# INDIAN OIL CORPORATION LIMITED v. STATE OF U.P. & ORS

- **Citation:** [2019] 6 S.C.R. 601
- **Court:** Supreme Court of India
- **Decided:** 2019-04-22
- **Case number:** Civil Appeal Nos. 3257-3268 of 2019
- **Bench:** Ashok Bhushan, K. M. Joseph
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/indian-oil-corporation-limited-v-state-of-u-p-ors-33922
- **Pages:** 37

## Headnote

Code of Civil Procedure, 1908 - s.11, Explanation IV -
Respondent-State enacted the 2007 Act after the High Court declared
the 2000 Act to be ultra vires inter alia holding that Entry Tax levied
on crude oil does not fulfil the requirements of compensatory tax -
Challenged by the appellant before the High Court - Supreme Court
in Jaiprakash Associates Limited case referred the issue of levy of
Entry Tax in various States enactments including U.P. for
determination by nine Judges Bench - High Court held that the
State did not lack legislative competence in enacting the 2007 Act -
SLP filed by the appellant - Supreme Court passed interim order
staying the operation of the judgment of the High Court inter alia
subject to the appellants in each case depositing 50% of the accrued
tax liability under the 2007 Act - Determination of interest, payable
by the appellant was to be determined subsequently - Nine Judges
Bench decided the reference in Jindal Stainless Limited case -
Thereafter, the matter was taken by the Regular Bench and by
judgment dtd. 21.03.17 Supreme Court granted liberty to the
appellant to question the levy of Entry Tax under the 2007 Act, on
the issues left open in the order of the Nine Judges Bench, before
High Court by way of fresh writ petition - Appellant filed Writ
Petition No.25730 of 17 before the High Court, where assessment
orders were also assailed - Dismissed vide judgment dtd.04.05.18
upholding the validity of the 2007 Act- Demand notices issuedChallenged by the appellant in so far as demand towards interest
was concerned - Respondents raised preliminary objection that the
writ petition is second writ petition on the same and consequential
cause of action- Dismissed - On appeal, held: Writ Petition
No.25730 of 17 was filed by the appellant in pursuant to the liberty
dtd. 21.03.17 challenging the vires of 2007 Act - s.11, Explanation
IV provides that a plea which might and ought to have been taken
 [2019] 6 S.C.R. 601
601
A
B
C
D
E
F
G
H
602
SUPREME COURT REPORTS
[2019] 6 S.C.R.
in the earlier suit, shall be deemed to have been taken and decided
against person raising the plea in the subsequent suit - Present is a
case where the plea questioning the leviability of the interest was
specifically raised by the appellant in the Writ Petition No.25730
however, the Division Bench took the view that it was to deal with
the challenge on the grounds as reflected in the judgment dtd.
21.03.17 and thus did not permit the consideration of any other
questions including the question of interest - Issue which was not
expressly permitted to be decided cannot operate as res judicata in
subsequent writ petition where the challenge was to the leviability
of the interest - Further, the High Court de-tagged the writ petition
from the the main bunch where the challenge to levy of interest was
made - High Court committed error in upholding the preliminary
objection of the respondent - Matter remitted to High Court inter
alia for determining the liability of interest - U.P. Tax on Entry of
Goods Ordinance, 2000 - U.P. Tax on Entry of Goods into Local
Areas Act, 2000 - U.P. Tax on Entry of Goods into Local Areas Act,
2007 - ss.4, 9, 10, 12 and 13 - Constitution of India - Arts. 301
and 304.
U.P. Tax on Entry of Goods into Local Areas Act, 2007 - s.13
- Held: Application of provisions of VAT Act is provided by s.13 of
the 2007 Act with certain changes - s.13 mutatis mutandis applies
s.33 of the VAT Act - s.33 has to be applied with respect to payment
and recovery of tax - Thus, the payment of interest which is
contemplated u/s.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 s.33 of VAT Act is to be treated as machinery provision
which is to be applied by virtue of s.13 of 2007 Act, the machinery
provision has to be interpreted in a manner so as to make the liability
effective and treated to be substantive law - Submission of the
appellant that 20

## Text

_Characters 0–39,938 of 85,515. This is a partial read: ask again with offset=39938 for what follows._

A
B
C
D
E
F
G
H
601
INDIAN OIL CORPORATION LIMITED
v.
