Patna High Court
Food Corporation Of India vs The State Of Bihar And Ors. on 24 January, 2007
Equivalent citations: 2007(1)BLJR767, (2008)13VST41(PATNA)
Author: Aftab Alam
Bench: Aftab Alam, Rekha Kumari
ORDER Aftab Alam, J.
Page 0768
1. The petitioner, Food Corporation of India, seeks to challenge the order, dated 12.09.2006 passed by the Commercial Taxes Officer, Patliputra Circle, Patna under Section 8 of the Bihar Tax On Entry Of Goods Into Local Area For Consumption, Use Or Sale Therein Act, 1993 read with Section 32 of the Bihar Value Added Tax Act, 2005 charging entry tax amounting to Rs. 2,95,72,499.92 paise and penalty of Rs. 8,87,17,499.76 paise (totalling to Rs. 11,82,90,000/-). The entry tax was levied on food-grains (rice and wheat) brought by the petitioner to local areas within the State of Bihar from outside the State and the penalty was imposed as the Commercial Taxes Officer held that the action of the petitioner in not paying entry tax on the entire value of goods imported by it but only on the value of goods sold by it in Bihar during the relevant period amounted to concealment within the meaning of Section 32 of the VAT Act. The impugned order appertains to the first quarter of the year 2006-07, that is to say, for the period April 01 to June 30, 2006.
2. In the writ petition, it is stated that a notice vide Process No. 10410, dated 25.08.2006 (Annexure-2) issued by the Commercial Taxes Officer was received in the petitioner's office on 8.9.2006. In the notice, it was stated that the return for the first quarter submitted on behalf of the petitioner showed receipt of scheduled goods from outside the State amounting to Rs. 62,17,92,239/- but according to the information in his possession, the actual import made by the petitioner amounted to Rs. 1,06,45,90,171/-; it thus appeared that there was an attempt by the petitioner to suppress the true value of its imports. The petitioner was, therefore, asked to show cause, by 12.09.2006, why action should not be taken against it under Section 8 of the VAT Act, read with Section 32 of the Bihar Finance Act. On the date fixed (12.09.2006), the petitioner's representative appeared before the Commercial Taxes Officer and submitted its show cause. In the show cause, it was pointed out that the total value of food-grains imported by the petitioner into this State was Rs. 1,36,11,04,737/-, that is, much higher than the figure stated in the notice on the basis of the information that the Commercial Taxes Officer claimed to possess. It was further stated that the value of goods imported by the petitioner was correctly shown in the return for the first quarter duly submitted before the Commercial faxes Officer and a reference to it would have made it clear that the actual import was much higher than the figure stated by the Commercial Taxes Officer in his notice and, therefore, there was no question of any attempt at concealment or suppression of imports. It was further explained that entry tax was paid on goods amounting to Rs. 62,17,92,239/- (and not on the total value of the imports) because during the relevant period that was the value of the goods sold by the petitioner in Bihar. The balance quantity of goods, though imported, still remained in its godowns/warehouses unsold in this State.
3. The Commercial Taxes Officer accepted that the figures stated in the show cause were the same as shown in the petitioner's return for the first quarter. He nevertheless, held that payment of entry tax only on the value of goods sold and not on the total value of goods brought in the local area amounted to concealment and hence, imposed Page 0769 penalty apart from levying entry tax on the differential value of the goods. The impugned order was followed by demand notice(s) and attachment of the petitioner's bank account for realisation of the demand.
4. Mr. J.N. Sahaya, Counsel appearing for the petitioner assailed the impugned order, the demand notice(s) and the attachment of the petitioner's bank account on a number of grounds. One of the foremost grounds on which the impugned order was challenged was that the entry tax was constitutionally invalid, bad, illegal and inoperative.
5. Here it may be recalled that hearing of this case concluded on 20.11.2006 and order was reserved. After that, following the order of the Supreme court, a bench of this Court of which one of us (Aftab Alam, J) was a member examined the constitutional validity of the Bihar Entry Tax Act in two cases filed by Indian Oil Corporation Limited and Anr. v. The State of Bihar and Ors. CWJC No. 2739 of 2003 and Another. Harinagar Sugar Mills Limited v. The State of Bihar and Ors. CWJC No. 6540 of 2002. In the two cases, the Court considered in detail the provisions of the Bihar Tax On Entry Of Goods Into Local Areas For Consumption, Use Or Sale therein, Act 1993 and a number of amendments to which the Parent Act was subjected. By judgment and order, dated 9.1.2007 passed in those cases, this Court held that the impost under the Bihar Entry Tax Act, 1993, in its unamended form, was not compensatory in nature. Nevertheless, the Parent Act, before its amendments, was saved by virtue of Article 304(b) of the Constitution and was consequently a good piece of legislation. The amendments introduced in the Act by Amending Act 10 of 2001 (with effect from 5.11.2001) and by Amending Act 9 of 2003 and Amending & Validating Act 11 of 2003 (with effect from 22.08.2003) were, however, violative of the proviso to Article 304(b) of the Constitution. On account of the amendments the Act was deprived of the protection of Article 304(b) of the Constitution and was rendered constitutionally invalid and illegal. This position continued upto 29.08.2006 when as a result of further amendments introduced in the Act by Bihar Act 19 of 2006, the levy under it acquired the character of a compensatory tax and the Act came to be in accord with Article 301 of the Constitution. To sum up, the Bihar Entry Tax Act, 1993 was invalid, bad and illegal during the period 5.11.2001 to 28.08.2006.
