Case BriefsInternational Courts

East African Court of Justice-First Instance Division: The instant taxation ruling arose from a bill of costs filed before Yufnalis Okubo, Taxing Officer arising from application which was dismissed.

Facts of the case were that respondent had earlier filed an application where he prayed to join the suit as intervener under Article 40 of the Treaty for the Establishment of East African Community and Rule 36 of EACJ Rules of Procedure, 2013. The above application was concluded in favour of applicant. The applicant’s bill of cost was for USD 98,503 which covered instruction fees, perusals and other related work.

It was submitted by the applicant that the bill filed for USD 95,040 was drawn based on Rules of Court and should be taxed as drawn. Relying on Rule 9(4) of the schedule of the Rules of Court it was contended that the above value was based on the value of subject matter. Respondent opposed the instruction fees on the ground of it being exorbitant and had been decided only to receive leave for interveners to join the suit. The Taxing Officer allowed instruction fees only for Item 1. Under Rule 7(a) of the scales of charges of the third schedules, court allowed USD 200 on Item 2 for perusals of 40 folios. Like above, Court decided costs for other items. With regard to item 9, like items 6 and 4 had been mixed which made it difficult for the Court to ascertain the costs thus the officer allowed only USD 35 for Item 9. Respondent objected to the taxation on every item.

Therefore, Taxing Officer in his discretion decided USD 9,000 with 18% VAT amounting to USD 1,620 to be a reasonable amount for instruction fees of an application. The bill was taxed at grand total of USD 11, 084. [Union Trade Center Ltd. v. Succession Makuza Desire, Taxation Cause No. 1 of 2017, dated 14-08-2018]

Case BriefsSupreme Court

Supreme Court:  In the matter where the first proviso to Rule 3(2)(c) of the Karnataka Value Added Tax Rules, 2005 was being interpreted to facilitate the determination of taxable turnover as defined in Section 2(34) of the Karnataka Value Added Tax Act, 2003 in interface with Section 30 of the Act and Rule 31 of the Rules, the Court said that the interpretation to be extended to the proviso involved has to be essentially in accord with the legislative intention to sustain realistically the benefit of trade discount as envisaged. Any exposition to probabilise exaction of the levy in excess of the due, being impermissible cannot be thus a conceivable entailment of any law on imperative impost.

The Court further said that to insist on the quantification of trade discount for deduction at the time of sale itself, by incorporating the same in the tax invoice/bill of sale, would be to demand the impossible for all practical purposes and thus would be ill-logical, irrational and absurd. Trade discount though an admitted phenomenon in commerce, the computation thereof may depend on various factors singular to the parties as well as by way of uniform norms in business not necessarily enforceable or implementable at the time of the original sale. To deny the benefit of deduction only on the ground of omission to reflect the trade discount though actually granted in future, in the tax invoice/bill of sale at the time of the original transaction would be to ignore the contemporaneous actuality and be unrealistic, unfair, unjust and deprivatory. While, devious manipulations in trade discount to avoid tax in a given fact situation is not an impossibility, such avoidance can be effectively prevented by insisting on the proof of such discount, if granted.

The bench of Dipak Misra and Amitava Roy, JJ said that the requirement of reference of the discount in the tax invoice or bill of sale to qualify it for deduction has to be construed in relation to the transaction resulting in the final sale/purchase price and not limited to them original sale sans the trade discount. However, the transactions allowing discount have to be proved on the basis of contemporaneous records and the final sale price after deducting the trade discount must mandatorily be reflected in the accounts as stipulated under Rule 3(2)(c) of the Rules. The sale/purchase price has to be adjudged on a combined consideration of the tax invoice or bill of sale as the case may be along with the accounts reflecting the trade discount and the actual price paid. The first proviso has thus to be so read down, as above, to be in consonance with the true intendment of the legislature and to achieve as well the avowed objective of correct determination of the taxable turnover. [Southern Motors v. State of Karnataka, 2017 SCC OnLine SC 42, decided on 18.01.2017]

 

Case BriefsSupreme Court

Supreme Court: Deciding an important question of law as to whether provisions of Section 5 of the Limitation Act, 1963 are applicable in respect of revision petition filed in the High Court under Section 81 of the Assam Value Added Tax Act, 2003 (VAT Act), the Court held that the court cannot interpret the law in such a manner so as to read into the Act an inherent power of condoning the delay by invoking Section 5 of the Limitation Act so as to supplement the provisions of the VAT Act which excludes the operation of Section 5 of the Limitation Act by necessary implications.

Taking note of the fact that Section 84 of the VAT Act made only Sections 4 and 12 of the Limitation Act applicable to the proceedings under the VAT Act, the Court noticed that the legislative intent behind the same was to exclude other provisions, including Section 5 of the Limitation Act. Section 29(2) stipulates that in the absence of any express provision in a special law, provisions of Sections 4 to 24 of the Limitation Act would apply. If the intention of the legislature was to make Section 5, or for that matter, other provisions of the Limitation Act applicable to the proceedings under the VAT Act, there was no necessity to make specific provision like Section 84 thereby making only Sections 4 and 12 of the Limitation Act applicable to such proceedings, in as much as these two Sections would also have become applicable by virtue of Section 29(2) of the Limitation Act.

The bench of Dr. A.K. Sikri and Abhay Manohar Sapre, JJ said that the VAT Act is a complete code not only laying down the forum but also prescribing the time limit within which each forum would be competent to entertain the appeal or revision. The underlying object of the Act appears to be not only to shorten the length of the proceedings initiated under the different provisions contained therein, but also to ensure finality of the decision made there under. Hence, the application of Section 5 of the Limitation Act, 1963 to a proceeding under Section 81(1) of the VAT Act stands excluded by necessary implication, by virtue of the language employed in section 84. [Patel Brothers v. State of Assam, 2017 SCC OnLine SC 19, decided on 04.01.2017]