 of the Bihar Value Added Tax Act, 2005
(Act 27 of 2005), by virtue of sale of imported
Scheduled goods or sale of goods manufactured by
consuming such imported Scheduled goods, his tax
liability under the Bihar Value Added Tax Act, 2005
(Act 27 of 2005) shall stand reduced to the extent of
tax paid under the Act:
Provided also that if the sale of such scheduled
goods is exempted from tax under any notification
issued under Section 7 of the Bihar Value Added
Tax Act, 2005, reduction of his liability under the
Bihar Value Added Tax Act, 2005, as provided in this
section or any notification there under, issued shall
not be made.
(1) The amendment made in section 3 of the said
Act shall be deemed to be, and to always have
been, for all purposes, as validity and effectively in
force at all material times (w.e.f. 25.2.1993)
(2) Any assessment, collection, adjustment,
reduction or computation made or any other action
taken or anything done or purported to have been
taken or done under the Bihar Finance Act, 1981
12
and the Bihar Tax on Entry of Goods into Local
Areas for Consumption, Use or Sale Therein Act,
1993 and notifications issued and rules made there
under shall be deemed to be and to have always
been, for all purposes, as validly and effectively,
assessed, collected, adjusted, reduced, computed
or taken or done as if the said Act as amended by
this Ordinance had been in force at all material
times and accordingly, notwithstanding anything
contained in any judgment, decree, or order of any
court, or tribunal or other authority:–
(a) no suit or other proceedings shall be maintained
of continued in court or tribunal or other authority for
the refund of any amount received or realized by
way of such tax;
(b) no court, tribunal or other authority shall enforce
any decree or order directing the refund or any
amount received or realized by way of such tax;
(c) recoveries shall be made in accordance with the
third proviso to subsection (2) of Section 3 of the
Bihar Tax on Entry of Goods Into Local Areas for
Consumption, Use or Sale Therein Act, 1993 of all
amounts which could have been collected as tax
under the said Act by reason of amendment made
in Section 3 by this Ordinance but which had not
been collected.
(3) For the removal of doubts, it is hereby declared
that no act or omission on the part of any person
shall be punishable as an offence which would not
have been so punishable if this section has not
come into force.
Provided that in case of a manufacturer the
reduction in tax liability as aforesaid shall only be
allowed to industrial units of the small scale sector,
the medium scale sector and sick industrial units:
13
Provided that the said reduction in tax shall be
available to manufacturer if the imported scheduled
goods are used or consumed in the manufacture of
goods which are sold within the State of Bihar or in
the course of inter-State trade and commerce or in
the course of export out of the territory of India. In
case only a part of the goods manufactured out of
imported Scheduled goods are sold within the State
of Bihar or in the course of inter-State trade and
commerce or in the course of export out of the
territory of India, the claim for reduction in tax
liability shall stand proportionately reduced:
Provided further that such reduction from the tax
liability shall be admissible only if the dealer
specifically mentions in the returns, filed under
Section-24 of the Bihar Value Added Tax Act, 2005
(Act 27 of 2005), the Number, date and the amount
of the Challan by which the payment of Entry tax in
relation to which the reduction has been claimed,
has been made.
(3) The liability to pay tax on Scheduled goods shall
only be at the point of first entry into a local area
and any subsequent entry or entries into any other
local area or areas of the said Scheduled goods
shall not be subject to tax provided the subsequent
importing dealer produces before the assessing
officer the original copy of the cash memo, invoice,
bill or challan issued to him by the dealer from
whom he purchased or received the said Scheduled
goods, and files a true and complete declaration in
the Form and manner prescribed:
Provided that no tax shall be levied and collected in
respect of any motor vehicle which was registered
in any other State or Union Territory under the Motor
Vehicles Act, 1988 for a period of fifteen months or
more before the date on which it is registered in the
State under that Act.
14
THE BIHAR TAX ON ENTRY OF GOODS INTO
LOCAL AREA RULES, 1993
8. Manner for claiming reduction in the liability
to pay sales tax.—(1) A claim for reduction in the
liability to pay sales tax shall be made by registered
dealer who is entitled to claim such reduction under
sub-section (1) of section 4 or in accordance with
the notification issued under sub-section (1) of
Section 3 of the Act.
