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2008 DIGILAW 16 (GAU)

Mahamaya Agencies v. State of Tripura

2008-01-07

UTPALENDU BIKAS SAHA

body2008
ORDER U.B. Saha, J. 1. The instant writ petition has been filed by the petitioner-assessee, a registered dealer for selling motor vehicle parts/component of motor vehicles including "bearing", for cancelling/quashing and/or setting aside the decisions of the Assistant Commissioner of Taxes, the respondent No. 3 herein, vide his communications dated May 15, 2006, June 20, 2006 and 20/26 October, 2006, annexures C, E and G, respectively, to the writ petition along with interim prayer for staying the aforesaid impugned decisions till disposal of the writ petition. 2. Heard Mr. S. C. Saha, learned Counsel for the petitioner and Mr. N. C. Pal, learned Government Advocate assisted by Mr. D. C. Nath, learned Counsel for the State respondents. Considering the points involved in the instant writ petition, on January 3, 2008, the learned Government Counsel appearing for the State respondents was allowed time to obtain necessary instructions so that the entire matter can be disposed of at this stage when the State respondents filed their counter-affidavit. Today, when the matter is taken up for hearing, Mr. Nath, learned State Counsel has placed the instructions as given by the Commissioner of Taxes, Government of Tripura, wherein it is stated that before first amendment of the Tripura Value Added Tax Act, 2004 relating to entry No. 15 of the Schedule II(a) and entry No. 117 of the Schedule II(b), the tax on "bearing" sold as spare part of motor vehicle was 12.5 per cent, not four per cent, as the spare parts and accessories of motor vehicles include "bearing" as mentioned in paragraphs 16 and 17 of the counter-affidavit. The said provisions of entry No. 15 of the Schedule II(a) and entry No. 117 of Schedule II(b) of the Tripura Value Added Tax Act have already been amended by way of the Tripura Value Added Tax (Amendment) Act, 2007 (for short, "the TVAT Act, 2007"), to the effect that entry No. 15 of the Schedule II(a) be deleted because "bearing" is also motor parts taxable under entry No. 117 of the Schedule II(b) and "bearing" used as machine parts is taxable under serial No. 106 of the Schedule II(b) and "bearing" used as bicycle/rickshaw parts taxable under serial No. 18 of the Schedule II(a). So, when confusion is created in the business community as well as customers regarding rate of tax of "bearing", which may also cause revenue loss, in order to clear all doubts as well as to protect revenue in the TVAT Act, 2007, all types of "bearings" have been added in item (x) after item (ix) of entry No. 106 of Schedule II(b). 3. The facts necessary for disposal of this writ petition are as under: The petitioner is a proprietary business firm having registered as a dealer under the Tripura Sales Tax Act, 1976 and thereafter the Tripura Value Added Tax Act, 2004 and was also registered under the Central Sales Tax Act, 1956. After introduction of the Tripura Value Added Tax Act, 2004 (for short, hereinafter referred to as "the VAT Act, 2004"), the petitioner started collection of tax as per schedule of the new Act, i.e., the VAT Act, 2004 at four per cent on selling of "bearing" and by a letter, dated April 9, 2005, the petitioner informed respondent No. 4, the Superintendent of Taxes, Charge-1, Agartala, with regard to collection of value added tax at four per cent on selling of "bearing" mentioned in entry No. 15 of the Schedule II(a) of the VAT Act and during the period of 2005-06, the petitioner had collected VAT of Rs. 92,681.75 at four per cent on turnover of Rs. 23,17,043.64 in respect of "bearing" and deposited the same with the revenue authority. However, with no response, the petitioner wrote another letter dated May 4, 2006 to the respondent No. 2, the Commissioner of Taxes for confirmation of VAT on "bearing" stating inter alia that four per cent VAT will be applicable to all types of "bearings" including automobile, power tiller and tractor and industrial "bearings" and, according to the petitioner, all over India, where VAT is applicable, four per cent VAT is charged on all types of "bearings". The petitioner requested to confirm the same. Thereafter, by letter dated May 15, 2006, the Assistant Commissioner of Taxes informed the petitioner that if "bearing" is used as automobile part, then it is taxable at 12.5 per cent under entry No. 117 of Schedule II (b) of the VAT Act, 2004 and if it is used as part of power tiller or tractor, then it is taxable at four per cent under entry No. 95 of the Schedule II(a). But if it is used as part of capital goods, then it is taxable at four per cent under entry No. 25 of the Schedule II(a) and serial No. 2 of the notification dated June 8, 2006. 