Jharkhand High Court
Linde India Limited vs The State Of Jharkhand Through The ... on 5 December, 2022
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Civil Review No. 125 of 2019
With
Civil Review No. 124 of 2019
Linde India Limited --- --- Petitioner (in both cases)
Versus
1. The State of Jharkhand through the Secretary-cum-Commissioner,
Commercial Taxes Department, Ranchi.
2. Joint Commissioner of Commercial Taxes (Administration),
Jamshedpur Division, Jamshedpur.
3. Deputy Commissioner of Commercial Taxes, Jamshedpur Circle,
Jamshedpur. --- --- Respondents (in both cases)
---
CORAM: Hon'ble Mr. Justice Aparesh Kumar Singh
Hon'ble Mr. Justice Deepak Roshan
---
For the Petitioner : Mr. Sumeet Gadodia, Advocate
For the State : Mr. Ashok Kr. Yadav, Sr.S.C.-I
---
09/05.12.2022 These two review petitions arise out of a common judgment
dated 3rd September 2019 passed in W.P.(T) No.3172 of 2018 and W.P.(T)
No.3022 of 2018 by the learned Division Bench. W.P.(T) No.3022 of 2018
was preferred with the following prayer :-
(i) For issuance of appropriate writ/order/direction including a writ
of certiorari for quashing / setting aside the order dated
24.03.2017 (Annexure-11) passed in Revision Case No.JR 82 of
2012 by the Commercial Taxes Tribunal, Jharkhand pertaining to
the year 2008-09, VAT Proceeding wherein order dated
30.10.2012 passed by the Commissioner of Commercial Taxes,
Jharkhand has been confirmed.
W.P.(T) No.3172 of 2018 was preferred with the following prayer :-
(i) For issuance of appropriate writ/order/direction including a writ
of certiorari for quashing / setting aside the order dated
24.03.2017 (Annexure-11) passed in Revision Case No.JR 83 of
2012 by the Commercial Taxes Tribunal, Jharkhand pertaining to
the year 2009-10, VAT Proceeding wherein order dated
30.10.2012 passed by the Commissioner of Commercial Taxes,
Jharkhand has been confirmed.
2. The learned Writ Court upon consideration of the submission of
the parties and the pleadings on record as also the decisions relied upon by
them, dismissed the writ petitions in the following manner :-
"35. In the instant case, the facility charge is a consideration
passing from the purchaser (Tata Steel Limited) to the dealer (Linde
India Limited) in relation to the sale of gases. According to the
agreement, the freight charges are being taken for the provision,
operation and maintenance of the plant, the pipelines and the meters. All
the three constituents are important for selling gases by the petitioner to
Tata Steel Limited and in their absence sale may not be complete. The
plant is important for producing the saleable goods, the pipeline is
important for transporting the saleable goods and the meter is important
for calculating the total quantity of goods sold. Accordingly, facility
charges are directly relatable to sale of goods by the petitioner to Tata
Steel Limited and is a consideration passing from Tata Steel Limited to
the petition for sale of goods as also confirmed by the Hon'ble Supreme
Court of India in its judgment dated 03.02.2016 passed in Civil Appeal
No. 1799 of 2010 wherein this very Petitioner was the contesting party.
36. Further, it is also relevant to note that the Petitioner for the
same goods i.e. gases which are being sold to purchasers other than
Tata Steel Limited is not charging facility charges but the petitioner is
charging higher sale price for the said goods. This indicates that
where the facility charge is not charged separately by the petitioner
the sale price of the goods is higher and accordingly it demonstrates
that the facility charge is a part of sale price but charged separately to
some customers and charged compositely to other customers by
including the same into the sale price.
37. The definition of 'Sale Price' under the JVAT Act, 2005 is also
important and the same also supports the case of the revenue that
Facility Charge has to be included in the 'Sale Price'. 'Sale Price' has
been defined in Section 2 (xlviii) of the JVAT Act, 2005. The
definition of Sale Price along with Explanation II is relevant for the
instant case. The said definition along with Explanation II reads as
under:
"Sale Price" means the amount payable to a dealer as valuable
consideration in respect of the sale or supply of goods, and shall not
include tax paid or payable under this Act, by a person in respect of such
sales.....
