K. Vinod Chandran, CJ. – The questions of law framed in the above appeal arising from the order of the Commercial Taxes Tribunal, Bihar (henceforth for short, ‘the Tribunal’) by order no.6 dated 27.07.2015 are the following: –

“(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?”

2. The facts on which the above questions of law arise are as follows: –

The appellant manufactures and sells cement across the country through its various sales unit, one of which is located at Patna and the appellant was also a registered dealer under the Bihar Value Added Tax Act, 2005 (for brevity, ‘VAT Act’). The appellant imports cement into the State from outside the State of Bihar by way of stock transfer to its depot at Patna and the cement is sold within the capital city as also in other districts in the State. There are eight C&F agents appointed in Bihar for the fifteen Warehouses situated in different towns within the State, for storage of cement.

3. In the assessment year 2010-11, the appellant 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 (for brevity, ‘Entry Tax Act’).

4. The matter travelled 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 cannot 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, incurs 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.

5. Learned counsel for the appellant argued based on a decision of the Hon’ble Supreme Court in Hindustan Lever Ltd. vs. State of Bihar; (2004) 136 STC 396 that the entry tax paid would be entitled to be reduced from the total VAT liability of the assessee, especially when the damaged goods were not sold within the State. Reliance is also placed on a decision of the Hon’ble Supreme Court in H.M.M Limited vs. Administrator, Bangalore City Corporation; (1989) 4 SCC 640 to contend that there can be no tax or duty levied without authority of law and that in the present case, the action of the Assessing Officer has resulted in levying of tax on goods which have not been sold or consumed within the State of Bihar, thus making the levy under the Entry Tax Act, one without authority of law.

6. Reliance is also placed o