TaxTMI 
TaxTMI 
2017 (4) TMI 1157
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.... Patna, pertaining to imposition of entry tax for various periods between 2008-09 to 2014-15, as different orders have been passed on various dates, they are challenged separately in each of the petitions. However, as the facts and questions of law involved are identical, all the petitions are being disposed of by this common order. 2. For the sake of convenience, pleadings, documents and materials available in the record of CWJC No.17151 of 2014 are being referred to in this order. 3. The petitioner is a Government Company incorporated under the provisions of the Companies Act, 1956. The petitioner- Corporation is a dealer as defined in the Bihar Value Added Tax Act, 2005, the Central Sales Tax Act, 1956 and the Bihar Tax on Entry of Goods in to Local Areas for Consumption, Use or Sale Therein Act, 1993 (hereinafter referred to as the 'VAT Act', 'Central Act' and the 'Entry Tax Act', respectively). 4. In the State of Bihar, the Corporation has its marketing division with branches at Barauni (Begusarai), Patna, Ara, Raxaul, Gaya Airport and Patna Airport. From these branches, sales of petroleum products are effected. It is said that the Corporation receives crude oil which....
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....hased from the Corporation to the retailer, again they pay VAT at 24.5%, but the adjustment provided under the second proviso to Section 3(2) of the Entry Tax Act is not available in this transaction, and, therefore, in the matter of sale through the Oil Companies, the set off as provided under the second proviso to Section 3(2) of the Entry Tax Act is not available. Consequently, with respect to this transaction, both VAT and Entry Tax are paid without any set off being provided. 5. It is a case of the petitioner that for the periods in question, they had submitted the returns as per the statutory provisions well within the time period prescribed, assessments were completed and all tax dues paid. However, to their surprise, based on certain audit objections raised by the Accountant and Auditor General of Bihar, the respondent- Deputy Commissioner of Commercial Taxes, Special Circle, Patna with respect to the period 2011-12, subject matter of dispute in Civil Writ Jurisdiction Case No.17151 of 2014, issued a show cause on 16.04.2014, vide Annexure-1, in exercise of the powers available under Section 8 of the Entry Tax Act read with Section 33 of the VAT Act making a demand for t....
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....the second proviso to Section 3(2) of the Entry Tax Act is ultra vires or in the alternate it may be declared as arbitrary and unreasonable or it may be read down. It was argued that the aforesaid provision seeks to levy tax on the goods and not on the dealer and if the goods have already suffered entry tax, it cannot be subjected to VAT in the same local area and to that extent, the provision will have to be read down else it be declared as ultra vires being discriminatory and arbitrary. It is said that the products sold to the Oil Marketing Companies are taken to different local areas to be used either by them or they sell it on payment of VAT and as there is no use or consumption of the product in the local area at Patna, the petitioner cannot be held liable for payment of entry tax. 10. Taking us through the provision of Section 3(2) and the proviso to the said Section of the Entry Tax Act it was submitted that the provision is ultra vires and discriminatory in nature and if given effect to would result in serious absurd consequences and the discrimination in question was tried to be demonstrated by showing difference in the payment of petrol to be purchased by a consumer on....
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....il Corporation Limited & Anr. V. The State of Bihar & Ors. [2007 (1) PLJR 502], it was submitted that the provision made an apparent discrimination with regard to the same goods, it is dealt with in a different manner, in view of such a hostile discrimination in the matter of Scheduled goods brought into the local area being dealt with differently, the provision suffers from disability of being hostile and highly discriminatory in nature, therefore, liable to be struck down. Sri Arvind Datar took us through various provisions of the Act and tried to demonstrate that the second proviso is highly discriminatory, unworkable and therefore, even if it is not declared as ultra vires, it be read down to the extent that the discriminatory part of the provision is taken away. 14. However, during the course of hearing, he fairly submitted that in an earlier judgment on a petition filed by the petitioner themselves being Civil Writ Jurisdiction Case No.21535 of 2011 decided on 22.10.2013, even though this Court had dismissed the petition filed by the petitioner-Corporation by holding that the revenue has not committed any error in imposing entry tax on the petitioner in view of the provisi....
