October 07, 2008

SC dismisses Mitsubishi\'s plea on ST on DMRC coaches

India’s Supreme Court has dismissed a petition filed by Japanese firm Mitsubishi Corp seeking to restrain the Karnataka government from taking any coercive action for non payment of sales tax on high tech train cars it supplied to Delhi Metro Rail Corporation.

A bench headed by Chief Justice Mr SH Kapadia has declined to quash the high court's interim order that refused to stay the Karnataka government's demand notice asking the consortium headed by Mitsubishi to pay 50% of sales tax to the tune of INR 25 crore for assessment year 2005-06. Earlier, Supreme Court in another petition had restrained Karnataka from taking any coercive steps against the consortium for non payment of sales tax of INR 24 crore for assessment years 2003-05.

The consortium comprising of Mitsubishi Corporation, Rotem Company and Mitsubishi Electric Corporation had challenged the Karnataka High Court order holding that the train sets supplied by the consortium to DMRC was an inter state sale and liable to be taxed under the Karnataka Sales Tax Act of 1957. The High Court had held that the consortium was liable to pay sales tax to the state even though the company was importing components and was only assembling the train cars in Bangalore in collaboration with Bharat Earth Movers Limited.

While stating that the Karnataka government was not entitled to collect sales tax, Mr Vanita Bhargava and Mr Atul Shankar Mathur counsel of Mitsubishi stated that the movement of goods from Bangalore to Delhi was incidental and not an incident of sale that had taken place at Delhi between the consortium and DMRC.