2015 (1) TMI 855 - HC - VAT and Sales Tax

Exemption from payment of sales tax - Whether surcharge is leviable on the amount paid by the assessee as a condition of exemption notification dated 30.04.1993 issued by the State Government at the relevant time under the extant Section 4(2) of the Rajasthan Sales Tax Act of 1954 pari materia to Section 15 of the Act of 1994. - Held that - Language of notification dated 30.04.1993 issued under the extant Section 4(2) of the than Act of 1954 clearly resulted in exemption from payment of whole of the tax, albeit with conditions. Reference in this regard can be had to the succeeding Section 15 of the Act of 1994 which deals with exemption of tax and provides that notwithstanding anything contained in the Act, where the State Government is of the opinion that it is necessary or expedient in the public interest so to do, it may, by notification in the Official Gazette, exempt fully or partially, whether prospectively or retrospectively from tax the sale or purchase of any goods or class of goods or any person or class of persons, without any condition or with such condition as may be specified in the notification. The notification dated 30.04.1993 generally provides for an exemption from payment of tax under the Act of 1954 on the condition of payment of 1% of the total value of the works contract executed by the assessee in respect of works enumerated therein. Clearly the amount of 1% of the total value of contract in issue as paid by the assessee was not a payment of lump-sum in lieu of tax under Section 5 of the Act of 1994 as in fact has never been the case of the Department at any stage of the proceedings, but a payment to satisfy the condition for exemption from payment of tax. Even though the exemption notification does indeed refer to the payment of 1% of the work contract value as an exemption fee . Fee is a concept well known in law and has is own legal connotation. It would be desirable to note that nothing turns on the mere use of the word fee in a statute rule / circular / or notification. The nature and character of the impost is to be determined to conclude whether the charge is a fee or not. In the context of the legal connotation of a fee as enunciated by the Hon ble Supreme Court, the payment of 1% of the total value of the works contract under the notification dated 30.04.1993 as a condition to avail the exemption from payment of tax otherwise leviable first under the Act of 1954 and then under the Act of 1994 can in no circumstance be described as a fee. - The charge of 1% of the value of the works contract for enumerated purposes was thus not a charge in lieu of fee or a lump sum in lieu of tax under Section 5 of the Act of 1994 but only a condition to avail an exemption from tax in whatever form on the transactions or events otherwise exigible to tax. It is settled that every charge levied by the Government need not necessarily be a tax or a fee or even one in lieu thereof. The Government has the power to require a payment as a consideration ( Commissioner of Income Tax, Udaipur, Rajasthan Vs. Mcdowell & Company Ltd. 2009 (5) TMI 28 - SUPREME COURT ) and analogously as a condition of availing benefits its policy of which exemption from tax is a part. Invoking of Section 13 of the Act of 1994 to levy a surcharge on the amount of 1% of the total value of the works contract paid by the assessee as a condition to avail the exemption on tax on transfer of property in goods (whether as goods or in some other form) involved in the execution of works contracts relating to enumerated works was wholly misdirected and misplaced. Such a levy was not only on a narrow and erroneous understanding of the exemption notification dated 30.04.1993 but also against a wholistic construction of the statutory provisions of the Act of 1994. The Assessing Authority had made a fundamental error in interpreting Section 13 of the Act of 1994 and in seeking to visit the assessee with liability to surcharge on the amount of 1% of the value of the works contract paid under the exemption notification dated 30.04.1993. The Appellate Authority exercised its jurisdiction justly and fairly in setting aside the aforesaid order. The Tax Board rightly concurred with the Appellate Authority. - There is thus no occasion to interfere in this revision petition - Decided against Revenue.

Summary

Issues Involved:
1. Whether surcharge is leviable on the amount paid by the assessee as a condition of exemption notification dated 30.04.1993.
2. The interpretation of Section 13 of the Rajasthan Sales Tax Act, 1994 concerning the levy of surcharge.
3. The nature and character of the 1% payment under the notification dated 30.04.1993.

Issue-wise Detailed Analysis:

1. Whether surcharge is leviable on the amount paid by the assessee as a condition of exemption notification dated 30.04.1993:

The core issue revolves around whether the surcharge under Section 13 of the Rajasthan Sales Tax Act, 1994, is applicable to the 1% payment made by the assessee under the exemption notification dated 30.04.1993. The notification exempted tax on specific works contracts on the condition that the contractor pays 1% of the total contract value. The Assessing Officer's view was that the assessee was liable to pay a surcharge on this 1% payment. However, the Appellate Authority and the Tax Board overturned this view, stating that the exemption from tax included exemption from surcharge, as surcharge is essentially an additional tax.

2. The interpretation of Section 13 of the Rajasthan Sales Tax Act, 1994 concerning the levy of surcharge:

Section 13 of the Act of 1994 stipulates that a surcharge is payable on the amount of tax, fee, or sum in lieu of tax. The Appellate Authority and the Tax Board interpreted this section in light of the definition of "tax" under Section 2(41) of the Act of 1994, which includes "any tax or other levy by any name." They concluded that since the notification dated 30.04.1993 exempted the assessee from tax, it also exempted them from surcharge, as surcharge is an additional tax. This interpretation aligns with the Hon'ble Supreme Court's view that surcharge is an enhancement of the primary tax.

3. The nature and character of the 1% payment under the notification dated 30.04.1993:

The payment of 1% of the total contract value was a condition for availing tax exemption under the notification. The court examined whether this payment could be considered a fee or a lump-sum payment in lieu of tax. It concluded that the 1% payment was not a fee, as it did not have a reasonable correlation with services rendered, nor was it a lump-sum payment in lieu of tax under Section 5 of the Act of 1994. Instead, it was a condition to avail tax exemption. The court emphasized that the term "fee" has a specific legal connotation and the mere use of the word in the notification does not change the nature of the payment.

Conclusion:

The court concluded that the surcharge under Section 13 of the Act of 1994 could not be levied on the 1% payment made under the exemption notification dated 30.04.1993. The payment was neither a fee nor a lump-sum in lieu of tax but a condition for availing tax exemption. The Assessing Officer's interpretation was fundamentally flawed, and the Appellate Authority and the Tax Board rightly set aside the surcharge demand. The revision petition by the Department was dismissed, affirming the decisions of the lower authorities.