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2016 (8) TMI 25 - DELHI HIGH COURT

2016 (8) TMI 25 - DELHI HIGH COURT - TMI - Validity of notice for revision - notice issued u/s 74A(2) of the DVAT Act - notices of default assessments of tax, interest and penalty - Held that:- It is obvious that the notice dated 4th April 2013 issued under Section 74A (1) of the DVAT Act reproduces the mere words of the above provision without indicating the specific ground on which the Respondent proposes to revise the order dated 9th October 2009. As explained in Commissioner of C. Ex, Bangal .....

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d notice dated 4th April 2013 under Section 74A(2) of the DVAT Act is held to be bad in law and is accordingly quashed. - The Petitioner is entitled to the refund claimed for the said periods along with interest. - Decided in favor of assessee. - W.P.(C) 2528/2013, W.P. (C) 3119/2013 & CM No. 5916/2013 - Dated:- 27-7-2016 - S. MURALIDHAR & JUSTICE NAJMI WAZIRI JJ. Petitioner Through: Mr. Ruchir Bhatia, Advocate. Respondents Through: Mr. Sanjoy Ghose, Additional Standing counsel. O R D E .....

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ice dated 4th April 2013 issued to the Petitioner by the Respondent under Section 74A (2) of the DVAT Act proposing to revise an order dated 9th October 2009 passed by the Objection Hearing Authority ( OHA )/Additional Commissioner setting aside the notices of default assessment of tax, interest and penalty under Sections 32 and 33 of the DVAT Act. 2. The Petitioner states that it is engaged in the business of telephony and undertakes purchase and sale of CDMA handsets as a distributor of M/s. D .....

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of refund for the aforementioned periods was 27th July 2007 and 28th September 2007 respectively. 3. The Petitioner states that no notice of audit under Section 58 of the DVAT Act was issued nor any additional information under Section 59 sought as envisaged under Section 38 (4) of the DVAT Act. Further, no security as a condition for issuance of refund was demanded within 15 days from the date of filing of monthly returns as contemplated under Section 38 (5) of the DVAT Act. 4. On 27th July 20 .....

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nformation or audit. In that event, an intimation would be given by the Audit Wing of the Department/designated VAT authority/VATO concerned within 10 days from the receipt of the return in the Front Office. Meanwhile, the Petitioner also became entitled to interest in terms of Section 42 (1) of the DVAT Act. 5. The Petitioner states that a notice under Section 59 (2) of the DVAT Act from VATO, Ward-96 was received and thereafter notices of default assessments of tax, interest and penalty under .....

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was given soon after the purchase to enable to sellers to sell the handsets at prices well below the market price. The subsidy therefore ought to be included in the sale price. The OHA negatived the above contention by pointing out that the Petitioner was liable to pay tax at the rates specified in Section 4 of the DVAT Act on sales effected by it. The Petitioner was also entitled to claim input tax credit ( ITC ) on turnover of purchases as provided in Section 9 of the DVAT Act. The ITC to whi .....

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be received from the customers. As far as the Respondent was concerned, it was entitled to levy and collect value added tax ( VAT ) at the price at which the end customer buys the handsets. 7. The OHA held, by referring to the decision in Neyveli Lignite Corporation Limited v. Commercial Tax Officer, Cuddalore [2001] 124 STC 586a (SC); Rashtriya Chemicals and Fertilisers Limited v. State of U.P. (1996) 101 STC 487 (All); Natraj Organics Limited v. Assistant Commissioner (Assessment) Sales Tax, M .....

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order to inflate the demands, added the amount of refund to the figure of demand instead of reducing it. It is also pointed out that the concept of fair market value under Section 2 (l) of the DVAT Act also stood satisfied as the value at which goods were sold was that at which they would be sold between unrelated parties in the open market in Delhi. 8. Till more than three years after the above order, nothing was done by the Respondent to challenge to the above order of the OHA. This has led t .....

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d notices of default assessments of tax, interest and penalty were disposed of by an order dated 16th December 2009 by another OHA, i.e., the Joint Commissioner, Zone-V. This OHA held that the levy of tax was appropriate. He held that the selling of handsets below the purchase price would eventually result in the loss to the dealer and thus in order to compensate, TTL was paying subsidy to the dealer. Although the purchase price of the dealer was reduced, he could still claim the entire ITC on t .....

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. Therefore, the notice of assessment of penalty was set aside. 10. Aggrieved by the above order dated 16th December 2009 of the OHA the Petitioner filed a review application which is stated to be pending. 11. On 4th April 2013 the following notice was issued by the Respondent to the Petitioner under Section 74A (2) of the DVAT Act: Whereas it appears that in the order No. 981 dated 9th October 2009 passed under Section 74 of Delhi Value Added Tax, 2004 read with Section 32 and 33 of the said Ac .....

