TaxTMI 
TaxTMI 
2015 (2) TMI 705
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.... the impugned decision. STA No. 50/2014 is directed against 18 orders-in-original for monthly tax periods April, 2005 to September, 2006 under Section 33 of the Act imposing penalty under Section 86(10) of the Act @ 100% of the tax deficiency. In the impugned order, the Tribunal has mitigated the said penalty to 20% from 100% as imposed in the order-in-original. 3. We frame the following substantial question of law in STA Nos.47/2014 and 49/2014: Whether in view of Sections 105 and 106 read with Section 3 of the Delhi Value Added Tax Act, 2004, lease rentals paid on or after 1st April, 2005 can be taxed under the aforesaid Act even when the lease agreement was executed between the parties on or before 31st March, 2005? 4. We also frame the following substantial question of law in STA No.50/2014: Whether the order of the Appellate Tribunal, Value Added Tax imposing penalty at the rate of 20% under Section 86(10) of the Delhi Value Added Tax Act, 2004, is self contradictory and is contrary to the mandatory pre-conditions under the said Section?. 5. The appellant-assessee is engaged in the business of leasing of machinery and vehicles. It enters into a master lease agreement with....
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....g transaction was the rate prevalent on individual items, namely, motor vehicles @ 12.5%, machinery @ 12.5%, furniture @ 12.5%, computers @ 4%, etc. It would be appropriate to notice that the Act of 2002, i.e., Delhi Sales Tax Right on Right to Use Goods Act, 2002 was an independent enactment and unlike some of the other States, the Delhi Sales Tax Act, 1975 was not amended to bring within the ambit of taxation transfer of right to use goods. However, the Act, i.e. the Delhi Value Added Tax Act, 2004, repealed the Act of 2002, the Delhi Sales Tax Act, 1975, the Delhi Sales on Works Contract Act, 1999 and the Delhi Tax on Entry of Motor Vehicles into Local Areas Act, 1994. Therefore, the Act was enacted to consolidate as well as amend the law relating to levy of tax on sale of goods, tax on transfer of property involved on execution of work contracts, tax on transfer of right to use goods and tax on entry of motor vehicles by way of introducing a value added tax regime. 8. The contention of the appellant is that the Act would be applicable only to such agreements, which have the effect of transfer of right to use goods executed on or after 1st April, 2005. The agreements executed p....
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....005. Explanation.- This provision does not prevent the person claiming the special tax credit allowed under section 14 of this Act. (3) Where an amount is paid or received prior to 1st April, 2005 in respect of a sale or purchase occurring after 1st April, 2005, and the person calculates his turnover or turnover of purchases based on amounts paid and received, the amount shall be treated as forming part of the person's turnover or turnover of purchases in the tax period in which the sale occurs. (4) Where a dealer registered under the repealed Delhi Sales Tax on Works Contract Act, 1999 (Delhi Act 9 of 1999) (hereinafter referred to in this sub-section as "the repealed Act"), is liable to pay tax under this Act, and has at any time prior to the 1st day of April, 2005 entered into any works contract, where the total contract value was inclusive of the tax payable under the repealed Act, and the execution of the said work contract has continued after the 1st day of April, 2005, then the liability of the dealer to pay tax under this Act shall be discharged at the rates applicable under this Act, and the liability so discharged in respect of the said contract shall not exceed th....
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.... credit of input tax of allowing benefit of exemption or deferment of tax, imposition of any penalty or of interest or forfeiture of any sum, which relates to any period ending before 1st day of April, 2005 or for any other purpose whatsoever connected with or incidental to any of the purposes aforesaid, and whether or not the tax, penalty, interest or sum forfeited, if any, in relation to such proceedings, is paid before, on or after 1st day of April, 2005, the repealed Act and all rules, regulations, orders, notifications, forms and notices issued thereunder and in force immediately before 1st day of April, 2005 shall continue to have effect as if this Act has not been passed." 10. Section 106 is a repeal and a savings clause. As already noticed above, the Act repeals four earlier enactments by a single consolidated Act. Sub-section (2) to Section 106 protects any right, title, entitlement, obligation or liability already accrued, acquired or incurred under the Act of 2002 and states that it shall not affect previous operation of the said Act. Sub-section (3) expands the scope and clarifies sub-section (2) but in respect of anything done or any action taken in exercise of powers....
