Case Law Details

Case Name : M/s Indian Oil Corporation Ltd. Vs State of Bihar (Patna High Court)
Appeal Number : Civil Writ Jurisdiction Case No. 17151 of 2014
Date of Judgement/Order : 19/04/2017
Related Assessment Year :
Courts : All High Courts (4314) Patna High Court (16)

Relevant Extract of the High Court Judgment / Order is as follows:-

30. Having heard learned counsel for the parties at length and on going through various aspects of the matter, we are of the considered view that the following questions arise for consideration in the petitions:-

(i) Whether the second proviso to Section 3(2) of the Entry Tax Act is ultra vires to the Constitution?

(ii) Whether interest can be levied in the matter of late payment of entry tax under the Entry Tax Act, by virtue of the provisions of the Bihar Finance Act, and, with the aid of Section 8 of the Entry Tax Act?

(iii) Whether entry tax is liable to be paid when the goods only enter the local area and after such entry is subjected to sell only without there being any use of consumption of the goods in the local area?

(iv) Whether based on audit objection as contemplated under the provisions of Section 33 of the VAT Act, assessment can be re-opened with the aid of Section 8 of the Entry Tax Act?

(v) Whether the assessment undertaken under Section 33 of the VAT Act is permissible after a period of four years in view of the provision of Section 31 of the VAT Act?

31. With regard to the first question, it would be appropriate to take note of the provision of Section 3(2) of the Entry Tax Act. Provisions of Section 3(2) and the second proviso thereto of the Entry Tax Act reads as under:-

“3. (2) The tax leviable under this Act shall be paid by every dealer liable to pay tax under 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:

Xxx xxxx xxxx

Provided further that where an importer of Scheduled goods liable to pay tax under the Act, incurs tax liability, at the rate specified under section-14 of the Bihar Value Added Tax Act, 2005 (Act 27 of 2005), by virtue of sale of imported Scheduled goods or sale of goods manufactured by consuming such imported Scheduled goods, his tax liability under the Bihar Value Added Tax Act, 2005 (Act 27 of 2005) shall stand reduced to the extent of tax paid under the Act:”

32. From the aforesaid, it is clear that the second proviso would apply only in a case where an importer of Scheduled goods is liable to pay VAT and while making such payment set off is permitted to the extent of entry tax paid. The purpose of this provision seems to be to give benefit to a person, who incurs liability for payment of VAT and Entry tax on the imported goods at the same time.

33. As far as question No.(i) pertaining to the constitutional validity of the provision is concerned, before adverting to consider this question, it would be appropriate to take note of the principles of law laid down by the Supreme Court in the matter of jurisdiction available to this Court while evaluating or testing the validity of a provision under a fiscal law. In the case of Ganga Sagar Corporation Ltd. (supra), the issue has been elaborately dealt with and it has been held by the Supreme Court in the aforesaid judgement that Article 14 of the Constitution when applied to test the validity of a taxing provision should be done in a manner which should not be liberal as done in other provisions. Practical considerations of Administration, traditional practices in the trade, other economic pros and cons have to be taken care of and judicial generosity should be extended to the legislative wisdom and if it is found that the Statute suffers from madness in its method of implementation, gross disparity, judicial credulity may snap and then only interference should be made. It has been held by the Supreme Court that classification for taxation and uniformity in the application of taxation provision should be done with judicial restraint. In fact, after taking note of various judgements on the issue in question, in paragraphs 50 and 52, the law has been crystallised by the Hon‟ble Supreme Court in the following manner:-

“50. Fine-tuning to attain perfect equality may be a fiscal ideal but, in the rough and tumble of work-a-day economics, the practical is preferred to the ideal, provided glaring caprice or gross disparity does not make the levy arbitrary or frolicsome. Article 14 is not intellectual chess unrelated to actual impact or the wear and tear of life but even-handed justice with some play in the joints.

52. Reference to K.T. Moopil Nair‟ case (1961) 3 SCR 77 : (AIR 1961 SC 552) was made at the Bar to persuade us that unequal cannot be tortured into equality — a vice which stultifies the soul of Article 14 as Anatole France exposed in his sardonic epigram that “the law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread”. We are sure that equality has two sides, both important, and Moopil Nair adverted to one of the facets. Nothing more can be squeezed out of that case. The inequality of situation, in the total conspectus of socio-economic facts and human condition, must be striking and the unjust equality the rule forces down on unequal must be glaring. In taxation, the many criteria of intrinsic intricacy and pragmatic plurality persuade the court, as a realist instrument and respecter of the other two branches, to allow considerable free play although never any play for caprice, mala fides or cruel recklessness in intent and effect.”

