TMI Blog2013 (1) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... ided in Schedule VII - Held that:- There can be no doubt that “resale” should be construed according to the definition of “sale” under the Act which includes the transfer of right to use goods. The fiction created in defining "sale" as including transactions which otherwise, in the ordinary sense, would not have been but for the deeming provision, must apply as respect the entire Act, its Schedules, and the Rules made under the Act. The fiction has been created with respect to the term "sale", and would definitely extend correspondingly to the word "resale" as well. Thus this is a logical extension of the principle that “where the draftsmen uses the same word or phrase in similar contexts, he must be presumed to intend it in each place to bear the same meaning”. The reasoning of the Tribunal, and its reliance on the Hamdard case (2007 (4) TMI 607 - SUPREME COURT) is upheld. Thus, leasing activity carried on by the assessees does amount to resale. Applicability of value added tax on goods "Unmodified form" - Held that:- Having considered the meaning of the term "form", this Court is of the view that in the context of applicability of value added tax on goods, "unmodified form" wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal lease rental received by him, for the corresponding tax period (when the purchase is made by him), as well as any other VATable transaction he may be engaged in. Thus, the question of spreading over his credit, proportionately or otherwise, is unfeasible and in any case not borne out by the VAT Act or the Rules - There is no warrant for such method - question answered in favour of the assessee. - ST.APPL. 4/11, 5/11, 6/11, 7/11, 8/11, 9/11 & 16/2011, C.M. APPL. 10492/2011 & Cross Appeal 13377/2012 - - - Dated:- 17-1-2013 - MR. S. RAVINDRA BHAT AND MR. R.V. EASWAR, JJ. Respondent : Through: Sh. Parag. P. Tripathi, Sr. Advocate with Ms. Avnish Ahlawat and Ms. Monisha Handa, Advocates, for VAT. Through : Ms. Prem Lata Bansal, Sr. Advocate with Sh. Ruchir Bhatia and Sh. Arnav Kumar, Advocates. Sh. Vineet Bhatia, Advocate. MR. JUSTICE S.RAVINDRA BHAT 1. The revenue assails, in Appeal Nos. STA 8-9/2011, the impugned order dated 14.12.1010 of the Appellate Tribunal Value Added Tax (the Tribunal, in short). Connected with these appeals are STA 4-6 of 2011 and STA 7 of 2011 where the revenue challenges the impugned orders dated 21.1.2011 and 27.1.2011 res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be availed. In support, counsel relied on Section 9(2)(b) read with Serial No 1 of the List of Non-Creditable Goods as provided in the Seventh Schedule to the Act. It was submitted that as motor vehicles fell within the ambit of Sl. No. 1, and did not fall within Sl. No. 2, it is ineligible for input tax credit. It was also argued that the leasing activity carried on by the assessees does not qualify as resale in unmodified form ; as a result, Sl. No. 2 of the list in the Seventh Schedule is not attracted. Counsel relied on the definition of form from The Law Lexicon (1982 Edn., P. Ramanatha Iyer) to contend that the visible aspect is important, and stands changed during use of a motor vehicle. 5. It was argued by Mr. Parag Tripathi, learned Senior Counsel for the revenue that in terms of Section 2(1)(zc)(vi) sale price includes, in relation to transfer of the right to use goods for any purpose , valuable consideration or hiring charges received or receivable for such transfer. Therefore, purchase price (which is to be construed accordingly) for the purpose of Section 9(1) would include just the hiring charges paid or payable for the acquisition of the right to use. The pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... like in the case of capital goods where a special provision has be enacted under Section 9(9) devising a complete mechanism. 9. It was argued that Rule 4(b) of the Rules was applicable only in cases of purchases occurring by way of transfer of a right to use goods; and that the Tribunal erred in invoking Rule 4(b). Consequently, when a dealer purchases an asset by way of acquiring the right to use the goods, he shall be entitled to only the tax credit which he has paid to the seller. Furthermore, urged counsel that in cases of outright purchases, the turnover of purchase would be the aggregate amount of purchase price paid or payable in a tax period. 10. The revenue, in response to the dealer‟s arguments in its appeal, defended the proportionately rule mandated by the Tribunal by placing reliance on the language of Section 9(1). Counsel underlined that this provision uses to expression to the extent of proportion of the goods which have been put to sale which manifests the proportionality rule. In spirit of this principle in section 9- and pursuant to Section 12, which empowers the government to prescribe the time at which a dealer shall declare turnover of purchases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es so far as the provision contained in sec. 9 is concerned. 24... In our considered view appellants, will have to satisfy all the clauses of section 9(2) for claiming input tax credit. Clause (b) disallows input tax credit for the purchase of non-creditable goods, as contained in Schedule VII to the Act. A careful perusal of Schedule VII shows the restriction to claim input tax credit is on goods‟ other than tradable goods. Schedule VII restricts the claim of input tax credit on the 26. The term resale has not been defined in the Act. However, common parlance, it means to sell the purchased goods in unmodified form i.e. the contrition in which these goods were at the time of purchase. In a lease transaction, a vehicle or any other commercial goods after purchase are subjected to sale‟ by way of transfer of right to use and so there can be no doubt that leasing of goods means nothing but resale in unmodified form and so goods cannot be treated as non-creditable goods for leasing activity. Thus though nomenclature wise, leased goods (such as