2013 (12) TMI 1495 - HC - VAT and Sales Tax

Summary

Issues involved: Assessment of value added tax on annual maintenance contract turnover, violation of principles of natural justice.

Assessment of VAT on AMC turnover: The assessee, engaged in computer hardware and software sales, provided annual maintenance contract (AMC) services and paid service tax on 90% of AMC turnover. Authorities levied VAT on 10% of turnover, later increased to 75% based on customer statements. The petitioner argued that VAT should not apply to service contracts, and the order lacked basis and violated natural justice principles.

Principles of natural justice: The petitioner contended that the authorities' decision to increase VAT to 75% without providing opportunity for cross-examination or explanation based on customer statements was unjust. The government advocate defended the decision, stating each year's assessment is independent and the 75% VAT was justified based on investigations.

Judgment: The court noted the petitioner's consistent payment of VAT on 10% of turnover and service tax on 90%, as per pre-2005 Supreme Court judgment. Authorities' reliance on customer statements to increase VAT to 75% was deemed unjust without petitioner's input or cross-examination. The court directed authorities to provide all collected statements and materials to the petitioner, allowing for response and cross-examination, and set aside the tax, interest, and penalty. The petitioner was granted a refund and instructed to appear for assessment proceedings within three months.