2016 (1) TMI 872 - HC - VAT and Sales Tax

Purchase of Goods against Form C - concessional rate of tax - Deputy Commissioner amended the registration certificate after deleting the two items, namely, deep-freezer and tricycle , on the ground, that the petitioner is not re-selling the said items. By another order of the same date, the Deputy Commissioner rejected the petitioner s application for issuance of Form-C, on the ground, that the registration certificate has been amended and, therefore, Form-C could not be issued. Held that - the petitioner was purchasing tricycles and deep-freezers from the manufacturers outside the State of U.P. and these products are mentioned in the certificate of registration issued under Section 8(3)(b) of the Act. The petitioner was, therefore, entitled for issuance of Form-C to enable the petitioner to avail concessional rate of tax on the purchase of these products. The respondents have also admitted that the petitioner has entered into a lease agreement with its distributors and sub-dealers and is paying taxes every year on the lease rent. The order amending the registration certificate is quashed as well as the order refusing to grant Form-C is also quashed. - Form-C to be issued - Decided in favor of assessee. In the light of the aforesaid provisions, it is apparently clear, that deep-freezers and tricycles are re-sold to the distributors and dealers of the petitioner in the same form and condition as a transfer on the right to use the goods. Such transfer of the right to use the goods is a sale as defined under the Central Sales Tax Act as well as under the VAT Act. The goods purchased by the petitioner as per the products indicated in the certificate of registration are clearly intended for resale by it and consequently, the petitioner is entitled for issuance of Form-C in order to avail concessional rate of tax.

Summary

Issues Involved:
1. Amendment of the registration certificate under Section 7(4) of the Central Sales Tax Act.
2. Refusal to issue Form-C for concessional tax rates.
3. Interpretation of "for resale" under Section 8(3)(b) of the Central Sales Tax Act.
4. Availability of alternative remedy.

Detailed Analysis:

1. Amendment of the Registration Certificate:
The petitioner, a Limited Company registered under the U.P. Value Added Tax Act, 2008, contended that the deep-freezers and tricycles it purchased were intended for resale through lease agreements with distributors and dealers. The Deputy Commissioner, Commercial Tax, Bareilly, amended the registration certificate under Section 7(4) of the Central Sales Tax Act, deleting these items on the grounds that they were not being resold in the same form. The court found that the Deputy Commissioner committed a manifest error by not recognizing the lease of these items as a "transfer of right to use," which is deemed a sale under both the Central Sales Tax Act and the VAT Act. This transfer qualifies as resale, thus entitling the petitioner to the concessional tax rate.

2. Refusal to Issue Form-C:
The petitioner applied for Form-C to avail concessional tax rates on the purchase of deep-freezers and tricycles. Despite a previous court order directing the assessing authority to consider the application, the Deputy Commissioner rejected the request, citing the amended registration certificate. The court held that the amendment to the registration certificate could not be applied retrospectively to pending applications. Therefore, the petitioner was entitled to Form-C for periods prior to the amendment.

3. Interpretation of "For Resale":
The core issue was the interpretation of "for resale" under Section 8(3)(b) of the Central Sales Tax Act. The court examined definitions under both the Central Sales Tax Act and the VAT Act, concluding that "sale" includes the transfer of the right to use goods. Consequently, the lease agreements constituted resale, as the goods were transferred in the same form and condition. The court emphasized that the turnover of sales includes lease rent, making the petitioner eligible for concessional tax rates.

4. Availability of Alternative Remedy:
The respondent argued that the petitioner should have pursued an alternative remedy through an appeal. The court acknowledged that while Article 226 of the Constitution provides wide discretionary powers to issue writs, it is not obligatory if an alternative remedy exists. However, the court noted that exceptions apply, particularly when a pure question of law is involved without factual disputes. Given that the case hinged on the legal interpretation of "for resale," the court found it appropriate to exercise its jurisdiction under Article 226.

Conclusion:
The court quashed the impugned orders, including the amendment of the registration certificate and the refusal to issue Form-C. A writ of mandamus was issued, directing the Deputy Commissioner to issue Form-C within three weeks. The court reiterated that the amendment could not be applied retrospectively and that the petitioner was entitled to the concessional tax rate for the periods in question. The writ petitions were allowed, with each party bearing its own costs.