STATE OF U.P. & ORS.
(Civil Appeal Nos. 3257-3268 of 2019)
APRIL 22, 2019
[ASHOK BHUSHAN AND K. M. JOSEPH, JJ.]
Code of Civil Procedure, 1908 - s.11, Explanation IV -
Respondent-State enacted the 2007 Act after the High Court declared
the 2000 Act to be ultra vires inter alia holding that Entry Tax levied
on crude oil does not fulfil the requirements of compensatory tax -
Challenged by the appellant before the High Court - Supreme Court
in Jaiprakash Associates Limited case referred the issue of levy of
Entry Tax in various States enactments including U.P. for
determination by nine Judges Bench - High Court held that the
State did not lack legislative competence in enacting the 2007 Act -
SLP filed by the appellant - Supreme Court passed interim order
staying the operation of the judgment of the High Court inter alia
subject to the appellants in each case depositing 50% of the accrued
tax liability under the 2007 Act - Determination of interest, payable
by the appellant was to be determined subsequently - Nine Judges
Bench decided the reference in Jindal Stainless Limited case -
Thereafter, the matter was taken by the Regular Bench and by
judgment dtd. 21.03.17 Supreme Court granted liberty to the
appellant to question the levy of Entry Tax under the 2007 Act, on
the issues left open in the order of the Nine Judges Bench, before
High Court by way of fresh writ petition - Appellant filed Writ
Petition No.25730 of 17 before the High Court, where assessment
orders were also assailed - Dismissed vide judgment dtd.04.05.18
upholding the validity of the 2007 Act- Demand notices issuedChallenged by the appellant in so far as demand towards interest
was concerned - Respondents raised preliminary objection that the
writ petition is second writ petition on the same and consequential
cause of action- Dismissed - On appeal, held: Writ Petition
No.25730 of 17 was filed by the appellant in pursuant to the liberty
dtd. 21.03.17 challenging the vires of 2007 Act - s.11, Explanation
IV provides that a plea which might and ought to have been taken
 [2019] 6 S.C.R. 601
601
A
B
C
D
E
F
G
H
602
SUPREME COURT REPORTS
[2019] 6 S.C.R.
in the earlier suit, shall be deemed to have been taken and decided
against person raising the plea in the subsequent suit - Present is a
case where the plea questioning the leviability of the interest was
specifically raised by the appellant in the Writ Petition No.25730
however, the Division Bench took the view that it was to deal with
the challenge on the grounds as reflected in the judgment dtd.
21.03.17 and thus did not permit the consideration of any other
questions including the question of interest - Issue which was not
expressly permitted to be decided cannot operate as res judicata in
subsequent writ petition where the challenge was to the leviability
of the interest - Further, the High Court de-tagged the writ petition
from the the main bunch where the challenge to levy of interest was
made - High Court committed error in upholding the preliminary
objection of the respondent - Matter remitted to High Court inter
alia for determining the liability of interest - U.P. Tax on Entry of
Goods Ordinance, 2000 - U.P. Tax on Entry of Goods into Local
Areas Act, 2000 - U.P. Tax on Entry of Goods into Local Areas Act,
2007 - ss.4, 9, 10, 12 and 13 - Constitution of India - Arts. 301
and 304.
U.P. Tax on Entry of Goods into Local Areas Act, 2007 - s.13
- Held: Application of provisions of VAT Act is provided by s.13 of
the 2007 Act with certain changes - s.13 mutatis mutandis applies
s.33 of the VAT Act - s.33 has to be applied with respect to payment
and recovery of tax - Thus, the payment of interest which is
contemplated u/s.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 s.33 of VAT Act is to be treated as machinery provision
which is to be applied by virtue of s.13 of 2007 Act, the machinery
provision has to be interpreted in a manner so as to make the liability
effective and treated to be substantive law - Submission of the
appellant that 2007 Act does not contain any substantive law for
levy of the interest, rejected - U.P. Value Added Tax Act, 2008 -
s.33 - Machinery provision when treated as substantive law.
