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Non-reportable  

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5103  OF 2016 (Arising out of Special Leave Petition (C) No.15206 of 2012)

Indo Burma Petroleum Corp. Ltd.       …. Appellant

Versus

Commissioner VAT Delhi & Ors.              …. Respondents

WITH

C.A. No.5104 of 2016 @ SLP(C) No.15274/2012 C.A. No.5105 of 2016 @ SLP(C) No, 15275/2012 C.A. No.5106 of 2016 @ SLP(C) No. 15279/2012 C.A. No.5107 of 2016 @ SLP(C) No. 15374/2012 C.A. No.5108 of 2016 @ SLP(C) No.15379/2012 C.A. No.5109 of 2016 @ SLP(C) No.15680/2012 C.A. No.5110 of 2016 @ SLP(C) No.15732/2012 C.A. No.5111 of 2016 @ SLP(C) No.15736/2012 C.A. No.5112 of 2016 @ SLP(C) No.16330/2012 C.A. No.5113 of 2016 @ SLP(C) No.16333/2012 C.A. No.5114 of 2016 @ SLP(C) No.16498/2012 C.A. No.5115 of 2016 @ SLP(C) No.16520/2012 C.A. No.5116 of 2016 @ SLP(C) No.16599/2012 C.A. No.5117 of 2016 @ SLP(C) No.16601/2012 C.A. No.5118 of 2016 @ SLP(C) No.16615/2012 C.A. No.5119 of 2016 @ SLP(C) No.16707/2012 C.A. No.5120 of 2016 @ SLP(C) No.16711/2012 C.A. No.5121 of 2016 @ SLP(C) No.16793/2012

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C.A. No.5122 of 2016 @ SLP(C) No.16810/2012 C.A. No.5123 of 2016 @ SLP(C) No.16837/2012 C.A. No.5124 of 2016 @ SLP(C) No.16841/2012 C.A. No.5125 of 2016 @ SLP(C) No.16900/2012

               C.A. No.5126 of 2016 @ SLP(C) No.17164/2012    AND  

              C.A. No.5127 of 2016 @ SLP(C) No.17510/ 2012)

J U D G M E N T  

Uday Umesh Lalit, J.

1. Leave granted.

2. These appeals by special leave challenge correctness of the common

judgment and order dated 27.02.2012 passed by the High Court of Delhi at

New Delhi in Sales Tax Appeal No.20 of 2012 and other connected matters.

Apart from lead matter i.e. Sales Tax Appeal No.20 of 2012 filed by Indo

Burma Petroleum Corporation Ltd., the High Court also dealt with Sales Tax

Appeal  Nos.6,  7,  10,  14,  16,  23,  25 and 27 of  2012 filed  by Hindustan

Petroleum Corporation Limited, Sales Tax Appeal Nos.8, 11, 17, 18, 21, 22,

28 and 30 of 2012 filed by Indain Oil Corporation Limited and Sales Tax

Appeal  Nos.9,  12,  13,  15,  19,  24,  26  and  29  of  2012  filed  by  Bharat

Petroleum Corporation  Limited.    These  petroleum  companies  had  filed

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Sales Tax Appeals under Section 81 of the Delhi Value Added Tax Act, 2004

(“the Act” for Short).   

3. On 01.06.2006 rates of Petrol and High Speed Diesel were increased

by Rs.4/- and Rs.2/- respectively from the midnight of 5/6th June, 2006.  This

increase in rates would have resulted in ad valorem increase in Value Added

Tax (VAT) at the rate of 0.66 paise per litre of Petrol and 0.22 paise per litre

of High Speed Diesel.  With a view to grant some relief in the price rise to

the customers, the Government of National Capital Territory of Delhi issued

a Memorandum dated 20.06.2006 which was to the following effect:

“GOVERNMENT OF NATIONAL CAPITAL TERRITORY OF DELHI

OFFICE OF THE COMMISSIONER, VALUE ADDED TAX

DEPARTMENT OF TRADE AND TAXES, BIKRIKAR

BHAWAN, I.P. ESTATE, NEW DELHI

No.F1[13/Pll/VAT/Act/2006/2069  Dated 20th June, 2006

MEMORANDUM

In pursuance  of  the  ordinance  dated  20.06.2006  [copy enclosed]  promulgated  by  the  Lt.  Governor  of  the National  Capital  Territory  of  Delhi,  Value  Added  Tax shall  not  be  charged  with  immediate  effect  on  the incremental  prices  [including  the  duties  and  levies charged  thereon  by the  Central  Government]  of  petrol and diesel as has been announced by the Government of India with effect from 6th June, 2006.

