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Category: Recent Decisions: Part B: VAT

RECENT DECISIONS PART B : VAT

Jyothy Laboratories Limited vs. State of Bihar
and Others, (2019) 60GSTR 71 (Patna High
Court) – Judgment dated 17th July, 2018
Correction in the C Form.

FACTS
The Department had issued incorrect Form C. the Petitioner
had written several letters to the authorities, however
no action was taken to issue correct C Form. Finally, the assesse approached the High Court under Article, 226 of the
Constitution of the India.

HELD
The Hon’ble High Court directed the Commissioner of
Commercial Taxes to either himself take up the issue and
decide the question of correction in the Form C as prayed for
or should assign the matter to any other Statutory Authority
constituted for that purpose. The action was directed to be
taken within Three Weeks from the date of appearance of the Petitioner. It was also directed that in case, the corrected
form C could not be issued to the Petitioner, it would be
incumbent upon the authority to hear the Petitioner, consider
the submissions and pass a speaking order indicating
reasons to the Petitioner as to why his grievance could not
be remedied.

V.V. Shameer vs. State of Kerala(2019) 60 GSTR
73 (Ker)– Judgment dated 3rd July, 2018
Whether a claim can be granted when the Credit
Notes were not issued in the prescribed form?

FACTS
The Petitioner had received incentives from the
manufacturer. Those incentives were received at a later
stage. The Petitioner had shown such incentives in the books
of accounts, however, had not shown them in the returns,
neither had filed revised returns. The Petitioner had claimed
Input Tax Credit without considering the incentives received
by him. During assessment the Petitioner contended that
the manufacturer had paid full tax and had not considered
the incentives given by him to the buyers. Further, Petitioner
had also issued Credit Notes to the manufacturer. However,
the assessing authority disallowed the Input Tax Credit.

HELD
It was held that the Credit Notes as relied on by the Petitioner
were not in the prescribed form. Those did not contain the
details that would be necessary for allowing the claim of
credit to the dealer by the manufacturer. Though the amounts
were disclosed in the book of account and discrepancy was
noticed in the Audit Statement the Petitioner did not attempt to file revised return. Thus, the Credit Notes having not been
issued in the prescribed form the disallowance of Input Tax
Credit having been granted with respect to the incentives
was confirmed by the Court.
Commissioner, Commercial Tax, Uttarakhand
vs. Jai Durge (2019) 60 GSTR 82(Uttarakhand)–
Judgment dated 10th April, 2018
Whether the filing of prescribed form in the case
under consideration was mandatory?

FACTS
The assessee was the Job Worker. He had manufactured
tiles for the Government Department and supplied the
same to them. The Tribunal had given the findings that all
materials were supplied by the Government Department to
the assessee and that what was supplied by the assessee
was actually the labour component. The materials were
made use of by the assessee, who had supplied the labour
to make the tiles to be supplied. The Revenue contended
before the High Court that the assessee had not filed Form
No. IIID which was prescribed for that purpose.

HELD
The Court Noticed that the findings of the Tribunal were not
challenged by the Revenue. The Court also noticed that for
the earlier year the Tribunal as well as the High Court had
decided the same issue in favour of the appellant and had
held that the appellant was doing only a job work. The Court
therefore, held that the submission of Form IIID was not fatal
to the case of the assessee and confirmed the order of the
Tribunal.

RECENT DECISIONS PART B: VAT

The Addi. Commissioner of Sales Tax vs.
Benchmark Engineering Pvt Ltd.(Bom H.C) –
Judgment dated 28th November, 2018
Whether VAT can be levied on Service Tax,
Separately collected, even when the VAT is paid
under Composition Scheme?

FACTS

The appeal related to the period 2005-2006. The substantial
question of law referred to the Hon’ble High Court was
whether the Tribunal was justified in holding that for
determining the Composition amount in lieu of amount of
tax payable in respect of Works Contract Sales, the amount
of Service Tax charged separately in the invoice will not be
included in total contract value?

HELD

The Hon’ble Court upheld the judgment of the Tribunal
which had observed that the amount of Service Tax charged
separately in the invoice will not be included in total contract
value for the purpose of levy of VAT. The Hon’ble Court
referred to Trade Circular No.6T dated 14.05.2015 issued
by the Commissioner of Sales Tax, Maharashtra State which
had informed the trade that the Government had accepted
the judgment of the Tribunal in the case of Sujata Painters
wherein it was held that the Service Tax could not formed
part of Sale Price u/s.2(25) of the MVAT Act, in a transaction
wherein the sale price is determined subject to Rule 58 of
the MVAT Rules and is not liable to VAT. The Court said,
once the State had accepted the decision of the Tribunal in
the case of Sujata Painters by issuing Trade Circular and
pointing out that so far as the period prior to 01.04.2015 was
concerned, the Department had accepted the order of the
Tribunal that Service Tax would not form part of the Sale price
and informed the trade, the same would bar the Revenue
from taking a contrary view. The Court further said that the
State has to apply law uniformly to all the assesses. The
AGP had drawn the attention of the Court to the appeal on
similar issue, involved in the case of Technocrat Engineers,
and submitted that the same had already been admitted by
the Hon’ble Court. However, the Court refused to accept his
submissions stating that aforesaid Circular No.16 of 2015
was not pointed out to the Court at the time of admission of
that appeal.

Deepak Fertilisers And Petrochemicals
Corporation Ltd. vs. State of Maharashtra and
Others (Bom H.C.) – Judgment dated
26th June, 2018
Whether the Trade Circulars issued by the
Commissioner of Sales Tax, Maharashtra State can
controll the substantive notifications?

FACTS

The Petitioner was engaged in the manufacture and sale of
fertilisers and for the purpose of manufacture of fertilisers,
purchased natural gas from GAIL. The natural gas was
either utilised as fuel or as an input in the manufacture
and processing of fertilisers and chemicals. The rate of tax
applicable to the natural gas prior to 30th June 2017 was
13.5% under the MVAT Act,2002. However, Input Tax Credit
was available under that Act above 3%. Thus, the effective
rate on natural gas under that Act, was 3%. The Goods and
Service Tax was introduced on 1st July 2017. The natural
gas along with some other few goods was left outside the
coverage of the GST Act and VAT and CST continued to be
levied on the same. With effect from 1st July 2017, when any
person purchased natural gas domestically, the seller would
collect full tax from him @ 13.5% and since the person was
no longer a dealer under the 2002 Act due to the section
16(6A), he could not claim setoff or refund of the input tax
collected from him. Furthermore, he would be liable to pay
goods and service tax on his outputs at the full rate since the
GST Act only provided for ITC of goods and Service Tax paid
and not of value added tax paid. Hence, the effective rate
after 1st July 2017 got increased to 13.5%. The Government
of Maharashtra in exercise of its powers conferred u/s. 9(1)
of the MVAT Act issued a Notification dated 24th August
2017 adding Entry 16 in Schedule “B” to the MVAT Act, by
which the sale of natural gas to a registered dealer, subject
to the condition mentioned in the notification, was eligible
for a lower rate of VAT @ 3%. To avail the benefit of the
reduced rate of 3%, the purchasing dealer was required to
be certified by the Joint Commissioner. Queries were raised
to the Commissioner of Sales Tax whether the benefits
given under the Notification dated 24th August, 2017 were
available to the tax payers registered under the GST Act.
The Commissioner issued trade Circular No.39T dated 8th
September 2017 clarifying that the benefits of notifications dated 24th August 2017 would also be available to taxable
persons registered under the GST Act. Subsequently, by
Notification dated October 13, 2017, an explanation to
entry 16 of Schedule “B” of the MVAT Act was amended
with effect from 14th October 2017 to the effect that the
benefit of the Entry 16 in Schedule “B” shall be available to
a registered taxable person under the GST Act. However,
by Trade Circular No.3T of 2018 dated 16th January 2018 it
was clarified that manufacturers – buyers who did not hold
registration certificate under the MVAT Act on or after 1st
July 2017 either due to cancellation of registration certificate
or due to the deeming provision relating to cancellation of
registration certificate u/s. 16(6A) of the MVAT Act, shall
not be entitled for the benefits of the reduced rate of 3% in
respect of use of natural gas in manufacturing, for the period
24th August 2017 to 13th October 2017. Writ Petitions were
filed contending that Notification dated 13th October 2017
should be given effect to and operated from 24th August 2017
because Trade Circular No.3T of 2018 dated 16th October
2018 and the addenda dated 13th January 2018 enabled
recovery of VAT in excess of 3%.

HELD
Writ Petitions were dismissed holding that the language of
the Notifications issued was clear. The circulars were for
internal guidance or clarification of queries of the trade and
officials, but their language could not control the substantive
notifications.

 

Vishat Diagnostic Pvt Ltd. vs. State of
Maharashtra and Others (VAT Appeal Nos. 425
and 567 of 2017 (MSTT) – Judgment dated
30th November, 2018
Whether the words ‘on the body’ appearing in the
Entry for “Drug’ in the MVAT Act, 2002 exclude the

diagnostic kits used in the laboratory for testing of
blood etc., from the coverage of that entry and sent
the same to the residuary entry?

FACTS
The appellant was dealing in diagnostic reagents which were
used in laboratories in the diagnosis of the diseases like
diabetes, cancer etc.. The Advance Ruling Authority (ARA)
had relied upon the words ‘on the body’ appearing in Entry
No. C-29 (a) which was for drugs and held that the same
were falling under the residuary entry liable to tax @12.5%. It
was the contention of ARA that the words ‘on the body’ were
inserted in the said entry consequent to the judgment of the
Hon’ble Bombay High Court in the case of Merind Ltd. The
introduction of the said words in the Entry under the MVAT
Act was conscious. The legislature intended to exclude such
products which are used outside the human body i.e. in the
laboratory.

HELD
Hon’ble Maharashtra Sales Tax Tribunal relied on the
several judgments of the Apex Court, more particularly,
on the judgment in the case of Rajendra Prasad Yadav
and Others vs. State of M.P. and others (1997) 6 SCC
678 dated 09/07/1997 were in it was held that it is settled
principal of interpretation that all the provisions should be
harmoniously interpreted to give effect to all the provisions
and no part thereof rendered surplusage or otiose. Thus,
the words ‘diagnosis’ and ‘on the body’ were harmoniously
construed by the Hon’ble Tribunal. The Tribunal also relied
on the certificates issued by the competent authorities which
averred that there is no such product which can be used for
the purpose of diagnosis on the body of a person as held by
the ARA. The Hon’ble Tribunal gave liberal meaning to the
words ‘on the body’ and held that the diagnostic kits sold by
the appellant were covered by the entry for Drugs attracting
tax @5% and not 12.5%.

VAT

5. Brida Roadlines Pvt. Ltd. vs. Union Territory of
Daman & Diu [(2019)
2 GSTL (STC) 38] (Bombay
High Court)

 

Whether
the Commissioner of VAT is empowered under the law to hear second appeal

 

FACTS


The
dealer was assessed under the Daman and Diu VAT law. The A.O. imposed maximum
penalty u/s 10(d) r/w/s 10A of the CST Act, 1956. The assessee filed a first appeal
against the same, which was dismissed. The second appeal was filed with the Commissioner of VAT, Daman
& Diu, which was also dismissed. The power of the Commissioner entertaining
the second appeal was thereafter challenged before the Bombay High Court.

 

HELD


The
Commissioner of VAT had no power to hear the second appeal. The power was with
the Administrative Tribunal, Daman & Diu. The order passed by the
Commissioner in the second appeal was quashed by the Court.

 

6. Ricoh India Limited vs. State of Maharashtra [(2019)
GSTL (VAT) 120] (Bombay High Court)

 

Whether
Multi-Functional Printers and their parts and spares were covered by the Entry
No. C-56 of the MVAT Act, 2002 read with the Notification or the Residuary
Entry No. 102 of the said Act

 

FACTS


The
appellant was an importer and reseller of Multi-Functional Printers and their
parts and spares. They had applied for determination to the Commissioner of
Sales Tax, Maharashtra State. The Commissioner determined the same as falling
under the residuary entry and hence liable to VAT at 12.5%. The same was
challenged before the Tribunal; however, it confirmed the decision of the
Commissioner. The appellant thereafter approached the High Court at Bombay.

 

HELD


The
Court agreed that the Multi-Functional Printers were covered by the Automatic
Data Processing Machines and Units thereof falling under Entry No. 84.71 of the
Central Excise Tariff Act. However, the Court observed that even though the
Notification Entry under the VAT Act refers to the Central Excise Tariff, the
Notes stated under the said entry under the MVAT Act are not similar. The Court
further observed that the impugned product was covered by Note Nos. 2 and 4.
The printers were imported and assessed to duty under the ‘Others’ category and
the said category was not covered under Notes in the MVAT Act. The decision of
the Tribunal as regards classification was thus upheld. The classification of
the parts and spares done under the residuary entry by the Tribunal was also
upheld.

 

7. Bharati Airtel Limited
vs. Mira-Bhayander Municipal Corporation & others [(2019)
1 Gstl (Misc.) 138 (Bom.)]

 

Is
Local Body Tax (LBT) under clause ‘aaa’ of sub-section 2 of section 127 of the
Maharashtra Municipal Corporations Act, 1949 recoverable on SIM cards, recharge
coupons and e-recharge on their entry into the limits of a municipal
corporation?

 

FACTS


By
a license agreement dated 28th September, 2001 entered into between
the Hon’ble President of India through the Department of Telecommunications,
Ministry of Communication, Government of India on one part, and the petitioner
company on the other part, a licence was granted to the petitioner u/s 4 of the
Indian Telegraph Act, 1885 to set up and operate cellular mobile phone services
in Mumbai and Maharashtra Telegraph Circle on the terms and conditions set out
therein. In accordance with the said agreement, the petitioner is providing telecommunication
services including mobile telephony, text messaging, voice messaging, access to
internet, etc., to the members of the public in Global System for Mobile
communication (GSM) format which involves GSM wireless modem which works with
GSM wireless network. The customers of the petitioner avail of the services by
using mobile handsets.

 

It
was stated that the SIM (Subscriber Identification Module) card is provided by
the petitioner which is a plastic / paper card encrypted with the unique number
which is known as International Mobile Subscriber Identification (IMSI). The
SIM card enables the subscriber access to the telecommunication service
provided by the petitioner. The contention in the petition was that the SIM
card does not have any utility or intrinsic value by itself. The petitioner
provides either pre-paid or post-paid services. In case of pre-paid services,
the subscriber can renew the services through the recharge coupon / card or
e-recharge.

 

HELD


By
incorporating clause ‘aaa’ in sub-section 2 of section 127 of the said Act by
the Bombay Provincial Municipal Corporation and Bombay Village Panchayat
Amendment Act, 2009 a provision was made for levy of LBT in lieu of cess
or octroi. The State Government by a notification dated 25th March, 2010
notified the Bombay Provincial Municipal Corporations (Local Body Tax) Rules,
2010 (for short, LBT Rules). The LBT Rules provide a mechanism for the levy and
collection of LBT and the rates of LBT. In exercise of the power under clause ‘aaa’ of sub-section 2 of section
127 of the said Act, the State Government directed various municipal
corporations in the State, including the Corporation, to levy LBT on the entry
of goods into the limits of the city for consumption, use or sale in lieu of
octroi or cess with effect from 1st April, 2010.

 

On
18th February, 2011 another notification was issued by the State
Government in exercise of the powers u/s 99B read with sections 152B and 152C
of the said Act by which the rates of LBT to be levied by the Corporation on
entry of various categories of goods into the limits of the city for the
financial year 2011 were notified. One of the items included in Schedule A to
the said notification is SIM cards (Tariff Item No. 8542 10 10).

 

The
case made out in the petition was that the petitioner and its distributors were
compelled to register themselves under the LBT Rules. They did so under
protest. It was alleged that neither the petitioner nor its distributors paid
any LBT on SIM cards or recharge coupons or e-recharge. The case made out in
the petition is that in October, 2010 the officers of the first respondent
visited the premises of various distributors of the petitioner and called upon
them to pay LBT on SIM cards and recharge coupons on the basis of the amount /
value of talk time mentioned. By a communication dated 30th October,
2010 the petitioner informed the first respondent that the SIM cards, recharge
coupons and e-recharge were not goods which could be subjected to LBT and, in
fact, the petitioners are paying service tax on providing telecommunication services.
On 28th March, 2013 the State Government issued a notification
fixing a rate of 3.5% on ‘SIM cards, memory cards, activation / renewal slips
whether recharged online or otherwise’.

 

The
challenge in this petition under article 226 of the Constitution of India was
to the action of the first respondent of assessing, levying and recovering LBT
on SIM cards, recharge coupons and e-recharge brought into the limits of the
first respondent. There is a consequential challenge to the notification dated
28th March, 2013 issued by the State Government.

 

The
SIM cards are normally made of plastic or paper. They are capable of being
bought and sold and have utility value. The SIM cards are also capable of being
transferred, stored and possessed. The concept of sales tax and LBT are not the
same. LBT can be levied on the goods brought within the limits of a municipal
corporation even if the same are not sold but are brought either for
consumption or use. Going by what is held by the Apex Court in paragraph 11 referred
to (paragraph 12 in 10GSTR) of its decision in the case of Idea Mobile
Communication Ltd. [2011] 43 VST 1 (SC); [2011] 10GSTR 12 (SC); [2011] 12 SCC
608, SIM cards are capable of being used by putting the same in a
mobile phone handset. A SIM is a portable memory chip used in cellular
telephones. It is a tiny encoded circuit board which is fitted into the cell
phones at the time of signing on as a subscriber.

 

Even
assuming that by itself a SIM card has no intrinsic sale value, considering the
nature of its use it has a value in terms of money apart from its value as a
portable memory chip. Even recharge vouchers which are made of paper or plastic
are capable of being bought, sold and used. They can be transferred, stored and
possessed. The recharge vouchers or cards made up of paper or plastic may have
little value by themselves, but the same are capable of being used and their
use has value as the holder thereof can get talk time or internet data which
has a value in terms of money. SIM cards and recharge vouchers are tangible
goods which are capable of being brought into the limits of a city. The same
are capable of being used after they are brought into the limits of a city.
Hence, the same will be goods within the meaning of clause 25 of section 2 of
the said Act.

 

In
the decision of the Apex Court in the case of Idea Mobile Communication
Ltd. (Supra), the Court had come to the conclusion that a SIM card has
no intrinsic sale value and therefore sales tax is not payable. But the Apex
Court has not considered the question whether SIM cards are capable of being
used which is a relevant consideration for charging LBT.

 

The
Schedule under the rules framed under the said Act provide for levy of LBT on
the following items:

 

Group
II: ‘133. All types of mobile phones, pager, I-pad, I-pod, tablet and all sorts
of means of communication and their components, spare parts and accessories.
SIM card, memory card, activation / renewal slips / vouchers whether recharged
online or otherwise’ (emphasis added).

 

As
far as e-recharge is concerned, by no stretch of imagination can it be said
that e-recharge is capable of being brought into the limits of a city. In
clause 133 quoted above, e-recharge is not specifically included. Assuming that
it is included, it is nothing but an electronic download by use of internet.
Hence, e-recharge cannot be subject to levy of LBT. E-recharge is capable of
being used but it cannot be said that by downloading e-recharge through
internet, e-recharge is brought into the limits of a municipal corporation.
Hence, LBT cannot be recovered on e-recharge.

 

Coming
back to SIM cards and recharge coupons / cards, as held earlier, the same will
be covered by the definition of ‘goods’ under sub-section 25 of section 2 of
the said Act. The charging section for LBT under the said Act is section 152P.
LBT is leviable on the entry of goods into the limits of a city for
consumption, use or sale. Hence, the corporation was well within its powers to
levy LBT on SIM cards and recharge vouchers in physical form. Thus, the
petition partly succeeded.

 

 

VAT

1.       Pfizer
Products India Pvt. Ltd. vs. State of
Maharashtra & Others

Writ
petition No. 3149 of 2019

Date
of order: 1st August, 2019

(Bombay
High Court)

 

Whether the part payment made in
the earlier round of appeal is required to be adjusted against the mandatory
part payment of 10% u/s 26A of the MVAT Act, 2002

 

FACTS

The petitioner had approached the
Hon’ble Bombay High Court under Article 226 of the Constitution of India
challenging the refusal of the Joint Commissioner to accept the appeal since
the same was not accompanied with proof of part payment as required u/s 26A of
the MVAT Act, 2002. The petitioner had in the earlier round of the same appeal
made the part payment as directed by the Joint Commissioner. The Joint
Commissioner had remanded that appeal.

 

HELD

The amounts deposited before the
appellate authority continued to be with the State, even though the earlier
order was set aside. Therefore, for the purpose of computing 10% payable u/s
26A of the MVAT Act, the amounts which were deposited in the earlier round with
the appellate authorities should be taken into account for computing 10% of the
disputed State tax under the MVAT Act for the appeal being entertained on
merits.

 

2.      
Sudirman Paper Pvt. Ltd. vs. State of
Tamil Nadu

(Madras High Court)

 

Whether the revision order passed
in pursuance of the notices issued to the amalgamating company after
amalgamation is good in law

FACTS

A company, S, was amalgamated
with another company by order dated 20th September, 2012 of the High
Court with retrospective effect on and from 1st April, 2011 and this
fact was communicated to the Commercial Tax Officer concerned by letter dated 1st
November, 2012.

 

Notwithstanding such intimation
regarding amalgamation, revision notices were issued to the transferor company
and ultimately revised assessment orders were passed in the name of the
transferor company. The orders so passed were challenged before the Madras High
Court.

 

HELD

The Court directed that the
revised assessments were to be redone and completed giving an opportunity to
the transferee entity, i.e., the transferee company, to make objections and
show cause, or, in other words, a reasonable opportunity was to be granted to
it. The orders in question were directed to be treated as show-cause notices
prior to the revised assessment.

 

3.       Arihant
Granite and Marbles vs. State of Tamil Nadu

73
GSTR 262

 

Whether order of penalty passed
without assessment is sustainable

 

FACTS

The petitioner had paid tax after
a visit by the enforcement branch. Thereafter, based on the report submitted by
the enforcement officials, the assessing authority issued a notice proposing to
impose penalty at the rate of 150% of the tax due under the Tamil Nadu VAT Act,
2006. The dealer filed an objection but the authority passed orders imposing
penalty at the rate of 100%. The dealer then filed a writ petition.

 

HELD

The A.O. ought to have issued a
notice of the proposal to the dealer, both in respect of its tax liability as
well as penalty, if so warranted, and passed the order of assessment thereafter
upon hearing the dealer in respect of both components. The payment of tax
amount by the dealer before the inspecting officials could not be a reason for
the A.O. not to pass the order of assessment in respect of the tax component as
well.

 

The report of the inspecting officials could not be
the only source or reason for passing the order of assessment; it might be one
of the sources or reasons for doing so, since the A.O. while discharging the
functions of a quasi-judicial authority when making the assessment, had to pass
an order with independent application of mind. In this case, the A.O. had
straightaway issued the notice of proposal for imposing penalty and,
thereafter, passed the order confirming the proposal. The order was an
independent order levying penalty alone without assessing the tax liability.
The assessing authority had no jurisdiction to impose penalty by a separate and
independent order. The order imposing penalty was set aside.

VAT

7. State of Uttar Pradesh & Anr. vs. Birla  Corporation Limited [(2020) 72 GSTR 1 (SC)]

 

FACTS

A notification dated 27th February, 1998 was issued by the
State Government of U.P. u/s 5 of the UP Trade Tax Act, 1948 granting rebate on
the tax levied under the Act to industrial units set up in notified districts
within the State for ten years from the date of commercial production, subject
to certain conditions in respect of goods manufactured using fly ash procured
from thermal power stations within the State. This notification was challenged
before the High Court on the ground that the conditions specified in the
notification resulted in causing discriminatory treatment to the producers and
suppliers of the same product imported from neighbouring States as opposed to
goods manufactured and produced in the State of U.P. The High Court upheld the
challenge and the Supreme Court in appeal confirmed the decision of the High
Court declaring that the notification would also apply to cement manufacturing
units of neighbouring States who used fly ash as raw material.

 

After the decision of the High Court, a notification dated 14th
October, 2004 was issued rescinding the notification dated 27th
February, 1998. This notification was also challenged on the ground that the
same could not be enforced against industries which had already commenced
commercial production after 27th February, 1998 but before 14th
October, 2004 and taking any other view would result in giving retrospective or
retroactive effect to the notification dated 14th October, 2004. Giving
such effect was not permissible in law. The High Court allowed the Writ
Petition based on the principle of promissory estoppel. The State of
Uttar Pradesh filed an appeal; however, the Supreme Court dismissed the same.

 

HELD

The Apex Court observed in its judgment that it was evident from section
5 of the UP Trade Tax Act, 1948 that there was no express authority given to
the executive to issue notifications for withdrawing or rescinding the rebate
facility from a date prior to the date of notification. Thus, the
respondent-unit and similarly placed persons would be entitled to rebate for
the relevant period prescribed in the notification dated 27th February,
1998 which would continue to remain in vogue until the expiry of the specified
period, that is, ten years. It is well established that the Court is obliged to
insist on a highly rigorous standard of proof in the discharge of the burden
and the onus is upon the State to justify its action as supervening
public interest.

 

8. Ultra Readymix Concrete Private Ltd. vs. State of Tamil Nadu &
Ors. [(2020) 72 GSTR 62 (Mad.)]

 

FACTS

The petitioner used to make inter-State purchases of high speed diesel
oil at a concessional rate @ 2% by way of ‘C’ forms. However, the ‘C’ forms
could not be downloaded after the introduction of the GST Act. After due
inquiry with the Department, the petitioner was informed that after the
introduction of the GST Act with effect from 1st July, 2017, the
petitioner was not entitled to make purchases of high speed diesel oil from
other States at a concessional rate of tax, i.e., 2% and thus the Department’s
site had been blocked to deny access to the petitioner and other similarly
placed persons from downloading ‘C’ forms.

 

HELD

The Madras High Court, allowing the petition, held that the amendment
restricting the definition of ‘goods’ u/s 2(d) of the GST Act to six petroleum
products did not affect the provisions entitling the dealers to a concessional
rate of tax after the GST regime came into force. Thus, the petitioner was
entitled to make purchase of high speed diesel from other States on a
concessional rate of tax even after introduction of the GST Act.

 

9. K.M. Refineries and Infraspace Pvt. Ltd. vs.
State of Maharashtra & Others[(2020) 72 GSTR 94 (Bom.)]

 

FACTS

The New Package Scheme of Incentives, 1993 was introduced by the State
which allowed monetary and other incentives in the matter of tax subsidy or tax
exemption at the rates prescribed in the Scheme and other benefits. The
incentives could be availed of only on the industries qualifying in terms of
the eligibility conditions prescribed in the Scheme. The industries were
required to obtain an eligibility certificate from the District Industries
Centre. Thereafter, the Commissioner of Sales Tax shall endorse the eligibility
certificate issued by the implementing agency and it shall be his duty to
specify the date of effect of the eligibility certificate under the Incentives
Scheme. There is no authority given to the Commissioner of Sales Tax to modify,
enlarge or curtail the validity period decided by the implementing agency.

 

The petitioner-dealer made an application to the District Industries
Centre for issuance of an eligibility certificate under the 1993 Scheme. The
dealer was found eligible and by a final order dated 20th March,
2017, the General Manager, District Industrial Centre, issued an eligibility
certificate which was valid for nine years. However, when the eligibility
certificate reached the Commissioner of Sales Tax, the latter prescribed the
effective date but, while doing so, curtailed the validity period by about
three years by his order passed on 10th August, 2017.

 

HELD

The Bombay High Court held that the curtailment was beyond the powers of
the Commissioner of Sales Tax. The dealer had acted upon a promise given by the
State. The principle of promissory estoppel would thus apply and would
forbid the Government from taking any decision of not implementing the
Incentive Scheme. The Scheme had been framed ostensibly to achieve one of the
Directives contained in Article 39(C)  of
the Constitution for ensuring equal distribution of wealth and means of
production. Thus, the order of the Commissioner of Sales Tax was quashed and
set aside.

 

VAT

4. Commercial Tax Officer vs. M/s Bombay Machinery Stores Civil Appeal No. 2217 of 2011 Date of order: 7th April, 2011 (Supreme Court)

Constructive
delivery u/s 6(2) of the CST Act, 2002

 

FACTS

The Supreme Court in its
judgment in this case, overruled the Delhi High Court judgment in the case of Arjan
Das Gupta vs. The Commissioner, Delhi Administration (1980) 45 STC 52.
In that judgment, the Delhi High Court had developed a principle akin to constructive
delivery qua the termination of movement of goods as contemplated under
Explanation 1 to section 3 of the CST Act, 1956.

 

The High Court had said, ‘…
Normally, when the goods are carried by a carrier from one State to another,
the delivery is taken by the importer immediately after the goods land in the
importing State. Thus, normally, the landing of the goods in the importing
State and the delivery of the goods are almost simultaneous acts, although
technically there will be some hiatus between the two. Considering these
commercial facts, it is difficult to accede to the retailer’s contention that
the movement of goods continues even if the goods have landed in Delhi only
because the importer has transferred the documents of title to the purchasing
retailers and such retailers take delivery from the Railways at a subsequent
time. If taking delivery is the test of termination of movement and not the
landing of the goods in an importing State, Explanation 1 to section 3(b) of
the Central Sales Tax Act, 1956 would lead to anomalous results. If, after the
landing of the goods in Delhi, the Railway receipts are endorsed one after
another to ten persons and the delivery is taken by the tenth person, say after
3 months, the movement of goods would on the dealer’s interpretation
artificially continue for three months after the landing of the goods in Delhi.’

