In a relief to leading vehicle dealers, the Nagpur bench of Bombay High Court has asked Sales Tax authorities not to take any coercive action against them for recovery of Sales Tax. The authorities issued notice to all vehicle dealers and levied 12.5 per cent Sales Tax (VAT) on the RTO registration charges, insurance premium charges and handling charges on vehicles sold during 2016-17. Vehicle dealers have been contesting this interpretation imposing additional tax burden on them since last year. A division bench consisting of Justice Sunil Shukre and and Justice Anil Kilor while hearing a petition filed by Vidarbha Automobile Dealers Association and 16 other dealers, granted two weeks time to the State Government and restrained the authorities from taking any coercive steps against vehicle dealers. The petitioner-vehicle dealers challenged the final assessment order made against them under section 23 of the Maharashtra Value Added Tax Act, 2002 by the respondent assessing officers thereby including all surcharges and taxes as part of sales price.

 

The vehicles were sold during 2016-17 and the orders were received recently to pay sales tax on the RTO tax and registration charges, insurance premium charges and handling charges by treating the said charges as part of the sale price of the motor vehicle. According to the petitioners, the impugned assessment orders are ex-facie bad in law and have been passed without jurisdiction. The vehicle dealers are assessed Sales Tax on their gross annual turnover of sales. But recent show cause notices issued by the assessing officers have been initiated at a much belated stage by mechanically following the order of the Advance Ruling Authority dated June 20, 2018 under section 55 of the MVAT Act. The authority has taken a view that VAT is leviable on RTO charges, insurance premium charges and handling charges as it formed part of the ‘sale price.’

 

The order itself is bad in law and misinterprets the scope of term ‘sale price’ defined under section 2(25) of the MVAT Act, petitioners claimed. Besides, the order was passed during the period of national lockdown due to COVID-19 pandemic under section 23 of the MVAT Act and huge liability was fastened on the petitioners by levying 12.5 per cent Sales Tax (VAT) on the RTO tax and registration charges, insurance premium charges and handling charges in respect of the sale of motor vehicles during the assessment period April 1, 2016 to March 31, 2017. The taxes and insurance coverage are post-sale events and are not part of the sale price of the motor vehicle, the petitioners claimed. Adv Harish Thakur appeared for the petitioners. AGP Amit Madiwale represented the respondents.