1. vat notification dated 8th September 2006, vis-à-vis rti Act, 2005

This piece of writing is in continuation of our column for the month of January 2007 wherein, we had mentioned that the Appellate Authority under the RTI Act, 2005 has heard us on 17-1-2007 and the Appeal Order is awaited.

2. We are now pleased to inform you that the Appeal Order dated 22-1-2007 was passed in our favour and was received by the appellant on 6-2-2007. Thereafter, we were required to make payment of copying charges towards the "file notings" which we had asked for. We had completed this part of procedure and are in receipt of the "file notings" from the Finance Dept. in compliance with the Appeal Order. We are therefore publishing in Part-III of the Review, the Appeal Order as well as full text of the "file notings" for the benefit of our readers. The credit of this success goes to the RTI Act, 2005.

3. Suffice to say that nowhere in the "file notings" the satisfaction of the Govt. of Maharashtra is noted to the effect that – "circumstances exist which render it necessary to take immediate action further to amend the Maharashtra Value Added Tax Rules, 2005 and to dispense with the condition of previous publication thereof under the proviso to sub-section (4) of section 83 of the MVAT Act, 2002." The said Rules were notified in the Gazette dated 8th September, 2006. In order to effect amendments to the Maharashtra Value Added Tax (Fourth Amendment) Rules, 2006 as per the "file notings" the process had started on 31-3-2006 with a specific mention that the Notification is going to be issued effective from 1-4-2006. Thereafter, on various dates the file was processed by the various authorities concerned and the last noting on the file is dated 8-9-2006 which states that the revised Rules have been received from the Sales Tax Dept. vide letter dated 8-9-2006 in compliance with the guidelines received from the Law & Judiciary Dept. Accordingly, the revised Rules may be sent for publication to the Government Printing Press. And we thus had the Gazette Notification dated 8-9-2006 notifying the fourth amendment rules, 2006. On receipt of the said gazetted notification, the Finance Dept. closed the file on 29-9-2006. This position clearly indicate that the first few copies of the said gazetted notification were made available to the Finance Dept. only on 29-9-2006, although the date of publication of the notification is 8th September, 2006.

4. We have placed the above hard facts with documentary evidence before our readers and they should now draw their own conclusion as to how we are being governed.

2. Special Bench Judgment in the case of M/s. Great Eastern Shipping Co. Ltd.

The special Bench of the Hon’ble Sales Tax Tribunal in the case of M/s. Great Eastern Shipping Co. Ltd., SA Nos. 1503 & 1524 of 2001 decided on 31-1-2007 has in the facts and circumstances of the case following the judgments in Dist. Controller of Stores, Northern Railway (1976) 37 STC 423 (SC) and Controller of Stores, Central Railway (1995), 99 STC 222 (Bom) held as under:

"11. In the instant case, sales tax has been levied on the sales of unserviceable materials and iron scrap by the Railways. The above activity has been held by the Supreme Court to a transaction in connection with or incidental to the main activity of the Railways which amounts to "commerce" and hence "business". It would, therefore, be a dealer within the meaning of clause (11) section 2 of the Act read with clause (5A) thereof. We do not find any distinguishing feature which may justify a departure from the ratio of the above decision of the Supreme Court.

12. …….. From this judgment, it is clear that the appellant is a dealer even during the period prior to 16-8-1985 and therefore the explanation brought in on 16-8-1985 is really redundant so far as the appellant is concerned. He is therefore liable to pay tax on all sales and all purchases like any other normal dealer. It will not therefore be correct to say that his tax liability is restricted only to the sales of scrap materials. In fact this position was accepted by the appellant before this Tribunal in Second Appeal No. 221 of 1994 and accordingly the ground regarding his being
not a "dealer" was then given up by him.

(Emphasis supplied)

*13. The Tribunal has consistently held the view that if the body/organization specified in the impugned Explanation is a "dealer" carrying on "business" as per the main provisions of the Bombay Act, then he is liable as a normal dealer to pay tax qua his sales as well as purchases. The provision to restrict the liability to the sales tax only and not to extend it to the purchases is to be followed only in respect of such body/organization which is specified in the impugned Explanation and which is not a "dealer" carrying on "business" as per the main provisions. In our considered opinion, there is no justifiable reason to depart from this view."

* This paragraph is wrongly mentioned as Paragraph 11 in the Judgment, which please note.

2. In the earlier part of the Judgment, the Hon’ble Tribunal recorded the law question refer to the special bench and briefly the following facts:-

1. The question as regards whether on the particular facts and circumstances of the case, and on a true and correct interpretation of the Explanation (i) to section 2(11) of the Bombay Sales Tax Act, 1959, whether the present appellant being a shipping company, is legally liable to pay tax on his purchases under the Bombay Act or whether his liability is restricted only to the sales tax payable on the disposals of goods effected by him, came before the Fourth Bench of this Tribunal for necessary decision in the captioned Second Appeal. Feeling that this issue involves a substantial point of law, requiring interpretation of the non-obstante clause contend in the Explanation (i) to section 2(11) of the Bombay Act, the Fourth Bench by passing judgment dated 31-3-2005 recommended reference of the said question to the special Bench of the Tribunal for necessary adjudication.