 

This decision of the Delhi
High Court, which held that Explanation 1 to section 3(b) of the CST Act, 1956
did not permit the dealers to expand the movement of goods beyond the time of
physical landing of the goods in the Union Territory of Delhi, was thereafter
followed in many other states. The assessing authorities in Maharashtra have
also followed this decision, more particularly in the case of yarn dealers and
such second sales (popularly known as in-transit sales) have been disallowed if
such sales in this state were not effected by such dealers immediately after
the landing of the goods in the state. In fact, some A.O.s held the view that
such second sales should be effected even before the landing of the goods in
the state.

 

The Commercial Tax Department
of the state of Rajasthan had issued two Circulars based on the said Delhi High
Court judgment. The first one was issued on 16th September, 1997
informing the trade that the reasonable time for effecting such second sale u/s
6(2) of the Act would be ten days after the goods land in their state, i.e. the
destination state. In the opinion of the said Department, normally the
transporters impose a condition of delivery of the goods at the destination
within ten days. Therefore, the Circular stated that if the carrier retained
the goods for a period beyond ten days, then there was a clear inference that
the consignee was aware of the arrival of the goods and the transporter was
holding the goods on his behalf as a bailee for the consignee. Any such second sale
effected after ten days was thus treated as local sale. Aggrieved by such
unreasonable limitation laid down by the Circular, the representatives of the
trade approached the authority and the authority was pleased to increase the
period from ten to 30 days by another Circular dated 15th April,
1998.

 

In this particular case, the
Bombay Machinery Store had purchased electric motors and their parts in the
year 1995-96 out of the state of Rajasthan and sold them to purchasers within
the Kota region of the same state. For such sales, they obtained the benefit of
exemption u/s 6(2) of the 1956 Act. These goods had remained with the transport
company upon arrival in Kota for more than a month. But this claim of sales u/s
6(2) was disallowed by the assessing authority for the reason that after
importing these goods into Rajasthan, sale was effected through transport
receipt on obtaining separate orders. Such sales, in the opinion of the
assessing authority, constituted sales within the state and hence were taxable
at 12% per annum under the Rajasthan Sales Tax Act, 1954. Even though the
second sales effected by the Bombay Machinery Stores u/s 6(2) of the CST Act,
1956 were prior to the issuance of the Circulars, the assessing authority had
disallowed such sales being beyond the period of 30 days. However, the appeal
against the assessment order was allowed by the Deputy Commissioner, Appeals.
And the Rajasthan Tax Board confirmed this order. The Rajasthan High Court
upheld the orders passed by the Rajasthan Tax Board. The impugned Circulars
were also quashed by the Rajasthan High Court. The Revenue then filed an appeal
to the Supreme Court.

 

HELD

The Apex Court rejected the
appeal of the Revenue with the following observations:

 

Para
12: ‘In this set of appeals we have already indicated that transfer
of documents of title were effected subsequent to the goods reaching the
location within destination State. But when the goods are delivered to a
carrier for transmission, first Explanation to section 3 of the 1956 Act
specifies that movement of the goods would be deemed to commence at the time
when goods are delivered to a carrier and shall terminate at the time when
delivery is taken from such carrier. The said provision does not qualify the
term “delivery” with any timeframe within which such delivery shall have to
take place. In such circumstances fixing of time frame by order of the Tax
Administration of the State in our opinion would be impermissible.’

 

The Revenue had relied on
section 51 of the Sale of Goods Act, 1930 before the High Court. In appeal, the
Supreme Court stated that section 51 was of no assistance since there was no
material available on the record which would indicate that the transporter had
informed the consignee that he was holding the goods as a bailee.

 

The Court also stated that
the Delhi High Court did not lay down a correct proposition of law in its
judgment in Arjan Das Gupta (Supra)

 

The Court observed that on a
plain reading of the statute, the movement of the goods for the purposes of
clause (b) of section 3 of the 1956 Act would terminate only when delivery is
taken, having regard to the first Explanation to that section. There is no
scope of incorporating any further word to qualify the nature and scope of the
expression ‘delivery’ within the said section. The Legislature had eschewed
from giving the said word an expansive meaning. The High Court rightly held
that there is no place for any intendment in taxing statutes. The Court further
stated that in the event the authorities felt that any assessee or dealer was
taking unintended benefit under the aforesaid provision of the 1956 Act, then
the proper course would be Legislative amendment. It also said that the tax
administration authorities could not give their own interpretation to
Legislative provisions on the basis of their own perception of trade practice.
This administrative exercise, in effect, would result in supplying words to
Legislative provisions, as if to cure omissions of the Legislature. The appeals
were allowed.

 

The Supreme Court, in this
judgment, has not laid down any new principle of law. In fact, the Constitution
Bench of the Supreme Court in the year 1978 itself had said that in the taxing
statute there is no room for intendment and effect should be given to the clear
meaning of the words. [See Hemraj Gordhandas vs. H.H. Dave, 1978 (2) ELT
J350.]

M/S. J. K. Lakshmi Cement Ltd. vs. Commercial Tax Officer, Civil Appeal No.102 of 2010, 16th Sep- tember, 2016 , SC.

Central Sales Tax – Exemption From Payment of Tax Or Concessional Rate
of Tax – Notification u/S. 8(5) – under Two Separate Notifications – Not
allowed, Section 8(5) of The Central Sales tax, act, 1956.

Facts

The   appellant, 
a  Public  limited  
Company  incorporated under the
Companies act, 1956, is engaged in the business of manufacturing and selling
Grey Portland Cement. in exercise of powers conferred by section 8(5) of the
Central Sales tax act, 1956 (for short, “CST act”), the Government of Rajasthan
had issued a Notification No. F4(72)FD/Gr. IV/81- 18 dated 06.05.1986 allowing
partial exemptions from the sales tax payable in respect of inter-state sales
in the manner and subject to the conditions mentioned therein. Partial
exemption was granted under the said notification at the rate of 50%/75% on the
basis of increase in the percentage of the entire inter-state sales and
decrease in percentage of stock transfers but the benefit under the said
notification was not available on levy cement. from the assessment year 1989-90
to 1997-98 the appellant had been granted benefit of partial exemption under
the notification dated 06.05.1986 except for the assessment year 1995-96 and
1996-97 as no claims were made by the appellants being not eligible. By
Notification no. 97-122 dated 12.03.1997 issued u/s. 8(5) of the CST act, the
State Government rescinded the Notification No. 94-70 dated 07.03.1994 and
directed that CST  on inter-State sales
of cement shall be calculated at the rate of 4%, inter alia, subject to
fulfillment of the condition that the dealer making inter-State sales under
this notification shall not be eligible to claim benefit provided by partial
exemption notification dated 06.05.1986. further, in exercise of power u/s.
8(5) of the CST act, the State Government vide Notification No. 97-266 dated 21.1.2000
directed that tax payable under sub-sections (1) and (2) of the said Section on
the inter-state sales of cement shall be calculated at the rate of 6%, inter
alia, subject to the condition that the dealer making inter-state sales under
this notification shall not be eligible to claim benefit provided under partial
exemption notification dated 06.05.1986. After a lapse of seven years from the
previous circular dated 15.04.1994, the CCT issued another Circular no.
94-95/119 dated 16.04.2001 purporting to clarify the applicability of partial
exemption notification  dated  06.05.1986  vis-a-vis 
notification  dated 07.03.1994 and
subsequent notifications dated 12.03.1997 and 21.01.2000. By the said circular,
the competent authority purported to state that the dealer can avail the
benefit of either of these two notifications in any financial year meaning
thereby that if he opts for the benefit under notification dated 06.05.1986 for
the year 2000-2001, he would not be entitled to claim simultaneous benefit in
respect of the same year under the notification dated 21.01.2000. The
Department Held that as per circular dated 16.04.2001 the benefit could not be
claimed under notification dated 06.05.1986 if the unit had made sales under
notification dated 21.01.2000. It was Held that benefit of both the
notifications could not be availed of in the same financial year.

The High Court in appeal, filed
by the appellant, confirmed the order of Rajasthan Board allowing the appeal
filed by the Department. The appellant company filed appeal before the SC.

Held

The circular dated 15.04.1994,
when in force, had referred to the notifications dated 07.03.1994 as well as
06.05.1986. Under the notification dated 07.03.1994, the rate of central sales
tax on inter-State sale of cement was unconditionally fixed at 4%, even when
there was no declaration in form  C and
form  d. The notification dated
06.05.1986 relating to inter-State sale required Form C and Form D, for
availing the benefit. The circular did not in clear and categorical terms lay
down that dual or multiple benefits under the two notifications could be
availed of by the same dealer. it, however, appears that both the assessee as
well as the revenue had understood the circular dated 15.04.1994 to mean that
inter-state transactions would qualify and would be entitled to partial
exemption under the notification dated 06.05.1986, when accompanied with
form  C and d and for inter-state sale
transactions without Form C and D, benefit of notification dated 07.03.1994
would apply. The understanding by the assessee and the revenue, in obtaining
factual matrix, has its own limitation. it is because the principle of res-
judicata would have no application in spite of the understanding by the
assessee and the revenue, for the circular dated 15.04.1994, is not to the specific
effect as suggested and, further notification dated 07.03.1994 was valid
between 1st  april, 1994 up to 31st  march, 1997 (upto 31st march, 1997 vide
notification dated 12.03.1997) and not thereafter. The Commercial tax
department, by a circular, could have extended the benefit under a notification
and, therefore, principle of estoppel would apply, though there are authorities
which opine that a circular could not have altered and restricted the
notification to the detriment of the assessee. Circulars issued under tax
enactments can tone down the rigour of law, for an authority which wields power
for its own advantage is given right to forego advantage when required and
considered necessary. This power to issue circulars is for just, proper and
efficient management of the work and in public interest. It is a beneficial
power for proper administration of fiscal law, so that undue hardship may not
be caused. Circulars are binding on the authorities administering the enactment
but cannot alter the provision of the enactment, etc. to the detriment of the
assessee.

The controversy herein centres
round the period from 1st april, 2001 to 31st 
march, 2002. The period in question is mostly post the circular dated
16.04.2001. The appellant­ assessee has pleaded to take benefit of the circular
dated 15.04.1994, which stands withdrawn and was only applicable to the
notification dated 07.03.1994. It was not specifically applicable to the
notification dated 21.01.2000. The fact that the third paragraph of the notification
dated 21.01.2000 is identically worded to the third paragraph of the
notification dated 07.03.1994 but that would not by itself justify the
applicability of circular dated 15.04.1994.

Accordingly, the SC dismissed the
appeal, filed by the appellant, and Held that due to language of notifications
the appellant cannot take benefit of concession under both notifications in
same financial year.

M/S. Hindustan Lever Ltd. vs. State of Karna- taka, Civil Appeal No. 4003 of 2007, dated 2nd September, 2016, SC.

Entry Tax – Exemption – Packing material is used For Packing of Tea
-Not Raw material – Not Exempt When Only Raw material is Exempt – Section 11a
of The Karnataka Tax on Entry of goods act, 1979.

Facts

The appellant is a public limited
company, having a tea manufacturing unit at dharwad (Karnataka) and various
other units which also manufacture tea. The tea manufactured by the appellant
is of three types, namely, packet tea, tea in tea bags, and quick brewing black
tea. The appellant claimed that its dharwad unit, as opposed to the other units
manufacturing tea, is a new unit and is, therefore, exempt altogether from
payment of entry tax on packing material of tea under a notification dated
31.3.1993 issued u/s. 11A of the Karnataka tax on entry of Goods act, 1979. Insofar
as the other units are concerned, it is the case of the appellant they are
covered by Explanation II to a Notification dated 23.9.1998 issued u/s.3 of the
said act, and “packing material” being covered by the said explanation would
entitle them to pay entry tax at the rate of 1% and not 2%. all the authorities
under the entry tax act i.e. the assessing authority, the first appellate
authority and the Karnataka appellate tribunal have Held that packing material
cannot be regarded as raw material, component parts or inputs used in the
manufacture of finished goods and, therefore, in the context of the Entry tax
act, read with Schedule i, such packing material is neither exempt nor
chargeable at the rate of 1% on a true construction of the notifications of
1993 and 1998. The High Court in turn also dismissed the revision petitions
filed under the statute by the assessee. the question that arises for decision
in appeal before SC was whether “packing materials” which enter the local, area
for consumption therein, that is for packing tea that is manufactured by the appellant,
can be said to be raw material, components, or inputs used in the manufacture
of tea for the purpose of either of exemption or liable to lower rate of tax of
1% instead of 2%.

Held

In the context of the entry tax
act, the difference between “goods” used in the manufacture of goods and
“packing material” is also brought out by Schedule i. Packing materials are
separately defined in Entry 66. On the other hand, raw material, component
parts and inputs, which are used in the 
manufacture  of  an 
intermediate  or  finished 
product, are separately and distinctively given in entry 80 thereof. The
context of the entry tax act therefore is clear. When raw material, component
parts and inputs are spoken of, obviously they refer to material, components
and things which go into the finished product, namely, tea in the present case,
and cannot be extended to cover packing material of the said tea which is
separately provided for by the aforesaid entry 66. The notification dated
23.9.1998 issued u/s. 3 uses identical language as that contained in entries 66
and 80 of Schedule I to the Entry Tax Act. Equally, notification dated
31.3.1993 is an exemption notification issued u/s. 11A which also uses the
identical language of Entry 8 of Schedule I. Thus, notification cannot be read
to include “packing material” as “raw material, component parts  or 
inputs  used in the manufacture”
of tea. Accordingly, the SC dismissed the appeal filed by the appellant and
judgment of High Court was affirmed.

M/S Kataria Automobiles Limited&Anr.V. State of Gujarat, Appeal No. 535 of 2010, dated 18th July, 2016, (Guj).

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Central Sales Tax- Exemptionfrom Payment of Tax -In Excess of 4%-Without C Form -UnderNotification Dated 12.09.1995- Issued U/S 8(5) of The Act– Even After Amendment to Section 8(5) from 11.05.2002- Is valid, S. 8(5)of The Central Sales Tax Act, 1956.

Facts:
The appellant is an authorized distributor of Maruti cars and is a registered under the Gujarat Sales Tax Act and the CST Act. The Gujarat Government had issued a notification dated 12.09.1995 under section 8(5) of the CST Act to exempt from payment of tax in excess of 4% in respect of all inter-state sales effected from the State of Gujarat which was later on rescinded from 31.03.2006.

Accordingly, the appellant had paid tax @ 4% on its inter-state sales affected without C forms. The revenue did not accept the claim in view of the amendment to section 8(5) of the CST Act from 11.05.2002. The Tribunal also dismissed the claim and the appellant filed appeal before the Gujarat High Court against the said decision of Tribunal.

Held:
For applying the rate of tax on inter-State sales, two conditions have been laid down in Section 8. Section 8(1) lays down the condition that if sales are supported by ‘C Forms’, then concessional rate is supposed to be applied and Section 8(2) lays down that if sales are not supported by ‘C Forms’, then higher rate is applicable.

The amendment dated 11.05.2002 has inserted the condition in Section 8(5) that the State Government can exercise the powers vested in them subject to conditions laid down in Section 8(4). Section 8(4) states that benefit of concessional rate as provided for u/s 8(1) is allowable subject to the submission of ‘C Forms’.

In other words, the conditions laid down in Section 8(4) are in relation to Section 8(1) meaning thereby that on fulfillment of conditions, laid down in Section 8(4), the sale would be accepted and treated as sale under Section 8(1) otherwise, it would be considered as sale covered and governed by Section 8(2). Thus, the amendment in anyway, does not affect Section 8(2) as it is in connection with Section 8(1). The State Government had issued several Notifications u/s 8(5) with respect to Section 8(1) until 11.05.2002, which is the date on which the amendment was brought in. By the said amendment, the Legislature intended to restrict the issuance of Notifications with respect to conditions laid down in Section 8(1) and 8(4). If the amendment is treated to be affecting Section 8(2) then the said section would become redundant, which is not the intention of the Legislature.The amendment dated11.05.2002 does not affect or restrict the powers of State Government to issue Notifications u/s 8(5) with respect to Section 8(2).
Therefore, the State Governments can issue Notifications u/s 8(5) reducing the rate of tax with respect to transactions falling u/s 8(2) even after this amendment. In any case, the amendment does not affect the Notifications issued prior to amendment. It is settled position of law that Notifications hold the field unless they are specifically rescinded and the Notification in question, has been rescinded w.e.f. 31.03.2006 and so, it holds the field till then.
Hence, the authorities are bound to follow the same.

Accordingly, the High Court allowed the appeal and held that the rate of CST would be 4% in respect of all inter-state sales affected without C forms under the said notification till it was rescinded.

Commissioner of Commercial Taxes V. M/S A.R. Thermosets (Pvt.) Ltd., Civil Appeal No. 2650 of 2016, dated 6th September, 2016, SC

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VAT- Classification of Goods – Bitumen Emulsion- Is Bitumen- Taxable at 4%, Entry 22 of Part A of Schedule II of the Uttar Pradesh Value Added Tax Act, 2008.

Facts:
Respondent company manufactures “bitumen emulsion”. It filed an application before the Commissioner, Commercial Taxes, Lucknow, U.P., under Section 59 of the VAT Act seeking a clarification about the rate of tax applicable to the sale of bitumen emulsion. The Commissioner of Commercial Taxes, vide order dated 23.1.1999, opined that bitumen emulsion is an unclassified commodity and, therefore, is excisable to tax at the rate of 12.5% as it would fall under the residuary Entry. The Company filed appeal before the Tribunal where it was dismissed. The High Court, in appeal filed by the company, allowed the appeal. The revenue filed appeal before the SC against the decision of High Court allowing appeal of the respondent company.

Held:
The principal controversy, involved is “whether “bitumen emulsion” is covered within Entry 22 of Schedule II of the VAT Act which only refers to “bitumen”.

The bitumen, in its original form, is solid but melts when heated, for it is used in molten stage. There is no difficulty to appreciate that bitumen emulsion comes into existence when bitumen is treated with emulsifiers and other chemicals to attain a liquid form. It has a huge advantage and added benefit because it is not to be heated and detained in its liquid form and has better stability and thus, saves time and cost components. That apart, it ensures its use at the stage of application. Needless to say it is comparatively less hazardous. Bitumen consists of four forms of variants namely solid bitumen, polymer bitumen, crumble rubber modified bitumen and bitumen emulsion. The stand of the Revenue is that the word “bitumen” must be conferred a narrow meaning for the reason that the legislature has not thought it appropriate to use the prefix or suffix like “all”, in all forms or of all kinds. To this the SC clarified that bitumen is a generic expression which would include different types of bitumen. Revenue, however, intends to apply it restrictively. The said submission has a fundamental fallacy. Entry 22 does not exclude or specify that it would not include bitumen of all types    and varieties. This is not the principle or precept applied to interpret the entries under the Schedule of the Act.
The nature and composition of the product or the goods and the particular entry in the classification table is important. Matching of the goods with the Entry or Entries in the Schedules is tested on the basis of identity of the goods in question with the Entry or the contesting entries and by applying the common parlance test, i.e., whether the goods as understood in commercial or business parlance are identical or similar to the description of the Entry. Where such similarity in popular sense of meaning exists, the generic entity would be construed as including the goods in question. Sometimes on certain circumstances the end use test, i.e., use of the goods and its comparison with the Entry is applied.
The Entry in question uses the word “bitumen” without any further stipulation or qualification. Therefore, it would include any product which shares the composition identity, and in common and commercial parlance is treated as bitumen and can be used as bitumen. Applying the three tests, namely, identity, common parlance and end use of the goods and the Entry in question, bitumen emulsion would be covered by the Entry bitumen. It is worthy to note that bitumen emulsion matches the Entry as it is only one of the varieties of bitumen. Bitumen emulsion is processed bitumen, but the process has not changed its composition, commercial identity or its use. Bitumen emulsion is regarded and performs the same function as bitumen. As a result of processing, neither the primary character nor the composition is lost. Emulsification only eases and provides proficiency to the use of application of bitumen. Hence, in popular and commercial sense, bitumen emulsion is nothing but bitumen, which is in liquid form and is user friendly.
It is perceivable that the legislature has used the word “bitumen” and treated it as a separate entity. It has not indicated that this was done with the intention and purpose to exclude some type or variety of bitumen. All bitumen products, which share and have common composition and commercial entity, and meet the popular parlance test, is, therefore, meant to be covered by the said Entry. In the instant case, even the end use test is satisfied. There is nothing in the Entry to suggest and show that the Entry is required to be given a restrictive and a narrow meaning.The two varieties and types carry the same composition, do not differ in character and have the same commercial identity i.e. bitumen. That apart, the use or end use test is also satisfied.
Accordingly, the SC dismissed the appeal filed by the revenue and up held the judgment of High Court holding bitumen emulsifier is bitumen within the meaning of the entry 22 of part A of Schedule II of the act and taxable at 4%.

M/S|Larsen & Toubro Limited V. Additional Deputy Commissioner of Commercial Taxes &Anr., Civil Appeal No. 2956 of 2007, 2318 OF 2013 and 7241 of 2016, dated 5th September, 2016 (SC)

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Sales Tax- Works Contract- Total Turnover- Does Not Include Turnover of Sub Contract, S. 6B of The Karnataka Sales Tax Act, 1957.

Facts:
The petitioner company, registered under the Karnataka Sales Tax Act and engaged in works contract had executed works contract and part of it or whole of it was given to another contractor as sub-contract and claimed deduction from total turnover for the purpose of levy of tax under section 6B of the Act in respect of value of contracts executed by sub-contractors. The department did not accept the claim of the company. The High Court in two periods denied the claim but in another appeal allowed the claim. The company filed appeal before the SC against the High Court judgment disallowing the claim and department filed appeal before the SC against the judgment of High Court allowing the claim. The SC by common judgment decided all three appeals involving identical issue for deduction of sub-contract value for levy of tax.

Held:
What is significant is that total amount paid or payable to the dealer as a consideration for ‘transfer of property in goods’, which is involved in execution of the works contract, is to be treated as ‘total turnover’.The Rule, thus, specifically restricts the total turnover in respect of those goods alone, where the property has been transferred. Thus, transfer of property in goods, becomes necessary event and unless there is a transfer of property, the amount paid is not to be included in the total turnover. The amount paid to the sub-contractor is not for transfer of property in goods. Accordingly, the SC held that the value of thework entrusted to the sub-contractors or payments made to them shall not be taken into consideration while computing total turnover for the purposes of Section6-B of the Karnataka Act. As a consequence, the two appeals which were filed by the company were allowed and the appeal preferred by the Revenue was dismissed by the SC.

M/s. Permasteelisa (India) Pvt.Ltd. vs. State of Maharashtra, Sales Tax, Reference No.55/2014 and 80/ 2010 , dated 6th May, 2016, Bomay High Court.

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Works Contract-Composition–Construction of Glass Curtain Wall – Not a Contract for Construction of Building, section 6A of The Maharashtra Sales Tax on the Transfer of Property in Goods involved in the Execution of Works Contracts (Re-enacted) Act, 1989,

Facts
The Applicant is engaged in activity of fixation of glass walls. It is the case of the Applicant that these glass walls also known as curtain walls are used in the construction of modern buildings. These glass walls are permanent walls and are constructed instead of usual brick walls. In the modern age of architecture these glass walls have replaced the traditional brick walls and many buildings are constructed and developed using glass walls. If the glass walls are erected for a building then brick walls are not required as these glass walls have all the characteristics of traditional brick walls as a result of which there are modern high rise buildings and skyscrapers. In applying the rate of composition as applicable under the Work Contracts Act, the Applicant has relied upon the Notification dated 8 March 2000 in terms of which certain contracts specified therein are identified as ‘construction contract’ eligible for beneficial rate of tax. According to the Applicant, the activities, it undertakes, are in respect of construction contracts or contracts incidental or ancillary to the construction contracts as set out in the Notification dated 8 March 2000 and it has raised invoices and filed returns accordingly.

The assessing authority held that the Applicant was not eligible for benefit under the said Notification dated 8 March 2000. The order of the Assessing Officer was upheld by the Deputy Commissioner of Sales Tax (Appeal). Aggrieved by the order of the Deputy Commissioner of Sales Tax (Appeal), the Applicant filed Appeal before the Tribunal. The Tribunal held that the activity undertaken by the Appellant was not construction and the contracts undertaken by the Applicant are not building construction contracts and would not be covered by the Notification dated 8 March 2000. Aggrieved by the order of the Tribunal, the Applicant preferred a Rectification Application which was dismissed by tribunal by an order passed in February 2013. The Tribunal, at the instance of the appellant, referred the question of law before the Bombay High Court.

Held
The Notification dated 8 March 2000 clearly mentions the contract for “construction of buildings”. The term “construction of buildings” would not involve the fixing of glass walls. Since the Applicant is seeking a lesser rate of tax, the burden to probe is on the Applicant and the provisions of the Notification dated 8 March 2000 have to be construed strictly .The word “construction” and the word “building” are not defined in the Act and are to be read in the context of their ordinary meaning. The work of fixing glass to a building can in no manner said to be an activity which is covered under Notification dated 8 March 2000. The work of the Applicant is also not covered under the term “incidental or ancillary activity to the construction of the building” as that would have to have a direct nexus to the construction of the building itself. Therefore, the alternative argument that the contract would get covered by paragraph B of the said Notification which includes incidental or ancillary contract to the contract of construction also cannot be accepted. What meaning is to be attached to the word “building” as mentioned in the Notification would have to be determined considering the facts and circumstances of each case. The reliance on the definition of ‘building’ in the Regulation 2(3)(11) of DCR is misplaced and would not assist the Applicant in any manner. That definition is in the context and purposes of DCR and cannot be imported and applied in the facts and circumstances of the present case. Accordingly, the High Court answered the question of law referred by the Tribunal as under:

The contracts of construction of glass curtain wall executed by the applicant would not constitute contracts for construction of buildings mentioned in para A of the Notification dated 8 March 2000 issued for the purpose of section 6A(1) of the Works Contract Act nor would it constitute contracts incidental or ancillary to the contracts as mentioned in paragraph B of the said Notification.

The Commissioner of Sales Tax vs. M/s. Neulife Nutrition System Pvt.Ltd., VAT Appeal No. 932of 2014, dated 6th May, 2016, Bombay High Court.

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VAT- Classification of Goods- Health Drinks- Are Beverages- Concentrate in Powder Form –From Which Non-Alcoholic Beverages are Prepared- Are Covered by Entry C-107(11)(g)- Liable for 4% Tax, Schedule Entry C-107(11)(g) of The Maharashtra Value Added Tax Act, 2002

Facts
The Respondent dealer had filed an Application for determination u/s. 56 of the MVAT Act before the Commissioner of Sales Tax to decide the classification of its products and the rate of tax applicable for the relevant period i.e. 15-01-2011 to 31-03-2013. It had sought to determine the rates of tax applicable to ‘protein powders’.

It was the case of the Respondent-dealer, before the Commissioner of Sales Tax, that they were dealers in non-alcoholic beverage concentrate in powder form and the said products are general purpose protein powders from which non-alcoholic beverages are prepared. These powders are manufactured in USA and the proteins are obtained from those products which are remnants of cheese making process, these are sold in flavours, and, that the said products are covered under Schedule Entry No.C-107 (11)(g) of MVAT Act which are eligible to tax @ 5%. The Commissioner of Sales Tax, by his common order dated 18 July 2004, held that the said products were not covered by Schedule Entry C-107 (11) (g) of MVAT Act. Being aggrieved by the said order, the Respondent-dealer preferred two Appeals before the Tribunal. After hearing the parties, the Tribunal set aside the Commissioner’s order dated 18 July 2014 by allowing both the Appeals and held that the said products of the Respondent-dealer are classifiable under Schedule Entry C-107(11) (g) and liable for tax at the rate of 5%. Being aggrieved by the order of the Tribunal, the Appellant- Commissioner of Sales Tax has preferred the appeals before the Bombay High Court.

Held
It is well settled that the Entry in the Schedule is to be construed as it stands and when the Entry is clear and equivocal, it does not demand any outside interpretation. There can be no dispute that the said products of the Respondent- dealers are `powders’ from which ‘non-alcoholic’ drinks are prepared for the purpose of consumption by mixing the said powders with liquids like water, milk, juice, etc. There is no warrant for restricting the meaning of term “beverages” in Schedule Entry C-107 (11)(g) as sought to be contended by the learned Counsel for the Appellant. The Entry is clear and unambiguous. The Entry is couched with the non-technical word “beverages”, which has to be understood in its ordinary meaning. The meaning of “beverage” as stated in the Concise Oxford English Dictionary is “drink other than water”. Merely because a drink has more nutritive value in the form of proteins and meant for a certain class of consumers, it would not cease to be a “beverage”. Even if the potable drink made from the said powders are perceived as health drink, it does not fall out of the purview of the Entry. In view of the specific Entry 107-C (11)(g) to the Statute, it would override the general Entry. Even otherwise, the drink prepared from the said powders can be excluded from the term `beverages’, even assuming that the principle of common parlance were to apply, the Tribunal has rightly concluded that the `powders’ of the Respondent-Dealers are covered under Schedule Entry C-107 11(g) liable to tax @ 5%. Accordingly the High Court dismissed the appeal filed by the Department and confirmed the order of the Tribunal.

Commissioner, Delhi VAT vs. ABB Ltd, Civil Appeal Nos. 2989 – 3008 of 2016, dated 5th April, 2016, 2016 NTN (Vol-60) – 363 (SC)

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Value Added Tax – Works Contract – Import of equipment – For Use in Execution of Works Contract -As per Requirement and Specification- Is Sale in Course of Import, s. 5(2) of The Central Sales Tax Act, 1956.