(2) The claim shall be valid only when the amount of
entry tax has been paid on the concerned goods.
(3) The burden of proving the claim for reduction of
sales tax shall be on the dealer.
(4) Such claim shall be made by furnishing a
statement in triplicate in Form ET-X which shall be
filed along with the quarterly return.
(5) On receipt of the claim in Form ET-X, the
authority prescribed for assessment of tax shall
scrutinize the same before the date for filing of the
next quarterly return and shall satisfy itself
regarding the correctness of the claim. He shall
make appropriate endorsement in the assessment
record of the dealer and sign the certificate in the
said form.
(6) Two copies of the statement containing
certificate of the assessing authority shall be
returned to the dealer. He shall furnish one copy of
the form to the authority prescribed under the Bihar
Value Added Tax Act, 2005 to enable it to reduce the
dealers liability at the time of assessment of sales
tax payable under the said Act and shall keep other
copy as evidence with himself.
FORM E.T.-X
15
(See Rule 8)
Statement of claim for reduction in the liability
of sales tax payable under the Bihar Finance
Act, 1981 consequent upon payment of entry
tax.
(To be furnished in triplicate)
1. Name of the dealer.
2. Style of business & full address
3. Registration number under the B.T. on E. of G.
into L.A. Ord., 1993
4. Registration No. under the Bihar Finance Act,
1981.
5. Period to which the claim relates.
I ............ (Full name of the dealer) hereby request
for reduction in my liability of sales tax payable
under the Bihar Finance Act, 1981 in accordance
with the provision of sub-section (1) of section 4 of
the Bihar Tax on Entry of Goods into Local Areas for
Consumption, Use or Sale therein Ordinance, 1993
the notification issued under sub-section (12) of
section 3 in respect of the goods on which entry tax
has been paid by me/us and which have been sold
subsequently and sales tax under the Bihar Finance
Act, 1981 has become payable.
PARTICULARS
Sl.
No.
Description
of
schedule
goods on
which
entry tax
has been
paid by the
Concerned
Bill /
Invoice /
Challan
No. & date
in case of
Motor
Vehicles
Quantity Value
16
dealer. mention
Chassis
no. &
Engine
No. also
1 2 3 4 5
Amount
of entry
tax
paid
(Quote
T.C.
No. &
date)
Period
during
which
sold
C.M.
Bills /
Invoice
no. &
date
relating
to sale
Sales tax
payable
Sale tax
payable
after
reduction
of liability
Remarks
6 7 8 9 10 11
I hereby declare and certify that the above
particulars are collect and complete to the best of
my knowledge and belief.
I further certify that the amount of entry tax shown in
this statement has been paid by me.
Signature of the dealer or his declared manager.
CERTIFICATE
(To be signed by the assessing officer)
Certified that the particulars furnished in this
statement have been scrutinised by me and found
to be correct. The amount of entry tax on the goods
concerned, to the extent of which the liability of
17
sales tax under the Bihar Finance Act, 1981 has
been claimed to be reduced has been duly paid by
the dealer.
Signature & designation of the authority.”
10. So far as the Bihar VAT Act is concerned, it is necessary
to refer to the following provisions:
“3. Charge of tax.– (1) Every dealer who is
registered under the Bihar Finance Act, 1981 (Bihar
Act 5 of 1981), as it stood before its repeal by
section 94, shall be liable, on or after the
commencement of this Act, to pay tax under this Act
on sale or purchase, made by him.
(2) Every dealer to whom the provisions of subsection
(1) do not apply and whose gross turnover
of sales calculated from the commencement of the
year ending on the day immediately before the
commencement of the Act, exceeds the specified
quantum, as applicable to him under the Bihar
Finance Act, 1981, as it stood before its repeal by
Section 94, on the last day of such year shall, in
addition to the tax, if any, payable by him under any
other provision of this Act, be liable to pay tax under
this Act on all his sales.