4. As the decision of respondent No. 3 was against the statutory provisions of the VAT Act, 2004, the petitioner made a prayer before the Commissioner of Taxes so that the petitioner can deposit the value added tax on sale of "bearing" at four per cent as collected and it was also pointed out that the clarification given by the Assistant Commissioner of Taxes vide annexure C to the writ petition is contrary to and inconsistent with the provisions of law. In response to the letter dated May 29, 2006, the Assistant Commissioner of Taxes informed the petitioner by a letter dated June 20, 2006 that if "bearing" is used in a manner other than that mentioned in the letter dated May 15, 2006, then it is taxable at four per cent under entry No. 15 of the Schedule II(a) of the VAT Act, 2004 (annexure E to the writ petition). Being aggrieved by the said action of the Revenue authority, the petitioner filed a writ petition before this Court to get proper redress, which was registered as W. P. (C) No. 330 of 2006. 5. On August 30, 2006, after hearing the parties and considering the nature of grievances raised in the writ petition, particularly, annexures C and E, i.e., the communication dated May 15, 2006 and June 20, 2006 of the instant writ petition, this Court disposed of the writ petition relegating the matter to respondent No. 3, with an observation that "if need be, in consultation with the Commissioner of Taxes, Government of Tripura, the respondent No. 3 shall pass a fresh order keeping in mind that 'bearing' appearing in Clause (15) of the Schedule II (a) has been specifically incorporated prescribing the taxable rate at four per cent. He will also decide as to whether in such a situation other provisions as indicated in annexure C communication dated May 15, 2006 will at all be applicable. When a specific provision has been made relating to item 'bearing', taking recourse to other provisions may not be available. He will also decide as to whether in such a situation other provisions as indicated in annexure C communication dated May 15, 2006 will at all be applicable. When a specific provision has been made relating to item 'bearing', taking recourse to other provisions may not be available. However, no opinion is expressed at this stage and the matter is left open to be decided by the respondents in accordance with law. Above exercise which is now required to be carried out shall be so carried out in terms of this order within a period of one month from the date of receipt of the certified copy of this order along with a copy of the writ petition and its enclosures. Needless to say that if any adverse order is passed, it will be open for the petitioner to take recourse to such legal action as may be available to them." 6. After receiving the aforesaid order of this Court, respondent No. 3 has entered into the matter afresh and has given a decision vide his letter dated October 20/26, 2006 wherein he has stated that "bearing" is taxable at 12.5 per cent instead of four per cent and in support of his decision, respondent No. 3 has clarified the respective entry in the Schedule II(a) and II(b) of the VAT Act, 2004. Being aggrieved by the said decision, the petitioner preferred the present writ petition. 7. By filing a detailed affidavit-in-opposition, the respondents-revenue authorities denied allegations of the petitioner and the stand of the Revenue authorities is specifically stated in paras 16 and 17 of their counter, which are reproduced hereunder: 16. That, in reply to the averments and/or contention made in paragraph 10 of the writ petition, I state that, the averment made in paragraph 10 is disputed because the dealer-petitioner possesses the registration certificate only for batteries and parts, lubricants and components and spare parts of motor vehicle and the 'bearings' imported with the strength of his registration for the purpose specified is liable to pay VAT at 12.5 per cent. 17. 