Case: Indian Oil Corporation Limited Vs. State of Bihar &amp; Another

plea also does not avail the Appellant for the simple reason that there are two taxes which are levied in the present case, one is VAT and the other is Entry Tax. In one case, VAT is set off against the Entry Tax and in another, VAT is not so set off. Any anomaly arising from the aforesaid position would not lead to a charge of clear and hostile discrimination.24. When it comes to taxing statutes, the law laid down by this Court is clear that Article 14 of the Constitution can be said to be breached only when there is perversity or gross disparity resulting in clear and hostile discrimination practiced by the legislature, without any rational justification for the same. (See The Twyford Tea Co. Ltd. & Anr. v. The State of Kerala & Anr., (1970) 1 SCC 189 at paras 16 and 19; Ganga Sugar Corporation Ltd. v. State of Uttar Pradesh & Ors., (1980) 1 SCC 223 at 236 and P.M. Ashwathanarayana Setty & Ors. v. State of Karnataka & Ors., (1989) Supp. (1) SCC 696 at 724- 726).25. We must also not forget that no assessee can claim set off as a matter of right and the levy of Entry Tax cannot be assailed as unconstitutional only because set off is not given. (See Godrej & Boyce Mfg. Co. Pvt. Ltd. & Ors. v. Commissioner of Sales Tax & Ors., (1992) 3 SCC 624 at para 9 and State of Karnataka v. M.K. Agro Tech Pvt. Ltd, C.A. 15049-15069 of 2017 decided on 22nd September, 2017, at para 31).26. However, Shri Datar referred to observations contained in Ayurveda Pharmacy & Anr. v. State of Tamil Nadu, (1989) 2 SCC 285 , Aashirwad Films v. Union of India & Ors., (2007) 6 SCC 624 , State of Uttar Pradesh & Ors. v. Deepak Fertilizers and Petrochemical Corporation Ltd., (2007) 10 SCC 342 and Union of India & Ors. v. N.S.Rathnam and Sons, (2015) 10 SCC 681. Each of these judgments concerned taxation rates that were ex-facie arbitrary and/or discriminatory, in that the very same tax was levied at different rates without any rational justification for the same and were, thus, struck down as being arbitrary and/or discriminatory. None of these judgments would have any application to the facts of the present case, in which it is clear that the plea of discrimination is qua a set off of one tax against a separate and independent tax imposed. This fact circumstance would be sufficient to distinguish the said judgments from the facts of the present case.27. Since we have found that the plea of discrimination must fail on the aforesaid grounds, no question of reading down the provisions would then arise.28. However, when it comes to the levy of interest, the impugned judgment dated 19th April, 2017, held that there can be no levy of interest as there is no substantive statutory provision for the same. The assessee succeeded on this point and the State has not filed any appeal against the same. Therefore, the finding qua interest, having become final, cannot be interfered with by us.29. However, Shri S. Ganesh, learned Senior Advocate appearing for the Revenue, has argued before us that, as a matter of restitution, interest must be granted in favour of the Revenue for the period for which stay orders have been obtained in writ petitions filed in 2014 and 2015. This Court has held that, if a party ultimately succeeds, it must be put back in the same position as if no such stay orders have been passed, and for this purpose he referred to and relied upon State of Rajasthan & Anr. v. J.K. Synthetics Limited & Anr., (2011) 12 SCC 518 at paras 18 and 23 and Nava Bharat Ferro Alloys Limited v. Transmission Corporation of Andhra Pradesh Limited & Anr., 2011(3) R.C.R.(Civil) 599 : (2011) 1 SCC 216 at paras 16 to 27.30. It will be noticed, on a reading of para 23 of Bharat Ferro Alloys (supra), that ultimately restitution is not a matter of right, but is a matter of discretion, and that hardships on both sides must be looked at in order to find a pragmatic solution by way of restitution. Given the fact that the State continued with the grant of set off till the year 2014, and reopened assessments beginning from 2008-09 based on an audit objection, we are of the view that it would be highly inequitable at this juncture to allow the State to charge interest, which would arise as a result of stay orders being passed in the writ petitions. The principal amount also is not something that the Appellant was able to pass on to the ultimate consumer in the peculiar facts of this case. Had the Appellant known, from the assessment year 2008-09, and had the Department raised an objection in that very year, it would have arranged its affairs in such a manner as to avail of set off under the Entry Tax Act, which it did after 2014, when the audit objections were raised for the first time. On the facts of this case, therefore, we are not inclined to exercise our discretion to grant restitutional interest to the Revenue.31. The matter, however, does not end here. Shri Datar pointed out that after the audit objections; a show cause notice dated 16th April, 2014 was issued by the authority, which was replied to by letters dated 16th June, 2014 and 27th June, 2014, in which the assessee repeatedly asked for time to make a detailed objection on the merits of the case. Finally, by a letter dated 22nd August, 2014, the assessee was able to muster certain certificates for the assessment years in question given by BPCL and HPCL to show that a large amount of the sales made by them in turn to their retail consumers and though retail outlets were outside the local area of Patna, and, therefore, not exigible to Entry Tax at all.