2021 (9) TMI 827 - HC - VAT and Sales Tax

Inter state sale or Intra-state sale - elevators are sold to the contractees - petitioner would procure peripheral machinery and use further manpower for installation purpose on which it would pay VAT - AO was of the opinion that even on the cost of elevators the petitioner must pay the local taxes - HELD THAT - The Assessing Officer and the revisional authority have made a serious error in demanding VAT from the petitioner on sale and supply of the elevators to its contractees. In plain terms, the machinery was supplied separately by way of a sale which was in the nature of an inter-state sale and on which applicable Central Sales Tax was paid. When the petitioner undertook the work of installation of such machinery and commissioning of the project, the petitioner could be charged only on the incremental value where the local sale took place. The sale of elevators cannot be by any standard treated as a local sale. The Assessing Officer devised an artificial means to tax the same under TVAT Act by suggesting that the petitioner had a local registration and in the course of execution of the work of installation and commissioning of elevators, the petitioner could have brought the machinery from outside and implemented the contract. If we understand correctly what the Assessing Officer is trying to convey is that had the petitioner from its branch offices brought the machinery within the State and thereafter transferred the title in the goods into the contractees, the same would have amounted to local sale and, therefore, local VAT would have been applicable. This is not a matter of desire of the Assessing Officer where the sale should take place so that the same would be inter-state sale or intrastate sale - the Assessing Officer by way of artificial means tried to tax the same transaction again as a local sale demanding VAT which was wholly impermissible. Impugned order of assessment is set aside - revision petition allowed.

Summary

Issues:
Challenge to assessment order under TVAT Act for installation and commissioning of elevators, demand for unpaid tax, interpretation of inter-state sale, applicability of local VAT, revision petition dismissal based on double taxation.

Analysis:
The petitioner challenged an assessment order under the TVAT Act for installation and commissioning of elevators, where the Assessing Officer demanded unpaid tax for the years 2009-10 to 2013-14. The petitioner contended that on the value of elevators, no local tax should be levied as it constituted an inter-state sale. However, the Assessing Officer argued that the petitioner should pay local VAT on the cost of elevators, citing unjustified use of permits by the dealer to evade VAT. The Commissioner dismissed the revision petition on the grounds of no double taxation, leading to the current revision petition.

Upon hearing both parties and examining the records, the Court found serious errors by the Assessing Officer and the revisional authority in demanding VAT from the petitioner on the sale and supply of elevators. The Court clarified that the machinery supplied by the petitioner for installation was part of an inter-state sale, subject to Central Sales Tax. The Assessing Officer's attempt to tax the transaction under the TVAT Act based on the petitioner's local registration was deemed artificial and impermissible. The Court emphasized that the sale of elevators could not be considered a local sale, and the Assessing Officer wrongly attempted to impose local VAT on the transaction.

The Court referred to a decision by the Karnataka High Court where a similar transaction involving the same company under comparable circumstances was treated as an inter-state sale beyond the local VAT authority's power to tax. Consequently, the Court allowed the revision petition, setting aside the impugned assessment order. The Court's decision clarified the distinction between inter-state and local sales, emphasizing the correct application of taxes based on the nature of the transaction.