The main legal point established in the judgment is the interpretation of Sections 105 and 106 of the Delhi Value Added Tax Act, particularly regarding the taxation of lease rentals and the imposition of penalty under Section 86(10). The court's decision clarified the taxable event and the applicability of the Act to sales and purchases made on or after 1st April, 2005, and emphasized the requirement for a reasonable cause for imposing penalties.

SANJIV KHANNA, J.

1. These three appeals under Section 81 of the Delhi Value Added Tax Act, 2004 (Act, for short) impugn a common order dated 23rd June, 2014 passed by the Appellate Tribunal, Value Added Tax (Tribunal, for short) in the case of M/s. Orix Auto Infrastructure Services Limited (appellant, for short).

2. STA No. 49 of 2014 arises out from the order-in-original passed by the Commissioner, Value Added Tax under Section 84 of the Act dated 29th March, 2006, which has been upheld by the Tribunal in the impugned order. STA No. 47 of 2014 is directed against 18 orders-in-original passed under Section 32 of the Act for monthly tax periods from April, 2005 to September, 2006. The said order again has been upheld by the Tribunal in the impugned decision. STA No. 50 of 2014 is directed against 18 orders-in-original for monthly tax periods April, 2005 to September, 2006 under Section 33 of the Act imposing penalty under Section 86(10) of the Act @ 100% of the tax deficiency. In the impugned order, the Tribunal has mitigated the said penalty to 20% from 100% as imposed in the order-in-original.

3. We frame the following substantial question of law in STA Nos. 47 of 2014 and 49 of 2014:

Whether in view of Sections 105 and 106 read with Section 3 of the Delhi Value Added Tax Act, 2004, lease rentals paid on or after 1st April, 2005 can be taxed under the aforesaid Act even when the lease agreement was executed between the parties on or before 31st March, 2005?

4. We also frame the following substantial question of law in STA No. 50 of 2014:

Whether the order of the Appellate Tribunal, Value Added Tax imposing penalty at the rate of 20% under Section 86(10) of the Delhi Value Added Tax Act, 2004, is self contradictory and is contrary to the mandatory pre-conditions under the said Section?

5. The appellant-assessee is engaged in the business of leasing of machinery and vehicles. It enters into a master lease agreement with the hirer, which stipulates the period of lease, including the date of commencement, lease value, lease rent, etc. The appellant-assessee continues and remains the owner and has title and interest over the machinery and vehicles and on expiry of the term, vehicles and machinery have to be returned. The lessee in terms of the master lease agreement is entitled to take on hire specific vehicles/machinery and at that time supplementary agreement is executed in accordance with the terms and conditions of the master lease agreement, including the term of the lease and other stipulations.

6. Article 366 (29A) was inserted by way of Forty-Sixth Amendment to the Constitution and clause (d) thereof reads as under:-

"(29A) Tax on the sale or purchase of goods includes:-

(d) A tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration.

Such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made."

7. The effect thereof is that the State Legislature could henceforth tax transfer of right to use in goods for any purpose, whether or not for specified period, for cash, deferred payment or other valuable consideration. By deeming fiction, these were treated as sale or purchase of goods. This had the effect of expanding the scope of the words sale of good in Entry 54 of List II, Schedule VII of the Constitution of India, which empowers the State Governments to levy tax on sale or purchase of goods other than newspapers. Consequent to the aforesaid constitutional amendment, the Delhi Sales Tax on Right to Use Goods Act, 2002 (Act of 2002, for short), as a separate enactment, was enacted. The said enactment was notified and came into operation with effect from 15th September, 2004 and remained in force till 31st March, 2005. Act of 2002 was repealed by t