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2010 DIGILAW 186 (PAT)

Itc Limited v. State Of Bihar

2010-02-15

DIPAK MISRA, MIHIR KUMAR JHA

body2010
JUDGEMENT DIPAK MISRA, J. 1. Invoking the extraordinary jurisdiction of this Court, the petitioner has assailed the constitutional validity of the levy and collection of tax under the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1993 (for brevity the Act) on the basic foundation that the Division Bench of this Court in Indian Oil Corporation Ltd. & Anr. V/s. State of Bihar & Ors., (2007) 10 VST 140 Patna while upholding the validity of the Act had only upheld the provisions after a particular year on the foundation that the entry tax levied after 29.8.2006 does not violate Article 301 of the Constitution of India as it has become compensatory in nature inasmuch as the proceeds thereof are being directly credited and appropriated to the Bihar Trade Development Fund created under the newly inserted Section 4 of the Act for exclusive use in the development of trade, commerce and industry in the State, but the validity of Section 4 of the Act was not considered in the light of the provisions contained in Article 266 of the Constitution of India which clearly postulates that ail revenues received by a State by way of tax or fees, etc. shall form part of the Consolidated Fund of the State as has been held in the case of State of H.P. & Ors. V/s. Shivalik Agro Poly Products & Ors., (2004) 8 S.C.C. 556 , and, therefore, the present challenge is on a different ground. That apart, many other ancillary facets have been highlighted for the purpose of stay of demand of tax and also for collection of entry tax at a particular rate. 2. We have heard Mr. S. Ganesh, learned Senior Counsel along with Mr.Rohitabh Das, learned counsel for the petitioner and Mr. Lalit Kishore, learned Additional Advocate General III along with Mr.Satyabir Bharti, Junior Counsel to Additional Advocate General III, learned counsel for the State on the question of admission and grant of interim orders. 3. Before we advert to the submissions raised at the Bar, it is necessitous to have a brief resume of events in a chronological manner. The Act came into force on 25.02.1993. On 11.07.2001, the Act was amended by which the original Schedule was substituted by a new Schedule which included, inter alia, tobacco. On 25.07.2001, by Notification no. 3. Before we advert to the submissions raised at the Bar, it is necessitous to have a brief resume of events in a chronological manner. The Act came into force on 25.02.1993. On 11.07.2001, the Act was amended by which the original Schedule was substituted by a new Schedule which included, inter alia, tobacco. On 25.07.2001, by Notification no. S.O. 92 dated 25.07.2001, the rate of tax on tobacco was prescribed at 5%. On 19.08.2003, the Act was further amended by the Amending Act 9 of 2003 by which the upper limit of the rate of tax was enhanced from 5% to 20%. On 22.08.2003, a notification was issued whereby the State Government enhanced the rate of entry tax on tobacco from 5% to 8%. A writ petition being C.W.J.C. No. 11394 of 2003 was filed by the petitioner challenging the constitutional validity of the Act. While admitting the said writ petition, this Court, as an interim measure, directed that there shall be no recovery of tax beyond 5% on tobacco. On 29.08.2006 the Act was amended by the Amendment Act 19 of 2006 which stipulated that the entry tax collected under the Act would be appropriated to the Trade Development Fund created thereunder and the said fund would be used exclusively for the development of trade, commerce and industry in the State of Bihar. 4. As is evincible from the narration of facts, on 09.01.2007 the Division Bench of this Court in Indian Oil Corporation Ltd. & Anr. (supra) held that the Amending Acts 10 of 2001 and 9 of 2003 were unconstitutional as the tax sought to be levied thereunder was not compensatory in nature as per law laid down in Jindal Stainless Ltd. V/s. State of Haryana & Ors. (2006) 7 S.C.C. 241 and the said amendments were also not saved by Article 304 (b) of the Constitution. However, the Bench expressed the view that consequent upon the amendment to the Act, by Amending Act no. 19 of 2006 the tax sought to be levied thereafter, i.e. from 29.08.2006, has become compensatory in nature and hence, constitutionally valid. 5. The petitioner had preferred C.W.J.C. No. 11394 of 2006, which was allowed in part in terms of the decision rendered in Indian Oil Corporation Ltd. & Anr. (supra) by judgment dated 27.08.2008. 6. 19 of 2006 the tax sought to be levied thereafter, i.e. from 29.08.2006, has become compensatory in nature and hence, constitutionally valid. 5. The petitioner had preferred C.W.J.C. No. 11394 of 2006, which was allowed in part in terms of the decision rendered in Indian Oil Corporation Ltd. & Anr. (supra) by judgment dated 27.08.2008. 