(3) Every dealer to whom the provisions of subsection
(1) or sub-section (2) do not apply, shall be
liable to pay tax under this Act -
(a) on all his sales of goods which have been
imported by him from any place outside Bihar, with
effect from the day on which he effects first sale of
such goods; or
(b) in any other case, from the date on which his
gross turnover, during a period not exceeding
18
twelve months, first exceeded such taxable
quantum as may be prescribed:
Provided that the taxable quantum as may be
prescribed under this sub-section shall not exceed
ten lakh rupees.
Provided further that different taxable quantum may
be prescribed for different classes of dealers.
13. Point or points in series of sales at which
Sales Tax shall be levied.- (1) (a) Subject to the
provisions of section 16 and section 17, tax on sale
of goods shall be levied at each point in a series of
sales in Bihar by a dealer liable to pay tax under this
Act.
(b) Where the tax is levied at each point of sale, the
tax payable by a dealer at any point shall be the
amount arrived at after deducting, the input tax
credit specified under section 16 or section 17, from
the tax computed at that point of sale.
(2) (a) Notwithstanding anything contained in subsection
(1), the tax on the sale of goods specified in
Schedule IV shall be levied at such point or points in
a series of sales in the State as the State
Government may, by notification, specify.
(b) Where by a notification published under clause
(a), the State Government specifies, in respect of
any goods specified in Schedule IV, that the tax
shall be levied at the first point of their sale in the
State of Bihar by a dealer, subsequent sales of the
same goods in the State of Bihar shall not be levied
to tax, if the dealer making subsequent sale
produces before the prescribed authority the original
copy of the cash memo, or invoice or bill issued to
him and files a true and complete declaration in the
form and in the manner prescribed.
19
(c) Where by a notification published under clause
(a), the State Government specifies, in respect of
any goods specified in Schedule IV, that the tax
shall be levied at more than one point or on all
points of sale, the amount of tax paid at each
preceding stage of sale shall be adjusted against
the amount of tax payable at each subsequent
stage of sale in the manner prescribed.
(d) The declaration referred to in clause (b) shall be
issued by the selling dealer to the purchasing dealer
not later than the 30th day of September of the year
following the year to which such sales relate.
(3) If upon information, the prescribed authority has
reasons to believe that the selling dealer has,
without reasonable cause, failed to issue to the
purchasing dealer the declaration referred to in subsection
(2), he shall, after giving the selling dealer a
reasonable opportunity of being heard, direct that
the selling dealer shall pay, by way of penalty, a
sum of rupees five thousand per month for every
month of default or the amount of tax involved,
whichever is less.
14. Rate of Tax.- (1) Tax shall be payable on the
sale price of—
(a) the goods specified in the Schedule II, at the
rate of one percent;
(b) the goods specified in the Schedule III, at the
rate of six percent;
(bb) the goods specified in the Schedule IIIA, at the
rate of five percent;
(c) the goods specified in the Schedule IV, at the
rate not below ten percent and not exceeding fifty
percent and subject to such conditions and
restrictions, as the State Government may, by
notification specify.
20
(d) any other goods, not specified in the Schedules
I, II, III, IIIA and IV, at the rate of fifteen percent.
(2) The State Government may, by notification, alter
any Schedule to this Act.
16. Input Tax Credit (3) No input tax credit under
sub-section (1) shall be claimed or be allowed to a
registered dealer —
(a) in respect of goods specified in Schedule-IV or
such other goods as may be prescribed;
35. Taxable Turnover.- (1) For the purposes of this
Act, the taxable turnover of a dealer shall be that
part of his gross turnover which remains after
deducting therefrom —
(f) sale price at the subsequent stages of sale of
such goods as are specified in Schedule IV of the
Act as being subject to tax at the first point of their
sale in the State of Bihar, if necessary evidence as
required by sub-section (2) of section 13 are filed
with the return filed by the dealer under sub-section
(3) of section 24.
Schedule-IV
(See section 14)
Goods
1. Country liquor including spiced
country liquor.
2. Portable spirit, wine or liquor
whether imported or manufactured
in India.
3. High Speed Diesel Oil and Light
Diesel Oil.
