2014 (11) TMI 162 - HC - VAT and Sales Tax

Levy of entry tax - Whether entry tax can be levied on scheduled goods purchased inside the local area from another registered dealer of the same local area who brought the scheduled goods into the local area - Held that - Incidence of taxation is on entry of goods into the local area for use, consumption or sale therein. The core of taxing statute is in the charging section and liability to tax arises by virtue of charging section. The rule of construction of charging section is that before taxing any person, it must be shown that he falls within the ambit of charging section by clear words used in the Section. No one can be taxed by implication. Charging section has to be construed strictly. If a person has not been brought within the ambit of charging section by clear words, he cannot be taxed at all. (See Commissioner of Wealth Tax, Gujarat-III Ahmedabad vs. Ellis Bridge Gymkhana, 1997 (10) TMI 2 - SUPREME Court). while interpreting charging section of a taxing statute utmost care should be taken to give proper meaning to the words of the statute and the same should be construed strictly. Its construction cannot be extended beyond the language used in the charging section. no entry tax can be levied on scheduled goods purchased inside the local area from another registered dealer of the same local area who brought the scheduled goods into the local area. Whether under law it is obligatory on the part of a dealer to furnish Form E-1 in respect of the goods purchased by it from 13 another registered dealer of the same local area who brought the scheduled goods in question into the local area - Held that - The information required to be declared under column 8 is in consonance with the proviso to sub-section (2) of Section 3 which provides that no tax shall be levied under the Entry Tax Act on the entry of scheduled goods into a local area, if it is proved to the satisfaction of the assessing authority that such goods have already been subjected to entry tax or that the entry tax has been paid by any other person or dealer under the Act. Thus, Form E1 has to be furnished by a dealer who brings the scheduled goods into the local area and claims that in respect of such goods entry tax has been levied earlier - under law it is not obligatory on the part of a dealer to furnish Form E-1 in respect of the goods purchased by it from another registered dealer of the same local area who brought the scheduled goods in question into the local area. Whether to get the benefit from payment of entry tax in respect of the scheduled goods purchased by a dealer from another registered dealer of the same local area, who brought the said goods into the local area, the dealer has to prove that its seller has in fact paid the tax - Held that - The incidence of taxation is on entry of the scheduled goods into the local area for use, consumption or sale. Nobody is competent/authorized to shift the point of taxation. to get benefit from payment of entry tax in respect of the scheduled goods purchased by a dealer from another dealer/registered dealer of that locality, who has brought the goods into the local area, the dealer need not prove that its seller has in fact paid the entry tax. It will be enough for the dealer to show that its seller is identifiable and has in fact made entry of the scheduled goods into the local area and the tax is payable by its sellers. Whether it is mandatory for the dealer- petitioner registered under Cuttack-I Central Circle, Cuttack to furnish Form E1 along with return under Rule 10(1) of the OET Rules in respect of the goods purchased by it from a dealer registered in Bhubaneswar-1 Circle, Bhubaneswar and non-furnishing of Form E1 makes the dealer-petitioner liable to pay entry tax - Held that - furnishing of Form E-1 as prescribed under sub-rule (5) of Rule 3 along with returns under sub-rule (1) of Rule 10 is mandatory on the part of a dealer who brings the scheduled goods into the local area to prove that the goods purchased by it have already been subjected to entry tax or that the entry tax has already been paid under the Act for such goods and that non- furnishing of Form E-1 as prescribed under sub-rule (5) of Rule 3 along with return under sub-rule (1) of Rule 10 makes the dealer, who brings the scheduled goods into the local area, liable to pay the entry tax on scheduled goods purchased from outside the local area. Whether a dealer who has brought the scheduled goods into the local area and has filed a defective Form E-1 can call upon the Department to summon or call for the records of the selling dealer or any other person or to conduct any inquiry to test the correctness of its claim that the goods purchased by it has suffered tax at the hands of any purported selling dealer - Held that - dealer who claims that no tax is payable on entry of scheduled goods into the local area has to file requisite Form E-1 along with return as prescribed under the Statute. Form E-1 which has been filed in respect of the scheduled goods purchased from M/s. Lubrico, Bhubaneswar (RC No.BH I 895) is incomplete/defective and therefore, does not meet the requirement in order to prove that the dealer-petitioner is not liable to pay entry tax. The burden is on the dealer to file complete and defect free Form E-1. It is not open to contend that to test correctness of its claim the Department has to summon or call for the records of selling dealers or of any other person or to conduct any inquiry. The burden lies squarely on the dealer to substantiate its claim and if it is not done the consequence is that it is liable to pay tax. dealer who has brought the scheduled goods into the local area and has filed defective Form E1 cannot call upon the Department to summon or call for the records of the selling dealer or any other person or to conduct inquiry to test the correctness of its claim that the goods purchased by it has suffered tax at the hands of any purported selling dealer - Matter remanded back - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity, maintainability, and sustainability of the order dated 02.11.2012 by the Orissa Sales Tax Tribunal.
2. Liability to pay Entry Tax on scheduled goods purchased within the same local area.
3. Requirement to furnish Form E-1 to claim exemption from Entry Tax.
4. Burden of proof regarding the payment of Entry Tax by the seller.
5. Consequences of filing incomplete or defective Form E-1.
6. Authority of the Department to summon records to verify the claims of the dealer.

