2017 (4) TMI 1394 - HC - VAT and Sales Tax

Maintainability of petition - availability of effective statutory alternative remedy - case of petitioner is that the order impugned in the writ petition does not fall either under Section 7 or under Section 8 or under Section 9, so as to enable the petitioner to file an appeal under Section 11 (1) of the Act - Held that - The impugned order, if not an assessment, would at least fall under the category of collection of tax within the scope of Section 7, making it amenable to the jurisdiction of an appellate authority under Section 11 (1) of the Act. Recovery of tax allegedly collected by the petitioner from its customers - unjust enrichment - Held that - If a dealer or assessee, not liable to pay tax, collects tax from his customers under a wrong impression, he is bound, either to refund it to the customers or to remit it to the Government. Otherwise the collection of tax by the assessee or dealer from his own customer would be without the authority of law. The liberty granted by the Supreme Court should be seen in the context of the principle of unjust enrichment. Therefore, the order impugned in the writ petition should be deemed to be one passed under Section 7. Hence, the remedy under Section 11 (1) is certainly available. Inherent lack of jurisdiction - Bifurcation of State of Andhra Pradesh - Held that - Section 104 of the A.P. Reorganisation Act is nothing but a provision similar to the provisions of the Companies Act, 1956, dealing with schemes of amalgamation, rearrangement and merger etc. Just as a new entity after amalgamation succeeds to the rights and liabilities of the previous entity, the successor State is made by Section 104 of the Reorganisation Act to get substituted as a party to the proceedings - 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 - case of petitioner is that the period in issue is from 01-08-1999 to 19-01-2015 and that a demand in respect of the said period cannot be created for the first time in the year 2017, after a lapse of about 12 years - Held that - The starting point for the period of limitation will only be 06-02-2014, the date of the order of the Supreme Court, unless otherwise the Hon ble Supreme Court now takes a different view. We are unable to throw the writ petition out on the ground of availability of alternative remedy, since the issues raised in the writ petition lie somewhere in the twilight zone - while keeping the writ petition pending, the petitioner could be directed to avail the remedy of a statutory appeal under Section 11 (1) of the Act. After all the petitioner may be obliged only to make a pre-deposit of 2% of the tax, under Section 11 (2) to maintain an appeal - Petition disposed off.

Summary

Issues Involved:
1. Jurisdiction of the respondents post-bifurcation of the State.
2. Applicability of Section 50 and Section 104 of the A.P. Reorganisation Act, 2014.
3. Validity of the tax demand post the Supreme Court's judgment.
4. Limitation period for raising the tax demand.
5. Availability of alternative statutory remedy.
6. Principle of unjust enrichment.

Detailed Analysis:

1. Jurisdiction Post-Bifurcation:
The petitioner contended that the respondents, being functionaries of the State of Telangana, lacked jurisdiction to act on proceedings initiated by the erstwhile State of Andhra Pradesh before bifurcation. The court referred to Section 50 and Section 104 of the A.P. Reorganisation Act, 2014, concluding that the successor State has the right to recover arrears and continue legal proceedings. The court held that the Assessing Officer of Telangana had jurisdiction to proceed with the matter initiated by an officer of the combined State of Andhra Pradesh.

2. Applicability of Section 50 and Section 104 of the A.P. Reorganisation Act, 2014:
The petitioner argued that there were no arrears of tax or pending legal proceedings to attract these sections. The court rejected this contention, stating that any amount collected as luxury tax during the pendency of the challenge retains its character as tax, and the successor State has the right to recover it. Section 104 allows the successor State to be substituted in ongoing proceedings.

3. Validity of the Tax Demand Post Supreme Court Judgment:
The petitioner argued that the quantification of tax was not possible after the Supreme Court struck down the levy as unconstitutional. The court noted that the Supreme Court had granted liberty to recover the tax collected from customers, emphasizing the principle of unjust enrichment. The court held that the impugned order should be deemed as one passed under Section 7 of the Act, making it amenable to the appellate jurisdiction.

4. Limitation Period for Raising the Tax Demand:
The petitioner contended that the demand was barred by limitation as it pertained to the period from 1999 to 2005. The court rejected this argument, stating that the Supreme Court's order dated 06-02-2014 granting liberty to the Commercial Tax Officer marked the starting point for the limitation period. Thus, the demand raised in 2017 was within the permissible time frame.

5. Availability of Alternative Statutory Remedy:
The petitioner argued that the impugned order did not fall under the sections that allow for an appeal under Section 11 (1) of the Act. The court disagreed, stating that the order related to the collection of tax and fell within the scope of Section 7, making it subject to appeal under Section 11 (1). The court emphasized the need for factual disputes to be resolved through the statutory appeal process.

6. Principle of Unjust Enrichment:
The respondents argued that the recovery was based on the principle of unjust enrichment, as the petitioner allegedly collected tax from customers but did not remit it to the government. The court upheld this principle, stating that any tax collected by the petitioner must be remitted to the government to prevent unjust enrichment.

Conclusion:
The court directed the petitioner to avail the statutory remedy of appeal under Section 11 (1) of the A.P. Tax on Luxuries Act, 1987, within two weeks. The Appellate Authority was instructed to condone the delay and entertain the appeal, ensuring compliance with Section 11 (2). The impugned demand would not be enforced for two weeks to allow the petitioner to file an appeal and seek a stay. The court ordered the Registry to return the original assessment orders to the petitioner for the appeal process.