INDIAN OIL CORPORATION LIMITED versus STATE OF U.P. & ORS. on 22 April 2019

[2019] 6 S.C.R. 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 declaredthe 2000 Act to be ultra vires inter alia holding that Entry Tax leviedon crude oil does not fulfil the requirements of compensatory tax –Challenged by the appellant before the High Court – Supreme Courtin Jaiprakash Associates Limited case referred the issue of levy ofEntry Tax in various States enactments including U.P. fordetermination by nine Judges Bench – High Court held that theState did not lack legislative competence in enacting the 2007 Act –SLP filed by the appellant – Supreme Court passed interim orderstaying the operation of the judgment of the High Court inter aliasubject to the appellants in each case depositing 50% of the accruedtax liability under the 2007 Act – Determination of interest, payableby the appellant was to be determined subsequently – Nine JudgesBench decided the reference in Jindal Stainless Limited case –Thereafter, the matter was taken by the Regular Bench and byjudgment dtd. 21.03.17 Supreme Court granted liberty to theappellant to question the levy of Entry Tax under the 2007 Act, onthe issues left open in the order of the Nine Judges Bench, beforeHigh Court by way of fresh writ petition – Appellant filed WritPetition No.25730 of 17 before the High Court, where assessmentorders were also assailed – Dismissed vide judgment dtd.04.05.18upholding the validity of the 2007 Act– Demand notices issued–Challenged by the appellant in so far as demand towards interestwas concerned – Respondents raised preliminary objection that thewrit petition is second writ petition on the same and consequentialcause of action– Dismissed – On appeal, held: Writ PetitionNo.25730 of 17 was filed by the appellant in pursuant to the libertydtd. 21.03.17 challenging the vires of 2007 Act – s.11, ExplanationIV provides that a plea which might and ought to have been taken

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Ain the earlier suit, shall be deemed to have been taken and decidedagainst person raising the plea in the subsequent suit – Present is acase where the plea questioning the leviability of the interest wasspecifically raised by the appellant in the Writ Petition No.25730however, the Division Bench took the view that it was to deal withthe challenge on the grounds as reflected in the judgment dtd.B21.03.17 and thus did not permit the consideration of any otherquestions including the question of interest – Issue which was notexpressly permitted to be decided cannot operate as res judicata insubsequent writ petition where the challenge was to the leviabilityof the interest – Further, the High Court de-tagged the writ petitionCfrom the the main bunch where the challenge to levy of interest wasmade – High Court committed error in upholding the preliminaryobjection of the respondent – Matter remitted to High Court interalia for determining the liability of interest – U.P. Tax on Entry ofGoods 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,D2007 – ss.4, 9, 10, 12 and 13 – Constitution of India – Arts. 301and 304.

Conclusion

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 ofthe 2007 Act with certain changes – s.13 mutatis mutandis appliesEs.33 of the VAT Act – s.33 has to be applied with respect to paymentand recovery of tax – Thus, the payment of interest which iscontemplated u/s.33 on the amount of tax has to be applied withregard to the payment of Entry Tax and the interest thereon – Evenif provision of s.33 of VAT Act is to be treated as machinery provisionFwhich is to be applied by virtue of s.13 of 2007 Act, the machineryprovision has to be interpreted in a manner so as to make the liabilityeffective and treated to be substantive law – Submission of theappellant that 2007 Act does not contain any substantive law forlevy of the interest, rejected – U.P. Value Added Tax Act, 2008 –

s.33 – Machinery provision when treated as substantive law.GWords & Phrases – ‘mutatis mutandis’ – Meaning of –Discussed.

Allowing the appeals, the Court

HELD: 1.1 Writ Petition No.25730 of 2017 was filed by theHappellant in pursuant to the liberty dated 21.03.2017. The main pleadings and the grounds raised in the writ petition relate tochallenge to vires of U.P. Tax on Entry of Goods into Local AreasAct, 2007. In the writ petition direction sought was declaring theAct, 2007 as invalid, void and unconstitutional in so far as purportsto levy entry tax on crude oil imported into India for MathuraRefinery. Further reliefs were claimed in the writ petition includingprayer for quashing the assessment orders 1999-2000 to 2011-2012. In the writ petition there was challenge to interest also.The Division Bench took the view that it is to deal with thechallenge on the grounds as reflected in the judgment of theRegular Bench dated 21.03.2017. The Division Bench, thus,confined the consideration limited to the grounds reflected inthe questions framed by the regular Bench of the Supreme Court.The Division Bench, thus, consciously confined the considerationto only three questions from the judgment of Supreme Court dated21.03.2017. The Division Bench clearly did not permit theconsideration of any other questions including the question ofinterest which is clear from the judgment dated 04.05.2018. Whenthe judgment was reserved on 09.11.2017 in Bunch of writpetitions including W.P.No.25730 of 2017, in the writ petitionswhere challenge to levy of interest was separately made werede-tagged. [Paras 24-26][623-D-E; 624-F-G]

1.2 Present is a case where the Division Bench whiledeciding Writ Petition No.25730 of 2017 consciously restrictedthe consideration to three questions as noted in the judgment ofSupreme Court dated 21.03.2017 and did not permit to raise anysubmission other than three questions as noted above or proceedto consider any other questions. The issue which was notexpressly permitted to be decided by judgment dated 04.05.2018cannot operate as res judicata in subsequent writ petition filedby the appellant where the challenge to the leviability of theinterest has been raised. Explanation IV to s.11, CPC providesthat a plea which might and ought to have been taken in the earliersuit, shall be deemed to have been taken and decided againstperson raising the plea in the subsequent suit. Present is a casewhere the plea of questioning the leviability of the interest wasspecifically raised by the appellant in the writ petition. TheDivision Bench of the High Court did not entertain such pleasdue to the Court having restricted the consideration to the three AB

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Aquestions. Subsequent writ petition where plea of leviability ofthe interest was raised could not have been thrown on the groundof res judicata. The sequence of the events and the fact of de-tagging the writ petition with the main Bunch where challenge tointerest was made separately clearly indicate that the DivisionBench which reserved the judgment on 09.11.2017 clearlyBintended not to entertain the question of liability to pay interestin the Bunch which was reserved on 09.11.2017. When the HighCourt expressly restricted the consideration to three issues, theplea of constructive res judicata cannot be pressed in serviceagainst the appellant to preclude him from raising the questionCwhich was not expressly permitted to be argued in Writ PetitionNo.25730 of 2017. From the facts of the case, it is apparent thatin the order of this Court passed on 06.12.2013 while modifyingthe interim order passed in C.A. No. 3413 of 2012 (arising out ofSLP(C)No.2757-2758 of 2004), this Court observed “in the event of appellant failing in this appeal, the appellant will be liable toDpay the arrears of tax along with interest, as may be determinedby this Court under the provisions of the Uttar Pradesh EntryTax Act, 2007, at the time of final disposal of the appeal.” WhenAppeal No.3413 of 2012 was ultimately decided on 21.03.2017by this Court, this Court granted liberty to the appellant to fileEfresh writ petition raising the issues mentioned therein forconsideration of the High Court. In the order dated 21.03.2017there was no determination by this Court regarding interest tobe paid by the appellant under the provisions of the Entry TaxAct, 2007. However, when the liberty was granted by this Courtto the appellant to raise above noted three issues on theFnecessary factual background or any other constitutional/statutoryissues, which arise for consideration, the High Court was free toconsider the question of liability of interest to be satisfied by theappellant under Act, 2007. [Paras 28-30][625-C-E; 626-A-H]

1.3 The question relating to nature and extent of liability toGpay interest on Entry Tax under the scheme of Act, 2007 need tobe examined by this Court in these appeals. The High Court inthe impugned judgment committed error in upholding thepreliminary objection of the respondent. [Para 32][627-D-E]

