State of Gujarat vs Dresser Rand India Pvt. Ltd.

M.R. Shah, J.—The present application has been preferred by the applicant-State of Gujarat through the Commissioner of Commercial Tax, to stay, during pendency and final disposal of the main Tax Appeal, further implementation and operation and/or execution of the order dated February 29, 2012 passed by the Gujarat Value Added Tax Tribunal, Ahmedabad in Second Appeal No. 268 of 2007. Having heard Shri Jaimin Gandhi, learned Additional Government Pleader appearing on behalf of the applicant and Shri Kuntal Parikh, learned advocate appearing for Shri Paresh Dave, learned advocate appearing on behalf of the respondent and on considering the impugned judgment and order passed by the Tribunal, it appears that the Tribunal has quashed and set aside the levy of sales tax on performance/inspection charges of Rs. 3,71,992 and has allowed set-off in favour of the respondent-assessee under rule 44 in respect of packing material. By the impugned judgment and order, the Tribunal has held that performance/inspection charges before/while selling the goods shall not form part of the sale price and, therefore, the same is required to be deducted from the total sale price. By the impugned judgment and order the Tribunal has also held that with respect to packing material the respondent-assessee shall be entitled to set-off under rule 44.

Shri Jaimin Gandhi, learned Additional Government Pleader, has vehemently submitted that if the order is allowed to stand and the impugned judgment and order passed by the Tribunal is not stayed, the applicant-State shall suffer major loss inasmuch as the subsequent assessments shall have to be done in accordance with the directions of the Value Added Tax Tribunal set out in the order impugned dated February 29, 2012. It is submitted that the interpretation made by the Tribunal while passing the impugned judgment and order would come in the way of the Department in the subsequent assessments and, therefore, it is requested to grant stay for further implementation and operation of the impugned judgment and order passed by the Tribunal.

On the other hand, Shri Kuntal Parikh, learned advocate appearing on behalf of the respondent, has vehemently submitted that granting any interim relief at this stage would tantamount to allowing the appeal at this stage and consequently setting aside the impugned judgment and order passed by the Tribunal, without deciding the issue finally and at admission stage.

Heard the learned advocates appearing on behalf of the respective parties on interim relief. At the outset, it is required to be noted that if the interim relief as prayed for is granted and further implementation and operation of the impugned judgment and order passed by the Tribunal is stayed, in that case, hereinafter the assessing authority can pass the orders with respect to the subsequent assessment years treating the performance charges as part of sale price and may deny set-off under rule 44 in respect of packing materials. It is required to be noted at this stage that by the impugned judgment and order, the Tribunal has held that inspection/performance charges shall not form part of sale price and the respondent-assessee shall be entitled to stay in respect of packing materials. It is true that we have admitted the main appeal on the substantial questions of law, however, staying further implementation and operation of the impugned order and consequently permitting the assessing authority to pass the order of assessment treating the inspection/performance charges forming part of sale price, would tantamount to allowing the appeal at the admission stage. The aforesaid is not permissible. At the same time, the court needs to strike a balance and needs to take the apprehension on the part of the learned Additional Government Pleader that in the event of appeal being succeeded with no scope of reassessment at the stage of period of limitation with respect to the subsequent assessment years inspection/performance charges shall not be treated to form part of the sale price would continue to hold the filed. Similar would be with respect to the set-off to be claimed by the assessee under rule 44 in respect of packing material. Under the circumstances, while rejecting the present application for stay on the decision of the Tribunal, liberty is being resolved for allowing the reassessment proceedings with respect to the subsequent assessment years hereinafter and in case the applicant succeeds and the impugned order is set aside and it is held that the inspection/performance charges shall form part of sale price and that the respondent is entitled to set off under rule 44 in respect of packing materials, all other subsequent assessment with respect to the aforesaid issues shall be subject to the further final outcome of the main appeal. The present application is disposed of accordingly.