IN THE HIGH COURT OF JUDICATURE AT PATNA CWJC No.5916 of 2009 M/S VAISHALI FLOUR MILLS, a Partnership Firm having its place of business at Bataganj, P.S. Danapur, District – Patna through one of its Partner, Sanjay Bansal, Son of Shri Shiv Shankar Bansal, resident of 201, Santosha Complex, Bandar Bagicha, P.S. Kotwali, Town and District – Patna. Versus 1. THE FOOD CORPORATION OF INDIA having its Office situated at Regional Office, Exhibition Road, Patna through its General Manager (Bihar). 2. The General Manager (Bihar), Food Corporation of India, Regional Office, Exhibition Road, Patna. 3. The Dy. General Manager(R-II), Food Corporation of India, Regional Office, Exhibition Road, Patna. 4. The Manager Depot, Food Corporation of India, Food Storage Depot, Phulwarisharif, Patna. with CWJC No.6044 of 2009 M/S AMBE AGRO INDUSTRIES Pvt. Ltd. a Company incorporated under the provisions of the Companies Act, 1956 having its place of business at Patliputra, P S – Patliputra, Dist. Patna through one of its Directors, Amit Agrawal, son of Shri Satyanarain Agrawal, Resident of 237, Patliputra Colony, P.S. Patliputra, District – Patna. Versus 1. THE FOOD CORPORATION OF INDIA having its Office situated at Regional Office, Exhibition Road, Patna through its General Manager (Bihar). 2. The General Manager (Bihar), Food Corporation of India, Regional Office, Exhibition Road, Patna. 3. The Dy. General Manager(R-II), Food Corporation of India, Regional Office, Exhibition Road, Patna. 4. The Manager Depot, Food Corporation of India, Food Storage Depot, Phulwarisharif, Patna. with CWJC No.6069 of 2009 M/S DANAPUR FLOUR MIILS LTD. a Company incorporated under the provisions of the Companies Act, 1956 having its place of business at Nasriganj, P.S. Danapur, District – Patna through one of its Directors, Sameer Gupta, S/o late Surendra Gupta, Resident of 14, Kaveri Apartment, Bandar Bagicha, P.S. Kotwali, Town & District – Patna. Versus 1. THE FOOD CORPORATION OF INDIA having its Office situated at Regional Office, Exhibition Road, Patna through its General Manager (Bihar). 2. The General Manager (Bihar), Food Corporation of India, Regional Office, Exhibition Road, Patna. 3. The Dy. General Manager(R-II), Food Corporation of India, Regional Office, Exhibition Road, Patna. 2 4. The Manager Depot, Food Corporation of India, Food Storage Depot, Phulwarisharif, Patna. with CWJC No.6086 of 2009 M/S GUPTA NUTRITION PVT.LTD. a Company incorporated under the provisions of the Companies Act, 1956 having its place of business at Nasriganj, P.S. Danapur, District – Patna through one of its Directors, Sanjeev Kumar Munka, S/o Shri Basudeo Prasad Munka, resident of I-D, Durga Vihar Apartment, S P Verma Road, P S – Gandhi Maidan, District – Patna. Versus 1. THE FOOD CORPORATION OF INDIA having its Office situated at Regional Office, Exhibition Road, Patna through its General Manager (Bihar). 2. The General Manager (Bihar), Food Corporation of India, Regional Office, Exhibition Road, Patna. 3. The Dy. General Manager(R-II), Food Corporation of India, Regional Office, Exhibition Road, Patna. 4. The Manager Depot, Food Corporation of India, Food Storage Depot, Phulwarisharif, Patna. with CWJC No.6027 of 2009 M/S BANKE BEHARI FOODS PVT. LTD., a Company incorporated under the provisions of the Companies Act, 1956 having its place of business at Digha, P.S. Digha, District – Patna, through one of its Directors, Gaurav Sah son of Sri Om Prakash Sah, resident of Maalsalami, P S – Maalsalami, Patna City, Dist. Patna. Versus 1. THE FOOD CORPORATION OF INDIA having its Office situated at Regional Office, Exhibition Road, Patna through its General Manager (Bihar). 2. The General Manager (Bihar), Food Corporation of India, Regional Office, Exhibition Road, Patna. 3. The Dy. General Manager(R-II), Food Corporation of India, Regional Office, Exhibition Road, Patna. 4. The Manager Depot, Food Corporation of India, Food Storage Depot, Phulwarisharif, Patna. ----------- For the petitioners : M/S. S D Sanjay, Gautam Kejriwal and Shabina Rubab. For the respondents : M/S. G N Sahay & S K P Sinha. _________ 04. 