vehicles, equipmentand computers) are in the nature of capital goods, which are described in the definition of capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty was imposed upon him u/s 45(1) of the Act. The matter came up before the Apex Court. It was argued before Their Lordships that after the assessment was made on the LR, the legal fiction came to end and thereafter this LR remained a mere debtor to the department and therefore, penalty could not be imposed upon him u/s 46(1). Dealing with these arguments, Their Lordships held that when a thing is deemed to be something else, it is to be treated as if it is that thing, though, in fact it is not. It is in this sense that legal representative becomes an assessee by the fiction and it is this fiction, which has to be fully worked out without allowing the mind to boggle. In view of the principle of law laid down in this judgment, there can be no hesitation in holding that a transaction which in fact is not a sale, being not a traditional sale, but is a sale as it is so deemed by virtue of 46th Amendment of the Constitution of India which has been incorporated in the definition of word sale in cl. (i) to cl. (vii) of section 2(1)(zc) of the Act, is a deemed sale not for limited purpose as conceived by the Ld. Commissioner but for all the purposes that are available to a transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods which are to be incorporated into the structure of a building owned or occupied by the person; Explanation.- This sub-section does not prevent a tax credit arising for goods and building materials that are purchased either for the purpose of re-sale in an unmodified form, or for the performance of a works contract on a building owned or occupied by another; (d) for goods purchased from a dealer who has elected to pay tax under section 16 of this Act; (e) for goods purchased from a casual trader; (f) to the dealers or class of dealers specified in the Fifth Schedule except the entry no.1 of the said Schedule (g) to the dealers or class of dealers unless the tax paid by the purchasing dealer has actually been deposited by the selling dealer with the Government or has been lawfully adjusted against output tax liability and correctly reflected in the return filed for the respective tax period. Non-creditable goods are listed in Schedule VII. The relevant entry from the list provided in Schedule VII reads as: 1. Subject to clauses 2 and 3 of this Schedule, the following goods shall be non-creditable goods for the purposes of this Act: i. All automobiles in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not open to the court to artificially divide the concept. It was held, in East End Dwellings Co. Ltd. v. Finsbury Borough Council (1952 AC 109) that: " if you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. One of those in this case is emancipation from the 1939 level of rents. The statute says that you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs ". 15. In the present case, once it is held that the leasing of a car results in transfer of its right to use, the provisions of Section 9(1) would apply, because the cars were purchased by him, for the purpose of making sales (within the extended definition, i.e as leasing or selling the right to use). The concept of right to use would cover a wide spectrum of transactions; most certainly, a lease of the article, for a limited period, would be comprehe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w Lexicon (supra) that the Revenue‟s counsel relied on is: The word form‟ connotes a visible aspect such as shape or mode in which a thing exists or manifests itself, species, kind or variety. Rice in all forms would mean all kinds or variety of rice by species of rice, such as broken rice, kichidi rice, pichodi rice or rice, flour, etc. In this view of the matter there is no justification in holding that rice‟ in item No. 1 of the exempted articles in Schedule I, Hyderabad General Sales Tax be interpreted as meaning cooked rice or biryani or pulao. (Kayani Co. v. Sales Tax Commissioner, AIR 1953 Hyd 252 at 253) 18. The following dictionary meanings of form‟ are also useful: The outer shape or structure of something, as distinguished from its substance or matter - The Black‟s Law Dictionary (7th Edn., Bryan A. Garner) 1. A way in which a thing exists or appears; 2. A type or variety of something. Concise Oxford English Dictionary (10th Edn., Judy Pearsall) 1. The shape or configuration of something as distinct from its colour, texture, etc; 2. The particular mode, appearance, etc in which a thing or person manifests itself: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue and in favour of the assessee dealer accordingly. Question No. (c) 21. The assessee contended that the impugned orders of the Tribunal, to the extent they hold that input credit can be availed only in proportion to the tax paid, is not borne out by the statute, and there is no express limitation in that regard in Section 9, warranting such interpretation. Reliance was placed upon Vyasa Bank v. Commissioner of Income Tax, (2008) 17 VST 122 (Ori) to argue that when assessee leased out goods, it amounted to deemed sale . The Court held that no tax can be imposed by way of subsequent lease rent in respect of the same goods under the Orissa Sales Tax Act; reliance was also placed on I.T. C. Classic Finance and Services v. Commissioner of Commercial Taxes, 1995 (1) ALT 563 and Bharat Sanchar Nigam Ltd. and Anr. v. Union of India (UOI) and Ors., AIR 2006 SC 1383. 