6. The petitioner has preferred Special Leave Petition (Civil) No. 26543 of 2008 before the Apex Court challenging the decision of this Court upholding the levy and collection of tax since the date of amendment made to the Bihar Entry Tax Act by the Amendment Act No. 19 of 2006. 7. On 26/27.12.2008 the Commercial Tax Officer, Munger raised demands on the petitioner for payment of the balance amount of alleged entry tax liabilities on tobacco for the period 01.04.2008 to 31.10.2008 aggregating to Rs. 2,26,75,480/- rejecting the contention of the petitioner that the said amount should be adjusted in respect of the tax paid for the earlier period which could not have been collected as the provision imposing tax has been held invalid by the Division Bench of this Court. The respondents declined to adjust the amount. Being aggrieved by the aforesaid order of the Commercial Taxes Officer, the petitioner preferred C.W.J.C. No. 998 of 2009, which was disposed of by directing the petitioner to exhaust the alternative remedy available under the Act. The petitioner preferred an appeal challenging the demand made by the Commercial Tax Officer but the said appeal was dismissed by the Joint Commissioner, Commercial Taxes (Appeals), Bhagalpur without adjusting the amount which was payable to the petitioner consequent upon declaring the Amending Acts 10 of 2001 and 9 of 2003 as invalid. Thereafter, the Commercial Tax Officer, Munger Circle, Munger issued notice no. 324 dated 03.07.2009 requiring the petitioner to pay the entry tax dues amounting to Rs. 2,26,75,480/- with the stipulation that in case of failure to make payment of the aforesaid dues recovery measures would be taken against the petitioner. It is apt to note, against the order of the Joint Commissioner (Appeals), Bhagalpur and the demand notice dated 03.07.2009 issued in furtherance thereof, the petitioner filed Second Appeal No. BH 168 of 2009 before the Commercial Taxes Tribunal, Bihar. It is apt to note, against the order of the Joint Commissioner (Appeals), Bhagalpur and the demand notice dated 03.07.2009 issued in furtherance thereof, the petitioner filed Second Appeal No. BH 168 of 2009 before the Commercial Taxes Tribunal, Bihar. It is put forth that an application was filed on 15.1.2010 for withdrawal of the said Second appeal as the Tribunal cannot enter into the constitutional validity of Section 4 of the Act and the resultant invalidity of levy and collection of tax thereunder. In this backdrop, the present writ petition has been filed exclusively on the ground that the creation of the fund is violative of Article 266 of the Constitution of India and, therefore, Section 4 of the Entry Tax Act which has been amended by Amendment Act No. 19 of 2006 could not make the Act valid. 8. In Indian Oil Corporation Ltd. & Anr. (supra) a Division Bench of this Court has recorded its conclusion in seriatim as under: "69. In light of the above discussions, I may summarise the conclusion as follows: (i) The levy under the Parent Act of 1993, before its amendments, was not compensatory in character and was, therefore, violative of article 301 of the Constitution. (ii) The Parent Act of 1993, before its amendments, was nevertheless saved by virtue of article 304(b) of the Constitution and the decision in Bihar Chamber of Commerce (1996) 103 STC 1 (SC) to that extent remains subsisting till date. (iii) The amendments introduced in the Act by amending Acts 10 of 2001 and 9 of 2004 were bad because the former made the Act violative of article 304(a) of the Constitution and further because both the amendments were made without the previous sanction of the President. (iv) The introduction of imported goods within the definition of "entry of goods" was bad for being retrospective as also for want of the Presidential sanction/assent. (v) After the 2006 Amendment the levy under the Act acquired the nature of a compensatory tax and the Act in its present form is a valid piece of legislation. 70. In light of the above discussions, the two cases are fit to be allowed because they relate to the period 2001-2006. But I would refrain from making any order or direction in that regard since the matter is already pending before the Supreme Court. 71. 70. In light of the above discussions, the two cases are fit to be allowed because they relate to the period 2001-2006. But I would refrain from making any order or direction in that regard since the matter is already pending before the Supreme Court. 71. The two cases are thus disposed of as directed by the Supreme Court in Jindal Stainless Limited (2006) 7 SCC 271 ." 