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.... aforesaid interpretation becomes clear and finds resonance in sub-section (2), which deals with tax credit under Section 9 of the Act. Under clause (a) to sub-section (2) to Section 105 of the Act, tax credit is to be allowed on purchases, including purchase on instalment or hire-purchase made on or after 1st April, 2005, which is in consonance with clause (a) to sub-section (1) to Section 105 of the Act. Clause (b) to sub-section (2) to Section 105 entitles the hirer to take tax credit in respect of purchase occurring in form of acquisition of a right to use goods and to the extent that the right to use goods is exercised. If the said right to use goods is exercised after 1st day of April, 2005, tax credit would be available to the hirer. Thus, the benefit of tax credit would be available to the hirer to the extent right to use goods is exercised after 1st April, 2005. 13. The reason in enacting clause (a) and (b) to sub-sections (1) and (2) to Section 105 of the Act has a purpose and object. Clause (a) to Section 105(1) refers to sales made on or after 1st April, 2005. The term 'sale' is defined in sub-section (zc) to Section 2 in a comprehensive manner and includes in ....
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....time of payment may be different and subsequent to the taxable event, i.e., the date on which transfer of right to use goods is made. In Bombay Tyre International Limited (supra), the Supreme Court held that levy of tax in our country has a status of constitutional concept, but the point of collection, i.e., time of collection would depend upon the statute. The statute could, therefore, declare the point at which the tax is to be collected, which need not synchronise with the taxable event and can be different in point of time. The said judgment also elucidates the difference between the taxable event/subject matter of tax and the standard by which the amount of tax is measured. Measure of tax should throw light on the general character of tax, but is not the true test of the nature of tax or necessarily determinative. Thus, duty on excise is chargeable on manufacture or production of goods, but measure of tax or the method by which the tax is calculated should not be identified with the nature of tax. Thus, the contention that the measure of tax cannot include manufacturing profits was rejected. 16. The view we have taken is not contrary to the decision of the Supreme Court in 20....
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.... 'sales' by legal fiction, but the situs of said sales for the purpose of taxation by a particular State must not violate Articles 286 and 269 of the Constitution. For the purpose of deciding whether a State Legislature has power to tax transfer of right to use goods, the following observations were made:- "25. Article 286 is in Part XII of the Constitution which deals with "Finance, Property, Contracts and Suits". It is one of the several articles which are grouped under the heading "Miscellaneous Financial Provisions" in Chapter I of that Part. It is to be noted that it has not found a place in Part XI, Chapter I whereof deals with "Legislative Relations" including "Distribution of Legislative Powers" between Parliament and the legislatures of States. The marginal note to Article 286 is "Restrictions as to imposition of tax on the sale or purchase of goods", which, unlike the marginal notes in Acts of the British Parliament, is part of the Constitution as passed by the Constituent Assembly, prima facie, furnishes some clue as to the meaning and purpose of the article. Apart from the marginal note, the very language of that article makes it abundantly clear that its objec....
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.... be essential for the life of the community shall have effect unless it has been reserved for the consideration of the President and has received his assent. It should be noted that these are four separate and independent restrictions placed upon the legislative competency of the States to make a law with respect to matters enumerated in Entry 54 of List II. In order to make the ban effective and to leave no loophole the Constitution-makers have considered the different aspects of sales or purchases of goods and placed checks on the legislative power of the States at different angles. Thus in clause (1)(a) of Article 286 the question of the situs of a sale or purchase engaged their attention and they forged a fetter on the basis of such situs to cure the mischief of multiple taxation by the States on the basis of the nexus theory. In clause (1)(b) they considered sales or purchases from the point of view of our foreign trade and placed a ban on the States' taxing power in order to make our foreign trade free from any interference by the States by way of a tax impost. In clause (2) they looked at sales or purchases in their inter-State character and imposed another ban in the in....