4. Motor Spirit.
5. Natural Gas.
21
6. Aviation Turbine Fuel
7. Tobacco and tobacco products,
except biri and unmanufactured
tobacco (commonly known as
“Khaini”), and other
unmanufactured tobacco used in
manufacture of biri.
Bihar Value Added Tax Rules, 2005
18. Taxable turnover- For purposes of section 35
the taxable turnover of the dealer shall be that part
of his gross turnover which remains after deducting
therefrom:
(6) Sale price at the subsequent stages of sale of
such goods:
(a) specified in Schedule IV of the Act as being
subject to tax at the first point of their sale in Bihar,
or
(b) on the sale whereof tax at the maximum retail
price has been paid at the first point of its sale in
Bihar,
if necessary evidence as required by sub-section (2)
of section 13 is annexed with the return required
filed by the dealer under sub-section (1) of section
24.
19. Returns. – [(2) Every registered dealer, other
than a dealer paying tax under sub-section (1) or
sub-section (1A) or sub-section (4) of Section 15,
shall furnish to the authority specified in Rule 62:-
(a) A quarterly return in Form RT-I in duplicate;
(b) An annual return in Form RT-III in duplicate.
Provided that every registered developer, who has
opted to pay compounding tax under the provisions
22
of Section-15C of Bihar Value Added Tax Act, 2005
in lieu of tax payable under the Act shall furnish to
the authority specified in Rule 62-
(a) a quarterly return in Form RT-IA;
(b) an annual return in Form RT-IIIB.
FORM RT-I
[See Rule 19(2)]
Quarterly Return under Section 24 of the Bihar
Value Added Tax Act, 2005
Name and style of the dealer:
TIN:
Period of Return (Quarter and Year):
Part I (Details of turnover/transfers)
1 Gross Turnover (including value of debit notes):
Deductions:
2 Sales in the course of inter-state trade and commerce
3(i) Value of sales outside the State under Section 4 of the
Central Sales Tax Act, 1956
3(ii) Value of stock transfer to outside the State
4 Value of sales return of goods within 6 months of sale under
the Act
5 Export sales
6 Amount of other allowable deductions [As per Box A]
7 Total of deductions [2+3+4+5+6]
8 Taxable turnover [1-7]
Box A (other allowable deductions)
23
Deduction on account of: Value
(ii) Sale of Petrol, Diesel, ATF and Natural
Gas by an Oil Company to another Oil
Company (a list of different goods to be
annexed to this return separately
alongwith their respective sales values)
[Details of goods sold to different
companies to be submitted as per Box
E-2]
11. A notification dated 4th May, 2006 issued under Section
13(2)(a) of the VAT Act reads as follows:
“In exercise of the powers conferred by clause (a) of
sub-section (2) of section 13 of the Bihar Value
Added Tax Act, 2005 the Governor of Bihar is
pleased to direct that tax on the sale of goods
specified in column 2 of the table appended hereto
shall be levied at point or points in a series of sales
specified in column 3 of the said table subject to the
conditions and restrictions specified in column 4 of
the said table.
Table
Description
of Goods
Stage at which
said tax is to be
levied
Conditions and
Restrictions
1 Motor spirit
(Petrol)
(A) At the point
of sale by
importer if the
goods are
imported from
outside Bihar or
at the point of
sale by
24
manufacturer if
the goods are
manufactured in
Bihar or, (b) at
the point of sale
by oil companies
to the retailer or
direct to the
consumers, if
goods are sold
by these
companies.
2 High Speed
Diesel Oil and
Light Oil
Do
12. Since the set off in question depends upon the
interpretation of Section 3(2) of the Entry Tax Act, it is
necessary to state, at the outset, that the following conditions
need to be satisfied for claim of set off under the said provision:
(i) First and foremost, under Section 3(2) itself, the tax
leviable by way of Entry Tax can only be paid by every
dealer liable to pay tax under the VAT Act;
(ii) The set off can only be granted if the assessee is an
importer of scheduled goods, who is liable to pay tax
under the VAT Act;
(iii) The assessee must incur tax liability at the rates specified
under Section 14 of the VAT Act;
25
(iv) This must only be by virtue of the sale of imported
scheduled goods; and
(v) “His” tax liability under the VAT Act will then stand
reduced to the extent of tax paid under the Act.
