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2017 (11) TMI 747 - SC - VAT and Sales TaxLevy of VAT - Entry Tax - sale of petroleum products - grievance of the Appellant in the present appeals is that when a sale is made to the OMCs, after payment of Entry Tax, VAT is not set off against the Entry Tax - Whether the second proviso to Section 3(2) of the Entry Tax Act is ultra vires to the Constitution? - Held that - Since the set off in question depends upon the interpretation of Section 3(2) of the Entry Tax Act, it is necessary to state, at the outset, that certain conditions need to be satisfied for claim of set off - It will be seen that the tax leviable under the Entry Tax Act shall be paid by every dealer liable to pay tax under the VAT Act. Under Section 3(1) of the VAT Act, all persons who are registered dealers under the Bihar Finance Act, 1981, as it stood before its repeal, are liable to pay tax under the said Act on sales and purchases made by them. There is no dispute that the Appellant is a registered dealer under the Bihar Finance Act, 1981 and is thus liable to pay tax under the VAT Act - under Section 3(2) itself, the tax leviable by way of Entry Tax can only be paid by every dealer liable to pay tax under the VAT Act, this condition has been duty fulfilled. Second condition need to be fulfilled is, The set off can only be granted if the assessee is an importer of scheduled goods, who is liable to pay tax under the VAT Act - Held that - the Appellant is an importer of scheduled goods, viz., petroleum products. Words and expressions that are not defined under the Entry Tax Act shall have the meaning assigned to them under the VAT Act - when a sale is effected by the Appellant to BPCL and HPCL, there is no levy of any VAT that is contemplated at this point. The VAT gets levied only at the next point in the chain of sales, which is the sale from BPCL and HPCL to their retailers and/or consumers. Thus, it is clear that the second condition is not fulfilled as the importer of the scheduled goods i.e. the Appellant is not at all liable to pay tax under the VAT Act. Third condition which is needed to be fulfilled is, The assessee must incur tax liability at the rates specified under Section 14 of the VAT Act - Held that - there being no levy on the Appellant, the Appellant does not incur any tax liability at the rates specified under Section 14 of the VAT Act. Fourth condition need to be fulfilled is, This must only be by virtue of the sale of imported scheduled goods - Held that - this must be by virtue of sale of the very imported scheduled goods, which means that the sale must be by the Appellant itself and not by the other OMCs. Fifth and last condition needed to be fulfilled is, His tax liability under the VAT Act will then stand reduced to the extent of tax paid under the Act - Held that - This condition is also not met inasmuch as the set off is person specific and not goods specific, as is correctly contended by Shri Ganesh, learned Senior Advocate, appearing on behalf of the Revenue. On a literal reading of Section 3(2) second proviso, the Appellant would not be entitled to claim set off - the Appellant is a registered dealer under Section 3(1) of the VAT Act and would be a dealer liable to pay tax under the aforesaid Act within the meaning of the enacting part of Section 3(2) of the Entry Tax Act. However, it is clear that as importer of scheduled goods, the Appellant must be liable to pay tax under the VAT Act. As has already been found, the Appellant as an importer of scheduled goods is not liable to pay tax as the levy of tax is itself postponed when the Appellant sells the oil to another OMC, and VAT is leviable only on the transaction between the said OMC and its retailer or other customers. When it comes to taxing statutes, the law laid down by this Court is clear that Article 14 of the Constitution can be said to be breached only when there is perversity or gross disparity resulting in clear and hostile discrimination practiced by the legislature, without any rational justification for the same. - We must also not forget that no assessee can claim set off as a matter of right and the levy of Entry Tax cannot be assailed as unconstitutional only because set off is not given. The Appellant will approach the Appellate Tribunal with all relevant materials in this behalf, and the Appellate Tribunal will render a finding as to how much of the demand of Entry Tax for the assessment years in question would have to be struck down, in that sales made by HPCL and BPCL to their retail consumers and to others are made outside the local area of Patna. We give the Appellants 12 weeks time to approach the Appellate Tribunal with all details as aforesaid and request the Appellate Tribunal to render findings - petition allowed by way of remand.
Issues Involved:
1. Constitutionality of the second proviso to Section 3(2) of the Entry Tax Act. 2. Levy of interest on late payment of entry tax. 3. Liability of entry tax when goods enter a local area and are sold without consumption or use. 4. Reopening of assessments based on audit objections under Section 33 of the VAT Act. 5. Permissibility of assessment under Section 33 of the VAT Act after four years. Detailed Analysis: 1. Constitutionality of the second proviso to Section 3(2) of the Entry Tax Act: The appellant argued that the second proviso to Section 3(2) should be construed to allow set off of VAT against Entry Tax to ensure VAT collection. The appellant contended that the practice of allowing set off was followed until 2014, and the retrospective reopening of assessments based on an audit objection was improper. The court found that the conditions for claiming set off under Section 3(2) were not met by the appellant. Specifically, the appellant was not liable to pay VAT at the point of sale to other oil marketing companies (OMCs) as VAT was levied only at the subsequent sale by OMCs to retailers or consumers. The court held that the second proviso was not ultra vires the Constitution and the appellant was not entitled to set off. 2. Levy of interest on late payment of entry tax: The court upheld the appellant's contention that there was no substantive statutory provision for levying interest on late payment of entry tax. Consequently, the interest charged by the assessment orders was set aside. The State did not appeal against this finding, making it final. 3. Liability of entry tax when goods enter a local area and are sold without consumption or use: The court held that entry tax is levied on the entry of scheduled goods into a local area for consumption, use, or sale. The appellant's argument that entry tax should not be levied when goods are sold without consumption or use was rejected. The court found that the entry of goods into the local area for sale suffices for the levy of entry tax. 4. Reopening of assessments based on audit objections under Section 33 of the VAT Act: The court examined the reopening of assessments from 2008-09 based on audit objections raised in 2014. The appellant argued that the reopening was improper and that they were not given an opportunity to demonstrate that a significant portion of sales by HPCL and BPCL were outside the local area of Patna, thus not attracting entry tax. The court found that the reopening was permissible under the provisions of the VAT Act but allowed the appellant to present evidence before the Appellate Tribunal to show that sales outside Patna should not attract entry tax. 5. Permissibility of assessment under Section 33 of the VAT Act after four years: The court upheld the validity of assessments made after four years under Section 33 of the VAT Act. The appellant's contention that such assessments were impermissible was rejected. Conclusion: The court concluded that the appellant was not entitled to set off VAT against entry tax under Section 3(2) second proviso of the Entry Tax Act. The levy of interest on late payment of entry tax was set aside due to the absence of a statutory provision. The court allowed the appellant to approach the Appellate Tribunal with evidence to demonstrate that sales outside Patna should not attract entry tax. The reopening of assessments based on audit objections was upheld, and assessments made after four years were deemed permissible. The stay orders granted in the writ petitions were to continue until the decision of the Appellate Tribunal.
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