2012 (8) TMI 863 - HC - VAT and Sales Tax

Imposition of entry tax and penalty - Held that - there is no challenge to legality or constitutional validity of any statutory provision. For deciding whether the definition of dealer in the ET Act is legislation by mere reference or by incorporation it is relevant to notice not only the legal precedents noticed above but also the preamble and provisions of the ET Act. Whereas the Bihar Finance Act 1981 was legislated to consolidate and amend the law relating to the levy of tax on the sale and purchase of goods in Bihar the ET Act is to provide for levy and collections of tax on entry of goods into local areas for consumption use or sale therein. The Finance Act imposes tax on the transaction of sale or deemed sale of goods within the State of Bihar chargeable from a dealer. On the other hand entry tax as per the charging section 3 is levied on entry of scheduled goods for consumption use or sale in Bihar. The purpose of such tax is development of trade commerce and industry in the State. It may require insight into the working of the concerned enactment if one or the other view is adopted. It was highlighted that the kind of language used in the provision the scheme and purpose of the incorporating statute is of substantial consequence. In the facts of the case we find that the working of the ET Act is not at all impaired on account of our finding that the meaning of the term dealer in the ET Act is on account of incorporation of the relevant provisions in the Bihar Finance Act 1981 by reference. - The revisional order was also passed on June 30 2010 but even before that as per the facts given in the synopsis of the appeals an amount of 26, 00, 26, 812 was realized by the Department through the appellant s bank the State Bank of India. Clearly the appellant did not indulge in any dilatory tactics which could show that it was not acting bona fide. Even as per law laid down on the subject it is not easy to decipher whether legislation such as one under consideration is by way of incorporation by reference or is merely by reference or citation. The orders imposing penalty are set aside. But the orders of assessment imposing entry tax and the appellate and revisional orders upholding that part are confirmed - Decided partly in favour of Revenue.

Summary

Issues Involved:
1. Definition of "dealer" under the ET Act.
2. Applicability of the VAT Act's definition of "dealer" post-repeal of the Bihar Finance Act, 1981.
3. Legality and permissibility of penalty imposition.

Issue-wise Detailed Analysis:

1. Definition of "dealer" under the ET Act:
The court examined whether the Department of Railways qualifies as a "dealer" under the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1993 (ET Act). The appellant argued that the term "dealer" in the ET Act is not exhaustively defined and relied on the definition from the repealed Bihar Finance Act, 1981. The court noted that the ET Act incorporated the definition of "dealer" from the Bihar Finance Act, 1981, and this incorporation remains effective despite the repeal of the latter by the VAT Act, 2005. The court concluded that the term "a Government" in Explanation II of section 2(a) of the Bihar Finance Act, 1981 includes any government, whether State or Central, thereby deeming the Department of Railways as a "dealer."

2. Applicability of the VAT Act's definition of "dealer" post-repeal of the Bihar Finance Act, 1981:
The court analyzed whether the definition of "dealer" in the ET Act should be updated to reflect the VAT Act, 2005, which repealed the Bihar Finance Act, 1981. The appellant contended that the VAT Act's definition should apply, as the ET Act is not a self-contained code and relies on other acts. The court, however, determined that the ET Act's reference to the Bihar Finance Act, 1981, was by incorporation, meaning the definition from the repealed act was "bodily lifted" and made part of the ET Act. Thus, the repeal of the Bihar Finance Act, 1981, does not affect the definition of "dealer" in the ET Act.

3. Legality and permissibility of penalty imposition:
The appellant argued that the imposition of penalties was improper given their bona fide belief that they were not a "dealer" under the ET Act due to the repeal of the Bihar Finance Act, 1981. The court cited precedents, including Indian Oil Corporation Ltd. v. State of Bihar and Hindustan Steel Ltd. v. State of Orissa, which established that penalties should not be imposed in cases of bona fide legal disputes. The court found that the appellant acted in good faith and did not engage in dilatory tactics. Consequently, the court held that the imposition of penalties was improper and not in accordance with the law.

Conclusion:
The court allowed the appeals in part, setting aside the orders imposing penalties but confirming the orders of assessment imposing entry tax. The court emphasized that the ET Act's definition of "dealer" remains as per the Bihar Finance Act, 1981, despite its repeal, and the appellant's bona fide belief justified the removal of penalties.