2011 (11) TMI 596 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of the Commercial Tax Officer (Intelligence) to undertake the proposed assessment.
2. Legality of the show-cause notices issued without establishing jurisdictional facts.
3. Liability of the petitioner-company to pay VAT on installation charges for lifts/elevators.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Commercial Tax Officer (Intelligence):
The petitioner-company challenged the jurisdiction of the first respondent, the Commercial Tax Officer (Intelligence), to issue the show-cause notices for the tax periods 2009-10 and 2010-11. The petitioner argued that the first respondent had no authority to undertake the proposed assessment. However, the respondent countered that the Deputy Commissioner (Commercial Taxes), Secunderabad Division, had authorized the first respondent through proceedings dated March 9, 2011, to assess the petitioner-company for the relevant years. The court noted that Rule 59(1) of the Andhra Pradesh Value Added Tax Rules, 2005, did not require the authorizing officer to record reasons for such authorization. Thus, the authorization dated March 9, 2011, was valid, and the show-cause notices issued pursuant to it did not suffer from a lack of jurisdiction. Consequently, the court dismissed the petitioner-company's request for writs of prohibition against the first respondent on jurisdictional grounds.

2. Legality of the Show-Cause Notices:
The petitioner-company contended that the show-cause notices were issued mechanically without establishing the necessary jurisdictional facts for proposing VAT assessment. The court emphasized that the matter was still at the preliminary stage of enquiry and the petitioner-company had not yet responded to the show-cause notices. Citing the Supreme Court's observations in Special Director v. Mohd. Ghulam Ghouse, the court stated that High Courts should not entertain writ petitions against show-cause notices unless they are shown to be ex facie without jurisdiction. The court found that the first respondent had issued the show-cause notices based on the opinion that the petitioner-company had avoided VAT payment by not reporting the turnover of lifts sold by the Schindler Group of Companies in China. Therefore, the court concluded that the petitioner-company should respond to the show-cause notices and establish its case on the merits.

3. Liability to Pay VAT on Installation Charges:
The petitioner-company argued that the installation charges for lifts/elevators were in the nature of labor charges and should be subject to service tax, not VAT. The court noted that the petitioner-company had executed contracts for the supply, erection, installation, and commissioning of elevators/lifts and had paid VAT on the sale component and service tax on the erection, installation, and commissioning components. The first respondent's show-cause notices proposed to levy VAT on the installation charges, claiming that the petitioner-company had avoided legitimate VAT payment. The court observed that the petitioner-company needed to respond to the show-cause notices and present its case, including the purchase order from M/s. Lanco Hills Technology Park Private Limited to M/s. Suzhou Schindler Elevator Company Limited, China, which included installation work. The court emphasized that the statutory machinery should process the case, and the petitioner-company's apprehensions were insufficient to circumvent this process.

Conclusion:
The court dismissed the writ petitions, holding that the show-cause notices did not suffer from illegality or lack of jurisdiction. The petitioner-company was permitted to submit its response to the show-cause notices within two weeks and to file an application before the Commissioner under section 21(7) of the Andhra Pradesh Value Added Tax Act, 2005. The first respondent was directed to decide the matter in accordance with the law after considering the petitioner-company's objections and providing a personal hearing. No order as to costs was made.