Statutory set-off of entry tax is limited to sales actually subject to VAT; no adjustment for non-taxable diesel sales.

The Patna HC held that the statutory set-off of entry tax under the Bihar entry tax law is available only to the extent the importer actually incurs VAT liability on the sale of the imported scheduled goods. Because high speed diesel oil sold to oil marketing companies was not subject to VAT under the applicable notification, no corresponding VAT liability arose and the entry tax could not be adjusted against those sales. The adjustment was therefore confined to sales on which VAT was actually payable, and the writ petition failed.

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Issues: Whether entry tax paid on imported high speed diesel oil could be adjusted against VAT liability arising only on sales to retail suppliers, and whether such adjustment was available in respect of sales to oil marketing companies on which no VAT liability arose.

Analysis: The second proviso to Section 3(2) of the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1993 permits reduction of VAT liability only to the extent the importer incurs tax liability under the Bihar Value Added Tax Act, 2005 by virtue of sale of the imported scheduled goods. The proviso links the set-off to actual VAT liability on the relevant sale. High speed diesel oil sold to oil marketing companies was not exigible to VAT under the notification issued under Section 13(2)(a) of the Bihar Value Added Tax Act, 2005, because VAT was payable only on sales to retail vendors or consumers. Since no VAT liability arose on those sales, the corresponding entry tax could not be adjusted against VAT.

Conclusion: The adjustment of entry tax was not permissible against sales of diesel to oil marketing companies on which no VAT liability arose, and the writ petition failed.

Final Conclusion: The statutory set-off under the entry tax law is confined to the extent of actual VAT liability on the sale of the imported scheduled goods, and cannot be claimed for sales not subject to VAT.

Ratio Decidendi: Set-off of entry tax against VAT is available only where the dealer actually incurs VAT liability on the sale of the imported scheduled goods.

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