TMI Blog2019 (4) TMI 1322X X X X Extracts X X X X X X X X Extracts X X X X ..... ion filed by the appellant where the challenge to the leviability of the interest has been raised. The question relating to nature and extent of liability to pay interest on Entry Tax under the scheme of Act, 2007 need to be examined by this Court in these appeals - the High Court in the impugned judgment committed error in upholding the preliminary objection of the respondent - the question relating to nature and extent of liability of interest on Entry Tax under the scheme of Act, 2007 need to be examined and answered in these appeals. Whether Act, 2007 does contain any substantive provision for charging interest? - HELD THAT:- The liability of the interest under Section 12(3) is confined to one particular situation and does not provide for any universal application for payment of interest. Requirement of payment of interest under Section 12 (3), thus, is for a particular situation and has no application with regard to any other instance of liability to pay tax. Present is a case where appellant is not receiving any goods from any manufacturer, hence, in the present case Section 12 has no applicability. The application of provisions of VAT Act, 2008 is provided by Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by the respondent demanding interest on Entry Tax from the appellant. 2. These appeals centres round the issue regarding liability to pay interest on the Entry Tax on the appellant under The U.P. Tax on Entry of Goods into Local Areas Act, 2007 (hereinafter referred to as Act, 2007 ) The demanded Entry Tax having been paid by the appellant, the issue to be considered is with regard to liability to pay interest on the Entry Tax alone. 3. The Entry Tax Legislations in the State of U.P. as well as in other States of the country have a long history of litigation. The Entry Tax Legislations enacted by different States including the State of U.P. were challenged in the High Courts questioning the very legislative competence of State Legislature to enact Entry Tax Legislations, which according to writ petitioners violated freedom of trade, commerce and intercourse guaranteed under Article 301 and other Articles of Part XIII of the Constitution of India. Some of the High courts including Allahabad High Court have struck down the initial Entry Tax Legislations on the ground that it violates rights guaranteed under Part XIII of the Constitution of India. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsuant to Constitution Bench judgment, the matters were listed on 14.07.2006, when this Court permitted the parties to place the relevant materials in the concerned writ petitions within two months before the respective High Courts, which were to deal with the basic issue as to whether the impugned levy was compensatory in nature. The High Courts were requested to decide the issues within five months from the date of receipt of the order. After the above orders of this Court, the Allahabad High Court was pleased to decide the questions raised on 08.01.2007 holding that Entry Tax levied on crude oil and other goods does not fulfil the requirements of compensatory tax as laid down by this Court. On 17.04.2007, this Court in C.A. Nos. 997-998 of 2004 State of U.P. Ors. Vs. M/s. Indian Oil Corporation Ltd. Etc., passed an order in the following terms:- .The High Court s orders, wherever it has been passed in favour of the tax payers, shall operate so far as the writ petitioners are concerned .. 7. The effect in view of the above interim order was that the levy of Entry Tax in the State of U.P., thus, was held to be unsustainable. The State of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Judgement of the High Court of Judicature at Allahabad and in the light of observations with respect to the compensatory tax made by the Constitutional Bench of the Supreme Court and on the basis of the provisions of the Bihar Entry Tax Act, which had been held valid by the Patna High Court. Since the State Legislature was not in session and immediate legislative action was necessary to implement the aforesaid decision, the Uttar Pradesh Tax on Entry of Goods in to Local Areas Ordinance, 2007 (U.P. Ordinance No. 35 of 2007) was promulgated by the Governor on September 24, 2007. This Bill is introduced to replace the aforesaid Ordinance. 