17. That, in reply to the averments and/or contention made in paragraph 11 of the writ petition I state that, the VAT on 'bearings' at entry No. 15 of the Schedule II(a) is four per cent but this is not applicable to the dealer-petitioner since he possesses registration certificate for 'components and spare parts of motor vehicle' and is liable to pay VAT at 12.5 per cent according to entry specified for the purpose. 8. Mr. Saha, learned Counsel for the petitioner, submits that the communications dated May 15, 2006, June 20, 2006 and October 20/26, 2006 (annexures C, E and G, respectively) are not issued in accordance with the statutory provisions of the TVAT Act, 2007, rather those communications confused the petitioner and similarly situated businessmen, for which the State of Tripura amended the aforesaid VAT Act, 2004 in the month of October, 2007 by way of the TVAT Act, 2007 and by the said amended Act, amongst others, the Legislature also amended the provisions of Schedule II(a) as well as Schedule II(b) from which it appears that entry No. 15 of Schedule II(a) was deleted to the effect that "bearing" is an item as motor parts, motor cycle/scooter parts, taxable under entry No. 117 of Schedule II(b) and the said "bearing" used as machine parts were taxable under entry No. 106 of Schedule II(b) and when "bearing" is used as bicycle, rickshaw parts, the same is taxable under entry No. 18 of the Schedule II(a). As confusion was created in the business community as well as requirement regarding rate of tax on "bearing", which might also caused revenue loss, the Legislature in order to clear all doubts and also to protect the State Revenue included all types of "bearing" in entry No. 106 of the Schedule II(b) as stated supra, which shows that the revenue authorities themselves were not clear what should be the actual tax on "bearing", when there is a specific entry in the Schedule II(a) regarding "bearing", i.e., entry No. 15 of the Schedule II(a), wherein Legislature prescribed rate of tax on "bearing" at four per cent. Mr. Mr. Saha, referring to the respective entries to the Schedule II(a) and II(b), tried to convince this Court that taxing statute should be interpreted in view of the language used in the statute and when the statute is clear, then no external aid can be taken from other sources. In the instant case for "bearing" when there is specific rate fixed by the Legislature, the revenue authority cannot take the help of their own interpretation to impose more tax on the same article/goods/items. In the instant case, the petitioner collected tax from the purchaser of "bearing " at four per cent up to June 30, 2006 and thereafter when the authority clarified the position, the petitioner collected the tax on "bearing" at 12.5 per cent and the amount collected as revenue has already been deposited with the revenue authority, Mr. Saha contended. 9. Mr. Saha further contended that this Court by its order dated August 30, 2006 in W. P. (C) No. 330 of 2006 directed the Revenue authority, particularly respondent No. 3, to take decision keeping in mind that "bearing" appearing in entry No. 15 of the Schedule II(a) has been specifically incorporated and in that, prescribed taxable rate is at four per cent and the said authority has also been given liberty to decide whether in such a situation other provisions as indicated in annexure C communication dated May 15, 2006 will at all be applicable. But in spite of the aforesaid order, the Revenue authority did not consider the same in the light of the observations of this Court. According to him, had the stand of the Revenue authority stood correct, then the authority would not have come with subsequent amendment, therefore, according to Mr. Saha, that the petitioner collected four per cent tax on selling of "bearing " is not its fault. But as confused by the provisions of the statute, the petitioner collected four per cent of value added tax on "bearing". 10. Mr. Saha finally submits that it is not possible for a seller like the petitioner to know for what purpose the purchasers are purchasing the "bearing". But as confused by the provisions of the statute, the petitioner collected four per cent of value added tax on "bearing". 10. Mr. Saha finally submits that it is not possible for a seller like the petitioner to know for what purpose the purchasers are purchasing the "bearing". It is only the purchasers who can say for what purpose "bearings" are purchased by them and it would not be proper for the revenue authority or the State Legislature to fix the rate of tax differently for one item considering its nature and use for which any such decision of the revenue authority is contrary to the provisions of article14 of the Constitution. 