M.S. Ramachandra Rao, C.J.
1. The petitioner is a proprietary concern dealing with Petroleum Products like Petrol and Diesel under a dealership agreement with the Hindustan Petroleum Corporation.
2. The first question which arises for consideration in this case is:
(a) Whether the respondents can collect Value Added Tax under Section 3 of the Tripura Value Added Tax Act, 2004 on the retail sales of petrol and diesel done by the petitioner?
3. Section 3(1)(a) of the Tripura Value Added Tax Act, 2004 provides for coverage for every dealer, who, at the time of commencement of the Act, has
(i) a taxable turnover of sales during the year immediately preceding the commencement of the said Act exceeded the taxable limit; or
(ii) who is registered or liable to be registered under the Tripura Sales tax Act,1976 or the Central Sales Tax Act,1956, or Tripura Purchase Tax Act,1990, or
(iii) who is engaged in purchase of taxable goods as mentioned in schedule VIII.
4. Section 3(1)(b) of the Tripura Value Added Tax Act, 2004 provides that every dealer, to whom clause (a) of sub-section (1) of Section 3 does not apply, and :
(i) whose taxable turnover first exceeds the taxable limit during any period of twelve consecutive months, or
(ii) who is registered as a dealer under the Central Sales Tax, 1956 shall be liable to pay Value Added Tax (VAT) in accordance with the provisions of the Act.
5. There is a proviso to this clause (b) of section 3(1) which is very important to be considered and it states:
“Provided that the State Government may keep certain goods as listed in the schedule II (d) outside VAT which will be taxable in the first point of sale within the State without any tax credit at such rates as may be specified by the Government from time to time by notification in the Official Gazette.
Provided further that the rates of different items may be different. ”
6. Thus the State Government is empowered by issuing a notification in the official Gazette to “keep certain outside VAT”.
7. In this Writ Petition, we are concerned with what these words “keep certain outside VAT” mean.
We are not concerned with what is concerned in sub-sections (2) and (3) of Section 3 of the Tripura VAT Act, 2004.
8. Schedule II (d) of the Tripura VAT Act, 2004 gives the list of goods which are kept outside VAT and taxable at the first point of sale within Tripura at such rates as may be specified by the Government from time to time by notification in the Official Gazette.
9. Inter alia, Diesel is mentioned at Sl.no.2 and Petrol is mentioned at Sl.No.7 of the said Schedule.
10. On 7.4.2020, the Finance Department (Taxes and Excise) of the Government of Tripura, in exercise of powers conferred by proviso of clause (b)(ii) under sub-section (1) of section 3 of the Tripura Value Added Tax Act, 2004, issued a notification (Annexure-1) specifying the rates of tax of the items namely, Petrol and Diesel in schedule II (d) of the Act which are kept outside the Value Added Tax (VAT) and taxable at the first point of sale within Tripura as under:
| Sl.No. | Description | Rate of Tax |
| 1. | Petrol | 25% |
| 2. | Diesel | 16.5% |
| Sl.No. | Description | Rate of Tax |
| 1. | Petrol | 17.5% |
| 2. | Diesel | 10% |
12. Petitioner contends that collection of VAT on turnover of Petrol and Diesel by the respondents from dealers like it invoking the above notifications is without any authority since these goods have been mentioned in schedule II (d) of the Act, and by virtue of proviso to clause (b) of sub-section (ii) of Section 3 of the Tripura Value Added Tax Act, 2004, they are kept outside VAT.
13. According to the petitioner, for assessment year 2020-2021, respondent no.2 had collected Rs.12,45,171.90 towards excess tax on margin/profit earned by it and for Assessment Year 2021-2022, it had to pay Rs.10,44,072.95 as excess TVAT. Thus totally, Rs.22,89,244.35 ps was collected illegally from petitioner and this amount has to be refunded with interest at 18% p.a.
14. The respondents in their counter affidavit however contend that Petrol and Diesel are goods taxable at the first point of sale within the State of Tripura and place reliance on proviso to section 3(1) (b) (ii) of the Tripura Value Added Tax Act,2004. According to the respondents, the Hindustan Petroleum Corporation Limited, whose dealer the petitioner is, does not have a depot within the State of Tripura unlike Indian Oil Corporation Limited. So petitioner is bringing products from outside the State and is selling them in the State of Tripura on retail basis, and so, such sale of these products at petitioner‟s retail outlet is considered as first point of sale liable to tax at the rate mentioned in the notifications mentioned above.
15. According to the respondents, VAT is a multi stage tax levied at each stage of the value addition chain, with a provision to allow input tax credit on tax paid at a prior or earlier stage, which can be appropriated against the VAT liability on the subsequent sale. They contend that VAT is intended to tax every stage of sale where some value is added to raw materials, but tax payers will receive credit of tax already paid on procurement stages. In a VAT regime, there will be no problem of double taxation. It would not cause a cascading effect. They contend that VAT is levied as a proportion of the value added, that it is collected at every stage of the production and distribution process, and in principle, its burden falls on the final consumer or ultimate beneficiary.
16. It is contended that in case of goods listed under Schedule II (d) of the Tripura Value Added Tax Act, 2004, the general concept of VAT is not followed and the single point tax is imposed on the products mentioned in the said schedule. It is stated that it is done for better convenience of the dealers as well as minimizing tax burden. The first point of sale is considered as sale price of goods. They contend that as the general concept of VAT is not applied for those goods, so it is kept outside the VAT only. But imposition of taxes on those goods is done through the Tripura Value Added Tax Act, 2004, but the same is done by remaining outside the purview of VAT.
