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TMI Blog2023 (12) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... ereafter 'the DVAT Act'). 2. The petitioner is, essentially, aggrieved by the Explanation to Sub-clause (vii) of Clause of Section 2(j) of the DVAT Act, inasmuch as it also includes any corporation or company engaged in commercial banking. Sub-clause (vii) of Clause (j) of Section 2(1) of the DVAT Act is set out below: "2(1)(j)(vii) any person who, for the purposes of or consequential to his engagement in or in connection with or incidental to or in the course of his business disposes of any goods as unclaimed or confiscated, or as unserviceable or scrap, surplus, old, obsolete or as discarded material or waste products by way of sale. Explanation.- For the purposes of this clause, each of the following persons, bodies and entities who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of the word 'dealer' as being ultra vires Article 265 of the Constitution of India. 4. The petitioner is, essentially, aggrieved by the notices issued under Sections 32 and 33 of the DVAT Act by the respondent - notices dated 23.03.2018 seeking to recover tax and interest amounting to Rs.39,35,466/- and penalty of Rs.75,33,449/- and notices dated 06.03.2019 seeking to recover tax and interest amounting to Rs.94,09,083/- and penalty of Rs.1,79,71,806/-. The said notices (hereafter referred to as the impugned notices) have been issued imposing liability of value added tax (VAT) on the petitioner as a dealer in respect of sale of re-possessed vehicles. 5. Mr Kumar, the learned counsel appearing for the petitioner submits that the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnover tax" inasmuch as the turnover tax taxed every transaction constituting the turnover but VAT was a tax on the value added. 7. He also relied on the decision of the Supreme Court in Sundaram Finance Ltd. v. State of Kerala and Ors.: 1965 SCC OnLine SC 88 in support of his contention that sale of re-possessed vehicle in the course of business would not be exigible to tax on sale of goods. 8. The learned counsel appearing for the respondent countered the aforesaid submissions. 9. We have heard the learned counsel for the parties. 10. We are not persuaded to accept that the definition of the word 'dealer' falls foul of the Constitution of India. Article 265 of the Constitution of India merely provides no tax will be levied without aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-section (2) of Section 3, VAT is payable at the rates as specified under Section 4 of the DVAT Act. Section 5 of the DVAT Act, explains the term 'taxable turnover' as the turnover during the tax period subject to adjustments. Sections 6 and 7 of the DVAT Act contains provisions regarding sales that are exempted from tax and certain sales that are not liable to tax. Section 9 of the DVAT Act contains provisions regarding the tax credit. 14. The adjustments of tax credit in essence encapsulates the VAT regime. The machinery provisions, subject to other provisions, restrict the aggregate VAT to the tax at the last point of taxation. Thus, the petitioner's contention that the Scheme of the Act does not entail a charge on sale of goods, is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iller's flour that part of its value which came from the wheat he bought from the farmer. Instead, it taxes him only on the wage and salary cost of milling, and on the interest, rent, royalty, and profit cost of this milling stage of production. (That is, the raw material costs used from earlier stages are subtracted from the miller's selling price in calculating his "value added" and the VAT tax on value added....)" 17. The aforesaid Explanation clearly brings out the difference between the incidence of VAT and a turnover tax. The tax is chargeable on sale of goods at multiple stages. But the credit for the taxes on inputs effectively reduces the quantum of tax to the value addition. However, the said explanation cannot be read to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eemed to be a sale. Explanation (2).- * *" 19. As is apparent from the above, the definition specifically excludes hypothecation of goods. The principal issue involved in that case was whether the documents such as promissory notes, hire-purchase agreement etc., which were executed by the borrower in respect of vehicles that were financed by the appellants in that case, would bring the said appellants within the net of sales tax. In the present case, the impugned notices have been issued to the petitioner demanding VAT on the sale of re-possessed vehicles and not on the transaction of financing the vehicles at the initial purchase. 20. The controversy regarding levy of tax on the sale of re-possessed is squarely covered by an earlier de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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