(Emphasis supplied)

34. Similarly, in the case of Godfrey Phillips India Ltd. (supra), also similar principles have been laid down and a Writ Court is expected to be very cautious in striking down a taxing provision on account of it being the ultra vires to the Constitution.

35. In the case of Smt. Somawanti (supra), it has been indicated that normally, if a law has withstood the judicial scrutiny with regard to various provisions on various occasions and it has been upheld after such scrutiny, then merely upon pointing out some infirmity in a subsequent date based on a different provision, the Statute should not be declared as ultra vires. The observations made in paragraph 22 of the aforesaid judgement goes to show that merely on the pointing out a defect in a Statutory provision at a later point of time when the same has withstood judicial scrutiny earlier, the provision should not be declared as ultra vires.

36. In the case of P.M. Ashwathanarayana Setty (supra), it has been held that with respect to a taxing provision, the Court only have a power to destroy, but not to reconstruct it. The limitations in the matter of judicial wisdom to be exercised while reconstructing a statutory provision have been discussed by the Supreme Court in the aforesaid case in paragraph 31 in the following manner:-

“ 31. …..In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not
official deference to legislative judgement. The courts have only the power to destroy but not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events, self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability.”

“Laws regulating economic activity should be viewed differently from laws which touch and concern freedom of speech and religion, voting, procreation, rights with respect to criminal procedure, etc… judicial deference to legislature in instances of economic regulation is explained by the argument that rationality of a classification depends upon local conditions about which local legislative or administrative bodies would be better informed than a court.”

The lack of perfection in a legislative measure does not necessarily imply its unconstitutionality. It is rightly said that no economic measure has yet been devised which is free from all discriminatory impact and that in such a complex arena in which no perfect alternatives exist, the court does well not to impose too rigorous a standard of criticism, under the equal protection clause, reviewing fiscal services. In G.K. Krishnan v. State of Tamil Nadu, (1975) 2 SCR 715 (730) : (AIR 1975 SC 583, 592-93) this Court referred to, with approval, the dissent of Marshal, J. in San Antonio School District v. Bodrigues, (1973) 411 US 1:

“No scheme of taxation, whether the tax is imposed on property, income or purchases of goods and services, has yet been devised which is free of all discriminatory impact. In such a complex arena in which no perfect alternatives exist, the court does well not to impose too rigorous a standard of scrutiny lest all local fiscal schemes become subjects of criticism under the Equal Protection clause.”

“In summary, it seems to me inescapably clear that this Court has consistently adjusted the care with which it will review State discrimination in light of the constitutional significance of the interests affected and the invidiousness of the particular classification. In the context of economic interests, we find that discriminatory State action is almost always sustained, for such interests are generally far removed from constitutional guarantees. Moreover, the extremes to which the court has gone in dreaming up rational bases for State regulation in that area may in many instances be ascribed to be a healthy revulsion from the court‟s earlier excesses in using the Constitution to protect interests that have more than enough power to protect themselves in the legislative halls.” ( Dandridge v. Williams, (1970) 397 US 471 at p. 520)

The observations of this Court in Income-tax Officer, Shillong v. N. Takim Roy Rymbai,(1976) 3 SCR 413: (AIR 1976 SC 670) made in the context of taxation laws are worth recalling: (at p.674):

“The mere fact that a tax falls more heavily on some in the same category. is not by itself a ground to render the law invalid. It is only when within the range of its selection, the law operates unequally and cannot be justified on the basis of a valid classification, that there would be a violation of Article 14.”

(Emphasis supplied)

37. Finally, in the case of The Twyford Tea Co. Ltd. (supra), in the matter of interfering with a statutory provision on account of it being discriminatory, it has been held by the Supreme Court that it is the burden on the person complaining a discrimination to prove not only inequality or unequal treatment, but hostile inequality or unequal treatment. It has been held in the matter of taxing provision, simple inequality or unequal is not sufficient to interfere but hostile treatment or hostile discrimination should be established showing unreasonable, discriminatory attitude of the State between the persons similarly situated.