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]13. It will be seen that the tax leviable under the Entry Tax Act shall be paid by every dealer liable to pay tax under the VAT Act. Under Section 3(1) of the VAT Act, all persons who are registered dealers under the Bihar Finance Act, 1981, as it stood before its repeal, are liable to pay tax under the said Act on sales and purchases made by them. There is no dispute that the Appellant is a registered dealer under the Bihar Finance Act, 1981 and is thus liable to pay tax under the VAT Act. Condition (i), therefore, is certainly fulfilled.14. So far as Condition (ii) is concerned, the Appellant is an importer of scheduled goods, viz., petroleumcan be seen from the aforesaid definition that an importer would necessarily refer to a dealer who imports scheduled goods from outside the state.As is clear from Section 13(1) of the VAT Act, all sales of Schedule II and III goods have to suffer a levy of tax at each point in the series of sales by a dealer liable to pay tax under the said Act. This is subject, however, to Section 16, by which once the goods have suffered tax, input tax credit is given at every stage thereafter. This scheme applies generally down the line to all Schedule II and III goods. However, when it comes to tax on the sale of goods specified in Schedule IV, Item 3 of which includes High Speed Diesel oil and light diesel oil, the levy under the said Act is only at such point as the State Government may, by notification, specify. This takes us to the notification dated 4th May, 2006, which clearly states that when it comes to motor spirit, High Speed Diesel oil and light diesel oil, the levy is at the point of sale by oil companies to the retailer or direct to the consumer. On a reading of the aforesaid notification, it is clear that when a sale is effected by the Appellant to BPCL and HPCL, there is no levy of any VAT that is contemplated at this point. The VAT gets levied only at the next point in the chain of sales, which is the sale from BPCL and HPCL to their retailers and/or consumers. Thus, it is clear that the second condition is not fulfilled as the importer of the scheduled goods i.e. the Appellant is not at all liable to pay tax under the VAT Act.16. So far as the Condition (iii) is concerned, there being no levy on the Appellant, the Appellant does not incur any tax liability at the rates specified under Section 14 of the VAT Act.17. So far as Condition (iv) is concerned, in any case, this must be by virtue of sale of the very imported scheduled goods, which means that the sale must be by the Appellant itself and not by the other OMCs.Further, Condition (v) must be that "his" i.e. the Appellants tax liability under the VAT Act will then stand reduced, and this is only to the extent of tax paid under the Act. This condition is also not met inasmuch as the set off is person specific and not goods specific, as is correctly contended by Shri Ganesh, learned Senior Advocate, appearing on behalf of the Revenue.19. Thus, it will be seen that on a literal reading of Section 3(2) second proviso, the Appellant would not be entitled to claim setour opinion, it is clear that this judgment would have no direct application in the facts of the present case, inasmuch as the aforesaid judgment related to exemption of sales tax on production of additional cement in order that production of cement be boosted in the State. The expression "liable to pay tax" was held to apply because the question of exemption would arise only if there is a liability to pay tax in the first place. Cement was, at the relevant time, "scheduled" goods and, therefore, sales tax was liable to be paid on such goods. It is only on account of an exemption notification issued under Section 7 of the Act, as it then stood, that additional production of cement stood exempted from payment of sales tax. In the present case, there is no exemption at all. The present is a case where the importer under the second proviso must first be liable to pay tax under the Act. We have already seen that the Appellant is a registered dealer under Section 3(1) of the VAT Act and would be a dealer liable to pay tax under the aforesaid Act within the meaning of the enacting part of Section 3(2) of the Entry Tax Act. However, it is clear that as importer of scheduled goods, the Appellant must be liable to pay tax under the VAT Act. As has already been found, the Appellant as an importer of scheduled goods is not liable to pay tax as the levy of tax is itself postponed when the Appellant sells the oil to another OMC, and VAT is leviable only on the transaction between the said OMC and its retailer or other customers. In the ACC (supra) case, the levy on cement was always there, being a scheduled item, an exception to which