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1.4 Section 4 of the U.P. Tax on Entry of Goods into LocalAreas Act, 2007 provides for levy of tax. Section 4(1) providesthat for the purpose of development of trade, commerce andindustry in the State, there shall be levied and collected a tax onentry of goods specified in the Schedule into a local area forconsumption, use or sale therein, from any place outside thatlocal area, at such rate not exceeding five per cent of the value ofthe goods as may be specified by the State Government bynotification. Section 9 deals with submission of returns andassessment of tax. Section 10 deals with provisional assessmentof tax. Section 12 deals with realisation of tax throughmanufacturer. Section 12 deals with only one incident of realisationof Entry Tax, i.e., through manufacturer. Section 12(1) makes itclear that any person who intends to bring into a local area fromany manufacturer within the State, such goods specified in theSchedule as may be notified by the State Government, shall, atthe time of taking delivery of the goods from the manufacturer,pay to the manufacturer the tax payable on entry of such goodsinto the local area and the manufacturer shall receive the tax sopaid. Section 12(2) creates liability on person who intends to bringinto a local area from any manufacturer any goods specified inthe Schedule and the time of payment is statutorily laid down thatis at the time of taking goods. Section 12(3) contemplates asituation where although manufacturer received the tax underSection 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 oneparticular situation and does not provide for any universalapplication for payment of interest. Requirement of payment ofinterest under Section 12 (3), thus, is for a particular situationand has no application with regard to any other instance of liabilityto pay tax. Present is a case where appellant is not receiving anygoods from any manufacturer, hence, in the present caseSection 12 has no applicability. Section 13 mutatismutandis 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 isprovided by Section 13 of Act, 2007 with certain changes in points AB

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Aof details. Section 33 of the VAT Act, 2008 which has beenmentioned to apply under Section 13 has to be applied with respectto payment and recovery of tax. Thus, the payment of interestwhich is contemplated under Section 33 on the amount of tax hasto be applied with regard to the payment of Entry Tax and theinterest thereon. Even if provision of Section 33 of VAT Act, 2008Bto be treated as machinery provision which is to be applied byvirtue of Section 13 of Act, 2007, the machinery provision has tobe interpreted in a manner so as to make the liability effectiveand treated to be substantive law. The submission of the counselfor the appellant that Act, 2007 does not contain any substantiveClaw 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 interestand various aspects including factual aspects need to be examinedand considered by the High Court. For instance, what shall beDthe effect of deposit of Entry Tax in separate interest-bearingaccount in pursuance of the interim order of this Court dated09.02.2004 in Civil Appeal Nos.997-998 of 2004 needs to beconsidered. There may be few other issues, questions of factswhich need to be decided by the High Court for determining theliability of interest of the appellant. It shall also be open for theEHigh Court to frame any other question or issue which may berequired to be considered and answered. The impugned judgmentof the High Court is set aside. The Writs are revivedbefore the High Court to be considered and decided on merits.[Paras 49, 50][637-B-D]FJ.K. Synthetics Limited v. Commercial Taxes Officers(1994) 4 SCC 276 ; V.V.S Sugars v. Govt. of A.P. andothers (1999) 4 SCC 192 : [1999] 2 SCR 925– followed.

M/s. Ashok Service Centre and others v. State of OrissaG(1983) 2 SCC 82 : [1983] 2 SCR 363 ; Rajasthan StateIndustrial Development and Investment Corporationand another v. Diamond & Gem DevelopmentCorporation Limited and another 2013 (5) SCC 470 :[2013] 4 SCR 331 – relied on.

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Jindal Stainless Ltd. (2) and Another v. State of Haryanaand Others (2006) 7 SCC 241 : [2006] 3 SCR 1095 ;Atiabari Tea Co. Ltd. v. State of Assam AIR 1961 SC232 : [1961] SCR 809 ; Automobile Transport(Rajasthan) Ltd. v. State of Rajasthan AIR 1962 SC1406 : 1963 SCR 491 ; State of U.P. & Ors. v. M/s.Indian Oil Corporation Ltd. & Etc. 2017(6) SCALE 540 ; Jaiprakash Associates Limited v. Stateof 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. 1484of 2007; Jindal Stainless Limited & Anr. v. State ofHaryana & Ors. (2017) 12 SCC 1 : [2016] 1 SCR 1 ;M/s. Birla Corporation Limited vs. State of U.P Decisionof 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 SteelRolling Mills v. Commissioner of Central Excise andanother (2016) 3 SCC 643 : [2015] 12 SCR 332 ; IndiaCarbon Ltd. and others v. State of Assam (1997) 6 SCC479 : [1997] 3 Suppl. SCR 1 – referred to.

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Case Law Reference

ACIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 3257-3268 of 2019.

From the Judgment and Order dated 22.11.2018 of the HighCourt of Judicature at Allahabad in Writ Tax Nos. 757, 769, 772, 770,779, 776, 768, 775, 778, 766, 753 and 754 of 2018.B

Ms. Aishwarya Bhati, ASG, Dr. Manish Singhvi, AAG, GuruKrishan Kumar, Dhruv Agrawal, Dinesh Dwivedi, Sr. Advs., AjayAggarwal, Ms. Mallika Joshi, Rajan Narain, Nishit Agrawal, Manik Sethi,Bhakti Vardhan Singh, Yasharth Kant, Krishnam Mishra, SatyendraKumar, Shailja Nanda Mishra, Udit Jain, Abhishek Anand, Isaan Saran,CM. 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 BenchDjudgment of Allahabad High Court dated 22.11.2018 dismissing the writpetitions filed by the appellant questioning the demand notices issued bythe respondent demanding interest on Entry Tax from the appellant.

2. These appeals centres round the issue regarding liability to payinterest on the Entry Tax on the appellant under The U.P. Tax on Entryof Goods into Local Areas Act, 2007 (hereinafter referred to as “Act,E2007”) The demanded Entry Tax having been paid by the appellant, theissue to be considered is with regard to liability to pay interest on theEntry Tax alone.

3. The Entry Tax Legislations in the State of U.P. as well as inother States of the country have a long history of litigation. The EntryFTax Legislations enacted by different States including the State of U.P.were challenged in the High Courts questioning the very legislativecompetence of State Legislature to enact Entry Tax Legislations, whichaccording to writ petitioners violated freedom of trade, commerce andintercourse guaranteed under Article 301 and other Articles of Part XIIIGof the Constitution of India. Some of the High courts including AllahabadHigh Court have struck down the initial Entry Tax Legislations on theground that it violates rights guaranteed under Part XIII of the Constitutionof India.

4. For deciding the issues, which have arisen in these appeals, it isHnecessary to notice the history of litigation in so far as State of U.P. is concerned. Levy of tax on entry of any goods into a local area wasintroduced 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 ofGoods Act, 2000, which Act was deemed to have come into force on01.11.1999. The Entry Tax was also imposed on crude oil. The appellantfiled a Writ Petition No. 251 of 2003 before the Allahabad High Courtchallenging the validity of levy of Entry Tax on crude oil. The AllahabadHigh Court vide its judgment and order dated 27.01.2004 declared ActNo. 1 of 2000 as violative of Articles 301 and 304 of the Constitution ofIndia and, thus, was held to be ultra vires. The State of U.P. filed aSpecial Leave Petition against the judgment dated 27.01.2004, whichwas later re-numbered as Civil Appeal Nos. 997-998 of 2004. ThisCourt 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 theappellant’s depositing all taxes that may be realized by the appellantfrom the respondents after 27.1.2004 in a separate interest bearingaccount. This amount and the interest accrued thereon shall beheld 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 SCC241 laid down the yardsticks to determine whether tax was compensatoryor not. Constitution Bench reiterated that the doctrine of “direct andimmediate effect” on the trade and commerce under Article 301 aspropounded in Atiabari Tea Co. Ltd. Vs. State of Assam, AIR 1961SC 232 and the working test enunciated in Automobile Transport(Rajasthan) Ltd. Vs. State of Rajasthan, AIR 1962 SC 1406 fordeciding whether a tax is compensatory or not was to continue to apply.Constitution Bench held that accordingly, the constitutional validity ofvarious local enactments which are the subject matters of pending appeals,special leave petitions and writ petitions will now be listed for beingdisposed of in the light of this judgment.

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A6. Pursuant to Constitution Bench judgment, the matters werelisted on 14.07.2006, when this Court permitted the parties to place therelevant materials in the concerned writ petitions within two monthsbefore the respective High Courts, which were to deal with the basicissue as to whether the impugned levy was compensatory in nature.The High Courts were requested to decide the issues within five monthsBfrom the date of receipt of the order. After the above orders of thisCourt, the Allahabad High Court was pleased to decide the questionsraised on 08.01.2007 holding that Entry Tax levied on crude oil and othergoods does not fulfil the requirements of compensatory tax as laid downby this Court. On 17.04.2007, this Court in C.A. Nos. 997-998 ofC2004 – 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 hasbeen passed in favour of the tax payers, shall operate so far asthe writ petitioners are concerned………………..”