Explanation II - Sale price shall include any amount charged by the
dealer for anything done in respect of the goods at the time of, or before
delivery thereof to the buyer;"
38. As per the aforementioned definition, "Sale Price" includes
any amount charged by the dealer for anything done in respect of the
goods. Accordingly, in the instant case the facility charge is an
amount charged by the dealer (the Petitioner herein) for operating and
maintaining the plant, pipeline and meter which are used in respect of
the gases sold by the petitioner. Thus, the sale price of the petitioner
for selling gases to Tata Steel Limited would include 'Facility
Charge'.
39. The Petitioner has heavily relied on the judgment of the
Hon'ble Supreme Court dated 28.07.2009 passed in Civil Appeal No.
5689 of 2008 wherein the Hon'ble Apex Court has held that the
facility charge cannot be included in the assessable value for the
purpose of imposing excise duty under the Central Excise Act. The
ratio laid down in the said judgment is not applicable in the case of
the petitioner since the issue here is of applicability of sales tax and
not of excise duty.
40. The petitioner has also relied on the decision of Hon'ble Apex
Court in the case of Moriroku UT India (P) Ltd. v. State of Uttar
Pradesh reported in (2008) 4 SCC 548. However, the same judgment
itself has clarified the scope and applicability of both the taxes and
held in the following manner:
"23. On the other hand, excise duty is a levy on a taxable event
of "manufacture" and it is calculated on the "value" of
manufactured goods. Excise duty is not concerned with
ownership or sale. The liability under the excise law is event
based and irrespective of whether the goods are sold or captively
consumed. Under the excise law, the liability is there even when
the manufacturer is not the owner of raw material or finished
goods (as in the case of job-workers). Excise duty, therefore, is
independent of ownership [see Ujagar Prints (II) v. Union of
India [(1989) 3 SCC 488 : 1989 SCC (Tax) 469] ]. Therefore, for
sales tax purposes, what has to be taken into account is the
consideration for transfer of property in goods from the seller to
the buyer. For this purpose, tax is to be levied on the agreed
consideration for transfer of property in the goods and in such a
case cost of manufacture is irrelevant. As compared to the sales
tax law, the scheme of levy of excise duty is totally different. For
excise duty purposes, transfer of property in goods or ownership
is irrelevant. As stated, excise duty is a duty on manufacture"
41. Thus is ample clear that taxable event in case of 'Central
Excise' and 'Sales Tax' is different. While 'manufacture' is the event
in case of Central Excise; the taxable event in the case of VAT is
'sale'.
42. Furthermore, as aforesaid, the Hon'ble Apex Court, in the case
of BOC India Limited Vs. Commissioner of Commercial Tax and
Ors., (Civil Appeal No. 1799 of 2010) has clarified that the VAT is
leviable on facility charges. As the 'facility charge' is dependent upon
the sale price of the product (Clause 11.3A), coupled with the fact that
the sale is concluded after joint measurement by both parties, VAT is
applicable on facility charge. The petitioner cannot evade his liability
by changing the scope and the nature of the words as used in the
agreement as any agreement made with the intention to evade taxes is
against public police and hence void as held in the case of Unitech
Limited Vs. Union of India reported in (2016) 2 SCC 569.
43. In view of the aforesaid discussions and judicial
pronouncements, we hold and declare that "Facility Charge" levied by
the petitioner company is towards consideration of sale of gases and
is exigible to value added tax and there is no error in the common
order dated 24.03.2017 passed by the Commercial Taxes Tribunal,
Jharkhand in Revision Case No. JR 82 of 2012 and Revision Case No.
JR 83 of 2012 wherein order dated 30.10.2012 passed by the
Commissioner of Commercial Taxes, Jharkhand has been confirmed,
and the same are confirmed.
44. As a result both the writ applications are dismissed on contest.
Consequently, the pending interlocutory applications stand disposed
of."
3. During course of the proceedings of these review petitions,
learned counsel for the petitioner confined his challenge to the impugned
judgments so far as the levy of penalty is concerned, as according to him the
findings of the learned Tribunal and the Writ Court have not answered the
plea of non-observance of the procedure prescribed under Section 40(2) of the
JVAT Act, 2005 before levying the penalty.
4. In support of the aforesaid prayer, learned counsel for the petitioner
have urged the following grounds :-
(i) The impugned order passed under Section 40(2) is in violation
of principles of Audi Alteram Partem as it is a completely non-
reasoned order. No reason has been assigned for imposition of
penalty/interest.
(ii) The order is also silent as to under which sub-clause of Section
40(2), the order imposing penalty/interest was passed. In this
regard, reference made to judgment of the Hon'ble Apex Court
passed in the case of Amrit Foods Vs. Commissioner of Central
Excise, U.P. reported in (2005) 13 SCC 419, (relevant para 5).
