INDIAN OIL CORPORATION LIMITED versus STATE OF BIHAR & ANR.
[2017] 13 S.C.R. 477, Supreme Court of India, 2017
Outcome: Disposed off
Segment: Ratio
[2017] 13 S.C.R. 4 77 
INDIAN OIL CORPORATION LIMITED 
v. 
STATE OF BIHAR & ANR. 
(Civil Appeal No.3018 of2017) 
NOVEMBER 14, 2017 
[R. F. NARIMAN AND SANJAY KISHAN KAUL, JJ.J 
A 
B 
Entry Tax - Bihar Tax on Entry of Goods into Local Areas for 
Consumption. Ust; or Sale Therein Act, 1993 - s.3(2) - VAT set off 
against the Entry Tax - Claim for - Appellant-Corporation imports 
C 
crude oil from outside the State of Bihar and converts it into 
petroleum products, like High Speed Diesel, Petrol etc - Some part 
of these products are sold by appellants to two other oil marketing 
companies (OMCs). namely BPCL and HPCLfrom its Patna branch-
Appellant pays Entry Tax when product enters the local area of 
Patna - Grievance of the Appellant that when a sale is made to the 
D 
OMCs. after payment of Entry Tax, VAT is not set off against the 
Entry Tax - High Court agreed with the Advance Rulings Authority, 
and rejected the case of the appellant u!s.3(2) second proviso of 
the Entry Tax. stating that the set off would not be allowable under 
the aforesaid proviso - Held: The following conditions need to be 
E 
satisfied for claim of set off uls.3(2) - (i) u!s.3(2) the tax leviable by 
way of Entry Tax can only be paid by every dealer liable to pay 
under the VAT Act; (ii) The set off can only be granted !f assessee is 
an importer of scheduled goods, who is liable to pay tax under the 
VAT Act; (iii) Assessee must incur tax liability at rates specified u/ 
s.14 of the VAT'Act; (iv)
This must only be by virtue of the sale of F 
imported scheduled goods; and (v) "His" tax liability under the 
VAT Act will then stand reduced to the extent of tax paid under the 
Act - In instant case. appellant is a registered dealer and is thus 
liable to pay tax under the VAT Act, condition (i) is fulfilled -
Condition (ii) however, is not fulfilled, as notification dated G 
04.05.2006 under Bihar Value Added Tax Act. 2005 states that the 
levy is at the point of sale by oil companies to the retailer or direct 
to the consumer - There is no levy of any VAT, when a sale is effected 
by the appellant to BPCL and HPCL - The VAT gets levied only at 
the next point in chain of sales, which is sale from BPCL and HPCL 
to their retailers - So, though appellant is an importer of scheduled H 
477
478 
SUPREME COURT REPORTS 
(2017] 13 S.C.R. 
A goods. hut is hot liable to pay tax under the VAT - Condition (iii) is 
also not fulfilled, as there being no levy on the appellant. the 
appellant does not incur any tax liability u/s.14 of the VAT Act - So 
far as CondiMon (iv) is concerned, in any case, this must he by 
virtue of sale of the very imported scheduled goods. which means 
B 
c 
D 
E 
F 
that the sale must be by the appellant itself and not by the other 
OMCs, and thus condition (iv) is also not fa/filled - Condition (v) 
must he that "'his" i.e. the appellant :v 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 goodv specific - Thus. on literal 
reading of s. 3(2) second proviso. the appellant would not be entitled 
to claim set off - Bihar Value Added Tax Act. 2005 - ss. 3. 13. 16 -
Bihar Finance Act. 1981. 
Bihar Tax on Entry of Goods into Local Areas for 
Consumptwn. Use or Sale Therein Act, 1993 - Entry Tax -
Exigihility - Appellant-Corporation imports crude oil from outside 
the State of Bihar - Crude oil is processed and converted into 
petroleum products, like High Speed Diesel, Petrol etc - Some part 
of these products are sold by appellants to two other oil marketing 
companies (6JMCs). namely BPCL and HPCL from its Patna 
branch - Appellant pays Entry Tax when product enters the local 
area of Patna -
Grievance of the Appellant that when a sale is 
made to the OMCs, after payment of Entry Tax, VAT is not set off 
against the Entry Tax -
Set off of VAT. as claimed by the appellant 
was allowed until 1he year 2014 - However. pursuant to audit 
objections. set o.fl that had been allowed, were re-opened and then 
disallowed - The Entry Tax demand arising from such disallowance 
for the assessment years 2008-09 Ji// 2014-15 amounted to 
Rs. l,683.03 crores - Appellant contended it was not given 
opportunity to demonstrate that a large portion of demanded amount 
relates to sales that were made by HPCL and BPCL outside the 
local area of Patna. which would. therefore. not attract EntryTax at 
G 
all - Held: After audit objections. when a show cause notice was 
issued by the authority. the assessee repeatedly asked for time to 
make a detailed objection on the merits of the case - However, 
without asking for further data and hack up details the Assistant 
Commissionel' of Commercial Taxes passed an assessment order 
H 
immediately thereafter - Appellant accordingly now given
INDIAN OIL CORPORATION LIMITED v. STATE OF BIHAR 
479 
opportunity to approach the Appellate Tribunal wiih all relevant 
A 
materials in this behalf: and Tribunal to render its finding as to how 
much of the demand of Elltry Tax for the assessment years in question 
would have to he struck down. 
Tax/Taxation: 
Taxing statutes - On touchstone of Art.14 - Held: When ii B 
comes to taxing statutes. the law laid down hy the Supreme Court is 
clear that Art.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 - Constitution of India - Art.14. c 
RightY and Privileges - Set off - Held: No assessee can claim 
set off as a matter of right and levy of Entry Tax cannot he assailed 
as unconstitutional only because set off is not given. 
Disposing of the matters, the Court 
HELD: 1. The set off in question depends upon the 
Interpretation of Section 3(2) of the Bihar Tax on Entry of Goods 
into Local Areas for Consumption, Use or Sale Therein Act, 1993. 
The following conditions need to be satisfied for claim of set off 
under the said provision: 
D 
E 
(i) First and foremost, under Section 3(2) itself, the tax leviable 
by way of Entry Tax can only be paid by every dealer liable to pay 
tax under the VAT Act; 
(ii) The set off can only be granted if the assessee is an importer 
of scheduled goods, who is liable to
pay tax under the VAT Act; 
(iii)The assessee must incur tax liability at the rates specified 
under Section 14 of the VAT Act; 
(iv) This must only be by ~irtue of the sale of imported scheduled 
goods; and 
F 
(v) "His" tax liability under the VAT Act will then stand reduced 
G 
to the extent of tax paid under the Act. [Para 12] [500-B-D) 
2. For condition (i) to be satisfied, 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 H
480 
SUPREME COURT REPORTS 
(2017] 13 S.C.R. 
