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TMI Blog2014 (11) TMI 966X X X X Extracts X X X X X X X X Extracts X X X X ..... einafter referred to as the VAT) in excess of the actual sale price for which goods are being sold by members of the petitioner-association. The petitioner's grievance briefly put, is that the State legislature is not empowered to charge tax on any other amount except the actual sale price agreed between the oil companies and the retail outlets. The explanation introduced by way of an amendment is beyond legislative competence in view of Entry 54 of List II of 7th Schedule, appended to the Constitution of India. By enacting that tax shall be levied on the price at which petrol products are sold to consumers, the amendment includes the commission payable to retail dealers, for sale of petroleum products. The Counsel for the petitioner submits that the State of Haryana has issued Notification No.Leg. 22/2011, dated 29.09.2011, amending Section 2(1)(zg) of the Act, modifying the definition of sale price by adding explanation (v). The effect of the amendment is that petroleum companies would be collecting tax not on the actual price of sale made by them to dealers but upon the expected final sale price of such products, to consumers thereby including the commission payable to a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows:- "(zn) "taxable turnover" means that part of the gross turnover which is left after making deductions therefrom in accordance with the provisions of section 6; plus purchase value of goods liable to tax under sub-section (3) of section 3." It is contended that a conjoint reading of the aforesaid provisions reveals that tax is to be levied on the actual sale or purchase of goods at the time of sale. In the absence of any constitutional or statutory provision that permits levy of sales tax on notional or artificial price which is unrelated to the actual sale price settled between the parties, VAT cannot be levied in terms of the impugned amendment. It is further contended that after incorporating explanation (v) in Section 2 of the Act, tax is now being levied on a notional price, to be calculated equivalent to the price offered by each retail outlet by including the commission of a dealer as part of the sale price. The Counsel for the petitioner also submits that while interpreting the expression "sales of goods" the Hon'ble Supreme Court has held in "State of Madras V/s Gannon Dunkerley and Company", AIR 1958 SC 560, that it shall be assigned t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... namely Indian Oil Corporation Limited, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited. The goods are sold to consumers after adding the margin/commission paid to retail outlets. The additional tax, if any, is paid by the dealers in the treasury after claiming necessary deductions under the Act. It is further urged that a controversy arose with respect to evaporation of oil during transit, handling and sale of petroleum products relating to input tax credit. The respondents issued a clarification that if evaporation loss is within limits, it would be allowed and there would be no adverse impact on the input tax credit in terms of Section 8 of the Act read with schedule E. On the basis of this clarification assessments were framed and tax paid at the time of purchase of goods was regularly set off against output tax liability of members of the petitioner association and remaining tax was deposited. The Counsel for the State of Haryana submits that the impugned amendment is legal and valid as it falls within the expression of the words "sale or purchase" of goods used in Entry 54 of List II of 7th Schedule, appended to the Constitution of India. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich provide that sale price in relation to sale of petrol and diesel by a retail outlet, shall be equal to the price at which the retail outlet sells petrol and diesel to its consumers. The amended Section 2(1) (zg) of the Act including explanation (v) read as follows:- "2(1)(zg) "Sale Price" means the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed at the time of sale as cash or trade discount according to the practice, normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof and the expression 'purchase price' shall be construed accordingly. Explanation:- (i) to (iv)... (v) The amount received or receivable by oil companies for the sale of diesel and petrol to the retail outlets in the State shall be deemed to be equivalent to the price on which the retail outlets sell these commodities to the consumer." The expression "sale price" is defined under Section 2(1) (zg) of the Act as the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase of goods other than newspapers subject to the provisions of Entry 92A of List I." Entry 54 empowers the State legislature to impose tax on sale or purchase of goods. There are two restrictions envisaged on such power i.e. sale or purchase of newspapers and subject to Entry 92-A which deals with sale or purchase in the course of inter-State trade of commerce and reads as follows:- "92A Tax on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter state trade or commerce." A plain reading of entries 54-A and 92-A reveals that the amendment does not envisage a tax on newspapers or on sale or purchase in the course of inter-State trade or commerce and is, therefore, well within legislative competence of the State. The Haryana Value Added Tax Act, 2003 (hereinafter referred to as, the Principal Act) is a legislation enacted under Entry 54 of List II and as we are unable to discern any legal disability or impediment that would enable us to hold that the amendment is beyond competence of the State Legislation, reject the aforesaid contention. The mere fact that by way of this amendment a change has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese products to such an extent are not subjected to sale and sequelly the retail outlets are not able to get credit of input tax for loss in quantity of petrol/diesel because of evaporation, resulting in ever increasing gap between the input tax paid and credit taken thereof. The argument has no merit. It is a conceded fact that Ministry of Petroleum had allowed such losses to the extent of 0.6% in case of motor-spirit and 0.2% in case of high speed diesel. Vide separate instructions issued in this behalf to the assessing authorities, they were asked to ensure that the VAT payable at the hands of dealers, on this account, does not remain unassessed. Assessing authorities were further asked to ensure that the quantification of VAT on the basis of quantity of motor-spirit and high speed diesel sold during the assessment years finds a special mention in the assessment order. However, so far as gap regarding evaporation losses is concerned, in term of Clause (ii) of Entry 5 of the Schedule 'E' such liability of input tax shall be nil because petrol/diesel gets disposed of by way of loss in evaporation. This provision for ready reference is reproduced as below:- Sr. No. Descr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tput tax liability is attracted. Hence there arises no reason to allow input tax credit on the purchase of these evaporated goods. So at the time of framing of assessment the assessing authority is required to ensure that this aspect is examined in totality, both in quantity and value terms. The Assessing Authority should give his analysis and remarks and pass a well reasoned order while disallowing/ reversing input tax credits." So far as contention of the petitioner-association that VAT is levied even on the commission payable to the dealers is concerned, it also has no merit. By now, it has become abundantly clear that petrol/diesel are highly regulated items, sale price of which from the oil companies to the dealers and from dealers to the ultimate consumers is fixed and entire price structure is part of the agreement where prices cannot be varied by the dealers. Commission to these dealers is disbursed by oil companies as per the agreement executed between them. Neither the price structure nor the taxation regime gets affected by the quantum of commission disbursed to the dealers because gross turn over in terms of Section 2(1)(u) after certain deductions in terms of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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