2017 (3) TMI 210 - HC - VAT and Sales Tax

High Court sets aside deposit orders, DVAT Tribunal to hear appeals promptly, rights reserved.

The High Court set aside the orders directing the petitioner to deposit 20% of the tax, interest, and 10% penalty, finding no prima facie difference from ... Waiver of pre-deposit - Inter State sale or not? - nature of the transaction between the petitioners - works contract - contract for supply design, manufacturing, erection and commissioning of electrical systems - Held that: - The salient features flowing out as conditions in the contract and the entire conspectus of law on the issues as notice earlier, leave us with no option but to hold that the movement of goods by way of imports or by way of inter-state trade in this case was in pursuance of the conditions and/or as an incident of the contract between the assessee and DMRC - The goods were of specific quality and description for being used in the works contract awarded on turnkey basis to the assessee and there was no possibility of such goods being diverted by the assessee for any other purpose - pre-deposit set aside - the DVAT Tribunal shall proceed to hear the appeals on merits - appeal allowed by way of remand. Issues Involved:1. Taxation under the Delhi Value Added Tax Act, 2004 (DVAT Act) vs. Central Sales Tax Act, 1946 (CST Act).2. Nature of transactions: Inter-State sales and imports.3. Assessment of tax liability and penalties.4. Pre-deposit condition for hearing appeals.Detailed Analysis:1. Taxation under the DVAT Act vs. CST Act:The primary issue concerns whether the contracts for the supply, design, manufacturing, erection, and commissioning of electrical systems should be taxed under the DVAT Act or considered as inter-State sales and imports under the CST Act. The petitioner argued that these transactions fall under Section 5(2) of the CST Act, thus exempting them from DVAT. The transactions pertain to assessment years 2007-08 and 2008-09.2. Nature of Transactions: Inter-State Sales and Imports:The petitioner contended that the transactions were inter-State sales involving the movement of goods across state lines and imports, which were directly linked to specific contracts and specifications. The petitioner relied on Sections 3(a) and 3(b) and 5(2) of the CST Act, asserting that the payments were tied to the erection and installation rather than local sales. The OHA, however, rejected this argument, noting that the items supplied were not consumer-specific and could be used by other operators. The OHA emphasized that the goods were handed over to the beneficiary at the site after installation and commissioning, suggesting local sales.3. Assessment of Tax Liability and Penalties:The OHA upheld the default assessments made by the DVAT authorities, disallowing exemptions on the grounds that the transactions did not meet the criteria under Section 3 of the CST Act. The OHA noted that the petitioner did not provide sufficient evidence to establish the privity of contract between the supplier and the user, nor did it show that the goods were specifically procured from outstation suppliers. The DVAT Tribunal, however, granted partial relief by allowing the petitioner to deposit 20% of the tax and interest demand and 10% of the penalty amount as a precondition for hearing the appeals.4. Pre-deposit Condition for Hearing Appeals:The petitioner challenged the pre-deposit condition imposed by the DVAT Tribunal, arguing that there was no significant difference between the current transactions and those previously ruled upon by the Division Bench and affirmed by the Supreme Court in Commissioner, Delhi Value Added Tax Vs. ABB Limited (2016) 6 SCC 791. The Tribunal had observed that the matter required closer examination and thus directed a partial pre-deposit.Conclusion:The High Court found that the DVAT Tribunal had granted significant relief to the petitioner but noted that the nature of the transactions did not prima facie differ from those in the previous ruling. Consequently, the Court set aside the impugned orders directing the petitioners to deposit 20% of the tax and interest demanded and 10% penalty assessed. The DVAT Tribunal was directed to hear the appeals on merits and render its decision within three months. All rights and contentions of the parties were reserved.Final Orders:- The impugned orders directing the deposit of 20% of the tax and interest and 10% penalty were set aside.- The DVAT Tribunal was instructed to hear the appeals on merits and decide within three months.- All petitions and pending applications were disposed of in these terms.