AI Drafter 
TaxTMI 
TaxTMI 
2015 (8) TMI 1005
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....es as dealers, on account of credit notes issued by selling dealers, despite the selling dealers having confirmed that they have not reduced their output tax liability. (ii) Whether in the facts and circumstances of the case, it can be said that the returns filed by the appellants were false, misleading or deceptive, attracting penalty U/S 86(10) of the Act." Background 2. The Appellants are all registered dealers under the Delhi Value Added Tax Act, 2004 (DVAT Act). All of them faced demands issued by the Value Added Tax Officer (VATO) for failure to reverse the input tax credit (ITC) availed of by them as purchasing dealers on the ground that they had received discounts/incentives from their corresponding selling dealers subsequent to the sales. Each of the Appellants were unsuccessful in getting their objections accepted by the Objection Hearing Authority (OHA) and thereafter in their appeals before the Value Added Tax Appellate Tribunal ('Tribunal'). By a common order dated 6th August 2014 the Tribunal dismissed their appeals and therefore the present appeals are before this Court. Although the essential facts concerning the failure by the selling dealers to re....
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....s, shampoos, toothbrushes and is one of its distributors in Delhi. It is stated that the Appellant is a re-distribution stockist under a principal to principal buyer-seller agreement. It is stated that the Appellant then sells the products to other retailers and wholesalers. In order to promote the sale of its products, HUL comes out with several „price drop schemes' where discounts are offered to wholesalers, retailers through the re-distribution stockists like the Appellant. Objections before the OHA 5. Objections were filed by the Appellant against the aforementioned default assessments before the OHA i.e. Additional Commissioner - Special Zone and the Joint Commissioner (KCS). 6. By orders dated 7th July, 2011 and 30th January, 2012, the OHA rejected the objections in STA No. 76 of 2015. Similarly, by orders dated 31st August 2009 and 15th February 2010, the OHA rejected the objections in STA No. 26 of 2015.The appeal filed by the Appellant, along with the appeals of other similarly placed dealers, was dismissed by the Tribunal by the impugned orders dated 6th August, 2014 (in STA No. 76 of 2014) and 28th July 2014 (in STA No, 26 of 2015). The Tribunal's f....
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....rchase of goods, means the proportion of the price paid by the buyer for the goods which represents tax for which the selling dealer is liable under this Act" .... .... .... .... "2(zd) "sale price" means the amount paid or payable as valuable consideration for any sale, including- (i) the amount of tax, if any, for which the dealer is liable under section 3 of this Act; (ii) in relation to the delivery of goods on hire purchase or any system of payment by instalments, the amount of valuable consideration payable to a person for such delivery including hire charges, interest and other charges incidental to such transaction; (iii) in relation to transfer of the right to use any goods for any purpose (whether or not for a specified period) the valuable consideration or hiring charges received or receivable for such transfer; (iv) any sum charged for anything done by the dealer in respect of goods at the time of, or before, the delivery thereof; (v) [amount of duties levied or leviable on the goods under the Central Excise Act, 1944 (1 of 1944) or the Customs Act, 1962 (52 of 1962), or the Delhi Excise Act, 2009 (Delhi Act 10 of 2010) whether such duties are payab....
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....his section shall apply where, in relation to the sale of goods by any dealer -] (a) that sale has been cancelled; (b) the nature of that sale has been fundamentally varied or altered; (c) the previously agreed consideration for that sale has been altered by agreement with the recipient, whether due to the offer of a discount or for any other reason; [(d) the goods or part of the goods sold have been returned to the dealer within six months of the date of sale; or] (e) the whole or part of the price owed by the buyer for the purchase of the goods has been written-off by the dealer as a bad debt; and the dealer has - (i) provided a tax invoice in relation to that sale and the amount shown therein as tax charged on that sale is not the tax properly chargeable on that sale; or (ii) furnished a return in relation to a tax period in respect of which tax on that sale is attributable, and has accounted for an amount of tax on that sale that is not the amount properly chargeable on that sale." .... ..... .... .... "9 Tax credit [(1) Subject to sub-section (2) of this section and such conditions, restrictions and limitations as may be prescribed, a dealer....
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....et tax payable by a dealer for a tax period shall be determined by the formula: Net Tax = O - I - C where O = the amount of tax payable by the person at the rates stipulated in section 4 of this Act in respect of the taxable turnover arising in the tax period, adjusted to take into account any adjustments to the tax payable required by section 8 of this Act. I = the amount of the tax credit arising in the tax period to which the person is entitled under section 9 of this Act, adjusted to take into account any adjustments to the tax credit required by section 10 of this Act. C = the amount, if any, brought forward from the previous tax period under sub-section (2) of this section." .... ..... .... .... 38 (10) Where a registered dealer sells goods and the price charged for the goods is expressed not to include an amount of tax payable under this Act the amount may be refunded to the seller or may be applied by the seller under clause (b) of sub-section (3) of this section without the seller being required to refund an amount to the purchaser. .... ..... .... .... "40A Agreement to defeat the intention and application of this Act to be void (1) If the....
