TMI Blog2015 (8) TMI 539X X X X Extracts X X X X X X X X Extracts X X X X ..... not on price of actual completed sale but price of sale which is yet to take place – Law prohibits taxing of transaction which is not completed sale – Expression 'sale' within meaning of Section 3 was confined to actual sale that has taken place and it was only price of that sale that can legitimately constitute measure for levy of tax. As explained in State of Rajasthan v. Rajasthan Chemists Association [2006 (7) TMI 17 - SUPREME COURT OF INDIA] this cannot be overridden by devising measure of tax which relates to event which has not come into existence – Devise adopted was beyond legislative competence of legislature with reference to Entry 48 in List II to Constitution – Therefore, Explanation 2 hereby struck down as being ultra vires to Constitution –Consequently, omission in Form DVAT-16 of relevant column to enable dealer to claim input credit was also declared to be unsustainable in law – Petition allowed – Decided in favour of Assesse. - W. P. (C) No. 2929 of 2013, W.P. (C) No. 2179 of 2014, W.P. (C) No. 2240 of 2014, W.P. (C) No. 2499 of 2014 - - - Dated:- 4-8-2015 - S. Muralidhar And Vibhu Bakhru,JJ. For the Petitioner : Mr. Laxmi Kumaran with Mr. Manu Shesha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also be entitled to claim refund of any surplus for which he can make an application before the Commissioner. Definitions of relevant terms under the DVAT Act 6. Certain relevant terms and their definitions under the DVAT Act are set out as under: Section 2 (l) (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 which the selling dealer is liable under this Act. Section 2 (l) (zm): Turnover means the aggregate of the amounts of sale price received or receivable by the person in any tax period, reduced by any tax for which the person is liable under Section 3 of this Act. 7. Prior to the amendment to the Explanation to Section 2 (1) (zd) of the DVAT Act with effect from 16th January 2013, the said provision read as under: Section 2 (l) (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 instalments, the amount of valuable consideration payable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct to the extent to the remaining increase: PROVIDED ALSO that the aforesaid proviso shall not take effect till the benefit is passed on to the consumers. Explanation .- A dealer 's sale price always includes the tax payable by it on making the sale, if any 8. As can be seen, there was only one Explanation to Section 2 (1) (zd) which stated that the dealer s sale price would always include the input tax, if any. In other words, the input tax liability is included in the sale price and passed on to the purchaser. With effect from 16th January 2013, by the Delhi Value Added (Fourth Amendment) Act, 2012 the above Explanation was substituted as under: Explanation-1.- A dealer s sale price always includes the tax payable by it on making the sale, if any; Explanation.-2 - The amount received or receivable by oil marketing companies for the sale of diesel and petrol shall be deemed to be equivalent to the price on which the retail outlets will sell these commodities to the consumer. The case of the Petitioners 9. The Petitioners submit that this change permits VAT to be levied on the price charged for a sale which is yet to take place. It is submitted that Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay VAT on a quantity more than the actual quantity delivered to them by the oil companies. Consequently, this Court is not examining the said plea of the Petitioners in these petitions. The Court is also, therefore, not expressing any view on the plea of the Respondents that the said issue is in any event to be determined with reference to Rule 7(3) of the DVAT Rules. 13. Reverting to the merits of the challenge in the present petitions to the validity of the newly added Explanation 2 to Section 2 (1) (zd) of the DVAT Act, Mr. Laxmi Kumaran submitted that it has substituted for the actual sale price, a price that had not been paid by the Petitioners to the oil companies. It, therefore, had no nexus or connection between the actual taxable event of sale. He submitted that the substitution of assumed price and assumed quantity in place of actual price/quantity in a completed sale transaction for purpose of levy of tax on the subject matter of tax cannot be subject of tax under Entry 54 of List II of the 7th Schedule of the Constitution of India and further results in taking away from it the character of Sale Price and Sale of Goods as envisaged in Section 2 (1) (zd) and S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of commission paid by the oil companies to the dealers. The commission to the dealers is disbursed by the oil companies in terms of the agreements entered into with the dealers. He submitted that the petrol purchased by the dealer from the oil company was sold as such without any value addition and therefore in effect it was a single point sale with one sale price, viz., the price at which the commodity was sold to the consumer. 