Orissa HC Clarifies SC's Interim Relief on Entry Tax Interest Applies Only to SLP Petitioners [Read Order]

In a recent ruling, the Orissa High Court clarified that the Supreme Court's interim relief on a dispute regarding entry tax interest applies only to those who filed Special Leave Petitions (SLPs) challenging the imposition of interest.

Indera Motors, the assessee, and others challenged the entry tax demand under the Orissa Entry Tax Act, 1999 (OET Act). The Orissa High Court ruled in favor of the assessee, but the Supreme Court, through an interim order, directed payment of 1/3 of the tax immediately, with the remaining 2/3 payable after final judgment.

Eventually, the Supreme Court upheld the validity of the OET Act and confirmed the department’s competence to levy entry tax.

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Following this, the department raised a demand including 9% interest, calculated from the date of filing of returns, not from the Supreme Court’s final judgment. This interest demand was then challenged before the Orissa High Court.

The High Court upheld the department’s action, allowing interest on the balance of 2/3 from the Supreme Court’s judgment and also compensatory interest at 9% for the earlier period (between the return filing and the SC judgment).

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While some other parties approached the Supreme Court against this High Court ruling and got interim protection, the present petitioner did not file any appeal to the Supreme Court.

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Sidhartha Ray, counsel for the petitioner, argued that the Supreme Court is already hearing the matter and has passed an interim order for no coercive action. This relief should apply to all assessees, not just those who filed appeals. The interim order should have a right in rem effect, benefiting all assessees.

The counsel also added that the petitioner had already paid the remaining 2/3rds of the tax and interest after the Supreme Court’s final judgment. Therefore, the department should not treat the petitioner as a defaulter or raise fresh interest for the earlier period.

Meanwhile, Sunil Mishra, the department’s counsel, argued that the petitioner had not challenged the High Court’s judgment before the Supreme Court and hence could not seek the benefit of the interim relief granted in connected appeals.

After hearing, the division bench led by Justice Harish Tandon and Justice B.P. Routray held that the interim order passed by the Supreme Court applied only to the petitioners who filed the Special Leave Petitions. Since the petitioner had not filed an appeal before the Supreme Court, the interim order in rem could not be extended to them.

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The court observed that the petitioner had accepted the High Court's order and compiled by depositing the 2/3 tax with interest. As there was no express stay from the Supreme Court on this order, the court found no justification to extend the interim relief. However, the court gave the petitioner two months to deposit the outstanding demand.

To Read the full text of the Order CLICK HERE

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