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2015 DIGILAW 134 (JK)

Pir Panchal Traders v. State of J&K

2015-03-30

B.L.BHAT, N.PAUL VASANTHAKUMAR

body2015
JUDGMENT : Bansi Lal Bhat, J.:- 1. Petitioners are the dealers registered with Commercial Taxes Department of Jammu and Kashmir Government under Jammu and Kashmir Value Added Tax, Act 2005 (for brevity 'Act'). Some of them also claim to be registered under Central Sales Tax Act, 1956. They are aggrieved of clarification No. 19 of 2010 dated 26.03.2010 [2010 (10) JKS JK-69] issued by respondent No. 3 - Commissioner Commercial Taxes, whereby sales across Line of Actual Control made by the petitioners have been held not as export sales but intra-State sales on the ground that the territory under the illegal occupation of Pakistan i.e. POK is part of State of Jammu and Kashmir in terms of Section 4 of the Constitution of Jammu and Kashmir. It is contended that the department of Commercial taxes is only concerned with administration of tax statutes within the State of J & K and it cannot overreach the authority of Central Government which has decided to allow duty free trade across Line of Control and the State Government or its Commercial Taxes Department is not empowered to levy VAT/Tax on the sales made by the dealers of J & K State to traders of POK. It is further contended that the sale of 21 items approved for across LOC Trade constitutes export sales on which no VAT/Tax is leviable. However, respondent No. 3 has issued the clarification by virtue whereof sales made to POK traders are treated as local sales i.e. sales made within the State, and VAT has been made applicable on the said sales though the purchase made by the dealers under the Act from traders of POK is not a local purchase because POK is not under the physical control of J & K Government and any input tax credit on purchases from POK is not admissible. It is further contended that POK dealers are not registered with Commercial Taxes department of J & K Government and they cannot be so registered. The impugned clarification is further assailed on the ground that local VAT under the Act is leviable when both seller and purchaser are located within the State, carrying out their business activities within the State and are registered with the Commercial Taxes Department. VAT under the Act cannot be collected from the dealers of POK who are not registered with and under the control of Commercial Sales Department. VAT under the Act cannot be collected from the dealers of POK who are not registered with and under the control of Commercial Sales Department. It is contended that after the petitioners lodged strong protest against the impugned clarification, Assessing Authorities started raising liability of tax against them by conducting assessment under the provisions of VAT Act. It is further contended that after issuance of assessment order and notice of demand, punitive action of recovery under the provisions of J & K Land Revenue Act is sought to be made from the petitioners despite the fact that the petitioners have not charged any tax or VAT on sales conducted by them with the POK Traders. Respondents have filed objections questioning the maintainability of the writ petitions on the plea that the Act extends to the whole of State of Jammu and Kashmir which, in terms of provisions of Section 4 of the Constitution of Jammu and Kashmir comprises of all the territories which on 15th August, 1947 were under the Sovereignty and suzerainty of the Ruler of the State. It is pleaded that the area across LoC is part of the State of Jammu and Kashmir and the area across LoC cannot be declared as a "foreign territory". Reference is made to the unanimous resolution passed by Indian Parliament on 22.02.1994, declaring the whole area of State of Jammu and Kashmir as it existed on 15th August, 1947 as integral part of the Union of India. It is pleaded that all dealers conducting sales across LoC are duly registered under the Act. It is further pleaded that subject to provisions of the Act, every dealer registered or liable to be registered under the Jammu and Kashmir General Sales Tax, 1962 or the Central Sales Tax Act, 1956 is liable to pay tax on sales and purchases. It is pleaded that the Commissioner Commercial Taxes administering the Jammu and Kashmir Value Added Tax, Act is empowered to determine an issue referred to it either by a dealer/person or by a departmental authority. This power flows from Section 87 of the J & K VAT Act, 2005. It is pleaded that the Commissioner Commercial Taxes administering the Jammu and Kashmir Value Added Tax, Act is empowered to determine an issue referred to it either by a dealer/person or by a departmental authority. This power flows from Section 87 of the J & K VAT Act, 2005. The impugned clarification is defended on the ground that the same has been issued by the competent authority clearing doubts in regard to the nature and character of cross border LoC trade and by declaring that the transactions across LoC are not export sales but intra-State sales. It is further pleaded that under Section 16 of the Act, Government is empowered to levy tax under VAT at such rates as Government may notify from time to time and the Government has exercised such powers to exempt the goods sold or supplied across Line of Control from tax by amending Section 55(1) of the J & K VAT Act, 2005 by virtue of Jammu and Kashmir Value Added Tax (Amendment) Ordinance 2011 dated 25th August, 2011 [2011 (14) JKS JK-1] read with Jammu and Kashmir Value Added Tax (Amendment) Act, 2013 dated 25th April, 2013 [2013 (17) JKS JK-56]. Thus, in terms of the amended provisions benefit of Zero-rated Sales is extended to goods sold or supplied across the Line of Control. 2. Heard and considered. 3. The issue raised in regard to clarification No. 19 of 2010 issued by respondent No. 3 declaring sales across LoC as intra-State Sales leviable to VAT and not export sales exempt from VAT no more survives for consideration in view of the amendment effected in Section 55 of the Act in terms of ordinance No. II of 2011 which extended the benefit of Zero Rated Sales on goods sold or supplied across the Line of Control. 4. In view of the amendment carried out in Section 55(1) of Act, the issue of levy or exemption from VAT would merely be of academic interest as across Line of Control trade has been brought within the relaxation clause of Zero Rated Sales on goods sold or supplied across Line of Control. The relief claimed in these petitions would not survive in view of the aforesaid amendment. 5. These writ petitions are, accordingly, dismissed as having been rendered infructuous. The relief claimed in these petitions would not survive in view of the aforesaid amendment. 5. These writ petitions are, accordingly, dismissed as having been rendered infructuous. The issue raised in view of the impugned clarification whether supply of goods by traders across LoC constitutes intra-State sales or export sales is left open. However, any amount paid as VAT/Tax under the impugned clarification and notice of demand following issuance of such clarification shall not be refundable.