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....ntly argued that levy of interest in the facts and circumstances of the case is highly illegal and arbitrary. The judgments in this regard relied upon are:- India Carbon Ltd. and others Versus State of Assam [(1997) 6 SCC 479]; J. K. Synthetics Limited Versus Commercial Taxes Officer [(1994) 4 SCC 276]; Shri Bhagwati Steel Rolling Mills Versus Commissioner of Central Excise and another [(2016) 3 SCC 643]; and an unreported judgment of this Court in the case of M/s Shree Shanker Ice & Cold Storage Versus The State of Bihar & Ors., Annexure-8 at page-60 of the paper book, i.e. Civil Writ Jurisdiction Case No.19512 of 2010 decided on 07.03.2011. It was pointed out to us in this regard that in the order passed for the year 2011-12 on 27.08.2014, the revenue being conscious of these facts did not levy interest, but for all other years, interest has been levied which is said to be unsustainable. 17. The third ground canvassed was that once the assessment proceedings were completed and the returns accepted after assessment of tax, then with the aid of Section 33 of the VAT Act, based on audit objection, the impugned action taken is unsustainable. It was argued that based on audit objec....
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....o made to a judgment of the Supreme Court in the case of Jaswal Neco Ltd. Versus Commissioner of Customs, Visakhapatnam [AIR (SCW)-2015-0-4542], to say that when there is no provision like Section 33 of the VAT Act for reassessment in the Entry Tax Act with the aid of Section 8 of the Entry Tax Act, reassessment on the basis of audit report is impermissible. 20. Sri S.D. Sanjay, learned Senior Counsel, took us through various provisions and tried to indicate that in this case, the revenue has acted in an arbitrary and illegal manner and merely on the basis of audit objection, the action taken is unsustainable. 21. Refuting the aforesaid contentions, Sri S. Ganesh, learned Senior Counsel and Sri Lalit Kishore, learned Principal Additional Advocate General-I, submitted that the issue involved in this case is no more res integra. It already stands decided against the Corporation at their own instance with regard to certain orders passed by the Commercial Taxes Department, Patna on 22nd October, 2013, in CWJC No.21535 of 2011 (supra) wherein similar arguments based on the interpretation of second proviso of Section 3(2) of the Entry Tax Act has been negated by a Division Bench of....
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....y an extra amount for purchasing the final petroleum product or the Oil Company which purchases the product from the petitioner is not getting the set off. 24. Sri S. Ganesh submitted that if that be the position, it should be the consumers or the Oil Companies who should be aggrieved and not the petitioner. He submitted that the petitioner should have arranged its business in such a manner that the eventualities or any adverse effect of the provision could be avoided, he pointed out since February, 2014, the petitioner itself has arranged their business in such a manner that tax liability arising out of the said provision are being avoided. He further tries to demonstrate before us by referring to various facilities available to the Petroleum Companies, the facilities of subsidy provided by the Union of India and the design behind the Corporation in not selling the product at Barauni itself to say that it was the Corporation's choice in bringing the product into the local area, Patna and selling it to the consumers. He referred to certain submissions made in the supplementary affidavit to say that it was a method derived by the Corporation on business consideration to save tax ....
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....He referred to the argument of discrimination in detail and submitted that there is no question of discrimination in the matter. 27. As far as levy of interest is concerned, learned Senior Counsel Sri S. Ganesh argued that the provision of interest as contained in Section 39 of the VAT Act is incorporated into the Entry Tax Act by virtue of the provision of Section 8 of the Entry Tax Act. By referring to various judgments in the matter of legislation by incorporation or by reference, he submits that the provisions of the Bihar Finance Act have been bodily lifted and incorporated into Section 8 of the Entry Tax Act and, therefore, all the provisions in the Bihar Finance Act even after its repeal continued to be part of Entry Tax Act as it is a case of legislation by incorporation, therefore, interest could be charged as the provision for interest under the Bihar Finance Act and the VAT Act are incorporated into the Entry Tax Act and in support thereof, he relies upon the following judgments, namely, New Central Jute Mills Co. Ltd. Versus The Asst. Collector of Central Excise [AIR 1971 SC 451]; Girnar Traders (3) Versus State of Maharashtra and others [(2011) 3 SCC 1]; and The Sta....
