Bombay High Court Directs Sales Tax Commissioner To Determine Applicability Of VAT On Road Tax, Insurance Premium, Octroi Duty

The Bombay High Court has directed the sales tax commissioner to determine the applicability of VAT on road tax, insurance premiums, and octroi duty.

The division bench of Justice Nitin Jamdar and Justice Abhay Ahuja has observed that Section 55 of the MVAT Act provides for an advance ruling, which allows an applicant to apply to the Commissioner for an advance ruling on the specified question. The application must be made in the prescribed form and manner, stating the question on which the advance ruling is sought, as prescribed under sub-section (1). The Commissioner will then constitute the Advance Ruling Authority, comprising three officials not below the rank of Joint Commissioner, by notification in the Official Gazette, for giving advance rulings.

The petitioners/assessees are motor vehicle dealers and are engaged in the business of selling motor vehicles. The petitioners collect road tax, insurance premiums, octroi duty, and other charges and duties from their customers.

A question has arisen about the applicability of the Value Added Tax (VAT) under the Maharashtra Value Added Tax Act, 2002 (MVAT Act). The assessment orders have been passed against the petitioners, holding that the tax is leviable under the MVAT Act of 2002.

The petitioners relied on the order passed by the Maharashtra Sales Tax Tribunal at Pune in the case of M/s. B.U.Bhandari Auto Private Limited vs. The State of Maharashtra. The tribunal held that

The tribunal held that the Advance Ruling Order in respect of the registration charges, insurance charges, and handling charges received and paid on behalf of the customer of a motor vehicle, which form part of the "sale price" of such a motor vehicle, is modified. It was held that the charges cannot fall within the extended meaning of the expression "sale price" considering the provisions of Section 2(25) of the MVAT Act.

The department contended that the decision of the tribunal in the case of M/s. B. U. Bhandari Auto cannot be directly made applicable to the case of the petitioners as under Section 55 of the MVAT Act. The decision of the Advance Ruling Authority would apply to others only if they are considered similarly situated, and therefore, without this inquiry, it cannot be held that petitioners are not liable for the levy of VAT.

The court held that the decision of the Tribunal in the case of M/s. B.U.Bhandari Auto, though it provides relevant legal guidance for the petitions under consideration, cannot be applied directly to each petitioner to quash the assessment orders. It is necessary to conduct an inquiry to determine whether the petitioners can be considered similarly situated.

The court restored the assessment proceedings to the file of the Commissioner of Sales Tax.

Case Title: Modi Car Agencies Pvt. Ltd. Versus The State of Maharashtra and Ors.

Case No.: Writ Petition No. 2512 Of 2021

Date: 12/04/2023

Counsel For Petitioner: Ratan Samal

Counsel For Respondent: Shruti D. Vyas

Click Here To Read The Order