6. The impugned order is for the period 1.4.2006 to 30.06.2006 when according to the Court's judgment, the Entry Tax Act was not a valid and enforceable piece of legislation. On this ground alone, this writ petition has to be allowed.
7. But the facts of the case illustrate an important point regarding validity of the Act during the period 5.11.2001 to 28.08.2006 and I would like here to briefly touch upon that aspect of the matter.
8. It is to be noted that only six goods were listed under the schedule to the Parent Act, 1993 and paddy, rice and wheat (the subject of the levy in this case) were not among the scheduled goods. Paddy, rice and wheat were not included in the schedule even when it was expanded by Amending Act 10 of 2001 (with effect from 5.11.2001) and further by Amending Act 9 of 2003 (with effect from 22.08.2003). But the second Amendment Act (Act 9 of 2003) inserted Section 3A that empowered the State Government to amend or alter the Page 0770 schedule of the Act or to add anything in it by issuing a notification. In exercise of the power under Section 3A of the Act, the State Government issued notification No. SO 34, dated 1.4.2006 by which paddy, rice, wheat, pulses, flour, atta, maida, suji and besan were added at Serial No. 25 of the Schedule. On the same date, the State Government issued another notification bearing No. SO 32 in exercise of the power under Section 3(1) of the Act fixing the rate of entry tax on paddy, rice, wheat etc. at 4% of their value. It is an admitted position that at that time the rate of sales tax on paddy, rice, wheat etc. was 1%. In other words, the rate of entry tax on the goods in question was higher then the rate of sales tax by 3%.
9. Here, it may be recalled that in M/s Indian Oil Corporation Ltd. and M/s Harinagar Sugar Mills Ltd., it was argued that following the amendment in the definition of 'Entry of Goods' with effect from 5.11.2001 (by Amending Act 10 of 2001), the Act had become discriminatory against goods imported from outside the State. The Advocate General rebutted the contention submitting that the charge of discrimination overlooked the fact that simultaneously with the amendment in the definition of 'Entry of Goods', a provision was introduced (vide second proviso to Sub-section 2 of Section 3) for giving credit for entry tax levied and collected towards the sales tax payable on the sale of those goods. He submitted that the Act was provided with an internal balancing mechanism that saved it from being discriminatory against goods imported from other States. In that case, it was pointed out that atleast in case of paddy, wheat and rice, the rate of entry tax was higher than the rate of sales tax with the result that paddy, rice and wheat imported from outside the State suffered a higher incidence of tax compared to paddy, rice and wheat procured from within the State. The Advocate General countered the submission by taking the stand that if for some goods the rate of entry tax was higher than the rate of sales tax then that might be a ground to challenge the notification fixing the rate of entry tax under Sub-section (i) of Section 3 of the Entry Tax Act but on that basis, it could not be argued that the Act was itself discriminatory or violative of Article 304(a) of the Constitution. It thus becomes plain and clear that in order to save the Act from the vice of discrimination against paddy, wheat and rice imported from outside the State, the notification No. SO 32, dated 1.4.2006 fixing the rate of entry tax on those goods at 4% of their value must be struck down for being higher than the rate of sales tax on those goods. This is another important ground on which this writ petition is bound to succeed.
10. Since the writ petition succeeds on the two grounds as discussed above, it is not necessary to go into the other points raised by Mr. Sahaya. But I must observe here that leaving aside the constitutional validity of the Act during the period in question or the legality of the notification bearing No. SO 32, dated 1.4.2006, on the admitted facts of the case, I am completely unable to justify the finding that there was any attempt by the petitioner to evade the levy of entry tax and the consequential imposition of the heavy penalty. Further, as much as the imposition of penalty was unjustified, the demand notices and the attachment of bank account(s) for realisation of the demand were even more arbitrary and unwarranted. I am constrained to observe that such methods are bound to cause more harm than good to the cause of collection of State revenue.
Page 0771
11. In light of the discussions made above, the conclusion is inevitable that the levy of entry tax on paddy, rice and wheat imported by the petitioner during the period 1.4.2006 to 30.6.2006 was unauthorized, bad and illegal. The impugned order, dated 12.09.2006 and the consequent demands and the actions taken by the Authorities for realisation of the demand are accordingly quashed.
12. This writ petition is allowed.
Rekha Kumari, J.
13. I agree.