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7. The effect in view of the above interim order was that the levyof 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 intoLocal 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.1Eof 2000 and re-enacting the same w.e.f. 01.11.1999. The Statement ofObjects and Reasons, which necessitated the issuance of the aforesaidOrdinance 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 andcollection of tax on entry of goods into a local area for consumption,use or sale therein. The said act was declared ultra vires by theHon’ble High Court of Judicature at Allahabad in writ petitionNo. 251/2003 M/s Indian Oil Corporation Limited Versus StateGovernment in its Judgment dated January 27, 2004. The StateGovernment filed the special leave petition No. 2757-2758/2004against the said Judgement. The Hon’ble Supreme Court in thesaid special leave petition stayed the operation of the saidJudgement of the High Court on February 9, 2004 with thecondition that the amount realised as entry tax shall be deposited F

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in the separate interest bearing account. Thereafter in the caseof Jindal Steel Limited Versus State Government and others, theHon’ble Supreme Court required the High Court to submit itsreport regarding whether the entry tax under the said act falls inthe category of compensatory tax or not. The High Court in itsjudgment dated January 8, 2007 held that the entry tax under thesaid act does not fall in the category of compensatory tax. Thesame Judgement had been delivered by the High Court in thecase of the Indian Oil Corporation Limited and other similar cases.A special leave petition was filed in the Supreme Court by theState Government against the Judgement of the High Court datedJanuary 8, 2007. Since M/s Indian Oil Corporation Limited wasdemanding for the refund of Rs. 3022-58 crore on the basis of theinterim order dated April 17, 2007 of the Apex Court, the StateGovernment was considering to enact afresh the said Actretrospectively after the Judgement of the constitution Bench ofthe Supreme Court. In the meantime the Bihar Entry Tax Actwas held to be valid by the Patna High Court. It was thereforedecided to make a Law with retrospective effect by removing theshort-comings pointed out in the Judgement of the High Court ofJudicature at Allahabad and in the light of observations with respectto the compensatory tax made by the Constitutional Bench of theSupreme Court and on the basis of the provisions of the BiharEntry Tax Act, which had been held valid by the Patna High Court.

Since the State Legislature was not in session and immediatelegislative action was necessary to implement the aforesaiddecision, the Uttar Pradesh Tax on Entry of Goods in to LocalAreas Ordinance, 2007 (U.P. Ordinance No. 35 of 2007) waspromulgated 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. Taxon Entry of goods into Local Areas Act, 2007. The appellant afterenforcement of the Ordinance had filed a Writ Petition No. 1483 of2007 in the Allahabad High Court challenging the Ordinance No. 35 of2007. After enactment of the Act, writ petition was sought to be amendedby 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 referred the ABC

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Aissue of levy of Entry Tax in various States enactments including U.P.for determination of a Larger Bench of Nine Judges in terms of Article145(3) of the Constitution of India. On 23.12.2011, a Division Bench ofthe Allahabad High Court decided the Writ Petition No. 1483 of 2007alongwith bunch of writ petitions, leading writ petition being Writ TaxNo. 1484 of 2007 – ITC Limited Vs. State of U.P. and Others.BThe Division Bench of the Allahabad High Court held that the State ofU.P. did not lack legislative competence in enacting the U.P. Tax onEntry of Goods into Local Areas Act, 2007, imposing Entry Tax on theentry of scheduled goods into the local areas for consumption, use orsale thereunder. Concluding part of the judgment in Paragraph Nos.C151, 152 and 153 are as follows:- “151. For the reasons given as above, we hold that the State ofU.P. did not lack legislative competence in enacting U.P. Tax onEntry of Goods into Local Areas Act, 2007, imposing entry tax onthe entry of scheduled goods into the local areas for consumption,Duse or sale thereunder. The provisions of the Act patently andfacially indicate and that there are sufficient guidelines andguarantees under the Act for ensuring that the entire amount ofentry tax collected and credited to the U.P. State DevelopmentFund is utilised only for the purposes of its reimbursement tofacilitate the trade, commerce and industry. The State GovernmentEhas also established that the entire amount of entry tax is by wayof reimbursement / recompense to the trade, commerce andindustry, in the local areas of the State of U.P. provides quantifiable/measurable benefits to its payers. The levy under the Act, 2007 isalso not discriminatory, unreasonable or against public interest.FThe levy of entry tax under the Act, therefore, does not violatethe freedom of trade, commerce and intercourse guaranteed underArticle 301 of the Constitution of India. Section 17 of the Actvalidating the amount of entry tax levied, assessed, realized andcollected under the U.P. Tax on Entry of Goods Act, 2000, is alsovalid and authorises the State to keep the entire amount, for theGpurposes of its utilisation for facilitating trade, commerce andintercourse in the local areas of the State.

152. We may observe by way of clarification that in these writpetitions we have confined our enquiry to the constitutional validityof the U.P. Tax on Entry of Goods into Local Areas Act, 2007, H

and whether the entry tax is compensatory in nature, which doesnot violate the freedom of trade, commerce and intercourse underArticle 301 of the Constitution of India. We have not examinedthe other issues namely the validity of the notices, assessments,rebates, exemption and the liability of the traders, andmanufacturers of the scheduled goods to pay entry tax. All otherquestions, will remain open to be considered by the competentauthorities under the Act in accordance with law.

153. All the writ petitions are consequently dismissed. The interimorders 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 2012was filed by the appellant. On 10.01.2012, this Court passed an interimorder in several special leave petitions filed against the judgment dated23.12.2011 staying the operation of the impugned judgment of the HighCourt dated 23.12.2011 subject to the appellants in each case depositing50% of the accrued tax liability/arrears under the Act, 2007 and furnishbank 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 thepetitioner in this matter, would contend that the respondents haveissued demand notices, inter alia, demanding the payment of EntryTax under the provisions of U.P. Tax on Entry of Goods into LocalAreas Act, 2007 for the assessment periods 2007-2008, 2008-2009, 2009-2010 and 2010-2011, without there being anyquantification by way assessments for all these years. Facedwith this situation, learned senior counsel, Shri K.K. Venugopal,appearing for the respondent-State would submit that he will filean appropriate affidavit indicating whether the petitioners hereinhave filed the monthly or annual returns for the assessment yearsin question and whether the department has completedassessments or the basis on which the demand notices are issued.To facilitate them to file the said affidavit, we adjourn this matterto Thursday, i.e. 12.01.2012.”

10. The orders dated 17.01.2012 and 16.02.2012 were furtherpassed 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 A

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ATax. On 06.12.2013, prayer for further modification of the interim ordermade on behalf of the appellant was accepted, which is to the followingeffect:- “In I.A. No. 7 in Civil Appeal No. 3413 of 2012, Shri R.F.Nariman, learned senior counsel for the applicant(s) requests usBto modify our orders passed on 17.01.2012, by observing that inthe event of appellant(s) failing in this appeal, the appellant(s) willbe liable to pay the arrears of tax along with interest, as may bedetermined by this Court under the provisions of the Uttar PradeshEntry Tax Act, 2007, at the time of final disposal of the appeal.

CThe request of the learned senior counsel appears to bereasonable and if it is granted it would not prejudice the case ofthe respondents in any manner whatsoever.

In view of the above, we accept the prayer so made by ShriNariman, learned senior counsel.”

D11. This Court, thus, left the determination of interest, which wasto be payable by the appellant to be determined subsequently. On11.11.2016, the Nine Judges Constitution Bench decided the referencein Jindal Stainless Limited & Anr. Vs. State of Haryana & Ors.,(2017) 12 SCC 1. The reference was answered by the Court inEfollowing manner:-“1159. By majority the Court answers the reference in thefollowing terms:

1159.1. Taxes simpliciter are not within the contemplation ofPart XIII of the Constitution of India. The word “free” used inFArticle 301 does not mean “free from taxation”.

1159.2. Only such taxes as are discriminatory in nature areprohibited by Article 304(a). It follows that levy of a non-discriminatory tax would not constitute an infraction of Article301.

G1159.3. Clauses (a) and (b) of Article 304 have to be readdisjunctively.

1159.4. A levy that violates Article 304(a) cannot be savedeven if the procedure under Article 304(b) or the provisothereunder is satisfied.H

1159.5. The Compensatory Tax Theory evolved in AutomobileTransport case, AIR 1962 SC 1406 and subsequentlymodified in Jindal case, (2006) 7 SCC 241 has no juristicbasis and is therefore rejected.

1159.6. The decisions of this Court in Atiabari, AIR 1961 SC232, Automobile Transport, AIR 1962 SC 1406 and Jindal,(2006) 7 SCC 241 cases and all other judgments that followthese pronouncements are to the extent of such relianceoverruled.