A 
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. <::ondition (i), therefore, is certainly fulfilled. [Para 
B 
13 I [500-E-F) 
3.1 So far as Condition (ii) is concerned, the Appellant is an 
importer of scheduled goods, viz., petroleum products. Words 
and expressions that are not defined under the Entry Tax Act 
shall have the meaning assigned to them under the VAT Act, 
C (See Section 2(2) of the Entry Tax Act). Under the VAT Act, 
"importer" is defined. It can be seen from the aforesaid definition 
that an importer would necessarily refer to a dealer who Imports 
scheduled goods from outside the State. [Para 14) [500-F-G; 501-
A) 
3.2 As is clear from Section 13(1) of the VAT Act, all sales 
D 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 ls subject, however, to Section 16, by which once 
the goods have suffered tax, input tax credit is given at every 
E 
F 
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. The notification dated 4th May, 2006, 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 
G the next point in the chain of sales, which is the sale from BPCL 
and HPCL to th~ir 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. [Para 15) [501-B-E) 
H
INDIAN OIL CORPORATION LIMITED v. STATE OF BIHAR 
481 
3.3 So far as the Condition (iii) is concerned, there being 
A 
no levy on the Appellant, the Appellant docs not incur any tax 
liability at the rates specified under Section 14 of the VAT Act. 
(Para 16] (501-E-F] 
3.4 So far as Condition (iv) is concerned, in any case, this 
must be by Yirtue of sale of the very imported scheduled goods, 
B 
which means that the sale must be by the Appellant itself and not 
by the other OMCs. This becomes clear from the second part of 
this provision which reads: " ••. ; .•... or sale of goods manufactured 
by consuming such Imported scheduled goods ••.•••••• " [Para 171 
(501-F-G] 
c 
3.5 Further, Condition (v) must be that "his" i.e. the 
Appellant's 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 on behalf of the 
Revenue. [Para 18] .(501-G-H; 502-A] 
D 
3.6 Thus, it will be seen that on a literal reading of Section 
3(2) second proviso, the Appellant would not be entitled to claim 
set off. (Para 19] (503-C] 
4.1 Further, pica of appellant. was that a literal reading of E 
the second proviso to Section 3 would lead to a situation where 
the same goods would suffer different rates of tax and this would 
be discriminatory. This plea docs not avail the Appellant for the 
simple reason that
there are two taxes which arc levied In the 
present case, one is VAT and the other is Entry Tax. In one 
case, YAT is set off against the Entry Tax and in another, VAT Is 
F 
not so set off. Any anomaly arising from the aforesaid position 
would not lead to a charge of clear and hostile discrimination. 
[Para 23] [504-E-F] 
4.2 \Vhcn it comes to taxing statutes, the law laid down by 
this Court is clear that Article 14 of the Constitution can be said G 
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. Further, 
no asscssee can claim set off as a matter of right and the levy of 
H
482 
SUPREME COURT REPORTS 
(2017] 13 S.C.R. 
A Entry Tax cannot be assailed as unconstitutional only because 
set off is not given. [Paras 24, 25) [504-F-G; 505-A) 
5. Appellant however pointed out that after the audit 
objections; a show cause notice was issued by the authority, which 
was replied ~o by two letters, in which the assessee repeatedly 
B asked for time to make a detailed objection on the merits of the 
case. Finally, by another letter 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 
c exigible to Entry Tax at all. The Assistant Commissioner of 
Commercial laxes without asking for further data and backup 
details passed an assessment order immediately thereafter and 
issued demand notices. The Revenue appeared to have been in 
a great hurry to issue the aforesaid demand notices, and since 
D OMCs have complete details of sales made for the years in 
question to their retail customers and outlets outside the area of 
Patna, opportunity ought to be given to Appellant to produce all 
relevant docul)lentary material, which would show that a large 
amount of the demand for these years (of Rs.1,683.03 crores), 
would be liable to be done away with as Entry Tax would not be 
E 
leviable on these transactions at all as the
consumption, use or 
sale of petroleum products has taken place outside the local area 
of Patna. Indeed, all these sales must have suffered Entry Tax in 
the local area outside Patna, where such retail sales were made, 
provided, of course, that they were made within the State of Bihar. 
F 
Appellant to approach the Appellant Tribunal with all details and 
request the Appellate Tribunal to render findings as required by 
this judgment, as expeditiously as possible. [Para 31) (506-E-H; 
507•A-C] 
Associated Cement Companies Ltd. v. State of Bihar & 
G 
Ors. (2004) 7 SCC 642 : [2004] 4 Suppl. SCR 868; 
The State of Tamil Nadu v. MK. Kandaswami & Ors. 
(1975) 4 SCC 745 : [1976] 1 SCR 38; A. V Fernandez 
v. The Sta/e of Kera/a (1957) SCR 837; State of Bihar 
& Ors. v. Bihar Chamber a_( Commerce & Ors. (1996) 9 
SCC 136 : [1996] 2 SCR 184 ; Commissioner of 
H 
Income Tax, Bangalore v. J.H. Got/a, Yadagiri (1985)
INDIAN OIL CORPORATION LIMITED v. STATE OF BIHAR 
4 sec 343 : [1985] 2 Suppl. SCR 711 -
held 
inapplicable. 
Ayurveda Pharmacy & Anr. v. State of Tamil Nadu 
(1989) 2 SCC 285 : (1989) 2 SCR 37; Aashirwad Films 
v. Union of India & Ors. (2007) 6 SCC 624 : (2007] 
7 SCR310; State of Uttar Pradesh & Ors. v. Deepak 
Fertilizers and Petrochemical Corporation Ltd. (2007) 
10 SCC 342 : [ 2007) 6 SCR 525; Union of India & 
Ors. v. N.S.Rathnam and Sons (2015) 10 SCC 681 : 
[2015] 8 SCR 751 - distinguished. 
The Twyford Tea Co. Ltd. & Anr. v. The State of Kera/a 
& Anr. (1970) 1 SCC 189 : [1970] 3 SCR 383; Ganga 
Sugar Corporation Ltd. v. State of Uttar Pradesh & Ors. 
(1980) 1 sec 223 : (1980) 1 SCR 769; P.M. 
Ashwathanarayana Setty & Ors. v. State of Karnataka 
& Ors. (1989) Supp. (1) SCC 696 : [1988] 3 Suppl. 
SCR 155; Godrej & Boyce Mfg. Co. Pvt. Ltd. & Ors. 
v. Commissioner (){Sales Tax & Ors. (1992) 3 SCC 624: 
[1992] 3 SCR 683; State of Karnataka v. M.K. Agro 
Tech Pvt. Ltd. 2017 (12) SCALE 88 - relied on. 
State of Rajastha11 & Am: v. J.K. Synthetics Limited & 
Anr. (2011) 12 SCC 518 : [2011] 10 SCR 993; Nava 
Bharat Ferro Alloys Limited v. Transmission Corporation 
of Andhra Pradesh Limited & Am: (2011) 1 SCC 216 : 
[2010] 14 SCR 900 - referred to. 
