INDIAN OIL CORPORATION LIMITED versus STATE OF BIHAR & ANR.

Citation: [2017] 13 S.C.R. 477 · Decided: 14-11-2017 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Disposed off

Cited by 1 judgment(s) · cites 10 · see the full citation network in Lexace

Judgment (excerpt)

[2017] 13 S.C.R. 4 77 
INDIAN OIL CORPORATION LIMITED 
v. 
STATE OF BIHAR & ANR. 
(Civil Appeal No.3018 of2017) 
NOVEMBER 14, 2017 
[R. F. NARIMAN AND SANJAY KISHAN KAUL, JJ.J 
A 
B 
Entry Tax - Bihar Tax on Entry of Goods into Local Areas for 
Consumption. Ust; or Sale Therein Act, 1993 - s.3(2) - VAT set off 
against the Entry Tax - Claim for - Appellant-Corporation imports 
C 
crude oil from outside the State of Bihar and converts it into 
petroleum products, like High Speed Diesel, Petrol etc - Some part 
of these products are sold by appellants to two other oil marketing 
companies (OMCs). namely BPCL and HPCLfrom its Patna branch-
Appellant pays Entry Tax when product enters the local area of 
Patna - Grievance of the Appellant that when a sale is made to the 
D 
OMCs. after payment of Entry Tax, VAT is not set off against the 
Entry Tax - High Court agreed with the Advance Rulings Authority, 
and rejected the case of the appellant u!s.3(2) second proviso of 
the Entry Tax. stating that the set off would not be allowable under 
the aforesaid proviso - Held: The following conditions need to be 
E 
satisfied for claim of set off uls.3(2) - (i) u!s.3(2) the tax leviable by 
way of Entry Tax can only be paid by every dealer liable to pay 
under the VAT Act; (ii) The set off can only be granted !f assessee is 
an importer of scheduled goods, who is liable to pay tax under the 
VAT Act; (iii) Assessee must incur tax liability at rates specified u/ 
s.14 of the VAT'Act; (iv) This must only be by virtue of the sale of F 
imported scheduled goods; and (v) "His" tax liability under the 
VAT Act will then stand reduced to the extent of tax paid under the 
Act - In instant case. appellant is a registered dealer and is thus 
liable to pay tax under the VAT Act, condition (i) is fulfilled -
Condition (ii) however, is not fulfilled, as notification dated G 
04.05.2006 under Bihar Value Added Tax Act. 2005 states that the 
levy is at the point of sale by oil companies to the retailer or direct 
to the consumer - There is no levy of any VAT, when a sale is effected 
by the appellant to BPCL and HPCL - The VAT gets levied only at 
the next point in chain of sales, which is sale from BPCL and HPCL 
to their retailers - So, though appellant is an importer of scheduled H 
477 
478 
SUPREME COURT REPORTS 
(2017] 13 S.C.R. 
A goods. hut is hot liable to pay tax under the VAT - Condition (iii) is 
also not fulfilled, as there being no levy on the appellant. the 
appellant does not incur any tax liability u/s.14 of the VAT Act - So 
far as CondiMon (iv) is concerned, in any case, this must he by 
virtue of sale of the very imported scheduled goods. which means 
B 
c 
D 
E 
F 
that the sale must be by the appellant itself and not by the other 
OMCs, and thus condition (iv) is also not fa/filled - Condition (v) 
must he that "'his" i.e. the appellant :v tax liability under the VAT Act 
will then stand reduced, and this is only to the extent of tax paid 
under the Act - This condition is also not met inasmuch as the set 
off is person specific and not goodv specific - Thus. on literal 
reading of s. 3(2) second proviso. the appellant would not be entitled 
to claim set off - Bihar Value Added Tax Act. 2005 - ss. 3. 13. 16 -
Bihar Finance Act. 1981. 
Bihar Tax on Entry of Goods into Local Areas for 
Consumptwn. Use or Sale Therein Act, 1993 - Entry Tax -
Exigihility - Appellant-Corporation imports crude oil from outside 
the State of Bihar - Crude oil is processed and converted into 
petroleum products, like High Speed Diesel, Petrol etc - Some part 
of these products are sold by appellants to two other oil marketing 
companies (6JMCs). namely BPCL and HPCL from its Patna 
branch - Appellant pays Entry Tax when product enters the local 
area of Patna - Grievance of the Appellant that when a sale is 
made to the OMCs, after payment of Entry Tax, VAT is not set off 
against the Entry Tax -
Set off of VAT. as claimed by the appellant 
was allowed until 1he year 2014 - However. pursuant to audit 
objections. set o.fl that had been allowed, were re-opened and then 
disallowed - The Entry Tax demand arising from such disallowance 
for the assessment years 2008-09 Ji// 2014-15 amounted to 
Rs. l,683.03 crores - Appellant contended it was not given 
opportunity to demonstrate that a large portion of demanded amount 
relates to sales that were made by HPCL and BPCL outside the 
local area of Patna. which would. therefore. not attract EntryTax at 
G

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