1159.7. A tax on entry of goods into a local area for use, saleor consumption therein is permissible although similar goodsare not produced within the taxing State.

1159.8. Article 304(a) frowns upon discrimination (of a hostilenature in the protectionist sense) and not on mere differentiation.Therefore, incentives, set-offs, etc. granted to a specified classof dealers for a limited period of time in a non-hostile fashionwith a view to developing economically backward areas wouldnot violate Article 304(a). The question whether the levies inthe present case indeed satisfy this test is left to be determinedby the regular Benches hearing the matters.

1160. States are well within their right to design their fiscallegislations to ensure that the tax burden on goods imported fromother States and goods produced within the State fall equally. Suchmeasures if taken would not contravene Article 304(a) of theConstitution. The question whether the levies in the present caseindeed satisfy this test is left to be determined by the regularBenches hearing the matters.

1161. The questions whether the entire State can be notified as alocal area and whether entry tax can be levied on goods enteringthe landmass of India from another country are left open to bedetermined 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 orderdated 21.03.2017, this Court granted liberty to the appellant to questionthe levy of Entry Tax under Act, 2007 on the issues, which are left openin the order of the Nine Judges Bench before High Court by way of a A

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Afresh writ petition. The appellant filed a Writ Petition No.25730 of 2017before the High Court, where assessment orders were also assailed asthe consequential relief in (Prayer iii). There were other writ petitionsalso. The appellant’s Writ Petition No. 25730 of 2017 was heardalongwith the bunch of writ petitions on 09.11.2017 and on 09.11.2017judgment was reserved. There were few other writ petitions, whichBwere heard alongwith the bunch, one being Writ Tax No. 474 of2017 – M/s. Birla Corporation Limited Vs. State of U.P., wherethe validity of the demand of interest was separately challenged. Whilereserving the judgment on 09.11.2017, High Court de-linked all such writpetitions where validity of demand of interest was separately challenged.COn 04.05.2018, the High Court delivered the judgment in Writ PetitionNo. 25730 of 2017 and other connected matters dismissing the writpetitions upholding the validity of the Act, 2007. Immediately after thedecision of the High Court on 04.05.2018, demand notices were issuedfor the assessment years 2008-2009 to 2011-2012 and demand noticesdated 05.05.2018 for the assessment years 2000-2001 to 2007-2008Drequiring the appellant to deposit Entry Tax together with interestthereupon. The appellant paid a sum to the tune of Rs. 3,361.55 crorestowards Entry Tax for the years 1999-2000 to 2011-2012. The appellantfiled a writ petition challenging the demand notices dated 04.05.2018and 05.05.2018 in so far as demand towards interest was concerned. InEone 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 ofcertiorari calling for the records and quashing the impugnednotice dated 04.05.2018 (ANNEXURE-1) issued by theFRespondent No.3 demanding interest on entry tax from thepetitioner.

(ii) Issue a suitable writ, order or direction in the nature ofProhibition restraining the Respondents, their servants, agentsor representative from in any manner realizing any interestGon the entry tax from petitioner pursuant to the Act No. 30of 2007, assessment order and the impugned notice dated04.05.2018;

(iii) Issue a suitable writ, order or direction in the nature ofmandamus commanding the respondents to adjust the interestHpayable by the Respondents on the amounts paid by the Petitioner upto 23.09.2007 towards the entry tax togetherwith interest;

(iv) Issue any other suitable writ, order or direction as this Hon’bleCourt may deem fit and proper in the circumstances of thecase 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 forhearing by the High Court, learned counsel for the appellant madesubmission before the High Court that appellant proposes to make anapplication before this Court to adjudicate upon the liability to pay interestunder the Act, 2007, since the issue was left to be decided at the time offinal disposal of the appeal. High Court by order dated 10.05.2018,adjourned the proceedings considering the facts and prayers made bythe learned counsel for the appellant. An application for direction wasfiled by the appellant being Application No.1716 of 2018, which waspermitted to be withdrawn on submission of the learned counsel for theapplicant that the issue of levy of interest shall be pressed before theHigh Court.

14. After the above order dated 20.07.2018, the hearing in writpetition proceeded. Another demand notice dated 18.05.2018 was issuedby the respondent asking for depositing arrears of interest amount. Therespondents before the High Court raised a preliminary objection on25.07.2018 on the ground that writ petition is a second writ petition againstthe same assessment order on the same and consequential cause ofaction. It was stated in the preliminary objection that for the same reliefWrit Petition No.25730 of 2017 has already been dismissed by the HighCourt on 04.05.2018, wherein assessment orders were also challenged,hence the writ petition being second writ petition be dismissed as notmaintainable. Reply to preliminary objection was filed by the appellant.High Court after hearing all the parties by the impugned order dated22.11.2018 upheld the preliminary objection about the maintainability ofthe writ petitions and the writ petitions have been dismissed as notmaintainable. While dismissing the writ petitions, certain observationshave also been made by the High Court. Appellant, aggrieved by thejudgment dated 22.11.2018 has come up in this appeal.

15. We have heard Shri Dhruv Agrawal, learned senior counselfor the appellant. Shri Dinesh Dwivedi, learned senior counsel has A

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16. Learned counsel for the appellant submits that under the Act,B2007 there are no substantive provisions for realisation of interest onEntry Tax. In absence of a substantive provision providing for paymentof interest, no interest can be demanded from the appellant. It is submittedthat in Act, 2007, wherever it provided for payment of interest, it hasbeen so provided. Reference is made to sub-section (3) of Section 12 ofAct, 2007 where liability to tax alongwith interest is created. It isCsubmitted that Section 13 of the Act, 2007, which makes the provisionsof U.P. Value Added Tax Act, 2008 mutatis mutandis, applicable adoptsonly machinery provisions for the purposes of Act, 2007 and Section 33of Value Added Tax Act, 2008, which deals with demand and recoveryof tax is only machinery provision, which does not entitle the respondentDto claim any interest from the appellant. Apart from Section 12, there isno other substantive provision for payment of interest under the Act,2007. No charge is created by interpretation of machinery provisions byvirtue of Section 13 of Act, 2007. It is further submitted that bonafidedispute pertaining to liability of a dealer to make payment of Entry Taxwas going on in the High Court and this Court, which could be finallyEdecided on 04.05.2018, when writ petition filed by the appellantchallenging the vires of the Act, 2007 was finally dismissed. Therebeing bonafide dispute regarding liability to pay the Entry Tax itself, therespondents are not entitled to charge any interest on the Entry Tax. Itis submitted that till 23.09.2007, there was no power with the State toFrecover any Entry Tax, since the Act, 2007 was declared ultra vires bythe High Court. Levy of Entry Tax was validated by virtue of Act, 2007,hence there is no liability to pay any interest for the period prior to24.09.2007, on which date, the Act was passed. The interest is beingdemanded from the appellant from the year 1999, which is wholly illegaland without jurisdiction. As per the interim order passed by this CourtGincluding the order dated 06.12.2013 passed in S.L.P. No. 327 of 2012filed by the appellant, where this Court had passed an order on 06.12.2013directing that the appellant will be liable to pay arrears of tax alongwithinterest as may be determined by this Court under the provisions of Act,2007 at the time of final disposal of the appeal. It is submitted thatHneither the Nine Judges Constitution Bench in its judgment dated 11.11.2016 nor the Regular Bench deciding the appeals on 21.03.2017,entered into or decide the question of liability of interest. The judgmentof the High Court dated 04.05.2018 did not consider the question ofliability of interest of the appellant and the High Court confined to onlythree issues, which have been noted in the judgment. The writ petitionswhere challenge to demand of interest was separately made, were de-tagged, which make the intention of the High Court clear that it neitherintended or actually decided the issue of interest in the batch of writpetitions decided on 04.05.2018. In judgment dated 04.05.2018, theliability of interest under Act, 2007 having not been decided nor argued,the High Court in the impugned judgment has erroneously accepted thepreliminary objection of the respondent holding that the judgment dated04.05.2018 will operate as res judicata in subsequent writ petition filedby the appellant, where demand notices praying for payment of interesthas been challenged.