38. That being the principle governing the standard of judicial scrutiny with regard to a taxing provision which is claimed to be ultra vires, and, when we analyse the grievance of the petitioner in the backdrop of the aforesaid provision, we find that the petitioner claims the provision to be ultra vires mainly on account of differential or discriminatory treatment in the matter of non-grant of set off. It is not petitioner‟s case that the provision is beyond the powers available to the State to legislate on the subject in question. It is neither their case that it has been incorporated in violation to any provision of the Constitution which prohibits enactment of such a provision. It is primarily their case that it discriminates; the procedure is unreasonable resulting in the price of the petroleum product to be borne by the consumer to be different when sold through another Oil Company. The primary purpose of this provision is to grant set off to such of the assessees, who are required to pay VAT. Admittedly, the petitioner has not paid VAT in the transactions in question and if the petitioner has not paid VAT how can the petitioner claim set off when the basic liability to pay VAT in the case of the petitioner is not attracted. That being the position, it is not surprising that Sri S. Ganesh rightly raised a ground as to how the petitioner can be an aggrieved person. That apart, the provision has been incorporated to provide set off or rebate to assessees who have paid VAT and are required to pay entry tax on entry of goods into the local area. If the provision is incorporated for granting some benefits to some of the assessees, merely because the benefit is not applicable to the petitioner, the provision cannot be termed as arbitrary or discriminatory. The petitioner cannot say that because it is not beneficial to the petitioner, the provision should go and thereby depriving lakhs of assessees, who are reaping the benefit of the aforesaid provision. This could never be the purpose and intention of the legislature nor appropriate for this Court to make any
indulgence. The legislature has incorporated the provision to grant benefit to certain assessees and on the grounds canvassed by the petitioner, we see no reason to declare the same as discriminatory, ultra vires or unreasonable.

39. In the case of Gurusiddappa Nurandappa Uppin (supra), the Karnataka High Court had occasion to consider certain provisions of law when it was tried to be argued that a particular provision in the Income Tax Act amounts to double taxation. It was observed by the Karnataka High Court after taking note of the law laid down by the Supreme Court in the case of Jain Brothers Versus Union of India [AIR 1970 SC 778]; and Union of India Versus Tata Iron and Steel Co. [AIR 1976 SC 599], that the Constitution does not contain any prohibition against double taxation. The learned Court took note of various principles in this regard and held that even imposition of tax more than once cannot be prevented nor prohibited under the Constitution. If that be the position, we see no reason or ground to hold the provision to be ultra vires or unreasonable.

40. That apart, entry tax is a distinct subject covered under Entry 52 to List- II of Schedule VII of the Constitution, whereas Sales Tax or VAT fall in a different category, i.e. under Entry 54 to List-II of Schedule VII. Both these Entries are distinct and independent of each other and the Constitution permits imposition of tax separately under both these heads and if taxation are differently permitted under both these Entries, merely because in the matter of imposition of one of the taxes under one of the Entries, if set off against a tax payable under another entry is not granted, we are unable to hold that such an act or provision is unreasonable or ultra vires. The petitioner, in our considered view, seems to have come out with this ground of ultra vires only to somehow get over the judgement of this Court in the case of Indian Oil Corporation Ltd. Versus State of Bihar & Ors. [Civil Writ Jurisdiction Case No. 21535 of 2011] decided against the petitioner by a co-ordinate Bench of this Court. The Bench in the aforesaid judgement has taken note of the provisions of Section 3(2) and the second proviso thereto and after relying upon a judgement of the Supreme Court in the case of Associated Cement Companies Ltd. Versus State of Bihar & Ors. [(2004) 7 SCC 642] rejected petitioner‟s argument. The learned Court considered the matter in the following manner:-

“The matter before us is slightly different. It is not the case that the Corporation is exempted from payment of VAT on sale of the Diesel to the Oil Marketing Companies. Section 13 of the 2005 Act provides for the points in a series of sales in the State of Bihar at which a dealer would be liable to pay VAT. Sub-section (2) thereof empowers the State Government to determine the point in respect of the series of sales of the specified goods at which the VAT shall be levied. It is not in dispute that the High Speed Diesel Oil is the specified goods. In exercise of the aforesaid power conferred by Section 13(2)(a) of the 2005 Act, the Government of Bihar has issued the above referred Notification dated 4th May 2006 to determine the point in a series of sales at which the VAT would be payable. Under the said Notification, the VAT becomes payable on the sale of the High Speed Diesel Oil to the retail vendors or the consumers. The Oil Marketing Companies not being the retail vendors or the consumers, sale of the High Speed Diesel Oil to the Oil Marketing Companies is not exigible to VAT.

Thus, we are dealing with an article, the incidence of sale of which does not attract liability to pay VAT. In our opinion, the respondents are right in not allowing the Corporation the benefit of set off under the aforesaid second proviso to Section 3(2) of the 1993 Act in respect of sale of the Diesel to the Oil Marketing Companies on the premise that Corporation did not incur liability to pay VAT on such sale. The petition is devoid of any merit.

