2017 (4) TMI 1336 - HC - VAT and Sales Tax

Levy of Luxury Tax on tobacco and tobacco products - Amendment Act 9 of 1997 with effect from August 1, 1996 - the petitioner took a stand that they never collected luxury tax from their customers - whether the the respondents being the functionaries under the State of Telangana would have no jurisdiction to act upon the proceedings initiated and concluded by the erstwhile State of Andhra Pradesh? - Held that - it cannot be contended that after the bifurcation, the assessing officer of the State of Telangana would not have jurisdiction to proceed in respect of something initiated by an officer of the combined State of Andhra Pradesh. Time Limitation - Held that - the starting point for the period of limitation will only be February 6, 2014, the date of the order of the Supreme Court, unless otherwise the honourable Supreme Court takes a different view to it - after having suffered the order dated February 6, 2014, it is futile on the part of the petitioner to raise the plea of limitation with reference to the date January 19, 2005 or January 20, 2005. Availability of appellate remedy - section 11(1) of the A. P. Tax on Luxuries Act, 1987 - Held that - while keeping the writ petition pending, the petitioner could be directed to avail the alternative remedy of an appeal under section 11(1) of the Act. After all the petitioner may be obliged only to make a pre-deposit of two per cent of the tax, under section 11(2) to maintain an appeal. Petition disposed off.

Summary

Issues Involved:
1. Jurisdiction of the respondents post bifurcation.
2. Applicability of Section 50 of the A.P. Reorganisation Act, 2014.
3. Applicability of Section 104 of the A.P. Reorganisation Act, 2014.
4. Impact of the Supreme Court's declaration of the levy as unconstitutional.
5. Limitation period for the demand.
6. Scope of the liberty granted by the Supreme Court in the contempt petition.
7. Requirement of quantification or assessment for demand.

Detailed Analysis:

1. Jurisdiction of the Respondents Post Bifurcation:
The petitioner argued that the respondents, being functionaries of the State of Telangana, lacked jurisdiction to act upon proceedings initiated by the erstwhile State of Andhra Pradesh. However, the court held that Section 50 of the A.P. Reorganisation Act, 2014, vested the right to recover arrears of tax upon the successor State where the place of assessment was included on the appointed day. Section 104 allowed the successor State to be substituted in ongoing legal proceedings. Thus, the assessing officer of Telangana had jurisdiction to proceed with the case.

2. Applicability of Section 50 of the A.P. Reorganisation Act, 2014:
The petitioner contended that Section 50 did not apply as there were no arrears of tax. The court disagreed, stating that amounts collected as luxury tax during the pendency of the challenge retained their character as tax, even if the Act was later declared unconstitutional. Therefore, the respondents had the right to recover these amounts.

3. Applicability of Section 104 of the A.P. Reorganisation Act, 2014:
The petitioner argued that no legal proceedings were pending under the A.P. Tax on Luxuries Act, 1987, at the time of bifurcation. The court rejected this argument, clarifying that Section 104 allowed the successor State to continue any legal proceedings involving apportionable rights or liabilities. Hence, the proceedings initiated by Andhra Pradesh could be continued by Telangana.

4. Impact of the Supreme Court's Declaration of the Levy as Unconstitutional:
The petitioner claimed that since the Supreme Court had struck down the levy of luxury tax on tobacco products as unconstitutional, the quantification under the Act could not be made. The court noted that while the charging provision was struck down, the machinery provisions, including those for collection and appeal, remained in force. The amounts collected as luxury tax had to be remitted to the government to prevent unjust enrichment.

5. Limitation Period for the Demand:
The petitioner argued that the demand was barred by limitation, as it pertained to the period from August 1, 1999, to January 19, 2015, and was made in 2017. The court held that the limitation period started from the Supreme Court's order dated February 6, 2014, granting liberty to the Commercial Tax Officer. Therefore, the demand was not time-barred.

6. Scope of the Liberty Granted by the Supreme Court in the Contempt Petition:
The petitioner contended that the Supreme Court's liberty to proceed was limited to new materials not available during the contempt proceedings. The court clarified that the liberty granted by the Supreme Court allowed the Commercial Tax Officer to issue a show-cause notice and proceed based on the available materials, including the chartered accountants' reports.

7. Requirement of Quantification or Assessment for Demand:
The petitioner argued that without quantification or assessment, no demand could be made. The court noted that Section 7 of the A.P. Tax on Luxuries Act, 1987, provided for the collection of tax, and the impugned order fell within this scope. Therefore, the demand was valid, and the petitioner had an effective alternative remedy of appeal under Section 11(1) of the Act.

Conclusion:
The court directed the petitioner to avail the statutory appeal under Section 11(1) of the A.P. Tax on Luxuries Act, 1987, within two weeks from the receipt of the order. The appellate authority was instructed to condone the delay, entertain the appeal, and dispose of it in accordance with the law. The filing of the appeal would not prejudice the petitioner's contentions in the main writ petition. The impugned judgment would not be enforced for two weeks to allow the petitioner to seek a stay before the appellate authority. The Registry was directed to return the original assessment orders to the petitioner to enable them to file an appeal.