17. Shri Agarwal further submits that Act, 2000 having beendeclared unconstitutional, there is no liability to pay any interest before24.09.2007 on which date Act, 2007 was enacted. It is further submittedthat Act, 2007 was immediately challenged by the appellant which Actwas upheld by Division Bench of the High Court only on 23.12.2011.Before the aforesaid date, this Court has already referred various issuespertaining to Entry Tax legislation to a Larger Bench. A Larger Bench,i.e., Nine-Judges Bench decided the reference only on 11.11.2016. Thelarger Bench had reversed the law which was in operation for morethan last fifty years. In wake of such uncertainty of legal position, theappellant cannot be saddled with any liability to pay interest. It is submittedthat ultimately the Division Bench after liberty by this Court declaredthe Act valid on 04.05.2018. It is submitted that appellant be relievedfrom paying of any interest during the aforesaid period. It is submittedthat appellant had promptly made the payment of entire Entry Taximmediately after dismissal of writ petition on 04.05.2018. It is submittedthat appellant is a Public Corporation which may not be saddled withhuge liability of interest which shall adversely affect the functioning ofthe Public Corporation.

18. Shri Dinesh Dwivedi, learned senior counsel appearing forthe respondents supporting the impugned judgment submits that HighCourt has rightly dismissed the writ petition of the appellant as notmaintainable. It is submitted that in the Writ Petition No.25730 of 2017

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Afiled by the appellant, one of the prayers was also to quash the assessmentorders passed determining Entry Tax and interest and even though theissue of question of liability of interest having not been determined bythe Division Bench of the High Court on 04.05.2018, the principle ofconstructive res judicata shall be applicable debarring the appellant tochallenge the demand of interest by a subsequent writ petition. It isBsubmitted that High Court has rightly accepted the preliminary objectionof the respondents and held that writ petition is not maintainable. ShriDwivedi further addressed submissions on the merits of the claim of theappellant. It is submitted that Act, 2007 contains substantive provisionsregarding charging of interest. He submits that by virtue of Section 13Cof Act, 2007, the provisions of U.P. Trade Tax Act, 1948 and U.P. ValueAdded Tax Act, 2008 have been adopted, which contains the substantiveprovisions for payment of interest. Section 8 of the U.P. Trade Tax Act,1948 and Section 33 of the U.P. Value Added Tax Act, 2008 provides forcharging of interest when dealer fails to pay the tax, which is liable to bepaid under the Act. Thus, the submission of the appellant that there areDno substantive provisions for charging of the interest under the Act isunfounded. It is further submitted that the appellant has enjoyed thebenefit of the interim order passed by this Court in special leave petitionsfiled by the appellant challenging the judgment of the High Court dated23.12.2011 and now they are estopped from challenging the pay-abilityEof the interest. By Section 17 of the Act, 2007, the levy of the Entry Taxas per Act, 2007 has been validated. The Act, 2007 has been givenretrospective effect w.e.f. 01.11.1999, hence the appellant was liable topay both the Entry Tax as well as the interest. The liability to pay EntryTax arises as per the provisions of Act, 2007 and the U.P. Entry TaxRules, 2007 framed thereunder. The concept of interest evolves onFdefault in payment of Entry Tax. Shri Dwivedi also placed reliance onthe Principle of Restitution. Liability accrued under Act, 2000 is deemedto be one arising under the Act, 2007. On dismissal of the Writ Petitionon 04.05.2018, the issue of interest has also been closed finally. Afterthe interim order of this Court on 10.01.2012 and 17.01.2012 Entry TaxGwas partly paid and remaining was paid only after the judgment of theHigh Court on 04.05.2018. Despite the valid levy being there the Taxwas withheld by the appellant. The appellant took a chance with litigationand retained and used the amount withheld. The levy whose validity isupheld is deemed valid from date it was due and not from the date of thejudgment of the High Court. The appellant is liable for payment ofH

INDIAN OIL CORPORATION LTD. v. STATE OF U.P. & ORS.[ASHOK BHUSHAN, J.]

interest not only as per law but also on equitable grounds. Liability topay interest for a Stay period is valid as interest does not cease runningwith passing of interim order. Interest is to be awarded on equitablegrounds. Liability to pay interest on a tax is an accretion of tax andenlargement of tax liability. In the present case, interest liability on delayedpayment is prescribed by law.

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19. We have considered the submissions of the learned counselon behalf of the parties and have perused the records.

20. From the submissions of the learned counsel for the partiesand pleadings on the record, following are the questions, which arise forconsideration in these appeals:- C

(1) Whether the Writ Petition No.757 of 2018 and other WritPetitions filed by the appellant challenging the demand noticesdated 04.05.2018 and 05.05.2018 issued after judgment dated04.05.2018 of the High Court in Writ Petition No.25730 of2017 is barred by Principle of Res-judicata, in view of thedismissal of Writ Petition No.25730 of 2017 on 04.05.2018?

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(2) Whether Act, 2007 does contain any substantive provisionfor charging interest?

(3) Whether the appellant had liability to pay interest on the EntryTax levied between the period from 01.11.1999 to 23.09.2007,Ei.e., during the operation of Act, 2000, which had been struckdown by the High Court?

(4) What can be the liability of payment of interest with whichthe appellant can be saddled after the period w.e.f.24.09.2007?

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(5) Relief, if any, to which the appellant may be entitled?

Question No.1

21. The preliminary objection raised by the respondents on theground of res judicata has been allowed relying on the judgment of theHigh Court dated 04.05.2018 in Writ Petition No.25730 of 2017. Wemay first notice the prayers made in Writ Petition No.25730 of 2017.Following are the prayers made in the writ petition:

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“(i) that a suitable writ, order or direction be issued declaring the“Uttar Pradesh Tax on Entry of Goods into Local Area Act, H

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2007’ as invalid, void and unconstitutional in so far as purportsto levy entry tax on crude oil imported into India for MathuraRefinery.

(ii) that a suitable writ, order or direction in the nature ofmandamus be issued restraining the Respondents, theirBservants, agents or representative from in any mannercollecting any entry tax from petitioner pursuant to the Act;

(iii) that a suitable writ, of certiorari, order or direction in thenature of certiorari be issued calling for the records andquashing the assessment orders enclosed as AnnexureC3 to 11;

(iv) that a suitable writ, order or direction in the nature ofmandamus or prohibition be issued restraining/ prohibitingthe Respondents from taking any further steps or actionpursuant to the impugned assessment orders; D

(v) issue a suitable writ, order or direction for refund of the entrytax hitherto paid by the Petitioner to the Respondent pursuantto the impugned Act;

(vi) that a suitable writ, order or direction be issued as this Hon’bleCourt may deem fit and proper in the circumstances of theEcase in the facts and circumstances of the case.

(vii) award the costs of the petition to the petitioner.”

22. As noted above the liberty was granted by this Court to theappellant by its order dated 21.03.2017. The liberty granted to theappellant was on the issues which were left open by the Nine-JudgesFConstitution Bench judgment dated 21.03.2017 and noticed. Following are certain other aspects which were argued before the ConstitutionBench but left open:

“(1) Whether the entire State can be treated as ‘local area’ forthe purposes of entry tax?G

(2) Whether entry tax can be levied on the goods which aredirectly imported from other countries and brought in aparticular State?

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(3) In some statutes enacted by certain States, therewas a provision for giving adjustment of other 20 C. A.Nos. 997-998/2004 etc. taxes like VAT, incentives etc. paidby the indigenous manufacturers and it was contended bythe assesses that whether the benefits given to certaincategories of manufacturers would amount to discriminationunder Section 304.”

23. Ultimately, this Court on 21.03.2017 referring to the aforesaidissues gave following liberty:

“According to us, in the aforesaid scenario, appropriate courseof action would be to permit the appellants to file fresh petitionsby May 31, 2017, raising the aforesaid issues with necessary factualbackground or any other constitutional/ statutory issue which arisesfor consideration.”

24. Writ Petition No.25730 of 2017 was filed by the appellant inpursuant to the liberty dated 21.03.2017 aforesaid. The main pleadingsand the grounds raised in the writ petition relate to challenge to vires ofAct, 2007. In the writ petition direction sought was declaring the Act,2007 as invalid, void and unconstitutional in so far as purports to levyentry tax on crude oil imported into India for Mathura Refinery. Furtherreliefs were claimed in the writ petition including prayer for quashing theassessment orders enclosed as Annexure 3 to 11 to the writ petition thatis assessment orders 1999-2000 to 2011-2012. It is also relevant tonotice that in the writ petition there was challenge to interest also.Following was stated in paragraphs 33 and 34 of the writ petition:

“33. That in view of the aforesaid, it is submitted that the judgmentof Atiabari case and Automobile case having been overruledon 11.11.2016 by the Nine Judges Bench of the Apex Court, hencethe interest and penalty could not be demanded from the petitionerfor the period prior to 11.11.2016 as the petitioner has acted uponthe law, as has been declared by the Constitutional Benches ofHon’ble Apex Court earlier, which was holding the field, as beingthe law of the land. Hence, when the law itself has been overruledsubsequently and the petitioner being a bonafide dealer was actingas per the provisions of the law, as was existing during the periodin dispute, cannot be made to suffer due to subsequent change inthe law by the Hon’ble Apex Court.

