2011 (2) TMI 1255 - HC - VAT and Sales Tax

Writ petitions - transfer of the right to use goods - respondent issued notice proposing to tax the petitioner under section 4(8) of the Andhra Pradesh Value Added Tax Act, 2005, on the ground that assessee is engaged in leasing of hoardings to various customers displaying their advertisements for a fixed period for a fixed amount as consideration, and the Act envisaged levy of VAT on letting out of advertisement boards and signage boards to different customers for display of advertisement of their products Held that - whether the items in question constitute goods or immovable property , are required to be examined by the assessing authority in the light of the principles, and the judgments, aforementioned, respondent directed to issue a detailed show-cause notice afresh, give a reasonable opportunity to the petitioner to submit their objections, writ petitions disposed of

Issues Involved:
1. Applicability of VAT on the leasing of hoardings.
2. Classification of hoardings as "goods" or "immovable property".
3. Jurisdiction of the assessing authority under Section 4(8) of the Andhra Pradesh Value Added Tax Act, 2005.

Issue-wise Detailed Analysis:

1. Applicability of VAT on the Leasing of Hoardings:
The petitioner, an advertising agency, challenged the assessment orders for the years 2005-06 to 2008-09, where the third respondent taxed the petitioner under Section 4(8) of the Andhra Pradesh Value Added Tax Act, 2005, at 12.5% on the revenue from hoardings. The petitioner argued that their services fall under "advertising services" as per Section 65(105)(e) of the Finance Act, 1994, and are liable for service tax, not VAT. They contended that the hoardings are immovable properties and not "goods" under the Act, and thus, the transaction does not amount to a transfer of the right to use goods.

2. Classification of Hoardings as "Goods" or "Immovable Property":
The petitioner claimed that the steel structures and unipoles used for hoardings are permanently embedded in the earth, making them immovable property. They argued that the hoardings are designed for specific locations and cannot be moved without dismantling, thus not qualifying as movable property. Conversely, the respondent contended that the hoardings are movable property as they can be detached and relocated, and the vinyl sheets are affixed to hoardings, which are then attached to unipoles or steel structures. The respondent maintained that the hoardings are "goods" under Section 2(16) of the Act and subject to VAT.

3. Jurisdiction of the Assessing Authority under Section 4(8) of the Andhra Pradesh Value Added Tax Act, 2005:
The court emphasized that the jurisdictional facts, such as whether the items in question constitute "goods" or "immovable property," must be determined to establish the assessing authority's jurisdiction under Section 4(8). The court noted that the essential facts regarding the nature of the vinyl sheets, hoardings, and unipoles/steel structures were not clearly discernible from the impugned orders. The court highlighted the need to ascertain whether the vinyl sheets are merely stuck to the unipoles/steel structures or if they are first stuck on hoardings, which are then placed on the unipoles/steel structures, and whether these structures are deeply embedded in the earth to be considered immovable property.

Judgment:
The court set aside the impugned assessment orders and directed the third respondent to issue a detailed show-cause notice afresh, provide a reasonable opportunity for the petitioner to submit objections, and pass fresh orders of assessment in accordance with the law. The court made it clear that it had not expressed any opinion on the merits and allowed the petitioner to raise all available grounds before the third respondent upon receiving the show-cause notice. The writ petitions were disposed of without costs.

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