Words & Phrases - 'mutatis mutandis' - Meaning of -
Discussed.
Allowing the appeals, the Court
HELD: 1.1 Writ Petition No.25730 of 2017 was filed by the
appellant in pursuant to the liberty dated 21.03.2017. The main
A
B
C
D
E
F
G
H
603
pleadings and the grounds raised in the writ petition relate to
challenge to vires of U.P. Tax on Entry of Goods into Local Areas
Act, 2007. In the writ petition direction sought was declaring the
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. Further reliefs were claimed in the writ petition including
prayer for quashing the assessment orders 1999-2000 to 20112012. In the writ petition there was challenge to interest also.
The Division Bench took the view that it is to deal with the
challenge on the grounds as reflected in the judgment of the
Regular Bench dated 21.03.2017. The Division Bench, thus,
confined the consideration limited to the grounds reflected in
the questions framed by the regular Bench of the Supreme Court.
The Division Bench, thus, consciously confined the consideration
to only three questions from the judgment of Supreme Court dated
21.03.2017. The Division Bench clearly did not permit the
consideration of any other questions including the question of
interest which is clear from the judgment dated 04.05.2018. When
the judgment was reserved on 09.11.2017 in Bunch of writ
petitions including W.P.No.25730 of 2017, in the writ petitions
where challenge to levy of interest was separately made were
de-tagged. [Paras 24-26][623-D-E; 624-F-G]
1.2 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
Supreme 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 was not
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. Explanation IV to s.11, CPC provides
that a plea which might and ought to have been taken in the earlier
suit, shall be deemed to have been taken and decided against
person raising the plea in the subsequent suit. Present is a case
where the plea of questioning the leviability of the interest was
specifically raised by the appellant in the writ petition. The
Division Bench of the High Court did not entertain such pleas
due to the Court having restricted the consideration to the three
INDIAN OIL CORPORATION LTD. v. STATE OF U.P. & ORS.
A
B
C
D
E
F
G
H
604
SUPREME COURT REPORTS
[2019] 6 S.C.R.
questions. Subsequent writ petition where plea of leviability of
the interest was raised could not have been thrown on the ground
of res judicata. The sequence of the events and the fact of detagging the writ petition with the main Bunch where challenge to
interest was made separately clearly indicate that the Division
Bench which reserved the judgment on 09.11.2017 clearly
intended not to entertain the question of liability to pay interest
in the Bunch which was reserved on 09.11.2017. When the High
Court expressly restricted the consideration to three issues, the
plea of constructive res judicata cannot be pressed in service
against the appellant to preclude him from raising the question
which was not expressly permitted to be argued in Writ Petition
No.25730 of 2017. From the facts of the case, it is apparent that
in the order of this Court passed on 06.12.2013 while modifying
the interim order passed in C.A. No. 3413 of 2012 (arising out of
SLP(C)No.2757-2758 of 2004), this Court observed "in the event
of appellant failing 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. [Paras 28-30][625-C-E; 626-A-H]
1.3 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. [Para 32][627-D-E]
A
B
C
D
E
F
G
H
605
1.4 Section 4 of the U.P. Tax on Entry of Goods into Local
Areas Act, 2007 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. 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 deals with only one incident of realisation
of Entry Tax, i.e., through manufacturer. 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. Present is a case where appellant is not receiving any
goods from any manufacturer, hence, in the present case
Section 12 has no applicability. Section 13 mutatis
mutandis applies Section 33 of U.P. Value Added Tax Act, 2008.
[Paras 33, 34, 36 and 39][628-A-C; H; 630-A-D; 631-C-D]
1.5 Thus, application of provisions of VAT Act, 2008 is
provided by Section 13 of Act, 2007 with certain changes in points
INDIAN OIL CORPORATION LTD. v. STATE OF U.P. & ORS.
