VAT on Road Tax, Insurance Premium, Octroi Duty and Other Charges Collected by Vehicle Dealers: Bombay HC Directs Enquiry

The Bombay High Court has directed the VAT department to conduct an enquiry on whether VAT shall be applicable on the amount of road tax, insurance premium, octroi duty and other charges collected by the vehicle dealers from the customers in the light of the recent AAR ruling by the Maharashtra VAT department in the year 2018.

A bunch of petitions have been filed by the dealers engaged in the business of selling motor vehicles. The Petitioners charge road tax, insurance premium, octroi duty and other charges and duties from their customers. The VAT department passed orders against the Petitioners, holding that the tax is leviable under the MVAT Act of 2002. The petitioners approached the High Court challenging these assessment orders.

The department relied on the decision in M/s. B. U. Bhandari Auto, wherein the Advance Ruling Authority has held that VAT is applicable on these charges.

Justice Nitin Jamdar and Justice Abhay Ahuja observed 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, this decision cannot be applied directly to each Petitioner to quash the assessment orders. It is necessary to conduct an enquiry to determine whether the Petitioners can be considered similarly situated persons. The Assessing Officers based their decision on the law the Advance Ruling Authority laid down in the case of M/s. B.U.Bhandari Auto. If this order is reversed, the implication of the order passed by the Tribunal will have to be considered in each case of the Petitioners. Therefore, an enquiry must be conducted to determine whether the facts of each Petitioner case warrant similar treatment.”

Quashing the impugned assessment orders, the Court observed that“the assessment proceedings are restored to file before the concerned Commissioner of Sales Tax. The Commissioner would examine the issue pending before the Commissioner in light of the decision rendered by the Tribunal in the case of M/s. B.U.Bhandari Auto and in the context of the provisions of Section 55 of the Act referred to above and take the decisions as per law.”

“We make it clear that we have not concluded on other aspects that may arise during the assessment proceedings other than the decision of the Tribunal in the case of M/s. B.U.Bhandari Auto and the Commissioner would examine the facts of each case and pass the order as per law. Needless to state, the contentions of the Petitioners and the department are expressly kept open,” the Court concluded.

To Read the full text of the Order CLICK HERE

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