by way of exemption was allowed only on additional production of cement. It is also important to note that the expression "by virtue of sale of imported scheduled goods or sale of goods manufactured by consuming such imported scheduled goods ......." was added later by way of amendment and was not contained in Section 3(2) second proviso which was construed in the ACC (supra) case. This condition has clearly not been met in the present case as has been held by us hereinabove. In any case, the effect of the aforesaid judgment has been nullified by the addition of a third proviso to Section 3(2) by the Bihar Finance Act, 2006, which specifically provides that exempted goods will not be entitled to set off. For all these reasons, we are of the view that this judgment does not take the Appellants case very muchcase again need not detain us any further because we are not concerned with dealers liable to pay tax, but with importers of scheduled goods who are liable to pay tax in order that Section 3(2) second proviso is attracted. We have already held that in the enacting part of Section 3(2), the Appellant is certainly a dealer liable to pay tax under the VAT Act, in that it is a registered dealer falling within Section 3(1) of the said Act. Therefore, any argument based on gross turnover is wholly unnecessary to include the Appellant under Section 3(2) of the Entry Taxthis it can scarcely be held that this being the object, the second proviso must be completely altered in order that it subserves such object. We have already held that a literal reading of the second proviso, which gives a concession by way of set off, cannot possibly be held to be altered qua every material condition, so that the Appellant be entitled to claim a set off. Consequently, this judgment and other judgments cited by the Appellant, such as Commissioner of Income Tax, Bangalore v. J.H. Gotla, Yadagiri, (1985) 4 SCC 343  , to buttress the plea of purposive interpretation cannot be held to apply in the facts and circumstances of thisare afraid that this plea also does not avail the Appellant for the simple reason that there are two taxes which are levied in the present case, one is VAT and the other is Entry Tax. In one case, VAT is set off against the Entry Tax and in another, VAT is not so set off. Any anomaly arising from the aforesaid position would not lead to a charge of clear and hostile discrimination.24. When it comes to taxing statutes, the law laid down by this Court is clear that Article 14 of the Constitution can be said to be breached only when there is perversity or gross disparity resulting in clear and hostile discrimination practiced by the legislature, without any rational justification for the same.We must also not forget that no assessee can claim set off as a matter of right and the levy of Entry Tax cannot be assailed as unconstitutional only because set off is notof these judgments concerned taxation rates that werearbitrary and/or discriminatory, in that the very same tax was levied at different rates without any rational justification for the same and were, thus, struck down as being arbitrary and/or discriminatory. None of these judgments would have any application to the facts of the present case, in which it is clear that the plea of discrimination is qua a set off of one tax against a separate and independent tax imposed. This fact circumstance would be sufficient to distinguish the said judgments from the facts of the present case.27. Since we have found that the plea of discrimination must fail on the aforesaid grounds, no question of reading down the provisions would then arise.28. However, when it comes to the levy of interest, the impugned judgment dated 19th April, 2017, held that there can be no levy of interest as there is no substantive statutory provision for the same. The assessee succeeded on this point and the State has not filed any appeal against the same. Therefore, the finding qua interest, having become final, cannot be interfered with by us.It will be noticed, on a reading of para 23 of Bharat Ferro Alloys (supra), that ultimately restitution is not a matter of right, but is a matter of discretion, and that hardships on both sides must be looked at in order to find a pragmatic solution by way of restitution. Given the fact that the State continued with the grant of set off till the year 2014, and reopened assessments beginning frombased on an audit objection, we are of the view that it would be highly inequitable at this juncture to allow the State to charge interest, which would arise as a result of stay orders being passed in the writ petitions. The principal amount also is not something that the Appellant was able to pass on to the ultimate consumer in the peculiar facts of this case. Had the Appellant known, from the assessment yearand had the Department raised an objection in that very year, it would have arranged its affairs in such a manner as to avail of set off under the Entry Tax Act, which it did after 2014, when the audit objections were raised for the first time. On the facts of this case, therefore, we are not inclined to exercise our discretion to grant restitutional interest to the Revenue.