05 /03/2010 Since in all these writ applications there are 3 common questions of law and fact, therefore, they have been heard together and are being disposed of together by a common order. Minor variation in facts with regard to quantity of purchase and payments, which have been made by these petitioners to respondent Food Corporation of India, does not alter the basic questions of law, which have been raised at the bar. Respondent FCI, a Government of India Enterprise, issued a tender notice dated 26.12.2008. This was for open sale of wheat to bulk consumers under what is known “Open Market Sale Scheme”. The reserved price for the stock on offer was fixed at Rs.1096.21 per quintal. Tender papers could be obtained up to 5th of January, 2009 and they had to be submitted by 6th of January, 2009. Technical bid was to be opened on 6th of January at 3 PM. The tender notice is Annexure-1 and dated 26.12.2008. The other details and the terms and conditions of the tender is Annexure-2 to the writ application. All those persons who wanted to participate in the tender, had to deposit 10% of the cost of stock intended to be purchased as earnest money and successful tenderers thereafter were required to deposit 25% of the cost of the stock, of intended purchase as security money within five days. If there was failure to deposit the security money it would result in forfeiture of earnest money. Petitioners further state that Clause-H of Appendix-1 of Annexure-2 stipulates payments and delivery schedule. 4 Sub Clause (i) of Clause-H reads as follows: “Price of food grains will be payable on the net weight basis. All taxes and other levies, fees and charges of any nature whatsoever leviable by any authority shall be payable by the buyer in addition to the price offered.” By virtue of the above Clause it is the stand of the petitioners that all applicable taxes and levies were to be borne by them provided it was payable by them in addition to the base price or fixed price of wheat. All these petitioners depending upon the quantity of the purchase, they intended to make, deposited earnest money and security money. Their bid was accepted and even letters were issued by the Area Manager indicating the depots from where petitioners could lift their stock of wheat. The communication is Annexure-4 to the writ application. In the said communication, it is the stand of the petitioners that the respondents for the first time appended a note at the bottom of page 1 of Annexure-4 that “the Miller concern have to deposit full cost and tax (1% VAT, 3% Additional tax & 4% Entry tax) (4% Entry tax may be obtained on acquisition cost of wheat after adjusting 1% VAT)”. The petitioners immediately protested vide Annexure-5 pointing out to the respondents that a demand of 4% entry tax from these petitioners /purchasers of wheat seems to be misplaced because under the Entry Tax Act, entry taxes are 5 payable by Food Corporation of India, the seller or dealer who is importing goods (wheat) from outside the State. It is not chargeable from a purchaser as per law. They had no objection to payment of VAT which is a tax on sale. Under Section 3 of Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1993, an entry tax is levied on a dealer who has brought the scheduled goods to the local areas. The tax is levied on imported goods at the prescribed rate. It also indicates that a dealer‟s (importer‟s) liability to pay tax under Bihar Value Added Tax, 2005 i.e. (VAT) shall stand reduced to the extent of tax paid under the Entry Tax Act. In other words, certain set-offs were available to a dealer. But on some kind of mistake, motive or misunderstanding the purchasers i.e. petitioners before this Court are being asked to pay entry tax on the wheat, which was paid by F.C.I. to the State Government. It is the stand of the petitioners that no where in the contract any liability was created for payment of entry tax upon any of these petitioners. If Clause H (i) is read with Clause (vii) then the only liability cast upon these petitioners is payment of VAT/Sales-tax or taxes which are leviable on sale. By no stretch of imagination or interpretation an entry tax can be said to be a tax on sale which is payable by the purchasers, i.e. petitioners. Clause(1) of Section 2 (zd) of Bihar Value 6 Added Tax Act, 2005 reads and defines „Sale Price‟ as under: “Sale Price” means the amount payable to a dealer as valuable consideration for the sale or supply of any goods and includes- (i) any amount charged for anything done by the vendor in respect of the goods at the time of, or before, the delivery thereof; (ii) transport costs or freight, if any; (iii) trade commission, if any, by whatever name called: (iv) clearing, forwarding and handling charges, if any; (v) insurance charges, if any; (vi) taxes or duties levied under any law for the time being in force (other than tax paid or payable under this Act), by whatever name called, if any; (vii) cost of packing, if any; and (viii) the amount received or 7 receivable by the seller by way of non-refundable deposit, whether by way of a separate agreement or not, in connection with or incidental to or ancillary to, the said sale of goods; Obviously on some mistaken advice or motive, the respondent Corporation has tried to pass on the burden of entry tax on the purchasers, when law does not allow them to do so. Since the respondents did not agree to deduct the entry tax