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....e may be; (d) the serial number of the relevant tax invoice affected by the credit note or debit note, as the case may be; and (e) the amount of the variation to the tax amount shown on the tax invoice." Analysis of the provisions 11. In terms of Section 2(r) of the DVAT Act 'input tax' means „the proportion of the price' paid by the buyer which „represents tax' which is liable to be paid by the selling dealer. On a sale transaction of Rs. 100/- with rate of VAT @ 10 per cent the Input Tax would be Rs. 10/-. In terms of Section 3(3) of the DVAT Act the amount of tax payable by a dealer is the dealer's net tax for the period calculated under Section 11 of the Act. Section 9 permits a dealer to a tax credit in respect of the turnover of purchases occurring during the tax period where the purchase arises in the course of his activities as a dealer including sales which are liable to tax under Section 3 of the Act. While Section 8 talks of „Adjustment to tax'; Section 10 talks of „Adjustment to Tax Credit'. 12. In the example given it is stated that if HUL sells goods worth Rs. 100 to the Appellant it collects on the invoice VAT at 12.5% w....
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.... which according to him cast a legal obligation on the buying dealer to reverse the input tax credit. He contended that any discount being received after completion of the sale transaction would have the effect of altering the sale price, whether directly or indirectly. He sought to place reliance on the decision in Central Bank of India v. Their Workmen AIR 1960 SC 12. 16. The legal position as regards the circumstance under which an amendment can be said to be clarificatory has been explained by the Supreme Court in Union of India v. Martin Lottery Agency Ltd.2009 (7) SCALE 34. The Court in that case was considering the question whether the sales promotion and marketing of lottery tickets would be eligible to service tax within the meaning of the provisions of Section 65 (105) of the Finance Act, 1994. One of the incidental questions the Court was considering was whether the explanation appended to the provision which widened the tax net was merely clarificatory. The Court was of the view that by inserting the explanation to Clause (19) of Section 65 of the Finance Act, a new concept of imposition of tax had been brought in. It was not merely clarificatory. It was held: "th....
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....icatory of an existing legal position cannot have any application in the above facts and circumstances. Section 10 (5) is not retrospective 19. Further, Section 10 (5) brings about a change which is substantive and not procedural. It is a change that adversely affects the substantive rights of the buying dealer. There cannot, therefore, be a presumption of retrospectivity as far as the said provision is concerned. The settled legal position which was reiterated in Martin Lottery (supra) was that if by virtue of an insertion of an explanation in a taxing statute "a substantive law is introduced, it will have no retrospective effect". 20. Since considerable reliance has been placed by the Department on the decision of the Madras High Court in Jayam & Co. v. Assistant Commissioner (supra) it becomes necessary to discuss the said case in some detail. By the Tamil Nadu Value Added Tax (Second Amendment) Act 2010, an amendment was inserted by way of Section 19 (20) in the TNVAT Act to provide for reversal of the amount of ITC for the goods over and above the output tax in those cases where a registered dealer has sold the goods at a price less than the price of the goods purchas....
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....be presumed to be retrospective. Obligation of the selling dealer under Section 51 25. The learned ASG contended that Section 51 of the DVAT Act was mandatory and it was not open for the selling dealer to avoid issuing credit or debit notes, as the case may be, in the event there was any variation in the sale price. He further argued that failure to issue credit note under Section 51(a) of the Act would not enable the buying dealer to claim a higher tax and it was not be open for the dealers to choose the instance of tax on their own volition by not following the mandate of Section 51 of the DVAT Act. 26. Section 51 of the DVAT Act must be read in the context of the scheme of the Act. A purchasing dealer cannot claim any ITC without issuance of a tax invoice under Section 50 of the Act by the selling dealer. Section 50 of the Act also specifies that the tax invoice can only be issued by a registered dealer in cases other than the instances specified under the said section (which are also instances where ITC is not available to the buying dealer). A tax invoice is required to be issued in accordance with Rule 44 of the DVAT Rules. As far as the selling and buying dealer is ....
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....he amount of tax payable, the selling dealer would not be entitled to any refund unless the Commissioner is satisfied that the selling dealer has refunded the amount to the purchaser. This also, clearly, indicates that a selling dealer would not be entitled to any refund of tax collected from the purchaser unless (a) the amount is refunded to the purchaser if the purchaser is an unregistered dealer and (b) a credit note is issued to the purchasing dealer where the purchasing dealer is a registered dealer and is consequently reassessed on its liability. 30. Section 51(a) of the DVAT Act is, thus, a provision for the benefit of the selling dealer, inasmuch as the selling dealer cannot claim any refund of tax paid unless a credit note under Section 51(a) is issued. In case where the tax payable exceeds the amount paid, the selling dealer cannot claim any tax from the purchaser unless a debit note under Section 51(b) of the DVAT Act is issued. In the circumstances, it would be difficult to accept that the selling dealer is obliged to issue a credit or a debit note under Section 51 of the DVAT Act as it would always be open for the selling dealer not to avail its benefit, which is th....