A Bench led by Justice AK Sikri posted the matter for further hearing on December 6.

Challenging the HC judgment of May 4 that upheld the constitutional validity of the UP Tax on Entry of Goods into Local Areas Act, 2007, IOC said it had accepted the impugned judgment with regard to the constitutional validity of levying the entry tax and already deposited Rs 8,779.67 crore towards the same. However, it challenged the assessment orders for assessment years 2000-12 which asked it to shell out Rs 5,600 crore as interest on the entry tax paid.

“Such imposition of interest is unlawful and without any authority of law. The UP government is coercing the PSU to pay huge sums to the tune of around `5,600 crore,” solicitor general Tushar Mehta said.

According to the PSU, there is no substantive provision in the Entry Tax Act for levy of interest on traders and it should not be burdened with a huge liability towards interest when the apex court in 2016, while upholding the levy of entry tax by states, did not say anything on the interest issue.

However, senior counsel Dinesh Dwivedi, appearing for the state, argued that the impugned demand notices were pursuant to the orders of assessment of entry tax which have become final and conclusive. Even the issue of levy/demand of interest on entry tax also stands finalised, he said, adding that the challenge to the demand of interest on entry tax is barred by principle of constructive res judicata (A matter that has been adjudicated by a competent court and therefore may not be pursued further by the same parties).

IOC’s petition on the issue before the apex court got dismissed as withdrawn on the ground that it would raise the issue of levy of interest on entry tax before the HC, the state government said.

The PSU also told the Bench that the state government had no power to levy any entry tax until September 24, 2007 when the U.P. Ordinance No. 35 of 2007 was promulgated and a subsequent legislation on the liability to pay tax arose. Thus, the amounts collected as entry tax until 2007 were unlawful and without authority of any law and are liable to be refunded to the PSU, the appeal said, adding that the state government has become liable to refund the amounts collected from IOC from 1999 to 2007 along with interest.

For its refinery in Mathura, IOC purchases crude oil from different countries and transports it from the port of entry directly to the refinery through underground pipelines laid by it. The state government had levied entry tax on crude oil. While the validity of entry tax was challenged by IOC in 2003, the company had continued to make payments towards ‘entry tax.’