Court upholds 13% VAT on spirits, deems constitutional. Challenge on lease rental deferred pending SC decision. Sections validated.

The court upheld the imposition of 13% VAT on spirit, ruling that it is not arbitrary or ultra vires the Constitution. The challenge to VAT on lease rental was deferred pending a Supreme Court decision. The court found sub-section (6-A) of Section 14, Section 20(5), and the procedure under Sections 46 and 53 of the VAT Act valid, rejecting challenges to their constitutional validity. The petitioners were allowed to challenge assessment orders in appeal without costs awarded.

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Issues Involved:
1. Levy of Value Added Tax (VAT) at 13% on spirit.
2. Levy of VAT on lease rental.
3. Constitutional validity of sub-section (6-A) of Section 14 of VAT Act, 2002.
4. Constitutional validity of Section 20(5) of VAT Act, 2002.
5. Constitutional validity of the procedure under Sections 46 and 53 of VAT Act, 2002 read with Rule 60 of the Madhya Pradesh VAT Rules, 2006.

Issue-wise Detailed Analysis:

1. Levy of Value Added Tax (VAT) at 13% on Spirit:
The petitioners argued that the imposition of VAT at 13% on spirit is arbitrary and ultra vires Articles 14, 19, and 265 of the Constitution. They contended that spirit falls under the categorization of 'liquor' as per the VAT Act and should be taxed at 5%. The court considered the amendments to the VAT Act and noted that the word 'liquor' includes spirit, and the State has the competence to charge a higher rate of tax on ENA/Rectified Spirit under the residual entry. The court concluded that there is no ultra vires or arbitrary act by the State in charging 13% VAT on ENA/Rectified Spirit, and the challenge fails.

2. Levy of VAT on Lease Rental:
The issue of VAT on lease rental is sub-judice before the Hon'ble Supreme Court in SLP (c) No. 21700/2018. The court deferred the matter to the final outcome of the pending SLP.

3. Constitutional Validity of Sub-section (6-A) of Section 14 of VAT Act, 2002:
The petitioners challenged sub-section (6-A) of Section 14, arguing that it unfairly holds them accountable for unpaid VAT by the selling vendor without providing an opportunity to prove their bonafides. The court noted that the provision contains an inbuilt mechanism for affording an opportunity to the assessee to establish their entitlement to input tax rebate. The court found no ambiguity in the provision and held that the challenge to the validity of Section 14 (6A) fails.

4. Constitutional Validity of Section 20(5) of VAT Act, 2002:
The petitioners contended that sub-section (5) of Section 20 lacks jurisdictional foundation and is ultra vires. The court rejected this contention, stating that if procedural irregularities occur, the petitioners have the liberty to seek redressal through the forum of appeal. The court concluded that the challenge to the validity of sub-section (5) of Section 20 fails.

5. Constitutional Validity of the Procedure under Sections 46 and 53 of VAT Act, 2002 read with Rule 60 of the Madhya Pradesh VAT Rules, 2006:
The petitioners challenged the provisions mandating pre-deposits for filing appeals. The court referred to a previous judgment (Associated Alcohols and Breweries Ltd. Vs. State of M.P. & others) that upheld the validity of these provisions. The court reiterated that the requirement of pre-deposit is a common legislative practice and does not violate any constitutional rights. The court upheld the validity of Sections 46 and 53 of the VAT Act, 2002, read with Rule 60 of the Rules of 2006.

Conclusion:
The court disposed of the writ petitions, allowing the petitioners to challenge the assessment order in appeal, which should be decided on merit. No costs were awarded.

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