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TMI Blog2002 (12) TMI 584X X X X Extracts X X X X X X X X Extracts X X X X ..... 59,16,941.51 and Rs. 2,020 has been added as penalty under section 16(8) of the Bihar Finance Act, read with section 8 of the Act. Thus, the total liability of the entry tax determined against the petitioners including the penalty for the relevant period is Rs. 59,18,962. 3.. The petitioner No. 1 is a company registered under the Companies Act and its head office is at Bombay and regional office at Kolkata. It is engaged in carrying on business of selling and distributing its products in Bihar through its carrying and forwarding agents (for short, "C and F agents") set up at different places in the State of Bihar, namely, Patna, Raxaul, etc. It also engages C and F agents through individual contracts with each party. Petitioner No. 2 is a shareholder of petitioner No. 1 and is interested in the business of the petitioner-company. 4.. The admitted fact is that petitioner No. 1 is a dealer under the provisions of the Bihar Finance Act and registered as such. It is also registered under the provisions of the Act. According to the petitioners, its C and F agents maintains the godown for restoring the vegetable hydrogenated oil in Mohalla Pahadi under Patna city west circle in Patna c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or its sale therein will attract the liability under the Act. The entry of goods must be for the purposes of consumption, use or sale in the concerned local area. He further submitted that the hydrogenated oil is admittedly purchased at Mihijam and Dehri-onSone both in the State of Bihar and the petitioners have purchased the same from the manufacturers of hydrogenated oil at the aforesaid two places and have filed the relevant documents as provided under rule 7 of the Rules framed under the Act and as such the said hydrogenated oil is exempted from payment of tax under the Act in view of the specific provisions contained under the said rule. Thirdly, he submitted that the provisions of the Act have been amended by Ordinance No. 1 of 2001 on July 10, 2001, followed by a notification issued by the Government under section 3(1) of the Act specifying the rates, conditions and restrictions subject to which tax shall be charged under the Act. It has been clarified by the proviso added to the definition of entry of goods [2(c) of the Act] that in case of scheduled goods, which are liable to tax under section 12(A) of the Bihar Finance Act, entry of goods shall mean entry of goods into lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein. The local areas have been defined under section 2(f) of the Act, which means the Municipal Corporation, Board, etc. Section 3 of the Act is the charging section, which prior to amendment in 2001, was as follows: "3. Charge of tax.-(1) There shall be levied and collected a tax on entry of scheduled goods into a local area for consumption, use or sale therein at such rate not exceeding 5 per centum of the import value of such goods as may be specified by the State Government in a notification published in an official gazette subject to such conditions as may be prescribed: Provided different rates for different scheduled goods and different local areas may be specified by the State Government. (2) The tax leviable under this Act shall be paid by every dealer liable to pay tax under the Bihar Finance Act, 1981, or any other person who brings or causes to be brought into the local areas such scheduled goods whether on his own account or on account of his principal or takes delivery or is entitled to take delivery of such goods on such entry: Provided no tax shall be leviable in respect of entry of such scheduled goods effected by a person other than the dealer if, the val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoice, etc. Rule 6 of the Rules provides for claim of exemption from levy of tax on the evidence to be produced by the dealer. It provides, inter alia, that a dealer, who claims that any part of his turnover relating to import of scheduled goods is not liable to tax on the ground that the tax has been paid at the first point of entry into a local area as notified by the State Government under sub-section (1) of section 3 of the Ordinance, he will produce relevant documents as mentioned therein in support of the same and in that case exemption shall be granted from payment of levy of tax on the ground that under the provision of the Act, the liability to pay tax is at the first point of entry of the scheduled goods in the local area. Rule 7 provides, inter alia, that every registered dealer, who either manufactures or produces a scheduled goods in a local area and in course of his business sells these goods to another dealer or importer or any other person in the same local area, shall issue a cash memo or bill or invoice specifically certifying therein that the goods so sold are locally manufactured or produced goods and as such no entry tax is payable thereon. The said cash memo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in case of such goods which are liable to tax under section 12(1) of the Bihar Finance Act, 1981, entry of goods shall mean entry of goods into local area from any place outside the State for consumption, use or sale therein." 12.. After the aforesaid amendment, in case the scheduled goods, which are liable to tax under the Bihar Finance Act, the entry of goods for the purposes mentioned therein into the local areas will be liable to tax only if they entered into a local area from any area outside the State. By addition of the second porviso to sub-section (2) and substitution of sub-section (3) of section 3, the provision of the notification dated February 25, 1993 issued under section 3(1) of the Act as mentioned above has been incorporated. The second proviso to section 3(2) of the Act is as follows: "Provided further that where an importer of scheduled goods liable to pay tax under the Act, becomes liable to pay tax under the Bihar Finance Act, 1981 (Bihar Act No. 5 1981) by virtue of sale of such scheduled goods, his liability to pay tax under the Bihar Finance Act, 1981 shall stand reduced to the extent of tax paid under the Act." 13.. It provides that in a case