2018 (9) TMI 1710 - HC - VAT and Sales Tax

Dismissal of Challenge to VAT on Repossessed Vehicles Upheld by High Court

HDFC Bank Ltd. Versus State of Maharashtra & Ors.

The High Court dismissed the petition challenging the Notification inserting Entry No.82B in Schedule C to the MVAT Act, which levied VAT on repossessed ... Scope of the words “Seller” and “Dealer” - Notification dated 30th March, 2016 - repossession of the vehicles and the sale of the repossessed vehicles by the banks / institutions amounting tosale or not? - insertion of Entry No.82B in Schedule C to MVAT Act to levy VAT as “repossessed motor vehicles sold by the banks / financial institutions on which entry tax or as the case may be, Sales Tax has been paid at an earlier stage in the State - Held that:- At this stage, no notice has yet been issued to the petitioners seeks to assess the petitioners under Entry No.82B of the Schedule C of the MVAT Act. This in the light of the petitioner's contention that the petitioners are not the dealer nor is their activity in disposing of repossessed motor vehicles a sale under the MVAT Act. It is for the respondents now to issue an appropriate notice in case it does not agree with the contention of the petitioners. On such a notice being issued by the respondent, the petitioners would respond. As no proceedings have yet been commenced and no order has been passed by the Authorities under the MVAT Act on the proper interpretation of the words “Seller” and “Dealer” in the context of Entry No.82B of the Schedule C to the MVAT Act, it would only be proper that if and when the Revenue issues a notice, the petitioners will respond to the same and appropriate order thereon would be passed - If the petitioners succeed in its contention with regard to the interpretation of the words “Seller” and “Dealer” in the context of Entry No.82B, Schedule C to the MVAT Act, then the challenge to the constitutional validity would in the present facts become unnecessary. At this stage, the petition is premature - Petition disposed off. Issues:Challenge to Notification dated 30th March, 2016 under Article 226 of the Constitution of India regarding the insertion of Entry No.82B in Schedule C to the Maharashtra Value Added Tax Act, 2002 (MVAT Act) to levy Value Added Tax (VAT) on repossessed motor vehicles sold by banks/financial institutions.Analysis:Issue 1: Challenge to the Impugned NotificationThe petition challenges a Notification inserting Entry No.82B in Schedule C to the MVAT Act, levying VAT on repossessed motor vehicles sold by banks/financial institutions. The grounds of challenge include the argument that repossession and sale of such vehicles do not amount to the sale of goods and that the introduction of Entry No.82B is arbitrary and violates Article 14 of the Constitution of India. The petitioners argue that taxing identical goods differently from other dealers under a composition scheme is unfair.Issue 2: Interpretation of 'Seller' and 'Dealer'The Senior Counsel for the petitioners points out decisions from various High Courts where it was held that the petitioners were dealers liable to VAT for the sale of repossessed motor vehicles. However, these decisions are under appeal at the Supreme Court with a stay on recovery. The petitioners request the matter be admitted pending the Supreme Court's decision. The High Court notes that no notice has been issued to assess the petitioners under Entry No.82B yet. The court emphasizes that the interpretation of the terms 'Seller' and 'Dealer' under the MVAT Act is crucial in determining the tax liability of the petitioners.Issue 3: Prematurity of the PetitionThe High Court finds the petition premature as no proceedings have begun, and no orders have been passed under the MVAT Act regarding the interpretation of 'Seller' and 'Dealer' in the context of Entry No.82B. The court states that if the Revenue issues a notice and the petitioners respond, the proper interpretation of these terms will be crucial. The court holds that the challenge to the constitutional validity of the impugned notification can be raised later if necessary, after orders are passed by the Authorities under the Act.In conclusion, the High Court dismisses the petition as premature, emphasizing that the constitutional validity challenge can be raised later if needed. The court highlights the importance of proper interpretation of terms like 'Seller' and 'Dealer' in determining the tax liability of the petitioners under Entry No.82B of the MVAT Act.