1990 (3) TMI 348 - HC - VAT and Sales Tax

Purchasing dealer denied set-off under Entry Tax Act; only direct tax payers eligible.

The Court held that a purchasing dealer of tax-paid goods is not entitled to set-off under proviso (vii) of section 3(1) of the Entry Tax Act. Set-off is ... - Issues:Interpretation of proviso (vii) of section 3(1) of the Entry Tax Act regarding the entitlement to set-off for a purchasing dealer who bought tax-paid goods.Analysis:The case involved a reference under section 44(1) of the Madhya Pradesh General Sales Tax Act, 1958, concerning the disallowance of set-off under proviso (vii) of section 3(1) of the Entry Tax Act to a dealer who purchased goods after paying entry tax to the selling dealer. The applicant, a grain dealer, was assessed for entry tax and claimed set-off for tax-paid goods he purchased and sold in inter-State trade. The assessing authority and first appellate authority disallowed the set-off, which was upheld by the Tribunal citing a Division Bench opinion. The key question was whether a purchasing dealer of tax-paid goods is entitled to set-off under proviso (vii) of section 3(1) of the Entry Tax Act.The Court analyzed the proviso (vii) of section 3(1) of the Entry Tax Act, emphasizing that set-off is available only to a dealer who has paid the tax under the Act for the goods. The language of the provision, such as 'has been paid by a dealer' and 'set-off of tax already paid by him,' indicates that set-off can only be claimed by the dealer who paid the tax. The Court clarified that purchasing tax-paid goods does not constitute payment of entry tax, and set-off can only be claimed by the dealer who actually paid the tax, not by subsequent purchasers.The Court agreed with the Tribunal's view that interpreting proviso (vii) to allow all purchasing dealers from the selling dealer who paid tax to claim set-off would disrupt the provision's scheme. The Court emphasized that set-off can only be claimed by the dealer who effected the entry of goods and paid the tax, not by indirect purchasers. Consequently, the Court answered the reference in favor of the Revenue and against the assessee, as the purchasing dealer was not entitled to set-off under proviso (vii) of section 3(1) of the Entry Tax Act. The parties were left to bear their own costs as the assessee did not contest the case.