2020 (10) TMI 1129 - HC - GST

Valuation - Sale of vehicles - Demand of differential amount of token tax/fees of the vehicles sold - period from 01.08.2019 to 26.11.2019 - liability of seller to pay such amount - HELD THAT - As per Section 4 of the J K Motor Vehicles Taxation Act, 1957, the liability to pay the tax is on the registered owner or the person who has the possession of the vehicle and not that of the seller of the vehicle. The registration of the vehicle or payment of token tax was not rejected on the Portal as for all the vehicles registration certificates were issued. All of a sudden, the petitioner received a communication dated 22.06.2020, from the Transport Department directing it to deposit differential amount of token tax of the vehicles sold after issuance of SRO 492 dated 01.08.2019. It was the difference of tax on the amount of GST levied on sale of vehicle, on which the token tax was not charged earlier. It was with reference to the clarification issued by the Transport Department on 26.11.2019, which provided that the token tax/ road tax is to be levied on the aggregate cost of the vehicle which includes basic cost plus GST - It could not be disputed that the liability to pay the aforesaid tax is on the buyer of the vehicle who has to utilize the same on the public roads. The fault cannot be attributed to the petitioner for the reason that even the invoice was to be generated from the Vahaan Portal as per the Government Order dated 12.10.2017. Any clarification issued by the department to a notification cannot have retrospective effect - the department issued the clarification on 26.11.2019. It is not in dispute that after the issuance of the aforesaid clarification the token tax is being calculated on the value of the vehicle including the amount of GST. The impugned notices directing the petitioner to deposit the differential amount of tax for the period from 03.08.2019 to 26.11.2019, are set aside - petition allowed.

Summary

Issues:
1. Quashing of order directing deposit of differential token tax/fees for vehicles sold.
2. Jurisdiction of authority issuing clarification on tax calculation.
3. Liability of dealer to collect and deposit token tax.
4. Interpretation of Section 4 of the J&K Motor Vehicles Taxation Act, 1957.
5. Validity of retrospective effect of clarification on tax calculation.
6. Discrepancy in tax calculation and liability attribution.

Analysis:

1. The petitioner sought to quash an order directing the deposit of differential token tax/fees for vehicles sold. The petitioner, a registered company and authorized dealer of Hyundai Motors, collected taxes on vehicles sold. Initially, tax was calculated excluding GST, but a clarification in 2019 changed this to include GST. The Transport Department later directed the petitioner to deposit the differential tax for a specific period, leading to the challenge.

2. The petitioner argued that the clarification adding new words to the tax calculation notification exceeded the authority's jurisdiction. The contention was that the liability to pay token tax rested with the buyers of the vehicles, not the petitioner. The petitioner highlighted that any tax calculation discrepancies should have been addressed during registration, as all registrations were approved upon tax payment.

3. The respondents defended the clarification, stating it was a simple clarification without adding new elements. They emphasized the dealer's responsibility to calculate proper tax, as mandated by the notification. The department contended that the petitioner's failure to comply necessitated the payment of differential tax, linking back to the original notification's date.

4. Section 4 of the J&K Motor Vehicles Taxation Act, 1957 places the tax payment liability on the registered owner or possessor of the vehicle, not the seller. The Act's provisions clarify that the tax responsibility lies with the buyer, who will use the vehicle on public roads, emphasizing the distinction in liability.

5. The court noted that the retrospective effect of the clarification on tax calculation was not valid. The liability to pay tax rested with the vehicle buyers, and any changes should not retroactively impact the dealer. The court emphasized that a clarification to a notification cannot alter past liabilities or practices.

6. Ultimately, the court found merit in the petitions, allowing them and setting aside the notices demanding the deposit of differential tax. The court concluded that the petitioner, as a dealer, was not at fault for following the tax calculation system in place until the clarification. The liability for tax payment resided with the buyers, and any retrospective demands on the dealer were unwarranted.