Case Law Reference 
[2004) 4 Suppl. SCR 868 
held inapplicable 
Para 19 
[1976] 1 SCR 38 
held inapplicable 
Para 20 
(1957) SCR 837 
held inapplicable 
Para 21 
[1996) 2 SCR 184 
held inapplicable 
Para 22 
[1985) 2 Suppl. SCR
711 
relied on 
Para 22 
[1970] 3 SCR 383 
relied on 
Para 24 
[1980] 1 SCR 769 
relied on 
Para 24 
[1988] 3 Suppl. SCR 155 
relied on 
Para 24 
[1992] 3 SCR 683 
relied on 
Para 25 
2017 (12) SCALE 88 
relied on 
Para 25 
483 
A 
B 
c 
D 
E 
F 
G 
H
484 
A 
B 
c 
SUPREME COURT REPORTS 
[2017] 13 S.C.R. 
[1989] 2 SCR 37 
distinguished 
Para 26 
[2007) 7 SCR 310 
distinguished 
Para 26 
(2007) 6 SCR 525 
distinguished 
Para 26 
(2015) 8 SC~ 751 
distinguished 
Para 26 
(2011) 10 SCR 993 
referred to 
Para 29 
(20101 14 SCR 900 
referred to 
Para 29 
, 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3018 
of2017 
From th¢ Judgment and Order dated 22.10.2013 of the High Court 
of J udicaturc at Patna in Civil Writ Jurisdiction Case No. 2153 5 of 2011. 
WITH 
SLP(C)Nos.15875, 15899, 15900, 15893, 15926, 15896, 16192 
of2017 
D 
Arvind P. Datar, Sr. Adv., Hrishikesh Baruah, Ms. Radhika Gupta, 
E 
F 
Pranav Jain, Kshitij Paliwal, Suiddhant Kaushik.Advs. for the Appellant. 
S. Ganesh Sr. Adv., Ms. Abha R. Sharma, D. S. Parmar, Sujeeta 
Srivastava, Advs. for the Respondents. 
The Judipnent of the Court was delivered by 
R. F. NARlMAN, J. I. The present appeal and special leave 
petitions arise out of demands made from the Appellant for payment of 
Entry Tax under the Bihar Tax on Entry of Goods into Local Areas for 
Consumption, Use or Sale Therein Act. 1993 (hereinafter referred to as 
the Entry Tax Act). 
2. The Appellant has its marketing division in the State of Bihar 
with branches, inter alia, at Barauni and Patna. It is from these branches 
that sales of petroleum products are effected. The Corporation receives 
crude oil, which is imported from outside the State ofBihar, which then 
enters Bihar, where the Corporation
has its oil refinery; and after 
G 
undergoing ceqain processes, crude oil is converted into petroleum 
products, like High Speed Diesel, Petrol etc. The products manufactured 
in the Bihar oil refinery are then sent to a branch in Patna, mainly through 
a pipeline constructed specifically for this purpose. Some part of these 
petrolenm products, namely. High Speed Diesel and Petrol are sold by 
the Appellant to two other oil marketing companies (OMCs), namely, 
H
INDIAN OIL CORPORATION LIMITED v. STATE OF BIHAR 
485 
[R. F. NARIMAN, J.] 
Bharat Petroleum Corporation Ltd. (BPCL) and Hindustan Petroleum 
A 
Corporation Ltd. (HPCL ), who then take the products from the depot of 
the Corporation situated in Patna and thereafter sell the products to their 
retail dealers or through their petroleum outlets. The Appellants, apart 
from the sales made to these OM Cs, also sell the aforesaid petroleum 
products to local retailers and through petroleum outlets in Patna. The 
B 
Appellant pays Entry Tax at the rate of 16% when the product enters 
the local area of Patna and 24.5% VAT is paid and set off against the 
Entry Tax under Section 3(2) second proviso of the Entry Tax Act for 
sales made within the local area. The grievance of the Appellant in the 
present appeals is that when a sale is made to the OM Cs, after payment 
of Entry Tax, VAT is not set off against the Entry Tax. VAT is not actually 
C 
paid by the Appellant by reason of a notification dated 4"' May, 2006 
under the Bihar Value Added Tax Act, 2005 (VAT Act), where, in case 
of petroleum products sold by the Appellant to OM Cs, the levy itself is 
at the point of sale by the aforesaid OM Cs to their retailers or directly to 
their consumers, and this being the case, the set off of such VAT paid, as 
D 
claimed by the Appellant, was allowed until the year 2014. However, 
pursuant to certain audit objections raised by the Accountant General, 
Bihar, the aforesaid set offs that
were allowed to the Appellant, were 
re-opened with effect from the assessment year 2008-09, as a result of 
which set offs that were allowed were now disallowed. The Entry Tax 
demand arising from such disallowance for the assessment years 2008-
E 
09 till 2014-15 amount to Rs.1,683.03 crores. 
3. In Civil Appeal No.3018of2017, the impugned judgment dated 
22"d October, 2013 of the Patna High Court agreed with the Advance 
Rulings Authority, and rejected the case of the Appellant under Section 
3(2) second proviso of the Entry Tax Act, stating that the set off would 
F 
not be allowable under the aforesaid proviso. 
4. In the seven Special Leave Petitions before us by, a common 
judgment dated 19'' April, 2017, a Division Bench of the Patna High 
Court framed five questions as follows: 
"i) Whether the second proviso to Section 3(2) of the Entry Tax 
G 
Act is ultra vires to the Constitution? 
(ii) Whether interest can be levied in the matter oflate payment 
of entry tax under the Entry Tax Act, by virtue of the provisions 
of the Bihar Finance Act, and, with the aid of Section 8 of the 
Entry Tax Act? 
H
486 
SUPREME COURT REPORTS 
(2017] 13 S.C.R. 
A 
(iii) Whether entry tax is liable to be paid when the goods only 
enter the local area and after such entry is subjected to sell only 
without there being any use of consumption of the goods in the 
local area? 
(iv) Whether based on audit objection as contemplated under 
B 
the provisions of Section 33 of the VAT Act, assessment can be 
re-opened with the aid of Section 8 of the Entry Tax Act? 
c 
D 
E 
F 
G 
H 
(v) Whether the assessment undertaken under Section 33 of the 
VAT Act is permissible after a period of four years in view of 
the provision ofSection 31 of the VAT Act?" 
5. Qucstie)ns 1, 3, 4 and 5 were answered against the assessee, 
but question 2 was answered in its favour by stating that since there was 
no substantive provision by which interest could be levied, interest that 
was charged to the Appellant by the assessment orders in question would 
have to be set aside. 
6. Shri Arvind Datar, learned Senior Advocate appearing on behalf 
of the Appellant, has referred in copious detail to various provisions of 
the VAT Act, Rules made thereunder and Form RT-I made under the 
VAT Act. He also referred in detail to various provisions of the Entry 
Tax Act. It is his case that the Entry Tax Act in Bihar, unlike other Entry 
Tax Acts, was essentially to ensure that VAT was collected under the 
VAT Act in the State. According to him, the moment products contained 
in Schedule IV of the said Act suffer tax, the scheme
of the Entry Tax 
Act is that a set off on such goods, which bear VAT, is allowable. 