FACTS
The respondent is a Public Limited Company engaged, inter alia, in manufacture and sale of engineering goods including power distribution system and SCADA system. On 15.05.2003, DMRC invited tenders for supply, installation, testing and commissioning of traction electrification, power supply, power distribution and SCADA system for its Line 3 i.e. Barakhamba Road- Connaught Place-Dwarka Section. DMRC short listed the respondent and then executed the contract under which the respondent had to provide transformers, switch-gears, high voltage cables, SCADA system and also complete electrical solution, including control room for operation of trains. The respondent company claimed exemption from payment of tax on the ground of sale in course of import in respect of the importation of equipment which was strictly as per requirement and specification set-out by DMRC in their contract and only to meet such requirement of supply of specified goods which were imported, hence, the event of import and supply was clearly occasioned by the contract awarded to the respondent by the DMRC. There was a similar contention in respect of procurement of goods within the country and their movement from one State to another. The assessing authority rejected the claim and levied tax which was confirmed by the Tribunal. After carefully considering the relevant provisions of the contract, specifications of goods, requirement of inspection of goods at more than one occasion and right of rejecting the goods even on testing after supply, the High Court allowed appeal to accept the contentions advanced on behalf of respondent that the transactions leading to import of goods as well as movement of goods from one State to another were occasioned by the contract awarded by the DMRC to the respondent, hence, the transactions were not covered by the Delhi VAT Act but the CST Act. The department filed SLP before Supreme Court.

HELD
Based upon facts of the case, the SC held that the movement of goods by way of imports or by way of inter-state trade in this case was in pursuance of the conditions and/or as an incident of the contract between the assessee and DMRC. The goods were of specific quality and description for being used in the works contract awarded on turnkey basis to the assessee and there was no possibility of such goods being diverted by the assessee for any other purpose. Hence the law laid down in K.G. Khosla’s case has rightly been applied to this case by the High Court.

Accordingly, the appeal filed by the department was dismissed and the judgment of the High Court was upheld by the SC.

Mahyco Monsanto Biotech (India) Pvt. Ltd., vs. The Union of India And Others And M/S. Subway Systems India Pvt. Ltd V. The State Of Maharashtra And Others, WP. No. 9175 Of 2015 And 497 Of 2015, Dated 11th August, 2016 ( Bom).

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(a) Value Added Tax- Transfer Of Technical Know How- Sale- Liable To Vat.
(b) Value Added Tax- Frenchise Agreements- Not A Transfer Of Right To Use- Not A Sale- Not Liable For Vat, Schedule Entry C-39 of The Maharashtra Value Added Tax Act, 2002.

Facts
i) The Petitioner Monsanto India, a joint venture company of Monsanto Investment India Private Limited (“MIIPL”) and the Maharashtra Hybrid Seeds Co. Monsanto India developed and commercialized insect-resistant hybrid cotton seeds using a proprietary “Bollgard Technology”, one that is licensed to Monsanto India by Monsanto USA through its wholly-owned subsidiary, Monsanto Holdings Private Limited (“MHPL”). This technology is further sublicensed by Monsanto India to various seed companies on a non-exclusive and nontransferable basis to use, test, produce and sell genetically modified hybrid cotton planting seeds. In return for this technology, Monsanto India received trait fees based on the number of packets of seeds sold by the sub-licensees. These sub-licensing agreements, with almost 40 seed companies, were the transactions in question. The petitioner paid service tax on these transactions and did not paid vat. The department levied vat on these transactions treating transfer of technical knowhow as sale liable to vat. The petitioner file writ petition before the Bombay High Court.

ii) In other case the petitioner Subway was granted a non-exclusive sub-license by Subway International B.V. (“SIBV”), a Dutch limited liability corporation to establish, operate and franchise others to operate SUBWAY – branded restaurants in India. This non-exclusive license was granted to SIBV itself by Subway Systems International Ansalt, which in turn was granted such a license by Doctor’s Associates Inc., an entity that owns the proprietary system for setting up and operating these restaurants. These restaurants serve sandwiches and salads under the trade mark ‘SUBWAY’. The agreement includes not only the trade mark SUBWAY, but also associated confidential information and goodwill, such as policies, forms, recipes, trade secrets and the like. Typically, Subway enters into franchise agreements with third parties, under which it provides specified services to the franchisee. In return, the franchisee undertakes to carry on the business of operating sandwich shops in Subway’s name. The agreement only provides for a very limited representational or display right, and the franchisee cannot transfer or assign these exclusive rights to any third person. Subway also reserves the right to compete with these franchisees in the agreement. Under this agreement, Subway received two kinds of consideration, one being a one-time franchisee fee which is paid when the agreement is signed; and the second is a royalty fee paid weekly by the franchisee on the basis of its weekly turnover. Under these agreements, the franchisees have no more than a right to display Subway’s intellectual property in the form of marks and logos, and a mere right to use such confidential information as Subway discloses and as prescribed by the franchise agreement. Since September 2003, Subway was paying service tax to the Union of India on the consideration received by it from the franchisees. The vat department took the view that this consideration should be subject to VAT and passed the orders levying tax, interest and penalty against which the Subway filed writ petition before the Bombay High Court.

The High Court disposed both writ petitions by common order.

Held
(a) In first case the High Court held that the first question is whether there is a ‘transfer’ within the meaning of Article 366(29A)(d) the answer is yes. It is true that the essence of a ‘transfer’ is the divesting of a right or goods from transferor and the investing of the same in the transferee, and this is what Salmond on Jurisprudence and Corpus Juris Secundum both say. The seeds embedded with the technology are, in fact, transferred. Monsanto India is divested of that portion of the technology embedded in those fifty seeds and those were fully vested in the sub-licensee. It is not correct to say that the effective control of the ‘goods’ is with Monsanto India. The effective control over the seeds, and, therefore that portion of the technology that is embedded in the seeds, is entirely with the sub-licensee. That sub licensee is not bound to use the seeds (and the embedded technology) in accordance with Monsanto India’s wishes. Monsanto India cannot further dictate to the sub-licensee what he or it may do with these technology-infused seeds. The sub-licensee can do as it wishes with them. It may not use them at all. It may even destroy the seeds. Once the transaction is complete, i.e., once possession of the technology-imbued seeds is effected, and those seeds are delivered, Monsanto India has nothing at all to do with the technology embedded in those fifty seeds given to the sub-licensee. At no point does Monsanto India have access to this portion of the technology. In other words, the transfer is to the exclusion of Monsanto India. Further, the High Court held that the Monsanto India sub-licensing transaction could only be a service in one circumstance, i.e., if the seed companies gave Monsanto India a bag of seeds to mutate and improve with the Bollgard Technology which would, thereafter, be returned to the seed companies. That might perhaps be a service contract. Accordingly, the High Court held that it is a clear case of sale of goods liable to tax (Vat).

As regards plea of petitioner for transfer of the amount paid as service tax from the Consolidated Fund of India to the Consolidated Fund of State of Maharashtra, the High Court did not give any direction and left it to Monsanto India to adopt suitable proceedings in this behalf, and left their contentions open to the necessary extent.

(b) It is not true that the eligibility of Vat is to be determined by the State, and therefore it could levy sales tax on a transaction which already attracts service tax. The decisions in BSNL, Imagic Creative, and Associated Lease Finance are exactly on this. Service Tax and Sales Tax are mutually exclusive of each other. The agreement between Subway and its franchisees is not a sale, but it is in fact a bare permission to use. It is, therefore, subject only to service tax. The fact that the agreement between Subway and its franchisee is limited to the precise period of time stipulated in the agreement is vital to Subway’s case. At the end of the period of the agreement, or before in case there was any breach of its terms, the right of the franchisee to display the mark ‘Subway’ and its trade dress, and all other permissions would also end. This is what sets this agreement apart from the case of Monsanto and its sub licensee. There, the seed companies could do as they pleased with the seeds; they could alienate or even destroy them. In Subway’s case, there are set terms provided by the agreement which have to be followed. A breach of these would result in termination of the agreement. There is no passage of any kind of control or exclusivity to the franchisees. In fact, this agreement is a classic example of permissive use. It can be nothing else. For all the reasons in law and fact that the sub-licensing of technology in Monsanto is held to be a transfer of right to use, this franchising agreement must be held to be permissive use. It does not mean every franchise agreement will necessarily fall outside the purview of the amended MVAT Act. There is conceivably a class of franchise agreements that would have all the incidents of a ‘sale’ or a ‘deemed sale’ (i.e., a transfer of the right to use). Black’s Law Dictionary defines a franchise, in the context of a commercial transaction as: “The sole right granted by the owner of a trade mark or a trade name to engage in business or to sell a good or service e in a certain area”.

On facts, the High Court found that the Subway franchise does not meet these tests. There is no such exclusivity. The agreement itself says that Subway may itself open and operate its own outlets in direct competition with the franchisee. The agreements themselves expressly contemplate that Subway may create further franchisees in the very area in which these franchisees operate. The franchisee cannot unilaterally sub-franchise. The right of transferability is extremely restricted and it is impossible without Subway’s control throughout. Similarly, if there is no requirement of having to cease display and use or return the intangible property at the end of the franchise agreement’s term, then the transaction might arguably be a sale. Exercises in co-branding or sub-branding, where one party franchises its mark on a territorially-restricted basis and allows the franchisee to combine it with its own or other marks may also well have an element of sale. Similarly, where a dealership for, say, automobiles, has a territorial exclusivity, then it may amount to a franchise. The Subway franchise model has none of these elements. The so-called ‘system’ is controlled by Subway and it is exclusive to Subway. At the end of the franchise term, it cannot be used. The agreement gives Subway deep and pervasive control and dominion over the franchisee’s daily operations, without, at the same time, ceding to the franchisee the slightest hint or latitude in what it may do with the permitted marks and technology. This is, therefore, diametrically opposed to the Monsanto model, for Monsanto India has no control whatever in what its licensee does with the BT-infused donor seeds; that licensee may choose not to use them at all. There is also no question of any ‘return’ or ‘cessation’ to Monsanto India. Thus, viewed from any perspective, and on the facts of the case, the Subway franchise agreements does not have any of the necessary elements of a sale or a deemed sale.

Equally, the High Court rejected any general proposition to the effect that anything that is nothing but a service can be artificially converted into or treated as a sale merely by the insertion of an omnibus clause in a state-level taxing statute. To accept this argument, one would have to accept that the State Legislature can encroach upon the legislative powers of the Union in respect of items in the Union List simply by inserting such amendments that would by some process of fiscal and legal alchemy convert a pure service into a sale. The introduction of the word ‘franchise’ in the amended MVAT Act by way of a notification will have to be read to mean those franchises that can reasonably and plausibly be construed to have the effect of a sale; it cannot be widened to include agreements styled as ‘franchise’ agreements simply because of the nomenclature. Presumably, what the Legislature intended was to include only those franchise agreements that involved a transfer of the right to use or some other aspect of a deemed sale as defined under Article 366(29A) of the Constitution. The Subway’s franchise agreement grants to the franchisee nothing more than mere permissive use of defined intangible rights. It is therefore a service, and is not amenable to VAT .

Accordingly, the High Court disposed both writ petitions.

Smt. B. Narsamma vs. The Deputy Commissioner Commercial Taxes, Karnataka & Anor., Civil Appeal Nos. 4149 of 2007,4318 of 2007,.4319 OF 2007, 7400 of 2016 , 7401-7872 of 2016 and 7873- 7916 of 2016, dated 11th August, 2016, (SC).

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a) Value Added Tax – Works Contract – Use of Reinforced Iron and Steel used in Construction –Remains Declared Goods – Liable to tax @ 4%.
b) Value Added Tax- Works Contract – Use of Iron and Steel for Fabrication of Doors and Windows – Which are Used in Construction- Does not Remain Iron and Steel – Not Exempt From Payment of Tax, section 5B of The Karnataka Sales Tax Act, 1957 and section 4 of The Karnataka Value Added Tax Act, 2003.

FACTS
The group of appeals, concerning the rate of taxability o f declared goods i.e. goods declared to be of special importance u/s. 14 of the Central Sales Tax Act, 1956 were filed before the SC. The common issue involved in all these appeals was whether iron and steel reinforcements of cement concrete that are used in buildings looses their character as iron and steel at the point of taxability, that is, at the point of accretion in a works contract. All these appeals came from the State of Karnataka relatable to the provisions of the Karnataka Sales Tax Act, 1957, post 01.04.2005, and relatable to the Karnataka Value Added Tax Act, 2003. The facts in these appeals were more or less similar. Iron and Steel products were used in the execution of works contracts for reinforcement of cement, the iron and steel products becoming part of pillars, beams, roofs, etc. which were all parts of the ultimate immovable structure that is the building or other structure to be constructed.

In the other case appellant engaged in works contracts of fabrication and creation of doors, window frames, grills, etc. in which they claimed exemption under rule 6(4) of The Karnataka Sales Tax Rules, 1957, for iron and steel goods that went into the creation of these items, after which they said doors, window frames, grills, etc. were fitted into buildings and other structures. The High Court denied the exemption as the iron and steel is not used in the same form in which it was purchased against which appeal was filed by the appellant.

The SC heard all those appeals and delivered a common judgment.

HELD
Given the fact, situation in those appeals relating to use of iron and steel for reinforcement of cement for construction of building, the SC held that where, commercial goods without change of their identity as such, are merely subject to some processing or finishing, or are merely joined together, and therefore remain commercially the same goods which cannot be taxed again, given the rigor of section 15 of the Central Sales Tax Act. Accordingly it is taxable as declared goods attracting rate of 4% under both acts.

In case of use of iron and steel for fabrication and creation of doors, window frames, grills, etc. which were fitted into buildings and other structures the SC held that the iron and steel goods, after being purchased, are used in the manufacture of other goods, namely, doors, window frames, grills, etc. which in turn are used in the execution of works contracts and are therefore not exempt from payment of tax.

Accordingly, the SC disposed all these appeals.

SREI Equipment Finance Pvt. Ltd. vs. Assistant Commissioner, Hyderabad, [2013] 66 VST 68 (AP).

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Entry Tax –Person Liable- Who Caused entry of Goods In to The State- Need Not Be Owner- Dispatch Of Motor Vehicles – By Lessor to Lessee- Entry Tax Payable By Lessee- And Not By Owner (Lessor), s/s. 2(1)(g) and 3(4) of The Andhra Pradesh Tax on Entry of Motor Vehicles Into Local Areas Act, 1996.

Facts
The petitioner a company registered under the Companies Act incorporated in to carry on the business of financing and leasing for purchase of equipment and other infrastructure, machinery tohis customers. In the regular course of its business it had entered into an agreement dated May 8, 2008 with one M/s. V.P.R. Mining Infrastructure Private Limited for giving equipment and operating on lease to the said mining industries private limited whose registered office is based at Calcutta. Under the agreement, the petitioner provided the dumper trucks on lease, from its registered office at Calcutta to Andhra Pradesh. The department passed assessment order under the Andhra Pradesh Tax on Entry of Motor Vehicles into Local Areas Act, 1996 (for short, “the Act”) and demanded entry tax on entry of dumpers inside the State.The contention of the petitioner was that though they were the owners of the three dumpers they are not exigible to tax under the Act. Inasmuch as it was their customer who had brought the said dumpers into the State ofAndhra Pradesh and merely because they continued to be the owners on account of the financial arrangement and contract entered into between their company and the customer they cannot be visited with the liability under the Act. The department did not accept the contentions of the Company and levied tax. The company filed writ petition before the Andhra Pradesh High Court against the said assessment order levying entry tax.

Held
Under section 3(2) of the Act, the tax is payable by the importer and it is the duty of the court to discover who is the importer for the purpose of section 3 of the Act. Section 3(3) of the Act elucidates that aperson who causes the entry of the vehicle into the local area for use or sale specially deemed to be the importer who is liable to pay the tax. In other words merely because an owner of the vehicle satisfied the definition as importer in the context of section 3 of the Act the word “importer” need not necessarily be the owner and in the context the importer has to be considered to be the person who is responsible or who causes the entry of the motor vehicle into any local area for useor sale.

The argument of the learned counsel for the respondent supporting the assessment to the effect that the petitioner being the owner and satisfying the definition of “importer” is the one who is liable to pay the tax was not accepted by the Court in view of the interpretation placed on section 3 of the Act which is the charging section.

The Court further held that the purpose of definition is limited and only to illustrate what is being defined. The definition by itself does not fasten the liability especially in the taxing statute. The expression which is used occurring in the main text of the statute in the context of the section has to be interpreted to find the true meaning. it was the lessee of the petitioner, viz., M/s. VPR Mining Infrastructure Private Limited who had brought the dumpers in question into the local area situated within the State for use and utilization. Applying section 3(3) of the Act to the facts of the case though the petitioner being the owner of the dumpers may satisfy the definition of “importer” yet for the purpose ofsection 3(3) of the Act, the liability to pay tax arises on the entry of the dumpers into the State and the liability gets fastened on the person who brings the same for use or sale into the State. In this case, the customer of the petitioner, M/s. VPR Mining Infrastructure Private Limited, has satisfied the definition of “importer” inasmuch as the customer is the one who cause the entry of goods inside the State and liable to tax. The High Court accordingly allowed the writ petition filed by the Company and set aside the impugned assessment order.

Assistant Commissioner (CT), T. Nagar (South) and Joint Commissioner (CT), Chennai V. M/s. Pamban Oil Mills (P) Ltd. 2013 66 VST (Madras) [W.A. NO.2044 OF 2013 & M.P.NO.1 of 2013]

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Sales Tax – Settlement of Arrears- Order Passed for Refund Prior to Act- Refund Can Not Be Denied, s/s. 8, 9 and 10 of The Tamil Nadu Sales Tax (Settlement of Arrears) Act, 2008.

Facts
The best judgment assessment order was passed on November 30, 1998, which was subsequently revised on March 28, 2002. The respondent filed an appeal in A.P. No. 207/07, and with the sole objective of giving an opportunity to the respondent. The Appellate Assistant Commissioner set aside the assessment order and remanded back the matter to the assessing authority. As directed, after verification of the accounts, the first appellant passed orders of assessment on October 3, 2008 whereby the turnover was revised and it was declared that the respondent had in fact made excess payment of tax of Rs. 9,75,447 and found eligible for refund. Form C confirming the entitlement to refund was also issued on October 3, 2008 itself. The only formality that remained was the issuance of refund voucher and the respondent sent representations for the same. Earlier a notice dated June 27, 2007 was issued by the first appellant to the respondent demanding penal interest u/s. 24(3) of the Act for delayed payment of amount due under the deferral scheme and the same was still pending. Before further action could be taken, the Tamil Nadu Government had promulgated Tamil Nadu Ordinance No. 7 of 2008 and floated the Samadhan Scheme. The Rules commemorating the Ordinance was published in the gazette on October 31, 2008. The respondent approached the second appellant under section 5 of the Scheme for settlement of interest for the assessment year 1996-97 on October 30, 2009. Parallely, since the representations seeking refund did not yield any results, the respondent approached the Madras High Court in W.P. No. 18508 of 2010 and the same was disposed of with a direction to consider the representation dated December 21, 2009 and pass orders, within four weeks from the date ofreceipt of copy of the order. By an order dated September 23, 2010, the claim of refund was rejected on the grounds that any order passed by the assessing authority subsequent to the application for settlement under Samadhan Scheme could not be reopened and the claim was not admissible under sections 9 and 10 of the Tamil Nadu Sales Tax (Settlement of Arrears) Act, 2008. Aggrieved by the same, once again, the writ petition was filed by the respondent alleging, inter alia, that the payment of interest under the Samadhan Scheme will not affect the refund claim, which was alreadydecided by the department and therefore the same will not come within the purview of Samadhan Scheme. Even though, no claim of interest for belated refund was made earlier, the respondent company also claimed interest. The writ petition was partly allowed by single judge with regard to refund. However, therespondent’s claim of interest was not allowed but liberty was given to work out his remedy. The respondent has not preferred any appeal against the portion of the order wherein his claim of interest was negated. The department filed writ before the Division Bench of Madras High Court against the judgment of single judge allowing refund to the respondent company. ‘

Held
Admittedly, the respondent was entitled for refund of Rs. 9,75,447 and the issue to be decided is whether after approaching the department under the Samadhan Scheme, without reference to the referred claim, the right of refund continues or not. Section 9 of the Ordinance or Tamil Nadu Act No. 60 of 2008 providing bar to reopen any proceedings is applicable only in respect of the certificate issued under section 8 of the said act. Section 10 providing for withdrawal of appeal or revision is applicable to the issue pending before the authority must be with the certificate issued u/s. 8 of the Act and that the order of refund must have been made after the application for settlement u/s. 5. In the case before High Court the certificate was issued only with respect to the application of settlement of interest. The bar emphasized under sections 9 and 10 of the Act applicable only if the dealer wants to claim refund of the amount paid under the Samadhan Scheme and not the refund which was ordered before floating of the scheme.

The refund order was passed on October 3, 2008 i.e. even before the date of publication of ordinance. Therefore, no reliance can be placed upon sections 9 and 10 of the Settlement of Arrears Act. Accordingly the High Court dismissed the petition filed by the department and confirmed the order of single Judge allowing refund to the company.

M/s. G. E. Capital Transportation Financial Services Ltd. V. State of Haryana and Another, [2013] 63 VST 329 (P&H)

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VAT – Turnover of Sales – Deemed Sale – Transfer of Right to Use Goods – Rentals Received or Receivable in Given Period Only Taxable, Section 2 (2C) (iv) of The Haryana Value Added Tax Act, 2003.

FACTS
The appellant entered into agreement for lease of vehicles. The assessment orders were finalized by taking aggregate amount of all installments payable for the entire term of the lease periodfor the month in which the vehicles were delivered to the lessee. The appellate authorities including the Tribunal dismissed the appeal. The appellant filed appeal before the P & H High Court against the said order of the Tribunal dismissing the appeal.

HELD
The definition of tax period in terms of rule 2 (2f) of the Rules means a period of time usually a month, quarter or a year for which tax payable by a dealer is quantified. The turnover is aggregate of the goods sold or purchased by a dealer during a tax period in terms of rule (2g) of the Rules. Since the transfer of right to use in the vehicles is the sale falling within the definition of section 2(f), therefore, rentals received or receivables during the tax period is the sale price received by the dealer, exigible to tax in a financial year. The right to use vehicles is dependent upon monthly payment of rentals and therefore, the monthly rentals received or receivable by the dealer is a turnover and consequently the sale price. The lease rentals received or receivable during the tax period only, as a right to use goods, is the turnover forming part of sale price. Accordingly, the High Court allowed appeal filed by the appellant company and set aside the order passed by the Tribunal.

M/S.Vikas Poha Mill vs. Divisional Dy. CCT, [2013] 63 VST 132 (Chhatisgarh)

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Sales Tax – Sale of Poha and Murmura – Are Forms of Rice – Are “Cereals” – Exempt from Payment of Tax, Entry 23 of Part II of Schedule II of The Madhya Pradesh General Sales Tax Act, 1956.

FACTS
The Petitioner manufacturer of Poha and Murmura claimed exemption from payment of tax on sale of it being covered by the term “Cereals” under Notification dated March 30, 1994 read with section 14 of the CST Act, 1956. The department rejected the claimas the sale of Poha and Murmura is covered by specific entry 23, Part IV of Schedule II of the Act and also held that it is not covered by the term cereals, as there is a separate schedule entry. The petitioner filed writ petition before the Chhattisgarh High Court against the aforesaid assessment order.

HELD
The State has placed Poha and Murmura in the separate entry for the purpose of exigibility to taxation. However, in the exemption notification the word cereals includes, inter alia “rice” as enumerated in (i) to (x) in section 14 of the CST Act. All the terms used are the basic products, not other forms of the product. The term rice includes beaten and puffed rice both. Thus, the exemption is granted to all the goods, as specified in the State Act, the State can not get any advantage from the fact that there has been a separate entry for exigibility to tax in respect of Poha and Murmura. Accordingly, Poha and Murmura are one form of rice and entitled to exemption under the above stated notification. The exemption has been granted to Cereals which are enumerated after “that is to Say”. The term “Cereals” used in section 14( i) of the CST Act clearly means “rice “ and other like products of rice like Poha and Murmura. Thus, rice including Poha and Murmura are included within the definition of Cereals and as such covered by the notification dated March 30, 1994 for the purpose of exemption. Accordingly, the High Court allowed the writ petition and the matter was referred back to the assessing officer to make assessment a fresh in the light of law decided by the High Court.

M/s. G. K. Micro Metal Pvt. Ltd. vs. State of M. P. Ltd Others, [2013] 64 VST 147 (MP)

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VAT – Entries in Schedule – Aluminium Granules (Powder) – Are Same as Aluminium, Entry 36 of Part III of Schedule II of The Madhya Pradesh Value Added Tax Act, 2002.

FACTS
The assessee dealer, a company, sold aluminium powder and had paid sales tax @ 4% treating it aluminium covered by Entry 36 of Part II of the Schedule II of the Act. The department levied tax @12.5% under residual entry. The company filed writ petition before the Madhya Pradesh High Court (Gwalior Bench) against aforesaid assessment order.

HELD
Under Entry 36 of Part II of Schedule II of the Act, rate of tax on sale of aluminium is 4%. The company is selling aluminium granules (Powder). It is used as aluminium. There is no different use. Since the nature of the product is the same and use is the same, the petitioner company is not liable to pay tax 12.5% under residual entry. The residual entry would not be applicable when a specific rate of tax entry has been prescribed on a particular commodity. Accordingly, the High Court allowed the writ Petition filed by the company and directed the assessing authority to reassess the tax liability of the company after calculating payment of rate of tax payable by the company at four per cent on sale of aluminium granules (powder).

M/s. MRF Ltd. vs. State of Tamil Nadu, [2013] 64 VST 103 (Mad)

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Inter-State Sales – Delivery of Goods – Against Allotment Letter – Subsequent Dispatch of Goods Outside the State – Local Sale – Purchase Tax Payable – At Last Point, Section 3(a) of The Central Sales Tax Act, 1956 and Item 74 of Schedule I of The Tamil Nadu General Sales Tax Act 1959.

FACTS
The appellant company purchased rubber from State Trading Corporation against allotment letter. Delivery thereof was given within the State of Tamil Nadu by STC and the appellant dealer subsequently dispatched it to its branches outside the State of Tamil Nadu. Since goods were sent by the appellant dealer outside the State, the STC charged CST on such sales to applicant. The enforcement department visited place of business of the appellant dealer and found that delivery is given within the State as such did not accepted claim of inter-State purchase of appellant dealer and levied purchase tax at last point, despite tax paid by selling dealer under the CST Act treating it as inter-State sale. The Tribunal confirmed the order of lower authorities. The appellant filed revision petition before the Madras High Court against the order of Tribunal.

HELD
The terms and conditions of allocation of natural rubber shows that they are general in character, that whenever there is a movement of rubber in the course of inter-State trade, as an incidence of sale, certainly, as per the clause, central sales tax provisions would stand attracted. Therefore, the inclusion of a clause referring the to furnishing of C forms as regards inter-State sale in the general conditions, per se, would not in any manner, speak on the character of the transaction. There is nothing on the record to show that the parties intended on the facts of the case that allotment was intended to result in the movement of goods to various branches of the assessee. The application of the delivered rubber to any particular unit outside the State is a matter of choice and the discretion of the assessee and the seller, at no point of time, was involved in this. On a reading of facts of the case, the High Court held that the assessee after having purchased the goods had issued dispatch instruction for movement of goods to other State. Thus there was no link between the purchase and dispatch. It is difficult to say that the movement is nothing but an inter- State sale. Accordingly, the claim of applicant for inter-State purchase was rejected by the High Court and confirmed the levy of purchase tax as last point purchase. However, since selling dealer had charged CST @4% and remitted to the Government and rate of purchase tax is 5%, the State was directed to give necessary adjustment in respect of four per cent tax paid by selling dealer STC as the payment made in respect of the assessment made on the assessee as last purchaser and that the balance tax payable by the assessee would be only to the extent at one percent. Accordingly, the High Court dismissed the applications with above direction for adjustment of CST paid by selling dealer towards payment of purchase tax by the appellant.

M/s. Paul Varghese vs. CCT, [2013] 64 VST 6 (Ker)

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Sales Tax – Penalty – Levied Under Special Provision – Then Penalty Under General Provision Cannot be Levied for Same Offence, sections 17(4), (5A) and 45A of the Kerala General Sales Tax Act, 1963.

FACTS
The Petitioner had opted for simplified procedure of assessment u/s. 17 (4) of the Act and the assessment was completed accordingly, subsequently, upon investigation, the dealer was reassessed and subjected to penalty u/s. 17(5A) of the Act. Further, the dealer was also subjected to penalty u/s. 45A of the Act.

The dealer filed a writ petition before the Kerala High Court against the levy of penalty under the general provision of the act contained in section 45A of the Act particularly when penalty order for same offence u/s. 15(5A) was levied and accepted.

HELD
Admittedly, the liability u/s. 17(5A) of the act for levy of penalty upon reassessment of an order of simplified assessment passed u/s. 17(4) of the Act had become final. The dealer is not liable to be punished for the same offence by referring to the general provision of section 45A as to the failure to maintain proper accountants and non response to the notice, which stands on a much lower pedestal. Even though sections 17(5A) and 45A are distinct and different, governing separate situations, the offence involved is measured in greater scales, imposing punishment in a mandatory manner, that too by “three times” of the tax effect in respect of the years 1998- 1999 and 1991-2000, while leaving the rest in respect of 2000-2001 as the turnover did not touch the limit to suffer any tax liability in respect of 2000-2001 for imposing the “mandatory penalty” u/s. 17(5A), there is no question of considering the same for imposing the “discretionary penalty” u/s. 45A as well. When a “special provision’ is there the “general provision” has to be excluded, so as to give way to the former. In the instant case, section 17(5A) is the special provision and section 45A is the general provision, which in term has to yield to the former. Accordingly, the High Court allowed writ petition filed by the dealer and levy of penalty u/s. 45A of the Act was set aside.