8. The Ordinance No.35 of 2007 was replaced by the U.P. Tax on Entry of goods into Local Areas Act, 2007. The appellant after enforcement of the Ordinance had filed a Writ Petition No. 1483 of 2007 in the Allahabad High Court challenging the Ordinance No. 35 of 2007. After enactment of the Act, writ petition was sought to be amended by replacing the word Ordinance with Act . On 18.12.2008, a Two- Judge Bench of this Court in Jaiprakash Associates Limited Vs. State of Madhya Pradesh Ors. (2009) 7 SCC 339 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nquiry to the constitutional validity of the U.P. Tax on Entry of Goods into Local Areas Act, 2007, and whether the entry tax is compensatory in nature, which does not violate the freedom of trade, commerce and intercourse under Article 301 of the Constitution of India. We have not examined the other issues namely the validity of the notices, assessments, rebates, exemption and the liability of the traders, and manufacturers of the scheduled goods to pay entry tax. All other questions, will remain open to be considered by the competent authorities under the Act in accordance with law. 153. All the writ petitions are consequently dismissed. The interim orders are discharged. 9. Against the judgment of Allahabad High Court dated 23.12.2011, decision in the writ petition of the appellant, SLP (C) No. 327 of 2012 was filed by the appellant. On 10.01.2012, this Court passed an interim order in several special leave petitions filed against the judgment dated 23.12.2011 staying the operation of the impugned judgment of the High Court dated 23.12.2011 subject to the appellants in each case depositing 50% of the accrued tax liability/arrears under the Act, 2007 and f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Stainless Limited Anr. Vs. State of Haryana Ors., (2017) 12 SCC 1. The reference was answered by the Court in following manner:- 1159. By majority the Court answers the reference in the following terms: 1159.1. Taxes simpliciter are not within the contemplation of Part XIII of the Constitution of India. The word free used in Article 301 does not mean free from taxation . 1159.2. Only such taxes as are discriminatory in nature are prohibited by Article 304(a). It follows that levy of a nondiscriminatory tax would not constitute an infraction of Article 301. 1159.3. Clauses (a) and (b) of Article 304 have to be read disjunctively. 1159.4. A levy that violates Article 304(a) cannot be saved even if the procedure under Article 304(b) or the proviso thereunder is satisfied. 1159.5. The Compensatory Tax Theory evolved in Automobile Transport case, AIR 1962 SC 1406 and subsequently modified in Jindal case, (2006) 7 SCC 241 has no juristic basis and is therefore rejected. 1159.6. The decisions of this Court in Atiabari, AIR 1961 SC 232, Automobile Transport, AIR 1962 SC 1406 and Jindal, (2006) 7 SCC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of interest was separately challenged. While reserving the judgment on 09.11.2017, High Court de-linked all such writ petitions where validity of demand of interest was separately challenged. On 04.05.2018, the High Court delivered the judgment in Writ Petition No. 25730 of 2017 and other connected matters dismissing the writ petitions upholding the validity of the Act, 2007. Immediately after the decision of the High Court on 04.05.2018, demand notices were issued for the assessment years 2008-2009 to 2011-2012 and demand notices dated 05.05.2018 for the assessment years 2000-2001 to 2007-2008 requiring the appellant to deposit Entry Tax together with interest thereupon. The appellant paid a sum to the tune of ₹ 3,361.55 crores towards Entry Tax for the years 1999-2000 to 2011-2012. The appellant filed a writ petition challenging the demand notices dated 04.05.2018 and 05.05.2018 in so far as demand towards interest was concerned. In one of the writ petitions, Writ Petition No.757 of 2018 filed by the appellant, following prayers were made:- (i) Issue a suitable writ, order or direction in the nature of certiorari calling for the records and quashing the impug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enged, hence the writ petition being second writ petition be dismissed as not maintainable. Reply to preliminary objection was filed by the appellant. High Court after hearing all the parties by the impugned order dated 22.11.2018 upheld the preliminary objection about the maintainability of the writ petitions and the writ petitions have been dismissed as not maintainable. While dismissing the writ petitions, certain observations have also been made by the High Court. Appellant, aggrieved by the judgment dated 22.11.2018 has come up in this appeal. 15. We have heard Shri Dhruv Agrawal, learned senior counsel for the appellant. Shri Dinesh Dwivedi, learned senior counsel has appeared for the respondents. We have also heard Shri Guru Krishan Kumar, learned senior counsel, who has appeared for appellant in S.L.P. No. 2691 of 2018 VST Industries Limited Vs. The State of Uttar Pradesh Ors., which is being separately decided. 