ASSOCIATED CEMENT COMPANIES LTD. versus STATE OF BIHAR AND ORS.

Citation: [2004] SUPP. 4 S.C.R. 868 · Decided: 29-09-2004 · Supreme Court of India · Bench: ARIJIT PASAYAT · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
c 
D 
E 
F 
G 
ASSOCIATED CEMENT COMPANIES LTD. 
v. 
ST A TE OF BIHAR AND ORS. 
SEPTEMBER 29, 2004 
[ARIJIT PASAYAT AND C.K. THAKKER, JJ.] 
Bihar Finance Act, 1981-Section 3-Bihar Entry of Goods into Local 
Areas for Consumption, Use or Sale Therein Act, 1993-Section 3-Sales 
tax-Levy of-By Notification liability to pay tax under Finance Act exempted 
to the extent tax paid under Entry Tax Act-Demand of tax by Revenue 
denying adjustment of entry tax on the ground that there was no liability due 
to exemption-High Court upheld the demand-On appeal , held: Assessee 
was entitled to reduction to the extent of tax paid under Entry Tax Act in view 
of the Notification-It was liable to pay tax but for the exemption-Liability 
to pay tax and actual payment of tax are conceptually different. 
Words and Phrases: 
"Exemption", "Liable "-Meaning of 
Petitioner-Company was engaged in manufacture of cement. Their 
factories/units were registered under Bihar Finance Act, 1981. State of 
Bihar vide its Industrial Policy, 1995 offered Sales tax exemption on 
incremental production to existing industrial units in the State, which 
undertook expansion of their capacities. The policy was given effect to 
by Notification dated 22.12.1995. State granted exemption to the 
petitioner w.e.f. 1.4.1998 to 31.3.2007 protecting additional production 
of cement from payment of sales tax. Entry tax paid under Bihar Entry 
of Goods into Local Areas for Consumption, Use or Sale Therein Act, 
1993, for transfer of its stock to other districts of the State by the 
petitioners used to be adjusted towards total'liability of Sales Tax on the 
sale of cement in terms of the Industrial Policy and Section 3(2) of Entry 
Tax Act. 
After bifurcation of the State of Bihar into States of Bihar and 
Jharkhand, the concerned units of the petitioner fell in the State of 
Jharkhand. Revenue issued demand notices stating therein that entry 
H 
tax paid on exempted cement could not be adjusted against sales tax 
868 
ASSOCIATED CEMENT COMPANIES LTD. v. STATE 
869 
payable on other cement i.e. non-incremental production and demanded 
tax, for the exempted period. Petitioner filed Writ Petition challenging 
the demand notices. High Court dismissed the Petition upholding the 
validity of the demand notices. 
In appeal to this Court, respondent-State contended that when there 
was no liability because of exemption granted, question of adjustment of 
tax in respect of goods which have not suffered tax does not arise. 
Allowing the appeal, the Court 
A 
B 
HELD: 1. It cannot be said that as tax was not paid on portion of the 
C 
turnover of the scheduled goods i.e. cement, the assessee-appellant had no 
liability under Bihar Finance Act, 1981. It was definitely liable to pay tax 
under the Act, but for the exemption. The assessee-appellant was liable to 
pay tax under Section 3(3) of Bihar Entry of Goods into Local Areas for 
Consumption, Use or Sale Therein Act, 1993. Therefore, it was entitled to 
reduction to the extent of tax paid under the Entry Tax Act while working 
out tax payable by it under the Act. The notices issued by the respondent 
are without legal sanction and are quashed. [879-C-D-E] 
2. The question of exemption arises only when there is a liability to 
pay tax. The former depends on charge created by the statute and latter 
on computation in accordance with the provisions of the statute and 
rules framed thereunder, if any. Liability to pay tax chargeable un·Jer 
Section 3 of the Act is different from quantification of tax payable on 
assessment. Liability to pay tax and actual payment of tax are 
conceptually different. But for the exemption the dealer would be required 
to pay tax in terms of Section 3. Exemption presupposes a liability. 
Unless there is liability question of exemption does not arise. Liability 
arises in term of Section 3 and tax become payable at the rate as provided 
in Section 12. Section 11 deals with the point of levy and rate and 
concessional rate. [878-E-F-G] 
3. A bare reading of clause (2) of the Notification makes the position 
clear that liability of importer of cement under the Act shall be reduced 
to the extent of tax paid under the Entry Tax Act where such importer 
become liable to pay tax under the Act by virtue of sale of the scheduled 
goods. [877-G-H; 878-A-B] 
D 
E 
F 
G 
H 
870 
SUPREME COURT REPORTS [2004] SUPP. 4 S.C.R. 
A 
. Zungarrao Bhikaji Nagarkar v. · Union of India and Ors., [1997) 7 
B 
SCC 40

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