M/s. Sakthi Masala (P) Ltd. vs. Assistant Commissioner (CT), [2013] 64 VST 385 (Mad)

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Value Added Tax – Change in Law – By Substitution to Earlier Entry – Takes Effect From the Date of Earlier Entry, section 3 of The Tamil Nadu Value Added Tax ( Amendment) Act 2008.

FACTS
Under the provisions of the Tamil Nadu General Sales Tax Act, 1959 chilly, coriander and turmeric were exempted goods, falling under serial No. 16 of Part B of the Third Schedule to the Tamil Nadu General Sales Tax Act with effect from July 17, 1996. By G. O. (D) No. 383, dated October 22, 1998, the Government granted exemption to chilly powder, pepper powder and coriander powder. And the matter was further clarified by the Department by way of a clarification issued on December 9, 2002 in exercise of power u/s. 28A of the Tamil Nadu General Sales Tax Act. The Tamil Nadu Value Added Tax Act, 2006 was brought in by the Government with effect from January 1, 2007 under which what was serial No. 16 of Part B of the Third Schedule to the Tamil Nadu General Sales Tax Act was incorporated as serial No. 18 of Part B of the Fourth Schedule to the 2006 Act and the word “powder” in relation to the goods in question was not specifically mentioned therein. In the year 2008, Fourth Schedule to the 2006 Act was amended by section 3 of the 2008 Act which came into force on April 1, 2008 by substituting serial No. 18 of Part B of the Fourth Schedule to the 2006 Act to restore the position as it was prior to January 1, 2007. The petitioners engaged in the business of manufacture and sale of masala powder, turmeric powder, chilli powder and coriander powder and of buying and selling thereof from the manufacturers, sold chilly powder, coriander powder and turmeric powder as exempted goods and filed returns claiming exemption from payment of tax for the turnover of sale of such goods before the assessing officer and the returns so filed were accepted u/s. 22(2) of the VAT Act. The department issued notice for reassessment and levied tax on sale of chilli powder disallowing the claim of exemption from payment of tax for the period prior to the date of substitution of the said entry from April 1, 2008. The dealer filed Writ petition before the Madras High Court against the said re assessment orders.

HELD
The plea arising for consideration is, whether the substitution in serial No. 18 of Part B of the Fourth Schedule by Act 32/2008 will be with effect from April 1, 2008 as pleaded by the respondent/Department or it will have effect from January 1, 2007 as pleaded by the petitioners. In Government of India vs. Indian Tobacco Association [2005] 5 RC 379; [2005] 7 SCC 396, by referring to the decision in Zile Singh vs. State of Haryana [2004] 8 SCC 1, it has been clearly held that substitution would have the effect of amending the operation of law during the period in which it was in force. In this case, substitution in serial No. 18 of Part B of the Fourth Schedule has been made by the Government apparently to bring into force amended serial No. 18 of Part B of the Fourth Schedule by Act 32/2008 from the time of operation of the law, namely, serial No. 18 of Part B of the Fourth Schedule to the Act 32/2006. If the intention of the State prior to coming into force of Act 32/2006 is to grant exemption to powder form of chilly, turmeric and coriander and that is confirmed by the substitution made in serial No. 18 of Part B of the Fourth Schedule to the Act 32/2008, it is evident that the substitution made is only to state the obvious, namely, to fill up the lacunae for the period from January 1, 2007 to March 31, 2008. The old entry has been substituted by the new entry into Act 32/2006. It is not a case of insertion or addition of a new entry. What is substituted would stand substituted from inception, (i.e.), with effect from January 1, 2007 whereas insertion or addition will be relevant to the date of amendment, (i.e.), April 1, 2008. By substitution, the amended serial No. 18 of Part B of the Fourth Schedule replaces old serial No. 18 of Part B of the Fourth Schedule to the Act 32/2006. The old serial No. 18 of Part B of the Fourth Schedule becomes dead letter for all purposes. “Substitution” means put one in the place of another. This is exactly what has been done in the present case. The amendment serves the cause of exemption granted under Act 32/2006. The contention of the learned Additional Advocate-General that substitution effected will be operative from April 1, 2008 and not with effect from January 1, 2007 cannot be the intention of the Legislature and in any event, if there was an omission or a specific statement to that effect, the court, is empowered to give a constructive meaning to the intention of the Legislature and give it the force of life. The Court, from the facts of the present case, held that there is justification for this court to iron out the creases by interpreting the word “substitution” to mean that the intention of the Legislature was to replace the old serial No. 18 of Part B of the Fourth Schedule with new serial No. 18 to have effect for the period from January 1, 2007 and March 31, 2008. The understanding of the Department prior to coming into force of Act 32/2006 and from April 1, 2008, the date of coming into force of Act 32/2008, to state the obvious, is that the powder form of chilly, turmeric and coriander continues to be exempted goods for all purposes. If during the interregnum period, namely from January 1, 2007 to March 31, 2008, there appears to be an omission, that omission is sought to be corrected by way of substitution. The court clearly held that substitution has the effect of replacing the old serial No. 18 of Part B of the Fourth Schedule to the Act 32/2006 and the substitution will therefore entail goods described in serial No. 18 of Part B of the Fourth Schedule of Amending Act 32/2008 the benefit of exemption as is applicable from the inception of Act 32/2006. The new replaces the old and that is substitution and as a consequence, exemption becomes inevitable. The Department’s plea that the exemption will not apply to the period from January 1, 2007 to March 31, 2008 cannot be accepted, as substitution in this case will have to relate back to January 1, 2007 itself when Act 32/2006 came into force.

Further, the court held that that the goods, namely, powder form of chilly, turmeric and coriander, continue to enjoy the benefit of exemption despite their being a specific omission of the powder form from January 1, 2007 to March 31, 2008. The benefit of exemption granted based on returns filed is in order. Accordingly, the High Court allowed writ petition filed by the dealer and the reassessment orders passed by the authority were set aside.

M/s. Mahatma Gandhi Kashi Vidyapeeth vs. State of U.P. [2013] 64 VST 271 (All)

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Value Added Tax – Dealer – Business – Activity of Publishing
Brochures/Admission Forms etc. – By University – Not a Dealer- Not
Carrying any Business – Not Liable for Registration and Pay Tax, section
2(e) and (h) of The U.P. Value Added Tax Act, 2008.

FACTS
The
petitioner, a university, established under the provisions of the U.P.
State Universities Act, 1973 with aim and object to impart education in
various disciplines of higher education and research and also, what its
name suggests, imparting education from its campus at Varanasi and
affiliated colleges, had filed writ petition before the Allahabad High
Court to challenge the notice issued by the Deputy Commissioner of
Commercial Tax, Sector 11, Varanasi, asking it to produce the account
books as information available with him was that the petitioner had sold
forms worth Rs. 8,05,400, but has not paid VAT under the provisions of
the U.P. Value Added Tax Act, 2008, as the action of the respondents
calling upon the petitioner to produce account books with regard to the
printing and sale of test forms or initiation of proceedings under the
said Act, is wholly without jurisdiction and uncalled for.

HELD
Whether
the main activity of the petitioner was business or not, was the
decisive factor to answer the questionwhether the person was dealer for
incidental or ancillary activity. If the main activity of a person is
not business activity, then, such person would not be a dealer for
incidental or ancillary transaction/s. Imparting of education was a
mission. Right to education, in the context of article 45, 41 meant (a)
every child/citizen of this country had a right to free education, until
he completes the age of fourteen years; and (b) if a child or citizen
completes the age of 14 years, the State shall make effective provision
for securing the right to work and education within the limits of its
economic capacity and development. In ancient time, there were Gurukul
Ashrams to impart education. The importance of education has been
recognised by the Indian Courts from time to time. Education is perhaps
most important function of State and Local Self Governments. It is
unthinkable and beyond imagination to treat the imparting of education
as business. The relationship in between teacher and one taught is not a
business relation. The idea and purpose of imparting education is to
develop personality of the students to carry the nation forward and in
right direction. Accordingly, the High Court held that the petitioner is
not a dealer within the meaning of section 2(h) of the Act, therefore,
its activity of printing and selling of admission forms to the students
does not amount to business within the meaning of section 2(e) of the
Act. The petitioner, being beyond the purview of the U.P. VAT Act, could
not be compelled to obtain registration under the said Act or to
produce its account books before the respondents. The impugned notice
and orders passed by the authorities under the U.P. VAT Act are palpably
illegal and without jurisdiction and cannot be allowed to stand. In the
result, the writ petition filed by the petitioner was allowed.

M/s. Naulakha Theatre vs. State of , [2013] 64 VST 481 (P & H)

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Entertainment Tax – Promissory Estoppel – Concessions Announced in Annual Budget Based On Decision Taken In Cabinet – Subsequently Not Implemented – State Not Bound To Grant Concession, Punjab Cinemas (Regulation) Act, 1952.

Facts
The petitioners, owners of cinema theatre, made various representations to the Government for concession in payment of entertainment tax. In response, the Government took a decision to give 33% concession in the entertainment tax, if the tax is deposited in lump sum. Such decision was taken by the cabinet and was incorporated in the annual budget for the year 2003-04 presented before the Legislative Assembly on March 24, 2003. The petitioners have allegedly deposited the lump sum entertainment tax in pursuance of such budget proposal. It was later somewhere in September, 2004, the demand was raised against the petitioners on the ground that the petitioners have deposited entertainment tax availing of rebate of 33%, whereas no notification has been issued by the Punjab Government. The Petitioners filed writ petition, before the Punjab High court against such demand.

Held
The issue, whether entertainment tax can be permitted to be paid in lump sum or not, is a matter of policy. Such policy could be given effect to only by amending the Punjab Entertainment Tax (Cinematograph Shows) Rules, 1954. Neither the budget proposal nor the earlier statement of Chief Minister is to the effect that it has been decided to permit the payment of entertainment tax in lump sum. The representation is only that the State Government has proposed the payment of entertainment tax in lump sum so as to grant concession up to 33%. No promissory estoppel can be raised against the State on the basis of such promise, when the levy of entertainment tax is statutory.

One of the essential ingredients so as to invoke the doctrine of promissory estoppel is altering of position by a person. However, the averments do not show that the petitioners have altered their position on the basis of representation of the functionaries of the State. The petitioners were running cinemas and continued to run cinema even after the speech of the Chief Minister/ Finance Minister. If the petitioners have provided better facilities and infrastructure though in the absence of any material, such fact cannot be taken into consideration; still such better facilities do not lead to alteration of positions by the petitioners on the strength of promise made. It is the convenience of the visitors, which was taken care of by the cinema owners, when they provided better facilities and infrastructures or when they screen big budget films, which will obviously gave better revenue to the petitioners as well. Therefore, it cannot be said that the petitioners have altered their position to their detriment on the basis of speech of the Finance Minister proposing the reduction of the entertainment tax. Accordingly, the High Court dismissed the writ petition filed by the petitioners.

M/s. D. A. Sons v. Addl. CCT [2013] 63 VST 111(Karn)

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VAT – Classification of Goods – Sale of Mango Chutney, Mango Garlic Chutney, Mango and Saffron, etc.- Are Processed Fruit and Vegetables.

VAT – Classification of Goods – Exercise Books with Cartoons to be Painted by Children – With Appropriate Colours – Are Printed Books – Exempt from Payment of Tax, Entry 3 of Schedule III and section 4 (1)(b) of The Karnataka Value Added Tax Act, 2003.

FACTS
The appellant trading in edible products and other stationery products, sold Mango Chutney Mango Garlic chutney, Mango and saffron and other processed fruit and vegetables as well as exercise books meant for young children which contain cartoons and the children have to paint it with appropriate colours. The assessing authority held that above paste items sold by the appellant are not processed fruit and vegetables and levied tax under residential entry. As regards sale of exercise books it was not considered as exempt and taxed under entry II of the First Schedule to the Act. The appellate authority allowed the appeal. The Addl. Commissioner of Sales Tax revised the appeal order and restored the assessment order. The appellant filed appeal against revision order passed by the Addl. Commissioner before the Karnataka High Court.

HELD
Entry 3 of the Third Schedule to the Act covers all processed fruit and vegetable including Fruit Jams, Pickle, Fruit Squash, Paste, Fruit Drink and Fruit Juice (whether in sealed container or otherwise). The paste items used in preparation of vegetable items are basically made out of fruit and vegetables and the said paste is processed products.

The view of revisional authority that the above paste items contain other spicy ingredients, which do not constitute fruit or vegetable and therefore, they have to be excluded from the meaning of Processed fruit and vegetables as per entry 3 is an untenable argument. What is required to be seen in a matter like this would be that, in the given items of paste in question, what is the dominant ingredient, and it may be that there would be composition of other ingredients that would be the decisive criteria. In that view, the paste in question would come within the purview of entry 3 of the Third Schedule to the Act.

With regards to exercise books, the High Court held that they are in the nature of exercise books containing cartoons. The young children are expected to colour it with appropriate colour crayons. The purpose of the said exercise books is to inculcate the basic art of painting. Therefore, the said exercise books do constitute printed books to be exempted from the tax.

Accordingly, the High court allowed the appeal.

State of Haryana vs. Glaxo India Ltd. And Another [2013] 63 VST [P&H]

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Sales Tax – Sale of “Feed Supplements” – Covered by the Term “Poultry Feed” – Exempt From Payment of Tax, Entry 53 of Schedule B to The Haryana General Sales Tax Act, 1973.

FACTS
The respondent Company was assessed for the year 1996-1997 treating sale of “Feed Supplements” tax free covered by the term“poultry feed” falling in entry 53 of Schedule B to the Haryana General Sales Act, 1973. Subsequently the assessment order was revised by holding that sale of one or other constituent of “Poultry Feed” could not be taken as poultry Feed and levied tax. The Tribunal allowed the appeal and restored the assessment order allowing claim of tax free sales. The State filed appeal against thejudgment of Tribunal before The Punjab and Haryana High Court.

HELD
The benefit of exemption is given on the ground that the sale of feed supplements such as protein, salts and minerals, vitamins, antibiotics, etc., would also constitute “Poultry Feed”. The very fact that each of the feed supplements can individually be given to the cattle, shall not exclude such feed from the exemption clause as object of giving exemption to the “poultry Feed” under the Act is to promote sale of “poultry feed/Supplements”. Consequently, the High Court found that no substantial question of law required for consideration by it. Accordingly, the appeals were dismissed by the High Court.

M/S.Christy Raj Hospital vs. State of Kerala [2014] 53MTJ284SC, Civil Appeal No 1119 of 2006, and 975 of 2014, dated 22nd January, 2014.

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Sales Tax – Dealer – Hospital – Activity of Buying and Selling Medicines Through its Pharmacy – May be Business – Direction by VAT Department for Registration Under Sales Tax Law – Writ Petition Dismissed by High Court- Affirmed by SC – With a Permission to Raise All Grounds At The Stage of Assessment, Sections 16 and 17 of The Kerala General Sales Tax Act, 1963.

FACTS
The Appellant, Trust running a Hospital, had filed Writ Petition before the Kerala High Court challenging the direction given by the Sales Tax Department to obtain registration as dealer under the Kerala General Sales Tax Act. The appellant contended before the High Court that hospitals are not liable to be registered under KGST Act as they werewnot doing any business. The High Court dismissed the writ Petition.

The High Court held that though it is true that doctors of various specialties doing service in hospital by their intellectual skill in the matter of treating the patients by itself may not be a business activity and that is only a profession but various other facilities provided in the hospital cannot be said to be non business activity for example, a clinical laboratory, can independently function outside a hospital and do business. The fact that it is housed in a hospital will not make the service rendered a non-business activity. The activity in the hospital may involve business activities and non- business activities as well.

The appellant filed appeal before the Supreme Court against the judgment of Kerala High Court dismissing Writ Petition.

HELD
The Supreme Court disposed the appeal and affirmed the judgment and order passed by the High Court and granted permission to the appellant to raise all such grounds which are available to it, including certain grounds raised in appeal before SC at the stage of assessment. The assessing authorities were directed to look into those grounds, advert to them and pass a reasoned and speaking order. It was also clarified by SC that it has not examined the constitutional validity or otherwise of ‘Dealer’ as well as ‘Business’.

State of Tamil Nadu vs. M/s. Plastic Craft Industries, [2013] 66 VST 62 (Mad).

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Central Sales Tax- Sales Price-Excise Duty Paid on Past Transaction – In absence of Evidence of Its Collection-Does Not Form Part of Sale Price- Section 2(h) of The Central Sales Tax Act, 1956.

Facts
The assesse manufacturer of plastic components did not charge excise duty on certain transaction of sales on a bonafide belief that it is not payable. However, later on paid excise duty after taking licence under Central Excise provisions but did not collected the same from the buyers. The department based on proceedings from the excise authority, levied tax on excise duty paid by the dealer for past transactions although not collected from buyers. On appeal tribunal allowed appeal against which the department filed revision petition before the Madras High Court.

Held
As per definition of sale price contained in section 2(h) of the CST Act, what is charged as consideration alone could be considered as turnover of sales. Admittedly, the fact is, on the date of sale, the petitioner had collected as sale consideration and did not collect excise duty paid by it from the buyers and no evidence was available subsequent to payment of excise duty whether the portion of such payment had been passed over to the customer as a part of consideration. Therefore, the excise duty paid by the dealer and not collected from the customer cannot form part of sales turnover for levy of tax. Accordingly, the High Court dismissed the revision petition filed by the department and confirmed the order of the Tribunal.

State of AP vs. M/s. Sree Akkamamba Textiles Ltd. [2013] 66 VST 37 (AP).

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Central Sales Tax – Inter-State Sale or Stock Transfer-Dispatch of Goods to Branch Outside the State to Agents/Branch- In Absence of Documentary Evidence of Prior Contract – Is Stock Transfer. Section 6A of The Central Sales Tax Act, 1956.

FACTS
M/s. Akkamamba Textiles Ltd., Tanuku was manufacturing, selling and transferring the cotton yarn and waste. It was finally assessed by the C.T.O., Tanuku-I circle, for assessment year 1993-94, under Central Sales Tax Act, 1956. The assessing authority had allowed exemption on inter-state stock transfer to its Maharashtra (Bombay and Ichalkaranji), West Bengal and Tamil Nadu based four selling depot-agents under section 6A of the CST Act upon production of requisite Forms. The Deputy Commissioner (CT), Eluru Division, took up suo moto revision of the CTO ‘s order, disallowing exemption as turnover, relating to the sales said to have been made through depots, branch in Maharashtra, West Bengal and Tamil Nadu on certain grounds. Aggrieved by the aforesaid revision orders of the Deputy Commissioner (CT), Eluru division, the dealer preferred appeal before the Tribunal. The Tribunal allowed the appeal and remanded the matter to the DC (CT), Eluru, to give fair and reasonable opportunity to the appellantsassessee. In pursuance of these remand orders, the revisional authority passed consequential orders levying tax once again on the disputed turnovers under section 3(a) of the CST Act. Aggrieved of these orders the dealer preferred another appeal before the STAT , A.P. This time the appeals were allowed in favour of the assesse holding that these disputed transactions are not inter-state sales but are mere stock transfers to the four non-resident selling depot agents. The department filed revision before the Andhra Pradesh High Court.

HELD

In the considered opinion of the high court, the questions of law said to have been arisen are not the questions of law in as much as all the questions relate to the finding of facts. The assessing authority, after examination of returns filed by the dealer and on scrutiny of the books of accounts, granted exemption relating to depot/branch transfer of cotton yarn made from Tanuku to Maharashtra (Bombay-Ichalkaranji), West Bengal and Tamil Nadu and allowed the exemption of the turnovers in exercise of the powers conferred u/s. 6A of the CST Act. The tribunal also recorded finding of facts and stated in its order that the revisional authority had reversed the order of the dealer merely on surmises and conjecture without citing specific instances and without any additional material. The finding of facts recorded by the tribunal is not challenged before the High Court. Accordingly, the High Court held that there is no question of law that is required to be answered, thus dismissed the revision petitions filed by the department and confirmed the order of tribunal allowing claim of stock transfer under section 6A of the CST Act.

M/s. Southern Refineries Ltd. vs. State of Kerala and others, [2013] 64 VST 25 (Ker)

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Sales Tax – Scheme of Rehabilitation – Directing State to Grant Exemption From Payment of Tax- State not Granting It – Dealer Relying on Scheme and Not Collecting Tax – State Directed to Consider the Matter for Exemption, The Sick Industrial Companies (Special Provisions) Act, 1985.

FACTS
The appellant company, a Medium Scale Industries fell sick due to initial problems, could not avail one third of the sales tax exemption limit. BIFR declared the company sick and approved the rehabilitation scheme which provided for specific relief to the company in the form of sales tax exemption and concessional rate of CST.

This was circulated to all concerned. Accordingly the company had claimed exemption from payment of tax and not collected any tax. At the same time, CST was paid at concessional rate of 2%. The company approached the Government to extend the exemption of KGST and concessional rate of CST till March, 31, 2005 as contemplated in the Sanctioned Scheme. However, the tax department issued pre-assessment notices and demanded tax without extending the benefits of exemption under SRO as also the concessional rate of CST at the rate of two per cent. The company filed writ petition before the Kerala High Court to quash the order passed by the Government, as well as, notices and also soughtfor the benefit of exemption and concessions as per sactioned scheme by the BIFR.

HELD
In the present case, the respondent State participated in the proceedings before the BIFR. Taking note of the reluctance by the sales tax authorities to extend the relief envisaged by the sanctioned scheme, BIFR, issued revised directions u/s. 22A of the Act. The State did not prefer any appeal u/s. 25 of the Act. If order and notices allowed to stand, the same would put things out of gear and the entire efforts taken so far by the BIFR for reviving the appellant company from sickness would terribly be watered down, The burden is heavily on the Government to establish that it would be inequitable to hold the Government bound by the promise on account of public interest. The State was unable to establish overriding public interest which made it inequitable to enforce the estopple against them.

The High Court upheld the plea of promissory estoppels raised by the appellant company. The High Court allowed the appeal and order as well as notices were quashed and directed the respondent State to reconsider the matter and guided by the directions in Sanctioned Scheme by BIFR.

State of Kerala vs. Balsara Hygiene Products [2013] 63 VST 535 (Ker) Sales Tax “Odonil” – Room /Cup Board Freshener Not Taxable As “Shampoo Talcum Powder, Perfumeries and Cosmetics” or As “Repellent”- Taxable Under Residuary Entry.

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Sales Tax – Second Sale by Holder of TradeMark – Not a Resale – Taxable as First Sale, Section 5(2) and Entry 85 and 127 of Schedule I of The Kerala General Sales Tax Act, 1963.

FACTS
The Company engaged in sale of consumer products like toothpaste, Moth repellants, etc. within the State and also holder/owner of trademark claimed second sale in respect of sale of its products like “Promise” “Meswak” “Odonil” etc. being purchased from registered dealer. The company paid tax @8% on sale of “Odonil” moth repellant under entry 85 of Schedule I the Act. The assessing authority disallowed the claim of resale u/s. 5(2) of The Act being sale of goods by trade mark Holder/Owner and levied tax thereon.

Further, the assessing authority levied tax @20% on sale of “Odonil” as the same is an “Air Freshener” would be classified as “perfumery” coming within entry 127 of the schedule I of the Act.

The Tribunal held in favour of the company for levy of tax @8% on sale of “Odonil”. The Tribunal also allowed the claim of resale of the assessee company. The State filed appeal before the Kerala High Court against the said decision of Tribunal.

HELD
The entry 127 of Schedule I covers goods like “shampoo”, “Talcum Powder” etc. The item so specifically mentioned are all relating to items which are used on the human body for beautification, grooming and having cosmetic qualities or properties. By including the specific items, the expansions to include other perfumeries and cosmetics would also be restricted to such items which would answer the description of the specific items mentioned in the entry. The principle of “ejusdemgeneris” would compel to understand the meaning of a word from the meaning of the works employed together with it. The product “Odonil” which is admittedly a room/ cup-board fresher cannot be brought under the description of perfumery in entry 127. As regards claim of the company for levy of tax at 8% under entry 85 of Schedule-I, as “Mosquito Repellents”, the court held that the predominant function is not descernible from the records. The wrapper of products indicates that it is an air freshener and also a moth repellant. The fragrance provided is projected as masking the bad odour of chemical and also avoiding bad odour in rooms /covered space. In such circumstances, it cannot be said that the dominant use of the product is that of a moth repellant and the same would fall under residuary entry of schedule I of The Act. Accordingly, the High Court held it covered by residuary entry of the Schedule I of the Act.

In respect of the second issue of claim of resale, the High Court held that u/s. 5(2) of the Act sale of goods under a trademark or name, by the brand name holder or trademark holder within the State shall be the first sale for the purpose of this Act. In this case, the company is a trademark/brand name holder of certain products more specifically tooth paste and toothbrush sold in the trade name “Promise” and “Meswak”. The company had purchased the said goods from M/s. Besta Cosmetics Limited who manufactured said goods under grant of license by the assessee company to manufacture under the said trade name. Section 5(2) of the act is an anti evasion measure and it contemplates the liability to be at that point of sale in case sale of manufactured goods other that tea, within the State:-

i) Made under a trademark or brand name,
ii) By a trademark / brand name holder

The sale hence would be not only by a trademark / brand name holder, but it should also be under trademark / brand name. The first sale by the manufacturer to the assessee company is of course sale by a trademark/brand name holder but, not a sale under trademark/brand name. Hence the second sale effected by the assessee company being again a sale by a trade mark / brand name holder and also a sale under trademark / brand name, is liable to tax u/s. 5(2) of the Act. Accordingly, the order of Tribunal allowing the claim of resale of the assessee company was set aside and the order of first appellate authority levying tax was confirmed.

Secretary of Tamil Nadu vs. M/S. Chitra Timber Traders, [2013] 62 VST 277

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Central Sales Tax – Inter-State Stock Transfer to Agent – Agent Supplying Goods Directly to His Customer for Sale in Other State – After Making Payment for Lorry Freight, Octroi, etc.- Is Consignment Sale and Not Inter-State Sale, section 3(a) of The Central Sales Tax Act, 1956.

FACTS
Respondent a dealer in Timber had supplied goods to his agent outside the State and claimed inter-state stock transfer against form F and was assessed accordingly under the CST Act. Thereafter, the Deputy Commissioner of sales tax, based on verification report received from the enforcement department, revised the assessment order under the CST Act and disallowed the claim of consignment sales on the ground that the goods were supplied directly to the buyer and goods were never reached to the agent. Therefore, the revising authority treated it as inter-state sales and levied tax under the CST Act. The Tribunal allowed the appeal filed by the respondent dealer against which State filed writ petition before the Madras High Court.

Held
It is very clear that the delivery note itself contains the name of the agent and it is also very clear that the payment made to the respondent by the agent was only a net amount after deducting commission amount from total sales. If it was not consignment where was the question of payment of commission? Further, the agent had paid lorry freight, octroi, unloading charges and measurement charges for the goods transported to another buyer. This fact was verified by the assessing authority while allowing exemption which was not considered by the first appellate authority. Hence, the Tribunal had rightly considered this matter and categorically came to the conclusion that it was a clear cut sale outside the State and rightly the exemption was granted. Accordingly, the High Court dismissed the writ petition filed by the Sate and confirmed the order of Tribunal allowing the appeal of the respondent dealer.

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M/S. Mahabaleswarappa & Sons vs. Assistant Commissioner, [2013] 62 VST 241 (AP)

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Central Sales Tax – Claim of Deemed Export – Form H – Need Not to be Submitted Quarterly, R.12(10)(a) of The Central Sales Tax (Turnover and Registration) Rules, 1957.

Facts
The petitioner filed Form H covering sales made to exporter for entire year of 2006-07 and claimed exemption from payment of tax as deemed export u/s. 5(3) of the act which was accepted in assessment. Later on, revising authority disallowed the claim of exemption from payment of tax against form H on the ground that H form for quarterly period was not submitted. The petitioner’s appeal was dismissed by appellate authority including tribunal. The dealer filed writ petition before the Andhra Pradesh High Court against the order of the Tribunal.

Held
The Rule 12(10(a) of The Central Sales Tax (Turnover and Registration) Rules, 1957 mandates dealer to file declaration in form H duly signed by the exporter. Plain and literal reading of this rule would not admit to any such interpretation that a dealer should submit declaration in H form quarterly. Accordingly, the High Court allowed writ petition filed by the dealer and directed the revisional authority to consider the revision taking in to consideration all the material filed by the petitioner including declarations in H form.

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M/S. Aspick Engineering (P) Ltd. vs. State of Tamilnadu, [2013] 62 VST 216 (Mad),

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Central Sales Tax Act – Local or Inter-State Sale – No written Agreement – Goods Delivered to Buyer Within State – That the Buyer Moved Goods At His Own Cost Not Decisive – Transaction is Inter-State Sale, section 3 of The Central Sales Tax Act, 1956.

FACTS
The petitioner company effected sale to the M/S. Vijayshree Colata Ltd., Warora, claimed it an inter-state sale. The assessing authority treated it as local sale as there was no written agreement, the goods were delivered locally, the price was ex-godown and the goods were moved out of the State by the buyer. The appellate authority including the Tribunal confirmed the assessment order. The appellant filed appeal before the Madras High Court against the order of the Tribunal upholding the assessment order treating it as local sale.

HELD
The terms of the agreement between parties are evidenced only by the dispatch details, indicative of the understanding between the parties. Given the fact that an agreement need not be in writing, the one and only ground on which the claim of inter-state sale could be considered is the factum of movement of goods pursuant to the contract of sale. If the sale effected by the assessee and the movement thereon are inextricably and intimately connected with each other, then the one and only interference that would flow from the same is that it is an inter-state sale. The fact that the purchaser has borne the insurance charges or the seller had born the insurance charges or that the purchaser had moved the goods at their own cost would not be a decisive factor for the purpose of determining the nature of sale as inter-State sale or not. The criteria for considering the transaction as an inter-state sale or not is the movement of goods intimately connected with the sale. The High Court further held that the Tribunal and the other authorities had misdirected themselves in placing emphasis on the transport and insurance made by the purchaser as indicators of the sale being local sale. With the movement and the sale inextricably connected, the High Court allowed the appeal and treated it as an interstate sale.