A
B
C
D
E
F
G
H
606
SUPREME COURT REPORTS
[2019] 6 S.C.R.
of details. Section 33 of the VAT Act, 2008 which has been
mentioned to apply under 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. The submission of the counsel
for the appellant that Act, 2007 does not contain any substantive
law for levy of the interest, rejected. [Paras 43 and 48][634-E-F;
636-H; 637-A]
1.6 The questions for determining the liability of interest
and various aspects including factual aspects need to be examined
and considered by the High Court. For instance, what shall be
the effect of deposit of Entry Tax in separate interest-bearing
account in pursuance of the interim order of this Court dated
09.02.2004 in Civil Appeal Nos.997-998 of 2004 needs to be
considered. There may be few other issues, questions of facts
which need to be decided by the High Court for determining the
liability of interest of the appellant. It shall also be open for the
High Court to frame any other question or issue which may be
required to be considered and answered. The impugned judgment
of the High Court is set aside. The Writs are revived
before the High Court to be considered and decided on merits.
[Paras 49, 50][637-B-D]
J.K. Synthetics Limited v. Commercial Taxes Officers
(1994) 4 SCC 276 ; V.V.S Sugars v. Govt. of A.P. and
others (1999) 4 SCC 192 : [1999] 2 SCR 925
- followed.
M/s. Ashok Service Centre and others v. State of Orissa
(1983) 2 SCC 82 : [1983] 2 SCR 363 ; Rajasthan State
Industrial Development and Investment Corporation
and another v. Diamond & Gem Development
Corporation Limited and another 2013 (5) SCC 470 :
[2013] 4 SCR 331 - relied on.
A
B
C
D
E
F
G
H
607
Jindal Stainless Ltd. (2) and Another v. State of Haryana
and Others (2006) 7 SCC 241 : [2006] 3 SCR 1095 ;
Atiabari Tea Co. Ltd. v. State of Assam AIR 1961 SC
232 : [1961] SCR 809 ; Automobile Transport
(Rajasthan) Ltd. v. State of Rajasthan AIR 1962 SC
1406 : 1963 SCR 491 ; State of U.P. & Ors. v. M/s.
Indian Oil Corporation Ltd. & Etc. 2017(6)
 SCALE 540 ; Jaiprakash Associates Limited v. State
of Madhya Pradesh & Ors. (2009) 7 SCC 339 : [2008]
17 SCR 1282 ; ITC Limited v. State of U.P. and Others.
Decision of Allahabad High Court in Writ Tax No. 1484
of 2007; Jindal Stainless Limited & Anr. v. State of
Haryana & Ors. (2017) 12 SCC 1 : [2016] 1 SCR 1 ;
M/s. Birla Corporation Limited vs. State of U.P Decision
of Allahabad High Court in Writ Tax No. 474 of 2017;
VST Industries Limited v. The State of Uttar Pradesh &
Ors. S.L.P. No. 2691 of 2018; Shree Bhagwati Steel
Rolling Mills v. Commissioner of Central Excise and
another (2016) 3 SCC 643 : [2015] 12 SCR 332 ; India
Carbon Ltd. and others v. State of Assam (1997) 6 SCC
479 : [1997] 3 Suppl. SCR 1 - referred to.
Case Law Reference
[2006] 3 SCR 1095
referred to
Para 5
[1961] SCR 809
referred to
Para 5
1963 SCR 491
referred to
Para 5
2017 (6) SCALE 540
referred to
Para 6
[2008] 17 SCR 1282
referred to
Para 8
[2016] 1 SCR 1
referred to
Para 11
[2015] 12 SCR 332
referred to
Para 31
(1994) 4 SCC 276
followed
Para 37
[1999] 2 SCR 925
followed
Para 40
[1983] 2 SCR 363
relied on
Para 41
[2013] 4 SCR 331
relied on
Para 42
[1997] 3 Suppl. SCR 1
referred to
Para 44
INDIAN OIL CORPORATION LTD. v. STATE OF U.P. & ORS.
