1998 (11) TMI 642 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Violation of Section 27 of the Bihar Finance Act due to non-issuance of notice of demand under Section 25.
2. Non-initiation of assessment proceedings and absence of assessment order for entry tax.
3. Adjustability of entry tax paid on import of motor vehicles towards sales tax liability.

Issue-Wise Detailed Analysis:

1. Violation of Section 27 of the Bihar Finance Act:
The petitioner challenged the impugned orders on the grounds that they were passed in violation of Section 27 of the Bihar Finance Act, 1981, as no notice of demand under Section 25 was issued. The court clarified that while the issuance of a notice of demand under Section 25 is a condition precedent for recovery of sales tax, it is not applicable to entry tax. Entry tax is to be paid at the time of entry of goods into the local area, and failure to do so makes the importer a defaulter. Therefore, the recovery of entry tax can proceed under Section 27 of the Finance Act without the need for a notice of demand under Section 25. The court held that necessary changes should be read into Section 27 to make it workable with the Entry Tax Act.

2. Non-initiation of Assessment Proceedings:
The petitioner argued that no assessment proceedings had been initiated, nor any assessment order passed, which meant there was no determination of tax liability. The court explained that unlike the Finance Act, where assessment is required before tax recovery, the Entry Tax Act mandates immediate payment of entry tax at the point of entry of goods into the local area. The court noted that the petitioner neither paid the entry tax at the time of entry nor filed any returns. The tax liability was calculated based on information provided by M/s. D.C.M. Daewoo Motors Ltd., and the petitioner did not dispute the tax amount in their rejoinder affidavit. Thus, the court concluded that the respondents were justified in taking steps to recover the entry tax without a formal assessment order.

3. Adjustability of Entry Tax towards Sales Tax Liability:
The petitioner contended that the entry tax, if paid, should be adjustable towards the sales tax liability. The court acknowledged that under Section 4 of the Entry Tax Act, the sales tax liability of an importer is reduced to the extent of entry tax paid. However, this does not absolve the importer from the obligation to pay entry tax at the time of entry of goods into the local area. The court emphasized that failure to pay entry tax makes the importer a defaulter, and legal actions for recovery can be taken. The court concluded that the petitioner's obligation to pay entry tax was mandatory, and the adjustability towards sales tax does not negate this duty.

Conclusion:
The court dismissed the writ petitions, upholding the validity of the recovery orders for entry tax. The court found no merit in the petitioner's arguments regarding the violation of Section 27, the necessity of assessment proceedings, and the adjustability of entry tax towards sales tax liability. The judgment clarified the legal framework for the recovery of entry tax under the Bihar Finance Act and the Entry Tax Act, emphasizing the immediate obligation to pay entry tax at the point of entry of goods into the local area. The petitions were dismissed with no costs.