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A34. That without prejudice to the above, it is submitted that evenotherwise the interest, if any, could not be charged from thepetitioner prior to the date of passing the assessment order.”

25. A perusal of the judgment of the High Court dated 04.05.2018indicates that the Division Bench in paragraph No.40 took the view thatBthe Division Bench is to deal with the challenge on the grounds as reflectedin the judgment of the Regular Bench dated 21.03.2017. It is useful toextract paragraph No.40 of the judgment, which is to the following effect:

“40. Thus, while overruling the objection to the maintainability ofthese petitions, we would like to confine ourselves within theCforecorners of the judgment of the regular Bench dated 21 March,2017. We further observe, once again at the cost of repetition,that the challenge to the validity of the Act, 2007 was consideredby the Division Bench in ITC Limited on all grounds includingthe ground that the levy of tax under the Act is compensatory innature. In view of the opinion expressed by the Nine Judges’DBench, whereby compensatory theory has been completely wipedout, we would have to, therefore, consider the challenge limited tothe grounds reflected in the questions framed by the regular Benchof the Supreme Court. In short and in substance, we observe thatwe would be dealing with the challenge only on the grounds asEreflected in the judgment of the regular Bench dated 21.03.2017,in the light of the judgment of Nine Judges’ Bench in JindalStainless-II.”

26. The Division Bench, thus, confined the consideration limitedto the grounds reflected in the questions framed by the regular Bench ofFthe Supreme Court. The Division Bench, thus, consciously confined theconsideration to only three questions as we have extracted above fromthe judgment of this Court dated 21.03.2017. The Division Bench clearlydid not permit the consideration of any other questions including thequestion of interest which is clear from the judgment dated 04.05.2018.It has been specifically submitted that when the judgment was reservedGon 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 separatelymade were de-tagged. The order dated 09.11.2017 passed in Writ TaxNo.474 of 2017 (M/s. Birla Corporation Limited Vs. State of U.P. andothers) had been brought on record as Annexure P-24 where the Division H

Bench ordered: “This petition be de-linked from the Bunch. Place itbefore the appropriate Bench.”

27. Specific ground No.L has also been taken which reads asfollows:

“L. Because even at the time of reserving its judgment in Writ-CNo.25730 of 2017 and connected matters on 09.11.2017, the HighCourt had de-linked all such writ petitions in which the demand ofinterest on entry tax was assailed.”

28. It is admitted before us by the counsel for the parties that WritTax No.474 of 2017, which de-tagged with the Bunch of Writ PetitionNo.25730 of 2017 is still pending for consideration before the High Court.Present is a case where the Division Bench while deciding Writ PetitionNo.25730 of 2017 consciously restricted the consideration to threequestions as noted in the judgment of this Court dated 21.03.2017 anddid not permit to raise any submission other than three questions asnoted above or proceed to consider any other questions. The issue whichhas not been expressly permitted to be decided by judgment dated04.05.2018 cannot operate as res judicata in subsequent writ petitionfiled by the appellant where the challenge to the leviability of the interesthas been raised. Section 11 Explanation 4 C.P.C. on which much reliancehas been placed by the counsel for the appellant provides:

“Section 11. Res judicata.- No Court shall try any suit or issuein which the matter directly and substantially in issue has beendirectly and substantially in issue in a former suit between thesame parties, or between parties under whom they or any of themclaim, litigating under the same title, in a Court competent to trysuch subsequent suit or the suit in which such issue has beensubsequently raised, and has been heard and finally decided bysuch Court.

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Explanation IV.- Any matter which might and ought to have beenmade ground of defence or attack in such former suit shall bedeemed to have been a matter directly and substantially in issuein such suit.

29. What Explanation IV provides is that a plea which might andought to have been taken in the earlier suit, shall be deemed to have A

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Abeen taken and decided against person raising the plea in the subsequentsuit. Present is a case where the plea of questioning the leviability of theinterest was specifically raised by the appellant in the writ petition inparagraphs 33-34 as noticed above. The Division Bench of the HighCourt did not entertain such pleas due to the Court having restricted theconsideration to the three questions as noted above. In the above factBsituation, we are of the view that subsequent writ petition where plea ofleviability of the interest was raised could not have been thrown on theground of res judicata. The sequence of the events and the fact of de-tagging the writ petition with the main Bunch where challenge to interestwas made separately clearly indicate that the Division Bench whichCreserved the judgment on 09.11.2017 clearly intended not to entertainthe question of liability to pay interest in the Bunch which was reservedon 09.11.2017. When the High Court has expressly restricted theconsideration to three issues noted above, the plea of constructive resjudicata cannot be pressed in service against the appellant to preclude him from raising the question which was not expressly permitted to beDargued in Writ Petition No.25730 of 2017.

30. There is one more reason due to which we are not to shut theconsideration of question of liability of the appellant to pay interest onthe Entry Tax. From the facts of the case, as noticed above, it is apparentthat in the order of this Court passed on 06.12.2013 while modifying theEinterim order passed in C.A. No. 3413 of 2012 (arising out ofSLP(C)No.2757-2758 of 2004), this Court observed “in the event ofappellant failing in this appeal, the appellant will be liable to paythe arrears of tax along with interest, as may be determined bythis Court under the provisions of the Uttar Pradesh Entry TaxFAct, 2007, at the time of final disposal of the appeal.” When AppealNo.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 raisingthe issues mentioned therein for consideration of the High Court. In theorder dated 21.03.2017 there was no determination by this Court regarding interest to be paid by the appellant under the provisions of theGEntry Tax Act, 2007. However, when the liberty was granted by thisCourt to the appellant to raise above noted three issues on the necessaryfactual background or any other constitutional/statutory issues, whicharise for consideration, the High Court was free to consider the questionof liability of interest to be satisfied by the appellant under Act, 2007.

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31. Further, what is the scheme of payment of interest under Act,2007 is a question which depends on the interpretation of the Act, 2007and the Rules framed thereunder. The issue needs determination forproper working of the Act and the Rules. In this context, we may referto judgment of this Court in Shree Bhagwati Steel Rolling Mills Vs.Commissioner of Central Excise and another, (2016) 3 SCC 643,where question of levying interest under the provisions of Central ExciseAct, 1944 under Rule 96-ZO, 96-ZP and 96-ZQ of Central Excise Rules,1944 was held question of jurisdiction to levy interest and the said questionwas allowed to be raised. This Court laid down following inparagraph 29:

“29……………We also feel that since this is a question of thevery jurisdiction to levy interest and is otherwise covered by aConstitution Bench decision of this Court, it would be a travestyof justice if we would not allow Shri Aggarwal to make thissubmission.”

32. We are, thus, of the view that the question relating to natureand extent of liability to pay interest on Entry Tax under the scheme ofAct, 2007 need to be examined by this Court in these appeals. In view ofthe above discussion, we are of the view that the High Court in theimpugned judgment committed error in upholding the preliminary objectionof the respondent. We are of the view that the question relating to natureand extent of liability of interest on Entry Tax under the scheme of Act,2007 need to be examined and answered in these appeals. The questionis answered accordingly.

Question No.2

33. The submission of the appellant is that interest on the EntryTax is not payable by the appellant under the Act, 2007, inasmuch asthere is no substantive provision under the Act, 2007 providing for levyof interest on the outstanding Entry Tax. Referring to provision underAct, 2007 it is submitted that interest on Entry Tax is contemplated onlyunder Section 12 (3) where tax along with interest and penalty iscontemplated where any manufacturer fails to deposit the tax underSection 12. He submitted that there is no other substantive provision oflevy of interest. Referring to Section 13, contention is that Section 13applies only machinery provisions of U.P. Value Added Tax Act, 2008which provision can at best be stated to be applicability of machinery A

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Aprovisions and applicability of those provisions cannot be said to beapplicability of any substantive provision regarding interest. Forconsidering the above submission, we need to first notice the provisionsof Act, 2007 which are relevant for the present controversy. Section 4of the Act provides for levy of tax. Section 4(1) provides that for thepurpose of development of trade, commerce and industry in the State,Bthere shall be levied and collected a tax on entry of goods specified inthe Schedule into a local area for consumption, use or sale therein, fromany place outside that local area, at such rate not exceeding five percent of the value of the goods as may be specified by the StateGovernment by notification.C34. Section 9 deals with submission of returns and assessment oftax. Section 10 deals with provisional assessment of tax. Section 12deals with realisation of tax through manufacturer. Section 12(1), (2)and (3) are as follows:

“12. Realization of tax through manufacturer (1) NotwithstandingDanything contained in any other provision of this act, any personwho intends to bring into a local area from any manufacturerwithin the State, such goods specified in the Schedule as may benotified by the State Government, shall, at the time of takingdelivery of the goods from the manufacturer, pay to theEmanufacturer the tax payable on entry of such goods into thelocal area and the manufacturer shall receive the tax so paid. Themanufacturer 1[shall not deliver such goods] to the purchaserunless the amount of such tax has been paid by the purchaser.