A
B
C
D
E
F
G
H
608
SUPREME COURT REPORTS
[2019] 6 S.C.R.
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 32573268 of 2019.
From the Judgment and Order dated 22.11.2018 of the High
Court of Judicature at Allahabad in Writ Tax Nos. 757, 769, 772, 770,
779, 776, 768, 775, 778, 766, 753 and 754 of 2018.
Ms. Aishwarya Bhati, ASG, Dr. Manish Singhvi, AAG, Guru
Krishan Kumar, Dhruv Agrawal, Dinesh Dwivedi, Sr. Advs., Ajay
Aggarwal, Ms. Mallika Joshi, Rajan Narain, Nishit Agrawal, Manik Sethi,
Bhakti Vardhan Singh, Yasharth Kant, Krishnam Mishra, Satyendra
Kumar, Shailja Nanda Mishra, Udit Jain, Abhishek Anand, Isaan Saran,
M. P. Devanath, Advs. with them for the appearing parties.
The Judgment of the Court was delivered by
ASHOK BHUSHAN, J.
1. These appeals have been filed against the Division Bench
judgment of Allahabad High Court dated 22.11.2018 dismissing the writ
petitions filed by the appellant questioning the demand notices 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.
4. For deciding the issues, which have arisen in these appeals, it is
necessary to notice the history of litigation in so far as State of U.P. is
A
B
C
D
E
F
G
H
609
concerned. Levy of tax on entry of any goods into a local area was
introduced by the U.P. Tax on Entry of Goods Ordinance, 2000, w.e.f.
01.11.1999, which Ordinance was replaced by the U.P. Tax on Entry of
Goods Act, 2000, which Act was deemed to have come into force on
01.11.1999. The Entry Tax was also imposed on crude oil. The appellant
filed a Writ Petition No. 251 of 2003 before the Allahabad High Court
challenging the validity of levy of Entry Tax on crude oil. The Allahabad
High Court vide its judgment and order dated 27.01.2004 declared Act
No. 1 of 2000 as violative of Articles 301 and 304 of the Constitution of
India and, thus, was held to be ultra vires. The State of U.P. filed a
Special Leave Petition against the judgment dated 27.01.2004, which
was later re-numbered as Civil Appeal Nos. 997-998 of 2004. This
Court on 09.02.2004 passed following interim order:-
"Issue notice on the application for impleadment.
Leave granted.
The operation of the impugned judgment is stayed subject to the
appellant's depositing all taxes that may be realized by the appellant
from the respondents after 27.1.2004 in a separate interest bearing
account. This amount and the interest accrued thereon shall be
held subject to the further orders of this Court.
SLP (C) No.3033/3004
Delink this matter."
5. The Constitution Bench of this Court in Jindal Stainless Ltd.
(2) and Another Vs. State of Haryana and Others, (2006) 7 SCC
241 laid down the yardsticks to determine whether tax was compensatory
or not. Constitution Bench reiterated that the doctrine of "direct and
immediate effect" on the trade and commerce under Article 301 as
propounded in Atiabari Tea Co. Ltd. Vs. State of Assam, AIR 1961
SC 232 and the working test enunciated in Automobile Transport
(Rajasthan) Ltd. Vs. State of Rajasthan, AIR 1962 SC 1406 for
deciding whether a tax is compensatory or not was to continue to apply.
Constitution Bench held that accordingly, the constitutional validity of
various local enactments which are the subject matters of pending appeals,
special leave petitions and writ petitions will now be listed for being
disposed of in the light of this judgment.
INDIAN OIL CORPORATION LTD. v. STATE OF U.P. & ORS.
[ASHOK BHUSHAN, J.]
A
B
C
D
E
F
G
H
610
SUPREME COURT REPORTS
[2019] 6 S.C.R.