16. Learned counsel for the appellant submits that under the Act, 2007 there are no substantive provisions for realisation of interest on Entry Tax. In absence of a substantive provision providing for payment of interest, no interest can be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the High Court dated 04.05.2018 did not consider the question of liability of interest of the appellant and the High Court confined to only three issues, which have been noted in the judgment. The writ petitions where challenge to demand of interest was separately made, were de-tagged, which make the intention of the High Court clear that it neither intended or actually decided the issue of interest in the batch of writ petitions decided on 04.05.2018. In judgment dated 04.05.2018, the liability of interest under Act, 2007 having not been decided nor argued, the High Court in the impugned judgment has erroneously accepted the preliminary objection of the respondent holding that the judgment dated 04.05.2018 will operate as res judicata in subsequent writ petition filed by the appellant, where demand notices praying for payment of interest has been challenged. 17. Shri Agarwal further submits that Act, 2000 having been declared unconstitutional, there is no liability to pay any interest before 24.09.2007 on which date Act, 2007 was enacted. It is further submitted that Act, 2007 was immediately challenged by the appellant which Act was upheld by Division Bench of the Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax, which is liable to be paid under the Act. Thus, the submission of the appellant that there are no substantive provisions for charging of the interest under the Act is unfounded. It is further submitted that the appellant has enjoyed the benefit of the interim order passed by this Court in special leave petitions filed by the appellant challenging the judgment of the High Court dated 23.12.2011 and now they are estopped from challenging the pay-ability of the interest. By Section 17 of the Act, 2007, the levy of the Entry Tax as per Act, 2007 has been validated. The Act, 2007 has been given retrospective effect w.e.f. 01.11.1999, hence the appellant was liable to pay both the Entry Tax as well as the interest. The liability to pay Entry Tax arises as per the provisions of Act, 2007 and the U.P. Entry Tax Rules, 2007 framed thereunder. The concept of interest evolves on default in payment of Entry Tax. Shri Dwivedi also placed reliance on the Principle of Restitution. Liability accrued under Act, 2000 is deemed to be one arising under the Act, 2007. On dismissal of the Writ Petition on 04.05.2018, the issue of interest has also been closed finally. After the interim order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing are the prayers made in the writ petition: (i) that a suitable writ, order or direction be issued declaring the Uttar Pradesh Tax on Entry of Goods into Local Area Act, 2007 as invalid, void and unconstitutional in so far as purports to levy entry tax on crude oil imported into India for Mathura Refinery. (ii) that a suitable writ, order or direction in the nature of mandamus be issued restraining the Respondents, their servants, agents or representative from in any manner collecting any entry tax from petitioner pursuant to the Act; (iii)that a suitable writ, of certiorari, order or direction in the nature of certiorari be issued calling for the records and quashing the assessment orders enclosed as Annexure 3 to 11; (iv) that a suitable writ, order or direction in the nature of mandamus or prohibition be issued restraining/ prohibiting the Respondents from taking any further steps or action pursuant to the impugned assessment orders; (v) issue a suitable writ, order or direction for refund of the entry tax hitherto paid by the Petitioner to the Respondent pursuant to the impugned Act; (vi) that a suit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aphs 33 and 34 of the writ petition: 33. That in view of the aforesaid, it is submitted that the judgment of Atiabari case and Automobile case having been overruled on 11.11.2016 by the Nine Judges Bench of the Apex Court, hence the interest and penalty could not be demanded from the petitioner for the period prior to 11.11.2016 as the petitioner has acted upon the law, as has been declared by the Constitutional Benches of Hon ble Apex Court earlier, which was holding the field, as being the law of the land. Hence, when the law itself has been overruled subsequently and the petitioner being a bonafide dealer was acting as per the provisions of the law, as was existing during the period in dispute, cannot be made to suffer due to subsequent change in the law by the Hon ble Apex Court. 34. That without prejudice to the above, it is submitted that even otherwise the interest, if any, could not be charged from the petitioner prior to the date of passing the assessment order. 25. A perusal of the judgment of the High Court dated 04.05.2018 indicates that the Division Bench in paragraph No.40 took the view that the Division Bench is to deal with the ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2017, the High Court had de-linked all such writ petitions in which the demand of interest on entry tax was assailed. 