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Therefore, diesel and petrol shall be sold in the National Capital Territory of Delhi by not taking into account the component of the Value Added Tax on the increased price with immediate effect,  meaning thereby that VAT shall continue to be charged on the pre-revised prices of diesel and petrol till further notification in this regard.

[HANS RAJ] ADDITIONAL COMMISSIONER [POLICY]”

4. On  21.06.2006  an  Ordinance  was  promulgated  by  the  Lieutenant

Governor inserting a proviso to the definition “Sale Price” in Section 2(1)

(zd) of the Act.  Said Section after such insertion of the proviso reads as

under:

“(zd) "sale price" means the amount paid or payable as valuable consideration for any sale, including-

(i) the amount of tax, if any, for which the dealer is liable under Section 3 of this Act;

(ii) in relation to the delivery of goods on hire purchase or any system of payment by installments, the amount of valuable  consideration  payable  to  a  person  for  such delivery including hire charges, interest and other charges incidental to such transaction;

(iii) in relation to transfer of the right to use any goods for any purpose (whether or not for a specified period) the valuable consideration or hiring charges received or receivable for such transfer;

(iv) any sum charged for anything done by the dealer in respect of goods at the time of, or before, the delivery thereof;

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Explanation:-A dealer's sale price always includes the tax payable by it on making the sale, if any."

(The  proviso  for  the  sake  of  convenience  has  been highlighted in italics.)   

5. On 24.11.2006 Delhi Value Added Tax (Amendment) Act, 2006 came

into force.  While repealing the Ordinance, Section 2 of the Amendment Act

provided as under:

“2. Amendment  of  Section  2:-   In  the  Delhi  Value Added Tax Act, 2004 [Delhi Act 3 of 2005] [hereinafter referred  to  as  “the  Principal  Act”],  in  Section  2,  in sub-section  (1),  in  clause  [zd],  before  the  Explanation occurring at the end thereof, the following provisos shall be inserted, namely –

“Provided that an amount equal to increase in the prices of  petrol  and  diesel  [including  the  duties  and  levies charged  thereon  by  the  Central  Government]  taking effect from the 6th June, 2006 shall not form part of the sale price of petrol and diesel sold on and after the date of  the  commencement  of  the  Delhi  Value  Added  Tax [Amendment] Act, 2006 till such date as the Government may, by notification in the Official Gazette direct:

Provided further that the first proviso shall not take effect till the benefit is passed on to the consumer.”

6. On 30.11.2006 there was partial roll back of prices of Petrol and High

Speed Diesel which had been enhanced with effect from 06.06.2006.  The

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prices were again rolled back and brought to pre 06.06.2006 status w.e.f.

16.02.2007.

7. The appellant  oil  companies  filed  their  VAT Returns  with  the  Tax

Authorities on the footing that by reason of the continued operation of the

first proviso to Section 2(1)(zd) they were permitted to recover VAT only on

the amount of sale price currently charged, as reduced by the amounts of

Rs.4/- per litre on Petrol and Rs.2/- per litre on High Speed Diesel.  In other

words, even after the partial roll back which came into effect on 30.11.2006

and complete roll back w.e.f. 16.02.2007 the appellants continued to deduct

amounts of  Rs.4/-  per  litre on Petrol  and Rs.2/-  per  litre on High Speed

Diesel from the prevailing sale price and charged/recovered VAT in respect

of sale price so reduced by Rs.4/- and Rs.2/- as stated above.