6. Pursuant 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 U.P. promulgated the U.P. Tax on Entry of Goods into
Local Areas Ordinance on 24.09.2007 (U.P. Ordinance No. 35 of 2007)
with retrospective effect from 01.11.1999 repealing the earlier Act No.1
of 2000 and re-enacting the same w.e.f. 01.11.1999. The Statement of
Objects and Reasons, which necessitated the issuance of the aforesaid
Ordinance was as follows:-
"STATEMENT OF OBJECTS AND REASONS
The Uttar Pradesh Tax on Entry of Goods Act, 2000 (U.P.
Act No. 12 of 2000) was enacted to provide for the levy and
collection of tax on entry of goods into a local area for consumption,
use or sale therein. The said act was declared ultra vires by the
Hon'ble High Court of Judicature at Allahabad in writ petition
No. 251/2003 M/s Indian Oil Corporation Limited Versus State
Government in its Judgment dated January 27, 2004. The State
Government filed the special leave petition No. 2757-2758/2004
against the said Judgement. The Hon'ble Supreme Court in the
said special leave petition stayed the operation of the said
Judgement of the High Court on February 9, 2004 with the
condition that the amount realised as entry tax shall be deposited
A
B
C
D
E
F
G
H
611
in the separate interest bearing account. Thereafter in the case
of Jindal Steel Limited Versus State Government and others, the
Hon'ble Supreme Court required the High Court to submit its
report regarding whether the entry tax under the said act falls in
the category of compensatory tax or not. The High Court in its
judgment dated January 8, 2007 held that the entry tax under the
said act does not fall in the category of compensatory tax. The
same Judgement had been delivered by the High Court in the
case of the Indian Oil Corporation Limited and other similar cases.
A special leave petition was filed in the Supreme Court by the
State Government against the Judgement of the High Court dated
January 8, 2007. Since M/s Indian Oil Corporation Limited was
demanding for the refund of Rs. 3022-58 crore on the basis of the
interim order dated April 17, 2007 of the Apex Court, the State
Government was considering to enact afresh the said Act
retrospectively after the Judgement of the constitution Bench of
the Supreme Court. In the meantime the Bihar Entry Tax Act
was held to be valid by the Patna High Court. It was therefore
decided to make a Law with retrospective effect by removing the
short-comings pointed out in 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 TwoJudge Bench of this Court in Jaiprakash Associates Limited Vs.
State of Madhya Pradesh & Ors. (2009) 7 SCC 339 referred the
INDIAN OIL CORPORATION LTD. v. STATE OF U.P. & ORS.
[ASHOK BHUSHAN, J.]
A
B
C
D
E
F
G
H
612
SUPREME COURT REPORTS
[2019] 6 S.C.R.
issue of levy of Entry Tax in various States enactments including U.P.
for determination of a Larger Bench of Nine Judges in terms of Article
145(3) of the Constitution of India. On 23.12.2011, a Division Bench of
the Allahabad High Court decided the Writ Petition No. 1483 of 2007
alongwith bunch of writ petitions, leading writ petition being Writ Tax
No. 1484 of 2007 - ITC Limited Vs. State of U.P. and Others.
The Division Bench of the Allahabad High Court held that the State of
U.P. did not lack legislative competence in enacting the U.P. Tax on
Entry of Goods into Local Areas Act, 2007, imposing Entry Tax on the
entry of scheduled goods into the local areas for consumption, use or
sale thereunder. Concluding part of the judgment in Paragraph Nos.
151, 152 and 153 are as follows:-
"151. For the reasons given as above, we hold that the State of
U.P. did not lack legislative competence in enacting U.P. Tax on
Entry of Goods into Local Areas Act, 2007, imposing entry tax on
the entry of scheduled goods into the local areas for consumption,
use or sale thereunder. The provisions of the Act patently and
facially indicate and that there are sufficient guidelines and
guarantees under the Act for ensuring that the entire amount of
entry tax collected and credited to the U.P. State Development
Fund is utilised only for the purposes of its reimbursement to
facilitate the trade, commerce and industry. The State Government
has also established that the entire amount of entry tax is by way
of reimbursement / recompense to the trade, commerce and
industry, in the local areas of the State of U.P. provides quantifiable/
measurable benefits to its payers. The levy under the Act, 2007 is
also not discriminatory, unreasonable or against public interest.
