The main legal point established in the judgment is that the leasing activity of motor vehicles constitutes 'resale in an unmodified form' and the dealers are entitled to claim input tax credit proportionately. The court also clarified that the provision for proportionate grant of input credit, in point of time, only applies to capital goods and not to different categories of sale transactions.

S.RAVINDRA BHAT, J

1. The revenue assails, in Appeal Nos. STA 8-9/2011, the impugned order dated 14.12.1010 of the Appellate Tribunal Value Added Tax (the Tribunal, in short). Connected with these appeals are STA 4-6 of 2011 and STA 7 of 2011 where the revenue challenges the impugned orders dated 21.1.2011 and 27.1.2011 respectively, whereby the Tribunal had followed its earlier order (dated 14.12.2011). In STA 16 of 2011, the assessee-dealer challenges the Tribunal’s order dated 21.1.2011 to the extent that it holds that the dealer will avail input tax credit proportionately in accordance with Section 9(1) and Section 12(4) of the Delhi Value Added Tax Act, 2004 (in short, “the DVAT Act”) read with Rule 4 of the Delhi Value Added Tax Rules, 2005 (hereafter, “the Rules”). Cross Objection No.13377/2012 (in STA No.7/2011) has also been filed by the assessee seeking the same relief.

2. This Court had framed questions “a”-“b” in the revenue’s appeals, and question “c” in the assessee’s appeal:

a. “Are the respondents/dealers entitled to claim input credit in terms of Section 9, regard being had to Entry (i) of Seventh Schedule to the Delhi Value Added Tax, 2004.

b. In any event, are the respondents/dealers at all entitled to claim input tax credit, having regard to Section 9 of the Delhi Value Added Tax, 2004.”

c. Whether the Appellate Tribunal – VAT grossly erred in law in holding that a leasing company shall avail the Input Credit available to them on proportionate basis?”

3. The facts are that assessee/dealers (hereafter “dealers”) are engaged in the business of leasing cars/motor vehicles for which purpose they entered into contracts. Under the lease agreements, they are transfer the right to use, control and possession of the vehicles to their customers. Their claims for refund of input tax credit (ITC) under Section 9 of the Delhi Value Added Tax Act, 2004 (in short, “the Act”) on cars used for making taxable sales were rejected; the objection hearing authority under the DVAT Act rejected their claims. They ultimately appealed to the Tribunal, which by the impugned orders set aside the orders dismissing the objections claiming refund of ITC, and remanded the appeals back to concerned authority with a direction to decide the objections afresh in accordance with its (the Tribunal’s) order dated 14.12.2010 (one of the impugned orders) in Appeal Nos. 562/ATVAT/08-09 and 520/ATVAT/08-09. Act.

4. The revenue contended before this Court that the dealers involved in the present appeals are not entitled to ITC on goods purchased, for making a sale. It was contended that motor vehicles are non-creditable goods in respect of which no tax credit can be availed. In support, counsel relied on Section 9(2)(b) read with Serial No 1 of the List of Non-Creditable Goods as provided in the Seventh Schedule to the Act. It was submitted that as motor vehicles fell within the ambit of Sl. No. 1, and did not fall within Sl. No. 2, it is ineligible for input tax credit. It was also argued that the leasing activity carried on by the assessees does not qualify as “resale in unmodified form”; as a result, Sl. No. 2 of the list in the Seventh Schedule is not attracted. Counsel relied on the definition of “form” from The Law Lexicon (1982 Edn., P. Ramanatha Iyer) to contend that the visible aspect is important, and stands changed during use of a motor vehicle.

5. It was argued by Mr. Parag Tripathi, learned Senior Counsel for the revenue that in terms of Section 2(1)(zc)(vi) “sale price” includes, in relation to transfer of the right to use goods for any purpose , valuable consideration or hiring charges received or receivable for such transfer. Therefore, “purchase price” (which is to be construed accordingly) for the purpose of Section 9(1) would include just the hiring charges paid or payable for the acquisition of the right to use. The purchase price, therefore, does not include the purchase price of the goods involved in such transfer; since