According to the learned counsel, Section 3(2) second proviso should be 
construed in such a manner as would accord with this object and set off, 
as claimed by the Appellant, cannot, therefore, be denied to it. According 
to the learned counsel, it is clear that this practice of allowing set off 
was followed right up to 20 I 4, showing that both the Government as 
well as the assessee were clear that the provision had to be worked in 
this fashion. The reason for retrospectively reopening the assessments 
made from2008-09 is due to an audit objection raised only in the year 
2014, after which the assessee has so arranged its affairs that set off 
would be claimable and has, in fact, been allowed by the authorities. 
According to the learned counsel, the audit objection was itself only on 
the footing that a 2006 amendment had changed the definition contained 
in Section 2(1 )(c) of the Entry Tax Act of the "entry of goods" and it is 
for this reason that set off was disallowed, and not the reasons given
INDIAN OIL CORPORATION LIMITED v. STATE OF BIHAR & 
487 
ANR. [R. F. NARIMAN, J.] 
later by the State. According to the learned counsel, what has to be seen 
A 
is the overall picture qua the goods under the Entry Tax Act and once it 
is clear that the aforesaid goods suffer VAT, then a set off becomes 
payable. According to the learned counsel, a large portion ofRs.1,683.03 
crores that is demanded relate to sales that are made by HPCL and 
BPCL outside the local area of Patna, which would, therefore, not attract 
B 
Entry Tax at all. This has not been segregated, and if segregated, the 
demand for the assessment years in question would fall by at least 
Rs. l,000 crores. The Appellants were given no opportunity to 
demonstrate this in detail, despite the fact that they were able to give 
certificates by HPCL andBPCL for all the assessment years in question 
that those companies had, in fact, effected sales worth over a thousand 
C 
crores outside the area of Patna. 
7. According to Shri Datar, if this Court were to decide against 
the appellant on the construction of Section 3(2) second proviso, then, in 
any case, he would be liable to succeed, as the said proviso should be 
read down to make it constitutionally valid, as otherwise it would fall foul 
of Article 14 of the Constitution of India. According to the learned counsel, 
the same goods cannot bear different rates of tax which are ultimately 
passed on to the consumers and this ex facie discrimination would,
therefore, make the proviso bad in law requiring this Court to read it 
down, so that, at least so far the Appellant is concerned, a set off would 
be granted. Also, according to him, in any case, the matter should go 
back to the Appellate Tribunal to determine as to how much of the sales 
made by HPCL and BPCL would be outside the Patna area and, 
therefore, not exigible to Entry Tax at all. 
8. Shri S. Ganesh, learned Senior Advocate, appearing on behalf 
of the Revenue, has countered each of these submissions. According to 
the learned counsel, a plain reading of Section 3(2) second proviso of 
the Entry Tax Act would make it clear that the provision is assessee 
based and not goods based. According to the learned counsel, none of 
the conditions of the second proviso have been met by the Appellant and 
only ifthe said provision is completely rewritten, can the Appellant be 
given relief. Re-writing of the aforesaid provision, being a legislative 
function, would, therefore, be outside the judiciary's ken. According to 
the learned counsel, in any case, VAT and Entry Tax are separate taxes 
levied under separate Entries of List II of the Seventh Schedule. The 
granting of set off is a matter of indulgence and cannot be claimed as a 
D 
E 
F 
G 
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488 
SUPREME COURT REPORTS 
[2017] 13 S.C.R. 
A 
matter of right. It is of essence that the same person should have paid 
both Entry Tax and VAT to claim set off In the present case, the 
Appellant admittedly pays only Entry Tax and no VAT as there is no levy 
on the Appellant when it sells oilto otherOMCs. According to the learned 
counsel, Ai:ticle 14 of the Constitution cannot be invoked in the present 
B 
c 
D 
E 
case for the reason that there is no clear and hostile discrimination, which 
is the requirement of several judgments of this Court, before Article 14 
can be used to strike down tax legislation. In any event, according to the 
learned counsel, striking down the second proviso would only result in 
no i;<:t off being claimable at all and would be counterproductive. The 
leame<l counsel made a fervent plea that interest by way of restitution, 
at least, should,.bc giY<;m to the Government since the Writ Petitions that 
were filed in 2014 resulted in stay orders which have continued till date, 
making it impossible for the State to recover interest on the demands 
made. He cited anumberofjudgments to support all these propositions. 
9. Having heard learned counsel for both the partieS; it is necessary 
to set out some of the provisions of the two Acts in question. Since we 
are directly C{l)llcerned with the Bihar Entry Tax Act, the following 
provis:ions need to be adverted to: 
"2. Definitions.- (I) In this Act unless the context otherwise 
requires,-
(c)
"E>'ltry of goods", with all its grammatical variations and 
cognate expressions, means, entry of goods: 
(i) into: a local area from any place outside such area, 
(ii) into a local area from any place outside the State, 
F 
(iii) into a local area from any place outside the territory oflndia, 
for consumption, use or sale therein. 
Provided that in case of such goods which are liable to tax under 
Section-12(1) of the Bihar Finance Act, 1981, entry of goods 
shall mean entry of goods into local area from any place outside 
G 
the State for consumption, use or sale therein. 
H 
Explanation- Entry of goods into a local area for consumption, 
use or sale therein from any place outside the territory of India 
shall also be dee,med to be an entry of goods for the purposes of 
this Act.
INDIAN OIL CORPORATION LIMITED v. STATE OF BIHAR & 
489 
ANR. [R. F. NARIMAN, J.] 
3. Charge of Tax - (I) There shall be levied and collected a tax 
A 
on entry of scheduled goods into a local area for consumption, 
use or sale therein for the purpose of development of trade, 
commerce and industry in the State, at such rate, not exceeding 
twenty percent, of the import value of such goods, as may be 
specified by the State Government in a notification published in 
B 
a official gazette subject to such conditions as may be prescribed: 
Provided different rates for different scheduled goods may be 
specified by the State Government. 
Provided further, that if an importer claims that he imported goods 
notified under sub-section (I) not forthe purpose of consumption, 
use or sale, the burden of proving that the import was for purposes 
other than for consumption, use or sale shall be on importer 
importing such goods and making such claim. 
c 
Provided further, that if an importer claims that he imported goods 
notified under sub-section (I) not forthe purpose of consumption, 
D 
use or sale, the burden of providing that the import was for 
purposes other than for consumption, use or sale, shall be on 
importer importing such goods and making such claim. 
(IA).The tax under sub-section (I) shall be continued to be levied 
till such time as is required to improve infrastructure within the 
E 
State such as power, road, market condition etc. with a view to 
facilitate better
marlcet condition for trade, commerce and industry 
and to bring it to the level of, National average. 
(2) The tax leviable under this Act shall be paid by every dealer 
liable to pay tax under Bihar Value Added Tax Act, 2005 or any 
other person who brings or causes to be brought into the local 
areas such scheduled goods whether on his own account or on 
account of his principal or takes delivery or is entitled to take 
delivery of such goods on such entry: 
F 
Provided no tax shall be leviable in respect of entry of such 
G 
scheduled goods effected by a person other than the dealer if, 
the value of such goods does not exceed one thousand in a year. 
