Case Law Details
Tata Motors Ltd Vs State of Jharkhand (Jharkhand High Court)
Conclusion: Liability to pay any VAT on the trade discounts/incentives pursuant to bringing in Section 9(5) in JVAT Act was beyond the legislative competence of the State Legislature, and the same was ultra vires Article 246(1) of the Constitution of India, and could not be sustained in the eyes of law and accordingly, it had to be treated as if never existing in the Statute Book.
Held: Assessee-company was the manufacturer and seller of heavy and medium commercial vehicles and its spare parts and accessories. It was registered under the provisions of ‘JVAT Act’ and was, admittedly, liable to pay VAT on its turnover. Assessee in normal course of its business, allowed trade discounts, both in form of free supply of goods as well as providing cash incentives, or reduction in price to its purchasers, which was a target based discount. Similarly, assessee-company also received trade discounts and incentives in respect of the raw materials, purchased by it, in the similar manner. Admittedly, prior to bringing in Section 9(5) in the Statute Book, assessee was not liable to pay any VAT on the trade discounts/incentives, but pursuant to bringing in Section 9(5) in JVAT Act, it had become liable to pay the tax on the said trade discounts and incentives as well. In the present writ application, assessee had challenged the amendment in the JVAT Act, being ultra vires and unconstitutional, stating that the assessment orders after the year 2011, were under challenge and pending before the appellate/revisional authorities, and these appeals / revisions should be dependent upon the result of this writ application, as the appellate/revisional authorities could not look into the challenge to the vires of the JVAT. In the present case, it was found that the State Government had exceeded its legislative competence and had in that effort, treated the trade discounts/incentives as taxable transactions, treating them to be sale by a deeming fiction by bringing sub-Section (5) in Section 9 of the JVAT Act, and had thus sought to make such transactions taxable, which were in addition to the transactions described under Article 366 (29A) of the Constitution of India, which the State Government could not do, and admittedly, prior to bringing of Section 9(5) of the JVAT Act, into the Statute Book, such transactions were never being subjected to tax under the JVAT Act. In fact, Explanation III of Section 2(xlviii) of the JVAT Act, defining ‘Sale price’, clearly stated that sale price should not include the cash discount, if shown separately, and allowed by the dealer in the ordinary course of trade practice. In spite of the fact that JVAT Actwais no more in force, after coming into force of the GST regime, but the fact remained that the transactions, during the JVAT regime, were claimed to be taxed after the amendment made in the year 2011, which were not subjected to any tax, prior to the amendment of the JVAT Act in the year 2011. Accordingly, sub-Section (5) of Section 9 of the JVAT Act, as it stood with effect from 1.4.2010 to 30.06.2017 in the Statute Book, was hereby, held to be ultra vires, and accordingly, it had to be treated as if never existing in the Statute Book.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
Heard learned counsel for the petitioner Company and learned counsel for the State.
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