2014 (4) TMI 592 - SC - VAT and Sales Tax

Supreme Court upholds Entry Tax validity, directs State on assessments and uniform treatment

The Supreme Court upheld the constitutional validity of the Entry Tax under the U.P. Tax on Entry of Goods into Local Areas Act, 2007, previously affirmed ... Liability to pay Entry tax – Entry Tax on import of Crude oil - Constitutional validity of the UP Tax On Entry of Goods Into Local Areas Act, 2007– Issuance of Demand Notice - Held that:- The State has admitted that the assessees, for the period of 2008-2009, 2009-2010 and 2010-2011 have filed monthly returns but have not accepted the liability to pay the entry tax on the import of crude oil - It is also stated that the assessing authority has issued a pre-assessment notice u/s 9(4) - A reading of the affidavit filed by the State would indicate that for the aforesaid period, quantification of the tax liability is yet to be determined - However, it is now open to the State and its authorities to quantify the tax lia1ibity, either based on the returns filed by the assessee or on the basis of best assessment order if the Act so permits for the assessment years 2008-2009, 2009-2010 and 2010-2011 - After such quantification, the State is at liberty to issue appropriate demand notices – Decided partly in favour of assessee. Liability to pay Entry tax – Entry Tax on import of crude oil - Constitutional validity of the UP Tax On Entry of Goods Into Local Areas Act, 2007– Held that:- Since assessees have paid substantial amount by way of Entry Tax to the Department - For the assessment years 2000-2001 to 2009-2010, assessees have filed appeals/revisions before the High Court/statutory authorities and those appeals are pending for consideration - The request of the assessee are acceptable since it is not causing any prejudice to the department - Accordingly, petitioners/assessees granted liberty to make appropriate application/petition before the appellate authorities/revisional authorities/High Court – Respondents instructed not to resort to recovery proceedings against the petitioners till the disposal of the applications/petitions– Decided in favour of Assessee. Constitutional validity of the UP Tax On Entry of Goods Into Local Areas Act, 2007– Liability to pay Entry tax – Pre-deposit - Held that:- The operation of the impugned judgment and order is stayed subject to the appellant in each case depositing 50% of the accrued tax liability/arrears under the U.P.Act, 2007 and furnish bank guarantee for the balance amount - The appellant shall also deposit 50% of the tax liability/arrears, including interest and penalty, and furnish bank guarantee for the balance amount as and when demand notices are issued under the U.P.Act, 2007 for the past period - The interim orders passed by this Court in Indian Oil Corporation Limited vs. State of Assam & Ors. are confined on the demand raised against the appellant in the pending Special Leave Petitions - The Apex Court has adjusted the equities and passed a conditional stay order staying 50% of the past liability subject to bank guarantees to be kept alive - Supreme Court has granted liberty to the respondents to file appropriate application before this Court for modification of the interim orders granted, if for any reason, the appellant in this case has passed, on the tax burden on the consumers - Partial stay granted. Issues:1. Validity of Entry Tax under U.P. Act, 20072. Demand notices issued without quantification of tax liability3. Assessment and demand notices for specific years4. Treatment of assessees under the Act5. Interim relief granted in specific cases6. Stay order conditions for accrued tax liability7. Applicability of tax liability for past and future periods8. Coercive recovery measures by the DepartmentValidity of Entry Tax under U.P. Act, 2007:The Supreme Court addressed the issue of the constitutional validity of the Entry Tax imposed by the State under the U.P. Tax on Entry of Goods into Local Areas Act, 2007. The Division Bench of the High Court had previously upheld the vires of the Act. The Court considered the legality of the tax in light of petitions filed by aggrieved assessees challenging the High Court's orders.Demand notices issued without quantification of tax liability:The Court scrutinized the issuance of demand notices by the State without quantifying the tax liability for certain assessment years. It was highlighted that for the years 2008-2009, 2009-2010, and 2010-2011, the tax liability had not been determined, leading to concerns regarding the basis for issuing such demands. The State admitted to incomplete assessments for these years and agreed to quantify the tax liability before issuing further demand notices.Assessment and demand notices for specific years:The Court noted that assessments had been completed for years prior to 2007-2008, and demand notices had been issued accordingly. However, for subsequent years, the tax liability was yet to be determined. The State was directed to complete assessments for the pending years and issue demand notices based on quantified tax liability, either from returns filed by assessees or through best assessment orders.Treatment of assessees under the Act:The Court rejected the argument that assessees should be treated uniquely, emphasizing the need for uniformity in tax treatment under the Act. The Court directed all dealers, unless exempted, to be treated equally, maintaining consistency in interim orders and tax obligations.Interim relief granted in specific cases:Specific interim relief was granted to assessees, allowing them to file monthly returns for certain assessment years within a specified period. The assessing authority was directed to complete assessments based on the returns filed and issue demand notices accordingly.Stay order conditions for accrued tax liability:In another case, the Court granted a stay subject to the appellant depositing 50% of the accrued tax liability under the U.P. Act, 2007 and furnishing a bank guarantee for the balance amount within a stipulated period. The appellant was directed to maintain the bank guarantee during the appeal process, with conditions for future tax liabilities and potential refunds or encashment based on the final outcome.Applicability of tax liability for past and future periods:The Court specified conditions for depositing tax liability for past periods and maintaining payments for future tax obligations. It restrained the Department from coercive recovery actions and allowed statutory remedies against assessment orders, with provisions for verification of tax burden passed on to consumers.Coercive recovery measures by the Department:Lastly, the Court directed the Department not to resort to coercive recovery measures, provided the appellant complied with the interim orders and statutory remedies. It allowed the Department to verify tax burden passed on to consumers and seek modifications to interim orders if necessary.