2014 (8) TMI 445 - HC - VAT and Sales Tax

Validity of Circular No. 47 of 2005-06 - Inclusion of evaporation loss component in the claim of input tax credit - Jurisdiction of Commissioner - encroachment on the power and functioning of quasi-judicial bodies - Held that - Section 67 empowers the Commissioner to decide or determine specific questions. It places in position an elaborate procedure for determination of such questions; it is not as if all questions can be taken on board and decided as specific questions by the Commissioner. It would be apparent from section 84 that determinable questions which might call for decisions in a particular assessment proceeding (as long as it is not pending before the court of law and is not covered by situations spelt-out in section 84(3)), can be answered by the Commissioner. Such decisions of the Commissioner have binding effect on the party in terms of section 84(9). These proceedings are akin to advance ruling proceedings enacted in various fiscal statutes such as Income-tax Act, Central Excise Act, etc. Existence of section 67(3) is of no assistance. Facially section 67(3) supports the submission of the petitioner that no direction of the kind made by the impugned circular could have been issued by the Commissioner. If understood in its proper perspective, the impugned circular dated January 23, 2006 (No. 47/2005-06) in this case cannot be said to fall within the power of the Commissioner at all. In other words, if the circular purports to direct the assessing or quasi-judicial authorities to take a particular view and not grant credit in respect of evaporation loss, that is not to be interpreted as binding; the assessing authorities, of course, are entitled to take into consideration Revenue s concerns, as are permitted by law, while examining the claims for credit at the point of sale to their customers - impugned circular dated January 23, 2006 (Circular 47 of 2005-06) shall not bind the authorities into taking a particular view to disallow the claims for the evaporation losses claimed as credit by the petitioners at the point of sale to their customers. Such claims shall be examined and taken into account by the assessing authorities on a factual basis - Decided in favour of applicant.

Summary

Issues Involved:
1. Validity of Circular No. 47/2005-06 dated January 23, 2006.
2. Authority of the Commissioner to issue the circular.
3. Impact of the circular on the assessment process.
4. Rights of the petitioners regarding input-tax credit on evaporation loss.

Detailed Analysis:

1. Validity of Circular No. 47/2005-06 dated January 23, 2006:
The petitioners challenged the circular which directed petrol pump dealers to reverse input-tax credit claimed on evaporated quantities of petrol. The circular cited Rule 7(3) of the Delhi Value Added Tax Rules, 2005, which states that tax credit cannot be claimed on goods lost or destroyed, and any credit taken earlier must be reversed in the tax period when the loss is claimed.

2. Authority of the Commissioner to issue the circular:
The petitioners argued that the Commissioner's direction was without authority of law as it encroached on the powers of quasi-judicial bodies responsible for considering all relevant circumstances, including evaporation loss. The Commissioner's directive to disallow such credit and make reversals was seen as inconsistent with the rights of the dealers.

The Revenue countered by emphasizing the Commissioner's powers under Section 67 of the Delhi Value Added Tax Act, 2004, which allows the issuance of orders, instructions, and directions for the administration of the Act. However, Section 67(3) restricts the Commissioner from directing the determination of specific objections or questions in a particular manner.

3. Impact of the circular on the assessment process:
The court noted that Section 67 empowers the Commissioner to decide or determine specific questions, but these must follow an elaborate procedure and cannot be directed in a manner that binds assessing authorities to a particular view. The court referenced previous rulings, including the Supreme Court's decision in Orient Paper Mills Ltd. v. Union of India, which held that quasi-judicial bodies cannot be controlled by directions from higher authorities.

4. Rights of the petitioners regarding input-tax credit on evaporation loss:
The court observed that the impugned circular could not bind the authorities to disallow claims for evaporation losses as credit. Assessing authorities must examine such claims based on factual circumstances and consider the Revenue's concerns as permitted by law. The court directed that the circular should not influence the assessment process unduly and that assessments should be framed in accordance with the law.

Conclusion:
The court directed that Circular No. 47/2005-06 dated January 23, 2006, shall not bind the authorities to take a particular view on disallowing claims for evaporation losses. Assessing authorities are to consider claims factually and legally. If any assessments were completed during the proceedings and assessees were aggrieved by reliance on the circular, they may file objections within six weeks. The court clarified that these directions do not reflect on the merits of individual claims. The writ petitions were disposed of accordingly.