Bihar Entry Tax Act | Adjustment Of Entry Tax Paid On Damaged Cement Against VAT Liability Not Admissible: Patna High Court

In affirming the directive of the Commercial Tax Tribunal, the Patna High Court ruled that the adjustment of entry tax paid on damaged cement is not permissible under the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use, or Sale therein Act, 1993. The court reiterated and upheld the tribunal's decision, reinforcing that the provisions of the aforementioned act do not allow for the adjustment of entry tax in the case of damaged cement.The above ruling came in an appeal arising from the order of the Commercial Taxes Tribunal, Bihar.The appellant, M/s ACC Limited manufactures and sells cement across the country through its various sales units, one of which is located in Patna and the appellant was also a registered dealer under the Bihar Value Added Tax Act, 2005. In the assessment year 2010-11, the appellant had imported 10,12,535.90 MT of cement into the State from their own manufacturing units situated in Orissa, Chhattisgarh & Jharkhand. In addition to the freight paid to the Railways and commission paid to the C&F agents, entry tax was also paid.The audit team of the Commercial Taxes Department (henceforth for short 'the department') found that the assessee had shown stock transfer from outside the State worth Rs.45,12,63,567.00 in the annual return as well as TAR, and the total import value shown in ET-V (Entry Tax Payment) was Rs.527,56,05,041.00, thus concealing value worth Rs.76,29,71,474.00.It was also found that the adjustment of entry tax paid on damaged cement was not admissible under the provisions of the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use, or Sale therein Act, 1993.The matter traveled to 'the Tribunal,' which on the question of freight and commission, remanded the case to the Assessing Officer for verifying the documents to evidence the contention taken.As far as entry tax paid on damaged cement is concerned, 'the Tribunal' found that it could not be adjusted from VAT liability, in the circumstance of the proviso to Section 3(2) of the Entry Tax Act having provided for such reduction of tax payable under the VAT Act only when the imported goods liable to pay tax under the Act incurred tax liability within the State.The damaged goods having not incurred any tax liability, there would be no reduction of VAT liability to the extent of the entry tax paid on such damaged goods was the finding; from which the questions of law in the appeal arise.The questions of law framed in the appeal were:“(I) Whether on the facts and in the circumstances of the case, 'the Tribunal' was justified in denying adjustment of entry tax paid on the damaged cement against VAT liability?(II) Whether on the facts and in the circumstances of the case, the appellant is liable to pay entry tax on damaged cement under the provisions of the Entry Tax Act and whether the appellant is not entitled for the refund or adjustment of the same? (III) Whether on the facts and in the circumstances of the case, the imposition of interest under Section 39 (4) of the VAT Act is arbitrary, illegal and without jurisdiction?”The Court elaborated on Section 3(1) of the Entry Tax Act, titled 'Charge of Tax,' which imposes a tax on the entry of scheduled goods into a local area for consumption, use, or sale, aimed at fostering trade, commerce, and industry in the State. The tax rate, capped at twenty percent, is based on the import value of the goods. Additionally, the Court delved into Sub-section (2) of Section 3, which mandates that any dealer liable for tax under the VAT Act or any other person importing scheduled goods into the local areas of Bihar must pay the entry tax. This applies whether the import is done independently or on behalf of a principal, and it is essential to pay the tax levied under the Entry Tax Act.With reference to Sub-section (2) of Section 3, the Court highlighted, "The interpretation of the above provisos assume significance to resolve the dispute herein. Second proviso to Section 3(1) provides that if the assessee who imports scheduled goods has a contention that it was not being imported for the purpose of consumption, use or sale, the burden of proving the said factum is on the importer.""The second proviso to subsection (2) also provides that on payment of entry tax by an importer of schedule goods who is also liable to pay tax under the VAT Act, when he incurs liability under the VAT Act, such liability shall stand reduced to the extent of tax paid under the Entry Tax Act. The set off under the VAT liability would arise only when there is a liability incurred under that Act and in the event of there being no consumption, use or sale within the State, the importer would have to prove as to how the goods were disposed of," the Court added.The Court clarified that these two scenarios—proving the purpose of import and reducing VAT liability—are distinct. If goods were imported for a purpose other than consumption, use, or sale within the State, the importer must...

Bihar Entry Tax Act | Adjustment Of Entry Tax Paid On Damaged Cement Against VAT Liability Not Admissible: Patna High Court

Bhavya Singh

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