where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Bihar Finance Act, meaning thereby the tax liability under the Finance Act, will be reduced to the extent of the amount paid under the Act. The only amendment, which is of relevance, is proviso to section 2(c) of the Act, according to which, if the scheduled goods are liable to tax under section 12(1) of the Bihar Finance Act, in that case the entry of the goods into a local area for the purposes mentioned therein will be liable to tax only when they are brought into local area from outside the State. In other words, if they are brought from one local area to other local area, situated in the State of Bihar then such scheduled goods are not liable to tax after the date of the amendment. First point 16.. The assessing authority and the Tribunal have held that the sale in the local area cannot be given a limited meaning in the sense that the sale must be for the purposes of consumption or use. Once the goods entered into a local area and were sold then the charging section 3 will come into operation and the dealer will be liable to pay tax under the Act. The first point raised by the learned counsel for the petitioners in substance challenges the aforesaid view taken by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven case, the goods may be taken out and consumed there. The decisions clearly say that where the goods are sold within a local area for the purpose of being taken out of that local area and are actually taken out, no levy is permissible under entry 52." 20.. The said question was also raised in the case of Bihar Chamber of Commerce [1996] 103 STC 1 (SC), wherein the vires of the Act was challenged. The apex Court held that the sale must be for the purposes of consumption and use and a simpliciter sale in the local area will not attract the charging section. The apex Court in the aforesaid case at page 16 with regard to the same observed as follows: "Entry tax is a tax levied at the point of entry of goods into a local area for the purpose of consumption, use or sale therein. It is not a tax on sale. It is a tax on the entry of goods into a local area and it is precisely because of this that the petitioners say, article 301 is attracted. They cannot, at the same time, say that it is not a tax on entry but a tax in the nature of a tax on sale-apart from the fact that such a contention is wholly misconceived. Taxes on sale and purchase of goods are provided by entry 52 in List II. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a inside the State of Bihar and sold in the same local area, then the scheduled goods are not liable to entry tax and once a certificate to that effect is filed by a dealer of the other local area, who has brought that goods in that area for the purpose of consumption, use or sale therein before the concerned authority, he is not liable to pay tax under the Act. For this, reliance has been placed upon rule 7 of the Rules, which runs as follows: "7. Evidence in support of claim for exemption from entry tax on local goods.-(1) Every registered dealer, who either manufactures or produces a scheduled goods in a local area and in course of his business sells these goods to another dealer or importer or any other person in the same local area, shall issue a cash memo or bill or invoice specifically certifying therein that the goods being sold are locally manufactured or produced goods and as such no entry tax is payable thereon. (2) Every registered dealer or importer or any other person shall preserve the cash memo or bill or invoice containing the certificate as provided in sub-rule (1) and shall produce before the prescribed authority on demand. (3) Every registered dealer or impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners as the third point. 24.. At this stage, I would like to refer to the two decisions relied upon by the learned counsel for the petitioners in support of his submission that the amendment has been made with a view to make the earlier provisions of the Act, namely, sections 2(c) and 3, workable. It has supplied an obvious omission in the provision and as such it should be given retrospective operation by adopting a reasonable interpretation. According to him, the Legislature never intended that the scheduled goods produced and processed in the State of Bihar and liable to tax under the Bihar Finance Act should be subjected to tax in case of their movement from one local area to the other local area in the State of Bihar. However, its intention was not manifest in the legislative provision. When the Legislature noticed the aforesaid omission, it introduced an amendment by adding a proviso to the definition of entry of goods under section 2(c) of the Act. He relied upon a judgment of the apex Court in the case of Allied Motors (P.) Ltd. v. Commissioner of Income-tax, Delhi, reported in [1977] 224 ITR 677; (1997) 3 SCC 472, wherein while considering the proviso added to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for the respondent-State raised the question of maintainability of the writ application on the ground that the petitioners have alternative remedy of reference to this Court under section 48 of the Bihar Finance Act, provision of which is applicable in terms of the provisions contained under section 8 of the Act. The said objection was not allowed for the simple reason that the question raised was a pure question of law and was of a fundamental character and as such the writ application cannot be thrown out on the ground of availability of the alternative remedy. 27.. As I have already accepted the first point urged on behalf of the petitioners, the orders passed by the assessing authorities as well as that of the Tribunal have to be set aside for the simple reason that the authorities under the Act have not considered the question as to whether the sale of hydrogenated oil having taken place in the local area was for the purpose of consumption or use as stated above or it was sold or re-exported for taking the goods to a place outside the local area. The authorities should consider that question before fixing the liability of tax under the provisions of the Act. 28.. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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