ALD Automotive Pvt Ltd v. Commissioner Trade and Taxes Delhi

1. Issue notice. Ms. Ruchi Sindhwani, Advocate accepts notice on behalf of respondent.

2. The present appeal seeks to urge the following substantial question of law: - “whether the input credit claimed by the appellant/assessee was correctly disallowed and whether the Tribunal was justified in holding that the disallowance was valid in rejecting the application for pre-deposit.”

3. The brief facts are that the appellant is a VAT dealer engaged in leasing of motor vehicles. The VAT Audit Department conducted 2014:DHC:1109-DB ST.APPL.4/2014 Page 2 inspection of its activities and observed that during the first quarter of 2007-08, the dealer has shown purchases of cars and accessories to the tune of `91,01,978/- and claimed input credit to the tune of `23,77,248/- in the return. The VAT authority was of the opinion that such input credit was not permissible as the cars have not been resold and only effective control and possession had been transferred to the customers and, therefore, it does not constitute resale in unmodified form. The input credit was sought to be disallowed in terms of Section 9 (2) (b) of the DVAT Act. The OHA rejected the contentions of the assessee which thereafter carried the matter in appeal to the DVAT Tribunal. Before the appeal could be heard on merits, the VAT Tribunal took up the assessee’s request, through an application, for suspension and exemption of the requirement to pre-deposit. The impugned order directed pre-deposit of tax of `1,08,87,700/-, `5,44,38,503/- towards interest and `46,85,130/- towards penalty, holding that there was no resale in unmodified form and that the provisions of Section 9 (9) of the DVAT Act applied.

4. Learned counsel for the assessee points to the judgment of the Division Bench of this Court in Commissioner of VAT v. Carzonrent India Pvt. Ltd. (St. Appeal No.4/2011, decided on 17.01.2013). It is contended that three questions of law were framed in that appeal, each of them pertaining to identical transactions as to the permissibility of the input tax credit paid by the dealer who engages itself in leasing operations of vehicles. Learned counsel points out that even the issue of applicability of Section 9 (9) - which was strongly urged by the Revenue to negate the dealer’s contentions was ST.APPL.4/2014 Page 3 negatived as is evident from a reading of paragraph 24 of the judgment where it was held as follows: -

5. This Court has considered the submissions. It is evident from ST.APPL.4/2014 Page 5 the appeal before the Tribunal that the principal issue which it had to consider was whether the assessee could claim input tax credit in terms of the Delhi VAT Act. In Carzonrent case, identical issues and all related questions were dealt with and the submissions of the Revenue was rejected decisively. The Tribunal’s impugned order relies upon Section 9 (9). To this Court’s mind, the understanding of the Tribunal as to its applicability appears to have been based upon a misreading of judgment passed in Carzonrent as is evident from the extract of that judgment. In this view of the matter, ex facie, the view of the Tribunal with regard to the disallowance of input tax credit appears to be incorrect. As a result, the impugned order rejecting the application for waiver of pre-deposit requires to be and is accordingly set aside. The appeal preferred by the assessee in this case shall be heard on its merits and disposed of at the Tribunal’s earliest convenience and preferably within six months from today. This Court clarifies that the observations made in this case are not dispositive of the merits of the appeal. The contentions of both parties to urge all grounds in support of their submissions are kept open.

6. The appeal is allowed in the above terms. No costs.