Provided further that where an importer of Scheduled goods 
liable to pay tax under the Act, incurs tax liability, at the rate 
specified under Section 14 of the Bihar Value Added Tax Act, 
H
490 
A 
B 
c 
D 
F 
li 
H 
SUPREME COURT REPORTS 
[2017] 13 S.C.R. 
2005 (Act 27 of2005), by virtue of sale of imported Scheduled 
goods or sale of goods manufactured by consuming such imported 
Scheduled goods, his tax liability under the Bihar Value Added 
Tax Act, 2005 (Act 27 of2005) shall stand reduced to the extent 
of tax paid under the Act: 
Provided also that if the sale of such scheduled goods is exempted 
from tax under any notification issued under Section 7 of the 
Bihar Value Added Tax Act, 2005, reduction of his liability under 
the Bihar Value Added Tax Act, 2005, as provided in this section 
or any notification there under, issued shall not be made. 
(I) The amendment made in section 3 of the said Act shall be 
deemed to be, and to always have been, for all purposes, as 
validity and effectively in force at all material times (w.e.f. 
25.2.199$) 
(2) Any assessment, collection, adjustment, reduction or 
computation made or any other action taken or anything done or 
purported to have been taken or done under the Bihar Finance 
Act, 1981 and the BiharTaxon Entry of Goods into Local Areas 
for Consumption, Use or Sale Therein Act, 1993 and notifications 
issued and rules made there under shall be deemed to be and to 
have al'Mays been, for all purposes, as validly and effectively, 
assessed, collected, adjusted, reduced, computed or taken or done 
as if the said Act as amended by this Ordinance had been in 
force at all material times and accordingly,
notwithstanding 
anything contained in any judgment, decree, or order of any court, 
or tribunal or other authority:-
( a) no suit or other proceedings shall be maintained of continued 
in court or tribunal or other authority for the refund of any amount 
received or realized by way of such tax; 
(b) no colU't, tribunal or other authority shall enforce any decree 
or order directing the refund or any amount received or realized 
by way of such tax; 
(c) recoveric, shall b~ made in accordance with the third proviso 
to subsection (2) of Section 3 of the BiharTax on Entry of Goods 
Into Local Areas for Consumption, Use or Sale Therein Act, 
1993 of all amounts which could have been collected as tax under
INDIAN OIL CORPORATION LIMITED v. STATE OF BJHAR 
491 
[R. F. NARJMAN, J.] 
the said Act by reason of amendment made in Section 3 by this 
A 
Ordinance but which had not been collected. 
(3) For the removal of doubts, it is hereby declared that no act or 
omission on the part of any person shall be punishable as an 
offence which would not have been so punishable if this section 
has not come into force. 
B 
Provided that in case of a manufacturer the reduction in tax 
liability as aforesaid shall only be allowed to industrial units of 
the small scale sector, the medium scale sector and sick industrial 
units: 
Provided that the said reduction in tax shall be available to 
C 
manufacturer if the imported scheduled goods are used or 
consumed in the manufacture of goods which are sold within the 
State of Bihar or in the course of inter-State trade and commerce 
or in the course of export out of the territory of India. In case 
only a part of the goods manufactured out ofimported Scheduled 
D 
goods are sold within the State ofBihar or in the course ofinter-
State trnde and commerce or in the course of export out of the 
territory of India, the claim for reduction in tax liability shall stand 
proportionately reduced: 
Provided further that such reduction from the tax liability shall 
E 
be admissible only if the dealer specifically mentions in the returns, 
filed under Section-24 of the Bihar Value Added Tax Act, 2005 
(Act27 of2005), the Number, date and the amount of the
Challan 
by which the payment of Entry tax in relation to which the 
reduction has been claimed, has been made. 
(3) The liability to pay tax on Scheduled goods shall only be at 
the point of first entry into a local area and any subsequent entry 
or entries into any other local area or areas of the said Scheduled 
goods shall not be subject to tax provided the subsequent importing 
dealer produces before the assessing officer the original copy of 
F 
the cash memo, invoice, bill or challan issued to him by the dealer 
G 
from whom he purchased or received the said Scheduled goods, 
and files a true and complete declaration in the Form and manner 
prescribed: 
Provided that no tax shall be levied and collected in respect of 
any motor vehicle which was registered in any other State or H
492 
SUPREME COURT REPORTS 
(2017] 13 S.C.R. 
A 
Union Territory under the Motor Vehicles Act, 1988 for a period 
of fifteen months or more before the date on which it is registered 
in the State under that Act. 
B 
c 
D 
E 
F 
H 
THE BIJIAR TAX ON ENTRY OF GOODS INTO LOCAL 
AREA ~ULES, 1993 
8. Mann~r for claiming reduction in the liability to pay sales 
tax.-( I) A claim for reduction in the liability to pay sales tax 
shall be made by registered dealer who is entitled to claim such 
reduction under sub-section (I) of section 4 or.in accordance 
with the notification issued under sub-section (I) of Section 3 of 
the Act. 
(2) The claim shall be valid only when the amount of entry tax 
has been paid on the concerned goods. 
(3) The burden of proving the claim for reduction of sales tax 
shall be on the dealer. 
(4) Such qlaimshall be made by furnishing a statement in triplicate 
in Form ET-X which shall be filed along with the quarterly return. 
(5) On receipt of the claiminFormET-X, the authority prescribed 
for assessment of tax shall scrutinize the same before the date 
• for filing of the next quarterly return and shall satisfy itself 
regarding the correctness of the claim. He shall make appropriate 
endorsement in the assessment record of the dealer and sign the 
certificate in the said form. 
( 6) Two copies of the statement containing certificate of the 
assessing authority shall be returned to the dealer. He shall furnish 
one copy of the form to the authority
prescribed under the Bihar 
Value Added Tax Act, 2005 to enable it to reduce the dealers 
liability at the time of assessment of sales tax payable under the 
said Act and shall keep other copy as evidence with himself. 
FORM E.T.-X 
(See Rule 8) 
Statement of claim for reduction in the liability of sales 
tax payable under the Bihar Finance Act, 1981 
~onscquent upon payment of entry tax. 
(To be furnished in triplicate) 
I. Name of the dealer.
INDIAN OIL CORPORATION LIMITED v. STATE OF BIHAR 
493 
[R. F. NARIMAN, J.] 
2. Style of business & full address 
A 
3. Registration number under the B.T. on E. of G into L.A. 
Ord., 1993 
4. Registration No. under the Bihar Finance Act, 1981. 
5. Period to which the claim relates. 
I ............ (Full name of the dealer) hereby request for reduction 
in my liability of sales tax payable under the Bihar Finance Act, 
1981 in accordance with the provision of sub-section (I) of 
section 4 of the Bihar Tax on Entry of Goods into Local Areas 
B 
for Consumption, Use or Sale therein Ordinance, 1993 the c 
notification issued under sub-section ( 12) of section 3 in respect 
of the goods on which entry tax has been paid by me/us and 
which have been sold subsequently and sales tax under the Bihar 
Finance Act, 1981 has become payable. 
