2011 (11) TMI 590 - HC - VAT and Sales Tax

Summary

Issues involved: Determination of whether a seller of goods to a unit in a Special Economic Zone (SEZ) should be a registered dealer to avail benefits under section 7 of the Andhra Pradesh Value Added Tax Act, 2005.

Summary:
The writ petition raised the question of whether a seller of goods to a unit in a Special Economic Zone (SEZ) needs to be a registered dealer to benefit from section 7 of the Andhra Pradesh Value Added Tax Act, 2005. The petitioners contended that the goods sold to the SEZ unit were exempt from VAT under section 7 read with Schedule I, item 59 of the VAT Act. The Deputy Commercial Tax Officer (DCTO) detained the goods on the premise that the seller was unregistered. The petitioners argued that the detention was illegal as the goods were exempt from VAT. The DCTO maintained that the seller's lack of registration justified the detention.

The court analyzed the relevant provisions of the VAT Act, specifically sections 7 and 7A, and items 59 and 59A of Schedule I. It noted that while every dealer is liable to pay VAT on sales, registered dealers have certain benefits. Section 7A exempts sales to SEZ units by registered dealers. The court emphasized that the exemption applies to sales to any SEZ unit, not just those mentioned in item 59A. Detention of goods under section 45 of the VAT Act is only justified if tax is not paid on taxable goods.

The court rejected the argument that the goods were dispatched to a non-SEZ unit, citing evidence that the consignment was on behalf of the SEZ unit. Documents supported the petitioners' claim that they were eligible for VAT exemption. The court allowed the writ petition, setting aside the detention notice. The petitioners were directed to be reimbursed if they had paid a specified amount and the goods were to be released. The court waived costs, considering the jurisdictional issue raised in the petition.