9. Submission of Mr. Ganesh, learned Senior Counsel appearing for the petitioner is that this Court had treated the tax as compensatory on the basis of the amendment incorporated in the year 2006 by Bihar Act 19 of 2006 as a fund has been created for utilization of the proceeds of the levy under the Act which is not permissible under Article 266 of the Constitution of India. It is urged by him as the said contention was not advanced, the same can be raised and deserved to be dwelled upon. 10. Whether on an additional ground validity of an Act which has been declared intra vires can be assailed or not need not be debated upon in this case inasmuch as the petitioner has already challenged the order passed in his case on the basis of decision rendered in Indian Oil Corporation Ltd. & Anr. (supra) by filing a Special Leave Petition. It is not disputed that the matter is sub judice. 11. In this context, we may refer with profit the decision rendered in Kunhayammed & Ors. V/s. State of Kerala & Anr., (2000) 6 S.C.C. 359 . In paragraph 44 (iii) their Lordships have expressed thus: "44. (iii) The doctrine of merger is not a doctrine of universal or unlimited application. It will depend on the nature of jurisdiction exercised by the superior forum and the content or subject-matter of challenge laid or capable of being laid shall be determinative of the applicability of merger. The superior jurisdiction should be capable of reversing, modifying or affirming the order put in issue before it. Under Article 136 of the Constitution the Supreme Court may reverse, modify or affirm the judgment-decree or order appealed against while exercising its appellate jurisdiction and not while exercising the discretionary jurisdiction disposing of petition for special leave to appeal. The doctrine of merger can therefore be applied to the former and not to the latter." 12. Under Article 136 of the Constitution the Supreme Court may reverse, modify or affirm the judgment-decree or order appealed against while exercising its appellate jurisdiction and not while exercising the discretionary jurisdiction disposing of petition for special leave to appeal. The doctrine of merger can therefore be applied to the former and not to the latter." 12. In our considered opinion when the order has been challenged before the Apex Court and the matter is sub judice and the subject matter of challenge is capable of being laid before the Apex Court, the judicial discipline commands us not to entertain the said plea at this juncture. 13. It is next contended by Mr. Ganesh, learned Senior Counsel for the petitioner that the order passed by this Court in the writ petition preferred by the petitioner has not been challenged by the State before the Apex Court and, therefore, the petitioner is entitled to refund. To have a complete picture in this regard it is appropriate to refer to the order passed by this Court in the writ petition at the instance of writ petitioner. A Division Bench of this Court on 27.08.2008 referred to the order passed in Indian Oil Corporation Limited & Anr. (supra) and disposed of the writ petition in terms of the above order. In view of aforesaid it is clear as crystal there was no direction for refund for the years as the matter was sub judice before the Apex Court. 14. The next submission of Mr. Ganesh is that the writ petitions are not finally disposed of as no final direction has been given for the period in respect of which the provisions have declared ultra vires it is still deemed to be pending or alternatively the rate of tax that was collected prior to the amendment, i.e. 5% should be allowed to be collected. It is his further proponement that it was the arrangement when the writ petition was allowed and till the matter is finally disposed of, the said arrangement should be allowed to continue. In our considered view the submission that the writ petitions are still pending before this Court is sans substratum. What the Division Bench had stated that it is refraining from issuing any direction as the matter is sub judice before the Apex Court. In our considered view the submission that the writ petitions are still pending before this Court is sans substratum. What the Division Bench had stated that it is refraining from issuing any direction as the matter is sub judice before the Apex Court. From the aforesaid it is luminously manifest that the refund or adjustment or any other aspect shall be governed by the decision of their Lordships of the Apex Court. The said refrain cannot be construed to mean that the writ petition would be deemed to be pending for any other purpose before this Court. 15. Learned Senior Counsel has commended us to the decision rendered in United Spirits Limited V/s. The State of Bihar & Ors., 2008 (2) BBCJ V-410. In the said case the Division has expressed the view as follows: "18. Considering the above submissions, we have been persuaded by the learned counsel for the State to hold that as of now it cannot be said that there has been a final adjudication that the 2001 and 2003 Amendments are invalid. However, at the same time there is a pronouncement by this Court, which is binding on us, that the said amendments are invalid. Therefore until such time, the Hon.ble Supreme Court pronounces otherwise it would be inappropriate on our part to hold that despite such pronouncement by this Court the State is entitled to levy tax on the basis of the 2001 and 2003 Amendments. 