2014 (12) TMI 1371 - HC - VAT and Sales Tax

Classification of goods - mobile phones/cell phones - taxable at 14.5% under Schedule V of the Andhra Pradesh Value Added Tax Act 2005 or not - validity of circular of the Commissioner of Commercial Taxes dated 20.09.2014 - HELD THAT - The question whether or not mobile phones/cell phones fall under Entry 39 (15) of the IV Schedule to the Act must be examined by the assessing authority while exercising his quasi-judicial powers to pass an assessment order and it is not for the Commissioner (Commercial Taxes) to issue an administrative circular directing them to treat the subject goods as unclassified goods falling under Schedule V to the Act more so in the absence of any statutory sanction for issuing such a circular. The impugned circular of the Commissioner (Commercial Taxes) is therefore set aside. It is made clear that this Court has not expressed any opinion on whether the mobile phones/cell phones fall under Entry 39 (15) of the IV Schedule to the Act or whether they are liable to be treated as unclassified goods under Schedule V to the Act or on any of the other contentions urged by the petitioner in the Writ Petitions for these are matters which the assessing authority has to consider. While the submission of the learned Senior Counsel has considerable force the fact also remains that the Assistant Commissioner has invited objections from the petitioner herein. It is considered appropriate in such circumstances to treat the proceedings dated 06.11.2014 as a show cause notice and to permit the petitioner to submit their objections thereto within two weeks from today - petition disposed off.

Summary

Issues:
Challenge to circular of Commissioner of Commercial Taxes dated 20.09.2014 and subsequent notice dated 06.11.2014 regarding taxation of mobile phones/cell phones at 14.5% under Schedule V of the Andhra Pradesh Value Added Tax Act, 2005.

Detailed Analysis:

1. Circular of Commissioner of Commercial Taxes (20.09.2014):
The circular referred to an earlier memo clarifying the tax rate for mobile phones/cell phones and requested assessing authorities to consider taxing them at 14.5% as unclassified goods. The petitioners argued that this circular hindered the assessing authority's quasi-judicial powers. The second respondent clarified that the circular was internal, guiding authorities to assess the tax rate based on judicial decisions. The High Court held that the Commissioner's circular overstepped by directing treatment of goods as unclassified without statutory backing, setting it aside without expressing an opinion on the tax classification.

2. Assessment Order Notice (06.11.2014):
The petitioners contended that the notice was an assessment order demanding differential tax payment. However, the Assistant Commissioner invited objections, leading the Court to consider it a show cause notice. The Court directed the petitioners to submit objections within two weeks for the Assistant Commissioner to decide upon, maintaining a fair process.

In conclusion, the Writ Petitions were disposed of, with pending miscellaneous petitions also resolved, and no costs were awarded. The judgment clarified the limits of the Commissioner's authority in directing tax treatment and ensured a fair process for objections to the assessment order notice.