(2) The manufacture receiving the tax under sub-section (1)Fshall submit to the Assessing Authority a return in respect of thegoods supplied, and the tax received, by him under subsection (1)and deposit the tax so received in such manner and within suchtime as may be prescribed.

(3) Where any manufacturer fails to deposit, the tax under thisGsection he shall be liable to pay the tax along with the interest andpenalty, if any, payable thereon which shall be recoverable asarrears of land revenue.

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INDIAN OIL CORPORATION LTD. v. STATE OF U.P. & ORS.[ASHOK BHUSHAN, J.]

35. The next provision we notice is Section 13 which provides forapplicability of certain provisions of U.P. Value Added Tax Act, 2008.Section 13 as far as relevant is as follows:

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“13. Applicability of certain provisions of the Uttar PradeshTrade Tax Act, 1948 - The following provisions of the UttarPradesh Value Added Tax Act, 2008, shall mutatis mutandis applyBto all dealers and proceedings under this Act:-

(i) Section 9 - Liability of firm, association of persons andHindu Undivided Family;

(ii) Section 10 - Tax due from deceased person payable byChis representatives;

(iii) Section 11 - Tax liability in case of minor or incapacitatedperson;

(iv) Section 12 - Liability in case of Court of wards; D

(v) Section 16 - Burden of proof;

(vi) Section 19 - Security in the interest of revenue;

(vii) Section 21 - Account and documents to be maintained bydealers;

(viii) Section 29 - Assessment of tax of turnover escaped fromassessment; E

(ix) Section 30 - Rounding off of turnover and tax;

(x) Section 31 - Rectification of mistakes;

(xi) Section 32 - Power to set aside ex parte order ofassessment or penalty; F

(xii) Section 33 - Payment and recovery of tax; Xxxxxxxxx xxxxxxxxx”

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36. Now coming back to the submission of the learned counselfor the appellant that only substantive provision in Act, 2007 pertainingto payment of interest is Section 12. Section 12 deals with only oneincident of realisation of Entry Tax, i.e., through manufacturer. Section H

A12(1) makes it clear that any person who intends to bring into a localarea from any manufacturer within the State, such goods specified inthe Schedule as may be notified by the State Government, shall, at thetime of taking delivery of the goods from the manufacturer, pay to themanufacturer the tax payable on entry of such goods into the local areaand the manufacturer shall receive the tax so paid. Section 12(2) createsBliability on person who intends to bring into a local area from anymanufacturer any goods specified in the Schedule and the time ofpayment is statutorily laid down that is at the time of taking goods. Section12(3) contemplates a situation where although manufacturer receivedthe tax under Section 12(1) but failed to pay tax as required by SectionC12(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 particularsituation and does not provide for any universal application for paymentof 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 appellantDis not receiving any goods from any manufacturer, hence, in the presentcase Section 12 has no applicability.

37. Learned counsel for the appellant has placed reliance on theConstitution Bench judgment of this in J.K. Synthetics Limited Vs.Commercial Taxes Officers, (1994) 4 SCC 276. In paragraph 16 ofEthe judgment the Constitution Bench laid down following:

“16. It is well-known that when a statute levies a tax it does soby inserting a charging section by which a liability is created orfixed and then proceeds to provide the machinery to make theliability effective. It, therefore, provides the machinery for theFassessment of the liability already fixed by the charging section,and then provides the mode for the recovery and collection of tax,including penal provisions meant to deal with defaulters. Provisionis also made for charging interest on delayed payments, etc.Ordinarily the charging section which fixes the liability is strictlyGconstrued but that rule of strict construction is not extended to themachinery provisions which are construed like any other statute.The machinery provisions must, no doubt, be so construed as wouldeffectuate the object and purpose of the statute and not defeatthe same. (See Whitney v. IRC, CIT v. Mahaliram Ramjidas,India United Mills Ltd. v. Commissioner of Excess Profits Tax, G

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Bombay and Gursahai Saigal v. CIT, Punjab). But it must alsobe realised that provision by which the authority is empowered tolevy and collect interest, even if construed as forming part of themachinery provisions, is substantive law for the simple reasonthat in the absence of contract or usage interest can be leviedunder law and it cannot be recovered by way of damages forwrongful detention of the amount……”

38. What is relevant to be noticed in the aforesaid pronouncementis that what the Court has held that provision by which the authority isempowered to levy and collect interest, even if construed as formingpart of the machinery provisions, is substantive law. There is no quarrelto the proposition that liability to pay a tax or interest on it has to beprovided by a substantive law.

39. Section 13 mutatis mutandis applies Section 33 of U.P. ValueAdded Tax Act, 2008. Section 33 of the VAT Act, 2008 is as follows:

“33. Payment and recovery of tax- (1) Any amount of tax orfee or penalty or any other amount, which a dealer or other personis liable to pay under this Act, shall be deposited by the dealer orsuch 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 simpleinterest at the rate of one and quarter percent per mensum shallbecome due and be payable on unpaid amount with effect fromthe day immediately following the last date prescribed till the dateof payment of such amount and nothing contained in section 24shall prevent or have the effect of postponing liability to pay suchinterest.

Explanation-For the purposes of this sub-section, the taxadmittedly payable for a tax period or an assessment year, as thecase may be, shall be computed in accordance with provisions ofsection 15.

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(4) If the tax {other than the tax admittedly payable to which sub-section (2) applies} assessed, re-assessed or enhanced by anyauthority or court remains unpaid after expiration of the period A

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Aspecified in the notice of assessment and demand, simple interestat the rate of one percent per mensum on the unpaid amountcalculated from the date of such expiration shall become due andbe payable.

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B40. Further the Constitution Bench of this Court in V.V.S SugarsVs. Govt. of A.P. and others, (1999) 4 SCC 192, again reiteratedthe same principle in paragraph No.6, which is to the following effect:

“6. This Court in India Carbon Ltd. v. State of Assam has held,after analysing the Constitution Bench judgment in J.K. SyntheticsCLtd. v. CTO that interest can be levied and charged on delayedpayment of tax only if the statute that levies and charges the taxmakes a substantive provision in this behalf. There being nosubstantive provision in the Act for the levy of interest on arrearsof tax that applied to purchases of sugarcane made subsequent toDthe date of commencement of the amending Act, no interestthereon could be so levied, based on the application of the saidRule 45 or otherwise.”

41. What is the nature of the provision of Section 33 of the VATAct, 2008 which has been made applicable by virtue of Section 13 ofEAct, 2007 is the question to be answered? Section 13 “mutatis mutandis”applies certain provisions of VAT Act, 2008 as mentioned in Section 13.Words “mutatis mutandis” came to be considered in M/s. AshokService Centre and others Vs. State of Orissa, (1983) 2 SCC 82.In the aforesaid case this Court had occasion to consider the provisionsof Orissa Additional Sales Tax Act, 1975. Section 2(2) of which provisionFmutatis mutandis applies the provisions of Orissa Sales Tax Act, 1947.In the above reference, this Court explained the expression “mutatismutandis” in paragraph No.17, which is to the following effect:

“17. Section 3(2) of the Act which makes the provisions of theprincipal Act mutatis mutandis applicable to the levy of additionalGtax is a part of the charging provision of the Act and it does notsay that only those provisions of the principal Act which relate toassessment and collection of tax will be applicable to theproceedings under the Act. Before considering what provisionsof the principal Act should be read as part of the Act, we have tounderstand the meaning of the expression ‘mutatis mutandis’. Earl H

