2002 (12) TMI 584 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the tax liability determination under the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1993.
2. Applicability of rule 7(1) for exemption from entry tax.
3. Impact of the 2001 amendment on the Act and its retrospective application.

Issue-wise Detailed Analysis:

1. Legality of the tax liability determination under the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1993:
The petitioners challenged the order of the Commercial Taxes Tribunal, which upheld the tax liability determined by the Assistant Commissioner of Commercial Taxes. The liability was for the period from October 15, 1998, to March 31, 1999, amounting to Rs. 59,16,941.51 with an additional penalty of Rs. 2,020. The petitioners argued that the authorities wrongly fixed the liability based on the entry and sale of hydrogenated oil in the local area, contending that the tax should only apply if the entry was for consumption, use, or sale within the local area. The court noted that the entry of goods must be for consumption, use, or sale within the local area, and mere entry or sale within the local area does not attract the tax. The authorities erred in their interpretation, leading to the quashing of the orders and remanding the matter for reassessment.

2. Applicability of rule 7(1) for exemption from entry tax:
The petitioners claimed exemption under rule 7(1) of the Rules framed under the Act, arguing that the hydrogenated oil purchased within Bihar and sold in the same local area should not attract entry tax. The court clarified that rule 7 provides for exemption only at the point of first entry into a local area where the goods are manufactured or processed. However, if the goods move to another local area for consumption, use, or sale, they become liable to tax. The court emphasized that a rule cannot override the Act, and the charging section applies to goods entering a different local area for the specified purposes, thus rejecting the petitioners' claim for exemption based on rule 7.

3. Impact of the 2001 amendment on the Act and its retrospective application:
The petitioners argued that the 2001 amendment, which added a proviso to section 2(c) of the Act, should be considered clarificatory and retrospective. The amendment specified that scheduled goods liable to tax under the Bihar Finance Act would only be taxed if brought into a local area from outside the state. The court disagreed, stating that the amendment was not clarificatory or declaratory but introduced to benefit dealers of certain scheduled goods. It applied prospectively from the date of notification and did not affect transactions prior to the amendment. The court held that the amendment's provisions could not be retrospectively applied to exempt the petitioners from tax liability for the relevant period.

Conclusion:
The court allowed the writ application, quashing the impugned orders and remanding the matter to the assessing authority to reconsider the tax liability in light of the observations made in the judgment. The authorities must determine whether the sale of hydrogenated oil within the local area was for consumption, use, or re-export to another area before fixing the tax liability under the Act.