Pernod Ricard India (Pvt.) Limited vs State of Uttarakhand and Others

Alok Singh, J—For the reason stated in the application, supplementary affidavit filed on behalf of petitioner is taken on record.

CLMA No. 7645 of 2015 stands disposed of accordingly.

Petitioner has invoked writ jurisdiction of this Court under Article 226 of the Constitution of India, assailing the Provisional Assessment Order dated 30.09.2014, Annexure No. 11 to the writ petition, recovery citation dated 12.06.2015, Annexure No. 14 to the writ petition and seeking a writ of mandamus commanding the respondents to recover only 15% Commercial Tax (VAT) on all the brands of Indian Made Foreign Liquor for the Assessment Year 2014-15, as prescribed by the Government of Uttarakhand vide Government Order dated 31.03.2014, Annexure No. 3 to the writ petition, and further seeking a writ of mandamus commanding the respondents to enforce the Notification/Government Order dated 23.06.2014, w.e.f. 01.04.2014.

Undisputed facts of the present case, inter alia, are that the petitioner is a FL-2 licencee to import and supply Indian Made Foreign Liquor within the State of Uttarakhand; vide notification/Government Order No. 379 dated 28.03.2013, the State of Uttarakhand was pleased to fix 20% commercial Tax (VAT) on Indian Made Foreign Liquor for the Assessment Year 2013-14; vide Notification/Government Order No. 126 dated 28.02.2014, Annexure No. 1 to the writ petition, the Government of Uttarakhand was pleased to formulate Excise Policy for the Assessment Year 2014-15. i.e. w.e.f. 01.04.2014 to 31.03.2015; as per Rule 22 of the Excise Policy/Government Order No. 126 dated 28.02.2014, maximum retail price of Indian Made Foreign Liquor shall be fixed by the Government inclusive of Commercial Tax(VAT) and no dealer shall charge even a paisa more than the M.R.P. as fixed by the State Government; vide Notification/Government Order No. 216 dated 31.03.2014, Annexure No. 3 to the writ petition, the Government of Uttarakhand was pleased to fix 15% Commercial Tax(VAT) on all the brands of Indian made foreign liquor and has issued direction to fix the MRP of different brands of Indian Made Foreign Liquor inclusive of 15% Commercial Tax (VAT); vide Notification/Government Order No. 43-55 dated 01.04.2014, the Government of Uttarakhand was pleased to fix M.R.P. of different brands of Indian Made Foreign Liquor, which were inclusive of 15% Commercial Tax(VAT); petitioner has sold/supplied different brands of Indian Made Foreign Liquor on the M.R.P. fixed by the Government of Uttarakhand inclusive of 15% VAT.

Vide Notification/Government Order No. 602 dated 23.06.2014, 15% Commercial Tax (VAT) was directed to be recovered on Indian Made Foreign Liquor w.e.f. publication of the notification in the Official Gazette. Taking advantage of the Notification/Government Order No. 602 dated 23.06.2014, Annexure No. 6 (impugned in the present petition), a show cause notice was issued to the petitioner on 02.07.2014, saying that as per the Government Order dated 23.06.2014, VAT @ 15% shall be recovered w.e.f. 23.06.2014, therefore, as to why, petitioner should not be levied VAT @ 20% w.e.f. 01.04.2014 to 22.06.2014. Petitioner has preferred its reply on 08.08.2014 to the show cause notice and it was stated in the reply that since Government itself has included 15% VAT in the M.R.P., therefore, petitioner has sold/supplied different brands of Indian Made Foreign Liquor on the M.R.P. fixed by the Government, therefore, petitioner cannot be asked to pay VAT @ 20% w.e.f. 01.04.2014 to 22.06.2014.

Learned Assessing Officer did not agree with the petitioner and was pleased to pass impugned provisional Assessment Order dated 30.09.2014 holding therein that by the Government Order No. 379 dated 28.03.2013, VAT was fixed @ 20% which was reduced to 15% only vide Government Order No. 602 dated 23.06.2014, therefore, petitioner had to pay VAT @ 20% w.e.f. 01.04.2014 to 22.04.2015. Feeling aggrieved, petitioner preferred statutory appeal, however, same also came to be dismissed vide Order dated 23.06.2015 for the same reasons as recorded by the Assessing Officer.

It is reiterated that the facts as mentioned hereinbefore are undisputed and there is no factual dispute in the present matter. Since, facts are undisputed and only question of law is required to be adjudicated, therefore, present petition is taken up for final disposal at the admission stage, with the consent of the learned counsel for the parties.

Mr. Nikhil Agarwal, learned counsel appearing for the petitioner, has vehemently argued that what should be the rate of VAT for the assessment year 2014-15 or, in other words, as to whether, impugned Government Order No. 602 dated 23.06.2014 should be read w.e.f. 01.04.2014, in the light of earlier Government Order No. 126 dated 28.02.2014 and Government Order No. 216 dated 31.03.2014 and Government Order No. 43-55 dated 01.04.2014, cannot be decided by the Assessing Authorities or Appellate Authorities dealing with the assessment, therefore, same question is being agitated before this Court, by invoking writ jurisdiction under Article 226 of the Constitution of India.

