2012 (3) TMI 51 - HC - VAT and Sales Tax

Delhi VAT, 2004 - interpretation of proviso to Section 2(1)(zd) - appellants are Government undertakings marketing petrol, diesel and petroleum products increment of petrol prices by Government - relief in the price rise to the consumers provided by non-charging of VAT on incremental prices prices subsequently rolled back - appellants contended entitlement of reduction in VAT on the VAT payable even on restoration of prices Held that - The proviso inserted to Section 2(1)(z) only protected and gave exemption in respect of enhanced ad valorem VAT payable on account of increase in prices of diesel and petrol from 6th June, 2006 and this increase was not to form part of the prices of petrol and diesel. The proviso did not say that VAT will not be payable and applicable on the pre 6th June, 2006 prices on petrol and diesel. Further, benefit under the proviso ceased to be applicable on roll back of prices w.e.f. 16.02.2007. Assessee contention of applicability of proviso even after the roll back of the prices does not find merit Decided against the assessee.

Summary

Issues:
Interpretation of proviso to Section 2(1)(zd) of the Delhi Value Added Tax Act, 2004.

Analysis:
The case involved appeals by Government undertakings against an order passed by the Appellate Tribunal Value Added Tax concerning the interpretation of the proviso to Section 2(1)(zd) of the Act. The appellants marketed petrol, diesel, and petroleum products, subject to Value Added Tax (VAT) on an ad valorem rate basis. The Government of India had increased petrol and diesel rates in 2006, leading to a corresponding increase in VAT. To provide relief to consumers, the Government of NCT of Delhi issued a memorandum exempting VAT on the increased prices until further notification.

The ordinance promulgated by the Lieutenant Governor inserted a proviso to the definition of "sale price" in Section 2(1)(zd), stating that the increase in petrol and diesel prices would not be part of the sale price until a government notification directed otherwise. The appellants contended that the VAT reduction should continue even after price rollbacks, citing a notification issued in 2007. However, the tribunal rejected this argument, emphasizing that the proviso aimed to maintain VAT payments as if there was no price increase by the Central Government.

The High Court agreed with the tribunal's conclusion, stating that the proviso's purpose was to prevent ad valorem VAT increases due to the Central Government's price hikes. Once the prices were rolled back, the proviso's benefit ceased to apply. The court highlighted that the proviso did not exempt VAT on pre-increase prices and that the State Government retained the right to withdraw the concession through a notification, which was not dependent on subsequent amendments to the Act.

In summary, the court dismissed the appeals, concluding that no substantial legal questions arose from the interpretation of the proviso to Section 2(1)(zd) of the Act. The appellants' argument for continued VAT reduction post-rollbacks was deemed without merit, and the benefit under the proviso ceased once the enhanced prices were completely rolled back.