PARTICULARS 
SI. 
Description 
Concerned Bill Quantity Value 
NO. 
of schedule I 
Invoice 
I 
l 
goods 
on Challan No. & 
which entry date in case of 
tax has been Motor Vehicles 
paid by the mention 
dealer. 
Chassis no. & 
Engine 
No. 
- .. 
also 
I 
2 
3 
4 
5 
.. · 
Amount of Period 
C.M. Bills 
Sales 
Sale tax 
Remarks 
entry tax 
during 
I Invoice 
tax 
payable 
paid 
which 
no. & date 
payable 
after 
(Quote 
sold 
relating to 
reduction 
T.C. No. 
sale 
ofliability 
& date) 
6 
7 
8 
9 
10 
11 
D 
E 
F 
G 
H
494 
SUPREME COURT REPORTS 
(2017] 13 S.C.R. 
A 
I hereby declare and certify that the above particulars are collect 
and complete to the best of my knowledge and belief. 
B 
I further certify that the amount of entry tax shown in this 
statement has been paid by me. 
Signature of the dealer or his declared manager. 
CERTIFICATE 
(To be signed by the assessing officer) 
Certified that the particulars furnished in this statement have 
been scrutinised by me and found to be correct. The amount of 
C 
entry tax on the goods concerned, to the extent of which the 
liability of sales tax under the Bihar Finance Act, 1981 has been 
claimed to be reduced has been duly paid by the dealer. 
Signature & designation of the authority." 
D 
10. ~o far as the Bihar VAT Act is concerned, it is necessary to 
refer to the following provisions: 
E 
F 
G 
H 
"3. Charge of tax.- (1) Every dealer who is registered under 
the Bihar Finance Act, 1981 (Bihar Act 5of1981), as it stood 
before its repeal by section 94, shall be liable, on or after the 
commencement of this Act, to pay tax under th is Act on sale or 
purchase, made by him. 
(2) Every dealer to whom the provisions of sub-section (I) do 
not apply and whose gross turnover of sales calculated from the 
commencement of the year ending on the day immediately before 
the commencement of the Act, exceeds the specified quantum, 
as applicable to him under the Bihar Finance Act, I 981, as it 
stood before its repeal by Section 94, on the last
day of such 
year shall, in addition to the tax, ifany, payable by him under any 
other provision of this Act, be liable to pay tax under this Act on 
all his sales. 
(3) Every dealer to whom the provisions of sub-section ( 1) or 
sub-section (2) do not apply, shall be liable to pay tax under this 
Act -
(a) on all his sales of goods which have been imported by him 
from any place outside Bihar, with effect from the day on which 
he effects first sale of such goods; or
INDIAN OIL CORPORATION LIMITED v. STATE OF BIHAR 
495 
[R. F. NARIMAN, J.] 
(b) in any other case, from the date on which his gross turnover, 
A 
during a period not exceeding twelve months, first exceeded such 
taxable quantum as may be prescribed: 
Provided that the taxable quantum as may be prescribed under 
this sub-section shall not exceed ten lakh rupees. 
Provided further that different taxable quantum may be prescribed 
B 
for different classes of dealers. 
13. Point or points in series of sales at which Sales Tax 
shall be levied.- (I) (a) Subject to the provisions of section 16 
and section 17, tax on sale of goods shall be levied at each point 
in a series of sales in Bihar by a dealer liable to pay tax under 
C 
this Act. 
(b) Where the tax is levied at each point of sale, the tax payable 
by a dealer at any point shall be the amount arrived at after 
deducting, the input tax credit specified under section 16 or section 
17, from the tax computed at that point of sale. 
(2) (a) Notwithstanding anything contained in sub-section (I), 
the tax on the sale of goods specified in Schedule IV shall be 
levied at such point or points in a series of sales in the State as 
the State Government may, by notification, specify. 
(b) Where by a notification published under clause (a), the State 
Government specifies, in respect of any goods specified in 
Schedule IV, that the tax shall be levied at the first point of their 
sale in the State of Bihar by a dealer, subsequent
sales of the 
same goods in the State ofBihar shall not be levied to tax, if the 
dealer making subsequent sale produces before the prescribed 
authority the original copy of the cash memo, or invoice or bill 
· issued to him and files a true and complete declaration in the 
form and in the inanner prescribed. 
D 
E 
F 
(c) Where by a notification published under clause (a), the State 
Government specifies, in respect of any goods specified in 
Schedule IV, that the tax shall be levied at more than one point 
G 
or on all points of sale, the amount of tax paid at each preceding 
stage of sale shall be adjusted against the amount of tax payable 
at each subsequent stage of sale in the manner prescribed. 
( d) The declaration referred to in clause (b) shall be issued by 
the selling dealer to the purchasing dealer not later than the 30th 
H
496 
SUPRIBME COURT REPORTS 
(2017] 13 S.C.R. 
A 
day of September of the year following the year to which such 
sales relate. 
(3) If upon information, the prescribed authority has reasons to 
believe that the selling dealer has, without reasonable cause, failed 
to issue to the purchasing dealer the declaration referred to in 
B 
sub-section (2), he shall, after giving the selling dealer a reasonable 
opportunity of being heard, direct that the selling dealer shall 
pay, by way of penalty, a sum of rupees five thousand per month 
for every month of default or the amount of tax involved, 
whichever is less. 
c 
14. Rate of Tax.-(!) Tax shall be payable on the sale price of-
( a) the goods specified in the Schedule II, at the rate of one 
percent; 
D 
E 
F 
G 
H 
(b) the goods specified in the Schedule III, at the rate of six 
percent; 
(bb) the g<iJods specified in the Schedule UIA, at the rate of five 
percent; 
( c) the goods specified in the Schedule IV, at the rate not below 
ten percent and not exceeding fifty percent and subject to such 
conditions and restrictions, as the State Government may, by 
notification specify. 
(d) any other goods, not specified in the Schedules I, II, III, IIIA 
and N, at the rate of fifteen percent. 
(2) The State Government may, by notification, alter any Schedule 
to this Act. 
16. Input Tax Credit (3) No input tax credit under sub-section 
( 1) shall be claimed or be allowed to a registered dealer -
(a) in respect of goods specified in
Schedule-N or such other 
goods as may be prescribed; 
35. Taxable Turnover.- (I) For the purposes of this Act, the 
taxable turnover of a dealer shall be that part of his gross turnover 
which remains after deducting therefrom-
(f) sale priC1e at the subsequent stages of sale of such goods as 
are specified in Schedule N of the Act as being subject to tax at
INDIAN OIL CORPORATION LIMITED v. STATE OF BIHAR 
497 
[R. F. NARIMAN, J.] 
the first point of their sale in the State of Bihar, if necessary 
A 
evidence as required by sub-section (2) of section 13 are filed 
with the return filed by the dealer under sub-section (3) of 
section24. 
I. 
2. 
3. 