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.... was neither done at the time of assessment by raising objection before the Assessing Officer. It is being done for the first time by producing some certificate which is not permissible. Relying upon certain observations made in the case of Hindustan Lever Ltd. (supra), so also the subsequent judgment of this Court in the case of M/s. Escorts Limited Versus The State of Bihar & Ors. [2003 (2) PLJR 668], it is argued that in each case, this being a question of fact, a determination has to be made whether sale is for any other purpose, apart from the purpose of use or consumption in the local area and as this is a question of fact, a Writ Court, based on the evidence or the material adduced, i.e. only the certificate of the Oil Company, this issue cannot be decided. It was submitted that the petitioner should have adduced evidence in this regard before the competent authority. They having not done so have now missed the bus and cannot raise this ground. Accordingly, Sri S. Ganesh submits that no case for interfering into the matter in exercise of extra-ordinary jurisdiction of this Court in a petition under Article 226 of the Constitution is made out and, therefore, the petitions are....
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....nd while making such payment set off is permitted to the extent of entry tax paid. The purpose of this provision seems to be to give benefit to a person, who incurs liability for payment of VAT and Entry tax on the imported goods at the same time. 33. As far as question No.(i) pertaining to the constitutional validity of the provision is concerned, before adverting to consider this question, it would be appropriate to take note of the principles of law laid down by the Supreme Court in the matter of jurisdiction available to this Court while evaluating or testing the validity of a provision under a fiscal law. In the case of Ganga Sagar Corporation Ltd. (supra), the issue has been elaborately dealt with and it has been held by the Supreme Court in the aforesaid judgment that Article 14 of the Constitution when applied to test the validity of a taxing provision should be done in a manner which should not be liberal as done in other provisions. Practical considerations of Administration, traditional practices in the trade, other economic pros and cons have to be taken care of and judicial generosity should be extended to the legislative wisdom and if it is found that the Statute s....
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....s occasions and it has been upheld after such scrutiny, then merely upon pointing out some infirmity in a subsequent date based on a different provision, the Statute should not be declared as ultra vires. The observations made in paragraph 22 of the aforesaid judgment goes to show that merely on the pointing out a defect in a Statutory provision at a later point of time when the same has withstood judicial scrutiny earlier, the provision should not be declared as ultra vires. 36. In the case of P.M. Ashwathanarayana Setty (supra), it has been held that with respect to a taxing provision, the Court only have a power to destroy, but not to reconstruct it. The limitations in the matter of judicial wisdom to be exercised while reconstructing a statutory provision have been discussed by the Supreme Court in the aforesaid case in paragraph 31 in the following manner:- " 31. .....In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not official deference to legislative judgment. The courts have only the power to destroy but not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, t....
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....from the court's earlier excesses in using the Constitution to protect interests that have more than enough power to protect themselves in the legislative halls." ( Dandridge v. Williams, (1970) 397 US 471 at p. 520) The observations of this Court in Income-tax Officer, Shillong v. N. Takim Roy Rymbai,(1976) 3 SCR 413: (AIR 1976 SC 670) made in the context of taxation laws are worth recalling: (at p.674): "The mere fact that a tax falls more heavily on some in the same category. is not by itself a ground to render the law invalid. It is only when within the range of its selection, the law operates unequally and cannot be justified on the basis of a valid classification, that there would be a violation of Article 14." (Emphasis supplied) 37. Finally, in the case of The Twyford Tea Co. Ltd. (supra), in the matter of interfering with a statutory provision on account of it being discriminatory, it has been held by the Supreme Court that it is the burden on the person complaining a discrimination to prove not only inequality or unequal treatment, but hostile inequality or unequal treatment. It has been held in the matter of taxing provision, simple inequali....
