2026 (3) TMI 145 - HC - VAT / Sales Tax

Surcharge on VAT applies in addition to concessional tax for declared goods; levy valid where measured by tax payable.

Section 7-A authorises an additional surcharge measured by reference to the tax payable on taxable turnover and operates independently of the concessional ... Levy of additional tax in the nature of surcharge under Section 7-A - tax payable under Section 7 on taxable turnover of declared goods - non-obstante clause in Section 7-A excluding restrictions of Section 7 - definition of “last turnover” under Section 2(u), “sale” under Section 2(ze), “sale price” under Section 2(zg), “taxable turnover” under Section 2(zn) - engaged in trading of iron and steel goods. Iron and steel goods being “declared goods” are taxable @ 5% on the taxable turnover under the 1956 Act - erroneous interpretation of Sections 7 and 7-A of 2003 Act by the Assessing Authority as well as the Appellate Authorities. Tax payable under Section 7 on taxable turnover of declared goods - HELD THAT: - The Court examined Section 7 and its sub provisions and concluded that Section 7(2) specifically prescribes the rate and mode of levy for sales to authorised dealers against the prescribed declaration (Form D 1), thereby fixing the tax at four per cent for such sales. The statutory scheme in Section 7 delineates the taxable event, person, rate and measure for computing the tax on such declared goods and the requirement of furnishing prescribed declarations for the concessional rate is integral to that levy. [Paras 10, 11] Tax payable under Section 7 in respect of sales of declared goods on production of prescribed declaration is confined to the rate stipulated in Section 7. Levy of additional tax in the nature of surcharge under Section 7-A - non-obstante clause in Section 7-A excluding restrictions of Section 7 - HELD THAT: - A plain reading of Section 7 A shows it commences with a non obstante clause and expressly levies an additional tax calculated as five per cent of the tax payable by a registered dealer. The provision is not a levy on gross or taxable turnover but on the tax computed under the Act. Because of the non obstante language, the restrictions and conditions in Section 7 do not preclude the operation of Section 7 A; consequently Section 7 A is leviable over and above the tax determined under Section 7. The four components of a valid levy (taxable event, person, rate and measure) are present for the surcharge under Section 7 A. [Paras 11, 13, 14, 16] Additional tax/surcharge under Section 7 A is leviable at five per cent of the tax payable under Section 7 and is not precluded by Section 7. Levy of additional tax in the nature of surcharge under Section 7-A - HELD THAT:- The Court noted that the legislature included a proviso to Section 7 A to ensure that the combined incidence of tax and surcharge conforms to Sections 14 and 15 of the Central Sales Tax Act for declared goods. That alignment demonstrates legislative competence to impose the surcharge subject to the central statute's ceiling, and confirms that the State levy resulting in an aggregate below the CST rate is permissible. Reliance on earlier decision in Mahashiv Promoters Pvt. Ltd. Vs. State of Haryana and another [2016 (9) TMI 869 - PUNJAB AND HARYANA HIGH COURT] concerning different factual and statutory contexts (such as lump sum composition cases) does not assist the appellant where taxable turnover was determined and taxed under Section 7. [Paras 17] The proviso to Section 7 A, which limits the aggregate tax and surcharge in conformity with the Central Sales Tax Act, validates the additional levy under Section 7 A in the present context. Final Conclusion: The Court held that Section 7 and Section 7 A operate in distinct fields: tax on taxable turnover under Section 7 (including concessional rate on declared goods) and an additional surcharge under Section 7 A calculated on the tax payable. The additional tax under Section 7 A is validly leviable in addition to tax under Section 7; the impugned orders are upheld and the appeals are dismissed. Issues: Whether Section 7-A of the Haryana Value Added Tax Act, 2003 authorises levy of an additional tax (surcharge) calculated at five per cent of the tax payable under Section 7, over and above the concessional rate of tax (4%) applicable to declared goods sold against Form D-1, or whether such surcharge is not leviable where taxable turnover is determined and taxed under Section 7.Analysis: The Court considered the language and scheme of Section 7 and Section 7-A of the Haryana Value Added Tax Act, 2003. Section 7(2) prescribes the concessional rate (4%) for declared goods sold to authorised dealers on production of prescribed declarations (Form D-1). Section 7-A, introduced by amendment, opens with a non-obstante clause ('Notwithstanding anything contained in this Act') and expressly provides for levy of an additional tax in the nature of surcharge calculated at five per cent of the tax payable by a dealer. The provisions operate in distinct and independent fields: Section 7 fixes the rate of tax on taxable turnover while Section 7-A prescribes an additional surcharge measured by reference to the tax payable. The proviso to Section 7-A aligns the aggregate of tax and surcharge with limits under Sections 14 and 15 of the Central Sales Tax Act, 1956, confirming legislative intent to permit a surcharge subject to central limits. The components necessary for a valid levy-taxable event, person liable, rate and measure-are ascertainable for Section 7-A, and the legislative text does not restrict its operation where tax under Section 7 has been determined on declared goods.Conclusion: Section 7-A of the Haryana Value Added Tax Act, 2003 is operative and authorises levy of an additional tax (surcharge) calculated at five per cent of the tax payable under Section 7; therefore the surcharge is leviable in addition to the concessional 4% tax on declared goods sold against Form D-1. The appeals challenging levy under Section 7-A are dismissed and the impugned orders upholding the surcharge are upheld.