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2016 (9) TMI 869 - HC - VAT and Sales TaxLevy of surcharge on amount of tax paid - works contract - Haryana Value Added Tax Act, 2003 - Whether on the facts and in the circumstances of the case, the Ld. Tribunal was justified in upholding the levy of additional tax as surcharge leviable on the taxable turnover even in the case of works contractor who has opted for lump sum tax? - Held that - the decision in the case Govind Saran Ganga Saran v. Commissioner of Sales Tax and others 1985 (4) TMI 65 - SUPREME Court is relied upon. It was opined that four components are (i) taxable event; (ii) taxable person; (iii) rate of tax and (iv) measure or value for which rate of tax is to be applied. In the absence of any of the components, the levy may be struck down. Taxable event for levy of additional tax under Section 7A of the VAT Act is on taxable turnover, is also evident from the fact that the retailers opting for payment of lump sum tax have been excluded from the levy. As provided for in Rule 52 of the Rules, in the case of retailers, taxable turnover is determined only then the amount of tax is calculated. Whereas in none of the other categories of the dealers opting for payment of tax on lumpsum basis, the taxable turnover is calculated. One of the important component on taxation being missing namely taxable turnover in the case of dealers opting for payment of tax on lump sum basis, levy of additional tax under Section 7A of the VAT Act cannot be sustained. Levy of additional tax and interest withheld - petition disposed off - decided in favor of petitioner.
Issues Involved:
1. Levy of additional tax (surcharge) on lump-sum tax for works contractors. 2. Justification of interest levy on the tax payable. Detailed Analysis: 1. Levy of Additional Tax (Surcharge) on Lump-Sum Tax for Works Contractors: The primary issue revolves around whether the Haryana Tax Tribunal was justified in upholding the levy of additional tax as a surcharge on the taxable turnover of a works contractor who has opted for lump-sum tax under the Haryana Value Added Tax Act, 2003 (VAT Act). The appellant, a registered works contractor, contended that the lump-sum tax paid under Section 9 of the VAT Act should be inclusive of all types of taxes, including the additional tax under Section 7A. The appellant argued that Section 7A, which imposes an additional tax in the nature of a surcharge, should not apply to lump-sum tax payments since there is no determination of taxable turnover in such cases. The appellant cited several judgments, including Bhima Jewellery Vs. Assistant Commissioner (Assessment), Kerala and another, and State of Uttar Pradesh and others Versus Systematic Conscom Limited, to support their argument that additional tax should not be levied on lump-sum tax payments. On the other hand, the State argued that Section 7A of the VAT Act, which starts with a non-obstante clause, mandates the levy of additional tax on the tax payable under the VAT Act, excluding only retailers who opt for lump-sum tax. The State distinguished the appellant's cited judgments and referred to the Division Bench judgment in Hoshiarpur Large and Medium Industries Association and others Versus State of Punjab and another, where the vires of surcharge provisions were upheld. Upon review, the Court analyzed the VAT Act's provisions, including Sections 3, 6, 7, 7A, and 9, and relevant rules (Rules 46-52). The Court noted that Section 7A imposes an additional tax on the taxable turnover, calculated as 5% of the tax payable. However, for dealers opting for lump-sum tax, the taxable turnover is not determined, making the application of Section 7A inapplicable. The Court cited the Supreme Court's judgment in Govind Saran Ganga Saran v. Commissioner of Sales Tax and others, which outlined the essential components of taxation, including the taxable event, taxable person, rate of tax, and measure of tax. The Court concluded that in cases where taxable turnover is not determined (such as lump-sum tax payments), the levy of additional tax under Section 7A is not sustainable. The Court referred to the Madras High Court's judgment in South India Corporation Ltd. Vs. Commercial Tax Officer, Coimbatore and others, which held that additional sales tax is not leviable on dealers opting for lump-sum tax as their taxable turnover is not determined. 2. Justification of Interest Levy on the Tax Payable: The appellant also challenged the levy of interest on the tax payable, arguing that the lump-sum tax should be inclusive of all taxes, including interest. However, the Court's decision on the primary issue of additional tax rendered this question moot. Since the Court found that additional tax under Section 7A is not leviable on lump-sum tax payments, the levy of interest on such additional tax also does not survive. Conclusion: The Court allowed the appeal, holding that additional tax under Section 7A of the VAT Act is not leviable on dealers opting for lump-sum tax payments where taxable turnover is not determined. Consequently, the circular issued by the Excise and Taxation Commissioner, Haryana, dated 14.1.2014, and the assessment order dated 27.11.2013, were set aside to the extent of the levy of additional tax and interest on delayed payment thereof. The writ petitions were disposed of accordingly.
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