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.... assessees and on the grounds canvassed by the petitioner, we see no reason to declare the same as discriminatory, ultra vires or unreasonable. 39. In the case of Gurusiddappa Nurandappa Uppin (supra), the Karnataka High Court had occasion to consider certain provisions of law when it was tried to be argued that a particular provision in the Income Tax Act amounts to double taxation. It was observed by the Karnataka High Court after taking note of the law laid down by the Supreme Court in the case of Jain Brothers Versus Union of India [AIR 1970 SC 778]; and Union of India Versus Tata Iron and Steel Co. [AIR 1976 SC 599], that the Constitution does not contain any prohibition against double taxation. The learned Court took note of various principles in this regard and held that even imposition of tax more than once cannot be prevented nor prohibited under the Constitution. If that be the position, we see no reason or ground to hold the provision to be ultra vires or unreasonable. 40. That apart, entry tax is a distinct subject covered under Entry 52 to List- II of Schedule VII of the Constitution, whereas Sales Tax or VAT fall in a different category, i.e. under Entry 54 to L....
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....AT. In our opinion, the respondents are right in not allowing the Corporation the benefit of set off under the aforesaid second proviso to Section 3(2) of the 1993 Act in respect of sale of the Diesel to the Oil Marketing Companies on the premise that Corporation did not incur liability to pay VAT on such sale. The petition is devoid of any merit. For the aforesaid reasons, the petition is dismissed." 41. It has been held that the petitioner was liable to pay Entry tax. This judgment is not only binding on us, but also binds the petitioner and on this ground alone, the claim made challenging the imposition of liability under the Entry Tax Act is liable to be dismissed. We are informed that the question is sub-judice before the Hon'ble Supreme Court. There is no stay in the matter and as the Hon'ble Supreme Court has directed this Court to proceed and decide all these petitions within three months, we are required to proceed in the matter and take a decision and, therefore, we find that with regard to the first ground canvassed by the petitioner to say that the provision is ultra vires, arbitrary or discriminatory, we find the aforesaid submission to be wholly misconceiv....
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....xing statute cannot be challenged merely because different rates of taxation are prescribed for different categories of persons or objects. The validity of a taxing statute cannot be challenged merely on the ground that the rate of taxation is excessive. However, if the statute is a colourable piece of legislation or a fraud on legislative power, it would be open to challenge on the ground that while enacting the law, the legislature has adopted a cloak or devise to confiscate the property of a citizen who is taxed. But such a conclusion cannot be reached merely on a finding that the tax which is imposed is unreasonably high or excessive. 593. Conceptually, the availability of judicial review in regard to taxing legislation is distinct from the standard of judicial review. Taxing legislation is not immune from constitutional challenges based on a lack of legislative competence, a breach of fundamental rights or a violation of a constitutional limitation or provision. But the standard of judicial review in relation to fiscal statutes recognizes that the legislature must possess a wide latitude to classify persons or objects for the purposes of the levy. (Emphasis s....
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....ramed thereunder the authority empowered to assess, reassess, collect and enforce Payment of tax and penalty payable by a dealer under the Bihar Finance Act, 1981 (Bihar Act 5, 1981) shall assess, reassess, collect and enforce payment of tax and penalty payable under this Act and for this purpose they may exercise all or any of the powers assigned to them under the said Act and Rules made thereunder for the time being enforce including the provisions relating to returns, assessment, reassessment, escaped assessment, recovery of tax, special mode of recovery, maintenance of accounts, inspection, search and seizure liability in representative character, refund, appeal, revision and reviews, statement of cases to the High Court, compounding of offences and other miscellaneous matter and the provisions of the said Act shall mutatis mutandis apply accordingly." (Emphasis supplied) 46. Section 39(3) of the VAT Act provides for recovery of simple interest. Sub-section (3) of Section 39 of the VAT Act reads as under:- "39. (3) If a dealer or a person fails to make payment of any amount of tax by the period specified in the notice issued under sub-section (2) or fails t....