13. It will be seen that the tax leviable under the Entry Tax Act
shall be paid by every dealer liable to pay tax under the VAT
Act. Under Section 3(1) of the VAT Act, all persons who are
registered dealers under the Bihar Finance Act, 1981, as it
stood before its repeal, are liable to pay tax under the said Act
on sales and purchases made by them. There is no dispute
that the Appellant is a registered dealer under the Bihar
Finance Act, 1981 and is thus liable to pay tax under the VAT
Act. Condition (i), therefore, is certainly fulfilled.
14. So far as Condition (ii) is concerned, the Appellant is an
importer of scheduled goods, viz., petroleum products.
Words and expressions that are not defined under the Entry Tax
Act shall have the meaning assigned to them under the VAT
Act, (See Section 2(2) of the Entry Tax Act). Under the VAT Act,
“importer” is defined as follows:
26
“2. Definitions- In this Act, unless the context
otherwise requires:
(p) “importer” means a dealer who brings any goods
into the State of Bihar or to whom any goods are
despatched from any place outside the State of
Bihar.”
It can be seen from the aforesaid definition that an importer
would necessarily refer to a dealer who imports scheduled
goods from outside the state. The question arises as to
whether, on such goods, the Appellant, as importer, is liable to
pay tax under the VAT Act.
15. As is clear from Section 13(1) of the VAT Act, all sales of
Schedule II and III goods have to suffer a levy of tax at each
point in the series of sales by a dealer liable to pay tax under
the said Act. This is subject, however, to Section 16, by which
once the goods have suffered tax, input tax credit is given at
every stage thereafter. This scheme applies generally down the
line to all Schedule II and III goods. However, when it comes to
tax on the sale of goods specified in Schedule IV, Item 3 of
which includes High Speed Diesel oil and light diesel oil, the
levy under the said Act is only at such point as the State
Government may, by notification, specify. This takes us to the
27
notification dated 4th May, 2006, which clearly states that when
it comes to motor spirit, High Speed Diesel oil and light diesel
oil, the levy is at the point of sale by oil companies to the
retailer or direct to the consumer. On a reading of the
aforesaid notification, it is clear that when a sale is effected by
the Appellant to BPCL and HPCL, there is no levy of any VAT
that is contemplated at this point. The VAT gets levied only at
the next point in the chain of sales, which is the sale from BPCL
and HPCL to their retailers and/or consumers. Thus, it is clear
that the second condition is not fulfilled as the importer of the
scheduled goods i.e. the Appellant is not at all liable to pay tax
under the VAT Act.
16. So far as the Condition (iii) is concerned, there being no
levy on the Appellant, the Appellant does not incur any tax
liability at the rates specified under Section 14 of the VAT Act.
17. So far as Condition (iv) is concerned, in any case, this
must be by virtue of sale of the very imported scheduled goods,
which means that the sale must be by the Appellant itself and
not by the other OMCs. This becomes clear from the second
28
part of this provision which reads:
“………. or sale of goods manufactured by
consuming such imported scheduled goods………”
18. Further, Condition (v) must be that “his” i.e. the
Appellant’s tax liability under the VAT Act will then stand
reduced, and this is only to the extent of tax paid under the Act.
This condition is also not met inasmuch as the set off is person
specific and not goods specific, as is correctly contended by
Shri Ganesh, learned Senior Advocate, appearing on behalf of
the Revenue.
19. Thus, it will be seen that on a literal reading of Section
3(2) second proviso, the Appellant would not be entitled to
claim set off. However, Shri Datar relied strongly on the
judgment in Associated Cement Companies Ltd. v. State of
Bihar & Ors., (2004) 7 SCC 642. In this judgment, two
manufacturing units of the Appellant, post-bifurcation of the
State of Bihar, fell into the State of Jharkhand. Thanks to an
industrial policy to give incentives to existing units to encourage
additional production, the Appellant was exempted in terms of
29
the aforesaid policy from payment of sales tax on additional
production for the period in question. The Entry Tax Act, as it
then stood, was set out in the judgment and this Court held
that, despite the fact that sales tax on cement was exempted,
the Appellant was held to be a person who was liable to pay tax
as the question of exemption would arise only when there is a
liability to pay tax in the first place. The Appellant was liable to
pay tax but for the exemption, and since it paid tax on the
original production, apart from the additional production, it
would be entitled to set off of tax paid under the Entry Tax Act.
