2020 (2) TMI 1248 - HC - VAT and Sales Tax

Levy of tax at reduced rate - value addition in respect of the sales of used cars by the petitioner - Notification G.O.,Ms.No.78, CT R (B-2, dated 11.07.2011 No.II(1)/CT R/12(R-20)/2011 - HELD THAT - It is already held that the benefit of Notification Number in G.O.M.S.No.79/CT R/B2 at Serial No.1, dated 23.03.2007 and Notification Number in G.O.M.S.No.78/CT R/B2 at Serial No.2, dated 11.07.2011, operate and apply to different kinds of dealers and therefore they are not to be taxed. In the light of the clarification dated 25.10.2016 of the Authority for Clarification and Advance Ruling issued under Section 48 A of the Tamil Nadu VAT Act, 2006, the issue relating to availability of benefit of G.O.Ms.No.79 CT R (B2) Dept. dated 23.3.2007 as amended by the of G.O.Ms.No.78 CT R (B2) Dept. dated 11.7.2011 would require reconsideration by the respondent. The issue relating valuation is answered in favour of the Petitioner. Thus, the demand of tax on Trade Discount in the impugned orders are quashed to that extent - As far as the issue relating to rate of tax is concerned, the same is remitted back to the respondent to pass fresh order in the light of the clarification issued by the Authority for Clarification and Advance Ruling vide its order dated 25.10.2016. Petition disposed off.

Summary

Issues:
Challenge to impugned orders denying benefit of tax reduction on used car sales as per specific notifications.

Analysis:
The petitioner filed a writ petition seeking a Writ of Certiorarified Mandamus to challenge orders by the respondent denying tax benefits on used car sales. The impugned orders observed that dealers failed to prove that used cars sold had already suffered VAT, as the notification forbids claiming VAT as Input Tax Credit (ITC). The dealers were required to show that used cars were previously subjected to VAT as new cars. The notification allowed reduced tax rates if ITC was not claimed on purchases. The objections of dealers were rejected as they failed to prove sales turnover and mismatch in reported purchases and sales. The court noted that dealers should not be taxed under specific notifications.

The court considered arguments from both parties and referred to a previous order where it held that different notifications applied to different dealers, exempting them from tax. In light of a clarification by the Authority for Clarification and Advance Ruling, the court ordered a reconsideration of the benefit of specific notifications by the respondent. The court quashed tax demands on Trade Discounts and remitted the issue of tax rates back to the respondent for a fresh order based on the clarification issued. The impugned order on tax rates was to be treated as a show cause notice, and the respondent was directed to issue a corrigendum if necessary. The petitioner was given a timeline to respond accordingly.

In conclusion, the writ petitions were disposed of with the above directions, and no costs were awarded. Connected miscellaneous petitions were closed as a result of the judgment.