For the aforesaid reasons, the petition is dismissed.”

41. It has been held that the petitioner was liable to pay Entry tax. This judgement is not only binding on us, but also binds the petitioner and on this ground alone, the claim made challenging the imposition of liability under the Entry Tax Act is liable to be dismissed. We are informed that the question is sub-judice before the Hon‟ble Supreme Court. There is no stay in the matter and as the Hon‟ble Supreme Court has directed this Court to proceed and decide all these petitions within three months, we are required to proceed in the matter and take a decision and, therefore, we find that with regard to the first ground canvassed by the petitioner to say that the provision is ultra vires, arbitrary or discriminatory, we find the aforesaid submission to be wholly misconceived and untenable and the claim made by the petitioner to say that they are not liable to pay entry tax deserves to be dismissed on account of the fact that similar issue has already been considered in the case of the present petitioner themselves and rejected by this Court, as indicated herein above in CWJC No.21535 of 2011.

42. That apart, we find that recently, the Constitution Bench of the Supreme Court in the case of Jindal Stainless and another Versus State of Haryana and others [AIR 2016 SC 5617] had considered certain aspects in this regard. Hon‟ble Justice Dr. D. Y. Chandrachud in the aforesaid judgement from paragraph 585 on wards has laid down certain principles pertaining to judicial review of a tax legislation in the backdrop of plea of discrimination or arbitrariness. It has been held after taking note of various provisions of the Constitution and the judgements in the case of Moopil Nair v. The State of Kerala [AIR 1961 SC 552) and Ramjilal v. Income Tax Officer, Mohindargarh [AIR 1951 SC 97] that a taxing legislation can be impugned on the following three grounds:

(i) lack of legislative competence;

(ii) violation of a prohibition under a specific article of the Constitution; or

(iii) repugnancy to the fundamental rights guaranteed by Part III.

It has been held in the aforesaid judgement by His Lordship that a law imposing a tax is not immune from constitutional challenge merely because taxation is a manifestation of the sovereign power of the State or on account of the fact that tax is levied in public interest. It has been held that the guarantees of fundamental freedoms contained in Part III of the Constitution and its limitation would also apply. Thereafter while considering the question of judicial review of such a taxing provision, His Lordship says that if a classification is rational, a taxing statute cannot be challenged merely because different rates of taxation are prescribed for different categories of persons or objects. In paras-592 and 593 of the aforesaid judgement, the principle has been laid down in the following manner:-

“592. The standard of judicial review in relation to taxing legislation however recognises that there inheres in the legislature the power to determine the objects on which a tax should be levied and to classify persons or properties for the purposes of the levy. If the classification is rational, a taxing statute cannot be challenged merely because different rates of taxation are prescribed for different categories of persons or objects. The validity of a taxing statute cannot be challenged merely on the ground that the rate of taxation is excessive. However, if the statute is a colour able piece of legislation or a fraud on legislative power, it would be open to challenge on the ground that while enacting the law, the legislature has adopted a cloak or devise to confiscate the property of a citizen who is taxed. But such a conclusion cannot be reached merely on a finding that the tax which is imposed is unreasonably high or excessive.

593. Conceptually, the availability of judicial review in regard to taxing legislation is distinct from the standard of judicial review. Taxing legislation is not immune from constitutional challenges based on a lack of legislative competence, a breach of fundamental rights or a violation of a constitutional limitation or provision. But the standard of judicial review in relation to fiscal statutes recognises that the legislature must possess a wide latitude to classify persons or objects for the purposes of the levy.

(Emphasis supplied)

43. Thereafter certain principles laid down in the case of Federation of Hotel and Restaurant Association of India v. Union of India [AIR 1990 SC 1637] is taken note of wherein it has been held that taxing laws are not outside the purview of Article 14. However, having regard to the wide variety of diverse economic criteria that go into the formulation of a fiscal policy, the legislature enjoys a wide latitude in the matter of selection of persons, subject-matter, events etc. for taxation. It is held that rigours of discrimination is less in a taxing statute and while examining the provision on allegations of discrimination, existence of hostile discrimination should be strictly analysed and exercise of extremely wide discretion are available to the legislature in this regard. That is the principle applicable while evaluating taxing law which is said to be discriminatory in nature.