Issue-wise Detailed Analysis:

1. Validity, Maintainability, and Sustainability of the Tribunal's Order:
The petitioner challenged the Tribunal's order confirming the assessment of Entry Tax for the year 2003-04. The Tribunal upheld the assessment by the Sales Tax Officer and the First Appellate Authority, dismissing the petitioner's claim that entry tax had already been paid by the sellers. The Tribunal found no justifiable reason to interfere with the lower authorities' orders.

2. Liability to Pay Entry Tax on Scheduled Goods Purchased Within the Same Local Area:
The petitioner argued that since the goods were purchased from registered dealers within the same local area, no entry tax was applicable. Under Section 3 of the OET Act, entry tax is levied on the entry of scheduled goods into a local area from outside. The court held that no entry tax can be levied on goods purchased within the same local area from another registered dealer who brought the goods into the local area.

3. Requirement to Furnish Form E-1 to Claim Exemption from Entry Tax:
The petitioner claimed exemption from entry tax, asserting that the goods had already suffered entry tax. The court examined whether it was obligatory to furnish Form E-1 for goods purchased from another registered dealer within the same local area. It concluded that it is not mandatory to furnish Form E-1 in such cases.

4. Burden of Proof Regarding the Payment of Entry Tax by the Seller:
The court addressed whether the dealer must prove that the seller has paid the entry tax to claim exemption. It held that the dealer need not prove that the seller has paid the entry tax but must show that the seller is identifiable and has brought the goods into the local area.

5. Consequences of Filing Incomplete or Defective Form E-1:
The petitioner admitted to purchasing goods from M/s. Lubrico, Bhubaneswar, and furnished a defective Form E-1. The court emphasized that furnishing a complete and defect-free Form E-1 is mandatory to claim exemption. Non-furnishing or defective furnishing makes the dealer liable to pay entry tax.

6. Authority of the Department to Summon Records to Verify the Claims of the Dealer:
The petitioner requested the Department to summon records of the selling dealers to verify the claims. The court held that the burden of proof lies with the dealer to substantiate the claim through complete and defect-free Form E-1. The Department is not obligated to summon records or conduct inquiries to verify the dealer's claims.

Conclusion:
The court concluded that the Tribunal's order was legally appropriate. However, it remitted the matter back to the Tribunal for fresh adjudication, allowing the petitioner to present new contentions and the Revenue to counter them. The Tribunal is directed to consider the observations made by the court and provide an opportunity for both parties to present their cases comprehensively.