2006 (9) TMI 520 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutionality of Section 61(2)(e) of the Haryana Value Added Tax Act, 2003.
2. Legality of the tax assessment order dated November 8, 2004.
3. Definition and taxability of Duty Entitlement Pass Book (DEPB) under the HVAT Act.

Issue-Wise Detailed Analysis:

1. Constitutionality of Section 61(2)(e) of the Haryana Value Added Tax Act, 2003:
The petitioner challenged the constitutionality of Section 61(2)(e) of the HVAT Act, arguing that the right to credit of duty under the DEPB Scheme is not "goods" and thus, taxing it was beyond the legislative competence under entry 54, List II of the Seventh Schedule to the Constitution of India. The court, however, upheld the provision, stating that DEPB is a tradable document, frequently bought and sold in the market, and not a chose-in-action or an actionable claim. The amendment was considered beneficial legislation aimed at better tax collection in public interest, and not confiscatory.

2. Legality of the Tax Assessment Order Dated November 8, 2004:
The petitioner sought to quash the assessment order passed by the Assessing Authority, which included the turnover of sales of DEPB for the year 2002-03. The court upheld the assessment order, referencing the legislative intent behind the amendment, which provided a reduced tax rate of four per cent on DEPB transactions to incentivize compliance. The court also noted that the amendment was not retrospective but prospective, aligning with the Supreme Court's judgment in Sunrise Associates' case, which overruled earlier judgments only prospectively from April 28, 2006.

3. Definition and Taxability of Duty Entitlement Pass Book (DEPB) under the HVAT Act:
The central issue was whether DEPB qualifies as "goods" under sales tax laws. The court referenced the Supreme Court's decision in Vikas Sales Corporation, which held that import licenses like REP licenses are goods, as they are freely transferable and treated as merchandise in the commercial world. Despite the Supreme Court's later judgment in Sunrise Associates, which overruled H. Anraj's case prospectively, the court maintained that DEPB, similar to REP licenses, is goods for the purpose of sales tax. The court also cited the Delhi High Court's judgment in Philco Exports, which affirmed the taxability of DEPB under similar reasoning.

Conclusion:
The court dismissed the writ petition, holding Section 61(2)(e) of the HVAT Act valid and upholding the tax assessment order. The DEPB was deemed taxable as goods, aligning with prior judgments and legislative intent to ensure effective tax collection.