The Delhi High Court, under the jurisdiction of Justices Vibhu Bakhru and Amit Mahajan, has recently delivered a significant verdict affirming the imposition of value-added tax (VAT) on the sale of repossessed vehicles.
Brief Facts of the Case:
The petitioner in this case was Indusind Bank, a scheduled bank, which contested the demand for VAT on the sale of repossessed vehicles. Notably, the Court clarified that the tax was specifically related to the sale of these vehicles and not the initial financing transactions.
Contentions of the Parties:
Indusind Bank based its challenge on the contention that the expansive definition of the term 'dealer' under the Delhi Value Added Tax (DVAT) Act (hereinafter referred to as DVAT Act) was inconsistent with the legislative objectives. The petitioner argued that the definition of 'dealer' was ultra vires Article 265 of the Constitution of India. The notices issued under Sections 32 and 33 of the DVAT Act, seeking tax, interest, and penalties, were the primary cause of dissatisfaction for the petitioner.
The core of Indusind Bank's argument rested on the assertion that it did not contribute any value to the repossessed vehicles but acted as a facilitator for their sale on behalf of the borrower to recover outstanding dues. The petitioner deemed the imposition of VAT on the sale of repossessed vehicles as a taxation measure devoid of any actual value addition.
Observations by the Court:
The Court dismissed the bank's petition, rejecting the claim that the definition of 'dealer' violated the Constitution of India. The Court highlighted that Article 265 of the Constitution mandates that no tax can be levied without the authority of law. In this case, the DVAT Act constituted the relevant law, and the Court acknowledged the legality of the tax collection under the enacted law.
The Court emphasised the need for any constitutional challenge to the definition of 'dealer' to demonstrate a violation of a specific provision within the Constitution. It clarified that a broad assertion of ultra vires status was insufficient; instead, there needed to be a specific violation of constitutional provisions.
The Court stated that the dispute over taxing the sale of repossessed vehicles was already addressed by a prior decision of the Delhi High Court in M/s Citi Bank v. Commissioner of Sales Tax (ST. REF. 1/2003) which supported the imposition of VAT on the sale of such repossessed vehicles. The Court noted that this decision directly applied to the petitioner's challenge against the notices seeking VAT, interest, and penalty under the DVAT Act.
The Decision of the Court:
The High Court dismissed the petition filed by the bank.
Case Name: Indusind Bank Limited vs. Department Of Trade & Taxes, Government Of NCT Of Delhi
Coram: Hon'ble Mr. Justice Vibhu Bakhru and Hon'ble Mr. Justice Amit Mahajan
Case No.: W.P.(C) 3799/2019
Advocates of the Petitioner: Mr Gunjan Kumar and Mr Rajeev M. Roy, Advocates.
Advocates of the Respondent: Mr Dhananjaya Mishra and Mr Navneet Dogra, Advocates.
Read Judgment @LatestLaws.com
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