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SUPREME COURT OF INDIA
ASHOK BHUSHAN, K.M. JOSEPH, JJ.
INDIAN OIL CORPORATION LIMITED – APPELLANT
VERSUS
STATE OF U.P. & ORS. – RESPONDENTS
CIVIL APPEAL NOS. 3257-3268 of 2019 (Arising Out of SLP(C) Nos. 31748-31759 of 2018)
Decided on : 22-04-2019
(B) Taxation – Entry Tax – Liability to pay interest on Entry Tax – Demand notices – Present is a case where appellant is not receiving any goods from any manufacturer – In present case Section 12 has no applicability – Provision by which authority is empowered to levy and collect interest, even if construed as forming part of machinery provisions, is substantive law – Liability to pay a tax or interest on it has to be provided by substantive law – Payment of interest which is contemplated under Section 33 on amount of tax has to be applied with regard to payment of Entry Tax and interest thereon – Even if provision of Section 33 of VAT Act, 2008 to be treated as machinery provision which is to be applied by virtue of Section 13 of Act, 2007, machinery provision has to be interpreted in a manner so as to make liability effective and treated to be substantive law – Questions for determining liability of interest and various aspects including factual aspects need to be examined and considered by High Court – Impugned judgment of High Court set aside – Writs revived before High Court to be considered and decided on merits. [U.P. Tax on Entry of Goods into Local Areas Act, 2007 – Sections 12(3) and 13; U.P. Value Added Tax Act, 2008 – Section 33] (Paras 36, 38, 43, 49 and 50)
Facts of Case:
Appeals centers around issue regarding liability to pay interest on Entry Tax on appellant under The U.P. Tax on Entry of Goods into Local Areas Act, 2007. Demanded Entry Tax having been paid by appellant, issue to be considered is with regard to liability to pay interest on Entry Tax alone. These appeals have been filed against Division Bench judgment of Allahabad High Court dismissing writ petitions filed by appellant questioning demand notices issued by respondent demanding interest on Entry Tax from appellant.
Findings of Court:
Questions for determining liability of interest and various aspects including factual aspects need to be examined and considered by High Court. There may be few other issues, questions of facts which need to be decided by High Court for determining liability of interest of appellant. It shall also be open for High Court to frame any other question or issue which may be required to be considered and answered.
Result : Appeals allowed
JUDGMENT
Ashok Bhushan, J.
These appeals have been filed against the Division Bench judgment of Allahabad High Court dated 22.11.2018 dismissing the writ petitions filed by the appellant questioning the demand notices issued by the respondent demanding interest on Entry Tax from the appellant.
2. These appeals centres round the issue regarding liability to pay interest on the Entry Tax on the appellant under The U.P. Tax on Entry of Goods into Local Areas Act, 2007 (hereinafter referred to as "Act, 2007") The demanded Entry Tax having been paid by the appellant, the issue to be considered is with regard to liability to pay interest on the Entry Tax alone.
3. The Entry Tax Legislations in the State of U.P. as well as in other States of the country have a long history of litigation. The Entry Tax Legislations enacted by different States including the State of U.P. were challenged in the High Courts questioning the very legislative competence of State Legislature to enact Entry Tax Legislations, which according to writ petitioners violated freedom of trade, commerce and intercourse guaranteed under Article 301 and other Articles of Part XIII of the Constitution of India. Some of the High courts including Allahabad High Court have struck down the initial Entry Tax Legislations on the ground that it violates rights guaranteed under Part XIII of the Constitution of India.
4. For deciding the issues, which have arisen in these appeals, it is necessary to notice the history of litigation in so far as State of U.P. is concerned. Levy of tax on entry of any goods into a local area was introduced by the U.P. Tax on Entry of Goods Ordinance, 2000, w.e.f. 01.11.1999, which Ordinance was replaced by the U.P. Tax on Entry of Goods Act, 2000, which Act was deemed to have come into force on 01.11.1999. The Entry Tax was also imposed on crude oil. The appellant filed a Writ Petition No. 251 of 2003 before the Allahabad High Court challenging the validity of levy of Entry Tax on crude oil. The Allahabad High Court vide its judgment and order dated 27.01.2004 declared Act No. 1 of 2000 as violative of Articles 301 and 304 of the Constitution of India and, thus, was held to be ultra vires. The State of U.P. filed a Special Leave Petition against the judgment dated 27.01.2004, which was later re-numbered as Civil Appeal Nos. 997-998 of 2004. This Court on 09.02.2004 passed following interim order:-
"Issue notice on the application for impleadment.
Leave granted.
The operation of the impugned judgment is stayed subject to the appellant's depositing all taxes that may be realized by the appellant from the respondents after 27.1.2004 in a separate interest bearing account. This amount and the interest accrued thereon shall be held subject to the further orders of this Court.
SLP (C) No. 3033/3004
Delink this matter."
5. The Constitution Bench of this Court in Jindal Stainless Ltd. (2) and Another vs. State of Haryana and Others, (2006) 7 SCC 241 laid down the yardsticks to determine whether tax was compensatory or not. Constitution Bench reiterated that the doctrine of "direct and immediate effect" on the trade and commerce under Article 301 as propounded in Atiabari Tea Co. Ltd. Vs. State of Assam, AIR 1961 SC 232 and the working test enunciated in Automobile Transport (Rajasthan) Ltd. vs. State of Rajasthan, AIR 1962 SC1406 for deciding whether a tax is compensatory or not was to continue to apply. Constitution Bench held that accordingly, the constitutional validity of various local enactments which are the subject matters of pending appeals, special leave petitions and writ petitions will now be listed for being disposed of in the light of this judgment.
6. Pursuant to Constitution Bench judgment, the matters were listed on 14.07.2006, when this Court permitted the parties to place the relevant materials in the concerned writ petitions within two months before the respective High Courts, which were to deal with the basic issue as to whether the impugned levy
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