The Patna High Court upheld the order of the commercial tax tribunal wherein it was held that adjustment of entry tax paid on damaged cement is not admissible under Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale therein Act, 1993.
M/s ACC Limited, the appellant manufactures and sells cement across the country through its various sales units, one of which is located in Patna and the appellant was also a registered dealer under the Bihar Value Added Tax Act, 2005 (‘VAT Act’). The appellant imports cement into the State from outside the State of Bihar by way of stock transfer to its depot at Patna and the cement is sold within the capital city as also in other districts in the State. There are eight C&F agents appointed in Bihar for the fifteen Warehouses situated in different towns within the State, for storage of cement.
In the assessment year 2010-11, the appellant imported 10,12,535.90 MT of cement into the State from their manufacturing units situated in Orissa, Chhattisgarh & Jharkhand. In addition to the freight paid to the Railways and commission paid to the C&F agents, entry tax was also paid.
The audit team of the Commercial Taxes Department(‘the department’) found that the assessee had shown stock transfer from outside the State worth Rs.45,12,63,567.00 in the annual return as well as TAR and the total import value shown in ET-V (Entry Tax Payment) was Rs.527,56,05,041.00, thus concealing value worth Rs.76,29,71,474.00. It was also found that the adjustment of entry tax paid on damaged cement was not admissible under the provisions of the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale therein Act, 1993 (‘Entry Tax Act’).
The matter travelled to ‘the Tribunal’ which on the question of freight and commission remanded the case to the Assessing Officer for verifying the documents to evidence the contention taken. As far as entry tax paid on damaged cement is concerned, ‘the Tribunal’ found that it cannot be adjusted from VAT liability, in the circumstance of the proviso to Section 3(2) of the Entry Tax Act having provided for such reduction of tax payable under the VAT Act only when the imported goods liable to pay tax under the Act, incurs tax liability within the State.
The damaged goods having not incurred any tax liability, there would be no reduction of VAT liability to the extent of the entry tax paid on such damaged goods was the finding; from which the questions of law in the appeal arise.
The appellant argued based on the decision of the Supreme Court in Hindustan Lever Ltd. v. State of Bihar that the entry tax paid would be entitled to be reduced from the total VAT liability of the assessee, especially when the damaged goods were not sold within the State.
Sri Vikash Kumar, on the other hand, supported the order of ‘the Tribunal’ specifically relying on the words employed in the statute. It is pointed out that there is no evidence produced as to how the damaged goods were disposed of. The damaged goods in normal conditions would be returned to the manufacturing unit, in which event the assessee could have claimed the refund. The State asserts that the appeal is liable to be dismissed and there arises no question of law. The State relied on Indian Oil Corporation v. State of Bihar 2018 (1) SCC 242.
Section 3 (1) of the Entry Tax Act with the nominal heading ‘Charge of Tax’, levies tax on entry of scheduled goods into a local area for consumption, use or sale therein for the development of trade, commerce and industry in the State, at such rate, not exceeding twenty per cent, of the import value of such goods.
Sub-section (2) of Section 3 further makes it mandatory for every dealer liable to pay tax under the VAT Act or any other person; who imports scheduled goods into the local areas of the State of Bihar whether on his account or account of his principal or takes delivery or is entitled to take delivery of such goods, to the tax leviable under the Entry Tax Act.
It was viewed that the liability to pay tax and the actual payment of tax were held to be conceptually different. The exemption notification does not efface the liability created by the charging section, but merely absolves the assessee from paying the tax, was the finding rendered in favour of the assessee.
The Chief Justice and Justice Rajiv Roy held that the question was raised of an exemption which does not efface the liability to tax and next that the words: ‘by sale of imported scheduled goods or sale of goods manufactured by consuming such imported scheduled goods’ were added to the provision granting set-off by way of an amendment, later to the ACC case.
It was categorically held that set-off is a concession which none can claim as a matter of right unless the specific conditions under which it is granted are satisfied. The matter was remanded only for consideration of the ground raised of no liability of entry tax since the OMCs to which the appellant had sold petroleum products had sold it outside Patna and thus the goods were not consumed, used or sold within the local limits of Patna.
The court dismissed the appeal.
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