5. Learned counsel for the petitioner has also taken this Court to
the specific grounds taken on this issue by the petitioner before the appellate
authority i.e. the Commissioner of Commercial Taxes, Jharkhand Revisional
Authority vide paragraphs-(g), (h), (i), (t) at Annexure-6 and paragraphs-45 to
50. It is contended that the Commissioner did not make any discussion or
finding on the issue of interest/penalty as would be evident from the
revisional order dated 30.10.2012 (Annexure-8). Further in support of the
same ground the memo of the revision petition at Annexure-9 has been cited
where at para-36, 38, 44 to 52, 59 and under Grounds (F), (H), (I), (U), (AA)
the same plea was taken. Even the questions of law at (A), (B to I), (K) & (T)
were specifically directed on the issue of imposition of penalty without
following the principles of natural justice. The impugned orders do not record
any reason for imposition of penalty/interest. It is submitted that even before
the Writ Court the petitioner had raised the issue of imposition of
interest/penalty at para-28, 41, 62 to 66 and 67 and under Question No.(ix).
However, learned counsel for the petitioner submits that the learned Writ
Court, while declaring that the levy of facility charge by the petitioner
company is towards consideration of sale of gases and is exigible to value
added tax and there is no error in the common order dated 24th March 2017
passed in both the revision petitions by the learned Commercial Taxes
Tribunal, simply confirmed the impugned orders without giving any finding
on the issue of imposition of penalty / interest. Therefore, the petitioner has
preferred the instant review petitions.
6. Learned counsel for the petitioner has during course of his
submission however also sought to assail the levy of facility charge on the
ground that the petitioner was under a bonafide belief that no tax is leviable
on facility charge. Therefore, it was neither included in the return as an
admitted liability of tax, nor any tax was paid on it in good faith. The tax on
the sale price as admitted in the return were duly paid. The respondents while
imposing penalty under Section 40(2) of the JVAT Act, have not specified the
sub-section under which penalty has been invoked. Section 40(2)(a) of the
JVAT Act prescribes for imposition of penalty if a dealer has concealed any
sales or purchases or any particular thereof. Admittedly, no such allegation
has been leveled under Section 40(2)(a) of the JVAT Act, 2005 by the
respondent authorities. Further penalty under Section 40(2)(b) of the JVAT
Act provides for levy of penalty if a dealer has furnished incorrect statement
of his turnover or incorrect particulars of his sales or purchases in the Return
furnished under Sub-section(1) of Section 29. The said provision is also not
applicable, as admittedly in the books of accounts, petitioner disclosed the
realization of facility charges. The said facility charges were not reflected in
return under bonafide belief that sales tax is not leviable upon facility charges
realized by it.
7. Learned counsel for the petitioner has relied upon the decisions
rendered by the Apex Court in the case of Sree Krishna Electricians Vs. State
of Tamil Nadu and Another reported in (2009) 11 SCC 687, para-4 and 7
and in the case of Amrit Foods Vs. Commissioner of Central Excise, U.P.
reported in (2005) 13 SCC 419, para-5. It is submitted that petitioner bore a
bonafide belief that since in the past years no VAT liability was either
admitted in the return or paid on facility charge, therefore, it was not included
in the sale price of gas and was never objected by the Department as well. It is
further submitted that Section 40(2) of the JVAT Act provides for levy of
interest but the same is in the nature of penalty where mens rea is essential
ingredient.
8. In order to test the aforesaid plea of the petitioner whether any
notice was issued upon the petitioner during course of assessment proceedings
vide order dated 4th July 2022, learned counsel for the State was asked to seek
instruction and be ready with the assessment records as to whether notice
under Section 40(2) of the JVAT Act, 2005 was issued before levy of penalty.
A counter affidavit has been filed pursuant thereto on 29th July 2022 wherein
categorical statements have been made at paragraphs-8, 9, 10 and 11 that a
notice was duly issued under Section 40(2) of JVAT Act, 2005 by providing
an opportunity of hearing to the petitioner as per order dated 21 st January
2011 for the assessment year 2008-09 and date of hearing was fixed on 8th
March 2011. Petitioner received the said notice bearing memo no.13122 dated
22nd February 2011 on 4th March 2011. The said notice was under the
prescribed form in JVAT 302 which is at Annexure-B to the instant affidavit.