44. If we analyze the impugned provision in this backdrop of the law and principles, it would be clear that the petitioner alleges discrimination only because the price of petrol, which is paid by the consumer, varies, and therefore, this amounts to hostile discrimination. In our considered view, this cannot be a ground for holding the provision as un-constitutional. In fact, difference in the pricing of the petroleum product which is ultimately sold to the consumer, is more so, because of the method adopted by the Corporation and other Oil Companies in the matter of transportation of the product from Barauni to Patna. It is the arrangement and system followed by the Oil Companies which resulted in the consequences, which is alleged to be discriminatory and it is not a direct result of the legislative policy of the Government. That being so, we are not impressed with the allegation of discrimination made and demonstrated before us in this regard. Accordingly, with regard to the first ground, we see no reason to make any indulgence into the matter.

Question No. (ii)

45. The next question is with regard to imposition of interest on the entry tax to be recovered. Before considering this
question, it would be appropriate to take note of Section 8 of the Entry Tax Act which reads as under:-

“8. Applicability of the provisions of the Bihar Finance Act, 1981 (Bihar Act 5, 1981) and rules made there under.
Subject to other provisions of this Act and the Rules framed there under the authority empowered to assess, reassess, collect and enforce Payment of tax and penalty payable by a dealer under the Bihar Finance Act, 1981 (Bihar Act 5, 1981) shall assess, reassess, collect and enforce payment of tax and penalty payable under this Act and for this purpose they may exercise all or any of the powers assigned to them under the said Act and Rules made there under for the time being enforce including the provisions relating to returns, assessment, reassessment, escaped assessment, recovery of tax, special mode of recovery, maintenance of accounts, inspection, search and seizure liability in representative character, refund, appeal, revision and reviews, statement of cases to the High Court, compounding of offences and other miscellaneous matter and the provisions of the said Act shall mutatis mutandis apply accordingly.”

(Emphasis supplied)

46. Section 39(3) of the VAT Act provides for recovery of simple interest. Sub-section (3) of Section 39 of the VAT Act reads as under:-

“39. (3) If a dealer or a person fails to make payment of any amount of tax by the period specified in the notice issued under sub-section (2) or fails to make payment of tax by the date extended or has defaulted in making payment of instalments under the first proviso of the said sub-section, the dealer shall, for such failure or default, pay, in addition to the amount of tax, an amount by way of simple interest calculated at the rate of one and a-half per cent for each calendar month or part thereof on the amount of such tax.”

47. According to the petitioner, under the Entry Tax Act, there is no provision for levy of interest, but the provision of Section 39 (3) is made applicable by virtue of the powers or the provisions of Section 8 of the Entry Tax Act. It is the  case of the petitioner that as Section 8 does not specifically provide for recovery of interest and, therefore, with the aid of Section 39(3), interest cannot be imposed, whereas it is the case of the revenue that the language of Section 8
would show that the entire provisions of the Bihar Finance Act stands implanted into the Entry Tax Act with regard to recovery, assessment, collection and enforcement of payment of tax and penalty which includes the provision for recovery of interest as contemplated under Section 39(3) of the VAT Act and, therefore, the interest can be levied.

48. It was argued by the learned Senior Counsel Sri S. Ganesh that the principle is nothing but legislation by incorporation, the provisions of the Bihar Finance Act and the provision as are contained in the said Act have been bodily lifted and implanted into Section 8 of the Entry Tax Act and therefore, it becomes part and parcel of the provisions of Section 8 of the Entry Tax Act.

49. In the matter of legislation by incorporation, learned Senior Counsel Sri S. Ganesh has placed reliance on the following three judgements, viz., New Central Jute Mills Co. Ltd.; Girnar Traders; and M. V. Narasimhan (supra). We have gone through these judgements and we have no hesitation in accepting the proposition put forward in this regard by Sri S. Ganesh. It is a fact that the wordings of Section 8, if read in the backdrop of the aforesaid judgement, would show that the entire provisions of the Bihar Finance Act with regard to assessment, reassessment, collection and enforcement of payment of tax, penalty have been bodily lifted from the Finance Act and incorporated into the Entry Tax Act.

50. However, in spite of the aforesaid, we have to consider this issue in the backdrop of the law laid down by the Supreme Court in the cases strongly relied upon by Sri Arvind Datar and Sri S. D. Sanjay, Senior Counsels, particularly the Constitution Bench judgement in the case of J. K. Synthetics Ltd. (supra). In the case of J. K. Synthetics Ltd. (supra), the Constitution Bench considered the provisions relating to the charging and levying of interest in a taxing statute and it has been held that a provision relating to charging and levying of interest is a substantive provision. The matter has been so dealt with by the Constitution Bench in the case of J. K. Synthetics Ltd. (supra) in paragraph 16 in the following manner:-

