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TMI Blog2014 (12) TMI 1024X X X X Extracts X X X X X X X X Extracts X X X X ..... in upholding levy of penalty and interest?" 2. The appellants herein are registered dealers under the Delhi Value Added Tax Act, 2004 (DVAT Act, for short). They had purchased motor vehicles/cars and paid sales tax or Value Added Tax (VAT, for short) at the point of purchase, either under the Delhi Sales Tax Act, 1975 (DST Act, for short) or DVAT Act. Input tax credit was not availed/granted on the Sales Tax or VAT paid on the motor vehicles. The appellants were not dealers or traders in motor vehicles, but manufacturers or traders dealing in other commodities. This factual position is undisputed. 3. The dispute and the question to be determined is whether the sale consideration received by the appellants on the resale of the used motor vehicle to third parties should be added or included in the taxable turnover thereby entailing payment of VAT. The appellants submit that the sale price of the used vehicle cannot be included in the turnover, whereas the Revenue i.e. the Value Added Tax authorities, submit that the sale consideration received is a part of the business turnover. 4. The Appellate Tribunal, Value Added Tax, has held that the sale price of used motor car should be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of this clause - (i) any transaction of sale or purchase of capital assets pertaining to such service, trade, commerce, manufacture, adventure or concern shall be deemed to be business; (ii) purchase of any goods, the price of which is debited to the business and sale of any goods, the proceeds of which are credited to the business shall be deemed to be business; xxxxxx (f) "capital goods" means plant, machinery and equipment used, directly or indirectly, in the process of trade or manufacturing or for execution of works contract in Delhi; xxxxx (t) "non-creditable goods" means the goods listed in the Seventh Schedule; xxxxxx (zc) "Sale" with its grammatical variations and cognate expression means any transfer of property in goods by one person to another for cash or for deferred payment or for other valuable consideration (not including a grant or subvention payment made by one government agency or department, whether of the central government or of any state government, to another) and includes- (i) a transfer of goods on hire purchase or other system of payment by installments, but does not include a mortgage or hypothecation of or a charge or pledge on goods; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 (1 of 1944) or the Customs Act, 1962 (52 of 1962), or the Delhi Excise Act, 2009 (Delhi Act 10 of 2010) whether such duties are payable by the seller or any other person; and (vi) amount received or receivable by the seller by way of deposit (whether refundable or not) which has been received or is receivable whether by way of separate agreement or not, in connection with, or incidental to or ancillary to the sale of goods; (vii) in relation to works contract means the amount of valuable consideration paid or payable to a dealer for the execution of the works contract; less - (a) any sum allowed as discount which goes to reduce the sale price according to the practice, normally, prevailing in trade; (b) the cost of freight or delivery or the cost of installation in cases where such cost is separately charged; and the words "purchase price" with all their grammatical variations and cognate expressions, shall be construed accordingly; PROVIDED that an amount equal to the increase in the prices of petrol and diesel (including the duties and levies charged thereon by the Central Government) taking effect from the 6th June, 2006 shall not form part of the sale price of petrol and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnover arising during the tax period which remains after deducting therefrom - (a) the turnover of sales not subject to tax under section 7 of this Act; and (b) the turnover of sales of goods declared exempt under section 6 of this Act. (2) In the case of turnover arising from the execution of a works contract, the amount included in taxable turnover is the total consideration paid or payable to the dealer under the contract excluding the charges towards labour, services and other like charges, subject to such conditions as may be prescribed: Provided that where the amount of charges towards labour, services and other like charges is not ascertainable from the books of accounts of the dealer, the amount of such charges shall be calculated at the prescribed percentages." xxxxxx 6 Sale exempt from tax (1) ......... (2) ........ (3) Where a dealer sells capital goods which he has used since the time of purchase exclusively for purposes other than making non-taxed sale of goods, and has not claimed a tax credit in respect of such capital goods under section 9, the sale of such capital goods shall be exempt from tax. xxxxxxx 9. Tax credit (1) Subject to sub-section (2) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that the Commissioner may - (a) after giving reasons in writing, reject the method adopted by the dealer and calculate the amount of tax credit; and (b) prescribe methods for calculating the amount of tax credit or the amount of any adjustment or reduction of a tax credit in certain instances. Explanation.