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M/S. Katuri Medical College and Hospital vs. CTO, [2013] 62 VST 185 (AP).

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Value Added Tax – Recovery Of Tax – Garnishee Proceedings – Issue of Notice Directing Bank to Remit the Tax – During the Pendency of Revision Petition – Against Order Rejecting Stay Application – Set Aside – Directed to Remit Back the Amount Recovered – Cost Awarded, section 29 of The Andhra Pradesh Value Added Tax Act, 2005.

FACTS
The Petitioner is a charitable trust and also registered under the AP VAT Act had filed appeal against the assessment order passed by the assessing authority and also file application for stay. The appellate authority rejected the application for stay by passing non speaking order. The Petitioner filed revision petition before the higher revisional authority. During the pendency of the revision petition, the assessing authority invoking power u/s. 29 of the Act issued notice directing the Bank, where the petitioner had account, to remit the disputed amount. The Bank remitted the amount to the assessing authority. The Petitioner filed writ petition before the AP High Court against the Garnishee order issued by the assessing authority directing the bank to remit the amount to the department.

HELD
If recoveries of disputed tax or penalty are made, where stay application is pending before the appellate authority, the appeal itself would be rendered infructous and that the assessee who is aggrieved by an order of assessment is given a statutory right of appeal which cannot be rendered infructous by being forced to pay the disputed amount pending the appeal. This will apply to a situation where the first appellate authority rejects the stay application and a revision is preferred by the assessee before the revisional authority seeking stay of the disputed amount. Therefore it would be just and proper for the assessing authority to await the disposal of the revision petition by the revisional authority. The High Court strongly deprecated the conduct of the assessing authority and held it to be arbitrary and high handed and awarded cost to the department of Rs. 10000/- payable to the petitioner. Accordingly, the High Court allowed the writ petition filed by the Trust and directed the department to remit back the amount recovered forcefully to the Bank account of the Petitioner and set aside the non speaking order passed for rejecting stay petition and remanded back for fresh hearing.

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Allentis Pharmaceuticals Pvt. Ltd. vs. State of M. P. and Others, [2013] 59 VST 241(MP)

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VAT- Agency – Supply of Goods to Agent – Thereafter by Agent to Buyer or Authorised Dealer of Principal For Commission – No Two Independent Sales-Supply of Goods to Agent – Not a Sale-Not Taxable, Section 2(4), Explanation (c ), of The Madhya Pradesh Value Added Tax Act, 2002.

FACTS
The Petitioner Company entered into an agreement with M/s. Rahul Pharma and appointed him as carry forward agent to supply the goods to the authorised distributors or dealers appointed by the Company. While assessing the petitioner company the assessing authority relying on Explanation (c ) to section 2(4) of the Act, treated supply of goods by the petitioner to its agent as first sale liable to VAT and thereafter when the selling agent further sold or transfers the goods to buyers, then also it was treated as sales taxable under the Act. The petitioner company objected to it as it amounted to double taxation. The petitioner company filed writ petition before the Madhya Pradesh High Court against the aforesaid action of the assessing officer.

HELD
Under clause ( c) of Explanation to section 2(4) of the MP VAT Act, for the purpose of Act, two independent sales or purchases are deemed to have taken place when the goods are transferred from principal to his selling agent and from the selling agent to the purchaser or when the goods are transferred from the seller to buying agent and from the buying agent to his principal. This, clause (c) applied only when there is transfer of property in goods. M/s. Rahul Pharma was an agent of the petitioner, company which was evident from the agreement. It only supplied the goods to the authorised dealer of the petitioner company for a commission not as his own property but as the property of the principal, who continued to be the owner of the goods. The supply of goods by the petitioner company to the agent was not a sale as per the interpretation of clause (c) of Explanation to section 2(4) of the Act therefore not liable to tax. When the agent supplied goods to the buyer of the petitioner company or to its authorised distributor on behalf of the petitioner, the petitioner company was liable to pay the tax. Consequently, the petition was disposed by the court with the direction that the delivery of goods to the agent of the petitioner for delivery of goods to the buyer or to the authorised distributer shall not be taxed under the provisions of VAT Act by treating it as an independent sale.

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M/S. Milk Food Ltd. vs. Commissioner, VAT and Others, [2003] 59 VST 1 (Delhi).

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Sales Tax – Deduction Claimed Based on Declaration Furnished By Purchasing Dealer – Whether Form Genuine or Conditions Complied With- Burden of Proof – Not on Selling Dealer. Sections 4(3)(a)(v), 50 (1)(a), 56(2) of The Delhi Sales Tax Act, 1975.

FACTS
The appellant engaged in business of manufacture of ghee and milk powder of different kinds in its factory at Patiala and having its offices all over India. The appellant had sold goods against form ST-1, in Delhi, and claimed deduction from payment of tax u/s. 4(2) (a)(v) of the Delhi Sales Tax Act. In assessment the claim of deduction was disallowed and confirmed by the Tribunal. The appellant filed appeal before The Delhi High Court against the impugned order of the Tribunal.

HELD
The Tribunal appeared to have placed the burden wrongly upon the appellant dealer. It is not the burden of the selling dealer to show that the declarations in form No ST-1 were not spurious or were genuine or that the conditions to which the forms were issued to the purchasing dealer by the department were complied with. The burden will shift to the selling dealer only if it is shown that the selling dealer and the purchasing dealer had acted in collusion and connived with each other to evade tax by obtaining spurious forms of deduction. The claim was disallowed in assessment due to certain discrepancies between form ST-1 and the accounts given by the purchasing dealers in form ST-2 or colour of form was different. This was not for the selling dealer to explain. The fact of different colour of form gave rise to the suspicion that the forms are not genuine could be a starting point for further inquiry but by itself does not establish any guilt on the part of the selling dealer. There appears to have no further query conducted by the sales tax authorities to show that the forms are spurious; neither is there evidence to show that the appellant was in any was connected with the alleged fraud committed by the purchasing dealer. Accordingly, the High Court allowed the appeal filed by the appellant.

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M/S. OMIL- JSC – JV vs. Union of India, [2013] 61 VST 370 (Gauhati),

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Central Sales Tax Act-Writ Petition – Jurisdiction of Court – Issue of C Form Declaration by Purchasing Corporation To Petitioner – Jurisdiction of Court – Not Barred – Direction to Issue C Form to Petitioner, Art 226 of The Constitution of India.

FACTS
The petitioner filed writ petition under article 226 of The constitution of India praying for issue of an appropriate writ directing the respondent, North Eastern Electric Power Corporation Ltd. (in short NEEPCO) to issue declaration form C under the Central Sales Tax Act, 1956 to the Petitioner who had executed works allotted by NEEPCO. The respondent had objected to issue C forms on the ground that there is no provision in the agreement for issue of C forms.

HELD
The issue is with regard to issue of declaration form ‘C’ by the respondent – NEEPCO to the Petitioner for availing concessional rate of tax under the Central Sales Tax Act, 1956, which is a statutory exaction and not the breach of any of the terms of the contract. Therefore, the jurisdiction of the Writ Court is not barred in taking up matters of taxation and liabilities under taxation statutes and cannot refuse to interfere on the ground that the question raised arises out of contractual agreement and is one of enforcement of contractual obligation and the same should be referred to arbitration. The Writ Court, under such circumstances, cannot deny a party of its right to have the issue decided by Writ Court. On perusal of rule 12 of the CST (Registration and Turnover) Rules, 1956, it becomes clear that the purchaser of the goods shall issue C form to the seller and that obligation is a statutory exaction of the CST Act and other specific provisions made in this behalf in regard to obtaining of the declaration form C and issue of duplicate, etc. There is no scope of defeating the intention of the Legislature stated in its provision at the sweet will and pleasure of the purchaser of goods. There is also no scope for denying the benefit available to a selling dealer as introduced by the Legislature upon the refusal of the purchaser to issue C form and it is made clear by providing under sub rule (3) of rule 12 that in case the original form issued by the purchasing dealer is lost, the selling dealer can demand from the purchasing dealer to issue a duplicate form. This necessarily implies that there exist an obligation to issue C forms by the purchasing dealer. Merely because, the contract agreement does not stipulate issue of C forms, it cannot refuse to issue the form to the petitioner who is entitled to the benefit u/s. 8 (1) of the Act only upon production of such forms. Moreover, the High Court found that the respondent NEEPCO through its correspondence to the petitioner, even prior to awarding the contract work, requested to avail of concessional rates of taxes, gave assurance to the petitioner time and again to issue C forms and even communicated to the Commissioner of Sales Tax, West Bengal. It cannot be allowed to deny the same and reject the claim of the Petitioner on the pretext of absence of any provision in the contract agreement to issue C form. Accordingly, the High Court allowed the Writ Petition and directed the respondent NEEPCO to issue the required C forms to the Petitioner within a period of one month from the date of receipt of a certified copy of the order.

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M/S. Prathista Industries Ltd. vs. CTO, [2003] 61 VST 158(AP).

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Central Sales Tax – Provisions for Advance Ruling – Contained in
Local VAT Law – Substantive Provisions – Not Applicable to Proceedings
Under Central Sales Tax Act, section-67 of The Andhra Pradesh Value
Added Tax Act, 2005 and section 9 (2) of The Central Sales Tax Act,
1956.

FACTS
The Petitioner Company, registered
under the VAT and CST Act and engaged in manufacturing of eco-friendlyfertilisers etc., had made an application u/s. 67(1) of the AP VAT Act,
for advance ruling with regard to classification of its 17 products. The
advance authority passed order on 16th November 2011 holding it covered
by entry 19 of Fourth Schedule against which appeal before the Tribunal
was filed. Meanwhile, assessing authority made assessment for the years
2005-2006 and 2006-07 under the VAT and CST Act which were set aside by
appellate authority. The assessing authority framed assessment for the
period 2007-2008 and 2008-2009 under the CST Act and levied tax at the
rate determined by Advance Ruling Authority despite appeal pending
before the Tribunal against the order of Advance Ruling Authority. The
Petitioner Company filed writ Petition before the Andhra Pradesh High
Court challenging the assessment order passed under the CST Act during
the pendency of appeal before the Tribunal.

HELD
The
provision for “advance ruling” is a mechanism introduced by the
legislature to ensure uniformity in orders of assessment, appellate and
revisional order, with regard to the classification of goods under
various entries of the schedule to the Act or rate applicable to such
goods, etc thereby avoiding conflicting orders being passed by different
assessing/ appellate/ revisionary authorities. Such a mechanism can
only be introduced by way of substantive provisions in a statute and
cannot be implied. Sub-section (2) of section 9 of the CST Act only
makes applicable provisions of the State sales tax law relating to
assessment, reassessment, collection and enforcement of tax including
any interest or penalty. Provisions relating to “advance ruling” would
not fall into any of the above categories. An advance ruling may be an
“aid” to an assessment, reassessment, collection of payment of tax but
it is not in itself a mechanism for it which are normally done under the
provisions of Central Sales Tax by the competent authorities under the
VAT Act. The above activities, it cannot be denied, can be done by such
authorities without benefit of advance ruling also (subject to appeal,
revision, etc.) in the hierarchy of authorities provided under the VAT
Act. The assessing authority is entitled to initiate and complete the
assessment under the Central Sales Tax Act in respect of the petitioner
when its application for “advance ruling” was pending before the
authority for advance ruling and pendency of its appeal against the said
ruling before the Tribunal would also not impede or operate disentitle
the assessing authority in any way in initiating or completing
assessment under the Central Sales Tax Act as the provisions of section
67 of the VAT Act would not apply to assessment made under the CST Act.
Accordingly, the High Court dismissed the writ petition filed by the
Petitioner Company.

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Koyo Tech Electro (P) Ltd, [2013] 60 VST 235 (WBTT)

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Cancellation VAT- Registration of Dealer – Rented Place of Business – Whether Landlord Holds legal Ownership of Building Complete or Incomplete- Not For Department to Consider – Carrying on Business and Filing of Returns and Paying of Tax – Sufficient Enough For Grant of Registration, section 29 of The West Bengal Value Added Tax Act, 2003.

FACTS
The dealer company had rented the office premises on monthly rent and had obtained registration certificate under The West Bengal VAT Act, and, filed periodical returns and paid taxes. Subsequently the company received order from VAT department cancelling registration certificate. The company applied to the Joint Commissioner, for restoration of registration which was rejected after taking report from the lower authority who cancelled the registration certificate on the ground of incomplete construction of building, non- confirmation of ownership of the owner, etc. The company filed an application before The West Bengal Taxation Tribunal against the aforesaid cancellation of registration certificate as well as the confirmation thereof by the Joint Commissioner.

HELD
The fact that building in which office of the dealer was situated was in an incomplete stage could not be considered in framing opinion that business could not be carried out from such premises. Business can be carried on from makeshift room. Such office-cum-godown does not require to be housed in a well furnished room. Further, in rejecting the prayer for restoration of certificate of registration, the Joint Commissioner had viewed that the landlord from whom the dealer had claimed tenancy, failed to establish her ownership of the building. In making such observation, the concerned authority sought to assume the role of a civil court. This is totally unwarranted. The landlady in question was not under any obligation to prove her legal ownership in respect of the building at the time of inspection conducted by the respondents. The Tribunal after considering fact of carrying on business, filing of return and payment of tax by the dealer, allowed the application and restored the registration certificate granted to the dealer.

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State of Karnataka vs. Vasavamba Stores, [2013] 60 VST 19 (Karn).

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VAT – Rate of Tax – ‘Fryums’ are “Pappad”- Exempt From Payment of Tax, section 4(1)(b) and Entry 40 of Schedule 1 of The Karnataka Value Added Tax Act, 2004.

FACTS
The respondent Company, the manufacturer, sold ‘Fryums’ and claimed exemption from payment of tax under Entry 40 of Schedule 1 of The KVAT Act being covered by the term ‘Pappad’. The respondent company was reassessed and the authority levied tax under residuary entry by treating ‘Fryums’ as Sandige. The VAT Tribunal allowed appeal. VAT department filed revision petition before The Karnataka High Court against the order of the Tribunal. The High Court held in favour of the respondent company.

HELD
The High Court, following judgement of SC in case of Shiv Shakti Gold Finger [1996] 9 SCC544, held that the shape of the “Pappad” is not a relevant consideration when the ingredients are the same. Accordingly, the High Court dismissed the revision Petition filed by the State Government and confirmed the order of Tribunal holding ‘Fryums’ are “Pappad” hence exempt from payment of tax under the KVAT Act.

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M/s. Jinsasan Distributors vs. Commercial Tax Officer (CT), [2013] 59 VST 256(Mad)

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VA T-Input Tax Credit – Allowed in Assessment – Subsequent Cancellation of Registration Certificate of Selling Dealer – Can Not Affect Right of Purchasing Dealer – ITC cannot be Reversed, Section 19 of The Tamil Nadu Value Added Tax Act, 2006.

FACTS
The petitioners had claimed input tax credit of tax paid on purchase of goods from registered dealer u/s. 19 of The TNVAT Act. Subsequently, department took action against the selling dealers, who sold the goods to the petitioners for one or other reason and cancelled registration certificates of selling dealers from retrospective effect. Based on this, the VAT department issued notices in some cases calling upon petitioners to show cause as why input tax credit should not be reversed, in some cases passed revised assessment orders reversing input tax credit availed. All the affected petitioners filed writ petition before the Madras High Court challenging the notices, revised assessment orders and provisional assessment orders.

HELD
It was not is dispute that the registration certificates of the selling dealers were cancelled with retrospective effect and, therefore, to reverse the input tax credit on the plea that registration certificates have been cancelled with retrospective effect cannot be countenanced. Whatever benefits that accrued to the petitioners based on valid documents in the course of sale and purchase of goods, for which tax was paid cannot be declined. The transaction that took place when the registration certificates of selling dealers were in force cannot be denied to the petitioners on the above plea. Accordingly, the High Court allowed the writ petition filed by petitioners and all the notices revised assessment orders and the provisional assessment orders, in so far they sought to deny the benefit of the input tax credit on the above ground were set aside.

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M/S. Malbar Gold Pvt. Ltd vs. Commercial Tax Officer and Others, [2013] 58 VST 191 ( Ker)

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VAT- Franchisee Agreement for Use of Trade Mark –Is Transfer of Right to Use Goods- Deemed Sales- Liable to VAT, s/s. 2(xx),(xliii) of The Kerala Value Added Tax Act, 2003

Facts
The petitioner company engaged in marketing, trading, export and import of jewellery, diamond ornaments, platinum ornaments, watches, etc., was the sole proprietor of the trade mark, ‘Malabar Gold’. The company had entered into franchisee agreements with several companies, situated inside and outside the State of Kerala and also abroad, as per which, on mutually agreed terms and conditions, these companies were allowed to use the trade mark owned by the petitioner. Franchisee services, being an activity attracting service tax under the Finance Act, 1994, the petitioner had obtained registration under section 69 of the Finance Act. For the year 2008-09, the petitioner received royalty of Rs. 3,27,68,607 from its franchisee companies for use of its trademark and for sharing business know-how and on this amount, they paid service tax. While so, the assessing authority issued notice stating that transfer of right to use any goods is taxable u/s. 6(1) of the Act and that, royalty received by the petitioner from its franchisees for use of its trade mark would attract VAT under entry 68 of the Third Schedule to the Act. On receipt of the notice, the petitioner contended that the transaction in question attracted service tax and payments of service tax and VAT are mutually exclusive and hence VAT is not payable.

Thereafter, the assessing authority passed the assessment order confirming the demand for Rs. 13,10,744 along with interest of Rs. 2,78,009 and also imposed penalty by a separate order. The petitioner company filed writ petition before the Kerala High Court to quash the assessment order as well as penalty order.

Held
From the constitutional and statutory provisions, it is clear that a transfer of right to use any goods for any purpose, for cash, deferred payment or other valuable consideration is deemed to be a sale for the purposes of the Act. In the pleadings in the writ petition itself, the petitioner company admitted that by virtue of the agreements entered into with their franchisees, the franchisees were authorised to use their trade mark and that in consideration thereof, they were receiving the agreed royalty. In such circumstances, it can be concluded that the trade mark of the petitioner is transferred to the franchisees for their use and the consideration received is the royalty paid to the petitioner. Such a transaction is a “deemed sale” as defined in section 2(xliii) of the Act read with Explanation V thereof.

The High Court further observed that as far as the requirement that transfer of trade mark to the transferees should be to the exclusion of the transferor is concerned, if the petitioner had a case that the franchisee has no exclusive right within the territory allotted to it, it was for them to plead and prove this contention. There was no such plea before the High Court and copy of the agreements were not even been produced before the Court. Further, the specimen franchisee agreement, made available by the counsel for petitioners before the Court, showed that the franchisee had undertaken not to use the showroom for any purpose or activity other than that were provided in the agreement and to stock only products authorised by the petitioner. In such circumstances, the High Court held that even according to the petitioner, the trade mark had been transferred for the use of their franchisees for royalty paid on terms which are agreed between the parties. Therefore, the contention with respect to nonexclusive transfer of right was not accepted by the Court.

The High Court further held that royalty received is liable to be taxed under the Act and the court was not called upon to decide the legality of the levy of service tax on the royalty received by the petitioner. Therefore, if the petitioner had a case that levy of service tax is illegal for any reason; it is up to them to challenge the levy in appropriate proceedings. Accordingly, the High Court dismissed the writ petition filed by the petitioner company.

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Commercial Tax Officer vs. Whirlpool India Ltd [2013] 58 VST 177 (Raj)

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Sales Tax Act- Collection of Optional Warranty Charges- At The Time of Sale of Goods-Does not Form Part of Sale Price- Not Liable to Tax, The Rajasthan Sales Tax Act, 1994.

Facts
The department challenged the orders of Rajasthan Tax Board, passed on December 5, 2002 holding that optional service/warranty charges were not included in the price of the goods sold (refrigerators) as they do not constitute a part of the sale price. The Rajasthan Tax Board has held that such charges paid by a customer to a dealer would not be liable to attract levy of tax under the Rajasthan Sales Tax Act, 1994.

Held
The Tax Board has held that the charges levied on account of after sales service/warranty were optional. There was enough material before the Tax Board to hold that the charge levied by the assessee towards service/warranty charges at the time of the sale was not universal but optional. Following this finding the legal consequences would be inexorable and entail exclusion of such charges from the ambit of sale price of the goods being post sale. Accordingly, the High Court dismissed the petition filed by the department.

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M/S. National Mineral Development Corporation Ltd. vs. State of AP, [2013] 58 VST 136 (AP)

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Sales Tax- Surrender of Exim Scrip- Not a Sale – Not Liable to Tax, section 2(1)(n) of The Andhra Pradesh Sales Tax Act,1957.

Facts
The appellants had REP licences/ exim scrips which they surrendered to the Government and received 20 per cent premium as provided in circular No. 11/93 dated May 5, 1993. The assessing authorities took the view that the amounts received by them towards the premium/price on the surrender of the REP licences/exim scrips is liable to tax as they are “goods” within the meaning of section 2(h) of the Andhra Pradesh General Sales Tax Act,1957. The appellants however contended that they surrendered the REP licences/ exim scrips and received premium as incentive and therefore the surrender value of the scrips cannot be subjected to tax. The appellants filed petition before the AP High Court against the judgment of tribunal holding it as sale liable to tax.

Held
Admittedly, the policy and system under which REP licences/ exim scrips were issued was discontinued with effect from March 1, 1992 and the Director-General of Foreign Trade issued the circular No. 11/93 dated May 5, 1993 announcing that unutilised exim scrips could be surrendered and authorised the Joint Director-General of Foreign Trade to pay 20 per cent premium to the exporters through State Bank of India and its subsidiaries. After the expiry of the period of validity, these REP licences/ exim scrips became valueless and holders of such REP licences/ exim scrips could neither import goods duty-free nor sell them for value. Thus, they ceased to be items which could be freely traded in the open market and on their surrender to the Government of India, even the Government of India cannot use them for trading in the open market and they would stand cancelled and were valueless. By no stretch of imagination can it be said that such surrender by an exporter of REP licences/ exim scrips is in the course of trade or business. The premium paid by the Government to the exporters on the surrender of the REP licences/ exim scrips is only a solatium for the inability of the exporters to avail of the benefit of the incentives and cannot be treated as price or valuable consideration.

Therefore, the transaction of surrender of REP licences/ exim scrips is not a “sale” within the meaning of section 2(1)(n) of the Act and also would not constitute “turnover” within the meaning of section 2(1)(s) of the Act. Accordingly, the High Court allowed the petition filed by the appellants.

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VAT – Works Contract – Goods Involved in Execution of Works Contract – Rate of Tax Applicable to The Goods Deemed to be Sold, section 4(1)(c)of The Karnataka Value Added Tax Act, 2003

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10. M/S Durga Projects Inc vs. State of Karnataka and Another, [2013] 62 VSTs 482 (Karn)

VAT – Works Contract – Goods Involved in Execution of Works Contract – Rate of Tax Applicable to The Goods Deemed to be Sold, section 4(1)(c)of The Karnataka Value Added Tax Act, 2003

Facts
The appellant, a partnership firm, engaged in the business of civil works contract, purchased necessary building materials, hardware, etc., the goods falling under Schedule III, certain items of ‘declared goods’ falling u/s. 15 of the CST Act and other non-scheduled goods from within and outside the State as well as from unregistered dealers. The appellant made an application u/s. 60 of the KVAT Act before the Authority for Clarifications and Advance Rulings (ACAR for short) seeking for clarification in respect of: a) A pplicability of the rate of tax on execution of civil works contract under the Act; and b) Whether input tax credit can be availed out of output tax paid by the contractor. The ACAR, after examining the matter in detail, by its order dated 2-8-2006 came to the conclusion that there is no specific entry providing rate of tax on works contract under the KVAT Act, up to 31-3-2006 and therefore, tax should be levied as per the rate applicable on the value of each class of goods involved in the execution of works contract i.e. if the goods involved are taxable at the rate of 4%, then works contract rate would be at 4% and if the rate is 12.5%, the works contract rate would also be at 12.5%. With regard to the clarification of input tax credit is concerned, no finding was given. The appellant subsequently sought for rectification of the order dated 2-8-2006 before the ACAR. The ACAR further clarified on 7-12-2006 stating that iron and steel is one of the commodities specified u/s. 14 of the CST Act 1956, as goods of special importance and therefore, the iron and steel are to be subjected to works contract tax at 4%, when it was used in the same form and if they are used in manufacture or fabrication of product, it would no longer qualify as iron and steel and would have to be subjected to works contract tax at 12.5%.The Commissioner for Commercial Taxes after noticing the clarification order passed by the ACAR found that the order passed by the ACAR is erroneous and prejudice to the interest of the revenue and issued notice u/s. 64(2) of the Act on 25- 8-2010. The Commissioner for Commercial Taxes, after considering the objections filed by the appellant, by its order dated 12-10-2010 set aside the order passed by the ACAR in exercise of its suo-motu revisionary power and held that the goods used in the works contract cannot be treated on par with the normal sale of goods for the purpose of arriving at the rate for the period prior to 1-4- 2006. Further, the iron and steel or any other declared goods used for executing the works contract would be liable to be taxed as per the State Law. The appellant, being aggrieved by the order dated 12-10-2010 passed by the Commissioner of Commercial Taxes, filed appeal before the Karnataka High Court.

Held

Section 4(1)(c) was inserted by Act No.4 of 2006 w.e.f. 1-4-2006 thereby levying tax on the works contract by specifying the rate of tax under the Sixth Schedule. Prior to the amendment, the tax was being collected on the rate applicable to sale of each class of goods under Section 3(1) of the Act. Section 3(1) of the Act provides for levy of tax on sale of goods. Section 4 prescribes the rate of tax. Neither section 3 nor section 4 of the Act seeks or intend to levy or prescribe different rate of tax for the goods involved in the normal sale and for the goods involved in the deemed sale. Both normal sale as well as the deemed sale should be treated as one and the same with respect to levy of tax on sale of goods. Admittedly, prior to 1-4- 2006 insertion of clause (c) to section 4, the rate of tax was not prescribed in respect of transfer of the property in goods, (whether as goods or in any other form) involved in the execution of works contract. Hence, the tax has to be levied as per section 3(1) of the Act. The sale under the works contract is a deemed sale of transfer of the goods alone and it is not different from the normal sale. Hence, the tax has to be levied on the price of the goods and material used in the works contract as if there was a sale of goods and materials. The property in the goods used in the work contract will be deemed to have been passed over to the buyer as soon as the goods or material used are incorporated to the moveable property by principle of accretion to the moveable property. For the period prior to 1-4-2006, tax has to be levied as per section 3(1) of the Act and for the period subsequent to 1-4-2006, tax has to be levied as per section 4(1)(c) of the Act. Accordingly, the High Court allowed the appeal filed by the firm. The order passed by the Commissioner was set aside and the order passed by the ACAR was restored.

Value Added Tax – Providing Passive Infrastructure Service and Related Operations and Maintenance Services – To Telecommunication Operators – on a Share Basis – Not a Transfer of Right to Use Goods – Not Taxable, Section 2(1)(2c) (vi) of The Delhi Value Added Tax Act, 2004.

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9. M/S. Indus Tower Ltd vs. Union of India, [2013] by VST 422 (Delhi)

Value Added Tax – Providing Passive Infrastructure Service and Related Operations and Maintenance Services – To Telecommunication Operators – on a Share Basis – Not a Transfer of Right to Use Goods – Not Taxable, Section 2(1)(2c) (vi) of The Delhi Value Added Tax Act, 2004.

Facts

Indus, the petitioner company, registered with the Department of Telecommunication for providing passive infrastructure services and related operations and maintenance services to various telecommunications operators in India on a sharing basis. It is the policy of the Government of India to encourage extensive infrastructure sharing and in pursuance with the policy, the telecom operators were required to create a high quality, rapid and wide coverage of mobile telecommunications network in India. The passive infrastructure facilities or services could be shared by several telecom operators so that it becomes cost effective.

Accordingly, it put up passive infrastructure facilities at several places. The arrangement worked this way. Indus would put up the towers and a shelter which is a construction in which the telecom operators are permitted to keep and maintain their base terminal stations (BTS), associated antenna, back-haul connectivity to the network of the sharing telecom operator and associated civil and electrical works required to provide telecom services. The telecom tower and shelter, both put up by the petitioner, is called “the passive infrastructure”. In addition to the tower and shelter, Indus also provided diesel generator sets, air-conditioners, electrical and civil works, DC power system, battery bank, etc. All these were known as passive infrastructure. The “active infrastructure” consists of the BTS, associated antenna, back-haul connectivity and other requisite equipment and associated civil and electrical works required to provide the telecommunication services by the telecom operator at a telecom and telecommunication site other than the passive infrastructure. The active infrastructure was owned and operated by the sharing telecom operator, passive infrastructure was owned by Indus. There could be several operators who may use the tower and shelter which are parts of the passive infrastructure by keeping their BTS, etc., therein and sharing the entire passive infrastructure on an agreed basis. The antennae belonging to the sharing telecom provider may be put up or installed at different heights in the tower as per the requirements of the sharing telecom operators. The working of the telecom network basically involves the process of receiving and transmitting the telecom signals. The active infrastructure which is owned and put up by the sharing telecom operators needs certain conditions for proper functioning and uninterrupted telecom network/ signals. These conditions are maintenance of a particular temperature, humidity level, safety, etc. These conditions are ensured by the passive infrastructure made available by the petitioner to the sharing telecom operators. The Indus Company filed application before the Commissioner of Vat u/s. 84 of the Delhi Value Added Tax Act, 2004 (DVAT ) and posed following question to be determined by him;- “Whether, in the facts and circumstances, the provision of passive infrastructure services by the applicant to sharing operators would tantamount to ‘Transfer of right to use goods’ as per section 2(1)(zc)(vi) of the DVAT Act, 2004 and therefore become liable to tax under the DVAT Act? If yes, then how should the sale price as per section 9(1) (zd) of the DVAT Act be determined for the purpose of discharging the liability under the DVAT Act ?” The Commissioner, on an examination of the agreement entered into between the petitioner and M/s. Sistema Shyam Tele Services Ltd., which was taken as representative of the agreements entered into by the petitioner with various telecom operators, held that the entire amount of consideration received from the sharing telecom operators for providing access to the passive infrastructure would amount to consideration for the “transfer of the right to use goods” as defined in section 2(1)(zc)(vi) of the DVAT Act and was exigible to tax under the said Act. He however held that since a separate bill was being raised for consumption of energy by each sharing operator as per actual consumption as detailed in the contract, the charges collected by the petitioner on this account shall be exempt from the levy of value added tax. The Company filed writ petition before the Delhi High Court against the impugned order of the Commissioner.