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Jowitt’s The Dictionary of English Law (1959) defines ‘mutatismutandis’ as ‘with the necessary changes in points of detail’.Black’s Law Dictionary (Revised 4th Edn., 1968) defines ‘mutatismutandis’ as “with the necessary changes in points of detail,meaning that matters or things are generally the same, but to bealtered when necessary, as to names, offices, and the like.Housman v. Waterhouse. In Bouvier’s Law Dictionary (3rdRevision, Vol. II), the expression ‘mutatis mutandis’ is defined as“[T]he necessary changes. This is a phrase of frequent practicaloccurrence, meaning that matters or things are generally the same,but to be altered when necessary, as to names, offices, and thelike”. Extension of an earlier Act ‘mutatis mutandis’ to a later Actbrings in the idea of adaptation, but so far only as it is necessaryfor the purpose, making a change without altering the essentialnature of the thing changed, subject of course to express provisionsmade in the later Act. Section 3(2) of the Act shows that theState legislature intended not to depart substantially from theprincipal Act except with regard to matters in respect of whichexpress provision had been made in the Act. The assumption madeby the High Court that the Act was an independent Act havingnothing to do with the principal Act is not correct. The Act onlylevied some extra sales tax in addition to what had been levied bythe principal Act. The nature of the taxes levied under the Actand under the principal Act was the same and the legislatureexpressly made the provisions of the principal Act mutatis mutandisapplicable to the levy under the Act. The additional sales tax wasin the nature of a surcharge over and above what was due andpayable by an assessee under the principal Act. The Act, thoughit had a long title, a short title and other usual features of everystatute, could not be considered as an independent statute. It hadto be read together with the principal Act to be effective. In thecircumstances the conclusion reached by the High Court that thetwo Acts were independent of each other was wrong. We are ofthe view that it is necessary to read and to construe the two Actstogether as if the two Acts are one, and while doing so to giveeffect to the provisions of the Act which is a later one in preferenceto the provisions of the principal Act wherever the Act hasmanifested an intention to modify the principal Act. The followingobservations of Lord Simonds in Fendoch Investment Trust Co.

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Av. Inland Revenue Commissioners made in connection with theconstruction of certain fiscal statutes are relevant here. He saidat p. 144:

“My Lords, I do not doubt that in construing the latest of aseries of Acts dealing with a specific subject-matter, particularlyBwhere all such Acts are to be read as one, great weight shouldbe attached to any scheme which can be seen in clear outlineand amendments in later Acts should if possible be construedconsistently with that scheme.”

42. Further, again the same proposition was reiterated in RajasthanCState Industrial Development and Investment Corporation andanother Vs. Diamond & Gem Development Corporation Limitedand another, 2013 (5) SCC 470. In paragraph No.18 following hasbeen laid down:

“18. Thus, the phrase “mutatis mutandis” implies that a provisionDcontained in other part of the statute or other statutes would haveapplication as it is with certain changes in points of detail.”

43. Thus, application of provisions of VAT Act, 2008 is providedby Section 13 of Act, 2007 with certain changes in points of details.Section 33 of the VAT Act, 2008 which has been mentioned to applyEunder Section 13 has to be applied with respect to payment and recoveryof tax. Thus, the payment of interest which is contemplated under Section33 on the amount of tax has to be applied with regard to the payment ofEntry Tax and the interest thereon. Even if provision of Section 33 ofVAT Act, 2008 to be treated as machinery provision which is to be appliedby virtue of Section 13 of Act, 2007, the machinery provision has to beFinterpreted in a manner so as to make the liability effective and treatedto be substantive law.

44. In this context, we may also notice the judgment of this Courtin India Carbon Ltd. and others Vs. State of Assam, (1997) 6 SCC479. In the above case the payment of Central Sales Tax on inter-StateGsales of petroleum coke were delayed and the appellants were requiredby the respondents to pay interest in purported exercise of their powersunder Section 35A of the Assam Sales Tax Act. The writ petition wasfiled challenging the exemption of tax. One of the questions noted forconsideration is as to whether Section 9(2) of the Central Sales Tax Act H

did not visualise any payment of interest. Section 9(2) has been extractedin the judgment in paragraph 4 which is to the following effect:

“4. Section 9(2) of the Central Act, as it stood at the relevanttime, read thus:

“9. (2) Subject to the other provisions of this Act and the rulesmade thereunder, the authorities for the time being empoweredto assess, reassess, collect and enforce payment of any taxunder the general sales tax law of the appropriate State shall,on behalf of the Government of India, assess, reassess, collectand enforce payment of tax, including any penalty, payable bya dealer under this Act as if the tax or penalty payable by sucha dealer under this Act is a tax or penalty payable under thegeneral sales tax law of the State; and for this purpose theymay exercise all or any of the powers they have under thegeneral sales tax law of the State; and the provisions of suchlaw, including provisions relating to returns, provisionalassessment, advance payment of tax, registration of thetransferee of any business, imposition of the tax liability of aperson carrying on business on the transferee of, or successorto, such business, transfer of liability of any firm or Hinduundivided family to pay tax in the event of the dissolution ofsuch firm or partition of such family, recovery of tax from thirdparties, appeals, reviews, revisions, references, refunds, rebates,penalties charging or payment of interest, compounding ofoffences and treatment of documents furnished by a dealer asconfidential, shall apply accordingly.”

45. The Constitution Bench judgment of this Court in J.K.Synthetics (supra) was noticed and referring to the ratio of theConstitution Bench following was observed in paragraph 7:

“7. This proposition may be derived from the above: interest canbe levied and charged on delayed payment of tax only if the statutethat levies and charges the tax makes a substantive provision inthis behalf.”

46. This Court in India Carbon Ltd. (supra) held that theprovision relating to interest in the latter part of Section 9(2) can beemployed by the States’ sales tax authorities only if the Central Act A

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Amakes a substantive provision for the levy and charge of interest onCentral sales tax and only to that extent. In paragraph 13 following hasbeen laid down:

“13. Now, the words “charging or payment of interest” in Section9(2) occur in what may be called the latter part thereof. SectionB9(2) authorises the sales tax authorities of a State to assess,reassess, collect and enforce payment of the Central sales taxpayable by a dealer as if it was payable under the State Act; thisis the first part of Section 9(2). By the second part thereof, theseauthorities are empowered to exercise the powers they have underthe State Act and the provisions of the State Act, includingCprovisions relating to charging and payment of interest, applyaccordingly. Having regard to what has been said in the case ofKhemka & Co. it must be held that the substantive law that theStates’ sales tax authorities must apply is the Central Act. In suchapplication, for procedural purposes alone, the provisions of theDState Act are available. The provision relating to interest in thelatter part of Section 9(2) can be employed by the States’ salestax authorities only if the Central Act makes a substantive provisionfor the levy and charge of interest on Central sales tax and only tothat extent. There being no substantive provision in the CentralAct requiring the payment of interest on Central sales tax theEStates’ sales tax authorities cannot, for the purpose of collectingand enforcing payment of Central sales tax, charge interestthereon.”

47. Section 9(2) was considered in two parts. This Court treatedthe first as substantive provision whereas second part only for proceduralFpurpose alone, due to the above reason, this Court held that any claim ofinterest was unfounded. In the case before us, Section 33 has beenmade applicable by virtue of Section 13 mutatis mutandis. There is nosuch dichotomy in Section 13 as was noticed in India Carbon Ltd. inSection 9(2) of the Central Sales Tax Act.

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48. As noticed above the Constitution Bench of this Court in J.K.Synthetics Ltd. has laid down “………But it must also be realised thatprovision by which the authority is empowered to levy and collect interest,even if construed as forming part of the machinery provisions, issubstantive law………” We have, thus, no hesitation in rejecting the H

submission of the learned counsel for the appellant that Act, 2007 doesnot contain any substantive law for levy of the interest. Question No.2 isanswered accordingly.

49. We having answered jurisdictional question no.1 and questionno.2, other questions and issues need to be remitted to the High Courtfor consideration. The questions for determining the liability of interestand various aspects including factual aspects need to be examined andconsidered by the High Court. For instance, what shall be the effect ofdeposit of Entry Tax in separate interest-bearing account in pursuanceof the interim order of this Court dated 09.02.2004 in Civil AppealNos.997-998 of 2004 as noted above needs to be considered. Theremay be few other issues, questions of facts which need to be decided bythe High Court for determining the liability of interest of the appellant. Itshall also be open for the High Court to frame any other question orissue which may be required to be considered and answered.

50. In result, the appeals are allowed. The impugned judgment ofthe High Court dated 22.11.2018 is set aside. The Writs are revivedbefore the High Court to be considered and decided on merits.

51. The parties shall bear their own costs.

Divya Pandey

Appeals allowed.

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