Bihar Industrial Incentive Policy | Except VAT Amount Assessee Couldn't Claim Other Incentives By Way Of Reimbursement Of Entry Tax Amount: Patna HC

While interpreting the Bihar Industrial Incentive Policy, 2006 (“Policy”), the Patna High Court on Tuesday (Aug. 6) observed that an assessee who paid Entry Tax (“ET”) while importing the goods in the state can claim 80% reimbursement only the Value Added Tax (“VAT”) ought to be paid by the assessee.

Setting aside the order of the Single Bench, the bench comprising Chief Justice K. Vinod Chandran and Justice Partha Sarthy observed that the assessee could not claim an incentive by way of reimbursement of 80% of the Entry Tax (ET) and Central Sales Tax (CST) together with the Value Added Tax (VAT).

As per the policy, the entry tax paid by the assessee/respondent no.1 while importing the goods in the State would be set off against the VAT to be paid by the assessee. In essence, the assessee would be liable to pay only the remaining amount of VAT which is calculated after deducting the 80% VAT amount from the entry tax already paid.

“Subsidy / Incentive on VAT:

This facility will be available to Small/large/ medium industries. The industrial unit will get a passbook from the State Government in which the details of the tax paid under Bihar VAT would be entered and verified by the Commercial Taxes Department in the form prescribed in Appendix - III. The Director, Industries will be authorized to pay the incentive amount on the basis of the verification.

The new Units will avail 80% reimbursement against the admitted VAT amount deposited in the account of the Government, for a period of ten years. The maximum Subsidy amount is payable 300% of the capital Invested.”, the Policy states.

The second proviso to sub-section (2) of Section 3 of the Bihar Entry Tax Act provides that on payment of Entry Tax by an importer of scheduled goods, who is also liable to pay tax under the VAT Act, the VAT liability would stand reduced to the extent of tax paid under the Entry Tax Act. The said provision enables a set-off as against VAT liability incurred on the imported goods, in the same form or in any altered form; when sold within the State, attracting the liability to tax under the VAT Act.

It is important to mention that the VAT liability is attracted only when imported uses the imported goods for manufacturing purposes. The policy provides incentives to those importers who manufacture from the importing goods, by providing 80% reimbursement of the VAT amount from the entry tax. 

The Court observed that since the assessee had set up an Iron and Steel Company within the State and the petitioner sources goods from outside the State and on its imports paid Entry Tax on entry into the State, therefore the manufacturing of the goods from the imported goods by the petitioner would attract VAT which can be set-off provided for the Entry Tax paid.

“We once again emphasise that the charge and levy of Entry Tax and VAT are under two different statues and the statute levying Entry Tax makes a provision for set-off, of the Entry Tax paid; when the goods on which the Entry Tax has been levied, in the same form or in any other form, is subjected to a subsequent transaction, attracting VAT liability. Hence, when the VAT liability is attracted, after the set-off, the assessee is liable to pay into the coffers of the State, only the balance VAT component; which is the tax paid under the Bihar VAT Act and deposited in the account of the Government. This is the output tax payable by the assessee, which alone would be granted the 80% reimbursement as per the Subsidy/Incentive on VAT, brought in by the Policy of 2006.”, the judgment authored by Chief Justice K Vinod Chandran said.

Since, the assessee claimed an incentive by way of reimbursement of 80% of the Entry Tax (ET) and Central Sales Tax (CST) together with the Value Added Tax (VAT), the Court held that Policy provided an incentive by way of reimbursement on the VAT paid to the state and not on the CST or Entry Tax.

"On the above reasoning, we find the Policy of 2006 to have enabled Incentive/Subsidy only on the VAT paid into the coffers of the State and not to either CST or Entry Tax. We set aside the judgment of the learned Single Judge and allow the appeal of the State.", the court concluded.

Accordingly, the department's appeal was allowed.

Appearance :

For the Appellant/s : Mr. Vikas Kumar, S.C. - 11, Mr. Rewti Kant Raman (A.C. To S.C -11)

For the Respondent/s : Mr. P. K. Shahi (AG)

Case Details: The Secretary-cum- Commissioner of Commercial Taxes Government of Bihar & Anr. Versus M/S Gangotri Iron and Steel Co. Ltd. & Anr.

Citation: 2024 LiveLaw (Pat) 65

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