2014 (6) TMI 63 - HC - VAT and Sales Tax

Liability to pay Entry tax Entry Tax on import of crude oil - Constitutional validity of the UP Tax On Entry of Goods Into Local Areas Act, 2007 Issuance of Demand Notice - Held that - The State has admitted that the assessees, for the period of 2008--2009, 2009--2010 and 2010--2011 have filed monthly returns but have not accepted the liability to pay the entry tax on the import of crude oil - It is also stated that the assessing authority has issued a pre-assessment notice u/s 9(4) - A reading of the affidavit filed by the State would indicate that for the aforesaid period, quantification of the tax liability is yet to be determined - However, it is now open to the State and its authorities to quantify the tax lia1ibity, either based on the returns filed by the assessee or on the basis of best assessment order if the Act so permits for the assessment years 2008--2009, 2009--2010 and 2010 2011 - After such quantification, the State is at liberty to issue appropriate demand notices Decided partly in favour of assessee. Liability to pay Entry tax Entry Tax on import of crude oil - Constitutional validity of the UP Tax On Entry of Goods Into Local Areas Act, 2007 Held that - Assessees have paid substantial amount by way of Entry Tax to the Department - For the assessment years 2000-- 2001 to 2009--2010, the petitioners have filed appeals/revisions before the High Court/statutory authorities and those appeals are pending for consideration - The request of the assessee acceptable since it is not causing any prejudice to the department - Accordingly, petitioners/assessees granted liberty to make appropriate application/petition before the appellate authorities/revisional authorities/High Court Respondents instructed not to resort to recovery proceedings against the petitioners till the disposal of the applications/petitions Decided in favour of Assessee. Constitutional validity of the UP Tax On Entry of Goods Into Local Areas Act, 2007 Liability to pay Entry tax Pre-deposit - Held that - The operation of the impugned judgment and order is stayed subject to the appellant in each case depositing 50% of the accrued tax liability/arrears under the U.P.Act, 2007 and furnish bank guarantee for the balance amount - The appellant shall also deposit 50% of the tax liability/arrears, including interest and penalty, and furnish bank guarantee for the balance amount as and when demand notices are issued under the U.P.Act, 2007 for the past period. The Apex Court has adjusted the equities and passed a conditional stay order staying 50% of the past liability subject to bank guarantees to be kept alive - Supreme Court has granted liberty to the respondents to file appropriate application before this Court for modification of the interim orders granted, if for any reason, the appellant in this case has passed, on the tax burden on the consumers - Interim orders are not precedent to be followed, specially by the Court, which has upheld the validity of the Act of 2007 Entertaining the writ petitions, on the basis of interim orders passed by the Apex Court, would be something like entertaining an appeal against its own judgment - The writ petitions are dismissed, with liberty to the petitioners to pursue their remedies against the notices or assessment orders Partial stay granted.

Summary

Issues Involved:
1. Constitutional validity of the Uttar Pradesh Tax On Entry of Goods Into Local Areas Act, 2007.
2. Assessment orders levying entry tax under the Act.
3. Interim orders and their implications on pending cases.

Issue-wise Detailed Analysis:

1. Constitutional Validity of the Uttar Pradesh Tax On Entry of Goods Into Local Areas Act, 2007:
The petitioners challenged the constitutional validity of the Uttar Pradesh Tax On Entry of Goods Into Local Areas Act, 2007. The High Court had previously upheld the Act's validity in a batch of writ petitions led by Writ Tax No. 1484 of 2007 (ITC Ltd vs. State of UP and others). The Court found that the State of U.P. did not lack legislative competence in enacting the Act, which imposed entry tax on scheduled goods entering local areas for consumption, use, or sale. The Act was deemed to have sufficient guidelines and guarantees to ensure that the collected entry tax was used to facilitate trade, commerce, and industry. The levy was not considered discriminatory, unreasonable, or against public interest, and did not violate the freedom of trade, commerce, and intercourse under Article 301 of the Constitution of India. Section 17 of the Act, which validated the entry tax levied under the U.P. Tax on Entry of Goods Act, 2000, was also upheld.

2. Assessment Orders Levying Entry Tax:
The petitioners also challenged the assessment orders passed by the Competent Authorities under the Act. The High Court clarified that its inquiry was limited to the constitutional validity of the Act and whether the entry tax was compensatory in nature. Other issues such as the validity of notices, assessments, rebates, exemptions, and the liability of traders and manufacturers to pay entry tax were left open to be considered by the competent authorities under the Act in accordance with the law.

3. Interim Orders and Their Implications on Pending Cases:
Several petitioners, including Indian Oil Corporation Ltd, filed Special Leave Petitions (SLPs) in the Supreme Court, challenging the High Court's judgment. The Supreme Court passed interim orders, including conditional stays on the demand notices for certain assessment years, pending the final decision on the SLPs. The interim orders required the petitioners to deposit a percentage of the accrued tax liability and furnish bank guarantees for the balance amount. The Supreme Court emphasized that interim orders are not precedents and can be modified based on the facts and circumstances of each case.

High Court's Final Decision:
The High Court noted that all writ petitions challenging the constitutional validity of the Act had been dismissed, and petitioners were directed to pursue remedies available under the law for assessment or appeal. The Court found merit in the State respondents' contention that interim orders are not precedents and should not be the basis for entertaining new writ petitions. The Court dismissed the writ petitions, granting liberty to the petitioners to pursue their remedies against notices or assessment orders. The Court also provided a one-month period for filing appeals, considering the prolonged pendency of these matters.

In summary, the High Court upheld the constitutional validity of the Uttar Pradesh Tax On Entry of Goods Into Local Areas Act, 2007, dismissed the writ petitions challenging the Act, and directed the petitioners to seek remedies through appropriate legal channels for any assessment-related grievances. The Supreme Court's interim orders in related SLPs were acknowledged but not deemed binding precedents for new cases.