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2004 (9) TMI 380 - SC - VAT and Sales TaxWhether the appellant had any liability under the Bihar Finance Act, 1981? Held that - Appeal allowed. It cannot be said that as tax was not paid on portion of the turnover of the scheduled goods, i.e., cement, the assessee-appellant had no liability under the Act. It was definitely liable to pay tax under the Act, but for the exemption. There is no dispute that the assessee-appellant was liable to pay tax under sub- section (3) of section 3 of the Entry Tax Act. Therefore, it was entitled to reduction to the extent of tax paid under the Entry Tax Act while working out tax payable by it under the Act. Above being the position the notices issued by the respondent are without legal sanction and are quashed. The judgment of the High Court is set aside
Issues Involved:
1. Legality of notices issued by the Deputy Commissioner, Commercial Taxes, Patna. 2. Entitlement to adjustment of tax paid under the Entry Tax Act while computing tax payable under the Bihar Finance Act. 3. Interpretation of exemption provisions under the Bihar Finance Act and the Entry Tax Act. 4. Applicability of exemption notification S.O. No. 37 dated February 25, 1993. 5. Concept of liability and exemption in tax laws. Detailed Analysis: 1. Legality of Notices Issued by the Deputy Commissioner, Commercial Taxes, Patna: The appellant challenged the legality of the notices dated May 30, 2002, and June 24, 2002, issued by the Deputy Commissioner, Commercial Taxes, Patna, proposing to levy tax for the assessment years 1998-99, 1999-2000, and April 1, 2000, to November 14, 2000. The High Court upheld the validity of these notices, which was contested by the appellant. 2. Entitlement to Adjustment of Tax Paid under the Entry Tax Act: The appellant argued that it was entitled to adjust the entry tax paid under the Entry Tax Act while computing the tax payable under the Bihar Finance Act. The High Court dismissed the writ petition, holding that there was no scope for such adjustment. The appellant contended that the High Court failed to notice the clear language used in the Act and the Entry Tax Act, asserting that bifurcation of goods that suffered tax and those exempted from tax was not legally permissible. 3. Interpretation of Exemption Provisions under the Bihar Finance Act and the Entry Tax Act: The Court examined the relevant provisions of the Entry Tax Act and the Bihar Finance Act, including Section 3(1) of the Entry Tax Act and the exemption notification S.O. No. 37 dated February 25, 1993. The Court held that "tax" as defined under clause 2(x) of the Act includes additional tax, and that the appellant was entitled to the benefit under the notification, adjusting its liability for additional tax against the payment of tax under the Entry Tax Act. 4. Applicability of Exemption Notification S.O. No. 37 dated February 25, 1993: The notification stipulated that the liability under the Bihar Finance Act shall be reduced to the extent of tax paid under the Entry Tax Act. The respondents argued that since there was no liability in respect of a portion of sales due to an exemption granted under the Industrial Policy, 1995, no adjustment could be made. The Court rejected this argument, stating that the appellant had a liability under the Act, but for the exemption. 5. Concept of Liability and Exemption in Tax Laws: The Court emphasized that liability to pay tax and actual payment of tax are conceptually different. Exemption pre-supposes a liability, and unless there is a liability, the question of exemption does not arise. The Court concluded that the appellant was liable to pay tax under the Act, but for the exemption, and was entitled to reduction to the extent of tax paid under the Entry Tax Act while working out tax payable under the Bihar Finance Act. Conclusion: The Supreme Court quashed the notices issued by the respondent, set aside the judgment of the High Court, and allowed the appeal with no order as to costs. The Court held that the notices lacked legal sanction and affirmed the appellant's entitlement to adjust the entry tax paid under the Entry Tax Act against the tax payable under the Bihar Finance Act.
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