28. It is admitted before us by the counsel for the parties that Writ Tax No.474 of 2017, which de-tagged with the Bunch of Writ Petition No.25730 of 2017 is still pending for consideration before the High Court. Present is a case where the Division Bench while deciding Writ Petition No.25730 of 2017 consciously restricted the consideration to three questions as noted in the judgment of this Court dated 21.03.2017 and did not permit to raise any submission other than three questions as noted above or proceed to consider any other questions. The issue which has not been expressly permitted to be decided by judgment dated 04.05.2018 cannot operate as res judicata in subsequent writ petition filed by the appellant where the challenge to the leviability of the interest has been raised. Section 11 Explanation 4 C.P.C. on which much reliance has been placed by the counsel for the appellant provides: Section 11. Res judicata.- No Court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in this appeal, the appellant will be liable to pay the arrears of tax along with interest, as may be determined by this Court under the provisions of the Uttar Pradesh Entry Tax Act, 2007, at the time of final disposal of the appeal. When Appeal No.3413 of 2012 was ultimately decided on 21.03.2017 by this Court, this Court granted liberty to the appellant to file fresh writ petition raising the issues mentioned therein for consideration of the High Court. In the order dated 21.03.2017 there was no determination by this Court regarding interest to be paid by the appellant under the provisions of the Entry Tax Act, 2007. However, when the liberty was granted by this Court to the appellant to raise above noted three issues on the necessary factual background or any other constitutional/statutory issues, which arise for consideration, the High Court was free to consider the question of liability of interest to be satisfied by the appellant under Act, 2007. 31. Further, what is the scheme of payment of interest under Act, 2007 is a question which depends on the interpretation of the Act, 2007 and the Rules framed thereunder. The issue needs determination for proper worki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h are relevant for the present controversy. Section 4 of the Act provides for levy of tax. Section 4(1) provides that for the purpose of development of trade, commerce and industry in the State, there shall be levied and collected a tax on entry of goods specified in the Schedule into a local area for consumption, use or sale therein, from any place outside that local area, at such rate not exceeding five per cent of the value of the goods as may be specified by the State Government by notification. 34. Section 9 deals with submission of returns and assessment of tax. Section 10 deals with provisional assessment of tax. Section 12 deals with realisation of tax through manufacturer. Section 12(1), (2) and (3) are as follows: 12. Realization of tax through manufacturer (1) Notwithstanding anything contained in any other provision of this act, any person who intends to bring into a local area from any manufacturer within the State, such goods specified in the Schedule as may be notified by the State Government, shall, at the time of taking delivery of the goods from the manufacturer, pay to the manufacturer the tax payable on entry of such goods into the local ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. Section 12(1) makes it clear that any person who intends to bring into a local area from any manufacturer within the State, such goods specified in the Schedule as may be notified by the State Government, shall, at the time of taking delivery of the goods from the manufacturer, pay to the manufacturer the tax payable on entry of such goods into the local area and the manufacturer shall receive the tax so paid. Section 12(2) creates liability on person who intends to bring into a local area from any manufacturer any goods specified in the Schedule and the time of payment is statutorily laid down that is at the time of taking goods. Section 12(3) contemplates a situation where although manufacturer received the tax under Section 12(1) but failed to pay tax as required by Section 12(2) then he shall be liable to pay tax along with the interest. Thus, liability of the interest under Section 12(3) is confined to one particular situation and does not provide for any universal application for payment of interest. Requirement of payment of interest under Section 12 (3), thus, is for a particular situation and has no application with regard to any other instance of liability to pay tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x- (1) Any amount of tax or fee or penalty or any other amount, which a dealer or