Summary
Indian Oil challenged denial of entry-tax setoff for petroleum sold to other oil companies, where VAT arose only on those companies’ later sales. The Court rejected the claimed setoff and discrimination challenge, refused interest, but allowed the company to establish before the Tribunal the extent of sales outside Patna not liable to the disputed entry-tax demand.
Issues
- Whether VAT paid on another oil company’s downstream sales entitled Indian Oil to entry-tax setoff.
- Whether denial of setoff was discriminatory or required reading down.
- Whether interest and reconsideration of sales outside Patna were warranted.
Provisions considered
- Section3(2), second proviso, Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1993Setoff required the importer itself to incur the relevant VAT liability; it was person-specific rather than goods-specific. (¶¶ 9, 12–22)
- Section13(2)(a) and notification dated4May2006, Bihar Value Added Tax Act, 2005The relevant petroleum VAT levy arose on the receiving oil companies’ sales to retailers or consumers, not Indian Oil’s intervening sale to them. (¶¶ 10–11, 15–19)
Held
- Indian Oil’s general status as a registered dealer did not satisfy the distinct requirement that it incur VAT liability on the relevant sale as importer. Because VAT was levied only on BPCL/HPCL downstream sales, the statutory setoff conditions were unmet. The concession could not be rewritten to attach to goods irrespective of the taxpayer. (¶ 12–22)
- VAT and entry tax were separate taxes. The differential availability of a conditional setoff did not establish the clear and hostile discrimination required on these facts. Setoff was not an unconditional right, and the provision did not require reading down. (¶ 23–27)
- The unappealed High Court ruling against statutory interest was final. Restitutional interest was discretionary and inequitable here, given the State’s prior acceptance of setoff, retrospective reopening after the2014 audit and the company’s inability to pass the demand on to consumers. (¶ 28–30)
- The company had not received adequate opportunity to substantiate downstream sales outside Patna. It was allowed12weeks to approach the Appellate Tribunal with supporting records so that the Tribunal could determine the extent of demand to be struck down. Existing stays continued until that decision; no quantified reduction was finally determined. (¶ 31–32)
Result
Civil appeal and special leave petitions disposed of. Setoff and discrimination claims rejected; interest refused. Appellant allowed12weeks to approach the Tribunal on sales outside Patna, with existing stays continued until its decision.