The levy of entry tax under the Act, therefore, does not violate
the freedom of trade, commerce and intercourse guaranteed under
Article 301 of the Constitution of India. Section 17 of the Act
validating the amount of entry tax levied, assessed, realized and
collected under the U.P. Tax on Entry of Goods Act, 2000, is also
valid and authorises the State to keep the entire amount, for the
purposes of its utilisation for facilitating trade, commerce and
intercourse in the local areas of the State.
152. We may observe by way of clarification that in these writ
petitions we have confined our enquiry to the constitutional validity
of the U.P. Tax on Entry of Goods into Local Areas Act, 2007,
A
B
C
D
E
F
G
H
613
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 furnish
bank guarantee for the balance amount within four weeks. In SLP (C)
No. 327 of 2012, following order was passed:-
"Shri R.F. Nariman, learned Solicitor General, appearing for the
petitioner in this matter, would contend that the respondents have
issued demand notices, inter alia, demanding the payment of Entry
Tax under the provisions of U.P. Tax on Entry of Goods into Local
Areas Act, 2007 for the assessment periods 2007-2008, 20082009, 2009-2010 and 2010-2011, without there being any
quantification by way assessments for all these years. Faced
with this situation, learned senior counsel, Shri K.K. Venugopal,
appearing for the respondent-State would submit that he will file
an appropriate affidavit indicating whether the petitioners herein
have filed the monthly or annual returns for the assessment years
in question and whether the department has completed
assessments or the basis on which the demand notices are issued.
To facilitate them to file the said affidavit, we adjourn this matter
to Thursday, i.e. 12.01.2012."
10. The orders dated 17.01.2012 and 16.02.2012 were further
passed by this Court in the SLP (C) No. 327 of 2012 of the appellant.
Appellant in the interim order has been directed to pay 50% of the Entry
INDIAN OIL CORPORATION LTD. v. STATE OF U.P. & ORS.
[ASHOK BHUSHAN, J.]
A
B
C
D
E
F
G
H
614
SUPREME COURT REPORTS
[2019] 6 S.C.R.
Tax. On 06.12.2013, prayer for further modification of the interim order
made on behalf of the appellant was accepted, which is to the following
effect:-
"In I.A. No. 7 in Civil Appeal No. 3413 of 2012, Shri R.F.
Nariman, learned senior counsel for the applicant(s) requests us
to modify our orders passed on 17.01.2012, by observing that in
the event of appellant(s) failing in this appeal, the appellant(s) 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.
The request of the learned senior counsel appears to be
reasonable and if it is granted it would not prejudice the case of
the respondents in any manner whatsoever.
In view of the above, we accept the prayer so made by Shri
Nariman, learned senior counsel."
11. This Court, thus, left the determination of interest, which was
to be payable by the appellant to be determined subsequently. On
11.11.2016, the Nine Judges Constitution Bench decided the reference
in Jindal 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.
A
B
C
D
E
F
G
H
615
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 241 cases and all other judgments that follow
these pronouncements are to the extent of such reliance
overruled.
1159.7. A tax on entry of goods into a local area for use, sale
or consumption therein is permissible although similar goods
are not produced within the taxing State.
1159.8. Article 304(a) frowns upon discrimination (of a hostile
nature in the protectionist sense) and not on mere differentiation.
Therefore, incentives, set-offs, etc. granted to a specified class
of dealers for a limited period of time in a non-hostile fashion
with a view to developing economically backward areas would
not violate Article 304(a). The question whether the levies in
the present case indeed satisfy this test is left to be determined
by the regular Benches hearing the matters.
1160. States are well within their right to design their fiscal
legislations to ensure that the tax burden on goods imported from
other States and goods produced within the State fall equally. Such
measures if taken would not contravene Article 304(a) of the
Constitution. The question whether the levies in the present case
indeed satisfy this test is left to be determined by the regular
Benches hearing the matters.