other person is liable to pay under this Act, shall be deposited by the dealer or such other person in the prescribed manner. (2) Subject to provisions of section 42, the tax admittedly payable, shall be deposited within the time prescribed, failing which simple interest at the rate of one and quarter percent per mensum shall become due and be payable on unpaid amount with effect from the day immediately following the last date prescribed till the date of payment of such amount and nothing contained in section 24 shall prevent or have the effect of postponing liability to pay such interest. Explanation-For the purposes of this sub-section, the tax admittedly payable for a tax period or an assessment year, as the case may be, shall be computed in accordance with provisions of section 15. xxx xxx xxx (4) If the tax {other than the tax admittedly payable to which sub-section (2) applies} assessed, re-assessed or enhanced by any authority or court remains unpaid after expiration of the period specified in the notice of assessment and demand, simple interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tail . Black s Law Dictionary (Revised 4th Edn., 1968) defines mutatis mutandis as with the necessary changes in points of detail, meaning that matters or things are generally the same, but to be altered when necessary, as to names, offices, and the like. Housman v. Waterhouse. In Bouvier s Law Dictionary (3rd Revision, Vol. II), the expression mutatis mutandis is defined as [T]he necessary changes. This is a phrase of frequent practical occurrence, meaning that matters or things are generally the same, but to be altered when necessary, as to names, offices, and the like . Extension of an earlier Act mutatis mutandis to a later Act brings in the idea of adaptation, but so far only as it is necessary for the purpose, making a change without altering the essential nature of the thing changed, subject of course to express provisions made in the later Act. Section 3(2) of the Act shows that the State legislature intended not to depart substantially from the principal Act except with regard to matters in respect of which express provision had been made in the Act. The assumption made by the High Court that the Act was an independent Act having nothing to do with the principal Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 13 has to be applied with respect to payment and recovery of tax. Thus, the payment of interest which is contemplated under Section 33 on the amount of tax has to be applied with regard to the payment of Entry Tax and the interest thereon. Even if provision of Section 33 of VAT Act, 2008 to be treated as machinery provision which is to be applied by virtue of Section 13 of Act, 2007, the machinery provision has to be interpreted in a manner so as to make the liability effective and treated to be substantive law. 44. In this context, we may also notice the judgment of this Court in India Carbon Ltd. and others Vs. State of Assam, (1997) 6 SCC 479. In the above case the payment of Central Sales Tax on inter-State sales of petroleum coke were delayed and the appellants were required by the respondents to pay interest in purported exercise of their powers under Section 35A of the Assam Sales Tax Act. The writ petition was filed challenging the exemption of tax. One of the questions noted for consideration is as to whether Section 9(2) of the Central Sales Tax Act did not visualise any payment of interest. Section 9(2) has been extracted in the judgment in paragraph 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereof. Section 9(2) authorises the sales tax authorities of a State to assess, reassess, collect and enforce payment of the Central sales tax payable by a dealer as if it was payable under the State Act; this is the first part of Section 9(2). By the second part thereof, these authorities are empowered to exercise the powers they have under the State Act and the provisions of the State Act, including provisions relating to charging and payment of interest, apply accordingly. Having regard to what has been said in the case of Khemka Co. it must be held that the substantive law that the States sales tax authorities must apply is the Central Act. In such application, for procedural purposes alone, the provisions of the State Act are available. The provision relating to interest in the latter part of Section 9(2) can be employed by the States sales tax authorities only if the Central Act makes a substantive provision for the levy and charge of interest on Central sales tax and only to that extent. There being no substantive provision in the Central Act requiring the payment of interest on Central sales tax the States sales tax authorities cannot, for the purpose of collecting and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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