“16. It is well-known that when a statute levies a tax it does so by inserting a charging section by which a liability is created or fixed and then proceeds to provide the machinery to make the liability effective. It, therefore, provides the machinery for the assessment of the liability already fixed by the charging section, and then provides the mode for the recovery and collection of tax, including penal provisions meant to deal with defaulters. Provision is also made for charging interest on delayed payments, etc. Ordinarily the charging section which fixes the liability is strictly construed but that rule of strict construction is not extended to the machinery provisions which are construed like any other statute. The machinery provisions must, no doubt, be so construed as would effectuate the object and purpose of the statute and not defeat the same. (See Whitney v. IRC, 1926 AC 37: 42 TLR 58, CIT v. Mahaliram Ramjidas, (1940) 8 ITR 442: AIR 1940 PC 124: 67 IA 239, India United Mills Ltd. v. Commissioner of Excess Profits Tax, Bombay, (1955) 1 SCR 810: AIR 1955 SC 79: (1955) 27 ITR 20, and Gursahai Saigal v. CIT, Punjab, (1963) 3 SCR 893: AIR 1963 SC 1062: (1963) 48 ITR 1). But it must also be realised that provision by which the authority is empowered to levy and collect interest, even if construed as forming part of the machinery provisions, is substantive law for the simple reason that in the absence of contract or usage interest can be levied under law and it cannot be recovered by way of damages for wrongful detention of the amount. (See Bengal Nagpur Railway Co. Ltd. v. Ruttanji Ramji, AIR 1938 PC 67: 65 IA 66 : 67 CLJ 153 and Union of India v. A.L. Rallia Ram, (1964) 3 SCR 164, 185-90: AIR 1963 SC 1685). Our attention was, however, drawn by Mr Sen to two cases. Even in those cases, CIT v. M. Chandra Sekhar, (1985) 1 SCC 283: 1985 SCC (Tax) 85: (1985) 151 ITR 433 and Central Provinces Manganese Ore Co. Ltd. v. CIT, (1986) 3 SCC 461: 1986 SCC (Tax) 601: (1986) 160 ITR 961, all that the Court pointed out was that provision for charging interest was, it seems, introduced in order to compensate for the loss occasioned to the Revenue due to delay. But then interest was charged on the strength of a statutory provision, may be its objective was to compensate the Revenue for delay in payment of tax. But regardless of the reason which impelled the Legislature to provide for charging interest, the Court must give that meaning to it as is conveyed by the language used and the purpose to be achieved. Therefore, any provision made in a statute for charging or levying interest on delayed payment of tax must be construed as a substantive law and not adjectival law. So construed and applying the normal rule of interpretation of statutes, we find, as pointed out by us earlier and by Bhagwati, J. in the Associated Cement Co. case, (1981) 4 SCC 578 : 1982 SCC (Tax) 3 : (1981) 48 STC 466, that if the Revenue‟s contention is accepted it leads to conflicts and creates certain anomalies which could never have been intended by the Legislature.”

(Emphasis supplied)

51. This judgment of the Constitution Bench in the case of J. K. Synthetics Ltd. (supra) has been again considered by the Supreme Court in the case of India Carbon Ltd. (supra). In the case of India Carbon Ltd. (supra), the assessee was a registered dealer registered under the Central Sales Tax Act and was liable to pay tax under the said provision with regard to petroleum coke which was subject of inter-State sales. The payment of tax on the inter-State Sales of petroleum coke was delayed and therefore the revenue imposed interest on the payment. Even though, there was no specific provision for levying interest under the Central Sales Tax Act, interest was levied in exercise of the powers available under Section 35-A of the Assam Sales Tax Act, 1947. While analysing the question as to whether in the matter of delayed payment of sales tax under the Central Sales Tax Act, with the aid of the provision of Assam Sales Tax Act, interest could be levied. The question was answered against the revenue in the case of India Carbon Ltd. (supra) and it was held after relying upon the judgement in the J. K. Synthetics Ltd. (supra), that a provision for charging and levying of interest is a substantive law and in the absence of there being any specific provision in the Central Sales Tax Act providing for levy of interest, the same could not be done. While doing so, provision of Section 9 (2) of the Central Sales Tax Act was taken note of. Section 9(2) of the Central Act which was considered by the Supreme Court reads as under:-

“9. (2) Subject to the other provisions of this Act and the rules made there under, the authorities for the time being empowered to assess, reassess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India, assess, reassess, collect and enforce payment of tax, including any penalty, payable by a dealer under this Act as if the tax or penalty payable by such a dealer under this Act is a tax or penalty payable under the general sales tax law of the State; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions, references, refunds, rebates, penalties charging or payment of interest, compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly.”

