2013 (9) TMI 978 - HC - VAT and Sales Tax

Whether Tribunal was justified in quashing and setting aside the levy of sales tax on performance/inspection charges of ₹ 3,71,992 and allowing set-off in favour of the respondent assessee under rule 44 in respect of packing material - Held that - If the interim relief as prayed for is granted and further implementation and operation of the impugned judgment and order passed by the Tribunal is stayed, in that case, hereinafter the assessing authority can pass the orders with respect to the subsequent assessment years treating the performance charges as part of sale price and may deny set-off under rule 44 in respect of packing materials. It is required to be noted at this stage that by the impugned judgment and order, the Tribunal has held that inspection/ performance charges shall not form part of sale price and the respondentassessee shall be entitled to stay in respect of packing materials. It is true that we have admitted the main appeal on the substantial questions of law, however, staying further implementation and operation of the impugned order and consequently permitting the assessing authority to pass the order of assessment treating the inspection/performance charges forming part of sale price, would tantamount to allowing the appeal at the admission stage - while rejecting the present application for stay on the decision of the Tribunal, liberty is being resolved for allowing the reassessment proceedings with respect to the subsequent assessment years hereinafter and in case the applicant succeeds and the impugned order is set aside and it is held that the inspection/performance charges shall form part of sale price and that the respondent is entitled to set off under rule 44 in respect of packing materials, all other subsequent assessment with respect to the aforesaid issues shall be subject to the further final outcome of the main appeal - Application disposed of.

Summary

Issues:
Stay of implementation of Tribunal's order on sales tax and set-off in favor of assessee.

Analysis:
The High Court of Gujarat heard an application by the State of Gujarat seeking a stay on the implementation of the order passed by the Gujarat Value Added Tax Tribunal. The Tribunal had set aside the levy of sales tax on performance/inspection charges and allowed set-off in favor of the respondent-assessee under rule 44 for packing material. The Tribunal held that performance/inspection charges should not be part of the sale price and allowed the set-off for packing material. The State contended that not staying the order would cause significant losses during subsequent assessments as the Department would have to follow the Tribunal's directions. The respondent argued against granting interim relief, stating it would amount to deciding the appeal prematurely without a final resolution.

The Court acknowledged that granting a stay would allow the assessing authority to treat performance charges as part of the sale price and deny set-off for packing material in subsequent assessments. While the main appeal was admitted on substantial legal questions, the Court emphasized that allowing the appeal at the admission stage was impermissible. However, the Court recognized the need to address the State's concerns regarding future assessments. Therefore, the Court struck a balance by rejecting the stay application but allowing reassessment proceedings for subsequent years. The reassessment would be subject to the final outcome of the main appeal. If the impugned order is set aside, the State's contentions regarding performance charges and set-off would be considered in subsequent assessments.