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2007 (7) TMI 591 - HC - VAT and Sales Tax
Issues:
Challenge to assessment under Andhra Pradesh Tax on Entry of Goods into Local Areas Act, 2001 based on G.O. Ms. No. 955, Revenue (CT II), dated May 11, 2005. Analysis: The assessment under the Andhra Pradesh Tax on Entry of Goods into Local Areas Act, 2001 was challenged in the writ petition on the grounds that it was made based on G.O. Ms. No. 955, Revenue (CT II), dated May 11, 2005, which was argued to be ultra vires section 3 of the Act itself. Section 3(1)(c) of the Act limits the rate of tax to be notified by the government for any commodity, ensuring it does not exceed the rate specified under the Andhra Pradesh General Sales Tax Act, 1957 or related notifications. The petitioner contended that the impugned notification, setting the tax rate for HDPE/PP woven fabrics and sacks at 12.5%, was in violation of this provision as per the Andhra Pradesh Value Added Tax Act, 2005 effective from April 1, 2005. The petitioner argued that under entry 90 of Schedule IV of the Andhra Pradesh Value Added Tax Act, all packing materials, including hessian cloth and jute twine, were taxed at four per cent. Thus, when read together with section 3(1)(c) of the Act, it was asserted that the government had no authority to issue the notification imposing a higher tax rate on HDPE/PP woven fabrics and sacks. Subsequently, a new government order, G.O. Ms. No. 405, Revenue (CT II), dated March 31, 2006, clarified the tax rate effective from April 1, 2006. However, the situation remained unclear for the period between the issuance of G.O. Ms. No. 955 on May 11, 2005, and G.O. Ms. No. 405 on March 31, 2006. The court found G.O. Ms. No. 955 to be violative and ultra vires of section 3(1)(c) of the Act, deeming it illegal concerning HDPE/PP woven fabrics and sacks. Consequently, the assessment order dated December 26, 2005, based on G.O. Ms. No. 955, was quashed. The writ petition was partially allowed, quashing the assessment order dated December 26, 2005. The petitioner expressed the intention to amend the writ petition to challenge the Andhra Pradesh Tax on Entry of Goods into Local Areas Act, 2001 itself, as other writ petitions were pending. The court allowed the petitioner to challenge the Act separately in a new writ petition, considering it a separate cause of action. The rule Nisi was made absolute accordingly.
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