TMI Blog2014 (12) TMI 1024X X X X Extracts X X X X X X X X Extracts X X X X ..... Act would be applicable and the benefit cannot be denied. Scope of the plant under DVAT - Held that:- the word ‘plant’ has not been defined in the DVAT Act and in ordinary sense it includes whatever apparatus is used by a business man for carrying on his business but not his stock-in-trade which he buys or makes for sale - the word ‘plant’ or ‘machinery’ is not restricted only to mechanical processes or apparatus – the same has been decided by the Supreme Court in the case of Scientific Engineering House Pvt. Ltd. vs. CIT [1985 (11) TMI 1 - SUPREME Court] wherein it has been held that Plant will include any article or object fixed or movable, live or dead, used by a businessman for carrying on his business and it is not necessarily confined to an apparatus which is used for mechanical operations or processes or is employed in mechanical or industrial business. However, in order to qualify as plant, the article must have some degree of durability – exemption allowed - Decided in favour of appellant dealers. - ST. APPL. 35/2014, ST.APPL. 37/2014, ST. APPL. 38/2014, ST.APPL. 41/2014, ST.APPL. 42/2014, ST.APPL. 44/2014, ST.APPL. 55/2014, ST.APPL. 57/2014, ST.APPL. 61/2014 - - - D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Trade and Taxes and Ors. (2013) 59 VST 524 (Delhi), on the ground that the said decision related to DST Act, wherein the term business was given a more restricted meaning. In Panacea Biotech Ltd (supra) it was, interalia, held that sale of used motor vehicles cannot be treated as part of turnover as this was neither ancillary nor incidental to the business, when the business of the assessee was not dealing with sale and purchase of vehicles. We agree with the Tribunal that Panacea Biotech Ltd case ( supra) would not apply, but express our inability to agree with legal findings and conclusion recorded by the Tribunal. 5. In order to appreciate the controversy, we would like to first reproduce definition clauses 2(d) which defines the term business ; 2(f) which defines the term capital goods ; 2(t) which defines the term non-creditable goods ; 2(zc) which defines sale ; 2(zd) which defines the term sale price and ; 2(zm) which defines the term turnover , and read as under: 2. Definitions .. (d) business includes (i) the provision of any services, but excluding the services provided by an employee;] (ii) any trade, commerce or manufacture; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f their main activity also sell goods repossessed or re-claimed; (iv) transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (v) transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (vi) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (vii) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service is for cash, deferred payment or other valuable consideration; (viii) every disposal of goods referred to in sub-clause 15[(vii)] of clause (j) of this 16[sub-section]; and the words sell , buy and purchase wherever appearing with all their grammatical variations and cognate expressions, shall be construed accordingly; xxxxxx (zd) sale price means the amount paid or payable as valuable consideration for any sale, including- (i) the amount of tax, if any, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment) taking effect from the 25th June, 2011 shall not form part of the sale price of diesel (HSD) sold on or after the date of the commencement of the Delhi Value Added Tax (Second Amendment) Act, 2011 till such date as the Government may, by notification in the official Gazette, direct or if the price of diesel (HSD) falls below the sale price prior to 25th June, 2011, whichever is earlier: PROVIDED further that if the price of diesel (HSD) further increases from the level of price as on 25th June, 2011, the first proviso shall not have any effect on such further increase: PROVIDED also that if the price of diesel (HSD) declines but remains above the price prevailing prior to 25th June, 2011, the first proviso shall have effect to the extent of the remaining increase: PROVIDED also that the first proviso shall not take effect till the benefit is passed on to the consumers. PROVIDED that where the dealer makes sale of goods imported into the territory of India, the sale price shall be greater of the following: (a) the valuable consideration received or receivable by the dealer; (b) value determined by the Custom authorities for payment of custom duty at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of making (a) sales which are liable to tax under section 3 of this Act; or (b) sales which are not liable to tax under section 7 of this Act. Explanation.- Sales which are not liable to tax under section 7 of this Act involve exports from Delhi whether to other States or Union territories or to foreign countries.] (2) No tax credit shall be allowed (a) in the case of the purchase of goods for goods purchased from a person who is not a registered dealer; (b) for the purchase of non-creditable goods; (c) for the purchase of 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; (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r work and is not engaged in the business of manufacturing of goods for sale by him and incidental to the business of job work or labour work, obtains any waste or scrap goods which are sold by him. (8) The tax credit may be claimed by a dealer only if he holds a tax invoice at the time the prescribed return for the tax period is furnished. (9)(a) Notwithstanding anything contained to the contrary in sub-sections (1) and (3) and subject to sub-section (2), tax credit in respect of capital goods shall be allowed as follows: - (i) 1/3rd of the input tax on such capital goods arising in the tax period, in the same tax period; (ii) balance 2/3rd of such input tax, in equal proportions, in corresponding tax periods, in two immediately successive financial years : PROVIDED that, where the dealer sells such capital goods, the dealer shall be allowed as tax credit, the balance amount of the input tax, if any, in respect of such capital goods as has not been earlier availed as tax credit, such 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 tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax period, in the same tax period; (b) balance 3/4th of such input tax, in equal proportions, in corresponding tax periods, in three immediately successive financial years. The definition clauses and their interpretation 7. (i) The term business as defined in Section 2(d) includes any trade, commerce or manufacture, any adventure or concern in the nature of trade, commerce, manufacture, adventure or any occasional transaction in connection with, incidental or ancillary to such trade, commerce, manufacture, adventure or concern. The Explanation expands the scope of the term business to include any transaction of sale or purchase of capital assets pertaining to such service, trade, commerce, manufacture, adventure or concern. The said transactions of capital assets are deemed to be a business. (ii) The expression capital goods has been defined in Section 2(f) to mean plant, machinery and equipment used directly or indirectly in the process of trade, manufacture or for execution of the works contract in Delhi. Thus, all plant, machinery and equipment used directly or indirectly in the process of trade, manufacture or execution of works are treated as capital goods. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x under Section 7. However, sub-section (1) is subject to sub-section (2) to section 9. Sub-section (2) to section 9 significantly qualifies that no tax credit shall be allowed in a case covered by any of the sub-clauses mentioned therein. We are only concerned with clause (b) as in the present case. The said clause to section 9(2) is applicable as the motor cars purchased and sold were non-creditable goods and they were/are included in the seventh Schedule of the DVAT Act. 9. The effect of section 9(2) would be that no credit would be granted to a dealer like the appellants on the VAT paid on the purchase of motor vehicles as they were not dealers trading in motor vehicles. Thus, the motor vehicle would be a capital good as defined in Section 2(f) and purchase thereof would form part of the business, but input tax credit of VAT paid would not be available. 10. Sub-section (9) of Section 9 of the DVAT Act, is a non-obstante clause overriding sub-sections (1) and (3). However, primacy and overriding effect of sub-section (2) to Section 9 is not negated by sub-section (9). Dominance of Section 9(2) is not disturbed or over-ridden by sub-section (9) to section 9 of the DVAT Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods, this requirement for claiming exemption under Section 6(3) would be satisfied. The last requirement is that the dealer should not have taken tax credit in respect of capital goods. Once the aforesaid requirements are satisfied, the sale of such capital goods is treated as exempt from tax. To crystallize, the four conditions stipulated in Section 6(3) of the DVAT Act, to claim exemption are: (1) There should be sale of capital goods; (2) The said capital goods should have been used by the dealer from the time of purchase till sale; (3) The purpose for which the capital goods were used should be for making sale of taxable goods or taxable goods and non-taxable goods. The capital goods should not be exclusively used for making sale of non-taxable goods. (4) The dealer should not have taken tax credit in respect of such capital goods under Section 9. 12. The aforesaid interpretation to Section 6(3) is in consonance and accord with the underlining principle and objective of a VAT Legislation. VAT prevents cascading effect of taxation and also reduces tax evasion. The White Paper on State level VAT Act by the empowered committee of State Finance Ministers dated 27th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfied. Therefore, the requirements; the capital goods should have been used by the dealer; that the capital goods should have been used for the purposes of business of the assessee and the said business should not be restricted or exclusively relating to non-taxable goods and the assessee should not have taken or granted tax credit on the capital goods. In the cases of the appellants, if these conditions are satisfied then the sale price received by the appellant dealers on sale of used motor vehicles would not be included in the turnover for it would be exempt from tax under Section 6(3) of the DVAT Act. Therefore, in view of the accepted and admitted facts, section 6(3) of DVAT Act would be applicable and the benefit cannot be denied. 14. At this stage, we must deal with two other contentions raised by the counsel for the State/Revenue. The first contention was that the last part of Section 6(3) would not apply if the dealer cannot be granted tax credit in terms of Section 9(2) of the DVAT Act. In other words, the submission of the Revenue is that the assessee voluntarily should not have taken input tax credit, though he was entitled to claim input tax credit under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as an input. The restrictive meaning is clearly missing in section 2(f) of the DVAT Act which expressly states, to quote, capital goods, means plant, machinery and equipment used directly or indirectly, in the process of trade or manufacture . Section 9(1) which deals with tax credit, also uses the expression goods to be used directly or indirectly for the purpose of making sales liable to tax under Section 3 of the DVAT Act and sales which are not liable to tax under Section 7 of the DVAT Act. The Legislature has deliberately used the words directly or indirectly to reflect the wider meaning which they wanted to give to the expression capital goods . 16. The word plant has not been defined in the DVAT Act and in ordinary sense it includes whatever apparatus is used by a business man for carrying on his business but not his stock-in-trade which he buys or makes for sale. Plant includes all goods and chattels fixed or movable, live or dead which is required for his business (see observations of Lindley LJ in Yarmouth vs. France [(1887) 19 QBD 647)]. However, generally a place in which the business is carried out is not treated as a plant. It is also clear that the word ..... X X X X Extracts X X X X X X X X Extracts X X X X
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