17. According to the respondents the goods mentioned in schedule II (d) are not kept outside the purview of the Tripura Value Added Tax Act, 2004. They are kept outside the Value Added Tax (VAT) and not the Tripura Value Added Tax Act, 2004. The Net tax is calculated after adjusting the Input Tax Credit as permissible by the statute.
Finding on question (a):
18. We find substance in these pleas of the respondents.
19. The State Government did not intend to follow the principle of multi stage taxation which is normally how a VAT regime operates when it comes to goods like Petrol and Diesel.
20. They did not want a higher tax on the dealers which would be the case if the VAT regime is applied like in case of other goods. They wanted to minimize the taxing burden on the dealers.
21. So the State Government wanted the imposition of tax on these goods to be done through the Tripura Value Added Tax Act, 2004, but it is done by remaining outside the purview of Value Added Tax.
22. The interpretation sought to be placed by petitioner that the words “kept outside VAT” in clause (b) of sub-section (ii) of Section 3 mean the levy would be “kept outside the purview of the Tripura Value Added Tax Act,2004”, cannot be accepted.
23. In other statutes like the Andhra Pradesh Value Added Tax Act, 2005, the wording is somewhat different from the wording in the Tripura Value Added Tax Act, 2004.
24. In the Andhra Pradesh Value Added Tax Act, 2005, sub-section (5) of section 4 states:
“Every dealer shall pay tax on the sale price of goods specified in Schedule VI at the special rates and at the point of levy specified therein”
25. In schedule VI to the Andhra Pradesh Value Added Tax Act, 2005, Petrol and Diesel are both mentioned at Sl.No.2 and Sl.No.5 respectively, but both are subjected to levy of VAT at first point of sale at rates 33% and 32.55% respectively.
26. It is possible that in other States too, this approach was followed by those respective States.
27. We therefore do not find any error in the demand made by the respondents to the petitioner to pay the amount of Rs. 22,89,244.35.
28. Consequently, the petitioner is not entitled to refund of the said amount from the respondents.
29. Question (a) is therefore answered against the petitioner and in favour of the respondents.
Question (b):
30. The next question which arises in this case is:
(b) Whether the petitioner is liable to pay cess under section 3 of the Tripura Road Development Cess Act, 2015 (for short „the Cess Act‟) on the turnover of sales of Petrol, Diesel and natural Gas from petitioner/dealer?
31. Section 3(1) of the Cess Act provides for a levy of cess on the turnover of sales of Petrol, Diesel and Natural Gas from a manufacturer or importer or dealer, but after deducting therefrom such turnover on which Cess has been paid on earlier turnover of sales of Petrol, Diesel and Natural Gas. The proviso thereto however bars the levy of such cess at more than one stage.
32. The term “Cess” is defined in Section 2(1) (a) of the Cess Act as a Cess on the turnover of sales of Petrol, Diesel and Natural Gas levied under Section 3.
33. The term “Turnover of sales” is defined in Section 2(1) (g) of the Cess Act as „sales price including the amount of tax‟ as defined in clause (e) of Section 2.
34. The term “Tax” is defined in clause (e) of Section 2 as tax levied under the Tripura Value Added Tax Act, 2004.
35. The rate of the Cess was fixed at 3% of turnover of sales of Petrol and Diesel and 10% of turnover of sales of Natural Gas vide a Notification dt.21.6.2019 issued by the State Government by amending Rule 10 of the Rules framed under the Cess Act.
36. Petitioner contends that the respondents cannot collect Cess on the turnover of sales of Petrol, Diesel and Natural Gas and that such actions are not in accordance with law. It is contended that since the TVAT Act, 2004 has kept petroleum products outside the purview of the TVAT Act, the Cess Act cannot be basis for levy of cess on „turnover of sale of‟ petroleum products. It is contended that Cess cannot be collected on basis of VAT, when VAT is excluded on Petroleum products. It is stated that since petroleum products are expressly excluded from the TVAT Act via Schedule II (d), they legally generate zero turnover, and the State cannot magically conjure a fictional turnover for petroleum under the TVAT Act framework simply to calculate cess under the Cess Act.
37. The respondents contend that if something is kept outside VAT and made taxable at the first point of sale, it indicates that although it is not subject to VAT for some reason, it becomes subject to taxation at the moment it is first sold or transferred to a buyer. The petroleum products are kept outside VAT vide schedule II (d) but not outside TVAT Act, 2004. It is stated that charging cess on VAT collected on petroleum products taxed at first point of sale is not illegal.
38. We have already held while considering question (a) that the respondents can collect Value Added Tax under Section 3 of the Tripura Value Added Tax Act, 2004 on the retail sales of petrol and diesel done by the petitioner. The same logic would apply to answer question (b) too in favour of the respondents i.e. that the said products are kept outside VAT, but not outside the purview of the TVAT Act, 2004. Consequently, the levy of Cess under the Cess Act on the basis of VAT cannot be held illegal or impermissible.
39. For the aforesaid reasons, we do not find any merit in the Writ Petition, it is accordingly dismissed.
40. All pending applications stand disposed of.