2019 (4) TMI 796 - HC - VAT and Sales Tax

Levy of Entry Tax - whether the respondents can collect the entry tax based on the value of invoice which also includes the VAT? - Held that - The import value means the value of goods specified in the Schedule as ascertained from the original invoice and includes the charges as specified therein i.e. insurance excise duty freight charges paid or payable. Thereafter it states that and all other charges incidentally levied on the purchase of such goods which would also mean paid or payable. The question is as to whether the VAT which is included in the invoice though not taken as the invoice value as contained in the first part of the provision would fall under the other charges incidentally levied on the purchase of such goods. The fact that the petitioner is liable to pay VAT on the crude oil purchase cannot be in dispute. If that be so the issue is as to which of the points should be considered as the entry point when the purchase is made in the local area of Numaligarh. In the instant case the fact of the entry of goods into the local area is not in dispute but the question is as to whether the entry point could be created at the point marked A as per the diagram only to avoid the entry tax being levied including the VAT as indicated in the invoice when crude oil continues to pass through the pipeline without any check being made at point A . The point of delivery in the local area will have to be considered as the entry of goods to the local area. If that be the position even if the contention that the processing is to be done at the refinery and only thereafter VAT would be payable is taken note of the same is also incidental to the purchase irrespective of the fact as to whether the same is included in the invoice or not it would get attracted. The value of the VAT also would therefore get included in the import value for the purpose of processing the entry tax as it would fall under other charges incidentally levied on the purchase of such goods which is paid or payable. Revision petition dismissed.

Issues Involved:

1. Whether the respondents can collect entry tax based on the value of the invoice, including the Value Added Tax (VAT).
2. Determination of the import value for the purpose of entry tax under the Assam Entry Tax Act.

Issue-Wise Detailed Analysis:

1. Collection of Entry Tax Based on Invoice Value Including VAT:

The core issue was whether the entry tax should be calculated based on the invoice value, which includes VAT. The petitioner, a company refining crude oil, contended that VAT should not be part of the import value for calculating entry tax. The Assam Board of Revenue had upheld the assessment order that included VAT in the import value, which the petitioner challenged.

The court examined Section 3 of the Entry Tax Act, which mandates the levy of entry tax on specified goods entering a local area based on their import value. The definition of "import value" under Section 2(f) includes the value from the original invoice and charges like insurance, excise duty, and freight, along with "all other charges incidentally levied on the purchase of such goods."

The petitioner argued that VAT, being a post-entry tax, should not be included in the import value. They cited the Orissa Entry Tax Act, where VAT is explicitly included in the purchase value, to argue that the absence of such explicit mention in the Assam Entry Tax Act implies VAT should not be included.

However, the respondents contended that the invoice value, including VAT, should be the basis for entry tax as per Section 2(f). They argued that the crude oil's entry into the local area of Numaligarh from Duliajan (another local area) through pipelines constitutes an entry event, making the entire invoice value, including VAT, subject to entry tax.

The court agreed with the respondents, stating that the import value includes all charges incidentally levied on the purchase, which encompasses VAT. The court referred to the Supreme Court's decision in State of Kerala vs. Fr. William Fernandez, which held that even charges not explicitly mentioned in the statute, like customs duty, can be included in the import value if they are incidentally levied on the purchase.

2. Determination of Import Value for Entry Tax:

The petitioner argued that the entry point for the crude oil should be considered at the periphery of Numaligarh, where VAT is not applicable, rather than at the refinery where VAT becomes payable. They relied on the Supreme Court's ruling in State of Karnataka vs. M/s Hansa Corporation, which emphasized that the tax event is the entry of goods into the local area, and the value at that point should be used for tax computation.

However, the court noted that the delivery of crude oil through pipelines without any check at the periphery does not justify creating an artificial entry point. The court held that the point of delivery in the local area (the refinery) should be considered the entry point. Even if VAT is payable after further processing, it is incidental to the purchase and thus included in the import value for entry tax purposes.

The court dismissed the petitioner's argument, stating that the value at the entry point (refinery) includes VAT as it is incidental to the purchase. The court found no merit in the petitioner's contentions and upheld the Revenue Board's decision.

Conclusion:

The court concluded that the orders impugned do not call for interference, and the revision petitions were dismissed. The entry tax should be calculated based on the invoice value, including VAT, as it is considered part of the import value under the Assam Entry Tax Act. The determination of the import value includes all charges incidentally levied on the purchase, encompassing VAT, even if it becomes payable after the goods enter the local area.

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