In our opinion, it is clear that this judgment would have no direct
application in the facts of the present case, inasmuch as the
aforesaid judgment related to exemption of sales tax on
production of additional cement in order that production of
cement be boosted in the State. The expression “liable to pay
tax” was held to apply because the question of exemption
would arise only if there is a liability to pay tax in the first place.
Cement was, at the relevant time, “scheduled” goods and,
therefore, sales tax was liable to be paid on such goods. It is
only on account of an exemption notification issued under
30
Section 7 of the Act, as it then stood, that additional production
of cement stood exempted from payment of sales tax. In the
present case, there is no exemption at all. The present is a
case where the importer under the second proviso must first be
liable to pay tax under the Act. We have already seen that the
Appellant is a registered dealer under Section 3(1) of the VAT
Act and would be a dealer liable to pay tax under the aforesaid
Act within the meaning of the enacting part of Section 3(2) of
the Entry Tax Act. However, it is clear that as importer of
scheduled goods, the Appellant must be liable to pay tax under
the VAT Act. As has already been found, the Appellant as an
importer of scheduled goods is not liable to pay tax as the levy
of tax is itself postponed when the Appellant sells the oil to
another OMC, and VAT is leviable only on the transaction
between the said OMC and its retailer or other customers. In
the ACC (supra) case, the levy on cement was always there,
being a scheduled item, an exception to which by way of
exemption was allowed only on additional production of
cement. It is also important to note that the expression “by
virtue of sale of imported scheduled goods or sale of goods
31
manufactured by consuming such imported scheduled goods
…….” was added later by way of amendment and was not
contained in Section 3(2) second proviso which was construed
in the ACC (supra) case. This condition has clearly not been
met in the present case as has been held by us hereinabove.
In any case, the effect of the aforesaid judgment has been
nullified by the addition of a third proviso to Section 3(2) by the
Bihar Finance Act, 2006, which specifically provides that
exempted goods will not be entitled to set off. For all these
reasons, we are of the view that this judgment does not take
the Appellant’s case very much further.
20. Shri Datar also heavily relied upon The State of Tamil
Nadu v. M.K. Kandaswami & Ors., (1975) 4 SCC 745, in
which this Court, while construing Section 7A of the Madras
General Sales Tax Act, referred with approval to a Kerala High
Court judgment to hold that a dealer selling goods may still be
liable to pay tax in circumstances in which no tax is payable
under the Act. We must remember that this Court was dealing
with a provision which was stated to be a charging as well as a
remedial provision, the main object being to plug leakage and
32
prevent evasion of tax. It is in this situation that the aforesaid
provision was given a purposive interpretation. In the present
case, Section 3(2) second proviso is neither a charging section
nor a prevention of evasion of tax section. It is a section which
gives a certain concession as to set off, provided its conditions
are fulfilled. This judgment, therefore, also does not avail the
Appellant.
21. Shri Datar also relied upon A.V. Fernandez v. The State
of Kerala, 1957 SCR 837, for the proposition that the gross
turnover of the dealer should be looked at for finding out
whether a dealer is liable to pay VAT and clearly all sums
payable, including sums by way of inter-State sales and
exports, are taken into account for calculating gross turnover
which would then show that the dealer would be liable to pay
tax. This case again need not detain us any further because
we are not concerned with dealers liable to pay tax, but with
importers of scheduled goods who are liable to pay tax in order
that Section 3(2) second proviso is attracted. We have already
held that in the enacting part of Section 3(2), the Appellant is
certainly a dealer liable to pay tax under the VAT Act, in that it is
33
a registered dealer falling within Section 3(1) of the said Act.
