2004 (2) TMI 657 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to communication regarding set-off under Bihar Finance Act based on Industrial Policy and Notifications.

Analysis:
1. The writ petitioner challenged a communication from the Deputy Commissioner, Commercial Taxes, regarding the set-off of sales tax and additional tax under the Bihar Finance Act. The petitioner, a company manufacturing coaltar and allied products, claimed entitlement to set-off under Jharkhand Industrial Policy, 2001 and Notifications S.O. Nos. 65 and 66, dated January 12, 2002. The petitioner argued that the set-off should include not only sales tax but also additional tax paid on raw materials. The Deputy Commissioner disagreed, stating that set-off was only for sales tax on raw materials under the Industrial Policy and notifications.

2. The Commercial Taxes Department contended that the set-off provision did not include the additional tax, which was a separate levy under section 6 of the Act. They argued that the Industrial Policy and notifications specified set-off for sales tax on raw materials only, not for additional tax. The Deputy Commissioner's direction to deposit the wrongly set-off additional tax was justified.

3. The Jharkhand Industrial Policy, 2001, clause (28) outlined set-off benefits for industrial units, allowing set-off of Jharkhand sales tax on raw materials against sales tax on finished goods. The policy did not mention set-off for additional tax. Similarly, the notifications dated January 12, 2002, specified set-off for sales tax on raw materials against sales tax payable on sales, without including additional tax.

4. Sections 22 and 23 of the Act provided for set-off of tax paid on raw materials against tax payable on finished products within or outside Jharkhand. However, these sections did not explicitly mention set-off for additional tax. The petitioner argued that the definition of "tax" in section 2(x) included additional tax, citing relevant case law to support their interpretation.

5. The Supreme Court's decision in Kumar Distributors v. State of Bihar clarified that section 6 of the Act, relating to additional tax, was self-contained for charging and exemption of additional tax. This decision distinguished earlier cases and established that the charging section for additional tax did not include set-off for additional tax. Therefore, the Deputy Commissioner's decision to disallow set-off for additional tax was upheld, as per the legal interpretation and previous judgments.

6. In conclusion, the High Court dismissed the writ petition, affirming the Deputy Commissioner's decision that the petitioner was not entitled to set-off the additional tax paid against sales tax on goods sold within or outside the State. The court found the demand for depositing the wrongly set-off additional tax to be valid and justified, based on the legal provisions, Industrial Policy, notifications, and Supreme Court precedent.