2017 (2) TMI 871 - HC - VAT and Sales Tax

Levy of tax - Rule 38 (7) of the Rules - Held that - it is not necessary that only when the contractor is found in possession of goods that he can be proceeded with and not otherwise. Once the movement of consignment through the Railway Container Contractor is not disputed and is established, the obligation in law was upon the contractor, to furnish details of the consigner and consignee, so that the interest of revenue could be safeguarded, is clearly imposed. The failure on part of contractor to maintain the records, therefore, would entitle the revenue to proceed as per law. The Railway Container Contractor is required in law to get itself registered and maintain records, as is clearly specified u/r 38 (7) of the Rules, and in case such records are not made available under the statutory scheme, the contractor acquires status of a dealer, so as to attract relevant provisions of the U.P. Value Added Tax Act, 2008, for the purposes of levying tax. Petition disposed off.

Summary

Issues:
Interpretation of Section 2(h)(ix) of the U.P. VAT Act and Rule 38(7) regarding Railway Container Contractor's obligations and registration requirements.

Analysis:
The judgment concerns a Railway Container Contractor who failed to maintain adequate records, leading the Assessing Authority to treat them as a dealer under Section 2(h)(ix) of the U.P. Value Added Tax Act, 2008. The tribunal allowed the contractor's appeal, stating that the Act lacks specific provisions mandating record maintenance regarding consigner and consignee identities. However, the revenue challenged this decision through a revision under Section 58 of the Act. The Standing Counsel highlighted Section 2(h)(ix) and Rule 38(7), emphasizing the obligation for Railway Container Contractors to maintain specific records. The tribunal's failure to consider Rule 38(7) was noted, as it clearly outlines the necessary information contractors must possess. The judgment clarifies that contractors failing to provide required details can be treated as dealers, subject to tax obligations.

The judgment underscores the statutory requirements for Railway Container Contractors, emphasizing the necessity of registration and record maintenance as per Rule 38(7). It criticizes the tribunal's reliance on Sections 17 and 21, stating that the Act's Section 2(h) specifically addresses the dealer status based on record-keeping compliance. The tribunal's oversight of Rule 38's specifics rendered its decision legally unsustainable. The judgment rejects the applicability of a previous Supreme Court decision, highlighting the distinct statutory schemes and the tribunal's error in relying on it. It conclusively states that Railway Container Contractors must register and maintain records as per Rule 38(7), with non-compliance leading to dealer status and tax liability under the U.P. VAT Act, 2008.

In conclusion, the judgment answers the legal questions raised by affirming the obligation of Railway Container Contractors to register and uphold record-keeping standards outlined in Rule 38(7). Failure to meet these requirements subjects contractors to dealer status and tax liabilities under the U.P. Value Added Tax Act, 2008. The revisions were disposed of accordingly, emphasizing the importance of statutory compliance for contractors in the transportation sector.