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2022 (5) TMI 73 - HC - VAT and Sales Tax


Issues Involved:
1. Levy of tax under Section 3 of the MVAT Act and related notifications.
2. Applicability of principles laid down by the Supreme Court in "Hotel Ashoka" vs. "Nirmalkumar Parsan."
3. Double taxation on the same transaction.
4. Revenue neutrality of the transactions.
5. Levy of Central Sales Tax and its constitutional validity.
6. Violation of Articles 265 and 300A of the Constitution of India.

Issue-wise Analysis:

1. Levy of Tax under Section 3 of the MVAT Act:
The petitioner challenged the tax levied under Section 3 of the MVAT Act, arguing that the tax was already paid by M/s ASK Agencies at the "first point of sale." The court noted that the transaction was a bond-to-bond sale, and VAT was discharged by M/s ASK Agencies as per the applicable rate, treating it as the "first point of sale." The court found that the tax was rightly not paid by the petitioner based on the Supreme Court's decision in "Hotel Ashoka," which treated such sales as "in the course of import."

2. Applicability of Supreme Court Judgments:
The court considered whether the transaction should be governed by the principles laid down in "Hotel Ashoka" or the later decision in "Nirmalkumar Parsan." It was concluded that the transaction, which occurred in 2015-2016, should be governed by the law prevailing at that time, as declared in "Hotel Ashoka." The court held that subsequent judgments could not retroactively alter the tax liability for transactions that occurred under the earlier legal framework.

3. Double Taxation:
The court found that levying tax on the petitioner for the same transaction on which tax was already paid by M/s ASK Agencies would amount to double taxation, which is impermissible. The court highlighted that the tax collected from M/s ASK Agencies was for the same transaction, and thus, imposing additional tax on the petitioner would violate the principle against double taxation.

4. Revenue Neutrality:
The court noted that if the tax were to be recovered from the petitioner, it would necessitate a corresponding refund to M/s ASK Agencies, making the situation revenue neutral. The court cited Supreme Court judgments that recognized revenue neutrality as a ground for not imposing additional tax, interest, or penalties.

5. Levy of Central Sales Tax:
The court found that the assessing officer's reliance on the "Nirmalkumar Parsan" judgment to levy Central Sales Tax was misplaced, as the transaction was intra-state and not inter-state. The court held that the levy of Central Sales Tax was ex-facie illegal and ultra vires the provisions of the Central Sales Tax Act and MVAT Act.

6. Violation of Constitutional Articles:
The court concluded that the impugned assessment order violated Articles 265 and 300A of the Constitution of India, as it imposed a fresh levy on a transaction that had already been taxed. The court emphasized that tax must be collected according to law and not arbitrarily.

Conclusion:
The court allowed the writ petition, quashing the impugned assessment order and ruling in favor of the petitioner. The court held that the tax levied was ultra vires, amounted to double taxation, and violated constitutional provisions. The petitioner was granted relief as per the prayer clauses (a) to (c) in the writ petition.

 

 

 

 

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