16. Mr. Satyakam pointed out that as far as the plea of evaporation is concerned, Rule 7 (3) of the DV Rules provides that where any goods are lost or destroyed the dealer shall not be liable to tax on such goods and the credit taken in any earlier tax period shall be reversed in the tax period in which the goods are claimed to have been lost or destroyed. He submitted that the decision in State of Rajasthan Chemists Association was distinguishable on facts since it was not dealing with sale of petroleum products. Further, the provision in the Rajasthan legislation which was being considered in that case was different. He referred to the judgment dated 17th January 2014 of the Division Bench High Court of Punjab and Haryana in CWP No. 21948 of 2012 (Al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effects the sale. Under Section 3 (3) of the DVAT Act, the tax payable by the dealer is the dealer s net tax for the tax period calculated under Section 11 of the Act. When the oil companies sell the petrol/diesel to the dealer they include the VAT in the invoices and, therefore, the price at which they sell includes the VAT. Consequently as far as the first stage of transaction is concerned, the taxable event is not in doubt. The value i.e. the sale price on which the VAT is levied is also known. 20. The central issue therefore, as far as the present petitions are concerned, is whether Explanation 2 added to Section 2 (i) (zd) of the DVAT Act is constitutionally sustainable inasmuch as it seeks to levy VAT on a 'deemed' sale price i.e. different from the actual price at which petrol and diesel is sold by the oil companies to the dealers. Discussion of case law 21. In Sales Tax Officer, Pilibhit v. Budh Prakash Jai Prakash (supra), the Respondents, who were in the business of forward contracts, contended that the UP Sales Tax Act, in so far as it imposed a tax on forward contracts, was ultra vires the powers of the provincial legislature. Section 2(h) of the UP Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g event. Therefore, the question does arise whether a particular taxing event of sale could be subjected to tax at the prescribed rate to be measured with such price which is not the component of the transaction of sale, which has attracted the sales tax. 33. Thus primarily the rate of tax relates to measure of tax to come into existence simultaneous with occurrence of taxing event. The machinery provisions relating to its quantification and collection can take place later. Providing measure to which rate is to be applied is integrally connected with charge itself. 21.2 The Supreme Court then examined the question whether sales tax could be levied on the MRP which was different from the price charged by the wholesaler to the retailer. It was observed in paras 43 and 45 as under: 43. The principal contention about the invalidating of the basis of the measure of tax envisaged under Section 4A of the Act as inserted vide Finance Act, 2004 is that while it levies taxes on the sale transaction carried on by the manufacturer or wholesalers or distributor the measure with which total turnover is to be determined is not part of the sale which attracts tax but its premise is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as defined under the Act. This cannot be overridden by devising a measure of tax which relates to an event which has not come into existence when tax is ex-hypothesi determined, much less which can be said a completed sale and which cannot be subject of legislation providing tax on 'sale of goods' by transplanting a sum related to as likely price to be charged for subsequent sale to be taxed by the devise of measuring tax for the completed transaction which has become subject of tax. 22. The above decision serves to underscore that the subject of tax is not the goods or goods sold, but a transaction of sale of goods under the Sale of Goods Act. What is significant in the above decision is the conclusion that to the extent Section 4-A of the RSTA intended to levy tax on first point sale with reference to price which could be charged in respect of a subsequent sale which has not come into existence at the time liability to tax arises and is determined ex hypothesi is unsustainable on that basis. 23. Apart from the fact that the judgment of the Punjab and Haryana High Court in All Haryana Petroleum Dealers Association, Bhiwani v. The State of Haryana (supra) does ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
