2025 (11) TMI 851 - SCH - VAT / Sales Tax

Applicant liable for 12% statutory interest under Odisha Entry Tax Act; eight weeks to deposit Rs 5,15,58,677; respondent restrained

M/s. Jindal India Thermal Power Limited Versus The Commissioner of Commercial Taxes & Ors.

SC held the applicant prima facie liable to pay statutory interest at 12% per annum on the outstanding principal as on 03-03-2025 under the Odisha Entry ... Liability to pay statutory interest at 12% per annum on the outstanding principal amount as on 03-03-2025 under the Odisha Entry Tax Act, 1999 - HELD THAT:- It is true that the respondent did grant time to the applicant – herein to pay the balance amount but prima facie, it is difficult for us to take the view that the applicant is not liable to pay interest on the same. Thus, eight weeks’ time granted to the applicant – herein to deposit the amount of Rs. 5,15,58,677/- - For a period of eight weeks, the respondent shall not proceed to take any coercive steps against the applicant. List after eight weeks. ISSUES PRESENTED AND CONSIDERED 1. Whether the applicant is liable to pay statutory interest at 12% per annum on the outstanding principal amount as on 03-03-2025 under the Odisha Entry Tax Act, 1999 (Sec. 7(5))? 2. Whether interim relief in the form of stay of coercive recovery steps and grant of time to deposit the disputed interest amount is appropriate pending determination of the main appeal? 3. Whether previous judicial determinations and the Nine-Judges Bench ruling (overruling earlier precedents) preclude re-litigation of the tax/'deposit' character of interim payments and establish res judicata on liability to pay arrears and interest? 4. Whether, upon interim deposit pursuant to court direction, the State should be directed to undertake refund with interest if the appellant ultimately succeeds, and what rate and temporal scope such refund undertaking should cover? ISSUE-WISE DETAILED ANALYSIS Issue 1 - Liability to pay 12% statutory interest under Sec. 7(5) OETA Legal framework: The statutory provision (Sec. 7(5) OETA) levies interest on outstanding entry tax dues; the Commissionerate's directions and the High Court order consistently applied interest liability pending full discharge of principal. Precedent treatment: The Nine-Judges Bench decision cited by the authority overruled earlier authorities (including Kalyani Stores and Atiabari Tea Co.) and thereby settled the law on entry tax liability, removing earlier contentions that interim payments were mere 'deposits' not taxable. Interpretation and reasoning: The Court examined the Commissionerate's 18-03-2020 order which (a) implemented the High Court's direction to comply with the Supreme Court's Nine-Judges Bench ruling, (b) recorded undertakings and installment terms, and (c) explicitly stated that the petitioner is liable to pay interest as per the OETA until full discharge. Given that the law has been declared by the Nine-Judges Bench and the administrative order incorporated that settled law, the Court found it prima facie difficult to take a view that the applicant is not liable to pay statutory interest on the outstanding principal. Ratio vs. Obiter: Ratio - where a higher constitutional bench settles the substantive legal question (that entry tax and associated interest are payable and that earlier contrary precedents are overruled), the obligation to pay statutory interest follows as a binding legal consequence; the Court's observation that it is difficult to view the applicant as not liable is a binding interim conclusion for the purpose of the interlocutory application. Obiter - factual emphasis on the applicant's financial distress and installment arrangement is incidental to the legal finding on liability. Conclusion: There is a prima facie legal basis under Sec. 7(5) OETA and settled precedent for the applicant's liability to pay 12% statutory interest on the outstanding amount as on 03-03-2025. Issue 2 - Appropriateness of interim relief (stay of coercive steps and limited time to deposit) Legal framework: Courts may grant interim reliefs (stay of coercive action, time for deposit) while preserving the rights of the State and the litigant, balancing prima facie merits and the need to prevent prejudice. Precedent treatment: The Commissionerate's installment scheme (60 monthly installments, liability for interest, and consequences for default) and the High Court's direction to give undertakings guided the Court's discretion; no contrary Supreme Court precedent was presented to bar interim accommodation where liability is prima facie established but equitable considerations exist. Interpretation and reasoning: Recognizing the strong prima facie