2021 (8) TMI 1139 - HC - VAT and Sales Tax

Levy of VAT - traded goods (STB and remote) - purchase price treated as sale price - taxing the loss sustained by the Petitioner on sale of the set- up box - non-traded goods brought in by the Petitioner through Form F from other States by way of stock transfer and installed on entrustment basis without any consideration in the customer premises - HELD THAT - It appears that the learned Tribunal has committed serious errors on material facts which includes the finding that the Set Top Boxes that were sold to the customers were a part of non-traded goods although, it was the specific case of the petitioner, that it was sold by the petitioner on which VAT was paid and does not form a part of non-trading goods. This Court further finds that the learned Tribunal has not considered the subscription contract which is the foundational document in connection with the transactions involved in the present cases. This Court is of the view that the subscription contract of the relevant period as well as the Provisions of Telecom Regulatory Authority of India and the regulations framed thereunder, by which the petitioner was governed even at the relevant point of time, are required to be scrutinized and considered by the Tribunal to come to a correct finding in connection with subscription contract of the petitioner with its consumers - This Court is also of the view that the factual errors which have been committed by the learned Tribunal are required to be taken care of by the learned Tribunal at the first instance for arriving at a considered decision. This Court is not inclined to rectify such factual errors, which has been committed by the learned Tribunal, in writ jurisdiction. This Court is of the considered view that these matters are fit for remand before the learned Tribunal for fresh consideration in accordance with law - the matters are remanded to the Tribunal for fresh consideration in accordance with law - appeal allowed by way of remand.

Issues Involved:
1. Whether VAT can be levied on the traded goods (Set Top Box and remote) by treating the purchase price as its sale price or by taxing the loss sustained by the petitioner on the sale of the set-top box.
2. Whether VAT Authorities can levy tax on the value of non-traded goods brought in by the petitioner through Form 'F' from other states by way of stock transfer and installed on an entrustment basis without any consideration in the customer premises, with the property remaining with the petitioner company.
3. Imposition of penalty for the period 2006-2007.

Issue-wise Detailed Analysis:

Issue 1: Levy of VAT on Traded Goods (Set Top Box and Remote)
The petitioner challenged the imposition of VAT on Set Top Boxes (STBs) and remotes, arguing that these items were sold at a loss and should not be taxed based on the purchase price or the loss incurred. The appellate authority and the Commercial Taxes Tribunal held that the STB, Dish Antenna, and Recharge Vouchers together constituted a system enabling broadcasting and thus should be taxed collectively. The Tribunal's decision was based on the premise that the STBs were part of non-traded goods, although the petitioner contended that VAT was paid on these items as they were sold through channels. The High Court found that the Tribunal committed serious errors in material facts, including the incorrect classification of STBs as non-traded goods.

Issue 2: Levy of VAT on Non-traded Goods via Stock Transfer
The petitioner argued against the imposition of VAT on non-traded goods brought in from other states through Form 'F' on an entrustment basis, with no consideration involved. The Tribunal did not properly consider the subscription contract between the petitioner and its customers, which was crucial for understanding the nature of these transactions. The High Court noted that the Tribunal failed to scrutinize and consider the subscription contract and the relevant regulations under the Telecom Regulatory Authority of India (TRAI), which governed the petitioner at the relevant time.

Issue 3: Imposition of Penalty for the Period 2006-2007
An additional issue involved in W.P.(T) No.2281 of 2020 was the imposition of a penalty for the financial year 2006-2007. The Tribunal did not provide any findings regarding this penalty. The High Court observed that the Tribunal's order suffered from patent errors and required fresh consideration.

High Court's Decision:
The High Court, after hearing both parties, found that the Tribunal committed serious errors in material facts and failed to consider essential documents and regulations. The Court was not inclined to rectify these factual errors in writ jurisdiction and decided that the matters should be remanded to the Tribunal for fresh consideration.

The High Court set aside the impugned judgments of the Tribunal and directed the Tribunal to reconsider the cases in accordance with the law. The Tribunal was instructed to allow the petitioner to place the subscription contract and relevant TRAI regulations on record for better appreciation. The High Court emphasized that these matters pertain to the period from 2006-2007 onwards and should be decided expeditiously.

The Court also noted the petitioner's request for a physical hearing before the Tribunal and directed that such a request be considered as per prevailing guidelines.

Conclusion:
The High Court remanded the cases to the Commercial Taxes Tribunal for fresh consideration, setting aside the Tribunal's previous judgments. The Tribunal was directed to proceed in accordance with the law and decide the cases expeditiously. The writ petitions were disposed of, and any pending interlocutory applications were closed.

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