4. 
5. 
6. 
7. 
Goods 
Schedule-IV 
(See section 14) 
Country liquor including spiced country 
liquor. 
Portable spirit, wine or liquor whether 
imported or manufactured in India. 
High Speed Diesel Oil and Light Diesel 
Oil. 
Motor Spirit. 
Natural Gas. 
Aviation Turbine Fuel 
Tobacco and tobacco products, except biri 
and unmanufactured tobacco (commonly 
known 
as 
~'Khaini"), 
and 
other 
unmannfactured 
tobacco 
used 
in 
manufacture ofbiri. 
Bihar Value Added Tax Rules, 2005 
B 
c 
D 
E 
18. Taxable turnover- For purposes of section 35 the taxable 
turnover of the dealer shall be that part of his gross turnover 
F 
which remains after deducting therefrom: 
( 6) Sale price at the subsequent stages of sale of such goods: 
(a) specified in Schedule IV of the Act as being subject to tax at 
the first point of their sale in Bihar, or 
(b) on the sale whereof tax at the maximum retail price has been 
paid at the first point of its sale in Bihar, 
if necessary evidence as required by sub-section (2) of section 
13 is annexed with the return required filed by the dealer under 
sub-section (I) of section 24. 
G 
H
498 
SUPREME COURT REPORTS 
(2017] 13 S.C.R. 
A 
19. Returns. - ((2) Every registered dealer, other than a dealer 
paying tax under sub-section (I) or sub-section (IA) or sub-
section ( 4) of Section 15, shall furnish to the authority specified 
in Rule 62:-
B 
c 
D 
E 
F 
G 
H 
(a) A qµarterly return in Form RT-I in duplicate; 
(b)An annual return in Form RT-Ill in duplicate. 
Provided that every registered developer, who has opted to pay 
compounding tax under the provisions of Section-I 5C ofBihar 
Value Added Tax Act, 2005 in lieu of tax payable under the Act 
shall furnish to the authority specified in Rule 62-
( a) a quarterly return in Form RT-IA; 
(b) an annual return in Form RT-IIIB. 
FORM RT-I 
[See Ruic 19(2)) 
Quarterly Return under Section 24 of the Bihar Value 
Added Tax Act, 2005 
Name and style of the dealer: 
TIN: 
Period of Return (Quarter and Year): 
Part I (Details of turnover/transfers) 
1 
Gross Turnover lincludin!! value of debit notes): 
Deductions: 
2 
Sales in the course of inter-state trade and 
commerce 
3(i) 
Value of sales outside the State under Section 4 
of the Central Sales Tax Act, 1956 
3(ii) 
Value of stock transfer to outside the State 
4 
Value of sales return of goods within 6 months 
of sale under the Act 
5 
Exnort sales 
6 
Amount of other allowable deductions [As per 
Box Al 
7 
Total of deductions r2+3+4+5+61 
8 
Taxable turnover rl-71
INDIAN OIL CORPORATION LIMITED v. STATE OF BIHAR 
499 
[R. F. NARIMAN, J.] 
Box A (other allowable deductions) 
A 
Deduction on account of: 
Value 
(ii) 
Sale of Petrol, Diesel, ATF and 
Natural Gas by an Oil Company 
to another Oil Company (a list of 
B 
different goods to be annexed to 
this return separately alongwith 
their respective sales values) 
[Details of goods 
sold 
to 
different 
companies 
to 
be 
submitted as ver Bax E-21 
c 
11. A notification dated 4th May, 2006 issued under Section 13(2)(a) 
of the VAT Act reads as follows: 
1 
"In exercise of the powers conferred by clause (a) of sub-section 
(2) of section 13 of the Bihar Value Added Tax Act, 2005 the 
D 
Governor of Bihar is pleased to direct that tax on the sale of 
goods specified in column 2 of the table appended hereto shall 
be levied at point or points in a series of sales specified in column 
3 of the said table subject to the conditions and restrictions 
specified in column 4 of the said table. 
E 
Table 
Description of 
Stage at which said tax 
Conditions 
Goods 
is to be levied 
and 
Restrictions 
Motor spirit 
(A) At the point of 
(Petrol) 
sale by importer if the 
F 
goods are imported 
from outside Bihar or 
at the point of sale by 
manufacturer if the 
goods are 
manufactured in 
Biharor, (b) at the 
G 
point of sale by oil 
companies to the 
retailer or direct to 
the consumers, if 
goods are sold by 
these comnanies. 
H
500 
A 
B 
c 
SUPREME COURT REPORTS 
[2017] 13 S.C.R. 
2 
High Speed 
Do 
IDiesel Oil and 
Li!!ht Oil 
12. Since the set off in question depends upon the interpretation 
of Section 3(2) of the Entry Tax Act, it is necessary to state, at the 
outset, that the following conditions need to be satisfied for claim of set 
off under the said provision: 
(i) First and foremost, under Section 3(2) itself, the tax leviable by 
way of Entry Tax can only be paid by every dealer liable to pay 
tax under the VAT Act; 
(ii) The set off can only be granted ifthe assessee is an importer of 
scheduled goods, who is liable to pay tax under the VAT Act; 
(iii) The assessee must incur tax liability at the rates specified under 
Section 14 of the VAT Act; 
D 
(iv) This must only be by virtue of the sale of imported scheduled 
E 
F 
goods; and 
(v) "His" taic liability under the VAT Act will then stand reduced to 
the extemt of tax paid under the Act. 
13. It will be seen that the tax leviable under the Entry Tax Act 
shall be paid by every dealer liable to Pl!Y 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 
theBihar Finance Act, 1981 and is thus liable to pay tax under the VAT 
Act. Condition (i), therefore, is certainly fulfilled.
14. So fur as Condition (ii) is concerned, the Appellant is an importer 
of scheduled goods, viz., petroleum products. Words and expressions 
that are not defined under the Entry Tax Act shall have the meaning 
assigned to them under the VAT Act, (See Section 2(2) of the Entry Tax 
G 
Act). Under the VAT Act, "importer" is defined as follows: 
H 
"2. Definitions- In thisAct, unless the context otherwise requires: 
(p) "importer" means a dealer who brings any goods into the 
State of Bihar or to whom any goods are despatched from any 
place outside the State of Bihar."
INDIAN OIL CORPORATION LIMITED v. STATE OF BIHAR 
501 
[R. F. NARIMAN, J.] 
It can be seen from the aforesaid definition that an importer would 
A 
necessarily refer to a dealer who imports scheduled goods from outside 
the state. The question arises as to whether, on such goods, the Appellant, 
as importer, is liable to pay tax under the VAT Act. 
15. 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 
B 
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 
C 
the said Act is only at such point as the State Government may, by 
notification, specify. This takes us to the notification dated 4"' 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 
D 
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. 
This becomes clear from the second part of this provision which reads: 
E 
F 
" .......... or sale of goods manufactured by consuming such 
G 
imported scheduled goods ......... " 
18. Further, Condition (v) must be that "his" i.e. the Appellant's 
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 
" ••
502 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
(2017] 13 S.C.R. 