Therefore, any argument based on gross turnover is wholly
unnecessary to include the Appellant under Section 3(2) of the
Entry Tax Act.
22. Shri Datar then referred to State of Bihar & Ors. v. Bihar
Chamber of Commerce & Ors., (1996) 9 SCC 136, for the
proposition that the Objects and Reasons appended to the Bill
of the Entry Tax Act showed that it was with a view to make the
provision of the Bihar Finance Act more workable. From this it
can scarcely be held that this being the object, the second
proviso must be completely altered in order that it subserves
such object. We have already held that a literal reading of the
second proviso, which gives a concession by way of set off,
cannot possibly be held to be altered qua every material
condition, so that the Appellant be entitled to claim a set off.
Consequently, this judgment and other judgments cited by the
Appellant, such as Commissioner of Income Tax, Bangalore
v. J.H. Gotla, Yadagiri, (1985) 4 SCC 343, to buttress the plea
of purposive interpretation cannot be held to apply in the facts
and circumstances of this case.
34
23. Shri Datar’s next plea was that a literal reading of the
second proviso would lead to a situation where the same goods
would suffer different rates of tax and this would be
discriminatory. We are afraid that this plea also does not avail
the Appellant for the simple reason that there are two taxes
which are levied in the present case, one is VAT and the other
is Entry Tax. In one case, VAT is set off against the Entry Tax
and in another, VAT is not so set off. Any anomaly arising from
the aforesaid position would not lead to a charge of clear and
hostile discrimination.
24. When it comes to taxing statutes, the law laid down by
this Court is clear that Article 14 of the Constitution can be said
to be breached only when there is perversity or gross disparity
resulting in clear and hostile discrimination practiced by the
legislature, without any rational justification for the same. (See
The Twyford Tea Co. Ltd. & Anr. v. The State of Kerala &
Anr., (1970) 1 SCC 189 at paras 16 and 19; Ganga Sugar
Corporation Ltd. v. State of Uttar Pradesh & Ors., (1980) 1
SCC 223 at 236 and P.M. Ashwathanarayana Setty & Ors. v.
State of Karnataka & Ors., (1989) Supp. (1) SCC 696 at 724-
35
726).
25. We must also not forget that no assessee can claim set
off as a matter of right and the levy of Entry Tax cannot be
assailed as unconstitutional only because set off is not given.
(See Godrej & Boyce Mfg. Co. Pvt. Ltd. & Ors. v.
Commissioner of Sales Tax & Ors., (1992) 3 SCC 624 at para
9 and State of Karnataka v. M.K. Agro Tech Pvt. Ltd, C.A.
15049-15069 of 2017 decided on 22nd September, 2017, at para
31).
26. However, Shri Datar referred to observations contained in
Ayurveda Pharmacy & Anr. v. State of Tamil Nadu, (1989) 2
SCC 285, Aashirwad Films v. Union of India & Ors., (2007) 6
SCC 624, State of Uttar Pradesh & Ors. v. Deepak Fertilizers
and Petrochemical Corporation Ltd., (2007) 10 SCC 342 and
Union of India & Ors. v. N.S.Rathnam and Sons, (2015) 10
SCC 681. Each of these judgments concerned taxation rates
that were ex-facie arbitrary and/or discriminatory, in that the
very same tax was levied at different rates without any rational
justification for the same and were, thus, struck down as being
36
arbitrary and/or discriminatory. None of these judgments would
have any application to the facts of the present case, in which it
is clear that the plea of discrimination is qua a set off of one tax
against a separate and independent tax imposed. This fact
circumstance would be sufficient to distinguish the said
judgments from the facts of the present case.
27. Since we have found that the plea of discrimination must
fail on the aforesaid grounds, no question of reading down the
provisions would then arise.
28. However, when it comes to the levy of interest, the
impugned judgment dated 19th April, 2017, held that there can
be no levy of interest as there is no substantive statutory
provision for the same. The assessee succeeded on this point
and the State has not filed any appeal against the same.
Therefore, the finding qua interest, having become final, cannot
be interfered with by us.
