In Brief
Indian Oil Corporation, a petroleum products seller in Bihar, disputed Entry Tax assessments of ₹1,683 crores from 2008–09 onwards. When it sold petroleum to other oil companies (OMCs) after paying Entry Tax, it sought to set off VAT against this tax. The State disallowed the set-off based on audit objections. The Supreme Court held that under Section 3(2)(2) of the Entry Tax Act, a set-off is available only if the importer incurs VAT liability. Here, VAT on petroleum sold to OMCs is levied only when those companies sell to retailers—not at the importer's stage. Therefore, the conditions for set-off were not met. The Court rejected claims of constitutional discrimination and declined to grant restitutional interest, remitting the matter to the Appellate Tribunal to determine what portion of demand relates to sales outside the local area (which would not attract Entry Tax).
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