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Kuchhal Enterprises vs Commissioner Of Trade & Taxes on 7 August, 2014

Delhi High Court Kuchhal Enterprises vs Commissioner Of Trade & Taxes on 7 August, 2014Author: Sanjiv Khanna




Date of decision: 7th August, 2014

KUCHHAL ENTERPRISES ….. Appellant Through Mr. Ruchir Bhatia, Advocate.


COMMISSIONER OF TRADE & TAXES ….. Respondent Through Ms. Ruchi Sindhwani, Additional

Standing Counsel, Ms. Bandana Shukla &

Ms. Megha Bharara, Advocates with Mr.

Rajeev, VATO.





Having heard learned counsel for the parties, we are inclined to frame the following substantial question of law:- “Whether Appellate Tribunal Value Added Tax was justified and correct in directing the appellant-assessee to deposit 10% of the penalty amount as a pre-

condition for hearing the appeal?”

2. With the consent of the parties, we have heard arguments on the aforesaid question of law, which arises out of impugned order dated 16 th May, 2014. The appellant-assessee was at the relevant time engaged in the business of lubricants as distributor of M/s Hindustan Petroleum Corporation Limited, a Government of India undertaking. Entire purchases STA No. 33/2014 Page 1 of 4 by the appellant-assessee were from the said corporation. As per the appellant-assessee and as noted in the impugned order (paragraph 2), M/s Hindustan Petroleum Corporation Limited has issued a certificate that they had paid VAT on the entire sale consideration mentioned in their invoices and had not claimed any reduction or set off of tax liability on incentives or discounts, which were subsequently granted to the appellant-assessee. In these circumstances, learned counsel for the appellant-assessee relies upon decision of the Supreme Court in Andhra Agencies versus State of A.P., (2008) 14 SCC 540 and submits that the tribunal was not justified in directing the appellant-assessee to deposit 10% of the penalty amount, even when Rs.4,68,096/- was still available with the respondent-Revenue as refund payable.

3. Normally, we would not have interfered with the order passed by the tribunal, but in the facts of the present case, we deem it appropriate and proper to step in as it is noticeable that the appellant-assessee as per the impugned order had paid tax and interest by way of adjustment of the refunds and the primary tax liability as well as interest stands satisfied in view of adjustments. Further, the case of the appellant-assessee is that M/s Hindustan Petroleum Corporation Limited has paid the full tax on the sale price without taking into account subsequent incentives and discounts issued. Thus, respondent-Revenue has collected as per the averments recorded in the impugned order twice on the same sale price. STA No. 33/2014 Page 2 of 4

4. Learned counsel for the respondent-Revenue relies upon Section 10(1) and circular of the department to support their contention that adjustment was required in the case of M/s Hindustan Petroleum Corporation Limited in view of discounts/incentives. She submits that tax may be refundable to M/s Hindustan Petroleum Corporation Limited, but the appellant-assessee must pay the tax and interest at the first instance and this will also mean that the assessee should pay entire penalty. She submits that appeal should be only heard after full amount of tax, interest and penalty is paid as is normal and mandated. Only in exceptional cases, waiver should be granted.

5. We have considered the said contention, but do not find in the facts of the present case that the appellant-assessee should be asked to pay or deposit 10% of the penalty amount. The total amount of tax and interest due, which already stands adjusted, is to the tune of Rs.10,73,202/-. The total amount of penalty imposed is Rs.7,99,340/-, out of which Rs.4,68,096/- is already available with the Revenue as due and refundable. Revenue is not required to refund the said amount and is entitled to make adjustment. We feel in the facts of the present case that the appellant- assessee has made substantial deposits and there are legal issues and contentions, which require detailed adjudication and decision. Question of penalty itself would be a matter of debate in view of legal submissions. Judgment of the Supreme Court in Andhra Agencies (supra) is relied upon STA No. 33/2014 Page 3 of 4 by the appellant-assessee. Further, in terms of the certificate issued by M/s Hindustan Petroleum Corporation Limited, they have paid full tax without taking any adjustment in respect of incentives and discounts.

6. Accordingly, we answer the question of law in favour of the appellant-assessee and against the respondent-Revenue. It is held that the appeal before the tribunal shall be heard without directing the appellant to deposit 10% of the penalty amount. The observations made in this order are for the purpose of disposal of the present appeal. This will not be considered as binding findings or observations when the appeal of the appellant-assessee is taken up for hearing before the tribunal. The appeal is disposed of. No costs.



AUGUST 07, 2014


STA No. 33/2014 Page 4 of 4

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