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.... ultimate consumers and also hampered the free flow of inter-State trade or commerce. So the Constitution-makers had to cure that mischief. The first thing that they did was to take away the States' taxing power with respect to sales or purchases which took place outside their respective territories. This they did by clause (1)(a). If the matter had been left there, the solution would have been imperfect, for then the question as to which sale or purchase takes place outside a State would yet have remained open. So the Constitution-makers had to explain what an outside sale was and, this they did by the Explanation set forth in clause (1). The language employed in framing the Explanation, however, has given scope for argument to counsel and presented considerable difficulties to the court in ascertaining its purpose and intendment. If the Explanation simply said "For the purposes of sub-clause (a), a sale or purchase shall be deemed to have taken place outside a State when the goods have actually been delivered for the purpose of consumption in another State, notwithstanding the fact; etc. etc." then none of the difficulties would have arisen at all. But why, it is asked, did t....
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....this Explanation confers legislative power on what for the sake of brevity has been called the delivery State is to use it for a collateral purpose which is not permissible. Further, it is utterly illogical and untenable to say that Article 286 which was introduced in the Constitution to place restrictions on the legislative powers of the States, by a side wind, as it were, gave enlarged legislative powers to the State of delivery by an explanation sandwiched between two restrictions. This construction runs counter to the entire scheme of the article and the Explanation and one may see no justification for imputing such indirect and oblique purpose to this article. Had the Constitution-makers so desired they could have done so in a more direct and straightforward way. To hold that the Explanation has, besides its declared purpose, another hidden purpose of conferring or enlarging legislative power is to build up a fanciful argument merely on the unfelicitous and involved language used in the Explanation although it is distinctly not the purpose of the Explanation and although it does not purport substantively and proprio vigore, to confer any legislative power on any State. Its onl....
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....nce Corporation Ltd. (supra) cannot be interpreted as an authority for the proposition that delivery of possession of goods is not a necessary concomitant for complete transaction of sale under sub-clause (d) to Article 366(29A) and in order to decide whether particular State is entitled to levy tax, the court has to determine when and where the taxable event for the purpose of sale takes place. A.R. Lakshmanan, J. in his concurrent judgment has affirmatively stated that decision in 20th Century Finance Corporation Ltd. (supra) related only to situs for the purpose of the State which could impose the tax and not subject matter of taxation which is a transfer of right to use goods. The said observations are material and relevant. 19. At this stage, we would like to refer to the decision of Delhi High Court in Infrastructure Leasing and Financial Service Ltd. vs. Commissioner of Value Added Tax & Ors. (2010) 29 VST 349 (Del). The said case related to Act of 2002 and the issue was whether lease rentals received after 15th September, 2004 would be taxable though the agreements for transfer of right to use were prior to the said date. The Act of 2002 was enforced/notified with effect f....
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.... in STA Nos.47 and 49/2014. Accordingly, the substantial question of law framed in the said appeals is answered in against the appellant and in favour of the respondent Revenue. 22. However, the position in STA No. 50/2014 would be different. The said appeal relates to imposition of penalty under Section 86(10) of the Act. The finding given by the Tribunal reducing the penalty to 20% reads as under:- "11. Regarding penalty there is substance in the submissions by the Ld. Counsel for the appellant that on account of different interpretation of law as was also sought of by the appellant by filing determination application it cannot be said that the return was false, misleading or deceptive in material particulars as there was sufficient reason for filing the return at rate of 4% as per provisions of the DST on Right to Use Goods Act, 2002 which was default assessed at the rate of 12.5% which fact created tax deficiency. Considering the submissions, this Tribunal is of the considered view that second proviso to clause 2 of Sec. 86 of the DVAT Act applies to the appellant in term of submission that tax properly payable was not determined by the authorities including by this Tribunal ....