As such, sufficient notice was given to the petitioner, but no document could
be produced by him to rebut the charges. As such, the instant ground for
review is not tenable as there was no violation of the principles of Audi
Alteram Partem before imposition of such penalty and the requirement of
Section 40(2) of the JVAT Act, 2005. Therefore, the petitioner has not made
out any ground to question the finding of the learned Writ Court on the
alleged ground of violation of principles of natural justice and lack of notice
before imposition of penalty. The judgment of learned Writ Court is well
reasoned and does not require any interference in review. No grounds for
review are made out in terms of the principles enshrined in Order 47 Rule 1 of
the Civil Procedure Code. There are no apparent errors of record in the
impugned judgment.
9. We have considered the submissions of learned counsel for the
parties in the background of relevant pleadings and grounds urged by the
petitioner to assail the impugned judgment rendered by the Writ Court on the
issue of levy of penalty upon the petitioner. Section 40 of the JVAT Act is
quoted hereunder :-
"40. Turnover escaping Assessment -- (1) Where after a dealer is
assessed under Section 35 or Section 36 for any year or part thereof,
and the Prescribed Authority, upon information or otherwise has
reason to believe that the whole or any part of the turnover of the
dealer in respect of any period has -
(a) escaped assessment; or
(b) been under assessed; or
(c) been assessed at a rate lower than the rate on which it is
assessable
(d) been wrongly allowed any deduction therefrom; or
(e) been wrongly allowed any credit therein;
the prescribed authority may, serve or cause to serve a notice on
the dealer and after giving the dealer reasonable opportunity of
being heard and making such inquiries as he considers necessary,
proceed to assess to the best of his judgement, the amount of tax due
from the dealer in respect of such turnover, and the provisions of this
Act shall so far as may be, apply accordingly.
[Provided, for clause (a), where the prescribed authority has
reasons to believe that the dealer has concealed, omitted or failed to
disclose willfully, the particulars of such turnover or has furnished
incorrect particulars of his such turnover and thereby return figures
are below the real amount, the prescribed authority shall proceed to
assess or reassess the amount of tax due from the dealer in respect of
such turnover and the provisions of this Act, shall so far as may
apply accordingly and for this purpose, the provisions of sub-section
(6) of Section 37 shall apply accordingly."
(2) If the prescribed authority in the course of any proceeding or
upon any information, which has come into his possession before
assessment or otherwise, under this Act, and is satisfied that any
registered dealer or a dealer to whom the registration certificate has
been suspended under sub-section (7) of Section 25 -
(a) has concealed any sales or purchases or any particulars
thereof, with a view to reduce the amount of tax payable by him
under this Act, or
(b) has furnished incorrect statement of his turnover or incorrect
particulars of his sales or purchases in the return furnished under
sub-section (1) of Section 29; or otherwise,
the prescribed authority shall, after giving such a dealer an
opportunity of being heard, by an order in writing direct that he
shall, in addition to any tax payable which is or may be assessed
under Section 35 or 36 or 38, pay by way of interest, a sum at the
rate of two percentum for each month of such suppression or
concealment or for furnishing incorrect particulars; on the amount
of tax payable under the Act or on the suppressed turnover or on
concealed turnover or for furnishing incorrect particulars.
The interest shall be payable before the completion of the
assessment and for determining the amount of interest payable, the
prescribed authority shall quantify the amount of tax payable
provisionally under this Act."
"(3) Any penalty imposed or interest levied under this section
shall be without prejudice to any action, which is or may be taken
under Section 84 of this Act.]
[(4) No order of assessment and reassessment shall be made
under sub-Section (1) after the expiry of five years from the end of
the year in respect of which or part of which the tax is assessable."
10. Petitioner has profusely relied upon the pleadings of the revision
petition before the Commissioner Appeals; the Commercial Taxes Tribunal in
revision petitions and also before the Writ Court to allege that the levy of
penalty is in violation of the statutory provision as it has been imposed
without any prior notice. In the first place from a perusal of the order sheet of
the assessment proceedings, specifically the order dated 21.01.2011 it is
obvious that a proper notice was issued upon him in the prescribed form JVAT
302 to submit his reply by 8th March 2011 as to why not he be assessed for
imposition of tax in terms of Section 40(2) of the Act on the grounds of
escaped assessment. The proviso of Section 40(2) inserted by Act No.3 of
2008 prescribed payment of interest @ 2% for each month for suppression or
concealment or furnishing incorrect particulars on the amount of tax payable
under the Act or on the suppressed turnover or on concealed turnover or for
furnishing incorrect particulars.