11. Per contra, Mr. N. C. Pal, learned Government Advocate, while resisting the submissions of Mr. Saha, learned Counsel for the petitioner, submits that even after the amendment also, the petitioner is supposed to deposit the tax on "bearing" as VAT at 12.5 per cent as the petitioner's firm was registered for selling all motor vehicle parts/components of motor vehicles and the "bearings" imported with the strength of his registration for which tax is prescribed at 12.5 per cent. As the aforesaid TVAT Act, 2007 has given prospective effect and the four per cent tax was prescribed not for the "bearing" used in the motor vehicles, but for entry No. 15 of the Schedule II(a) of the VAT Act, i.e., before amendment. Mr. Pal further submits that clarification given by the Revenue authority vide annexures C, E, and G are not contrary to the provision of VAT Act, 2004, rather these are explanatory in nature. 12. For better understanding of the question to be settled between the parties, it would be proper to reproduce the letter communication of May 15, 2006, June 20, 2006 and October 20/26, 2006 and accordingly the same are quoted hereunder: No. F, 1-3 (2) – TAX/2005/6247 Government of Tripura Office of the Commissioner of Taxes, Palace Compound, Agartala Dated, Agartala the 15th May, 2006 To, M/s. Mahamaya Agencies Laxmi Narayan Ban Road, Agartala Sub : Charging of VAT on bearing. Sir, With reference to your letter No. MAV/AK/01 dated May 4, 2006 on the subject noted above this is to inform you that if 'bearing' is used as automobile part then it is taxable at 12.5 per cent under entry No. 117 of the Schedule II(b) of Tripura Value Added Tax Act, 2004. Sir, With reference to your letter No. MAV/AK/01 dated May 4, 2006 on the subject noted above this is to inform you that if 'bearing' is used as automobile part then it is taxable at 12.5 per cent under entry No. 117 of the Schedule II(b) of Tripura Value Added Tax Act, 2004. If it is used as part of power tiller or tractor then it is taxable at four per cent under entry No. 95 of the Schedule II(a). But if it is used as part of capital goods then it is taxable at four per cent under entry No. 25 of the Schedule II(a) and SI. No. 2 of the Notification issued vide No. F. 1-11(17)-TAX/VAT/2005 (Part-V)/5246-316 dated June 8, 2006. Yours faithfully, Sd/- B.K. Jamatia May 15, 2006 Asstt. Commissioner of Taxes Government of Tripura Encl. : As stated above No. F. 1 – 3 (2) – TAX/2005/9411 Government of Tripura Office of the Commissioner of Taxes, Palace Compound, Agaratala Dated, Agartala the June 20, 2006 To, M/s Mahamaya Agencies Laxmi Narayan Bari Road Agartala Sub : Charging of VAT on bearings. Sir, With reference to your letter No. MAV/AK/02 dated May 29, 2006 this is to inform you that if 'bearing' is used other than that mentioned in this office letter vide No. 1-3(2)/Tax/2005/6247 dated May 15, 2006 then it is taxable at four per cent under entry No. 15 of the Schedule II(a) of the TVAT Act, 2004. Yours faithfully, (B.K. Jamatia) June 20, 2006 Asstt. Commissioner of Taxes Government of Tripura No. F. 1-3 (2) TAX/2005/16807 Government of Tripura Office of the Commissioner of Taxes, Palace Compound : Agartala Dated : 20th/26 October, 2006 To, M/s Mahamaya Agencies Laxmi Narayan Bari Road Agartala Sub : Charging collection of VAT on ‘bearing’ under the Tripura Value Added Tax Act, 2004 Ref. : Order passed on August 30, 2006 in W.P. (C) No. 330 of 2006 by the honourable Division Bench and your prayer dated September 18, 2006. : Order passed on August 30, 2006 in W.P. (C) No. 330 of 2006 by the honourable Division Bench and your prayer dated September 18, 2006. Sir, Abiding by the 'order' passed on August 30, 2006 in W. P. (C) No. 330 of 2006 by the honourable Division Bench and considering your prayer dated September 18, 2006 the matter of charging/collection of VAT on selling of 'bearings' for use in automobile part under the Tripura Value Added Tax Act, 2004 at 12.5 per cent under Schedule II(b) of serial No. 117 has been examined carefully and decided in consultation with the Commissioner of Taxes wherein it is held that charging of VAT at 12.5 per cent on selling of 'bearings' by a dealer of 'components and spare parts of motor vehicle' is justified in terms of the Act on the following points: (a) TVAT Act, 2004 and Rules, 2005 made thereunder within the framework of model statute recommended by the empowered