TMI Blog2016 (9) TMI 462X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing authority shall afford the petitioner an opportunity of a personal hearing, and to produce documentary evidence to show (1) the price actually paid by them on the purchase of used/second hand vehicle, and (2) that the vehicles purchased by them had suffered VAT at the time of their initial registration, under the Motor Vehicles Act, 1988, within the State of Telangana. Matter remanded back - Decided partly in favor of assessee. - Writ Petition Nos. 20186, 20199 And 20201 of 2016 - - - Dated:- 19-7-2016 - Ramesh Ranganathan And M. Satyanarayana Murthy, JJ. For the Petitioner: Sri S. Ravi, Learned Senior Counsel for Ms. N. Niyatha For the Respondent : Sri T. Vinod Kumar, Learned Special Standing Counsel for Commercial Taxes ORDER ( Per Honble Sri Justice Ramesh Ranganathan ) Heard Sri S. Ravi, Learned Senior Counsel appearing on behalf of the petitioner and Sri T. Vinod Kumar, Learned Special Standing Counsel for Commercial Taxes and, with their consent, all the three Writ Petitions, wherein a common question of law arises for consideration, are being disposed of by a common order at the stage of admission itself. M/s. Tejaswi Motors Pvt. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 10.06.2016 records the assessing authority having examined the reply filed by the petitioner, to the show-cause notices, wherein they had claimed that they were eligible for notional input tax credit as per Rule 20(3)(a) of the Rules; they had filed sample documents in this regard; there was neither a dealer who sold the vehicles to them nor was there any tax invoice against which the sale transactions, of pre-owned vehicles, had taken place; no input tax credit was available on the purchases from non-VAT dealers or un-registered dealers; any claim of notional input tax credit was available only on fulfilment of two imperative conditions as explained in the show cause notice i.e, (1) the ITC claim should not be greater than output tax payable, and (2) the ITC claim should be against valid documentary evidence called the tax invoice; Rule 20(3)(a) should be read along with Sections 13 and 16; the ITC restriction and disallowance was neither a levy of tax nor was it double taxation; the petitioner had explained that the old vehicles were bought and exchanged at a certain cost at the time the new vehicle was sold by them; the vehicles that were bought, and were subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20(3)(a), documentary evidence is required only to find out the purchase price actually paid at the time of purchase by the VAT dealer; rejection of the petitioners contention, that no VAT is payable on the purchase of used or second hand vehicles by the petitioner-VAT dealer, is illegal and arbitrary; the ruling given by the advance ruling authority, in Jasper Industries Pvt Ltd, on 23.04.2010 is squarely applicable to their case; registration of vehicles by the RTA is conclusive proof of payment of VAT and life tax at the time of the original purchase; at the time of purchase of the second hand vehicle, a copy of the registration certificate is collected; in the case of a second hand sale there is no value addition; in fact there is depreciation, and thus VAT is not attracted; since purchase of pre-owned vehicles is from customers who are non-VAT dealers, it is not possible for them to issue a tax invoice; there can only be an acknowledgment of sale by them; a tax invoice can be issued only by VAT dealers; the assessing authority had erred in rejecting the petitioners claim on the ground that they had not produced valid documentary evidence called the Tax Invoice; and the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omobiles including commercial vehicles/two wheelers/three wheelers required to be registered under the Motor Vehicles Act, 1988, and including tyres and tubes, spare parts and accessories for the repair and maintenance thereof, unless the dealer is in the business of dealing in these goods. In view of Rule 20 (2)(a), it is only a dealer, who carries on business in the purchase and sale of vehicles, who is entitled to claim input tax credit, that too on vehicles required to be registered under the Motor Vehicles Act, 1988. While any person who purchases a new automobile, required to be registered under the Motor Vehicles Act, 1988 within the State of Telangana, is required to pay VAT to the dealer i.e., his vendor, the dealer in turn is required to remit the tax so collected to the Commercial Tax department. In view of Rule 20(2)(a) the individual, who had purchased the new vehicle from the dealer, would not be entitled to claim input tax credit when he sells the vehicle to another, as he is not a dealer registered under the Act. Rule 20(2) of the Rules also stipulates that when any goods, mentioned in clauses (a) to (r) thereunder, are subsequently sold without availing any tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such dealers cannot claim input-tax credit beyond the output-tax payable by them on the sale of second hand/used vehicles. Sri S. Ravi, Learned Senior Counsel appearing on behalf of the petitioners, would submit, rightly so, that, since Rule 20(3)(a) only requires documentary evidence to be produced, the assessing authority erred in insisting on production of a tax invoice as a pre- condition for the petitioner-dealer to claim input tax credit. The rule making authority has consciously used the words supported by documentary evidence, and not supported by a tax invoice, in Rule 20(3)(a) of the Rules. Section 2(35) of the Act defines tax invoice to mean a sale invoice containing such details as may be prescribed and issued by a VAT dealer to another VAT dealer. In using the words supported by documentary evidence in Rule 20(3-a), the rule making authority was conscious that the person from whom the VAT dealer, carrying on business in the purchase and sale of used/second hand vehicles, had purchased a used/second hand vehicle may not be a VAT dealer and has, therefore, not stipulated that a tax invoice should alone be produced to be eligible to claim the benefit of notional input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documentary evidence of the purchase price paid to their immediate vendor from whom they had purchased the used/second hand cars. The scope and ambit of Rule 20(3-a) can be better explained by way of an illustration. When an individual purchases a new car from a VAT dealer within the State of Telangana, he pays VAT on the purchase price of the vehicle and the VAT dealer, in turn, remits the tax, collected from the purchaser of the vehicle, to the Commercial Tax Department. If the individual, who purchased a new vehicle, sells it to another he neither collects tax nor is he entitled to claim the benefit of input-tax credit. For example a new vehicle is purchased by B from a VAT dealer A for ₹ 6.00 lakhs and VAT at 14.5% is paid on the said sale i.e., VAT of ₹ 87,000/-. B then sells the vehicle to C who is not a VAT dealer for ₹ 5.00 lakhs, C in turn sells it to D who is also not a VAT dealer for ₹ 4.00 lakhs, and D in turn sells it to E who is a dealer in second hand/used cars for ₹ 3.00 lakhs. D would not be able to produce a tax invoice as he had purchased the vehicle from C, another individual who is not entitled to issue a tax invoice to him. