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2011 (7) TMI 1029 - HC - VAT and Sales TaxWhether the deduction made by respondent Nos. 1 and 2 in the name of entry tax from the bills of the petitioner is violative of the provisions of the Bihar Entry Tax Act 1993 including provisions of the Bihar Finance Act 1981? Held that - This writ petition is allowed and respondent-M/s. Hindustan Petroleum Corporation Ltd. (respondent No. 2) as well as its wholly owned subsidiary company M/s. HPCL Biofuels Ltd. (respondent No. 1) are restrained from deducting any amount from the bills of the petitioner on import of goods from Haryana in the State of Bihar in the name of entry tax as they have no jurisdiction to deduct any amount of entry tax from the bills of the petitioner.
Issues Involved:
1. Jurisdiction to deduct entry tax from the bills of the petitioner. 2. Maintainability of the writ petition in the presence of an arbitration clause. 3. Liability of payment of entry tax under the Bihar Entry Tax Act, 1993. Detailed Analysis: 1. Jurisdiction to Deduct Entry Tax: The petitioner, a company based in Haryana, filed a writ petition to restrain M/s. Hindustan Petroleum Corporation Limited (HPCL) and its subsidiary from deducting entry tax from its bills. The petitioner argued that the entry tax liability falls on the respondents, who are the importers of goods into Bihar. The respondents, however, contended that the petitioner is liable for the entry tax and cited various legal precedents to support their claim. The court found that the goods were sold and delivered to the respondents in Haryana, making them the owners responsible for bringing the goods into Bihar. The entry tax was levied on the respondents, who paid it, but they attempted to deduct this amount from the petitioner's bills. The court held that the deduction of entry tax by the respondents was in violation of the Bihar Entry Tax Act, 1993, and the Bihar Finance Act, 1981. The court emphasized that under Section 3(1) and (2) of the Entry Tax Act, the tax should be paid by the person who brings the goods into Bihar, which in this case were the respondents. 2. Maintainability of the Writ Petition: The respondents argued that the writ petition was not maintainable due to the existence of an arbitration clause in the agreement between the parties. The court, however, held that the availability of an alternative remedy, such as arbitration, is not a rule of law but a matter of discretion. The court can exercise its jurisdiction under Article 226 of the Constitution of India, especially when fundamental rights are at stake or when the impugned order suffers from non-observance of natural justice principles. The court also noted that the State of Bihar and its authorities, who are necessary parties to the case, were not part of the arbitration agreement. Hence, the arbitration clause could not be invoked to resolve the dispute involving the state authorities. The court cited several legal precedents, including the case of Indian Oil Corporation Ltd. v. State of Bihar, to support its decision to entertain the writ petition despite the arbitration clause. 3. Liability of Payment of Entry Tax: The court examined the contractual terms and the statutory provisions to determine the liability for entry tax. The agreement between the petitioner and the respondents included separate contracts for supply, works, and services, but none of these contracts explicitly mentioned the entry tax. The petitioner had paid all other taxes as per the agreement, and the entry tax was paid by the respondents upon bringing the goods into Bihar. The court referred to Section 3 of the Entry Tax Act, which mandates that the tax should be paid by the person who brings the goods into the local area. Since the respondents brought the goods into Bihar, they were liable for the entry tax. The court also highlighted Article 265 of the Constitution of India, which prohibits the collection of tax without the authority of law. The respondents failed to show any legal authority for deducting the entry tax from the petitioner's bills. Conclusion: The court allowed the writ petition and restrained the respondents from deducting any amount of entry tax from the petitioner's bills. The court held that the respondents had no jurisdiction to make such deductions and that the entire liability for the entry tax fell on the respondents as the importers of the goods into Bihar.
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