2019 (9) TMI 1016 - HC - VAT and Sales Tax

Action of the Deputy Commissioner of Sales Tax (Respondent No.4) and the Assistant Commissioner of Sales Tax (Respondent No.5) in insisting on adjudicating upon SCN - HELD THAT - In response to the impugned notices the Petitioner requested the Respondent to keep these impugned notices in abeyance till the Apex Court has taken a final view on the Petitioner s pending appeal, but to no avail. The Petitioner apprehend that the Respondent Nos.4 and 5 will adjudicate upon the impugned notices. Therefore, this Petition. However after the matter was argued for some time, Mr. Dada, learned Senior Advocate on instructions states that without prejudice to the Petitioner s right and contentions, they would file the audit report in Form E-704 for the subject Financial Years 2012- 13, 2013-14, 2016-17 and 2017-18 within a period of four weeks from today. It is important to bear in mind that for the subject Financial Years, the Petitioners have on their own, admittedly discharged the VAT payable under the Act. In view of the above consensus arrived at between the parties, no specific directions are required to be passed - petition disposed off.

Summary

Issues:
Challenge to action of Deputy Commissioner of Sales Tax and Assistant Commissioner of Sales Tax in insisting on adjudicating show cause notices related to different financial years under Maharashtra Value Added Tax Act, 2002. Jurisdiction of Authority to tax the petitioner. Compliance with the Act regarding use of brand name/trademark by group companies. Previous court decisions on tax liability for use of brand name/trademark. Request to keep show cause notices in abeyance pending final view by Supreme Court. Agreement to file audit report and keep show cause notices in abeyance.

Analysis:

1. The petition challenges the action of the Deputy Commissioner of Sales Tax and Assistant Commissioner of Sales Tax in insisting on adjudicating show cause notices related to different financial years under the Maharashtra Value Added Tax Act, 2002. The notices called for explanations on why penalties should not be imposed and prosecution launched for failure to file the Audit Report in Form E-704. The petitioner argued that the jurisdiction of the Authority to tax them is under consideration by the Supreme Court and that the taxes for the relevant period have already been paid.

2. The petitioner contended that the use of its brand name/trademark by group companies for consideration does not constitute a sale but a service, for which service tax under the Finance Act, 1994 has been paid. Therefore, they argued that there is no obligation to comply with the Maharashtra Value Added Tax Act, and all proceedings under the Act are without jurisdiction.

3. The court referred to a previous case involving the petitioner, where it was held that the petitioner is liable to pay tax for allowing the use of its brand name/trade name by group companies for consideration. An appeal against this decision was admitted by the Supreme Court, which stayed the penalties but directed the petitioner to pay the tax involved in the transaction. The court noted that the appeal is pending and likely to be heard soon, with no change in facts or law for the years covered by the impugned notices.

4. The petitioner cited another case where a similar agreement regarding the use of a brand name was construed differently by the court, indicating a lack of sale in such transactions. The Revenue was in appeal against this decision, highlighting the conflicting interpretations of the law in different cases.

5. Despite the petitioner's request to keep the impugned notices in abeyance until the Supreme Court's final view, the authorities were inclined to adjudicate upon them. However, during the proceedings, the petitioner agreed to file the audit report for the relevant financial years within a specified period. Upon this undertaking, the authorities agreed to keep the show cause notices in abeyance.

6. The court acknowledged the consensus between the parties to file the audit report and keep the show cause notices in abeyance. It was decided that no specific directions were necessary, and the authorities would act in accordance with the Supreme Court's decision in the pending appeal. Consequently, the petition was disposed of based on the agreement reached during the proceedings.