committee which is followed by all the States without any exception to bring uniformity in provisions with reference to incidence of tax, input tax, output tax and zero rating in respect of goods mentioned in different Schedules. (b) Use of word 'bearings' on Schedule II(a) in SI. No. 15 mentioning VAT for multi purpose use only specially used in industrial equipment, agricultural equipment, etc. More clearly that 'bearings' should not be mixed up with the 'bearings' used in automobile parts as mentioned in Schedule II(b) at SI. No. 117. (c) VAT at four per cent is so imposed on multi-purpose use of 'bearings' taking into account the industrial growth and economic situation of the individual State meaning thereby there is a reasonable basis behind the said classification made by the Legislature between the Schedule II(a) SI. No. 15 and II(b) SI. No. 117. (d) Since there's a specific Schedule covering the entry motor vehicle... components, spare parts and accessories thereof on Schedule II(b) at SI. No. 117, the dealer of 'components and spare parts of motor vehicle' was/is liable to collect/pay VAT under Schedule II (b) of the TVAT Act, 2004 at 12.5 per cent on selling of 'bearings' which is included under automobile parts and also such dealer cannot deal in 'bearing' under Schedule II(a) beyond his Schedule of registration issued under the TVAT Act, 2004. Keeping in view the above terms of the Act, you being the dealer of 'components and spare parts of motor vehicle' were are liable to collect/pay VAT at 12.5 per cent on selling of 'bearings'. This is for your information, which is conveyed to you as per direction of the authority. Thanking you, Yours faithfully, Sd/- B.K. Jamatia October 26, 2006 Asstt. Commissioner of Taxes Govt. of Tripura 13. This Court has given anxious consideration to the submissions of the learned Counsel for the parties. The respondents-Revenue authorities themselves were in confusion about the rate of value added tax on sale of "bearing", as the "bearings" are used for various purpose in various machines like bicycles, tractors and boats, some are used for agricultural purpose and some for pisciculture and some are automobile, but as there is no specific entry regarding "bearing" except in entry No. 15 of the Schedule II(a), for clarification, the subsequent amendment was made, wherein tax on "bearing" is shown as at 12.5 per cent for all purpose. 14. Now the question that arises for proper decision of the matter is as to whether the Revenue authority has the power to claim different rates of taxes from any of the dealers/sellers on sale of "bearing" than the rates prescribed in specific entry of the Schedule, i.e., on entry No. 15 of the Schedule II(a) of the VAT Act, 2004 for the period before amendment of the said Act in the year 2007. For proper appreciation and also to give a proper decision, it is necessary to reproduce the entry No. 15 of the Schedule II(a), entry Nos. 18, 95 of the Schedule II(a) as well as entry No. 117 of Schedule II(b) of the said Act. Schedule II (a) List of goods taxable at the rate of four per cent Sl. No. Description 15. Bearings 18. (i) Bicycles, tricycles, cycle rickshaws and parts, tyres and tubes thereof, (ii) Non mechanized boats used by fisherman for fishing. 95. Tractors, threshers, harvesters and attachments and parts thereof. Schedule II (b) List of goods taxable at 12.5 per cent Sl. No. Description 117. Motor vehicle, chassis of motor vehicles, motor cycles, motor combinations, motor scooter, mopeds, motorettes, three wheelers, motor vessels, motor engine, trailers, build on motor vessels, components, spare parts and accessories thereof. 15. 95. Tractors, threshers, harvesters and attachments and parts thereof. Schedule II (b) List of goods taxable at 12.5 per cent Sl. No. Description 117. Motor vehicle, chassis of motor vehicles, motor cycles, motor combinations, motor scooter, mopeds, motorettes, three wheelers, motor vessels, motor engine, trailers, build on motor vessels, components, spare parts and accessories thereof. 