component from the release order, which is annexure-6 to the writ application, the petitioners decided to challenge such actions of the respondents by filing the writ applications in question. The stand of the respondents which emerges from their pleadings in the counter affidavit is that once the petitioners entered into an agreement, completed the contract, have drawn advantage therefrom, it is not open to challenge the same subsequently. In fact, there would be a bar from throwing such a challenge. They have further stated that FCI is only enforcing the terms of the contract. They categorically state that respondents have made it adequately clear in the notice inviting tender or the tender papers that all taxes, levies etc. payable shall 8 be charged over and above the price offered and they are payable by the petitioners. Today if such a demand is being made it is strictly in conformity with the terms and conditions of the contract. The petitioners‟ response to such a stand of the respondents is that only such tax or levies can be passed on to them which is payable by them and is obligatory upon them to pay under the law. The taxes and levies over and above the sale price no doubt are a separate component but such tax or levies which are payable by a purchaser only under the Value Added Tax, which is a component of sale. The word „tax‟ has been defined under the Bihar Value Added Tax under section 2 (ze). It defines, “tax” to mean tax leviable and payable under this Act‟ (emphasis mine). The VAT Act therefore no where envisages imposition of or passing of liability created on a dealer under the Entry Tax Act, 1993 on to the purchasers i.e. petitioners. The Bihar Tax on Entry of Goods Act, 1993 creates a liability or obligation on the dealer importing goods into the local areas for consumption, use or sale and he alone must bear the burden of such an imposition under the statute. It is further submitted on behalf of the petitioner that when the respondent Corporation fixed a basic minimum price for sale of wheat, there is underlying presumption that all the components and the cost including levies must have been worked 9 out and calculated by the Corporation. If for some reason it has not been done then it is not open to them now, on completion of contract, to pass on the burden of a tax payable by them by incorporating a clause in the release order directing the petitioners to pay entry tax at the rate of 4%. Counsel for the respondents thereafter relies on a few decisions which is the case of Messrs. Tata Iron and Steel Co. Ltd. vs. State of Bihar, [(7) STC 158 = AIR 1956 Patna 92] as well as the decisions rendered in the case of Dhanyalakshmi Rice Mills vs. The Commissioner of Civil Supplies and another, AIR 1976 SC 2243 as also of Somanath Mahaswara and others vs Orissa State Road Transport Corporation and another, AIR 1995 Orissa 186, to reinforce the submissions which have been made in support of the action. The Court fails to understand as to how the above decisions are of any help to the respondents. Even if for the sake of argument it is accepted that the sale had been completed based on a contract but can a subsequent demand by the respondents, which is component of entry tax, be permitted to be collected by the respondents in absence of authority under law to do so? If the legality of the same has been raised by the petitioners it will have to be tested within the parameters of the statute. The objections as above will not come in the way. What is being sought to be collected by the respondents from the petitioners is a component of tax which is 10 strictly leviable upon the respondents. Even from a plain reading of Clause H (i) as well as Clause (vii) the liability of the petitioners will be limited to the component of tax leviable on purchase of wheat. Payment of entry tax is not the liability of these petitioners and the same cannot be passed on to these petitioners. If the respondent FCI are unable to obtain set- off under VAT, to the extent of the entry tax, they may very well assail it or seek relief from the State authorities if law allows them to do so. Merely because the relevant notification at the relevant time allowed 1% set-off under VAT then that cannot be a reason to recover the balance from the petitioners in a coveted manner. All the writ applications stand allowed and the demand of entry tax @ 4% from these petitioners on the purchased quantity of wheat as per Annexure-4 is held to be illegal and a direction is hereby issued upon the respondents to refund the collected component of entry tax to the petitioners within a period of six weeks from the date of production/communication of a copy of this order., All the writ applications stand allowed. rkp ( Ajay Kumar Tripathi, J )