In my humble opinion, Assessing Officers and Statutory Appellate Authorities have to assess the tax as per the rates fixed by the State Government, however, neither Assessing Officer nor Statutory Appellate Authorities dealing with the assessment have any jurisdiction to look into the question of legality of the rate of Commercial Tax and date of the enforcement of the tax in view of three Government Orders i.e. dated 28.02.2014, 31.03.2014 and 01.04.2014 issued by the Government providing that Commercial Tax (VAT) shall be @ 15% from 01.04.2014 and contradictory Government Order dated 23.06.2014 that Commercial Tax (VAT) @ 15% shall be w.e.f. 23.06.2014 only. Therefore, for the questions raised in the present petition, present petition is maintainable under Article 226 of the Constitution of India.

Mr. Sayed Nadim, learned Standing Counsel appearing the State, has vehemently submitted that what should be the rate of VAT falls within the domain of the Department of Finance, therefore, rate of VAT can only be fixed by the Department of Finance and Excise Department has no business to reduce the rate of VAT as fixed by the Department of Finance. Further contends that since 20% VAT was fixed by the Department of Finance, vide Government Order No. 379 dated 28.03.2013 and same was reduced by the Department of Finance to 15% vide Government Order No. 602 dated 23.06.2014 w.e.f. publication of the Government Order dated 23.06.2014, therefore, supplier or dealer of the liquor has to pay VAT @ 20% w.e.f. 01.03.2014 till 22.06.2014. He further contends that even if the petitioner was asked to recover 15% VAT by the Excise Department but it will not take away the legal right of the Department of Finance to recover the tax, which was prevailing prior to the Government Order dated 23.06.2014.

Sub-Section (4) of Section 4 of the Uttarakhand VAT Act, 2005 reads as under:

"(4). The State Government may, by notification in the official gazette, declare different rates in respect of different goods, or add or remove any schedule (s), or add to, amend or alter any Schedule of this Act."

A bare reading of sub-section (4) of Section 4 of the Act, would demonstrate that State Government may, by notification in the official gazette, declare two different rates in respect of different goods, or add or remove any schedule or add or amend or alter any schedule of this Act. In simple words, State Government can alter, reduce or increase the VAT on a particular good.

Articles 154 and 166 of the Constitution of India, read as under:

"154. Executive power of State.--(1) The executive power of the State shall be vested in the Governor and shall be exercised by him either directly or through officers subordinate to him in accordance with this Constitution.

(2) Nothing in this article shall--

(a) be deemed to transfer to the Governor any functions conferred by any existing law on any other authority; or

(b) prevent Parliament or the Legislature of the State from conferring by law functions on any authority subordinate to the Governor.

Conduct of business of the Government of a State.- (1) All executive action of the Government of a State shall be expressed to be taken in the name of the Governor.

(2) Orders and other instruments made and executed in the name of the Governor shall be authenticated in such manner as may be specified in rules to be made by the Governor, and the validity of an order or instrument which is so authenticated shall not be called in question on the ground that it is not an order or instrument made or executed by the Governor.

(3) The Governor shall make rules for the more convenient transaction of the business of the Government of the State, and for the allocation among Ministers of the said business in so far as it is not business with respect to which the Governor is by or under this Constitution required to act in his discretion."

As per Article 154 of the Constitution of India, the executive power of the State shall vest in the Governor and shall be exercised by the Governor either directly or through officers subordinate to him in accordance with the Constitution. As per Article 166 of the Constitution of India, all executive action of the Government of the State shall be expressed to be taken in the name of the Governor. As per Clause (2) of Article 166 of the Constitution of India, orders and other instruments made or executed in the name of the Governor shall be authenticated in such manner as may be specified in the rules to be made by the Governor and validity of an order or instrument which is so authenticated shall not be called in question on the ground that it is not an order or instrument made or executed by the Governor.

Bare perusal of Annexure No. 1 to the writ petition, Notification/Government Order No. 126 dated 28.02.2014, would reveal that it was issued in the name of the Governor of the State of Uttarakhand and as per Rule 22 of Annexure No. 1, Notification/Government Order dated 28.02.2014 no dealer shall supply or sell liquor over and above the M.R.P. fixed by the Government and M.R.P. shall be inclusive of Commercial Tax (VAT). At the bottom of Annexure No. 1, it is clearly mentioned that it was published/notified in the official gazette of the State of Uttarakhand.