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port category, not exceeding a particular weight and the prescribed seating capacity, tax shall be levied at the rates specified in the Sixth Schedule to the Act. The Sixth Schedule contains a table which prescribes the period/class of the vehicle, the vehicles owned by companies/institutions/organisations, and the tax in respect of second or more personalised vehicles upto a seating capacity of 10 persons in all owned by an individual. Serial No.1 of the table in the Sixth Schedule prescribes, under the head class of vehicles, the tax payable at the time of registration of new vehicles, which is, at present, 12% of the cost of the vehicle. For the purposes of determining the motor vehicles tax, payable at the time of registration of new vehicles, the person, in whose favour the vehicle is to be registered, is required to submit, among others, a copy of the invoice. The invoice value, on which tax under Section 3 of the A.P.Motor Vehicles Taxation Act is levied, is the price of the new vehicle plus VAT levied thereupon. Along with the application for registration of the new motor vehicle, the applicant is required to enclose the customer copy of the invoice which would reflect t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot to supplant the Act. A delegate cannot override the Act either by exceeding the authority or by making provisions inconsistent with the Act. (Britnell v. Secretary of State 1991 (2) All ER 726; J.K. Industries Ltd. v. Union of India (2007) 13 SCC 673 ). Delegated legislation involves delegation of rule-making power. This means that the legislature, having laid down the broad principles of its policy in the legislation, can then leave the details to be supplied by the administrative authority. In other words by delegated legislation, the delegate completes the legislation by supplying details within the limits prescribed by the Statute. When the delegate is given the power of making rules, in order to fill in the details to carry out and subserve the purposes of the legislation, the manner in which the requirements of the Statute are to be met, and the rights therein created are to be enjoyed, is an exercise of delegated legislation. (Hamdard Dawakhana v. Union of India AIR 1960 SC 554 = (1960) 2 SCR 671 ). The legislature can make a law to delegate a power to determine some fact or state of things upon which the law makes or intends to make its own action depend. There are ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hamdard Dawakhana AIR 1960 SC 554 = (1960) 2 SCR 671). A subordinate law-making body is bound by the terms of its delegated or derived authority and Courts of law, as a general rule, will not give effect to the rules thus made, unless satisfied that all the conditions precedent to the validity of the rules have been fulfilled. The Courts therefore (1) will require due proof that the rules have been made and promulgated in accordance with the statutory authority, unless the statute directs them to be judicially noticed; (2) in the absence of express statutory provision to the contrary, may inquire whether the rule-making power has been exercised in accordance with the provisions of the statute by which it is created, either with respect to the procedure adopted, the form or substance of the regulation, or the sanction, if any, attached to the regulation. (Craies on Statute Law, 7th edition; Kerala Samsthana Chethu Thozhilali Union v. State of Kerala (2006) 4 SCC 327). The Telangana VAT Rules were made by the State Government in the exercise of the powers conferred on it by Section 78 read with Section 2(21) of the Telangana Value Added Tax Act, 2005, and is in the nature of subor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44 ). Likewise the conferment of a rule making power by an Act does not enable the rule making authority to make a rule which travels beyond the scope of the enabling Act or which is inconsistent therewith or repugnant thereto. (Indraprastha Gas Ltd (2015) 9 SCC 209; State of Karnataka v. H. Ganesh Kamath (1983) 2 SCC 402). The power to make rules cannot be used to enlarge the powers beyond the scope intended by the legislature. Rules made, by reason of the specific power conferred by the statute to make rules, establish the pattern of conduct to be followed. (Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi (1975) 1 SCC 421 ; Indraprastha Gas Ltd (2015) 9 SCC 209). The power to make subordinate legislation is derived from the enabling Act and the delegate, on whom such a power is conferred, has to act within the limits of the authority conferred by the Act. What is permitted is the delegation of ancillary or subordinate legislative functions, or, what is fictionally called, a power to fill up details. (Indraprastha Gas Ltd (2015) 9 SCC 209; St. Johns Teachers Training Institute v. National Council for Teacher Education (2003) 3 SCC 321). Where the legislature has provided a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the Act, keeping in mind the object sought to be achieved by the Act. The legislative intent, derived from the objects of the Act, should be achieved. The interpretation, furthering the object and purposes of the Act, has to be preferred in comparison to an interpretation which would frustrate the same. (Pratap Chandra Mehta (2011) 9 SCC 573). The regulatory provisions are to be read and applied keeping in view the nature and textual context of the enactment as that is the source of power. (Indraprastha Gas Ltd (2015) 9 SCC 209). The Telangana VAT rules must, therefore, be harmoniously construed with the provisions of the Telangana VAT Act and the objects for which the Act was made. A statutory rule cannot be so construed as to extend its scope even beyond the provisions of the Act. The court has to examine the nature, object and the scheme of the legislation as a whole and, in that context, should consider what is the area over which powers are given by the Section under which the rule making authority is to act. As the Court starts with the presumption that the impugned Rule is intra vires, the Rule has to be read down to save it from being declared ultra vires if the Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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