2013 (5) TMI 756 - HC - VAT and Sales Tax

Rate of tax applied to Paraffin wax manufactured and sold by appellant - 4% or 20% - Additional demand and penalties imposed - Delhi Value Added Tax Act, 2004 - Held that - Paraffin wax manufactured and sold by the appellant is of a standard other than the Food Grade Standard. Therefore, prima-faice, the Paraffin wax manufactured and sold by the appellant would fall under Entry No. 120 of the Third Schedule. Since Entry No. 120 of the Third Schedule is a specific Entry and Entry No. 1(ix) of the Fourth Schedule is a general Entry, it is the former Entry which would cover the case of the appellant and therefore, the rate of tax would be 4%. This case is when there is a divergence of views with regard to the applicability of a particular Entry, would the benefit of doubt, even at the prima-facie stage, go to the assessee or to the revenue. Thus taking a prima-facie view of the matter and giving the benefit of doubt to the assessee at this stage, the Tribunal ought not to have directed the appellant to deposit any amount out of the tax demanded as also the penalty levied as a condition for hearing the appeals. Consequently, we set aside the impugned order dated 18.02.2013.

Summary

Issues Involved:
Appeal against order under Delhi Value Added Tax Act, 2004 - Disputed additional demand and penalties - Dispute over applicable tax rate for Paraffin wax - Interpretation of relevant tax schedules.

Analysis:
The judgment pertains to appeals challenging an order passed by the Appellate Tribunal, Value Added Tax, concerning additional demand and penalties under the Delhi Value Added Tax Act, 2004. The appellant contested the requirement to deposit 20% of the disputed amount for hearing the appeals, arguing it would impose a significant burden despite having a strong case. The core dispute revolved around the applicable tax rate for Paraffin wax, with the appellant advocating for a 4% rate based on Entry No. 120 of the Third Schedule, while the revenue asserted a 20% rate under Entry No. 1(ix) of the Fourth Schedule. The Tribunal's prima facie view favored the revenue, citing the product's petroleum nature and varied uses beyond candle manufacturing. However, the High Court found the Tribunal's interpretation erroneous, emphasizing that Entry No. 120 covered all grades of Paraffin wax except Food Grade Standard, thus warranting a 4% tax rate.

The Court highlighted the importance of giving the benefit of doubt to the assessee in cases of Entry interpretation discrepancies. It criticized the Tribunal for not adequately addressing this issue and ruled in favor of the appellant, setting aside the order requiring the deposit of disputed amounts. Additionally, the Court directed the Tribunal to expedite the appeal process, aiming for a resolution within six weeks. Notably, the Court clarified that its prima facie observations should not influence the Tribunal's final decision during the appeal hearing. The parties were instructed to appear before the Tribunal for further proceedings, marking the conclusion of the case.