8. On  05.06.2007  following  Gazette  Notification  was  issued  by  the

Government of NCT:

       “Notification No.F.3[8]/Fin.[T&E]/2007-08/ Dated 5th June, 2007 In exercise of the powers conferred by first proviso to clause [zd] of sub-section [1] of Section 2 of the Delhi Value Added Tax Act, 2004[Delhi Act 3 of 2005], the Lt. Government of the National Capital Territory of Delhi, hereby, directs that the date of publication of this notification in the Official Gazette, to be the date from which the proviso referred to above shall cease to be effective.

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By order and in the name of the Lt. Governor of the National Capital Territory of Delhi.

      [Ajay Kumar Garg] Dy. Secretary Finance [T& E]”

9.  In October 2007, Notices of default under Section 32 of the Act were

issued to the appellants. Notice dated 22.10.2007 issued to the appellants in

the lead matter i.e. Indo Burma Petroleum Company Ltd. stated as under:

“……The  exemption  of  VAT which  was  allowed  vide notification dated 24/11/2006 was only in respect of that portion of price of petrol & diesel which was incremental to the price of petrol & diesel prevalent as on 5/6/2006.  However, it has been observed that the oil company even after reduction in the price of petrol & diesel has not paid VAT on an amount equal to the prices by which the price of petrol & diesel were increased on 6/6/2006 which is not as per law.”

10. The Notices as aforesaid having called upon the appellants to pay VAT

and penalty, objections were taken by each of the appellants under Section

74  of  the  Act  which  were  rejected  by  the  Additional  Commissioner  III,

Department of Trade and Taxes, Government of National Capital Territory of

Delhi vide Common order dated 04.08.2008.  It was observed:

“The  amendment  clearly  says  that  to  extend  relief  from the increase made in the price level of 05-06-2006 Govt. declared to forgo the VAT on the increased portion taking effect from 06-6-2006.  The base price fixed by the Govt. in deciding the exemption was the price level prevailing on 05.05.2006.  The amendment  was  made  only  to  stop  the  prices  from  further increase.  The Govt. had no intention to allow any relief on the

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price level prevailing on 05.06.2006 and if any intention would have  been  there  then  such  an  amendment  should  have  been made prior to 06.06.2006.  Now, with the reduction in price on 30-11-06 and 16-02-07 the prices came down to the level of 05.06.2006 and with prices coming at  the level  it  is  implied that, the exemption allowed in VAT would cease as this would not be in conformity with the intentions of the legislature.  The notification  dated  05-06-2007  issued  by  the  Govt.  was  done only  to  end  the  prevailing  confusion  among  the  petroleum dealers.  Once the price decreased on 16-02-07 and brought at par  with  price  on 05-06-2006,  the  notification  issued  by the Govt. would deem to have become inoperative.  The penalty imposed  upon  the  dealers  are  consequential  to  the  tax imposed.”

11. The matters were carried in appeal by the appellants, namely Appeal

Nos.134-147/ATVAT/08-09  and  other  connected  matters.   The  Appellate

Tribunal in its common judgment and order dated 01.12.2011 dismissed the

appeals as regards the main issue but set aside the demand of penalties.  It

was observed, as under:

“17…. Tax is to be paid as per Section 4 of the Act on the taxable turnover.  Taxable turnover is to be computed as per Section 5 r/w Section 2(1)(zm) of the Act.  Section 2(1)zm)  talks  about  the  ‘sale  price’.   ‘Sale  price’  is defined by Section 2(1)(zd) as a  valuable consideration for any sale including amount of tax payable under the Act.  (emphasis in bold)  Thus if a State Govt. wants to give  relief  against  the  price  increased  by  the  Central Government the it could only do so by not charging tax on the increased portion but for doing so it had to exclude the increased  portion  from  the  purview  of  the  expression ‘valuable consideration for any sale’.  In our considered view purpose of the Govt. of NCT of Delhi in introducing the proviso in question, when considered from the plain