Second notification/Government Order No. 216 dated 31.03.2014 would reveal that the Government was pleased to calculate Commercial Tax (VAT) @ 15% while fixing the M.R.P. of different brands of Indian made foreign liquor. Vide third Notification/Government Order No. 43-55 dated 01.04.2014, Government of Uttarakhand was pleased to fix M.R.P. of different brands of Indian Made Foreign Liquor inclusive of 15% Commercial Tax (VAT). All the above three Notifications/Government Orders are not under challenge. Nor have been recalled, repealed, revoked, superseded or rescinded, therefore, all the three above Notifications/Government Orders still stand good and cover the field.

It is not in dispute that the petitioner has supplied the different brands of Indian Made Foreign Liquor at the M.R.P. so fixed by the Government inclusive of 15% Commercial Tax (VAT). It is also not in dispute that neither any other dealer nor petitioner could have recovered any amount from the customer over and above the M.R.P. fixed by the Government.

In view of the fact that all the three Government orders dated 28.02.2014, 31.03.2014 and 01.04.2014 were issued by the Competent Officers who were subordinate to the Governor of the State, therefore, every dealer including the petitioner was duty bound to obey the same. The net conclusion of these Government Orders would be that Government has decided to reduce the rate of Commercial Tax (VAT) from 20% to 15% w.e.f. 01.04.2014 and M.R.P. was fixed inclusive of Commercial Tax (VAT) @ 15%. In view of Article 154 and 166 of the Constitution of India, all the three above Notifications/Government Orders shall be deemed to be valid.

There is another aspect of the matter.

If acting upon three different Government Orders as mentioned hereinbefore, petitioner has sold/supplied the different brands of liquor on the rates fixed by the State Government inclusive of Commercial Tax (VAT) @15%, now it is not open to the another department of the Government in view of the doctrine of promissory estoppel to ask the petitioner to pay Commercial Tax (VAT) @20% w.e.f. 01.04.2014 to 22.06.2014, in view of the fact that the Finance Department has issued notification dated 23.06.2014 reducing the VAT from 20% to 15% w.e.f. 23.06.2014 only.

While construing different Government Orders rule of interpretation should be applied in such a fashion which may result in the harmonious interpretation of the Government Orders.

As observed, hereinbefore, that vide earlier Government Orders dated 31.03.2014 and 01.04.2014, Government of Uttarakhand has decided to charge the Commercial Tax (VAT) @ from 20% to 15% w.e.f. 01.04.2014 and by the impugned Government notification dated 23.06.2014 once again, it was reduced @ from 20% to 15%, the intention of the Government is clear that for the assessment year, Commercial Tax (VAT) should be charged @ 15% instead of 20%. Now, the only question of interpretation remains is as to whether reduced rate of Commercial Tax (VAT) @ 15% should be charged w.e.f. 01.04.2014 or w.e.f. 23.06.2014?

The moment Government vide Notifications/Government Orders dated 31.03.2014 and 01.04.2014 has decided to charge/calculate commercial Tax @ 15% on different brands of Indian Made Foreign Liquor w.e.f. 01.04.2014 with the stipulation that no dealer shall sell the liquor more than the M.R.P. fixed by the Government inclusive of Commercial Tax @ 15%, petitioner was bound to sell the liquor on the M.R.P., therefore, now Government is estopped to allege that since, Department of Finance has not reduced the Commercial Tax @ 15% w.e.f. 01.04.2014 and has reduced it w.e.f. 23.06.2014, therefore, petitioner should pay Commercial Tax @ 20% from 01.04.2014 to 22.06.2014.

Petitioner and all the dealers were having every reasonable expectation and assurance from the Government that entire Commercial Tax (VAT) on different brands of Indian Made Foreign Liquor has been included in the M.R.P., therefore, petitioner/dealers have to pay the same and if Government would modify Commercial Tax(VAT) in that event M.R.P. shall also be modified accordingly.

In view of the above discussion, petitioner is saved by the Doctrine of Promissory Estoppel and Reasonable Expectation.

Applying the principle of promissory estoppel and doctrine of reasonable expectation, the harmonious interpretation of both the Government Orders, would be that reduced rate of 15% would be applicable w.e.f. 01.04.2014. If Government is allowed to charge Commercial Tax @ 20% w.e.f. 01.04.2014 to 23.06.2014, it would amount to arbitrary exercise and unjustified action on the part of the Government which would be hit by Article 14 of the Constitution of India.

In view of the above discussions, writ petition succeeds and is allowed. Impugned provisional assessment order dated 30.09.2014 and impugned recovery citation dated 12.06.2015 are hereby quashed. Since, appeal was also dismissed vide order dated 23.06.2015 against provisional assessment order, therefore, order of the Appellate Authority dated 30.09.2014 is also quashed. It is held that Commercial Tax (VAT) on the Indian Made Foreign Liquor w.e.f. 01.04.2014 would at the rate of 15% till it is modified by the future Government notification/order in terms of subsection (4) of Section 4 of the Uttarakhand VAT Act, 2005 read with Section 21 of the Uttar Pradesh General Clauses Act.

In the peculiar facts and circumstances of the case, no order as to costs.

CLMA No. 7143 of 2015 also stands disposed of accordingly.