Case: Associated Cement Cos. Ltd Vs. State Of Bihar

Appellant is a public limited company registered under the Companies Act, 1956 (in short the Act) and has two manufacturing units-one at Sindri and another at Jhinkpani. Prior to bifurcation of the erstwhile State of Bihar the units were registered under the Act and as well as under the Entry Tax Act and the consolidated registration was made at Patna Special Circle, under the Act. On 15th November, 2000, the erstwhile State of Bihar has bifurcated into two States, namely, State of Jharkhand and the State of Bihar and the said two manufacturing units of the appellant now have fallen in the State of Jharkhand.4. In the year 1985, the State Government has come out with Industrial Policy to give incentives to the new units or the existing units having additional / incremental production with regard to payment of sales tax. In terms of the aforesaid policy, claim of the appellant is that it invested money for additional / incremental production cement in the unit at Sindri and with regard to aforesaid additional/ incremental production exemption was granted in terms of the aforesaid industrial policy as well as under the provisions of the Act for the period from 1.4.1998 to 31.3.2007. The appellant also claimed exemption under the provisions of the Act on the basis of the aforesaid Industrial Policy which was denied by the State and then he filed a writ petition before the High Court and the same was dismissed and the matter is pending before this Court.5. According to the appellant it was entitled to adjust the entry tax paid under the Entry Tax Act while computing the tax payable under the Act. Appellant questioned correctness of the notices issued by filing writ petition (CWJC No. 7821 of 2002). By the impugned judgment dated 28.3.2003 the Division Bench of the High Court dismissed the writ petition holding that there was no scope of such adjustment.6. Reference was made to various provisions of the Act i.e. Section 3(1) of the Entry Tax Act and the exemption notification No. SO 37 dated 25th February, 1993 issued by the State Government. It was held that tax as defined under clause 2(x) of the Act includes additional tax. Clause 2 of the exemption notification issued clearly stipulated that if there was liability under the Act then that shall be reduced to the extent of tax paid under the Ordinance issued in relation to the entry tax. It was further held that as additional tax is also a part of tax as stipulated in clause 2 of the Act, the appellant is entitled to benefit under the notification and its liability for payment of additional tax has to be adjusted against payment of tax under the Entry Tax Act.

Reasoning: . Crucial question, therefore, is whether the appellant had any liability under the Act. The answer to this lies in Section 3 of the Act, which is extracted above and is the charging section. In Sub-section (1) subject to the provision of the part (i.e. part I) sales tax or purchase tax, as the case may be, shall be paid by every dealer as provided in the section itself. Section 7 speaks of exemption. Sub-section (3) of Section 7 stipulates that State Government may, by notification and subject to such conditions or restrictions as it may impose, exempt from sales tax or purchase tax certain sales or purchases as the case may be. The question of exemption arises only when there is a liability. Exigibility to tax is not the same as liability to pay tax. The former depends on charge created by the Statute and latter on computation in accordance with the provisions of the Statute and rules framed thereunder if any. It is to be noted that liability to pay tax chargeable under Section 3 of the Act is different from quantification of tax payable on assessment. Liability to pay tax and actual payment of tax are conceptually different. But for the exemption the dealer would be required to pay tax in terms of Section 3. In other words, exemption presupposes a liability. Unless there is liability question of exemption does not arise. Liability arises in term of Section 3 and tax become payable at the rate as provided in Section 12. Section 11 deals with the point of levy and rate and concessionalit cannot be said that as tax was not paid on portion of the turnover of the scheduled goods i.e. cement, the assessee-appellant had no liability under the Act. It was definitely liable to pay tax under the Act, but for the exemption. There is no dispute that the assessee - appellant was liable to pay tax under sub-section (3) of Section 3 of the Entry Tax Act. Therefore, it was entitled to reduction to the extent of tax paid under the Entry Tax Act while working out tax payable by it under the Act.21. Above being the position the notices issued by the respondent are without legal sanction and are quashed. The judgment of the High Court is set aside.