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.... of the law laid down by the Supreme Court in the cases strongly relied upon by Sri Arvind Datar and Sri S. D. Sanjay, Senior Counsels, particularly the Constitution Bench judgment in the case of J. K. Synthetics Ltd. (supra). In the case of J. K. Synthetics Ltd. (supra), the Constitution Bench considered the provisions relating to the charging and levying of interest in a taxing statute and it has been held that a provision relating to charging and levying of interest is a substantive provision. The matter has been so dealt with by the Constitution Bench in the case of J. K. Synthetics Ltd. (supra) in paragraph 16 in the following manner:- "16. It is well-known that when a statute levies a tax it does so by inserting a charging section by which a liability is created or fixed and then proceeds to provide the machinery to make the liability effective. It, therefore, provides the machinery for the assessment of the liability already fixed by the charging section, and then provides the mode for the recovery and collection of tax, including penal provisions meant to deal with defaulters. Provision is also made for charging interest on delayed payments, etc. Ordinarily the cha....
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....the Revenue's contention is accepted it leads to conflicts and creates certain anomalies which could never have been intended by the Legislature." (Emphasis supplied) 51. This judgment of the Constitution Bench in the case of J. K. Synthetics Ltd. (supra) has been again considered by the Supreme Court in the case of India Carbon Ltd. (supra). In the case of India Carbon Ltd (supra), the assessee was a registered dealer registered under the Central Sales Tax Act and was liable to pay tax under the said provision with regard to petroleum coke which was subject of inter-State sales. The payment of tax on the inter-State Sales of petroleum coke was delayed and therefore the revenue imposed interest on the payment. Even though, there was no specific provision for levying interest under the Central Sales Tax Act, interest was levied in exercise of the powers available under Section 35-A of the Assam Sales Tax Act, 1947. While analyzing the question as to whether in the matter of delayed payment of sales tax under the Central Sales Tax Act, with the aid of the provision of Assam Sales Tax Act, interest could be levied. The question was answered against the revenue in the case ....
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....owever, in Section 9 (2), the provision of interest was not included and after interpreting Section 9(2) of the Central Act, Hon'ble Supreme Court held that interest can be levied and charged on delayed payment of tax only if the statute that levies and charges the tax makes a substantive provision in this behalf. Thereafter, considering the provisions of Section 9(2) of the Central Sales Tax Act in para-11 it has been held that Section 9(2) makes applicable to the assessment, reassessment, collection and enforcement of Central Sales Tax the provisions relating to offences and penalties contained in the State Acts as if the Central sales tax was a State sales tax. But as Section 9(2) makes no reference to interest, it was held that there was no substantive provision in the Central Act requiring payment of interest on Central sales tax and, accordingly, it was held that the assessee was obliged to pay tax on delayed payments of Central sales tax. The matter has been dealt with in paras-11 and 12 in the following manner:- "11. Section 9(2-A) makes applicable to the assessment, reassessment, collection and enforcement of Central sales tax the provisions relating to offences a....
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....case of Jaswal Neco Ltd. (supra), wherein the Hon'ble Supreme Court after considering the principles laid down in the cases of India Carbon Ltd (supra) and J. K. Synthetics Ltd. (supra), have held that in the absence of any indication in the statute itself either specifically or by necessary implication indicating liability to pay interest on the assessed duty, no interest could be levied. It has been held in the aforesaid case after taking note of the principles laid down by the Supreme Court in the case of India Carbon Ltd (supra) in paragraphs 11, 12 and 13 that in the absence of there being a substantive provision, interest cannot be levied. This judgment also addresses the issue of levying interest in favour of the assessee. 56. As far as levy of interest is concerned, apart from the fact that Section 8 of the Bihar Entry Tax Act does not contemplate a provision for levy of interest, we may take note of the fact that Section 8 of the Entry Tax Act has been substituted and amended by the Bihar Finance Act of 2015, namely Act No.9 of 2015, wherein amendments have been made to the VAT Act of 2005 and the Entry Tax Act of 1993. By this amendment incorporated with effect from 6t....