case for statutory liability but also the applicant's pending challenge and financial considerations, the Court exercised its equitable discretion to (a) grant eight weeks' time for deposit of the disputed interest amount (Rs. 5,15,58,677), (b) stay coercive action for those eight weeks, and (c) require an affidavit undertaking that the amount will be deposited within the period. The Court conditioned the accommodation on timely deposit and made clear that failure would permit the State to resume recovery under law. Ratio vs. Obiter: Ratio - the Court's direction granting a limited period to make an interim deposit and staying coercive action is the operative interim relief grounded in the prima facie finding of liability and equitable balance. Obiter - observations on the applicant having been granted time earlier by the State are ancillary. Conclusion: Interim relief in the precise form granted (eight-week deposit window, stay of coercive steps, affidavit undertaking, and reservation to the State on default) is appropriate pending final adjudication. Issue 3 - Effect of settled law and res judicata on characterization of interim payments and liability Legal framework: Final decisions of a competent court on questions of law produce res judicata effects and bind parties; administrative orders implementing such judicial pronouncements carry that binding consequence in subsequent adjudications. Precedent treatment: The Nine-Judges Bench ruling overruled prior conflicting precedents and thereby precluded relitigation of the basic legal question whether amounts paid at interim stages were 'deposits' rather than tax. The Commissionerate explicitly relied on that settled position in its order, treating the arrears as entry tax and insisting on interest liability. Interpretation and reasoning: The Commissionerate's order records that the law has been fully settled and that the issue of characterization of earlier interim payments is res judicata; consequently, the Court found limited room for the applicant to challenge liability on that ground in the interlocutory proceedings. The Court therefore treated the liability as established for interim purposes. Ratio vs. Obiter: Ratio - the res judicata effect of the higher bench judgment is binding and determinative for the interlocutory relief sought; Obiter - any discussion of the factual circumstances underlying the earlier interim payments is ancillary. Conclusion: The settled Nine-Judges Bench law and the administrative order render the question of characterization of earlier interim payments res judicata for present purposes; this supports the prima facie finding of liability to interest. Issue 4 - State's undertaking to refund with interest if appellant succeeds; rate and temporal scope Legal framework: Where an interim deposit is made under compulsion of litigation and the appellant ultimately succeeds, equitable restitution with interest may be ordered; courts often fix a rate and timeframe for refund in such circumstances. Precedent treatment: The State in this instance undertook to refund the entire amount at 6% p.a. if the applicant succeeds in the main appeal. The Additional Solicitor General, however, indicated a contention that the State's refund liability need not be fastened beyond a temporal limit because the lis before the High Court ran only until 28-03-2027; the Court left the precise scope to be examined at final hearing. Interpretation and reasoning: The Court accepted the State's interim undertaking to refund at 6% p.a. should the main appeal succeed, but noted the State's clarification reserving the question of temporal scope of refund liability (whether limited by the High Court's lis period). The Court declined to finally adjudicate that refund scope at the interlocutory stage and deferred detailed consideration to final hearing. Ratio vs. Obiter: Ratio - acceptance of an interim refund undertaking at 6% p.a. is an operative condition of the interim order; Obiter - the State's submission regarding limiting refund liability to the High Court lis period is an issue reserved for final adjudication. Conclusion: The State's interim undertaking to refund at 6% p.a. is recorded and will be operative if the appellant succeeds, but the precise temporal extent and any limitation raised by the State require determination at the final hearing of the main matter. Ancillary / Procedural Directives Forfeiture/Default: The Court clarified that failure to deposit within eight weeks will permit the State to proceed with recovery under law. Further proceedings: An application to amend the appeal will be heard with the main matter; the appeal is listed after eight weeks for further directions.