Full Text
HIGH COURT OF DELHI
Date of Decision: 22.11.2022
ABB LIMITED ..... Appellant
Through: Mr Ashok K. Bhardwaj with Mr Manish K. Hirani, Advocates.
Through: Mr Rajiv Aggarwal, ASC.
HON'BLE MS. JUSTICE TARA VITASTA GANJU [Physical Hearing/Hybrid Hearing (as per request)]
RAJIV SHAKDHER, J.: (ORAL)
JUDGMENT
1. Allowed, subject to just exceptions.
2. This appeal is directed against the order dated 07.09.2022 passed by the Delhi Value Added Tax Appellate Tribunal [hereinafter referred to as “Tribunal”].
3. Mr Ashok K. Bhardwaj, who appears on behalf of the appellant, says that the only question of law which the appellant would want this court to consider is the following: “Whether the provisions of the DVAT Act, 2004 provide for a claim of Input Tax Credit only for the tax period to which such purchases pertain based on the date indicated on the tax invoices.”
4. Admit.
5. The aforesaid question of law was considered and arguments were advanced by the counsels for the parties qua the same.
6. Briefly, the facts which are necessary to be considered while rendering a decision qua the aforesaid question of law are the following:
6.1. The appellant received materials for execution of a works contract. The details of the invoices along with the tax period and the value added tax (VAT) paid by the vendor i.e., Sacred Constructions Pvt. Ltd. are set forth hereinafter:
6.2. The record shows that each of the tax invoices referred to above indicate the component of the VAT included therein along with the price of the material furnished by the aforementioned vender. These tax invoices are part of the record.
6.3. It is also not disputed by the appellant that while the price of the material supplied by the vendor was paid, what was withheld by the appellant was the tax component.
6.4. Mr Bhardwaj in support of this plea has referred to the communication dated 02.04.2007, addressed by the vendor to the appellant. For the sake of convenience, the said communication, being brief, is extracted hereinafter: “We are executing the above said work, and as per the conditions, the payment of VAT shall be reimbursed to us by ABB Ltd. Please find enclosed herewith the detail of the payment of VAT to be reimbursed for R/A-01, R/A-02 & R/A-03 amounting to Rs. 15,44,081.00 (Rupees Fifteen Lacs Forty Four Thousand Eighty One Only) duly certified by our Chartered Accountant. The copy of the Returned file, the Challans of payment of VAT & the Tax Invoice are enclosed herewith. It is requested that the payment of VAT upto IIIrd Quarter i.e., 31.12.2006 amounting to Rs. 15,44,081.00 (Rupees Fifteen Lacs Forty Four Thousand Eighty One Only) shall be paid to us. Kindly release the payment of VAT at the earliest & oblige.”
9. Furthermore, Mr Bhardwaj has also relied upon the certificate issued by the Chartered Accountant dated 29.03.2007, to which reference is made in the above-extracted communication dated 02.04.2007 addressed by the vendor to the appellant. The certificate facially indicates that the VAT for each of the three invoices in issue has been paid.
10. Mr Bhardwaj says that a harmonious reading of the provisions of Delhi Value Added Tax Act 2004 [in short, “2004 Act”] and Delhi Value Added Tax Rules 2005 [in short, “2005 Rules”] would show that the tax period vis-à-vis which credit could be taken, is not dependent upon the date when the invoice was issued.
10.1. For this purpose, Mr Bhardwaj has referred to Sections 9(3) and 12(4) of the 2004 Act and Rule 4(c) of the 2005 Rules.
11. Mr Rajiv Aggarwal, who appears on behalf of the respondents/revenue, contends to the contrary.
12. Having heard the learned counsel for the parties, it is relevant, at this juncture, to set forth the relevant provisions of the 2004 Act, as the facts set out above are not in dispute: “Section 9(3) - The amount of the tax credit to which a dealer is entitled in respect of the purchase of goods shall be the amount of input tax arising in the tax period reduced in the manner described in sub-sections (4) and (6) of this section. [Emphasis is ours]
12.1. A perusal of Section 9(3) of the 2004 Act shows that a dealer would be entitled to take tax credit in respect of the purchase of goods correlatable to the input tax which arises in the tax period, reduced in the manner described in the sub-sections referred to in the said provision. 12.[2] The marginal heading of Section 12 of the 2004 Act, indicates that it is a provision which inter alia, provides the legislative clue [when read with the relevant rule] for ascertaining the time at which a certain class of transactions arise. More specifically, in this context the class of transactions to which the provision applies are referred to in sub-section (4) of Section 12 of 2004 Act. The said provision reads as follows: Section 12(4) - The Government may prescribe the time at which a dealer shall treat the – (a) turnover; (b) turnover of purchases; and
(c) adjustment of tax or adjustment to a tax credit, as arising for a class of transactions.” 12.[3] A bare perusal of the aforesaid provision would show that it grants the Government leeway for prescribing the time at which a dealer shall treat when “turnover of purchases” would arise; amongst other class of transactions.
13. Insofar as the works contract is concerned, the provision, as rightly pointed out by Mr Bhardwaj, is contained in Rule 4(c) of the 2005 Rules. For the sake of convenience the said rule is extracted hereafter:
13.1. As would be evident from the above extract, the said Rule is interlinked to sub-section (4) of Section 12 of the 2004 Act. It, inter alia, provides that the amount of turnover or turnover of purchases, arising in the tax period in the case of sale or purchase occurring under a works contract, whether executed or under execution in the tax period, is the consideration received or receivable by the dealer for such transfer of property in goods during relevant tax period.
13.2. Therefore, the expression „arising in the tax period‟ as set forth in Section 9(3) of 2004 Act would have to be given meaning by adverting to sub-clause (c) of Rule 4 of the 2005 Rules.
13.3. The plain language of the said provision is indicative of the fact that the turnover of purchases arising in the tax period by means of transfer of property in goods under a works contract, executed or under the execution in the tax period, is consideration received or receivable by the dealer for such transfer of property during the relevant tax period.
14. Clearly, in the instant case, the consideration was receivable by the purchasing dealer upon transfer of property in the subject goods i.e., when the tax invoices were generated, if not earlier.
14.1. The fact that by mutual inter se arrangement the appellant was required to reimburse the tax component to the selling dealer at a point in time much which was later than when the tax invoices were raised, would not enable the appellant to take credit of the input tax paid on such purchases.
15. The Tribunal, broadly, has reached the same conclusion which is evident from a perusal of the following paragraphs of the judgement dated 07.09.2022.
16. In our view, the Tribunal has reached the right conclusion, although there is only reference to Section 9(3) of the 2004 Act. Rule 4(c) of the 2005 Rules, in our opinion, provides clarity as to how the expression “arising in the tax period” is required to be understood, for claiming credit of the input tax.
17. In these circumstances, the question of law, as framed, is decided in favour of the respondents/revenue and against the appellant/assessee.
18. The appeal is disposed of in the aforesaid terms.
RAJIV SHAKDHER, J TARA VITASTA GANJU, J NOVEMBER 22, 2022 / tr/nn