Held

The ‘right to use goods’ – in this case the right to use the passive infrastructure can be said to have been transferred by Indus to the sharing telecom operators only if the possession of the said infrastructure had been transferred to them. They would have the right to use the passive infrastructure if they were in lawful possession of it. There has to be, in that case, an act demonstrating the intention to part with the possession of the passive infrastructure. There is none in the present case. The passive infrastructure is an indispensable requirement for the proper functioning of the active infrastructure which is owned and operated by the sharing telecom operators. The passive infrastructure is shared by several telecom operators and that is why they are referred to as sharing telecom operators in the MSA. The MSA merely permits access to the sharing telecom operators to the passive infrastructure to the extent it is necessary for the proper functioning of the active infrastructure. It was the responsibility of Indus to ensure that the passive infrastructure functions to its full efficiency and potential, which in turn means that it had to be in possession of the passive infrastructure and cannot part with the same in favour of the sharing telecom operators. With several such restrictions and curtailment of the access made available to the sharing telecom operators to the passive infrastructure and with severe penalties prescribed for failure on the part of the Indus to ensure uninterrupted and high quality service provided by the passive infrastructure, it is difficult to imagine how Indus could have intended to part with the possession of part of the infrastructure. That would have been a major impediment in the discharge of its responsibilities assumed under the MSA. The limited access made available to the sharing telecom operators is inconsistent with the notion of a “right to use” the passive infrastructure in the fullest sense of the expression. At best it can only be termed as a permissive use of the passive infrastructure for very limited purposes with very limited and strictly regulated access. It is therefore difficult to see how the arrangement could be understood as a transfer of the right to use the passive infrastructure. When Indus has not transferred the possession of the passive infrastructure to the sharing telecom operators in the manner understood in law, the limited access provided to them can only be regarded as a permissive use or a limited license to use the same. The possession of the passive infrastructure always remained with Indus. The sharing telecom operators did not therefore, have any right to use the passive infrastructure. Accordingly, the High Court allowed the writ petition filed by the Indus and quashed the order passed by the Commissioner holding the Indus liable to pay vat.

Sales Tax – Pulp based Drink – Known as “Slice” – Predominantly Contained Water – Not a Food Article Within the Meaning of Entry 47 of Schedule I, Section – 4(1)(a)(d) and Entry 47 of Schedule I of The Delhi Sales Tax Act, 1975

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8. M/S. Varun Beverages Ltd vs. Commissioner of Vat, [2003] 62 VST 388 (Delhi)

Sales Tax – Pulp based Drink – Known as “Slice” – Predominantly Contained Water – Not a Food Article Within the Meaning of Entry 47 of Schedule I, Section – 4(1)(a)(d) and Entry 47 of Schedule I of The Delhi Sales Tax Act, 1975

FACTS

The appellant trades in aerated drinks, mineral water and fruit pulp based drink known as “slice”. It sought to deposit sales tax at 8% under residual entry on the basis that “slice” is not a preserved food article thus not covered by entry 47 of Schedule I of the Act. The department on the other hand treated it as food article and levied tax @12% under entry 47 of Schedule I of the Act. The appellant filed appeal up to Tribunal without any success. The appellant thereafter filed appeal before The Delhi High Court against the decision of the Tribunal rejecting the appeal filed by it.

HELD

There is no reference under the Delhi Sales Tax Act imposing definition contained in The Prevention of Food Adulteration Act and reliance by the Tribunal on it was misplaced. The predominant content of the Mango Pulp Drink is water i.e. 70 % and the Mango Pulp content is 17%. This product does not claimed to be a fruit juice and therefore the revenue cannot urge that it has even a minimum modicum of nutritive properties. Arguably, if the product was entirely milk based, the consideration might have been different. However, the mango pulp based drink, at best an instant energy giver and in all cases a thirst quencher; by no stretch of imagination can it be called a “food article” at least not within the contemplation of the statute, by an application of the common parlance test. Accordingly, the High Court allowed the appeal filed by the company and held that the impugned product is not covered by entry 47 of Schedule I of the Act as “preserved food article” and taxable at 8% under residual entry.

VAT – Levy of VAT on MRP – Not Permissible, Section 4(5) of The Karnataka Value Added Tax Act, 2004.

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7. M/S. ITC Limited vs. State of Karnataka and Others, [ 2013] 62 VST 320 (Karn)

VAT – Levy of VAT on MRP – Not Permissible, Section 4(5) of The Karnataka Value Added Tax Act, 2004.

FACTS

The Petitioner filed a Writ Petition before the Karnataka High Court challenging the constitutional validity of section 4(5) of the Act, inserted by Karnataka Value Added Tax (Amendment) Act, 2004 for levy of tax on sale of Cigars, Gutkha and other manufactured tobacco, on the maximum retail price (MRP) indicated on the label of the container or packing thereof.

HELD

The Supreme Court, in Rajasthan Chemist Association [2006] 147 STC 542, while considering the validity of a provision similar to the one impugned herein had upheld view of the Rajasthan High Court that it is not permissible for the legislature of a State to levy tax on sale of goods by adopting a notional price as a measure of tax; such a legislative measure has to be outside the ambit of entry 54 of List II of the Seventh Schedule to the Constitution of India. The same reasoning applies to the provision impugned herein as both are similar. Accordingly, the High Court allowed the writ petition filed by the company and sub-section (5) of section 4 of the Act providing levy of tax on sale of cigars, tobacco etc. on the MRP as unconstitutional on the ground that such a taxing provision is beyond the legislative competence of the State under entry 54 of List II of the seventh Schedule to the Constitution of India.

Trade Circular 2T of 2015 – Extension of time for filing VAT Audit Report in Form 704 for year 2013-14 dated 14-01-2015

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Due date for uploading of VAT audit report in Form 704 for the year 2013-14 has been extended from 15-01-2015 to 30-01-2015, and due date to submit the physical copy of the acknowledgement and the statement of submission has been extended to10-02-2015.

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M/S. Cheema Paper Ltd. vs. Commissioner Trade Tax, (2012) 55 VST 473

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Entry Tax- Rate of Tax- Duplex Board- Ordinarily Used As Packing Material-Made out of Paper- Not Covered by Entry “Paper of All Kinds”, section 4 of The Uttar Pradesh Tax on Entry of Goods into Local Areas Act, 2007

Facts
The dealer company engaged in the manufacture of craft paper and duplex board. The Commercial Tax Tribunal confirmed levy of entry tax on duplex board holding it to be covered by entry relating to “paper of all kind”. The company filed revision petition before the Allahabad High Court against the impugned order of the Commercial Tax Tribunal.

Held
The definition of paper is of wide import which may include anything which is macerated in to pulp, dried and pressed and is used for writing, printing, drawing, decorating, covering wall or for packing purpose. But board whether card board or duplex board are different meant for packing purpose only and not for use as paper, as is understood in common parlance. The duplex board which undoubtedly is a product of paper and is used as packing material would not be paper covered by the entry of “paper of all kind” as contained in notification and liable for entry tax. Accordingly the court allowed the revision petition.

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M/S.Sanjos Paritosh Hospital V. Commercial Tax Officer, Thrissur and Others, (2012) 55 VST 208 (Ker)

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VAT- Dealer- Business- Private Hospitals Selling Medicines and Consumables to Patientsare Dealers and Liable to Pay VAT, S. 2(ix), (xv), (xx), (xliii) and (lii) of The Kerala Value Added Tax Act, 2003

Facts
The Kerala Private Hospital’s Associations, State Committee filed writ petition before the Kerala High Court disputing their liability under the Kerala Value Added tax Act (KVAT ).

Held
A comparative analysis of the provisions contained in the KGST Act which were considered by the court in case of P.R.S. Hospital [2004] 135 STC (ker) and the corresponding provisions of the KVAT Act show that statutory provisions remain the same although the KGST Act is replaced by the KVAT Act. Therefore following earlier judgment of division bench of Kerala High Court in P.R.S. Hospital the court held that the hospitals are carrying on a business and are dealers liable to pay vat on sale of medicines and consumable to patients. The court also upheld the constitutional validity of charging section 6 of the act. Accordingly the writ petition was dismissed.

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Reckitt Benckiser India Pvt. Ltd vs. State of Assam and Others, [2012] 56 VST 452 (Gauhati)

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VAT- Entry in Schedule-Rate of Tax- Sale of Harpic and Lizol – Falls Under Pesticides – Sale of Dettol- Falls Under Drugs and Medicine- And Not As Toilet Articles, Entries 1 of Sch. I, 19 of Part A of Sch. II and 21 of Sch. IV of The Assam Value Added Tax Act, 2003

Facts
The petitioner company engaged in the business of various household products, sold “Harpic and Lizol”; “Dettol” and paid tax @ 4% being covered by schedule entries relating to pesticides and drugs and medicine respectively. The vat authority in assessment levied higher rate of tax of 12.5% being covered by residual entry. The petitioner company filed writ petition before the Gauhati High Court against the impugned assessment order.

Held
The products “Harpic and Lizol” are admittedly disinfectants. By giving broader meaning of the term pesticides, disinfectants which primarily kill germs and bacteria would be covered within the meaning of “pests” and therefore liable to tax @ 4% under entry 19 of Pat A of Schedule II relating to pesticides. As regards sale of “Dettol” the High Court held that the main purpose of use of “Dettol” is to prevent infections which may occur due to minor cuts, injuries, abrasions, grazes, insect bites, etc. Thus by applying “users test”, it would be squarely falling under the definition of “Drugs’ as defined in Drugs and Cosmetics Act, as well as under the definition of Section of the Medicinal and Toilet Preparations (Excise Duty ) Act, 1955. The “Dettol” cannot be considered to be a cosmetic substance because the purpose of use of “Dettol” is to prevent infection and for sanitation because of its therapeutic and prophylactic properties. Accordingly, it was held as “Drugs and Medicine” covered by the entry 21 of the Schedule IV of the act and will not fall within the excluded category relating to cosmetic and toilet preparations under the Explanation. The High Court accordingly allowed the writ petition filed by the petitioner company and set aside the assessment orders passed by the department with direction to take consequential actions in accordance with law.

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State of Tamil Nadu vs. Steel Authority of India, [2012] 56 VST 441 (Mad)

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Central Sales Tax Act-Sale in Course of Import – Contract for Supply of Coin Blanks to Government of India – Not Occasioned Import of Goods In to India – Where Under Another Independent Contract Coin Blanks are Converted and Supplied By Foreign Supplier to the respondent – In turn Supplied To Government of India Under Independent Contract – Not Exempt from payment of Tax, section 5(2) of The Central Sales Tax Act, 1956 M/S. Cheema Paper Ltd. vs. Commissioner Trade Tax, (2012) 55 VST 473 Entry Tax- Rate of Tax – Duplex Board – Ordinarily Used As Packing Material-Made out of Paper – Not Covered by Entry “ Paper of All Kinds”, section 4 of The Uttar Pradesh Tax on Entry of Goods into Local Areas Act, 2007

Facts
The respondent company entered into a contract with foreign supplier for conversion of still strips to blank coins at Italy. Thereafter, the company entered in to contract with Government of India for manufacture and supply of blank coins. The company claimed sale, to the Government of India, of blank coins as sale of goods in the course of import and exempt from payment of tax u/s. 5(2) of The Central Sales Tax Act, 1956. The Tribunal allowed the appeal against which the tax department filed a writ petition before the Madras High Court. 

Held
In order to earn exemption from payment of tax as sale in the course of import of goods into India u/s. 5(2) of the Central Sales Tax Act, the goods must move from the foreign country to India in pursuance of condition of contract of sale between the foreign supplier and the local purchaser. In present case, the goods were imported from foreign country in pursuance of the contract between the foreign supplier and the first respondent. A conjunct reading of both agreements would make it clear that these two agreements are independent to one another and are different entities. The first respondent entered in to these agreements for import of goods for its own purpose and there is no privity of contract between the local purchaser, the Government and the foreign seller. Therefore the sale of goods by the respondent company to the local purchaser i.e. the Government of India is not exempt from payment of tax as sale in the course of import under section 5(2) of the act. The High Court accordingly allowed the writ petition filed by the department and the order of the Tribunal allowing the claim was set aside.

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M/S. National Aluminum Company Ltd. vs. Deputy Commissioner of Commercial Taxes, Bhubaneswar III, Circle, Khurda, [2012] 56 VST 68 (Orissa)

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VAT- Input Tax Credit- Purchase of Coal, Alum,
Caustic Soda etc.- Used in Generation of Power- Used for Manufacturing
of Goods- Are Input- Eligible for Input Tax Credit, sections 2(25),(26),
(27), 17,20(8)(k),42 and 43(2) of The Orissa Value Added Tax Act, 2004

Facts
The
petitioner a Central Government public sector undertaking filed VAT
returns under the Orissa Vat Act and claimed input tax credit in respect
of tax paid on purchase of coal, alum, caustic soda, consumables used
on its captive power plant for generation of electricity which in turn
is used in continuous process of aluminum. The vat department in
assessment disallowed the input tax credit claimed by the company on
purchase of such goods that are used for generation of electricity,
which itself is a final product and exempt from payment of tax, and as
such no input tax credit is available under the act. The Company filed
writ petition before the Orissa High Court against such assessment
order.

Held
U/s. 17 of the act sale of goods
specified in Schedule A is exempt from payment of tax. Sale of
electricity appearing in item no. 13 of Schedule A is exempted from
payment of vat under the act. Consequently, no input tax credit is
allowed on purchases of input used in producing or manufacturing of
electrical energy in terms of section 20(k) of the act. Admittedly, the
company is not selling electrical energy but has used it in
manufacturing aluminum which is taxable under the act. Under the Act,
input tax credit is available on purchase of inputs either for resale or
for use in execution of works contract, or for manufacture and
processing against the output tax payable on sale of any taxable goods.
Power/energy is one of the primary and essential commodities which has a
direct relation in the manufacturing process. The purchase of inputs
used in generation of electrical energy which in turn is used for
manufacturing of aluminum taxable are “input” as defined in section
2(25) of the act and tax paid on purchases thereof is eligible for input
tax credit against output tax payable on sale of aluminum etc.

Accordingly,
the High Court allowed the writ petition filed by the company and
quashed the assessment order disallowing input tax credit on purchase of
such inputs.

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State of Uttarakhand and Others vs. Nestle India Ltd., (2012) 55 VST 145 (Uttarakhand)

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VAT- Rate of Tax-Entry in Schedule-Tomato Sauce-Is Processed Vegetables-Taxable at Four Percent, Entry 6 of Sch. II (B) of The Uttarakhand Value Added Tax Act, 2005

Facts
The respondent company had paid tax @ 4% under the Uttarakhand Vat Act on sale of tomato sauce being all kinds of processed vegetables and covered by entry 6 of the Schedule II(B) of the Act. The assessing authority levied tax of 12.5% based on circular issued by commissioner clarifying rate of tax on sale of tomato sauce as 12.5%. The company filed writ petition before the Uttarakhand High Court against the assessment order and the single judge allowed the writ petition filed by the company and quashed the circular and directed that the rate of 12.5% should not be recovered from the company on sale of tomato sauce. The revenue filed appeal before the division bench of High Court against the judgment of single judge.

Held
Under entry 6 of Schedule II(B), tax is payable at 4% on sale of all processed and preserved vegetables, vegetable mushrooms and fruits including fruit jams, jellies, fruit squash, paste, fruit drinks and fruit juices and achar (whether in sealed container or otherwise). Botanically, the tomato is a fruit but for the purpose of trade it is classified as a vegetable. It is common that tomatoes are widely used as canned vegetable in the form of juice, sauces, pastes and ketchup. Tomato sauce refers to tomato concentrate with salt, pepper, onion/garlic, sugar, spices and preservatives. It is a processed item, normally marketed in bottles and Cannes before being served as a dish. The tomato sauce being a processed and preserved vegetable is covered under entry 6 of schedule II(B) of the act liable to tax @ 4%. Accordingly, the High Court dismissed the appeal filed by the revenue and confirmed the order of single judge.

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M/S. ABB Ltd vs. Commissioner, Delhi VAT, (2012) 55 VST 1 (Delhi)

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Inter-State Sale – Works Contract-Manufacture of Goods outside the State- Used In Works Contract-Transaction of Inter-State Sale.

Sale In Course of Import- Works Contract- Import of Goods- As Approved by Employer- Used In Contract- Sale in Course of Import- Not Taxable, sections 3 and 5(2) of The Central Sales Tax Act, 1956

Facts
The appellant a Public Ltd. Company was awarded indivisible works contract for supply, installation, testing and commissioning of traction, electrification, power supply, power distribution and SCADA systems for Delhi Metro by Delhi Metro Rail Corporation (DMRC). The company manufactured certain goods required for the projects outside the State of Delhi and used in execution of works contract. Likewise, the company imported certain goods required for the projects and used in execution of works contract. The company took approval of the DMRC for purchase of goods as stipulated in the contract. The company while filing vat returns under the Delhi Vat Act claimed the exemption form payment of the tax on sale of goods purchased from outside the State of Delhi being inter-State sale not liable to tax under the Delhi Vat Act. Likewise it claimed exemption form payment of tax u/s. 5(2) of the CST Act in respect of sale of goods imported under the contract being sale in the course of import. The vat department rejected the claim of company both as inter-State sale as well as sale in the course of import and levied tax under the Delhi Vat Act. The company filed appeal before the Delhi High Court against the judgment of the Tribunal confirming the assessment order.

Held
On the facts of the case the High Court held that in the present case, there was a live and conceivable link between the sale and movement of goods. The goods were custom made. The DMRC was aware that the goods were to be sourced from the appellant’s factories which were outside Delhi. The reference to specific locations, in the list issued by DMRC, in respect of particular equipment which were integral to the contract. Accordingly, the High Court held the transaction as inter-State sale and not liable to tax under the Delhi Vat Act.

In respect of import of goods the High Court considering various conditions in the contract held that the transaction was a sale in the course of import exempt u/s. 5(2) of the CST Act. The High Court allowed the appeal filed by the Company.

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M/S. Sujata Painters, Appeal No. 18 of 2013, decided on 9th March, 2015 by MSTT.

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VAT- Sale Price- Works Contract-Collection of Service Tax- Does Not Form Part of Sales Price, section 2 (25) of The Maharashtra Value Added Tax, Act, 2002.

Facts
The appellant was engaged in business of execution of works contract of powder coating raised bill to the customer by charging vat on 80% of total contract value by deducting 20% amount prescribed in rule 58 for labour and services and also charged service tax @ 12.36% on 40 % of total contract value. He applied to the Commissioner of Sales Tax for determination of disputed question u/s. 56 of the act whether amount collected by way of service tax forms part of sale price. The Commissioner of Sales Tax held that the amount collected by way of service tax forms part of sales price. The appellant filed appeal, against the said order of Commissioner, before The Maharashtra Sales Tax Tribunal.

Held
Service tax is leviable on service value. It has no relation to the goods. It is independently leviable on value of services under the Finance Act. So on a plain reading of inclusive part of the definition of “sales price” u/s. 2 (25) of the Act, the service tax could not form part of sale price. The service tax and vat are mutually exclusive. Therefore by no stretch of imagination service tax would be a part of sale price. Accordingly, the appeal was allowed and levy of vat on service tax amount was set aside and deleted.

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HP India Sales P. Ltd vs. State of Assam and Others, [2012] 56 VST 472 ( Gauhati)

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VAT- Entry in Schedule-Rate of Tax- Sale of
Inkjet Cartridges and Tonor Cartridges – Falls Under Parts and
Accessories of Computer System and Peripherals –Taxable at 4%, Entry 4
of Part B of Sch. II , The Assam Value Added Tax Act, 2003

Facts
The
petitioner company was engaged in the business of IT products, sold
“inkjet cartridges and toner cartridges” and paid tax @ 4% being covered
by entry 4 of part B of Schedule II of the act relating to parts and
accessories of items listed in serial nos. 1, 2 and 3 which includes
Computer Systems and Peripherals respectively. The vat authority in
three different assessment years levied higher rate of tax of 12.5%
being covered by residual entry which was confirmed by the appellate
authority. The petitioner company filed writ petition before the Gauhati
High Court against the impugned order.

Held
The
items in question are integral part of printer which undisputedly is
covered by entry 3. Principle laid down by SC about interpretation of
“accessory” also lends support to the contention of the assessee.

The
High Court accordingly allowed the writ petition filed by the
petitioner company and allowed the revision of assessment orders
accordingly.

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M/S. Plastic Processors vs. State of Tamil Nadu [2013] 58 VST 86 (Mad)

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Sales Tax-Penalty – Concealment- Claim of High Seas Sale Disallowed-Levy of Penalty- Not Justified, section 16(2) of The Tamil Nadu General Sales Tax Act, 1959.

Facts
The assessee while filing the original returns had claimed exemption in respect of certain high- seas sales and the same was disallowed and a penalty was levied u/s. 16(2) of the Act. Against the said order of the assessing authority; the assessee filed an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner confirmed the order of the assessing authority, against which the assessee filed a further appeal before the Tribunal and the Tribunal while confirming the orders of both the authorities, reduced the penalty to 50 per cent by holding that there is willful nondisclosure u/s. 16(2) by the assessee. The assessee filed a revision petition before the Madras High Court against the impugned order of the Tribunal.

Held
The law is well-settled that once the sale is shown in the bill of lading and an exemption claimed that will not amount to willful non-disclosure by the assessee. It is not even the case of the assessing authority that there was willful non-disclosure u/s. 16(2) of the Act. The act is quasi-criminal in nature and there must be willful nondisclosure on the part of the assessee for the purpose of imposing the penalty. Accordingly, the High Court allowed the petition filed by the assessee.

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M/S. F. K. M. Steels and Ors.vs. Assistant Commissioner (CT) [2013 ] 58 VST 58 (Mad)

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VAT- Cancellation Of Registration Certificate- No Power to Cancel From Retrospective Effect- section 39(15) of The Tamil Nadu Value Added Tax Act, 2006

Facts
The sales tax registrations of the petitioners, under the Tamil Nadu Value Added Tax Act, 2006, had been cancelled retrospectively by the impugned orders of the respondent, dated June 29, 2010, without giving an opportunity of personal hearing to the petitioners, contrary to clause (15) of section 39 of the Tamil Nadu Value Added Tax Act, 2006. The Dealers filed a writ petition before the Madras High Court against the impugned order.

Held
In view of the averments made on behalf of the petitioners as well as the respondent, and on a perusal of the records available, that the registrations of the petitioners had been cancelled by the impugned orders of the respondent, without giving an opportunity of personal hearing to the petitioners, as provided under clause (15) of section 39 of the Tamil Nadu Value Added Tax Act, 2006. Further, nothing has been shown on behalf of the respondent to substantiate the claim that the respondent has the authority or power to cancel the registration, retrospectively. In such circumstances, the impugned orders of the respondent were set aside by the Court. The High Court issued direction that it would be open to the respondent to serve notices on the petitioners, at the addresses furnished by the petitioners in their writ petitions, asking the petitioners to show cause as to why the registrations of the petitioners should not be cancelled. On receipt of such notices, the petitioners shall file its objections, if any, along with the relevant documents. On receipt of such objections, the respondent shall consider the same and pass appropriate orders thereon, on merits and in accordance with law, after giving an opportunity of personal hearing to the petitioners. Accordingly, the writ petitions were disposed.

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M/S. Harsh Jewelers vs. Commercial Tax Officer, [2013] 57 VST 538 ( AP)

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VAT- Input Tax Credit- Purchase From Registered Dealer-Selling Dealer Did Not Disclose Sales in His Return- Not a Ground For Denial Of Input Tax Credit, section 13(1) of The Andhra Pradesh Value Added Tax Act, 2005

Facts
The petitioner purchased goods from the registered dealer and claimed input tax credit. Subsequently the registration certificate of the selling dealer was cancelled after the date of sale by him to the purchasing dealer but he did not disclose the turnover in his returns. The vat department disallowed the input tax credit claimed by the petitioner on the impugned purchases on the ground that the turnover of sales is not declared by selling dealer in his returns and raised ademand . The petitioner filed a writ petition before the Andhra Pradesh High Court against the said assessment order.

Held
Section 13(1) of the Act entails input tax credit to the VAT dealer for the tax charged in respect of all purchases of taxable goods, made by that dealer during the tax period. It is not disputed that the registration of the selling dealer was cancelled after the transaction in question occurred. The failure on the part of the selling dealer to file returns or remit the tax component of the sale made to the petitioner dealer cannot per se be a ground for denial of input tax credit. Accordingly, the High Court quashed the order of assessment and it was made open to the vat department to pass revised order if there be material on the basis of which the input tax credit can be denied except on the ground that the selling dealer, despite being a registered dealer on the relevant date, did not remit the tax. The writ petition was allowed by the High Court.

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Hindustan Zinc Limited vs. State of Andhra Pradesh And Others, [2012] 47 VST 1 (CSTAA)

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Inter-State Sale/Stock Transfer-Dispatch of Goods by Factory to its branch Out Side the State–To Meet Monthly Requirements Of Goods as per Order Placed To Branch By Customer- Transaction Of Inter-State Sale- Taxable In the State from Which Goods Dispatched By the Factory-Sections 3, 6 and 22(1B) of the Central Sales Tax Act, 1956.

Facts
The appellant, a public sector Company, having stock point and Kolkata and factory in the State of Andhra Pradesh received orders from two customers of west Bengal for supply of Zinc and lead for supply of goods of specified quantity at specified rate as per schedule of delivery. One of the conditions of the order was that in case of breach of any condition of the contract, the sum of Rs. 50,000/- paid by the customer at the time of placing order, could be forfeited by the appellant company. The factory of the appellant company situated in Andhra Pradesh dispatched the goods to its Kolkata and Jharkhand branch showing the appellant company as consignor and consignee in all documents of transport of goods including excise gate pass. The Kolkata and Jharkhand branch of the company supplied goods to the customer and paid tax at applicable rate under the local sales tax law. The Company in the State of Andhra Pradesh showed the movement of goods to its Kolkata and Jharkhand branch as inter-State stock transfer. The sales tax authorities in AP assessed the above transaction by treating it as inter-State sale of goods taking place from the State of AP, which was confirmed by the State Appellate Tribunal. The Company filed appeal against the said judgment of Tribunal before the Central State Appellate Authority (CSTAA) u/s. 20 of The Central Sales Tax Act, 1956.

Held
The scope of an appeal filed u/s. 20 of The CST Act is wide inasmuch as an appeal lies against an order determining issues relating to stock transfers of goods in so far as they involve a dispute of inter-state nature. The authority has the right not only to consider any question of law that may arise, but also to reassess the facts and consider the correctness of the inference drawn by the lower authorities including the Tribunal.

The authority further held that specific orders were made by the branch office of the appellant company to the customers for sale of their products on the conditions mentioned therein. The customers placed orders for supply of specified quantity of goods in specified monthly quantities. It is true that even though the orders placed by the customers indicated the specified quantities to be supplied every month and the supplies did not always confirm to it, that by itself may not tilt the scale in favour of the appellant. Similarly, the fact that in some months, more quantities were supplied to the customers or that the goods sent from the factory to the branch were not earmarked may not also change the position. It is not for the Tribunal to consider each element individually and appreciate its impact on the transaction. On the other hand, it would be the proper thing to take note of all the circumstances, in the light of the facts available and come to a conclusion whether the movement of goods was triggered by the orders of purchase placed on the branch office.

The authority on an appreciation of all facts and circumstances confirmed the decision of the State Tribunal treating the transaction as inter-state sale taxable in the State of AP under The CST Act. It also directed the State of West Bengal and Jharkhand, to transfer the refundable amount of tax based on its order to the State of AP to which tax was due on the disputed transactions.

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M/S. Glaxo Smithkline Pharmaceuticals Ltd. vs. State of Kerala, [2012] 50 VST 486 (Ker)

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Sales Tax- Goods Return – Return of Medicines Sold by Retailer on Expiry- Beyond Prescribed Period of Three Months-Not Allowed-It is Not Unfructified Sale, Rule.9(1)(b) of The Kerala General Sales Tax Rules, 1963.

Facts
The petitioner company, the manufacturer of medicines, sold medicines in the State of Kerala to retailers through distributors. As per trade practice followed by all manufacturers, the company took back from the retailers through distributors, the unsold medicines after its expiry and destroyed by the company later. During the assessment for the period 2001-02 and 2002-03, the company claimed deduction from turnover of sales for such return of goods as goods return. The assessing authority disallowed the claim of goods return being beyond prescribed period of three months from the date of sale as provided in Rule 9(1)(b) of The Kerala General sales Tax Rules, 1963. The disallowance was also confirmed by the Tribunal. The Company filed revision petition filed before the Kerala High Court against the decision of tribunal.

