Conditional tax set-off depends on the assessee's own VAT liability; Article 14 challenge and restitutionary interest fail.

A conditional set-off under the second proviso to Section 3(2) of the Bihar Entry Tax Act was available only where the importer itself incurred VAT liability on sale of the imported scheduled goods. Because VAT on the relevant petroleum products was deferred until sale by oil companies to retailers or consumers, no set-off was available for sales to other oil marketing companies. The Article 14 challenge failed, as the differential treatment arose from the interaction of entry tax and VAT and did not show hostile discrimination. Restitutionary interest was declined on equitable grounds, and the demand was remitted for segregation of sales made outside the local area of Patna.

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Issues: (i) Whether the assessee was entitled to set off under 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 in respect of sales made to other oil marketing companies; (ii) whether the second proviso was liable to be read down or struck down as violative of Article 14 of the Constitution of India; (iii) whether restitutionary interest could be granted to the Revenue; and (iv) whether the demand required segregation of sales made outside the local area of Patna.

Issue (i): Whether the assessee was entitled to set off under 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 in respect of sales made to other oil marketing companies.

Analysis: The statutory conditions for set off required the importer of scheduled goods to be a dealer liable to pay tax under the Bihar Value Added Tax Act, 2005, to incur VAT liability, and that liability had to arise by virtue of sale of the imported scheduled goods by the assessee itself. The levy of VAT on the relevant petroleum products was postponed by notification until sale by the oil companies to retailers or consumers, so no VAT was payable by the assessee at the stage of sale to the other oil marketing companies. The concession under the second proviso was person-specific and not goods-specific. Earlier authorities on exemption and purposive construction did not assist because the proviso operated as a conditional concession and not as a charging or anti-evasion provision.

Conclusion: The assessee was not entitled to the claimed set off under the second proviso.

Issue (ii): Whether the second proviso was liable to be read down or struck down as violative of Article 14 of the Constitution of India.

Analysis: The differing treatment arose from the interaction of two distinct taxes, namely entry tax and VAT, and not from hostile discrimination within a single taxing measure. In tax legislation, Article 14 is attracted only where there is clear and hostile discrimination without rational justification. The absence of set off does not, by itself, render the levy unconstitutional, and the claimed inequality did not justify reading down the provision.

Conclusion: The constitutional challenge failed and no reading down was warranted.

Issue (iii): Whether restitutionary interest could be granted to the Revenue.

Analysis: The Court accepted that restitution is discretionary and depends on the equities of the case. In view of the long-standing allowance of set off, the subsequent reopening based on audit objections, and the fact that the assessee had altered its position after 2014, it would be inequitable to burden the assessee with interest for the period during which the writ petitions remained stayed.

Conclusion: Restitutionary interest was declined.

Issue (iv): Whether the demand required segregation of sales made outside the local area of Patna.

Analysis: The record showed that a substantial part of the sales by the other oil marketing companies may have been made to retail consumers outside the local area of Patna and thus may not have attracted entry tax in Patna at all. The assessee was therefore to be given an opportunity to place the relevant material before the Appellate Tribunal, which was to determine the extent to which the demand was unsustainable on that account.

Conclusion: The matter was remitted to the Appellate Tribunal for factual determination on segregation of the demand.

Final Conclusion: The challenge to the denial of set off and to the validity of the proviso failed, but the assessee was granted an opportunity to seek factual reduction of the demand before the Appellate Tribunal, while no restitutionary interest was allowed to the Revenue.

Ratio Decidendi: A conditional tax concession is available only when each statutory requirement is strictly satisfied, and where the legislature has structured set off as a person-specific benefit tied to the assessee's own VAT liability, courts will not rewrite the provision under purposive interpretation or Article 14 absent clear hostile discrimination.

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