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e stated order under Section 74A of the Delhi Value Added Tax, 2004. Therefore, in view of the above, you are hereby directed to appear, before the undersigned at the above mentioned address on 17th April 2013 at 11 am in person or through authorized representative along with books of accounts, copy of contract with Tata Teleservices Limited (TTSL) and all relevant documents, failing which an order in this regard shall be passed on merits as per law. 12. The Petitioner then filed Writ Petition ( .....

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ithin a period of two weeks from that date. The said order was ultimately complied with by the Respondent on 30th March 2016 by depositing a demand draft in the sum of ₹ 1,24,01,725 (inclusive of interest up to date). 13. This Court has heard the submissions of Mr. Ruchir Bhatia, learned counsel for the Petitioner and Mr. Sanjoy Ghose, learned Additional Standing counsel for the Department. 14. Mr. Bhatia submitted that the order dated 9th October 2009 of the OHA had comprehensively negati .....

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s bad in law as it was a mere reproduction of the provision without specifying the ground on which the order dated 9th October 2009 of the OHA was sought to be revised. He placed reliance on the decisions in Commissioner of Central Excise, Bangalore v. Brindavan Beverages (P) Limited 2007 (213) ELT 487 (SC); Amrit Foods v. Commissioner of Central Excise 2005 (190) ELT 433 (SC); Rawani Dal & Flour Mills v. Commissioner of Sales Tax, Orissa (1992) 86 STC 409 (Orissa) and Om Shri Jigar Associat .....

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direction for disposal of both the review petition filed by the Petitioner as well the revision petition proposed by the Department so that the conflicting views of the OHAs could be reconciled. On merits he urged that the widest possible meaning had to be given to the expression sale in Section 2(1)(zc) of the DVAT Act. Mr. Ghose submitted that the word sale would include anything that would go to enhance the value of the product sold. In this case, according to Mr. Ghose, the subsidy granted .....

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is not under challenge in these petitions. The Court is therefore not called upon to examine that order. Further, the Court is required to examine whether there is any justification in the Respondent seeking to revise the order dated 9th October 2009 of the OHA. Therefore it would be no answer to direct the disposal of the revision petition without first deciding that question. 17. The expression sale in Section 20(1)(zc) of the DVAT Act has been widely defined to mean any transaction of propert .....

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other valuable consideration for which there could be a transfer of property in goods from one person to another. 18. The short question that arises in the present cases is whether the subsidy granted to the Petitioner by TTL in respect of the handsets sold by it could be termed as 'other valuable consideration' and therefore, could be included in the sale price? 19. In Neyveli Lignite Corporation Limited v. Commercial Tax Officer, Cuddalore (supra) the issue was whether the retention p .....

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received by the manufacturer, viz., the subsidy and the price fixed under the Control Order were independent of each other. The subsidy under the Government Scheme did not form part of the bargain between the manufacturer and the purchaser of the fertilizer. The amount given by the Government under the administrative scheme of furnishing subsidy was not part of the sale price or consideration for the sale of fertilizers by the Appellant (manufacturer) and did not form part of the turnover for th .....

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m products and retention price fixed by the Oil Co-ordination Committee set up by the Ministry of Petroleum, the Gauhati High Court in Bongaigaon Refinery and Petrochemicals Limited v. Commissioner of Taxes, Assam (supra) held it to be in the nature of a subsidy and not part of the sale price for purposes of taxation under the Assam General Sales Tax Act, 1993. 21. In Tisco General Office Recreation Club v. State of Bihar (supra), a dealer ran a canteen for the benefit of officers and employees .....

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e price and consequently did not form part of the gross turnover of the Appellant for the purposes of sales tax under the Bihar Finance Act, 1981. 22. In Andhra Agencies v. State of A.P. (supra), the Supreme Court held that the basic issue can be better appreciated by way of an illustration. Hypothetically, taking the sale price to be ₹ 100, the tax to be paid by the selling dealers has to be on 100. He may collect 90, after giving discount. If the sale price of the intermediate seller is .....

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he purpose of generating revenue from call charges etc paid by the consumer. It was not towards the sale of handsets. It, therefore, did not affect the sale price of the handsets. In the light of the law explained in the above decisions, the Court holds that the subsidy offered by TTL to the Petitioner cannot be included in the sale price for the purposes of VAT. 24. The order dated 9th October 2009 of the OHA sustaining the objections filed by the Petitioner against the notices of default asses .....

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er or person subordinate to him, the Commissioner may, of his own motion or upon information received by him, call for the record of such order and examine whether - (a) any turnover of sales has not been brought to tax or has been brought to tax at lower rate, or has been incorrectly classified, or any claim is incorrectly granted or that the liability to tax is understated, or (b) in any case, the order is erroneous, in so far as it is prejudicial to the interest of revenue, and after examinat .....

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