Held
The Kerala Sales Tax Act or Rules do not provide any specific provision for grant of refund or adjustment of tax paid in respect of sale of medicines which have lost potency at the hands of dealer and which have been collected and destroyed by the manufacturer company. The only provision for deduction under the Rule is deduction for sales return within the prescribed period of three months from the date of sale. Since the goods are not returned within the prescribed periodthe deduction for sales return is not permissible.

The High Court also did not accept the alternate plea of the company that the transaction should be treated as unfructified sales. However, the High Court felt that this is a genuine problem of the medicines dealers which State has to address. In the result the revision petition filed by the company was dismissed.

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Bhattacharjee Pharmaceuticals & Co. Ltd. And Another v. ACST, Corporate Division, Kolkata, [2012] 50 VST 435 (WBTT)

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VAT- Rate of Tax- Drugs and Medicine- Medicated Toothpaste – Taxable as Drugs And Medicines, Entry 25A of Schedule C of The West Bengal Value Added Tax Act, 2003.

Facts
The applicant company was a distributor and consignment agent of different pharmaceutical companies. The company had sold Thermoseal, R.A. Thermoseal and Hexigel, a medicated toothpaste and paid 4% tax applicable to drugs and medicines covered by entry 25A of Schedule C of the WB VAT Act. The department did not accepted the classification of above goods as drugs and medicine and levied tax at 12.5% applicable to general good. The company filed application before the West Bengal Taxation Tribunal assailing the assessment order passed by the assessing authority levying 12.5% tax on sale of above items.

Held
The item drug is not defined under the WB VAT Act. It is defined in section 3(b) of the Drugs and Cosmetics Act, 1940. The disputed items are drugs used for prevention of any diseases or disorder in human teeth. Under the West Bengal Sales Tax Act, 1994 there was a separate entry for toothpaste, but under the vat act there is no such separate entry for tooth paste. In the event of deletion of special entry, all the items of special entry come under the purview of general entry from the date of deletion of special entry. Under the West Bengal Sales Tax Act, entry 24 covered drugs and medicines and entry 54 covered toothpaste (whether medicated or not) along with other items. Under the WB VAT Act, there is no such entry like toothpaste. As a result, the medicated toothpaste shall come under purview of drugs and medicines covered by entry 25A of Schedule C liable to 4% tax and non medicated toothpaste shall be covered by the Schedule CA liable to tax at 12.5%. The Tribunal accordingly allowed the application filed by the company.

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M/S.Tata Consultancy Service vs. Commercial Tax Officer Thiruvanmiyur Assessment Circle, Chennai and Another, [2012] 54 VST 477 (Mad)

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Sales Tax- Recovery of Tax- Sale of Land On Which Unit of the Seller was Situated- Bona Fide Transaction-Notice to The Purchaser- For Recovery of Arrears Of Sales Tax Dues- Of Selling Dealer- Not Permissible-Transaction Not Void, Section 24A of The Tamil Nadu General Sales Tax Act, 1959.

Facts
The petitioner company had purchased land from M/S. Gum (India) Ltd. after making due enquiry and had obtained encumbrance certificate which did not disclose any encumbrance over the property in question. The sale deed was executed on 30th March, 2001. The sales tax department issued notice to the petitioner company on 26th May, 2004 to pay amount of sales tax payable by the seller namely M/S. Gum (India) Ltd. under the Tamil Nadu General Sales Tax Act, 1959, for the period 1992-93 to 1998-99 on the ground that the land was purchased by the petitioner company knowing the fact that the selling dealer was in arrears of sales tax. The petitioner company filed writ petition before the Madras High Court to quash the notice issued by the sales tax department for payment of arrears of sales tax payable by the selling dealer.

Held
The High Court on facts of the case held that the petitioner had purchased the land from the selling dealer without notice of charge said to have been created on the property in question in respect of alleged arrears of sales tax payable by the vendor company. As long as the transaction, between the original assessee and petitioner-company, is not shown to be fraudulent in nature, it cannot be said that such transaction is void as per section 24A of the Tamil Nadu General Sales Tax Act, 1959. As the respondent had failed to establish their claim that the petitioner company had purchased the property in question, with the knowledge of liability of employees provident fund, and in respect of the arrears of sales tax said to be payable to the sales tax department, the purchase of said property by the petitioner company cannot be held as invalid in the eyes of law. Accordingly, the High Court allowed the writ petition filed by the company and set aside the impugned notice of demand issued by the sales tax department.

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Additional Commissioner of VAT-I, Mumbai vs. Gupta Metallics & Power Ltd. [2012] 54 VST 292 ( Bom)

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Value Added Tax- Set-off- Raw Material- Coal Used as Raw Material by Manufacturer of Sponge Iron- Not Used as Fuel- Full Set-Off to Be Granted, Provision To Disallow Set-Off on Purchase of Motor Spirit Except In Certain Cases Mentioned in Rule- Dealer Not Entitled to Claim Set-Off-On Purchase of High Speed Diesel- Used As Fuel, Rs. 52(1)(a), 53, 54(b) of The Maharashtra Value Added Tax Rules, 2005.

Facts
The respondent company is a manufacturer of sponge iron and used iron ore, coal and dolomite as raw materials. The respondent company claimed full set-off of tax paid on purchase of coal used as raw material and also claimed set-off of tax paid on purchase of High Speed Diesel used as fuel. The assessing authority treated use of coal partially as raw material and partially as fuel and accordingly disallowed 50% set-off of tax paid on of purchase of coal treated used as fuel. Further, it disallowed set-off of tax paid on purchase of High Speed Diesel used as fuel. The first appellate authority confirmed the action of the assessing authority. The Tribunal allowed the appeal and granted full set-off of tax paid on purchase of coal by treating it used as raw material and granted partial set-off of tax paid on purchase of High Speed Diesel used as fuel. The department filed appeal before the Bombay High Court against the judgment of Tribunal.

Held
The High Court considering chemical report held that chemical qualities of non-coking coal to generate heat were used to manufacture sponge iron. Merely because heat is generated in the process it cannot be a ground to hold that non-coking coal was used as fuel. On facts the High Court held that the coal was used as raw material and not used as fuel. Accordingly, the High Court dismissed the appeal filed by the department and confirmed the judgment of Tribunal to grant full set-off of tax paid on purchase of coal by treating it used as raw material.

As regards another issue for disallowance of set-off of tax paid on purchase of High Speed Diesel used as fuel, the High Court held that rule 54(b) creates an embargo as regards claiming set-off except cases mentioned in it, which prohibits grant of set-off on purchase of motor spirit. On account of this specific provision, the provision of rules 52 and 53 cannot be applied in favour of the respondent company. Accordingly, the High Court allowed appeal filed by the department and disallowed set-off tax paid on purchase of High Speed Diesel used as fuel.

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National Organic Chemicals Industries Ltd vs. State of Maharashtra, [2012] 54 VST 271 (Bom)

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Central Sales Tax- Works Contract- -Supply and Laying of Pipe Line- Prior to 11-05-2002-Whether Divisible or Indivisible- Issue of Invoice Showing Value of Material- For Payment of Excise Duty- Not Relevant- On Facts- Held As Indivisible Works Contract- Not Liable to Tax- Section 2(g) of The Central Sales Tax Act, 1956.

Facts
The applicant company entered in to contract for supply and laying of pipe lines for transportation of natural gas with Assam Gas. The company claimed exemption from payment of tax as no tax under the CST Act was applicable prior to amendment to section 2(g) of the CST Acti.e.11-5-2002, defining the term sale, to include transfer of property in goods involved in execution of works contract. The company claimed the transaction as indivisible works contract effected in the course of inter- State trade and in absence of definition of sale to include deemed sale no tax was paid under the CST Act. The assessing authority considering excise invoice issued by the company, in the name of Assam Gas, showing value of material for payment of excise duty and other terms of the contract held the contract as divisible works contract one for supply of pipes and other for installation and levied tax under the CST Act. The appellate authority as well as Tribunal up held the levy of tax under the CST Act by the assessing authority. The Tribunal at the instance of Company referred question of law before the Bombay High Court.

Held
The authorities below erred in placing reliance on the invoices which were raised by the applicant company to only comply with the excise duty provisions.The High Court considering various clauses of agreement held that the transaction between the company and Assam Gas was indivisible inter-State works contract. The liability to pay tax under the CST Act would arise only after 11-05-2002 from which the section 2(g) was amended. Since the transaction pertains to period prior to 11-05- 202 no tax under the CST Act is payable. The High Court accordingly answered the question of law in favour of the applicant company.

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M/S. Lawrence and Mayo ( India) Pvt. Ltd. vs. S.T.O. and M/S. Sokkia India (P) Ltd. vs. C.S.T.,West Bengal and Another, [2012] 51 VST 423 (WBTT)

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VAT – Classification of Goods-Surveying Instrument- Covered By Entry Relating to Plant –Taxable at 4%, Entry No. 54B, 83 (c), Part I, Schedule C, of The West Bengal Value Added Tax Act, 2003

FACTS
The dealers filed petition before the West Bengal Taxation Tribunal against the order of the Commissioner of Sales Tax holding sale of surveying instrument covered by Schedule CA of the act and taxable at 12.5%.

HELD
Survey is an integral part in the entire process of construction. In fact, the execution of work is done on the basis of data furnished by the surveying instruments. As indicated in the brochures, the surveying instruments, in India, are not just used for taking measurement only. It performs multifarious functions; taking measurement is one of its functions. Judging this aspect, it cannot be called to be a ‘measurement tool’ simpliciter. In view of amplitude of the definition of “plant”, as held in several cases, the surveying instruments squarely come within the extended meaning of ‘plant’ and would be covered by Entry No. 54B, Part I, of Schedule C of the Act. Therefore, it is taxable at 4%. Accordingly, the Tribunal allowed the petition filed by the dealers and set aside the order of the Commissioner.

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M/S. Shriya Enterprises vs. Commissioner Commercial Taxes, Uttarakhand, [2012] 51 VST (Uttara).

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VAT – Classification of Goods- Potato Chips – Covered by All Kinds of Processed Vegetables – Taxable at 4%, Entry 6, Sch II(B) of The Uttaranchal Value Added Tax Act, 2005.

FACTS
The dealer had purchased Potato chips from M/S. Pepsico India Holdings (P) Ltd. by paying 4% VAT thereon and paid 4% vat on sales made by him. The assessing authorities levied tax @12.5% by treating ‘Potato Chips’ covered by residual entry attracting 12.5% tax. The appellate authority including Tribunal confirmed the assessment order levying 12.5% tax on sale of potato chips. The dealer filed revision petition against the impugned order of the Tribunal confirming the assessment order before the Uttarakhand High Court,

HELD
Entry 6 of Schedule II (B) of the Act, indicates that all processed and preserved vegetables would be covered by it and taxable at 4%. Unless the department can establish that the goods in question can by no conceivable process of reasoning be brought under any of the tariff items, resort can not be had to the residual category and if there is a conflict between entries, then the residuary category should not be taken into consideration. The High Court further held that it can not be disputed that potato is a vegetable after going thorough the process of slicing, frying and spicing the potato chips does not cease to be a vegetable. It is irrelevant as to whether it becomes a snack item or not. A processed vegetable can also be a snack item but then it does not take the snack item outside the entry of processed vegetables. Accordingly, the High Court allowed the revision petition filed by the dealer. The assessing authority was directed to levy tax on sale of Potato Chips at 4%

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C. V. Cherian vs. CA Patel, [2012] 51 VST 71 (Guj)

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Sales Tax – Recovery Of Dues Of Company – Director Of Company – Not Liable To Pay Personally, The Gujarat Sales Tax Act, 1970 and The Gujarat Value Added Tax Act, 2003

FACTS
The Sales Tax Department held auction of personal property of a director of Private Limited Company to recover arrears of tax of the Company. The director filed writ petition against the impugned auction before the Gujrat High Court.

HELD
The attachment and auction of the residential building of the director can not be made to recover dues of the Private Limited Company in which he is a director. The High Court followed the Judgment of division bench in case of Choksi V. State of Gujarat [2012] 51VST 73 (Guj). Accordingly, allowed the writ petition filed by the director.

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State Of Tamil Nadu vs Therman Heat Tracers Ltd, [2012] 51 VST 69 (Mad)

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Sales Tax – Turnover – Liquidated Damages – Deducted From Contracotr’s Bill – Does Not Form Part of Turnover Of Sales -Not Taxable, The Tamil Nadu General Sales Tax Act, 1959.

FACTS
Certain amount was deducted from the bill of the contractor by the employer. The assessing authority determined gross amount before deduction of liquidated damages as turnover of sales and levied tax. The Tribunal in appeal allowed the deduction of liquidated damages from total turnover of sales. The Department filed revision petition against the impugned judgment of Tribunal before the Madras High Court.

HELD
The Tribunal had correctly found that the liquidated damages were to be borne by the contractor and the payment was reduced to that extent. Therefore, such amount received after the contractual deductions can alone be treated as turnover. The High Court accordingly affirmed the judgment of Tribunal and revision petition filed by the Department was dismissed.

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M/S. Century India Ltd vs. Asst. Commissioner (Ct), [2012] 51 VST 130 (Mad).

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Sales Tax – Rate Of Tax- ‘Halls’ – Ayurvedic Medicine – Not A Confectionary Item, S/s. 17, 28A and Schedule I, Part C, of The Tamil Nadu General Sales Tax Act, 1959.

FACTS
The assessment of the dealer company was completed by treating ‘Halls’ as ayurvedic medicine based on clarification issued by the Commissioner. Later on the Department initiated revision proceedings on the basis that ‘Halls’ is not an ayurvedic preparation and it is only a confectionary taxable at 12%. The dealer filed writ petition before the Madras High Court against impugned notice for revision of assessment.

HELD
The Commissioner of Commercial Taxes has issued clarification that ‘Halls’ is an ayurvedic medicine and assessment is completed on that basis. Further, he had revised assessment on earlier occasion and concluded it and also levied penalty for excess collection of tax. Another assessing authority, by mere change of opinion, cannot propose to revise the assessment treating the said product as confectionary.

Pudina and Nilgiris Thailam, etc. are generally used for ayurvedic preparations and that is why, the Commissioner of Commercial Taxes, Chennai, had clarified that ‘Halls” tablets is taxable at 4%. The extent of medicament used in a particular product and the fact that the use of the medical element in the product was minimum that would not detract that the same being classified as Medicament. It is also not necessary that the said item must be sold under doctor’s prescription and that the availability of the product across the counter in many shops is not relevant.

In view of binding precedents of the circulars, issued by the Commissioner of Commercial Taxes, in favour of the dealer, the High Court set aside the notice for revision of assessment. Accordingly, the High Court allowed writ Petition.

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Supreme Food Industries vs.. State of Kerala [2012] 47 VST 487 (Ker)

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VAT-Sale – Supply of Deep Freezers – By Ice Creame Manufacturing Company To Its Distributors Against Deposit – Up to full value of Cost- To be Adjusted Against Wear and Tear- In Four Equal Annual Instilments – Amounts To Sale – And Liable to Pay Tax – As well As Eligible to Input Tax Credit of Tax Paid on Purchase of Deep Freezers – The Kerala Value Added Tax Act, 2003.

Facts:
The petitioner company is engaged in manufacturing and sale of ice cream made purchase of deep freezers as an incentive and delivered same to the distributors against collection of security deposit almost equal to the value of deep freezers from each distributors. The assessing authority during the assessment for the years 2005-2006 and 2008-2009 treated such delivery of deep freezers as sale and levied tax thereon and did not grant input tax credit of tax paid on purchase of it being capital goods. The appellate authority as well as the Tribunal confirmed the assessment orders. The petitioner company filed revision petition before the Kerala High Court against such assessment orders.

Held :
The High Court rejected contention of the petitioner that there is no sale of deep freezers to the distributors because in fact it is a sale on deferred payment basis and the cost is recovered at 25 % each for the four years from the date of delivery. The transaction is a pure sale but on credit basis against payment in four installments.

As regards claim of input tax credit, the High court held that Deep freezers purchased and delivered are used for storage of ice cream by the distributors, and so much so, were capital goods for them and trading goods for the petitioner, who has purchased and sold the same to the distributors and is eligible to claim input tax credit on purchase thereof. Accordingly, the High Court allowed revision petition partly by directing assessing authority to grant input tax credit as per provisions of the law.

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State of Kerala vs. Yenkay Complex Pvt. Ltd. [2012 ] 47 VST 288 (ker)

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Sales Tax – Rate of Tax – Based on Star Hotels – Given By Tourism Department – Government of India – Special Rate Applies From Date of Approval of Star Granted – And not From 1st Day of Financial Year – Section-5B and Entry 46 of Schedule I of The Kerala General Sales Tax Act, 1963.

Facts:
The respondent is a resort hotel having three star approvals by Tourism Department of Government India with effect from 11-09-2002. Accordingly, the respondent paid license fee for the period up to 11/09/2002 and from 11-09-2002 paid tax on sale of Cooked Food @ special rate of 8% applicable to star hotels under Entry 46 of Schedule I of The Act.

However, the assessing officer having treated classification of three star hotels from 1st day of April 2002, applied special rate of tax of 8% from that date. The Tribunal allowed the claim of the respondent. The Department filed revision petition before the Kerala High Court against the said judgment of Tribunal.

Held:
Liability for tax on sale of cooked food which is generally served in hotel is fixed under the Statue with reference to the classification of hotels. In fact, only bar attached and star hotels are specifically covered by Entry 46 of Schedule I, attracting special rate of tax of 8 %. Other hotels are covered by section 5B, which provides for collection of license fees. The Tourism Department of Government of India is the agency constituted to declare star status of a hotel. Therefore for the purpose of Entry 46, star hotels mean only those hotels so classified by tourism department of Government of India. Therefore, the respondent is liable to pay tax at special rate of 8 % from 11-09-2002 onwards, when the approval of star was given by the tourism department and for earlier period the respondent is liable to pay license fees u/s. 5B of The Act. Accordingly, the High Court dismissed the revision petition filed by the State and approved the order of Tribunal.

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State of Tamil Nadu vs. Essar Shipping Limited [2012] 47 vst 209 (mad)

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Sales Tax – Sale – Transfer of Right to Use – Time Charter Party Agreement – To Hire Out Ship – No Transfer of Possession or Control – Not Taxable.

Sales Tax – Location of Goods at The Time of Contract of Sale Entered – Sale of Named Ship – Not in State – Sale outside the State – Not Taxable – Section 3A of The Tamil Nadu General Sales Tax Act, 1959

Facts :
The assessee company, owner of ships, had let on hire 11 ships to various parties, within and out side the State of Tamil Nadu and collected charges on rendering services. The assessee had entered into Time charter party agreement for letting ship on hire to transport goods mentioned therein. The assessee had also effected sale of old ships. The assessing authorities treated time charter party agreement as transfer of right to use ships and levied tax on charges collected thereon and also levied tax on sale of named ships as local sale although ships were not in the State at the time of sale. The Tribunal held that time charter party agreement is taxable as transfer of right to use goods but accepted the plea of the assessee that the transactions is in the course of inter-State trade as such not taxable u/s. 3A of The Tamil Nadu General Sales Tax Act. The Tribunal in respect of sale of Ships held that it is not taxable as at the time of sale it was not located in the State. The State filed revision petition before the Madras High Court against the Judgment of Tribunal.

Held :
A reading of the various clauses enumerated in the charter shows that the contract is not for the hire of the vessel but hiring of the services to be provided by the owner as a carrier to carry goods which are put on board of the ship by the time charterer. The Tribunal committed a serious error in its understanding of what possession would mean, in the face of the time charter agreement. The High Court accordingly held that the time charter party agreement is one for services, hence not taxable under the provisions of the sales tax act.

As regards sale of named ships, the High Court held that the location of the goods at the time of sale determines the jurisdiction of that State to levy sales tax under the local Act. Thus, in the case of ascertained goods, the place where goods are at the time of contract is the State which has the jurisdiction to assess the transaction. Admittedly on the date of sale, the agreement was for named ships which were nowhere near the jurisdiction of the State of Tamil Nadu. The mere fact that the contract was entered into in the State of Tamil Nadu or for that matter the assessee had sought for registration under the State act, by itself, would not confer jurisdiction on the State to impose tax on the sale of assets located outside the State. The Tribunal found that at time of sale of Ships, all the named ships were positioned out side the State as such the Tribunal was right in holding the transaction not taxable in the State of Tamil Nadu.

Accordingly, the High Court dismissed the revision petition filed by the State.

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India Exports vs. State of U.P. and others [2012] 47 vst 126(Allahabad).

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Sale – Sales from SEZ – Not a Sale In The Course of Import – Taxable, Section 5(2) of The Central Sales Tax Act, 1956

Facts:
The Petitioner having a unit in Special Economic Zone, cleared furniture manufactured therein, for sale to Domestic Tariff Area (DTA Units) under section 2(i) of The SEZ Act, 2005. The petitioner claimed exemption from payment of tax on such sale of goods u/s. 5(2) of The Central Sales Tax Act, 1956, being sale in course of import as whole of India excludes areas of SEZ under the SEZ Act. The assessing authorities imposed tax on impugned transactions, against which petitioner filed writ petition before the Allahabad High Court.

Held:
The SEZ Act, 2005 has provided for amendment of various taxing statues or modified them for fulfilling object and purpose of the Act. Section 57 of the said Act amends the enactment specified in the Third Schedule, which are amended by SEZ Act, 2005. The Central Sales Tax Act is not included in any of these Schedules. The sales from SEZ Unit to Unit in DTA cannot be deemed to be imports. No such presumption can be drawn from section 5(2) of The CST Act or any of the provisions of SEZ Act as such it is taxable. Accordingly, the High Court dismissed the Writ Petition filed by the Petitioner.

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State of Tamil Nadu vs. M/S. Mahaveer Chemical Industries, [2012] 49 VST 200 (Mad)

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Central Sales Tax – Subsequent Sale By Transfer of Document of Title To Goods – Transporters Giving Delivery of Goods To Buyers As Per Instruction of Dealer – Not a Continuation of Inter-State Sale–S/s. 3(b) and 6(2) Of The Central Sales Tax Act, 1956.

FACTS
The assessee, a dealer in chemicals having office at Coimbatore, Tamil Nadu, had purchased liquid/gaseous chemicals from M/s. Cochin Refineries Limited Ernakulum, Kerala. The said goods were further sold to the dealers either in Coimbatore or to the dealers out side the state of Tamil Nadu and claimed exemption from payment of tax u/s. 6(2) of the CST Act, 1956 by producing the required E-1 and Form C. The assessing authority rejected the claim after noticing the fact that after taking delivery from the transporters, the assessee had issued from XX delivery notes to transport chemicals in same tankers to the end users within and outside the state of Tamil Nadu. The Tribunal allowed the claim and the department filed revision petition before the Madras High Court.

HELD
As per section 3(b) of the CST Act, 1956 all subsequent inter-State sales effeted by transfer of document of title to the goods also qualified to be inter-state sales. However, when there is a break in the movement and it comes to an end, the exemption u/s. 6(2) of the Act is no longer available to claim benefit of second inter-state sale. Such subsequent inter-state sale could be made between two dealers residing in the same street provided that there is a sale by transfer of document of title to the goods while they are in transit from one state to another. The burden of proof is on the assessee. The Court further held that in the present case, the journey of goods started from Cochin to Coimbatore and there was no obligation on the part of carrier to transport the goods further to any place beyond Coimbatore. Thus, the subsequent arrangement that the assessee had with the transporter to carry the goods to another place for a different person however did not make the movement a continuation of the original inter-state sale. Once the movement of goods terminated at Coimbatore, on the doctrine of constructive delivery, the authorities rightly rejected the assessee’s claim of exemption u/s. 6(2) of the CST Act. Accordingly, the High Court allowed revision petition filed by the department and set aside the judgment of the Tribunal.

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M/S.Shree Shyam Enterprises vs. Joint Commissioner, Sales Tax, Bally Circle And Others, [2012] 49 VST 177 (WBTT)

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Value Added Tax – Input Tax Credit – Tax Invoice Purchase of Goods Under Auction – Sale Release Order Issued By Vendor Containing Prescribed Particulars – Disallowance of Claim For Want of Tax Invoice – Not Correct, Section 21 of The West Bengal Value Added Tax Act, 2003 and R. 91 (7) Of The West Bengal Value Added Tax Rules, 2005

FACTS
The assessee dealer purchased goods from M/s. South Eastern Railway on auction after paying due tax to it. The vendor issued sale release order containing particulars, i.e., date of sale, sale order number and date, name and address of selling dealer, full description of goods sold, quantity or number of goods sold, value of the goods sold, rate and amount of tax charged. The dealer claimed input tax credit in returns. The department rejected the claim for want of proper tax invoice and did not consider the sale release order as tax invoice. The dealer filed application u/s. 8 of The West Bengal Taxation Tribunal Act, 1987 against the rejection of claim of input tax credit.

HELD
The vendor issued sale release order containing all the particulars required under sub-Rule (7) of Rule 91. The documents having contained all the particulars, as required in sub-rule (7) of rule 91 of the VAT Rules, 2005, the Sale Release Order ought to have been equated with and treated at par with the Tax Invoice. The appeal was allowed and assessing authority was directed to allow the claim on verification of documents, treating the sale release order as tax invoice.

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M/S. IFB Industries Ltd. vs. State of Kerala, [2012] 49 VST SC 1.

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Sales Tax – Turnover of Sales – Trade Discount – Given Subsequently – By Credit Notes – Deductible, Section 2 (xxvii) of The Kerala General Sales Tax Act, 1963 and R 9(a) of The Kerala General Sales Tax Rules, 1963.

FACTS
The appellant Company is a manufacturer of home appliances. The company as a part of Sales Promotion Scheme allowed discount to its dealers on achieving pre-set sale targets subsequent to issue of sales invoices by way of credit notes. The Company claimed deduction of such trade discount from turnover of sales. The assessing authority principally accepted the claim but there was a dispute in the computation thereof. The matter was disputed up to the High Court. The Kerala High Court held that discount in question was not a trade discount at all and it was not eligible for deduction in terms of Rule 9(a) of the Rules. The appellant company filed appeal before the SC.

HELD
The definition of the term “turnover” contained in section 2(xxvii) read with Explanation (2)(ii) to it recognises discounts other than cash discounts and provides that those other discounts like the cash discount shall not be included in the turnover. Further, Rule 9(a) stipulates that the accounts should show that the purchaser has paid only the sum originally charged less discount. There is nothing in Rule 9(a) to read it in a restrictive manner to mean that a discount in order to qualify for exemption under its provisions must be shown in the invoice itself. Accordingly, the SC allowed the appeal and remanded the matter back to the assessing authority to pass fresh orders in light of the judgment of the SC.

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T. Subramanian vs. Deputy Commercial Tax Officer, Ettayapuram, [2012] 50 VST 410 (Mad)

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Sales Tax – Interest-Tax Paid As per Order Of High Court- In a Writ Petition Filed- Against Recovery Proceedings- Demand For Interest – Not Permissible, section 24(3) of The Tamil Nadu Sales Tax Act, 1959.

Facts
The father of the petitioner had filed writ petition before the Madras High Court against the recovery action taken by the Department for recovery of assessed dues. The High Court directed him to pay the dues in six equal installments, which he paid without any default. Thereafter, the Department issued demand notice claiming interest as per section 24(3) of the act for the belated payment of due amount. The petitioner filed writ petition before the Madras High Court against such demand notice for payment of interest.

Held
Indeed, ordinarily, there is no discretion vested with the authority under the act to desist from levying interest or reducing the same. Also, no notice or providing reasonable opportunity to the assessee is no essential. In law, there is no estoppel against a statute. But in the present case, the High Court in the earlier writ had permitted the petitioner to pay due amount in installments. At that time, on both sides, no plea was raised for payment of interest for the delayed payment by the assessee and admittedly no writ appeal is filed against the said order of High Court. Hence, the order of High Court became final and binding between the parties. When the High Court had permitted to pay due amount by way of installments by exercising its judicial discretion, then the invocation of section 24(3) of the Act for payment of interest, for payment made as per order of the High Court, is neither justifiable, nor valid and not prudent one. The High Court accordingly allowed the writ petition and set aside the demand raised by the department for payment of interest to promote the substantial cause of justice.

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M/S. Frostees Exports (India) Pvt. Ltd. vs. DCCT, Corporate Division, Kolkata and Others, [2012] 50 VST 392

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Sale of Motor Vehicles- Recovery Of Road Tax,
Insurance Charges And Registration Cost- Post Sale- Not Forming Part of
Sale Price, section 2(30) and (31) of The West Bengal Sales Tax Act,
1994

Facts
The petitioner a private limited company
engaged in the business of selling motor vehicles sold motor vehicles
and collected, over and above price of motor vehicles, cost of
registration, insurance premium and road tax payable by the buyer under
the Motor Vehicles Act, 1989. The Company claimed collection of such sum
as not forming part of sale price being post sale services, whereas the
department treated it as forming part of sale price and levied tax
thereon. The Company filed appeal before the West Bengal Taxation
Tribunal against the order of appeal confirming the levy of tax by the
assessing authority on such sum.

Held
Under the Motor
Vehicles Act, delivery to the owner is a pre-condition of a sale and
sale was complete with the issue of sale certificate. Under the Act, it
is the liability of the owner to get it insured before registration.
Therefore, the registration of the motor vehicle is a post-delivery
event. The insurance premium is payable by the owner before
registration. Likewise, the owner of motor vehicles has to pay road tax.
So therefore, there is no scope for debate that the payment of road tax
is a post delivery event and hence it should not form part of sale
price.