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language  of  the  proviso,  was  to  direct  the  appellant dealers  to  continue  to  pay the  VAT as  if  there  was  no increase  in  the  prices  by  the  Central  Govt.   In  our considered view, the act of the Govt. of NCT of  Delhi in introducing  the  proviso  in  question,  by  no  stretch  of imagination, could goad the appellants to embark upon an exercise  in  reducing  the  basic  price  for  calculating  the VAT, as  argued  by  the  Ld.  Counsel  for  the  appellants because  simple  meaning  of  this  proviso  is  that  oil companies  were  not  required  to  include  the  increased component as a part of sale consideration under Section 2(1)(zd) of the Act.  When the increased component was not to be a part of sale consideration under Section 2(1) (zd) of the Act, the obviously the appellants were not to charge VAT on the same as per the definition of the term ‘sale price’ which came to be controlled by introduction of the proviso in question.  When there was no effect of the increased component, in the liability to pay Vat then it was immaterial when there was complete roll  back or when the Notification was issued as per this proviso.  Thus in our considered view, the submission of the Ld. Counsel for the appellants that the meaning of this proviso was that appellants  shall  continue  to  follow  the  deduction  till another notification was issued which was in fact issued in June 2007 and oil companies stopped taking benefit of the proviso after this notification in June 2007, is without any merit.”

12. The  appellant-companies  being  aggrieved  in  so  far  as  the

interpretation placed on the first proviso to Section 2(1)(zd) of the Act was

concerned, preferred appeals under Section 81 of the Act before the High

Court.  The High Court took the view that upon the partial roll back w.e.f.

30.11.2006 and upon the complete roll back w.e.f. 16.02.2007 benefit of the

proviso ceased to be partly or fully applicable.  According to the High Court

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the proviso simply protected and gave exemption in respect of enhanced ad

valorem  VAT payable  on  account  of  increase  in  petrol  and  diesel  from

06.06.2006 and the benefit under the proviso ceased to operate partly and

fully on and w.e.f. partial and complete roll back respectively.  These appeals

by special leave challenge the correctness of the decision of the High Court.

We have heard Mr. S. Ganesh, learned Senior Advocate in support of the

appeals and Mr. Arvind Datar learned Senior Advocate for the respondents.

13.   According  to  the  appellants,  the  benefit  in  terms  of  the  proviso  in

question was to the extent of VAT chargeable and payable in respect of the

amount of  increase and the benefit so quantified must be made available

regardless of any variation or  decrease in the rates of Petrol and High Speed

Diesel. For example, if the price before the increase in rates is taken to be  x

and the price were to be  x+4 as a result of increase w.e.f. 06.06.2006, the

benefit of VAT payable in respect of the element of increase i.e. 4 must be

available even if upon partial roll back the price were to be x+1 or upon full

roll back the price were to be x itself. If the logic is accepted, upon full roll

back, according to the appellants the VAT would be payable on x-4.

14.   In our view, the proviso ought to be given normal and natural meaning

keeping  in  mind  the  context,  object  and  reasons  for  its  enactment  and

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incorporation.   The idea was to  protect  the interest  of  the consumers  by

giving  exemption  in  respect  of  enhanced  ad  valorem  VAT payable  on

account of increase in prices of diesel and petrol from 06.06.2006.  On the

element  of  increase  no  additional  ad  valorem  VAT  was  payable  and

according to the proviso the increased component was not to be part of sale

consideration.  Consequently VAT was not to be charged in respect of such

increased component, as per definition of the term “sale price” which came

to  be  controlled  by  introduction  of  the  proviso.   When  there  was  no

increased component and therefore no liability to pay VAT in respect of such

increased component, benefit under the proviso ceased to be applicable. The

proviso cannot be given operation beyond the element of increase, so much

so that even after complete roll back, the benefit in respect of that amount

must  operate.  That  certainly  was  not  the  intent.   The  idea  was  to  grant

benefit only in respect of that element of VAT respecting increase in rates

and not beyond. If that component of increase ceased to be in existence, the

benefit of proviso also ceased to be in operation.

15. We,  therefore,  affirm  the  view  taken  by  the  High  Court  and  the

Appellate Authority and are not persuaded to take a different view in the

matters.   Affirming  the  judgment  of  the  High  Court,  these  appeals  are

dismissed without any order as to costs.

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………………… ……….CJI.

   (T.S. Thakur)

.….………………………..J.      (Uday Umesh Lalit)

New Delhi May 13, 2016

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