19. Power to specify levy of tax by publication of notification was granted by the Original Act, which has not been declared invalid. However, the same remained confined in respect of six specified goods and was limited up to 5% of the import value of such goods. By the 2001 Amending Act, the power to specify levy of tax increased from 6 to 18 specified goods. By the 2003 Amending Act, the power to specify levy of tax became available in respect of 24 species of goods and at the same time, the limit of imposing tax stood increased from 5% to 20% of the import value of such goods. The Amending Acts of 2001 and 2003, as aforesaid, have been declared by this Court as invalid on the ground that they are not compensatory in nature and accordingly, not within the competence of the State Legislature. The Amending Acts of 2001 and 2003, as aforesaid, have been declared by this Court as invalid on the ground that they are not compensatory in nature and accordingly, not within the competence of the State Legislature. By reason of such declaration, although the notifications published after coming into force of the 2001 and 2003 Amending Acts have not died their natural death, as was contended by the learned counsel for the petitioner, but certainly they became dormant. Life in those notifications, no doubt could be infused by a Validation Act, but only after the 2006 Amending Act came into force, i.e. from 29th August, 2006, inasmuch as the said Amending Act has been upheld by this Court as valid. The question is whether the same has been done by the Amending and Validation Act, 2007 and in particular, by sub-section (2) of Section 2 thereof. 20. If we accept the contention of the learned counsel for the State that validation of actions accorded by sub section (2) of Section 2 of the Amending and Validation Act is without limit, then the logical conclusion would be that all actions of past have been validated and accordingly, all assessments, collections, adjustments, reductions or consumptions made or any other action taken or anything done or purported to have been done prior to 29th August, 2006 i.e. prior to coming into force of the 2006 Amending Act, on the basis of the 2001 and 2003 Amending Acts have also been validated. When the pronouncement is that the 2001 and 2003 Amending Acts are beyond the competence of the State Legislature, the same could not be validated by the State Legislature. The logical conclusion would, therefore, be that assessments, collections, adjustments, reductions or consumptions made after 29th August, 2006 i.e. when the 2006 Amending Act came into force, were validated. In such circumstances, if we have to hold that the notifications issued prior to 29th August, 2006 were validate by sub-section (2) of Section 2 of the Amending and Validation Act with effect from 29th August, 2006, then we would be required to supply words in sub section (2) of Section 2 of the Amending and Validation Act, a fiscal statute, which we cannot do. 21. 21. There being admittedly no notification fixing tax liability in respect of the goods reintroduced by the Amending and Validation Act, the one and the only logical conclusion would be that there is no scope of levying tax upon persons dealing with the goods brought in the Schedule of goods with effect from 29th August, 2006. 22. However, at the same time, being alive of the situation that even now there is a possibility of the Honble Supreme Court declaring the 2001 and 2003 Amendments as valid amendments, we would dispose of these writ petitions by directing the parties to maintain status quo as of today until the judgment of the Hon.ble Supreme Court in relation to the validity of the 2001 and 2003 Amendments is rendered. In the event, it is held by the Hon.ble Supreme Court that the said amendments are invalid, the State would be precluded from recovering any tax from the petitioner on the demands being the subject matter of challenge in these writ petitions." 16. On a perusal of the aforesaid decision, we are of the considered opinion that the same does not render any assistance to the petitioner, for in the said case the factual matrix was quite different and the Bench was dealing with a different situation altogether. In the said factual backdrop, the Bench has passed an order of status quo. Thus, the decision rendered in United Spirits Limited (supra) is distinguishable. 17. In view of the aforesaid analysis we are disposed to think that the submissions urged by learned Senior Counsel for the petitioner do not merit consideration and, therefore, we have no other option but to dismiss the writ petition in limine and, accordingly, we so direct.