1161. The questions whether the entire State can be notified as a
local area and whether entry tax can be levied on goods entering
the landmass of India from another country are left open to be
determined in appropriate proceedings."
12. After the judgment of Nine Judges Bench dated 11.11.2016,
the matter was taken by the Regular Bench and by judgment and order
dated 21.03.2017, this Court granted liberty to the appellant to question
the levy of Entry Tax under Act, 2007 on the issues, which are left open
in the order of the Nine Judges Bench before High Court by way of a
INDIAN OIL CORPORATION LTD. v. STATE OF U.P. & ORS.
[ASHOK BHUSHAN, J.]
A
B
C
D
E
F
G
H
616
SUPREME COURT REPORTS
[2019] 6 S.C.R.
fresh writ petition. The appellant filed a Writ Petition No.25730 of 2017
before the High Court, where assessment orders were also assailed as
the consequential relief in (Prayer iii). There were other writ petitions
also. The appellant's Writ Petition No. 25730 of 2017 was heard
alongwith the bunch of writ petitions on 09.11.2017 and on 09.11.2017
judgment was reserved. There were few other writ petitions, which
were heard alongwith the bunch, one being Writ Tax No. 474 of
2017 - M/s. Birla Corporation Limited Vs. State of U.P., where
the validity of the demand 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 Rs. 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 impugned
notice dated 04.05.2018 (ANNEXURE-1) issued by the
Respondent No.3 demanding interest on entry tax from the
petitioner.
(ii)
Issue a suitable writ, order or direction in the nature of
Prohibition restraining the Respondents, their servants, agents
or representative from in any manner realizing any interest
on the entry tax from petitioner pursuant to the Act No. 30
of 2007, assessment order and the impugned notice dated
04.05.2018;
(iii) Issue a suitable writ, order or direction in the nature of
mandamus commanding the respondents to adjust the interest
payable by the Respondents on the amounts paid by the
A
B
C
D
E
F
G
H
617
Petitioner upto 23.09.2007 towards the entry tax together
with interest;
(iv) Issue any other suitable writ, order or direction as this Hon'ble
Court may deem fit and proper in the circumstances of the
case in the facts and circumstances of the case.
(v)
Award the costs of the petition to the petitioners."
13. On 10.05.2018, when the writ petitions were taken up for
hearing by the High Court, learned counsel for the appellant made
submission before the High Court that appellant proposes to make an
application before this Court to adjudicate upon the liability to pay interest
under the Act, 2007, since the issue was left to be decided at the time of
final disposal of the appeal. High Court by order dated 10.05.2018,
adjourned the proceedings considering the facts and prayers made by
the learned counsel for the appellant. An application for direction was
filed by the appellant being Application No.1716 of 2018, which was
permitted to be withdrawn on submission of the learned counsel for the
applicant that the issue of levy of interest shall be pressed before the
High Court.
14. After the above order dated 20.07.2018, the hearing in writ
petition proceeded. Another demand notice dated 18.05.2018 was issued
by the respondent asking for depositing arrears of interest amount. The
respondents before the High Court raised a preliminary objection on
25.07.2018 on the ground that writ petition is a second writ petition against
the same assessment order on the same and consequential cause of
action. It was stated in the preliminary objection that for the same relief
Writ Petition No.25730 of 2017 has already been dismissed by the High
Court on 04.05.2018, wherein assessment orders were also challenged,
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
INDIAN OIL CORPORATION LTD. v. STATE OF U.P. & ORS.
[ASHOK BHUSHAN, J.]
A
B
C
D
E
F
G
H
618
SUPREME COURT REPORTS
[2019] 6 S.C.R.
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 demanded from the appellant. It is submitted
that in Act, 2007, wherever it provided for payment of interest, it has
been so provided. Reference is made to sub-section (3) of Section 12 of
Act, 2007 where liability to tax alongwith interest is created.