Additional Tax Under Haryana VAT Act Valid Even on Concessional Sales: Punjab & Haryana High Court Dismisses Dealer’s Appeals

Case Name: M/s Jyoti Strips Pvt. Ltd., Faridabad v. State of Haryana and Others

Date of Judgment: 27 February 2026

Citation: VATAP-83-2018 and connected cases

Bench: Hon’ble Justice Lisa Gill and Hon’ble Justice Parmod Goyal

Held: The Punjab & Haryana High Court held that additional tax or surcharge under Section 7-A of the Haryana Value Added Tax Act, 2003 is payable over and above the tax levied under Section 7, even where sales of declared goods are made at a concessional rate against statutory declaration forms. Sections 7 and 7-A operate in distinct fields, and the surcharge under Section 7-A is calculated on the tax payable under Section 7, not on taxable turnover.

Summary: The appeals were filed by M/s Jyoti Strips Pvt. Ltd., a registered dealer engaged in trading iron and steel goods, challenging assessment orders, appellate orders and the decisions of the Haryana Tax Tribunal relating to multiple assessment years.

The appellant had effected sales of iron and steel goods, which are “declared goods” under the Central Sales Tax Act, to registered dealers within the State of Haryana. Such sales were made at a concessional rate of 4% upon production of declaration in Form D-1 by the purchasing dealers, who certified that the goods would be used in the manufacture of goods for sale. The appellant had charged tax at 4% and claimed the benefit of input tax credit in accordance with the statutory scheme.

However, the Assessing Authority levied additional tax or surcharge under Section 7-A of the Haryana VAT Act at the rate of 5% of the tax payable, resulting in an effective tax liability of 4.2% (4% tax under Section 7 plus 0.2% additional tax). The appellant challenged this levy, contending that once the concessional rate of tax under Section 7 was applied on production of the declaration forms, no further tax could be imposed.

The appellant argued that the authorities had incorrectly interpreted Sections 7 and 7-A of the Haryana VAT Act and had imposed an impermissible additional levy beyond the statutory framework. According to the appellant, the scheme of the Act contemplated levy of tax on taxable turnover only under Section 7, and the surcharge provision could not operate independently in cases where concessional tax had already been applied.

The State, on the other hand, contended that Section 7-A begins with a non-obstante clause and provides for levy of additional tax calculated at 5% of the tax payable under the Act. It was argued that the surcharge was not imposed on taxable turnover but on the tax amount payable under Section 7, and therefore its levy was legally valid.

The Court examined the statutory scheme of Sections 7 and 7-A of the Haryana VAT Act. It observed that Section 7 governs the levy and rate of tax on taxable turnover, including concessional sales of declared goods against statutory declaration forms. In contrast, Section 7-A provides for levy of additional tax in the nature of surcharge and operates independently of Section 7.

The Court held that the additional tax under Section 7-A is calculated as a percentage of the tax payable under Section 7 and not on the taxable turnover itself. Since Section 7-A contains a non-obstante clause, its operation is not restricted by the provisions of Section 7. Accordingly, the levy of surcharge is legally permissible even where the underlying tax is imposed at a concessional rate.

The Court also observed that the statutory scheme ensures compliance with the limits imposed under Sections 14 and 15 of the Central Sales Tax Act regarding declared goods. In the present case, the combined tax liability of 4.2% remained within the permissible ceiling of 5% prescribed under the Central legislation.

Consequently, the Court concluded that the levy of additional tax under Section 7-A in addition to tax under Section 7 did not suffer from any illegality or infirmity.

Decision: The High Court dismissed all the appeals and upheld the assessment orders, appellate orders and the orders of the Haryana Tax Tribunal. The questions of law were decided against the appellant dealer and in favour of the State authorities.