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 set off. 
However, Shri Datar relied strongly on the judgment in Associated 
Cement Companies Ltd. v. State of Bihar & Ors., (2004) 7 SCC 
642. In this judgment, two manufacturing units of the Appellant, post-
bifurcation of the State ofBihar, fell into the State ofJharkhand. Thanks 
to an industrial policy to give incentives to existing units to encourage 
additional production, the Appellant was exempted in terms of the 
aforesaid pol icy from payment of sales tax on additional production for 
the period in question. The Entry Tax Act, as it then stood, was set out 
in the judgment and this Court held that, despite the fact that sales tax on 
cement was exempted, the Appellant was held to be a person who was 
liable to pay tax as the question of exemption would arise only when 
there is a liability to pay tax in the first place. The Appellant was liable to 
pay tax but for the exemption, and since it paid tax on the original 
production, apart from the additional production, it would be entitled to 
set off of tax paid under the Entry Tax Act. In our 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 ofadditional 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 aheady 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
INDIAN OIL CORPORATION LIMITED v. STATE OF BIHAR 
503 
[R. F. NARIMAN, J.] 
leviable only on the transaction between the said OMC and its retailer or A 
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 manufucturcd by consuming such 
B 
imported scheduled goods ....... " was added later by way ofamendment 
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 oft he aforesaid judgment has been nullified by the addition 
of a third proviso to Section 3(2) by the Bihar Finance Act, 2006, which 
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spec,ifically 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 Appellant's case very much further. 
20. Shri Datar also heavily relied upon The State ofTamilNadu 
v. M.K. Kandaswami & Ors., (1975) 4 SCC 745, in which this Court, 
while construing Section 7 A of the Madras General Sales Tax Act, 
referred with approval to a Kerala High Court judgment to hold that a 
dealer selling goods may still be liable to pay tax in circumstances in 
which no tax is payable under
the Act. We must remember that this 
Court was dealing with a provision which was stated to be a charging as 
well as a remedial provision, the main object being to plug leakage and 
prevent evasion of tax. It is in this situation that the aforesaid provision 
was given a purposive interpretation. In the present case, Section 3(2) 
second proviso is neither a charging section nor a prevention of evasion 
of tax section. It is a section which gives a certain concession as to set 
off, provided its conditions arc fulfilled. This judgment, therefore, also 
does not avail the Appellant. 
21. Shri Datar also relied upon A.V. Fernandez v. The State of 
Kerala, 1957 SCR 837, for the proposition that the gross turnover of the 
dealer should be looked at for finding out whether a dealer is liable to 
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pay VAT and clearly all sums payable, including sums by way of inter-
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State sales and exports, are taken into account for calculating gross 
turnover which would then show that the dealer would be liable to pay 
tax. This case 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 arc 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 
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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 
Tax Act. 
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22. Shri Datar then referred to State of Bihar & Ors. v. Bihar 
Chamber of Commerce & Ors., (1996) 9 SCC 136, for the proposition 
that the Objects and Reasons appended to the Bill of the Entry Tax Act 
showed that it was with a view to make the provision of the Bihar Finance 
Act more workable. From this 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 
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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 this case. 
23. Shri Datar's next plea was that a literal reading of the second 
proviso would lead to a situation where the same goods would suffer 
£ 
different rates of tax and this
would be discriminatory. We are 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 
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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 
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The State of Kerala & Anr., (1970) I SCC 189 at paras 16 and 19; 
Ganga Sugar Corporation Ltd. v. State of Uttar Pradesh & Ors., 
( 1980) I SCC 223 at 236 and P.M.Ashwathanarayana Setty & Ors. 
v. State of Karnataka & Ors., (1989) Supp. (I) SCC 696 at 724-726).
INDIAN OIL CORPORATION LIMITED v. STATE OF BIHAR 
505 
[R. F. NARIMAN, J.] 
25. We must also not forget that no assessee can claim set off as 
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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 22'"' September, 
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2017, at para 31). 
26. However, Shri Datar referred to observations contained in 
Ayurvcda 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 C 
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 
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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 sufficientto 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 ofinterest, the impugned 
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judgment dated 19m April, 2017, held that there can be no levy of interest·. F .. . __ 
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 . G 
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, 
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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 Bhara; Ferro Alloys Limited v. 
Transmission Corporation of Andhra Pradesh Limited & Anr., 
(2011) I 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 ofright, but is a 
matter of discretlion, 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 co(1tinued with the grant of set off till the year 2014, and 
reopened asses$ments beginning from 2008-09 based on an audit 
objection, wear¢ 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 th¢ 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 
alter 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 gra~t restitutional interest to the Revenue. 
31. The mWer, however, does not end here. Shri Datar pointed 
out that after the audit objections; a show cause notice dated 16" April, 
2014 was issued by the authority, which was replied to by letters dated 
16'h June, 2014 and 27'h June. 2014, in which the asscsscc repeatedly 
asked for time to make a detailed objection on the merits of the case. 
Finally, by a letter dated 22'" August, 2014, the assessec 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 tum to their retail consumers and though retail outlets were 
outside the local area of Patna. and, therefore, not exigible to Entry Tax 
at all. We find that. without asking for further data and back up details, 
the A5Sistant Commissioner of Commercial Taxes passed an assessment 
order immediately thereatler, on 27ili August, 2014, and issued demand 
notices on the very same date. We arc of the view that the Revenue 
appeared to have been in a great hurry to issue the aforesaid demand 
notices. and since we are dealing with OM Cs who have complete details
INDIAN OIL CORPORATION LIMITED v. STATE OF BIHAR 
507 
[R. F. NARIMAN, J.] 
of sales made for the years in question to their retail customers and 
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outlets outside the area of Patna, we feel that Shri Datar is right in 
asking that we give an opportunity to the Appellant to produce all relevant 
documentary material. which would show that a large amount of the 
demand for these years (ofRs.1,683.03 crores), would be liable to be 
done away with as Entry Tax would not be Jcviable on these transactions 
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at all as the consumption, use or sale of petroleum products has taken 
place outside the local area of Patna. Indeed, all these sales must have 
suffered Entry Tax in the local area outside Patna, where such retail 
sales were made, provided, of course, that they were made within the 
State of Bihar. We are, therefore, of the view that the Appellant will 
approach the Appellate Tribunal with all relevant materials in this behalf, 
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and the Appellate Tribunal will render a finding as to how much of the 
demand of Entry Tax for the assessment years in question would have 
to be struck down, in that sales made by HPCL and BPCL to their retail 
consumers and to others are made outside the local area of Patna. We 
give the Appellants 12 weeks' time to approach the Appellate Tribunal 
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with all details as aforesaid and request the Appellate Tribunal to render 
findings as required by this judgment, as expeditiously as possible 
thereafter. The stay orders granted in the
writ petitions, which have 
been continued till date, will continue till the decision of the Appellate 
Tribunal. 
32. With these observations, the Civil Appeal and the Special Leave 
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Petitions are disposed of. 
Ankit Gyan 
Matters disposed of.