2023 (12) TMI 672 - HC - VAT and Sales Tax

Constitutional validity of the definition of the term dealer as defined under Clause (j) of Sub-section (1) of Section 2 of the Delhi Value Added Tax Act, 2004 - Explanation to Sub-clause (vii) of Clause of Section 2(j) of the DVAT Act, inasmuch as it also includes any corporation or company engaged in commercial banking - HELD THAT - In terms of Sub-section (2) of Section 3, VAT is payable at the rates as specified under Section 4 of the DVAT Act. Section 5 of the DVAT Act, explains the term taxable turnover as the turnover during the tax period subject to adjustments. Sections 6 and 7 of the DVAT Act contains provisions regarding sales that are exempted from tax and certain sales that are not liable to tax. Section 9 of the DVAT Act contains provisions regarding the tax credit. The adjustments of tax credit in essence encapsulates the VAT regime. The machinery provisions, subject to other provisions, restrict the aggregate VAT to the tax at the last point of taxation. Thus, the petitioner s contention that the Scheme of the Act does not entail a charge on sale of goods, is erroneous. The DVAT Act expressly provides for charge of tax on sale of goods subject to certain exemptions and adjustments provided for under the DVAT Act. The scheme of DVAT Act does provide for credit for the taxes already borne to avoid the cascading effect of tax on sale of goods. However, it would be erroneous to assume that charge of tax in not on the sale of goods. The contention that the petitioner is not liable to pay any tax on sale of goods on the ground that there is no value addition, is insubstantial. The petitioner s challenge to the constitutional validity of the definition of the dealer is founded on ex facie erroneous premise. The same is, accordingly, rejected. In HDFC Bank v. Commissioner of Value Added Tax, Delhi 2016 (10) TMI 1345 - DELHI HIGH COURT , another Coordinate Bench of this Court had, following the decision of M/s Citi Bank v. Commissioner of Sales Tax M/s Citi Bank v. Commissioner of Sales Tax 2015 (12) TMI 1040 - DELHI HIGH COURT , rejected an appeal against the decision of the VAT Tribunal holding that sale of such re-possessed vehicles was subject to the charge of VAT. The said two decisions cover the petitioner s challenge to the impugned notices demanding VAT, interest, and penalty under the DVAT Act. Petition dismissed.

Summary

Issues:
The petitioner challenges the constitutional validity of the definition of the term 'dealer' under the Delhi Value Added Tax Act, 2004, specifically objecting to the inclusion of corporations or companies engaged in commercial banking.

Judgment Details:

1. The petitioner, a scheduled bank, challenges the expansive definition of 'dealer' under the DVAT Act, arguing that it goes against the Act's objective and is ultra vires Article 265 of the Constitution of India.

2. The petitioner contests notices seeking to recover tax, interest, and penalty for the sale of re-possessed vehicles, claiming it does not involve value addition and should not be subject to VAT.

3. The Court examines the definition of 'dealer' and the object of the DVAT Act, finding that the Act encompasses the levy of tax on the sale of goods and the right to use goods.

4. Provisions of the DVAT Act regarding VAT imposition, taxable turnover, exemptions, and tax credit are discussed to establish the Act's framework for taxation on the sale of goods.

5. The Court rejects the petitioner's argument that no tax should be levied on the sale of goods without value addition, emphasizing that the DVAT Act does impose tax on sales subject to exemptions and adjustments.

6. The Court addresses the petitioner's reliance on the difference between VAT and turnover tax, clarifying that VAT is imposed on the sale of goods with consideration for value addition at each stage of the transaction chain.

7. The petitioner's reference to a previous decision regarding the definition of 'sales' under a different tax Act is deemed irrelevant to the current case involving VAT on the sale of re-possessed vehicles.

8. The Court highlights a prior decision by a Coordinate Bench regarding the taxation of re-possessed vehicles under the DVAT Act, establishing precedent for the petitioner's challenge to the impugned VAT demands.

9. Ultimately, the petition challenging the VAT notices is dismissed as unmerited, upholding the legality of the tax imposition on the sale of re-possessed vehicles under the DVAT Act.