29. However, Shri S. Ganesh, learned Senior Advocate
appearing for the Revenue, has argued before us that, as a
matter of restitution, interest must be granted in favour of the
37
Revenue for the period for which stay orders have been
obtained in writ petitions filed in 2014 and 2015. This Court has
held that, if a party ultimately succeeds, it must be put back in
the same position as if no such stay orders have been passed,
and for this purpose he referred to and relied upon State of
Rajasthan & Anr. v. J.K. Synthetics Limited & Anr., (2011)
12 SCC 518 at paras 18 and 23 and Nava Bharat Ferro Alloys
Limited v. Transmission Corporation of Andhra Pradesh
Limited & Anr., (2011) 1 SCC 216 at paras 16 to 27.
30. It will be noticed, on a reading of para 23 of Bharat Ferro
Alloys (supra), that ultimately restitution is not a matter of right,
but is a matter of discretion, and that hardships on both sides
must be looked at in order to find a pragmatic solution by way
of restitution. Given the fact that the State continued with the
grant of set off till the year 2014, and reopened assessments
beginning from 2008-09 based on an audit objection, we are of
the view that it would be highly inequitable at this juncture to
allow the State to charge interest, which would arise as a result
of stay orders being passed in the writ petitions. The principal
amount also is not something that the Appellant was able to
38
pass on to the ultimate consumer in the peculiar facts of this
case. Had the Appellant known, from the assessment year
2008-09, and had the Department raised an objection in that
very year, it would have arranged its affairs in such a manner as
to avail of set off under the Entry Tax Act, which it did after
2014, when the audit objections were raised for the first time.
On the facts of this case, therefore, we are not inclined to
exercise our discretion to grant restitutional interest to the
Revenue.
31. The matter, however, does not end here. Shri Datar
pointed out that after the audit objections; a show cause notice
dated 16th April, 2014 was issued by the authority, which was
replied to by letters dated 16th June, 2014 and 27th June, 2014,
in which the assessee repeatedly asked for time to make a
detailed objection on the merits of the case. Finally, by a letter
dated 22nd August, 2014, the assessee was able to muster
certain certificates for the assessment years in question given
by BPCL and HPCL to show that a large amount of the sales
made by them in turn to their retail consumers and though retail
outlets were outside the local area of Patna, and, therefore, not
39
exigible to Entry Tax at all. We find that, without asking for
further data and back up details, the Assistant Commissioner of
Commercial Taxes passed an assessment order immediately
thereafter, on 27th August, 2014, and issued demand notices on
the very same date. We are of the view that the Revenue
appeared to have been in a great hurry to issue the aforesaid
demand notices, and since we are dealing with OMCs who
have complete details of sales made for the years in question to
their retail customers and outlets outside the area of Patna, we
feel that Shri Datar is right in asking that we give an opportunity
to the Appellant to produce all relevant documentary material,
which would show that a large amount of the demand for these
years (of Rs.1,683.03 crores), would be liable to be done away
with as Entry Tax would not be leviable on these transactions at
all as the consumption, use or sale of petroleum products has
taken place outside the local area of Patna. Indeed, all these
sales must have suffered Entry Tax in the local area outside
Patna, where such retail sales were made, provided, of course,
that they were made within the State of Bihar. We are,
therefore, of the view that the Appellant will approach the
40
Appellate Tribunal with all relevant materials in this behalf, and
the Appellate Tribunal will render a finding as to how much of
the demand of Entry Tax for the assessment years in question
would have to be struck down, in that sales made by HPCL and
BPCL to their retail consumers and to others are made outside
the local area of Patna. We give the Appellants 12 weeks’ time
to approach the Appellate Tribunal with all details as aforesaid
and request the Appellate Tribunal to render findings as
required by this judgment, as expeditiously as possible
thereafter. The stay orders granted in the writ petitions, which
have been continued till date, will continue till the decision of
the Appellate Tribunal.
32. With these observations, the Civil Appeal and the Special
Leave Petitions are disposed of.
…………………………..J.
(R.F. Nariman)
…………………………..J.
(Sanjay Kishan Kaul)
New Delhi;
November 14, 2017.
41