TMI Blog2014 (12) TMI 1144X X X X Extracts X X X X X X X X Extracts X X X X ..... as not sold the goods at a price below the purchase price - The net amount of trading account has been arrived at, after making adjustments of discount, purchase returns and other direct expenses. There is distinction between the scheme of tax on sale of goods both under the VAT regime and under the Sales Tax Act existing prior to that - Under the Sales Tax Act except a few items, all other goods were taxable at the point of first sale in the State - Therefore tax was levied and collected only from the first seller - Contrary to this, the scheme under the VAT regime is that the tax collected by the first seller is given as Input Tax Credit to the second seller, and the tax paid by the second seller is given as Input Tax Credit to the third seller and ultimately the entire tax is borne by the consumer - the tax paid on the value addition by a series of dealers is ultimately passed on to the consumer and dealers get reimbursement of the tax paid by them. ITC is not a concession granted under the scheme of Rajasthan VAT Act, 2003 - No set-off is given in respect of the tax paid by the appellant on the purchases of the raw material made by him outside the State of Maharashtra evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eech, religion etc. The legislature should be allowed some play in the joints and there is no straitjacket formula particularly in case of legislation dealing with economic matters and having regard to the nature of the problem required to be dealt with, greater play in the joins has to be allowed to the legislature - The Court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas, where fundamental human rights are involved - the word 'subsidize' would mean the price to be subsidized by the government, under any scheme - The word 'subsidize', in sub-section (3A) of Section 18, has not been used in a sense, in which the goods are sold on any concession, exemption, or subsidy, given by the State Government under any scheme - the constitutional validity of sub-section (3A) of Section 18 of the Rajasthan VAT Act, 2003 is upheld – Decided against petitioner. - D B Civil Writ Petition No.5521/2014 - - - Dated:- 12-11-2014 - MR. SUNIL AMBWANI AND MR. V IJAY BISHNOI, JJ. Mr. Dinesh Mehta, Mr.Lalit Pareek for the petitioner JUDGEMENT Per: Sunil Ambwani: 1. We have heard learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the definitions of 'Input Tax' 'Reverse Tax', and Section 18, including the amended sub-section (3A) of Section 18 of the VAT Act, 2003 inserted by Section 7(iii) of the Finance Act, 2011, as follows:- Section 2(17):- 'Input Tax' means tax paid or payable by a registered dealer in the course of business, on the purchase of any goods made from a registered dealer. Section 2(33):- 'Reverse Tax' means that part of the input tax for which credit has been availed in contravention of the provisions of section 18. Section 18. Input Tax Credit.- (1) Input tax credit shall be allowed, to registered dealers, other than the dealers covered by sub-section (2) of section 3 or 5, in respect of purchase of any taxable goods made within the State from a registered dealer to the extent and in such manner as may be prescribed, for the purpose of - (a) sale within the State of Rajasthan; or (b) sale in the course of Inter-state trade and commerce; or (c) sale in the course of export outside the territory of India; or (d) being used as packing material of goods, other than exempted goods, for sale; or ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being asked to do so by an officer not below the rank of Assistant Commercial Taxes Officer authorised by the Commissioner. (3A) Notwithstanding anything contained in this Act, where any goods purchased in the State are subsequently sold at subsidized price, the input tax allowable under this section in respect of such goods shall not exceed the output tax payable on such goods. (4) The State Government may notify cases in which partial input tax credit may be allowed subject to such conditions, as may be notified by it. 8. It is submitted that the insertion of Section 18(3A) in the Rajasthan VAT Act, 2003, is totally against the basic concept of law, governing Input Tax Credit. While inserting such a provision, the legislature has failed to consider the prevailing market practice and the nature of trade. It has curtailed the vested rights of the dealer. 9. It is submitted that the claim of credit of the tax paid at the time of purchase, that is, Input Tax Credit is an indefeasible and concrete right of the assessee. The assessee is entitled for claiming credit of the tax paid at the time of purchase on the goods, and such right cannot be taken away, curtailed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iability, which was subsequently demanded alongwith interest, the interest is payable only from the expiry of the date, on which the amount becomes due for payment, as per the revised demand notice. In the present case, there is no default in making payment of the tax payable by the petitioner. 13. We do not propose to decide the question about the demand of interest in the assessment order, for such demand is sought to be challenged on the ground that it is illegal, and violative of the provisions of Section 55 of the VAT Act, 2003, and that, such question has to be considered by the Appellate Authority in an appeal to be filed by the petitioner, and thereafter, if he is still aggrieved, he may approach the Tribunal. The challenge to any assessment order cannot be ordinarily made by way of filing a writ petition, without availing the alternative remedies of filing an appeal and review petition under the Act. 14. So far as the question of validity of the provisions of subsection (3A) of Section 18, which was inserted by Section 7(iii) of the Finance Act, 2011 with effect from 9.3.2011 is concerned, we do not find that the challenge has been made on the ground that the State L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er direct expenses. The amount so shown in purchase, is by way of net purchase, just to calculate the landing cost of the material, after adjusting all types of expenses and incentives. There is no provision in the VAT Act, 2003 about the charging of tax on trading loss. The reversal of Input Tax Credit is indirectly the levy of VAT on trading loss, because of discounts and schemes received by the assessee from the company, and is not the amount, which was reduced by him in sale bills from the sale price. In fact, it was not received from the cement company, in