2016 (9) TMI 1116 - HC - VAT and Sales Tax

Court reverses rejection of lumpsum tax payment application under Gujarat VAT Act, citing misinterpretation of rules

MB ASSOCIATES Versus STATE OF GUJARAT

The Court allowed the appeal, reversing the judgments of the lower authorities. It held that the rejection of the appellant's application for lumpsum tax ... Composition of tax under section 14A of the VAT Act - registered dealer under the provisions of the Gujarat Value Added Tax Act - works contract for construction of industrial establishment and factory buildings - dealer as defined in section 2(10)(f) of the VAT Act - for eight different works contract which the assessee was executing at the time of application but which had commenced prior to 1.4.2006 - whether on the facts and in the circumstances of the case, Gujarat Value Added Tax Tribunal is justified in law in holding that the appellant assessee is not entitled to be granted permission under Section 14A of the Gujarat Value Added Tax, 2003 read with Rule 28(8) of the Gujarat Value Added Tax Rules, 2006? - Held that: - in cases other than those falling in clause (iiia) of subrule( 8)(b) of Rule 28, an application for composition of tax would have to be made within 30 days from the beginning of the contract. However, in cases where the works contract is ongoing during the year 2006-2007, the last date for filing the application would be 30.11.2006, in such a case, the requirement of filing application within 30 days from the commencement of work envisaged in clause(iii) of subrule( 8)(b) of Rule 28, would not apply. The authorities below however, did not apply the provisions of clause (iiia) and merely with the aid of clause (iii) rejected the assessee's application for composition of tax on the ground that the same was beyond 30 days from the commencement of the contract - the competent authority shall entertain the application of the petitioner for composition of tax without objecting to the question of limitation in filing it and decide the same on merits. Appeal allowed - decided in favor of appellant. Issues:Challenge to Value Added Tax Tribunal's judgment dismissing Second Appeal.Analysis:The appellant, a registered dealer under the Gujarat Value Added Tax Act, applied for permission to pay lumpsum tax under section 14A of the Act. The application was rejected by the Commercial Tax officer citing that the works contract had commenced before 1.4.2006. The appellate authority and the Tribunal upheld this decision, stating that the application was correctly rejected based on the Act and Rules.The question of law admitted was whether the Tribunal was justified in holding that the appellant was not entitled to permission under Section 14A of the Act. The Tribunal referred to Rule 28(8)(b)(iii) which required the application to be filed within 30 days from the commencement of work, which was not done in this case.Section 14A allows the Commissioner to permit dealers to pay lumpsum tax instead of the amount of tax leviable under the Act. Rule 28 of the Rules specifies conditions for the application and permission for lumpsum tax payment. The Tribunal failed to consider the combined effect of clauses (iii) and (iiia) of Rule 28(8)(b), leading to the rejection of the appellant's application based solely on clause (iii).The Court held that the authorities erred in not applying the provisions correctly and failed to consider the amendment made by adding clause (iiia) to Rule 28(8)(b). The Court disagreed with the Tribunal's interpretation and noted that similar provisions existed under the previous Sales Tax Act. The appeal was allowed, and the judgments under challenge were reversed, directing the competent authority to entertain the appellant's application for composition of tax without considering the limitation in filing it.In conclusion, the appeal was allowed, and the issue regarding the entitlement of the appellant to permission under Section 14A of the Gujarat Value Added Tax Act was decided in favor of the appellant. The Court directed the competent authority to consider the application on its merits without objecting to the question of limitation in filing it.