11. A reading of the proviso of Section 40(1) would indicate that if
the prescribed authority has reasons to believe that the dealer has concealed,
omitted or failed to disclose willfully, the particulars of such turnover or has
furnished incorrect particulars of his such turnover and thereby return figures
are below the real amount, the prescribed authority shall proceed to assess or
reassess the amount of tax due from the dealer in respect of such turnover, so
far as may apply accordingly and for this purpose, the provisions of Sub-
section (6) of Section 37 shall apply accordingly. Sub-section (6) of Section
37 reads as under :-
"(6) If the prescribed authority is satisfied that the dealer, in
order to evade or avoid payment of tax-;
(a) has failed to furnish without reasonable cause, returns in respect
of any period by the prescribed date; or
(b) has furnished incomplete and incorrect returns for any period; or
(c) has availed Input Tax Credit to which he is not entitled to or
(d) has employed such method of accounting which does not enable
the prescribed authority to assess the tax due from him;
he shall, after giving the dealer reasonable opportunity of being
heard, direct that the dealer shall pay, by way of penalty; a sum
equal to twice the amount of additional tax assessed on account of
the said reasons under this Section."
12. It provides for imposition of penalty of a sum equal to twice the
amount of additional tax assessed on account of the reasons stated in the
instant Section. In case the prescribed authority is satisfied that the dealer, in
order to evade or avoid payment of tax has failed to furnish without
reasonable cause, returns in respect of any period by the prescribed date; or
has furnished incomplete and incorrect returns for any period; or has availed
Input Tax Credit to which he is not entitled to or has employed such method
of accounting which does not enable the prescribed authority to assess the tax
due from him, he shall, after giving the dealer reasonable opportunity of being
heard, direct that the dealer shall pay, by way of penalty; a sum equal to twice
the amount of additional tax assessed on account of the said reasons under this
Section.
13. A mere perusal of the aforesaid provisions shows that Section
37(6) is in the nature of imposition of a penalty whereas the provisions of
Section 40(2) only provides for levy of interest @ 2% on such suppression or
concealment or for furnishing incorrect particulars on the amount of tax
payable under the Act or on the suppressed turnover or on concealed turnover
or for furnishing incorrect particulars. The distinction is all the more obvious
from a reading of Sub-section 3 of Section 40 which contains two expressions
penalty or interest and is worded in the following manner :-
"Any penalty imposed or interest levied under this section shall be
without prejudice to any action which is or may be taken under
Section 84 of this Act."
14. As such there is a clear distinction between imposition of
interest under Section 40(2) read with Section 40(3) and penalty as is
conceived under Section 40(1) read with Section 37(6). As such, the very plea
raised by the petitioner of non-service of notice before levy of alleged penalty
is misconceived. The assessing authority having found that realization of
facility charges by the petitioner has escaped assessment proceeded to issue
the notice in the prescribed format JVAT 302 before imposition of interest on
the tax levied upon such reassessment. Such reassessment was undertaken
pursuant to the inquiry conducted by the inspecting team which found non-
payment of VAT on facility charge bills from the petitioner. A
recommendation was made for initiation of proceedings under Section 40(2)
of the JVAT Act, 2005, since the petitioner had not discharged the liability of
VAT from the amount of facility charge realized by it.
15. In the aforesaid light, the entire plea raised by the petitioner of
non-compliance of principles of natural justice and non-service of notice
before imposition of penalty/interest is misconceived and untenable in law
and on facts as well. Therefore, the findings of the Writ Court do not require
any interference so far as the issue of imposition of penalty is concerned as
there are no errors apparent on the record. The judgment relied upon by the
petitioner in the case of Shree Krishna Electricians is inapplicable to the case
of the petitioner on facts since in the case of present petitioner it is an
imposition of interest under Section 40(2) of the Act on non-payment of tax
on facility charges. For the same reason the decision rendered in the case of
Amrit Foods (supra) relied upon by the petitioner also does not apply to the
facts of the instant case as petitioner was duly served with the notice under
Section 40(2) of the JVAT Act, 2005 in Form JVAT 302 before levy of interest
@ 2% as was applicable upon the tax levied upon the petitioner as the
provisions stood then before being substituted by the amendment of 2011.
Accordingly, the instant review petitions are dismissed. Pending interlocutory
applications are closed.
(Aparesh Kumar Singh, J.)
(Deepak Roshan, J.)
Shamim/
