Vat on sale of used goods.

Dear Venkakrishna

The answer to querry can be given as follows: -

(you may read yellow & red colour highlighted part only): -

1) Dealer has been defined under VAT as: -

'Dealer' means any person who carries on business in Delhi and includes- 

1. any person who, for the purposes of or in connection with or incidental to or in the course of his business buys, sells, goods directly or otherwise, whether for cash or for deferred payment or for commission, remuneration or other valuable consideration;

2. any department of the Central Government or a State Government, a local authority, Panchayat, Municipality, Development Authority, Cantonment Board and each autonomous or statutory body or an industrial, commercial, banking, insurance or trading undertaking whether or not of the Central Government or any of the State Governments or of a local authority, if it buys, sells, supplies or distributes goods, in the course of specified activities which may be prescribed from time to time;

3. a factor, commission agent, broker, del credere agent, or any other mercantile agent by whatever name called, who carries on the business of buying, selling , supplying or distributing goods on behalf of any principal, whether disclosed or not;

4. an agent of a non-resident (where such non-resident is a dealer under any other sub-clause of this definition);

5. a local branch of a firm or company or association of persons, outside Delhi where such firm, company, association of persons is a dealer under any other sub-clause of this definition;

6. a club, association, society, trust, or cooperative society, whether incorporated or unincorporated, which buys goods from or sells goods to its members for price, fee or subscripttion, whether or not in the course of business;

7. an auctioneer, who sells or auctions goods belonging to any principal, whether disclosed or not and whether the offer of the intending purchaser is accepted by him or by the principal or a nominee of the principal;

8. a casual trader; or

9. any person who, for the purposes of or in connection with or incidental to or in the course of his business disposes of any goods as unclaimed or confiscated, or unserviceable or scrap, surplus, old, obsolete or as discarded material or waste products by way of sale;

2) Sales has been defined under VAT as:  -

Sale includes:- 

1. The conventional sale i.e. Transfer of property in goods;
2. Supply of goods by a society, club, firm, and company to its members;
3. Transfer of property in goods involved in execution of works contract;
4. Delivery of any goods on hire purchase or any other system of payment by instalments;
5. Transfer of right to use any goods, whether or not for a specified period; and
6. Supply of good or other articles by the restaurants, hotels etc., by way of or as a part of service.

Further, Value addition doesn't mean any value added either in quality or quantity or any content of the goods rather value addition means any increase in the rate of the goods sold & hence, liability to pay VAT arises.

Move the Comsumer court to get a decision on 9. above. If you don't get any compensation, move the Supreme Court and get 9. above struck down and may use legal tricks to get GATT included in which case file a Complaint with GATT if Supreme Court refuses to become a Court of Equity and Justice and cites law only.

Dear Hari Wadhwa

Thank you very much for your detailed  clarification.  As you suggested  I have observed the highlighted portions of   your writeup.

Further, Value addition doesn't mean any value added either in quality or quantity or any content of the goods rather value addition means any increase in the rate of the goods sold & hence, liability to pay VAT arises.

In my case ,  the seller  sold the machinery  because loss in business on through away price. Therefore there is no increase in teh rate of the goods sold. In fact  there is a loss to  it.

Next the  para 9,  it seems  our  law makers became mad or  not using their brains  or only  trying to sqeeze public for govt revenue.  They are forgetting the reality.  Is it not  against  principles of natural justice. 

Mr Venkatkrishna

I have full favour in your opinion. However, as you said, "Is it not  against  principles of natural justice.", I would like to say : - " NO"

1) Reasons: -

The meaning of Principles of Natural Justice as observed in some courts as: -

In Vionet v. Barrett (1885 (55) LJRD 39, 41), Lord Esher, MR defined natural

justice as ‘the natural sense of what is right and wrong’.

In Ridge v. Baldwin (1963 (1) WB 569, 578), Harman LJ, in the Court of appeal

countered natural justice with ‘fair play in action’ or "a duty to act fairly".

2) State Govt has powers to tax second hand goods: -

Schedule VII of the Constitution of india List II gives powers to the state govt to levy tax on " SALE OF GOODS" , it never bars to not to tax second hand goods. This means state govt has full powers to levy tax on second hand goods even though sold on loss.

3) It is not against the natural justice: -

Levying taxes on sale of second hand goods either on profit or on loss is  not against the principles of natural justice, as Central govt ( who has powers to levy tax on income under List I of schedule VII) would allow you claim loss on sale against your income. Thereby, acting fairly (which is the sense of principle of natural justice.)

4) Further, the legislature have not gone mad who are making the laws against the principle of natural justice. It is the CONSTITUTION which empowers the legislature to make laws, which again is open to be challanged in the high court by filling a writ ptition ,by any person, if he/she considers it against the fundamental rights.

VAT on used capital goods when no input credit has been taken on that goods while purchasing by the dealer, means the same goods are being charged same sales tax again. This is against natural justice and aginst the prevailing basic principle of taxation.