Neither of the sides asserted whether after the sale the
physical possession of the goods was retained by the selling dealer.
Even if retained, it was retained by him as bailee for the purpose of
service of registration, insurance and payment of road tax. This
possession is a possession on behalf of the person to whom the goods
were sold. Any amount spent in respect of those retained goods during
such possession was spent on behalf of the buyer and as such it would
not form part of sale price as defined in section 2(31) of the Act.

The
Tribunal further held that it is settled law that, in the composite
transactions also, the value of service cannot be included in the sale
and taxing the service rendered by the Dealer after sale of the goods is
beyond the scope of Entry 54 of List II, Schedule VII read with Article
366(29A) of the Constitution of India. The Tribunal allowed the appeal
and held that the collection of sum by way of road tax, insurance
premium and registration cost not to be included in sale price of the
goods sold and not liable for tax.

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State of Tamil Nadu vs. Karnataka Bank Ltd., [2012] 50 VST 93 (Mad)

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Sales Tax – Import of Goods by Bank – Under the Master Lease Agreement – Followed by Supplementary Lease Agreement-On Facts – Sale in The Course of Import – Not Taxable, section 5(2) of The Central Sales Tax Act, 1956 and section 3A(2)(a) of The Tamil Nadu General Sales Tax Act,1959

Facts
The assessee, a Bank entered into Master Lease Agreement with Hindustan Power Ltd., for importing and leasing of machinery on rental basis. The Bank accordingly ordered machinery as per the specification of the Company from the foreign manufacturers. While the goods were in transit, the Bank and the Company entered in to a Supplementary Lease Agreement which was stated to be a part of the Master Lease Agreement. Since, the Master Lease Agreement made no reference as to the purchase order placed with the foreign manufacturer, the revenue took the stand that the Supplementary Lease Agreement is un-connected with the Master Lease Agreement and rejected the claim of the assessee for exemption from payment of tax as sale in the course of import u/s. 5(2) of the CST Act, 1956. The first appellate authority as well as Tribunal allowed the claim and revenue filed revision petition before the Madras High Court.

Held
The bank had placed a purchase order on the manufacturer at the request of the lessee Company towards purchase of the specified equipment and in the event the lessee was unable to firm up with the manufacturer for the equipment to be leased within the stipulated time, it was open for the lessor bank to withhold for payment and canceled the same. Once the arrangement between the assessee and the lessee, as regards lease agreement, got finalised for the purpose of import of machinery, the subsequent documentation was merely a follow-up action and it is difficult to read each one of the documentation in isolation. When the first of the documents viz., the Master Lease Agreement got dovetailed into purchase order placed by the assessee with the foreign manufacturer, the subsequent documentation completes the balance of the transaction the assessee bank had with the lessee. On facts of the case, the High Court held that there was an inextricable link between the Master Lease Agreement and the Supplementary Lease Agreement on the one hand and the import of specific goods based on the purchase order on the other. Accordingly, the High Court rejected the revision petition filed by the revenue and allowed the claim of the assessee bank for exemption from payment of tax on the lease of the imported machinery to the Lessee company being sale in the course of import.

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Hotel Ashoka (Indian Tour. Dev. Cor. Ltd) vs. Assistant Commissioner of Commercial Taxes and Another, [2012] 48 VST 443 (SC).

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Sale in Course of Import or Export – Sale of
Goods In Air Port – By Duty Free Shop – Is Sale in Course of Imports,
section 5 (2) of The Central Sales Tax Act, 1956.

FACTS:
The
appellant dealer is managed by the Indian Tourism Department
Corporation having duty free shops at all major international air ports
in India. At the duty free shops, the dealer sold several articles
including liquor to foreigners and also to Indians, who are going abroad
or coming to India by air. The dealer claimed the sale of goods to
customers as sale in course of Import and the goods were delivered
before importing the goods or before the goods had crossed the customs
frontiers of India. The Karnataka sales tax authorities levied tax while
passing an assessment order on such sales made by the duty free shop at
Bengaluru. The dealer filed writ petition before the Karnataka High
Court against the said assessment order. The Karnataka High Court
dismissed the Writ Petition on the ground that the dealer had not
exhausted equally efficacious alternative remedy available to it under
the provisions of the Act. The dealer filed a special Leave Petition
before the SC against the said judgment of the High Court.

HELD:
It
is an admitted fact that the goods were imported by the dealer from
foreign countries and were kept in a bonded warehouse and they were
transferred to duty free shops situated at the Bengaluru International
Airport, as and when the stock of goods lying at the duty free shops was
exhausted. When the goods are kept in bonded warehouses, it cannot be
said that the said goods had crossed the customs frontiers of India. The
goods are not cleared from the customs till they are brought in India
by crossing the customs frontiers. When any transaction takes place
outside the customs frontiers of India, the transaction would be said to
have taken place outside India. Though the transaction might take place
within India but technically looking to the provisions of section 2(11)
of the Customs Act and Article 286 of the constitution, the said
transaction would be said to have taken place outside India.

The
SC further held that submissions of the department with regard to the
sale not taking effect by transfer of document of title to the goods are
absolutely irrelevant. The Transfer of document of title to the goods
is one of the methods whereby delivery of goods is effected. The
delivery may be physical also. At the duty free shops, goods are sold to
the customers by giving physical delivery, it would not mean the sales
were taxable under the Act. Accordingly, the SC allowed the SLP filed by
the dealer and quashed the assessment so far as the transactions which
were the subject matter of the litigation.

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Larsen & Turbo Limited vs. State of Orissa And Others, [2012] 48 VST 435 (or Orissa)

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Value Added Tax – Works Contract – Taxable Turnover – Deduction Provided For Other Like Charges – No Rules Framed to Prescribed “Other Like Charges” –Provisions Uncertain and Unworkable, section 11(2) ( c) of The Orissa Value Added Tax Act, 2004 and R 6(e) of The Orissa Value Added Tax Rules 2005.

FACTS:
The dealer filed a Writ Petition before The Orissa High Court to declare Provision of section 11(2) (c) of The Orissa Value Added Tax Act, 2004 as well as rule 6(e) of The Orissa Value Added Tax Rules, 2005 unworkable.

HELD:
Section 11(2)( c) of The Act provides for deduction towards labour, service charges and other like charges, the Rule 6(e) provides for deduction of labour and service charges only from the gross turnover to arrive at the taxable turnover in respect of works contract. Thus, even though section 11(2) (c ) provides deduction towards “ Other like charges” besides labour and service charges, the rules do not provide any such deductions. When the statute provides that something is to be prescribed in the rules then that thing must be provided in the rules with a view to making the provision workable and valid. Thus, if the measure of tax is not provided either under the Act or under the rules, the levy itself becomes uncertain and such uncertainty proves fatal to the validity of the taxing statute. To avoid such uncertainty, the State Government was directed by the High Court to amend rule 6(e) to bring in line with judgment of the SC in the Gannon Dunkerley’s case [1993] 88 STC 204 (SC) and the Commissioner of Sales Tax was directed to issue suitable instructions to all the taxing authorities to allow various deductions from the gross turnover to arrive at the taxable turnover in respect of the works contract in terms of decision of the SC in the Gannon Dunkerley’s case. The High Court allowed writ Petitions with the aforesaid directions/observations.

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Commissioner of Trade Tax U. P. Lucknow vs. Project Technologist Pvt. Ltd. [2012] 48 VST 406 (All)

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Central Sales Tax – Penalty- Issue of C Form- Representation That Goods Purchased are Covered by Registration Certificate-No Mensrea- Penalty Not Justified, SS 10(b) and 10A of The Central Sales Tax Act, 1956.

FACTS:
The dealer purchased cable and light fittings against Form C, thereby giving a declaration that the goods purchased are covered by a registration certificate. The department imposed penalty u/s. 10A read with section 10(b) of the CST Act on the ground that the goods were not covered by a registration certificate issued to the dealer. In appeal, filed by the dealer, the Tribunal set aside the order levying penalty. The department filed a revision Petition before the Allahabad High Court against the said order of the Tribunal.

HELD:
In view of provisions of sections 10(b) and 10A of the Central Sales Tax Act, 1956, a penalty can be imposed if the dealer has made a false representation. Where there is a bona fide act of the dealer, being under a bona fide belief that the goods in question are covered by the registration certificate then the provision for imposing penalty u/s. 10(b) does not apply. Thus, no penalty can be imposed. Though, under the registration certificate the dealer was authorised to import ‘consumables’, the items “cables and light fittings” were not specifically mentioned in the registration certificate, still the use of the word “ consumables” in the registration certificate showed that the dealer did not import “cables and light fittings” under any mala fide intentions. Accordingly, the High Court dismissed the revisions petition filed by the department and confirmed the order of the Tribunal knocking off the levy of penalty imposed by the lower authority.

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(2011) 38 VST 159 (P & H) M/s. Goyal Motor Parts v. State of Punjab

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Rate of tax — Sale of digital inverters with UPS facility — Information technology products — Taxable at 4% — Schedule Entry 60(27) of Punjab Vat Act, 2005 — Tribunal cannot brush aside reports of technical experts.

Facts:
The appellant sold microteck digital inverters, manufactured by M/s. Microteck International, as UPS-EB having extra facility of UPS (Uninterrupted Power Supply) to run computers and paid 4% rate of tax being covered by sub-entry (27) of entry 60 of Schedule B of the Punjab VAT Act, 2005. The designated authority held it taxable @12.5% being covered by residual entry. The Appellate Authority relying on report of certain laboratories allowed appeal, against which the Department filed appeal before the Punjab VAT Tribunal. The Tribunal allowed appeal filed by the Department and held that only such uninterrupted power supply (UPS) products which were information technology products were to fall in Entry 60 of Schedule B and any other product even if named UPS would be chargeable @12.5% tax. The appellant referred substantive question of law to the Court for determination arising out of the order passed by the Tribunal.

Held:
The product sold by the appellant is an electronic power source which stores the energy in batteries connected to it when the AC source is present and converts this energy automatically to AC power when the input AC source fails and automatically feeds so generated AC powers to load connected and returns to mains when the AC source comes back to the input side. As per certificate of IIT Delhi the product sold by the appellant is a UPS. This could be used both as inverter as well as in computers. The appellant sold the goods in the market through retailers and was not in a position to determine as to what use the goods would be put to, as the same would be entirely at the discretion of purchaser.

The Court following the decision of the Madras High Court in case of State of Tamil Nadu v. M/s. Vinyl Cable Industries, (1993) 88 STC 430 and decision of SC in case of M/s. Hindustan Poles Corporation, (2006) 145 STC 625 held that goods in question sold by the appellant fulfil all the conditions of an UPS and hence taxable at 4%. The Court further held that the Tribunal fell in error in brushing aside the reports of technical experts opining that goods in question were UPS.

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(2011) 39 VST 302 (Bom.) Commissioner of Sales Tax, Maharashtra State, Mumbai v. Cadila Healthcare Limited

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Rate of tax — Table margarine — Not hydrogenated vegetable oil or vegetable oil — Taxable at 12.5% under residual Entry E-1 — Schedule Entry C-100, 102 and E-1 of Maharashtra Value Added Tax Act, 2002.

Facts:
The Commissioner of Sales Tax filed appeal against the decision of the Tribunal, dated August 2, 2008, holding that Nutralite table margarine sold by the dealer is covered by Schedule C-Entry 102 of the MVAT Act and taxable at 4%. Entry 100 of Schedule C covers vanaspati (hydrogenated vegetable oil), whereas Entry 102 of Schedule C covers vegetable oil. It was argued before the Tribunal by the dealer that Nutralite table margarine is vanaspati and if it is not vanaspati, then it is vegetable oil covered by Schedule Entry C-102 taxable at 4%. The Tribunal held that Nutralite table margarine is vegetable oil taxable at 4% under Entry 102 of Schedule C of the MVAT Act. The High Court allowed the appeal filed by the Commissioner of Sales Tax and held against the dealer that Nutralite table margarine is not vanaspati and not a vegetable oil and taxable at 12.5%.

Held:
(i) Margarine is used for baking, cooking and Nutralite table margarine sold by the dealer is used for cooking and as a spread. Palm oil is subjected to process of emulsification and the resultant product that emerges is Nutralite table margarine. Admittedly, table margarine is considered to be a distinct marketable commodity under the Central Excise Act.

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(2011) 39 VST 257 (SC) Hyderabad Engineering Industries v. State of Andhra Pradesh

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Inter-State sale/stock transfer — Dispatch of goods to branch outside the State — Against the ‘Forecasts’ for delivery of goods to the buyer — Under sale agreement — Is inter-state sale — Liable to tax u/s.3(a) and 6A of the CST Act, 1956.

Facts:
The assessee claimed inter-State Stock transfers to its various depots situated outside the State as per ‘Forecasts’ to be delivered to M/s. Usha International Ltd. (UIL), under an agreement for sale entered with it. The sales tax authorities disallowed the claim of inter-State stock transfer and levied tax @10% under the CST Act. The Company filed appeal before SC against the judgment of the High Court confirming levy of CST on disputed inter-State stock transfers treated as inter-State sales by the assessing authorities.

Held:
(1) The consistent view of this Court appears to be that even if there is no specific stipulation or direction in the agreement, for an inter-State movement of goods, if such movement is an incident of that agreement or if the facts and circumstances of the case denote it, the conditions of section 3(a) would be satisfied.

(2) In the instant case, the movement of goods from the assessee’s factory to its various godowns situated in different parts of country was pursuant to ‘Sales agreements’ coupled with ‘Forecasts’ which are nothing but ‘indents’ or firm orders. It does not matter how much goods were delivered to the branch office, which just acted as a conduit pipe before it ultimately reached the purchasers’ hands. All that matters is that the movement of the goods is in pursuance of the contract of sale or as of necessary incident to the sell itself.

(3) After considering the facts of the case, finding of fact by the assessing authorities duly confirmed by the Tribunal, SC held that impugned delivery of goods by the dealer’s factory to its various depots situated outside the State for delivery of goods to UIL against ‘Forecasts’ and ultimate delivery of goods to UIL by its depots to UIL is an inter-State sale liable to tax under the CST Act in the State of AP.

Accordingly the appeal filed by the dealer was dismissed.

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(2011) 39 VST 102 (All.) Shiv Nath Singh Yadav v. Assistant Controller (Grade I)/Sub-Divisional Magistrate, Bharatana and Ors. Trade tax — Recovery of tax — Limitation — When no time limit prescribed, recovery to be within reasonable time — Recovery proceedings taken twenty years after date of recovery certificate unreasonable.

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Interest — Not to be charged after twelve years — UP Trade Tax Act.

The petitioner, represented by his widow, was in arrears of sales tax dues for assessment years 1972- 1973 to 1975-1976 for which recovery certificate was issued on 16th February, 1985. After 20 years, the Sales Tax Officer wrote a letter dated August 20, 2004 to The Deputy Post Master, for payment of balance dues of Rs.755498, which includes interest payable till 26th August, 2004, from the petitioner’s P. O. Monthly Scheme Accounts,. The asseessee filed writ petition before the High Court against issue of recovery certificate.

Held:

(1) When no time limit is prescribed for recovery of dues, the State is also expected to be vigilant and to make the recovery of its dues from whatever means or manner within the time-frame. Considering the limitation of 12 years for instituting of suit relating to immovable property, a period of 12 years from the date of issuance of recovery certificate can be constructed to be a reasonable period for recovery of dues, though not as an absolute rule. But, the period of 19 years is certainly not a fair and reasonable time.

(2) Considering facts of the case, the High Court issued direction to the sales tax authority to prepare statement of account showing the principal amount of tax due with interest and payment thereof, etc. In preparing statement of account no interest on interest accrued shall be charged and further no interest even on the principal amount, if any, after 12 years of issuance of recovery certificate shall be levied. Any excess amount recovered shall be refunded with interest at the same rate at which it has been charged. The deficient amount, if any, as per the statement shall be recovered from the petitioner only after affording opportunity of hearing to her subject to the satisfaction that she has inherited property in excess of the amount now sought to be recovered as the balance.

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Inter-state stock transfer — Production of F Form — Goods returned or goods transferred on jobwork — Decision of SC that where F Form not produced by dealer without his fault, transactions to be assessed on merit — Direction by High Court — Section 6A of the Central Sales Tax Act, 1956.

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The petitioners had challenged the assessment order, reassessment orders and notices u/s.21(2) of the U. P. Trade Tax Act, 1948 for levy of CST on the transactions of job work and goods — returned transactions by treating as inter-State sales for non-production of ‘F’ forms.

Following the judgment in case of Ambica Steels Limited v. State of U.P., (2009) 24 VST 356 (SC), the Commissioner of Trade Tax issued Circular dated June 26, 2009 to the effect that where the trader/dealer of the State of U.P. had not received ‘F’ form the transferee in the other State, or where form F is not issued without any fault on the part of trader/dealer in the State of UP, the Assessment Authority shall examine the transactions between the parties, and will complete the assessment on merits. In view of the later development, the issue was raised before the High Court to consider applicability of section 6A, for production of F form, only with regard to transactions involving job work and goods return. The High Court without deciding on merit of the case issued directions.

Held:

(1) In all cases of assessment and reassessment in which the transactions of job work and goods returned are involved, the assessment/ re-assessment orders are set aside only to the extent that the tax was imposed on such transactions for want of form F.

(2) The petitioners were directed to appear before the authorities to decide the case on its merits after examining the transactions between parties, keeping in mind findings recorded earlier in assessment on such transactions and also that the asseessee is not in a position to obtain form F, for no fault of his.

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Rate of tax — Entries in Schedule — Battery chargers supplied with cell phone — Attracts same rate of tax applicable to cell phone — Punjab Value Added Tax Act, 2005.

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Facts:

The Company sold cell phone in a composite package, without any extra charge for supply of battery charger, which is a part of cell phone. The entry 60(6)(g) of Schedule B to the Punjab VAT Act, 2005 covers parts of the products mentioned therein. The Assessing Authority levied tax @12.5% on differential amount for supply of battery charger and not at concessional rate applicable to cell phone. This view of Assessing Authority was upheld by the Tribunal also. The company filled appeal to the Punjab and Haryana High Court against the decision of the Tribunal.

Held:

(1) When a cell phone is sold in a composite package, without any extra charge for the battery charger, the battery charger is a part of cell phone. Mere fact that the battery charger was not affixed to the cell phone will not mean that it is a different item. The entry in question cannot be read as excluding the battery charger which is necessary for use of the cell phone.

(2) Compared to the value of the cell phone, value of the charger is insignificant. Cell phone cannot be used without charger. On these undisputed facts the charger cannot be excluded from the entry for concessional rate of tax which applies to cell phones and parts thereto. Accordingly the appeal was allowed.

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(2011) 38 VST 142 (P&H) M/s. Jaibharat Gum and Chemicals Ltd. v. State of Haryana and Others

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VAT — Quantification of refund as per appeal order — No power to consider merit of case.

Facts:
The petitioner, the manufacturer of ‘guar gum’, exported ‘guar gum’. The petitioner claimed refund of tax paid on purchase of raw material ‘guar’ which was disallowed in assessment but in appeal it was granted. Thereafter, while quantifying refund as per appeal order, the revisional authority disallowed the refund on merit. The Tribunal confirmed the order of revisional authority disallowing refund. The petitioner filed petition before the Punjab and Haryana High Court against the order passed by the Haryana Tax Tribunal.

Held:
The High Court, following its earlier order in case of Raghbar Dass Hukam Chand & Co v. State of Haryana, (2009) 25 VST 574, allowed the petition. The relevant observations of the Court in the said case are as under:

“Therefore, we are of the view that on principle as well as on precedent, it stands established that an officer exercising power of determining the amount of refund cannot exercise the power of review or appeal or revision. Such an officer has to respect the order of assessment and then is required to proceed to determine the amount of refund. The provisions of section 43 read with Rule 36 postulates limits of their power as already noticed and, therefore, the orders passed by the Deputy Excise and Taxation Commissioner are liable to be set aside.”

However, the Court made clear that this will not affect the merits of liability of the petitioner in pending appeal.

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Works Contract — Treatment of effluent water — Property in chemical used immediately becomes property of customer — Consumption in process is after sale — Taxable — Section 5 of Kerala Sales Tax Act.

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Facts:

The dealer undertook works contract for effluent treatment at the place of employer by using certain chemicals. The chemical mixture used by the dealer is named as ‘enviroflock’. The waste water is subjected to chemical treatment by using such chemical at the place of the employer. Due to this chemical treatment, coagulation of suspended particles and precipitation of dissolved organics take place. The solid particles settled at the bottom and the clear liquid overflows. The overflow water is subjected to activated sludge process and oxygen is supplied by means of surface aerators. The treated water is discharged to the river without containing any chemicals or pollutant. The sales tax authorities levied tax on supply of chemicals used in effluent treatment holding it as a sale whereas the dealer contested that there is no sale as chemicals are consumed in the process. The Division Bench referred matter to the Full Bench in view of later decisions of SC. The Full Bench of the High Court by majority, after considering judgment of various High Courts and SC, confirmed the levy of tax.

Held:

(1) It is undoubtedly true that even after the 46th amendment to the Constitution, sales tax cannot be levied merely because there is a works contract. There must be a transfer of property in goods whether in the same form or in any other form.

(2) It is also undoubtedly true that in view of the decision of SC in Gannon Dunkerley & Co. v. State of Rajasthan, (1993) 88 STC 204, the cost of consumables involved in works contract cannot be taxed.

(3) The issue is when property in goods passes? When the dealer has used it, will it remain the owner of the chemical any longer? Will not the property in the goods pass to the awarder? The effluent and the treated effluent both belonged to the awarder. It is therefore, into the property of the awarder, namely, the effluent, that the dealer supplies the chemical. Just like the toner and developer having been put into Xerox machine becoming the property of the customer in the case before the Apex Court in Xerox Modicorp Ltd. case and the sale taking place before the goods are consumed, in the same way, the property in the chemical passed to the awarder the moment they are put into the effluent by the dealer and its subsequent consumption is the consumption after sale and it does not detract from the factum of sale and consequently the exigibility to tax becomes unquestionable.

(4) There was indeed a sale of chemical involved in the execution of the works contract, in view of the Judgment of the Apex Court in Xerox Modicorp Ltd. v. State of Karnataka, (2005) 142 STC 209), as there is delivery of the same to the awarder by virtue of the chemical being poured into the effluent. Per Shri A. K. Basheer J. (Dissenting view):

(1) The short question is whether or not the combination of chemicals known as ‘Envirofloc’ used by the petitioner for effluent treatment is a consumable as envisaged u/s.5(C)(1)(c)(iii) of the Act.

 (2) In case of Xerox ModiCorp Ltd., under the Standards and Service Maintenance Agreement (SSMA), the appellant-company was bound to maintain the xerox machines and supply the spare part including toners, developers, etc. as and when required. Obviously the cost of tonersand developers to be supplied by the appellant company were to be borne by the customers. The short question that arose for consideration was whether the appellant-assessee would be liable to be assessed to sales tax for the sale of toners, developers, spare parts, etc. Their Lordships held that transfer of property took place the moment the goods viz., toners, developers, spare parts, etc. were put into the machine. In other words, tangible goods in toners, developers, etc. were transferred as and when they were used by the customer.

(3) The dictum laid down in Xerox Modicorp has absolutely no relevance, particularly to the facts of this case. There is no transfer of any goods in property whether as goods or in some other form attracting levy of sales tax. Still further, by virtue of the provisions contained in section 5C(1)(c)(iii), the cost of the chemicals used by the petitioner for the purpose of effluent treatment is liable to be deducted, they being consumables.

The Full Bench of the High Court by majority held in favour of the Department holding sale of goods attracting sales tax.

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Rate of tax — Notification — Jaljira — Packed masala — Rajasthan Sales Tax Act, 1994, Notification Entry 184, dated 29-3-2001.

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Facts:

The Sales Tax Department filed SLP Nos. 113581 of 2008 and 15883 of 2008 before the SC against the judgment of the Rajasthan High Court holding sale of Jaljira by the dealer taxable @10% under residual Entry 199 being not a masala. The State Government issued Notification from time to time classifying packed masala attracting higher rate of tax. The Deputy Secretary, Finance Department, Government of Rajasthan clarified vide letter dated November 12, 2001 that the term ‘Packed Masala’ used in Entry 184 of Notification dated 29-3-2001, means a masala where two or more ingredients are mixed and sold in packed conditions. Spices sold singly will continue to be taxed as per Entry 82 (at the rate of 4% tax).

Held:

It is settled law that when a particular item is covered by one specified entry, then the revenue is not permitted to travel to the residual entry. There is no doubt that ‘Jaljira’ is a drink. The contents of ‘Jaljira’ are put into water and taken as digestive drink, but when we look into the manner and method of preparation we find that it is a mixture of different spices after grinding and mixing. Therefore, it is nothing but a ‘masala’ packed into packets of different nature and quantity. Accordingly it was held that for all practical purposes, it would come within the Entry 184 being a ‘masala’ and it cannot be said that it would come under the residuary entry as held by the High Court. The judgment of the High Court was set aside and assessment order was restored.

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(2011) 39 VST 213 (Bom.) Addl. Commissioner of Sales Tax v. Bunge India P. Ltd.

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Rate of tax — Margarine — Hydrogenated oil — Vanaspati — Taxable at 4% — Schedule Entry C-100 of Maharashtra Value Added Tax Act, 2002.

Facts:
The Additional Commissioner of Sales Tax, Maharashtra, filed an appeal to the Bombay High Court, against the decision of the Maharashtra Sales Tax Tribunal, dated July, 9 2010, holding that margarine sold under the brand name ‘Lotus Margarine’ is vanaspati within the meaning of Schedule Entry C-100 of the MVAT Act, 2002 and is taxable at 4%. The High Court dismissed the appeal and confirmed the decision of the Tribunal.

Held:
(i) As per the opinion of the expert, margarine is a food in plastic form or liquid emulsion containing not less than 80% fat oil, vanaspati and margarine, all are essentially mixed triglycerides of the fatty acid. Oil and vanaspati contained moisture only in trace quantities, whereas margarine being formulated product contained about 12 to 16% moisture and other additives. Margarine is formulated using hydrogenated vegetable oil.

(ii) The High Court took in to account the fact that the margarine produced by other manufacturers viz., Kamani or Godrej is taxable at 4%, so under the principle of parity margarine which is produced by the respondent is rightly made taxable at 4% by the Tribunal.

(iii) Further, during the period from 2006 to 2008 the margarine produced by the respondent was classified in Schedule C, Entry 100 as vanaspati and was taxable at 4% till the decision of the AO, so there is no need to change the view.

(iv) Accordingly, the High Court affirmed the view taken by the Tribunal holding that margarine is vanaspati to be classified under Schedule C, Entry 100 of the MVAT Act, 2002 and taxable at 4%.

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(2011) 39 VST 191 (WBTT) Shri Rameshkumar Mehta and Another v. Commercial Tax Officer

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Sales tax — Refund — Dealer entitled to refund as per returns filed where assessment is set aside as time-barred — Sections 30, 45(1) and 60 of West Bengal Sales Tax Act, 1994.

Facts:
The dealer applied for refund of excess payment as per returns filed and amount paid after assessment under compulsion, where assessment order was set aside by the Tribunal being barred by limitation. The Department rejected his application against which dealer filed an application before the West Bengal Taxation Tribunal. Since there was difference in opinion between technical and judicial members, the matter was referred to the Full Bench for decision.

Held:
(1) Absence of an assessment order does not and cannot mean that the assessee’s tax liability under the Act remains uncertified or un-quantified. If the assessment is not made, then the assessee’s tax liability gets quantified as per the amount of tax payable on the basis of the return figures. If the assessment is made, tax liability is quantified as determined/ assessed amount.

(2) Setting aside of an assessment order on the ground that it was time-barred and failure to pass an assessment order have the same legal impact.

(3) Section 60 of the Act providing for grant of refund did not confine refund only to excess payments made after an assessment order.

(4) Accordingly, the dealer is entitled to get refund of tax paid in excess, if the tax payable under the Act, even if excess payment is made voluntarily, if there is no unjust enrichment thereby. Accordingly, the application was allowed with direction to grant refund of TDS as well as paid after the assessment.

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(2011) 38 VST 392 (Gauhati) Bharat Press v. State of Assam and Others

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VAT-TDS — Exemption — Clarification by Commissioner prevails unless set aside by appropriate authority or Court of Law — Sections 9 and 105 of Assam Value Added Tax Act, 2003.

Facts :
The dealer filed writ petition before the Gauhati High Court against the order passed by the Deputy Secretary to the Government of Assam, Election Department denying exemption to the dealer from paying VAT on printing of compendium, handbook, manuals, etc. in connection with general elections to Lok Sabha, 2009. The dealer had done printing works and supplied it to the Government of Assam and submitted bills without charging tax, being exempt from payment of tax under Schedule Entry 5 of the First Schedule of the Assam VAT Act. Under the said Entry, no tax is payable on sale of ‘Books, Periodicals and Journals.’ The Govt. of Assam informed the dealer that the payment of bills to him will be subject to deduction of VAT. The dealer then sought clarification from the Commissioner of Sales Tax for rate of tax on items supplied, who on physical verification of samples, held that goods supplied by the petitioner to the Govt of Assam are books and exempt from payment of tax, being covered by Schedule Entry 5 of the First Schedule. Despite this the Deputy Secretary to the Government of Assam turned down the request of the petitioner for no deduction of tax from the payment of bills of the petitioner. The dealer filed writ petition before the Gauhati High Court. The High Court allowed the writ.

Held :
The Commissioner of Sales Tax in his order came to the conclusion that the materials supplied by the petitioner are bound books with cover as per Entry at serial No. 5 of the First Schedule, those are exempt from payment of VAT. When the taxing authority exercising his statutory power u/s.105 of the Act is of the opinion that the supplied materials are not taxable, then whoever may be the authority higher in position is not entitled to set at naught the said order, unless the same is quashed by the appropriate Appellate Authority or by a Court of law. The High Court allowed the writ petition.

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