15. It appears from the aforesaid provisions that except entry No. 15 of Schedule II(a) of unamended VAT Act, there is no other entry in any of the Schedule relating to rate of tax on "bearing", from which it can be presumed by any reasonable person that rate of tax on "bearing" is different considering the different nature of use. As at the relevant time, there was no specific entry in any Schedule to the VAT Act, 2004 on "bearing", the seller dealer was not in a position to collect different rates of tax on same item from different purchasers taking the note of different use of the said taxable article. It is not possible by a seller to make elaborate enquiries from the purchasers at the time when he sells any articles as to for what purpose or use the purchasers are purchasing the articles. And not only that, in that situation the revenue authorities also have to make inquiries from every dealer to whom they sell the article and for what purpose, which is practically not possible and what will happen if the purchaser made different declaration regarding the nature of use of the articles at the time of purchasing the actual nature of use. In case of "bearing" the same can be used in bicycle, tractor, motor vehicles, boat used by the fishermen, etc., therefore, in every case of selling, an assessee-dealer on "bearing" has to maintain a register comprising of names of purchasers and purposes of use and a seller is certainly answerable to the inquiry of the purchaser on putting a different tax on "bearing" other than the one specified in the statute. Probably keeping the aforesaid situation in mind, by this time it is settled by various courts of the country including the apex court that when one particular item or article is covered by one specified entry, then Revenue authority is not permitted to travel to the residuary entry of Schedule to take the help of doctrine of inclusion what the Revenue did in this case taking help from entry 117 of the Schedule II(b) of unamended VAT Act. The aforesaid views of this Court gets support from the decision of the apex court in the case of Hindustan Poles Corporation v. Commissioner of Central Excise, Calcutta reported in 2006 (196) ELT 400 (SC) wherein it stated " It is settled law that when one particular item is covered by one specified entry, then the Revenue is not permitted to travel to the residuary entry. The residuary entry is meant only for those categories of goods which clearly fall outside the ambit of specified entries." 16. According to this Court, when the statute prescribed a particular rate for a particular article by a specific entry in the Schedule of VAT Act, 2004 irrespective of the nature of use, the revenue authority has no right to claim any other rate except the rate mentioned. They can collect tax only at the rate prescribed in the specific entry and in the instant case, the Legislature specifically prescribed the rate of value added tax on "bearing" in entry No. 15 of the Schedule II(a), hence this Court feels that the submission of Mr. Saha, learned Counsel for the petitioner has some force, as the classification of any goods cannot vary or alter with use which the article/goods would be used by the purchaser. This Court is unable to accept the submission of the learned Government Advocate, particularly, when the Legislature itself feels that so far as the rate of tax on "bearing" is concerned, there is confusion for which they have come with subsequent amendment, namely, the Tripura Value Added Tax (Amendment) Act, 2007 wherein it has clarified the position of the entries in the Schedule of the VAT Act, 2004, on the basis of which the Revenue authorities were claiming various rates of taxes on "bearing" which has been clubbed together in a new entry, i.e., entry No. 106 of the Schedule II(b). 17. 17. In view of the aforesaid discussion, this Court is of the further opinion that the writ petitioner is not liable to pay tax more than four per cent on "bearing" before the amendment of VAT Act, 2004 came, as by that amendment only, the Legislature clarified the rate of tax on "bearing". However, in the instant case, as it is admitted from the pleadings of the petitioner that before amendment of the Tripura Value Added Tax Act, 2004, the petitioner could not collect value added tax at 12.5 per cent on selling of "bearing" but after clarification by the Revenue authority, the petitioner collected tax at 12.5 per cent from July 1, 2006. Therefore, the petitioner is liable to deposit the value added tax collected by it from the purchasers at 12.5 per cent on and from July 1, 2006 to the Revenue authority, i.e., the Commissioner of Taxes, Tripura and consequent thereto, the impugned decisions/communications, dated May 15, 2006, June 20, 2006 and October 20/26, 2006, annexures C, E and G respectively, are hereby quashed. Accordingly, the writ petition is allowed. No order as to costs.