52. A perusal of the aforesaid Section shows that it is a pari materia of Section 8 of the Entry Tax Act which is applicable in the present case. In Section 9 (2) of the Central Act relied upon by the Supreme Court in the case of India Carbon Ltd (supra) also, the rules and the process of assessment, reassessment, collection, enforcement of payment of tax under the appropriate State Act was made applicable with regard to assessment, reassessment, collection, enforcement of payment of tax, including penalty payable. However, in Section 9 (2), the provision of interest was not included and after interpreting Section 9(2) of the Central Act, Hon‟ble Supreme Court held that interest can be levied and charged on delayed payment of tax only if the statute that levies and charges the tax makes a substantive provision in this behalf. Thereafter, considering the provisions of Section 9(2) of the Central Sales Tax Act in para-11 it has been held that Section 9(2) makes applicable to the assessment, reassessment, collection and enforcement of Central Sales Tax the provisions relating to offences and penalties contained in the State Acts as if the Central sales tax was a State sales tax. But as Section 9(2) makes no reference to interest, it was held that there was no substantive provision in the Central Act requiring payment of interest on Central sales tax and, accordingly, it was held that the assessee was obliged to pay tax on delayed payments of Central sales tax. The matter has been dealt with in paras-11 and 12 in the following manner:-

“11. Section 9(2-A) makes applicable to the assessment, reassessment, collection and enforcement of Central sales tax the provisions relating to offences and penalties contained in the State Acts as if the Central sales tax was a State sales tax. But Section 9(2-A) makes no reference to interest.

12. There is no substantive provision in the Central Act requiring the payment of interest on Central sales tax. There is, therefore, no substantive provision in the Central Act which obliges the assessee to pay interest on delayed payments of Central sales tax.”

53. In paragraph 13 thereafter, it is held that the provision relating to interest can be employed by the States‟ Sales Tax Authorities while implementing the Central Act only if a substantive provision is available in the Central Act and assessment of interest was held to be illegal in the aforesaid case.

54. In the present case also, the legal position, in our considered view, is identical to what was considered by the Supreme Court in the case of India Carbon Ltd (supra). If Section 8 of the Entry Tax Act is analysed, it would be seen that it makes applicable the provisions of the Bihar Finance Act to the Entry Tax Act in the matter of assessment, reassessment, collection and enforcement of payment of tax and penalty payable by a dealer under the Bihar Finance Act. Nowhere in the provisions of Section 8 is there any mention of recovery or imposition of interest. It empowers the authorities to apply the provisions of the Bihar Finance Act or, in fact, makes the provisions of the Bihar Finance Act, 1981 applicable mutatis mutandis in the matter of collection and enforcement with regard to payment of tax and penalty so also with regard to assessment, reassessment escaped assessment, recovery of tax, special mode of recovery, maintenance of accounts, inspection, search and seizure. There is no mention of recovery of interest in the aforesaid provision. That being the position, in the backdrop of the law laid down in the cases of India Carbon Ltd (supra) and J. K. Synthetics Ltd. (supra), we are of the considered view that interest could not be recovered from the assessee in view of the aforesaid.

55. The other judgements relied upon by the petitioner, as referred to in the preceding paragraphs of the judgement, are nothing but the judgements relying upon the law laid down by the Supreme Court in the case of J. K. Synthetics Ltd. (supra), and India Carbon Ltd (supra) and we need not refer to all of them separately, except for one judgement in the case of Jaswal Neco Ltd. (supra), wherein the Hon‟ble Supreme Court after considering the principles laid down in the cases of India Carbon Ltd (supra) and J. K. Synthetics Ltd. (supra), have held that in the absence of any indication in the statute itself either specifically or by necessary implication indicating liability to pay interest on the assessed duty, no interest could be levied. It has been held in the aforesaid case after taking note of the principles laid down by the Supreme Court in the case of India Carbon Ltd (supra) in paragraphs 11, 12 and 13 that in the absence of there being a substantive provision, interest cannot be levied. This judgement also addresses the issue of levying interest in favour of the assessee.

56. As far as levy of interest is concerned, apart from the fact that Section 8 of the Bihar Entry Tax Act does not contemplate a provision for levy of interest, we may take note of the fact that Section 8 of the Entry Tax Act has been substituted and amended by the Bihar Finance Act of 2015, namely Act No.9 of 2015, wherein amendments have been made to the VAT Act of 2005 and the Entry Tax Act of 1993. By this amendment incorporated with effect from 6th May of 2015, Section 8 has been substituted with a new Section and if we go through the amended Section, we find that the provision has been included for survey, assess, reassess, collect and enforce payment of tax, interest, fine and penalty payable under the VAT Act. The very fact that the words, „interest‟ and „fine‟ have been incorporated by amendment in 2015 clearly shows that prior to this amendment, which was brought into force on 06.05.2015, there was no provision for recovery of interest under the Entry Tax Act.

