2008 (7) TMI 890 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of sub-rule (2) of rule 6 of the West Bengal Value Added Tax Rules, 2005.
2. Effect of payment of penalty under section 23(4) of the VAT Act on the validity of registration.
3. Entitlement to retrospective effect of the registration certificate from the date of incurring liability.

Issue-wise Detailed Analysis:

1. Validity of sub-rule (2) of rule 6 of the West Bengal Value Added Tax Rules, 2005:

The applicant challenged the validity of sub-rule (2) of rule 6, arguing it was ultra vires the VAT Act and beyond the rule-making power of the State. The applicant contended that the rule contradicts the scheme of taxation and registration under the VAT Act, as it denies the benefit of input-tax credit to dealers who apply for registration after the prescribed time limit. The Tribunal analyzed the provisions of the VAT Act, including sections 22, 23, and 114, and concluded that the rule was not ultra vires. The Tribunal emphasized that the rule was consistent with the legislative intent to ensure better tax compliance and transparency by encouraging timely registration. The Tribunal held that the restriction imposed by sub-rule (2) of rule 6 was within the rule-making power of the State and did not contradict the VAT Act's objectives.

2. Effect of payment of penalty under section 23(4) of the VAT Act on the validity of registration:

The applicant argued that payment of penalty under section 23(4) or showing reasonable cause for delayed submission should entitle the dealer to retrospective registration. The Tribunal disagreed, stating that section 23(4) primarily serves as a deterrent to ensure timely registration and to avoid criminal prosecution under section 93(2). The Tribunal clarified that payment of penalty or acceptance of reasonable cause does not imply that the application for registration was filed within the prescribed time. Therefore, the registration certificate cannot be made effective from the date of incurring liability merely because the penalty was paid or reasonable cause was shown.

3. Entitlement to retrospective effect of the registration certificate from the date of incurring liability:

The applicant sought retrospective registration to avail of input-tax credit from the date of incurring liability. The Tribunal noted that the applicant was aware of his tax liability from April 29, 2005, but did not apply for registration until March 21, 2006. The Tribunal held that the applicant's failure to apply within the prescribed time frame disqualified him from retrospective registration. The Tribunal emphasized that the VAT Act allows retrospective registration only for those who apply within the prescribed time. The Tribunal concluded that the applicant was not entitled to retrospective effect of the registration certificate and upheld the decision of the STO/KR to make the registration effective from the date of the order.

Conclusion:

The Tribunal dismissed the application, affirming the validity of sub-rule (2) of rule 6 of the VAT Rules and the decisions of the STO/KR, ACST/BRC, and DCST/BRC. The Tribunal held that the applicant was not entitled to retrospective registration and input-tax credit for the period from April 29, 2005, to March 28, 2006. The Tribunal also clarified that payment of penalty under section 23(4) does not affect the validity of registration or entitle the dealer to retrospective registration.