2. The appellant, M/s Great Eastern Shipping Co. Ltd., was established in 1948, with its primary objects being to engage in shipping business. His main division is shipping division, which is registered under the provisions of BST Act as also CST Act. Besides the main shipping division, the appellant is also having three other divisions as under: -

   (a)	Property	:	Engaged in the construction, Division management and sale of properties.
   (b)	Trading	:	Engaged in the trading of Division agricultural commodities.
   (c)	Offshore	:	Engaged in offshore drilling Division services and marine construction services etc.

3. The trading division and offshore division are also holding separate registration certificate under the Bombay Act, and are being assessed separately. The present matters arise from out of the assessments of the shipping divisions for the F.Y. 1995-96 and 1996-97 under the BST Act, in respect of the assessment orders passed on 31-3-1999 and 31-12-1999, respectively. In the said assessment orders, extra demands had arisen mainly due to the levy of purchase tax in respect of the purchases held to be from unregistered dealers. Consequently, interest u/s 36(3) (b) was also levied. According to the appellant, being a shipping company, he is covered by clause (d) in the Explanation (i) to the definition of "dealer" in section 2(11), and therefore his liability is restricted only to the sales tax in the context of the disposals of goods; i.e., sales only and there is no liability towards any purchase tax in respect of URD purchases. This was the main contention before the lower authorities which was rejected by them but carried forward for decision before the Tribunal.

4. The column writer is of the opinion that the special Bench Judgment is in accordance with law laid down by the Hon’ble Supreme Court and Bombay High Court. At the same time, the writer feels that by and large the inclusion of Central Govt. and State Govt. into the definition of the term "dealer" under the State’s Sales Tax Laws was not initially contested before the Apex Court, on the ground that the main function of the Central or State Governments is to govern its subjects and they are not into the business; i.e., "commerce", which is the crux of the whole issue. In this connection, indeed it is true that they earn surplus in the course of their activity but it is ultimately used for the benefit of the society. Looked from this angle, it is very difficult to digest whether Central Govt. or State Govt. could be termed as "dealer" under the State Tax Laws. Is debate sill possible on this point? Readers may contribute their views in this behalf. Incidentally, it may be mentioned that while arguing the case of M/s B.T. Patil & Sons (SA No. 328 of 2000 decided on 12-10-2001), I have come across, in this case that the P.W.D. Department of the State Govt. had not obtained the Registration number under the BST Act, yet, the Sales Tax Dept. did nothing to force them as per law to obtain the Registration number in spite this fact having been brought to the notice of the Govt. Agent during the course of hearing in the above matter. Thus, the application of the law is not uniform. The Department may still take a note of this unpalatable position.

3. "Refund vat to Foreign Tourists", says Commerce Minister Kamal Nath

As per ‘Business Standard’ report dated 17-2-2007, Commerce Minister Kamal Nath is pushing for a major policy change to ensure that foreign travellers are refunded the Value Added Tax they pay on purchases made in India for the simple reason – "No tax should be exported."

2. If the above proposal is implemented, India would join the ranks of many countries in the Europen Union, United Kingdom and hot shopping destinations like Singapore and Thailand which refund the duty (VAT) paid by a visiting foreign national. Speaking to BS, Nath said, "India is going to be a major retail centre. Why should people go for shopping to Singapore and Thailand? Why should India not become a shopping centre?"

3. I appreciate the above policy change mooted by Hon’ble Union Commerce Minister. In this connection, I would like to share my personal experience with our readers as to how I got VAT refund instantly in respect of my purchases while I had gone to Singapore to attend International RRC few years back. In the course of my shopping, shop owner voluntarily informed me that I am entitled to VAT refund at the invoice stage itself, if I produce before him my passport and is ready to take delivery of the goods purchased on showing an invoice copy at the desk of Chamber of Commerce at Singapore Airport. Initially, I was hesitant to do so on the ground that whether my purchased goods will be made available at the Chamber’s counter. Having understood my mind, the shop keeper assured me guaranteed delivery at the Chamber’s counter at Singapore Air Port. So I decided to trust their system. Accordingly, I made the payment to the shop keeper and carried with me his assurance and not the goods purchased. However, on reaching the Chamber’s counter at Singapore Air Port, on my producing the original invoice in a minute I was delivered the goods which I had purchased free of VAT. Thus, I noticed that their system was quite efficient and without any hassles. Hence, it is no wonder then that Singapore is doing roaring business from tourists and their earnings are mind boggling from export trade.

4. Union Budget blues

As the Union Budget day approaches fast, suggestions are flying thick and fast about various thing that should be done in the budget.

Here below are noted two such suggestions:–

1. Sukumar Mukhopadhyay, eminent tax authority suggested: "If all of a sudden, all services are declared taxable, with a few services in the negative or exempted list, there will be chaos as Officers will start collecting tax for a large number of services which may not be service at all." (BS dated 19-2-2007)

2. Tobacco industry has urged Finance Minister P. Chidambaram to retain the specific duty structure on cigarettes and make it an exception to Value Added Tax. (ET dated 19-2-2007)