- A person may object in the manner referred to in section 74 of this Act to a decision of the Commissioner to reject a method of calculating a tax credit. (6) [Notwithstanding anything contained to the contrary in sub-section (1), where -] (a) a dealer has purchased goods (other than capital goods) for which a tax credit arises under sub-section (1) of this section; (b) the goods or goods manufactured out of such goods are to be exported from Delhi by way of transfer to a - (i) non-resident consignment agent; or (ii) non-resident branch of the dealer; and (c) the transfer will not be by way of a sale made in Delhi; the amount of the tax credit shall be reduced by the prescribed percentage. (7) For the removal of dou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 shall be allowed on that part of the value of such capital goods which represents the amount of input tax on such capital goods, which the dealer claims as depreciation under section 32 of the Income Tax Act, 1961 (43 of 1961). (c) If any capital goods in respect of which tax credit is allowed under clause (a) of this sub-section is transferred to any other person otherwise than by way of sale at the fair market value before the expiry of a period of five years from the date of purchase, the tax credit claimed in respect of such purchase shall be 9[reversed] in the tax period during which such transfer takes place.". (10) Notwithstanding anything contained to the contrary in sub-section (1), where - (a) a dealer has purchased goods (other than capital goods) for which a tax credit arises under sub-section (1) of this section; and, (b) the goods or goods manufactured out of such goods are to be exported from Delhi by way of sale made under sub-section (1) of Section 8 of the Central Sales Tax Act, 1956, the amount of the tax credit shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 2(zd) as the amount paid or payable as valuable consideration for any sale. We need not refer to the sub-clauses. (v) The definition of term 'sale price' must be read along with definition of term 'sale'. The term sale 'sale' as defined in Section 2(zc) refers to its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another. It is a very wide definition but it relates to transfer of property in goods and not immovable property. Therefore, in spite of wide definition of the term "business" which also in the Explanation refers to capital assets, when we refer to the expression 'sale price', we have to keep in mind the definition of the word 'sale'. (vi) Section 2(t) states that goods mentioned in the seventh schedule are not taxable. Sections 9 of the DVAT Act 8. Under Section 9(1) of DVAT Act, the assessee who is a dealer including a registered dealer is entitled to tax credit of the turnover of purchases incurred during the tax period in the course of activities as a dealer and in respect of the goods used by him directly or indirectly for the purpose of making sale that are liable to tax under Section 3 of the DVAT Act a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to sub-section (9) and the provisos, to examine whether or not they would be applicable. Section 6(3) of the DVAT Act and its interpretation 11. This brings us to sub-section (3) to Section 6, which relates to exemption from VAT. The price sale received and covered by section 6(3) is not be included in taxable turnover. The sub-section can be divided into parts for better and more accurate appreciation and interpretation. The first part specifies that the sub-section relates to sale of capital good which has been used since the time of the purchase. It refers to the use of the capital good sold by the dealer. Thus, the capital good referred to in the said sub-section are distinguishable and do not include or refer to goods in which the dealer is trading i.e. goods that form a part of the stock in trade. Section 6(3) states that the capital good should be used i.e. should not be new. The time or period of use, however, is immaterial. Sub-section (3) thereafter postulates two other requirements for the sale of such capital goods to be treated as exempt from sale. First requirement relates to the business of the dealer. Use of double negative is somewhat confusing but considered e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereto varies from State to State in terms of the applicable enactment. The justification and reason given for including and giving tax credit in respect of capital goods, which do not form a part of the stock in trade, is that it leads to capital formation of the country, when depreciation is made deductible from the tax base and, therefore, tax paid on capital goods used directly or indirectly for the purpose of business should be set off against VAT liability. These are, however, areas in the realm of Legislation. The courts only interpret the Statutes as enacted. Therefore, we are not concerned with the rationale behind of allowing input tax credit on capital goods or the reason for denying input tax credit under sub-section (2) to Section 9. Albeit what is discernible is that a dealer is given tax credit for the goods purchased or used as inputs, which are set off from the tax payable on the turnover which would include the sale price received on the sale. Therefore, when input tax credit is granted in respect of capital goods under section 9(9), consequences emanate and ensue on the sale of the said capital goods. But section 9(9) of the DVAT Act is not applicable and appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not creditable goods. They did not expressly or impliedly excluded "capital good" mentioned in schedule VII from application of the section 6(3) of the DVAT Act. 15. The second contention raised by the Revenue is that motor vehicles are not capital goods as defined in Section 2(f) of the DVAT Act for they cannot be treated as plant, machinery or equipment used directly or indirectly in the process of trade or manufacture etc. Reliance was placed upon the decision of the Supreme Court in Commissioner of Central Excise, Allahbad vs. Ginni Filaments Ltd. AIR 2005 SC 1330. This contention is also fallacious and without merit. In Ginni Filaments (supra), the Supreme Court was examining an exemption notification under the Excise Act, 1944, which was restricted to the goods used in manufacture and packaging. In view of the restrictive language of the notification which granted exemption for goods used in manufactured by an 100% Export Oriented Unit, it was held that the goods actually used in manufacture or production were exempt. The words used in the notification were contrasted from the phase "in connection with" manufacture. The said words, it was observed were broader and wider and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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