57. As far as levy of interest is concerned, this issue has also been decided by this Court in CWJC No.19512 of 2010 [M/s Shree Shanker Ice & Cold Storage Versus The State of Bihar & Ors.] and the issue has been decided in the following manner:-

“That leaves us with the third question whether the petitioner is liable to pay interest imposed by the assessing
authority. Section 8 of the Act of 1993 empowers the assessing authority to collect or enforce payment of tax and
penalty and for that purpose they may exercise all or any of the powers assigned to them under the Bihar Finance Act, 1981. Section 8 of the Act of 1993 refers to recovery of tax and penalty alone. The Act of 1993 does not envisage recovery of interest on the amount of entry tax levied.

In our opinion, learned counsel Mr. Jain has rightly contended that assessing authority has no right to recover interest on the amount of entry tax levied under the orders of recovery made under section 39(4) of the Act of 2005.

For the aforesaid reasons, we partially allow this petition. We uphold the assessment of entry tax made by the Deputy Commissioner of Commercial Taxes, West Circle, Muzaffarpur. We hold that the petitioner is not liable to pay interest over the amount of entry tax levied by the assessing officer. The impugned orders of recovery made under section 39(4) of the Act of 2005 are quashed and set aside insofar as the interest is sought to be recovered on the amount of entry tax assessed. The Deputy Commissioner of Commercial Taxes will, within two months from today, modify the impugned orders and issue orders of recovery of entry tax in accordance with law and in consonance with the above discussion.”

(Emphasis supplied)

58. We are in full agreement with the aforesaid principle laid down by the Division Bench as it is nothing but interpretation of Section 8 of the Entry Tax Act and it is in conformity with the interpretation recorded by us herein above. That being so, even in view of the law laid down by this Court in M/s Shree Shanker Ice & Cold Storage (supra), levying of interest is unsustainable.

59. The contention of learned Senior Counsel Sri S. G. Ganesh to say that the judgement in the case of M/s Shree Shanker Ice & Cold Storage (supra), does not consider various other judgements and the provision of law is per incuriam cannot be accepted. The judgement is by interpretation of the provision of Section 8 of the Entry Tax Act and the same being correct, we have no reason to take a different view.

60. Therefore, we answer question No. (ii) by holding that in the absence of there being any specific provision authorising the revenue to assess interest under the Entry Tax Act and in the absence of Section 8 of the Entry Tax Act contemplating a provision for recovery of interest, recovery of interest is not permissible and to that extent, relief has to be granted to the petitioner. We hold that charging of interest and proposing to recover interest on the duty or the tax determined is unsustainable. Section 8 of the Entry Tax Act only permits the respondents to take steps for assessment, reassessment, recovery of tax and penalty, but not interest, and that being the position, another question involved in the matter, i.e., question no.(iv), can also be addressed at this stage itself.

Question No. (iv)

61. At this stage before adverting to consider Question No. (iii) it may be appropriate to consider question No. (iv) as it can be decided on the basis of the same legal principle and provision discussed with respect to question No. (iii).

62. Question No. (iv) formulated pertains to whether with the aid of Section 33 of the VAT Act, based on audit objection, assessment could be reopened and action taken. It was the case of the petitioners that Section 33 of the VAT Act will not apply for reopening assessment pertaining to Entry Tax Act. If we take note of the provisions of Section 8 and its interpretation, which has been discussed herein above, we find that the authority empowered to assess, reassess, collect and enforce payment of tax and penalty by a dealer under the Bihar Finance Act is also empowered under the Entry Tax Act to assess, reassess, collect and enforce payment of tax and penalty payable under the Entry Tax Act and for that purpose, they are further empowered to exercise all the powers assigned under the Bihar Finance Act and the Rules framed there under pertaining to provisions relating to returns, assessment, reassessment, escaped assessment, escaped assessment, recovery of tax, special mode of recovery, maintenance of accounts etc. The provisions of assessment, reassessment, escaped assessment as is applicable under the Bihar Finance Act and the Bihar VAT Act having been made applicable, the provisions of reassessment under Section 33 of the VAT Act would apply and, therefore, to that extent, we find no error in the act of the respondents. Accordingly, question No. (iv) raised by the petitioner has to be rejected.

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