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....terpretation of Section 8 of the Entry Tax Act and it is in conformity with the interpretation recorded by us hereinabove. That being so, even in view of the law laid down by this Court in M/s Shree Shanker Ice & Cold Storage (supra), levying of interest is unsustainable. 59. The contention of learned Senior Counsel Sri S. G. Ganesh to say that the judgment in the case of M/s Shree Shanker Ice & Cold Storage (supra), does not consider various other judgments and the provision of law is per incuriam cannot be accepted. The judgment is by interpretation of the provision of Section 8 of the Entry Tax Act and the same being correct, we have no reason to take a different view. 60. Therefore, we answer question No.(ii) by holding that in the absence of there being any specific provision authorizing the revenue to assess interest under the Entry Tax Act and in the absence of Section 8 of the Entry Tax Act contemplating a provision for recovery of interest, recovery of interest is not permissible and to that extent, relief has to be granted to the petitioner. We hold that charging of interest and proposing to recover interest on the duty or the tax determined is unsustainable. Sectio....
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....here has to be sale, use and consumption in the local area. Mere entry or sale of the goods into the local area without its consumption or use in the local area will not make the goods liable for payment of entry tax and to that effect, we are of the considered view that there is no dispute with regard to the legal principles applicable. That is the law laid down by this Court in the case of Hindustan Lever Ltd. (supra) after following various judgments in this regard as laid down by the Hon'ble Supreme Court, including the judgment in the case of Bihar Chamber of Commerce (supra). However, if we take note of the principles laid down in the case of Hindustan Lever Ltd. (supra) and para 21 thereof, we find that principle has been discussed in the following manner:- "21. Thus, in view of the settled law, the authorities under the Act including the Tribunal, have committed a serious error of law in holding that once the goods have entered into the local area and have been sold, the charging section will come into play and the dealer will be liable to pay tax. The authorities have to decide while levying tax under the Act apart from entry of goods for consumption and use, the ....
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....orities are competent to consider the matter in the light of law settled by this Court as well as Apex Court reference of which has been made in the aforesaid judgment of this Court." 66. That being the position, it is clear that the question as to whether the goods after they enter the local area at Patna and after they were sold to the Oil Marketing Companies were re-exported by them out of the District without any consumption or use in the area is a mixed question of law and fact and it should have been pleaded, established and proved by adequate material by the petitioner-assessee before the competent authority in reference to the show cause notice issued and the proceedings held. 67. On going through the record, we find that after notices were issued vide Annexure-1 on 16.04.2014 and the audit objection dated 04.04.2014 were supplied to the petitioner, they submitted their show cause vide Annexure-2 on 16.06.2014. They raised various legal questions in this reply, but did not specifically plead or establish by cogent evidence or material that the product after entry into local area was not used or consumed in the local area. No averment in this regard has been made in th....
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....ling the assessment order on factual aspect before any statutory appellate authority, liberty may be available to the petitioner to raise this ground and, if permissible, the appellate authority may go into this aspect of the matter. Accordingly, question No.(iii) is also decided by holding that on this ground in these writ petitions, no relief can be granted to the petitioner. Question No. (v) 69. Finally, during the course of hearing, as an additional ground, it was tried to be argued on behalf of the petitioner that the assessments were for the years 2008-09 to the year 2014-15. The assessments were completed during the relevant financial years and the proceedings for reassessment by virtue of Section 33 of the VAT Act have been decided by the impugned orders which are passed between 27.08.2014 to 26.08.2016 and as they are passed beyond the period of four years as contemplated under Section 31 of the VAT Act, they are beyond the period of limitation. We have taken note of the submissions made in this regard both by Sri S. D. Sanjay, learned Senior Counsel for the petitioner and Sri S. Ganesh, learned Senior Counsel for the revenue. We find that Section 31 of the VAT Act c....