22. This Court in Jaishree Exports Vs.Commissioner Trade Taxes Department (STA Nos.11-12/2011, decided on 23-2-2012) outlined the general scheme of the provisions of the DVAT Act, and the dealers‟ rights and obligations in filing returns and claiming credit, in the following terms: 11. A conjoint and har ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also reproduced hereunder: Definitions: (r) input tax in relation to the purchase of goods, means the proportion of the price paid by the buyer for the goods which represents tax for which the selling dealer is liable under this Act; (zd) sale price means the amount paid or payable as valuable consideration for any sale, including- (i) the amount of tax, if any, for which the dealer is liable under section 3 of this Act; (ii) in relation to the delivery of goods on hire purchase or any system of payment by installments, the amount of valuable consideration payable to a person for such delivery including hire charges, interest and other charges incidental to such transaction; (iii) in relation to transfer of the right to use any goods for any purpose (whether or not for a specified period) the valuable consideration or hiring charges received or receivable for such transfer; (iv) any sum charged for anything done by the dealer in respect of goods at the time of, or before, the delivery thereof; (v) amount of duties levied or leviable on the goods under the Central Excise Act, 1944 (1 of 1944) or the Customs Act, 1962 (52 of 1962), or the Punjab Excise Act, 1914 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r which the person is liable under Section 3 of this Act; (zn) value of goods means the fair market value of the goods at that time including insurance charges, excise duties, countervailing duties, tax paid or payable under the Central Sales Tax Act, 1956 (74 of 1956) in respect of the sale, transport charges, freight charges and all other charges incidental to the transaction of the goods. xxxxxxxxxxxx xxxxxxxxxx xxxxxxxxxxx Section 9 xxxxxxxxxxxx xxxxxxxxxx xxxxxxxxxxx (3) The amount of the tax credit to which a dealer is entitled in respect of the purchase of goods shall be the amount of input tax arising in the tax period reduced in the manner described in sub-sections [(4) , (6) and (10)] of this section. (4) Where a dealer has purchased goods and the goods are to be used partly for the purpose of making the sales referred to in sub-section (1) of this section and partly for other purposes, the amount of the tax credit shall be reduced proportionately. (5) The method used by a dealer to determine the extent to which the goods are used in the manner specified in sub-section (4) of this section, shall be fair and reasonable in the circumstances: PROVIDED t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax credit shall be allowed in the tax period in which such capital goods are sold and only after adjusting the output tax payable by him: [PROVIDED FURTHER that where the dealer transfers such capital goods from Delhi otherwise than by way of sale before the expiry of three years from the date of purchase, he shall, after claiming the balance amount of input tax, if any, not availed earlier in respect of such capital goods, reduce the input tax credit by the prescribed percentage of the purchase price of such capital goods and make adjustments in the input tax credit in the tax period in which these capital goods are so transferred: PROVIDED ALSO that where a dealer has purchased capital goods and the capital goods are to be used partly for the purpose of making sales referred to in sub-section (1) of this section and partly for other purposes, the amount of tax credit shall be reduced proportionately: PROVIDED ALSO that no tax credit in respect of capital goods shall be allowed if such capital goods are used exclusively for the purpose of making sale of exempted goods specified in the first schedule: PROVIDED ALSO that no tax credit in respect of capital goods sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or type of sale. Section 9 (6) says that where a dealer purchases goods that are entitled to credit, the amount of tax credit shall be reduced by a prescribed percentage. Section 9 (9) is by far the most important provision. It enacts the principle of proportionate grant of input credit, in point of time, but only in respect of capital goods. The omission to enact a similar provision in respect of different categories of sale transactions (such as, for instance, the sale of the right to use) on the one hand, and the enactment of Section 2 (zd) (iii) which specifically deals with sale price in respect of transfer of the right to use, coupled with Section 2 (zm) ( turnover ) which states that turnover is aggregate of sale price, point to legislative deliberation that the theory of proportionality, of the kind, sought to be propounded by the revenue, - and accepted by the Tribunal, has no statutory basis. Once the legislature entitles the assessee as in this case, to a certain benefit of input credit, and puts in place a mechanism for working it out, which expressly provides one kind of proportional input credit, to a class of transactions, i.e. in relation to capital goods, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his appears to be an innovation suggested by the revenue, accepted somewhat readily by the Tribunal. When a dealer, who is involved in leasing business, purchases cars, the point at which credit can be claimed is the tax period when he makes the purchase. The amount of tax on the purchase so made- can be claimed as a credit, in the turnover which he is obliged to declare to the VAT authorities. That turnover would be the total lease rental received by him, for the corresponding tax period (when the purchase is made by him), as well as any other VATable transaction he may be engaged in. Thus, the question of spreading over his credit, proportionately or otherwise, is unfeasible and in any case not borne out by the VAT Act or the Rules. There is no warrant for such method. On the contrary, as held earlier, the presence of Section 9(9) and other clear terms is a pointer to the contrary. This question, therefore, is answered in favour of the assessee, and against the revenue. 29. It is further clarified that the interpretation that has been put to the relevant provisions while deciding Question no. (c) would remain same for both the versions of section 9(1). The original-unamend ..... X X X X Extracts X X X X X X X X Extracts X X X X
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