compliance to the various schemes. The Supreme Court has not accepted the stand of the Department in the Special Leave Petitions, that the sales tax can be levied on discount in a judgment delivered for the period, prior to 9.3.2011. As an alternative, it was stated in the reply that as per the trading results, if there is any loss in the trading account, it is because of the cut throat competition in the market. The assessee has managed the profits from the schemes and discounts received from the company, in the form of various discount schemes. The trading loss is a normal business phenomena, and it is very usual in the ty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as sales tax is a State subject and sales tax on sales within the State can be levied under Entry 54 of List II by respective State Governments. Initially the States Governments were reluctant to introduce VAT in their respective States. After persuasion by Central Government, all States ultimately agreed to introduce the State Level Sales Tax - VAT at the Conference of Chief Ministers of all States at Delhi in November, 1999. A High Power Committee (termed as Empowered Committee ) consisting of senior representatives of all 29 States was constituted under Chairmanship of Dr. Asim Dasgupta. Introduction of VAT was delayed on several occasions. Finally, it was announced that all States agreed to introduce VAT with effect from 1.4.2005. A White Paper was released by the Empowered Committee on 17.1.2005 and the said White Paper is a Policy Document indicating the basic policies of the State Sales Tax VAT. The White Paper circulated by the Empowered Committee of State Finance Ministers furnished the following rationale for the introduction of VAT: In the existing sales tax structure, there are problems of double taxation of commodities and multiplicity of taxes, resulting in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge on sales tax, additional surcharge, etc., but with introduction of VAT, these other taxes have been abolished. As a result, over all tax burden will be rationalised and prices in general will also fall. 24. It is not correct to contend that ITC is not a concession granted under the scheme of Rajasthan VAT Act, 2003. In Godrej and Boyce Mfg. Co. Pvt. Ltd. v. Commissioner of Sales Tax and others, (1992) 3 SCC 624, the Supreme Court dealt with Rule 41 of Bombay Sales Tax Rules which provides for setting off the purchase tax paid by the appellant on the raw material purchased by him within the State of Bombay. No set-off is given in respect of the tax paid by the appellant on the purchases of the raw material made by him outside the State of Maharashtra evidently for the reason that such tax is paid to such other States. While considering the provisions for grant of setting off under Rule 41 of Bombay Sales Tax Rules and observing that such set-off is a concession or indulgence and that it is open to the Legislature while granting concession to restrict or curtail the extent of entitlement as condition for availing the concession, the Hon'ble Supreme Court held as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ff, refund, etc. Though the terminology used in Section 48 is slightly different from the terminology used in Section 18 of the Rajasthan VAT Act, 2003, in effect what is contemplated under Section 48 of the MVAT Act is in effect a credit or a refund of duty paid by a dealer subject to fulfillment of the conditions set out in Section 48. The Bombay High Court analyzed the set-off provision and held that the purpose of set-off is to obviate a cascading effect of the tax burden on the ultimate consumer and this element of legislative policy is to be balanced with the need for securing tax compliance and ensuring against a loss of legitimate revenue owing to Government. After analysing the erstwhile provisions contained in the Bombay Sales Tax Act and the Maharastra Value Added Tax Act, the Division Bench of the Bombay High Court held that a set-off constitutes a concession granted by the legislature and in the absence of set-off, the selling dealer would be liable to pay tax on the sale consideration and there is no independent right to a set-off apart from Section 48. 26. In Mohammed Haji Manachithodi Agencies vs. State of Kerala [2012 (3) KLT (SN) 17], the Division Bench of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. The same principle was reiterated in Commissioner of Customs (Preventive), Amritsar v. Malwa Industries Ltd., (2009) 12 SCC 735. 30. In India Agencies (Regd.), Bangalore v. Additional Commissioner of Commercial Taxes, Bangalore, (2005) 2 SCC 129, the Supreme Court emphasised that in case of Inter-State sales, the provision for furnishing original Form-C to claim concessional rate of tax under Section 8(1) of Central Sales Tax Act, 1956 is mandatory and that dealer has to strictly follow the procedure. It was held that to claim concessional rate of tax, provisions have to be strictly construed and that unless there is strict compliance with the provisions of the Statute, the registered dealer is not entitled to the concessional rate of tax. 31. There is no force in the contention that Section 18(3A) would operate as an embargo to the registered dealer in claiming ITC causing prejudice to the registered dealer. The condition stipulated in Section 18 effectuates the scheme of the Act and more in the nature of beneficial to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been a clear transgression of the constitutional principles. Laws relating to economic activities should be viewed with greater attitude than laws touching civil rights such as freedom of speech, religion etc. The legislature should be allowed some play in the joints and there is no straitjacket formula particularly in case of legislation dealing with economic matters and having regard to the nature of the problem required to be dealt with, greater play in the joins has to be allowed to the legislature. The Court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas, where fundamental human rights are involved. That the Court should remember legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, there may be crudities and in equities in complicated experimental, economic legislation, but on that account alone it cannot be struck down as invalid. The same principle that in the matter of taxation, the Court permits great latitude to the legislature was reiterated in Mafatlal Industries Limited v. Union of India, (1997) 5 SCC 536. 37. We do not agree w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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