2016 (12) TMI 630 - HC - VAT and Sales Tax

Reassessment where original assessment is sought to be superseded on the ground that it was erroneous - change of opinion on the basis of subsequent decision, where different view adopted - taxability of sale of mobile phones in the state of Uttar Pradesh - Held that - How a product is to be taxed, is a matter of intent of the parties. In a composite contract, it depends on what the parties intended to buy and sell. In the facts of the present case, the intention of the parties was to sell the mobile phone alone, and not the mobile charger which was supplied along with the mobile phone in a composite pack. This writ petition has to be allowed with cost as law is well settled that assessment once having become final should not have been reopened on the basis of judgment of the Apex Court which has no applicability to the facts of this case and is in ignorance of factual position as is very clear from facts narrated herein above - petition allowed - decided in favor of assessee.

Summary

Issues:
Challenging reassessment notices under U.P. Value Added Tax Act based on change of opinion and subsequent judgment.

Analysis:
The petitioner, a manufacturing company of consumer electronics, challenged reassessment notices issued under the U.P. Value Added Tax Act. The petitioner contended that the reassessment was based on a change of opinion, which is not a valid ground for initiating reassessment proceedings. They argued that the subsequent judgment in the State of Punjab Vs. Nokia India Pvt. Ltd. case, which formed the basis for the reassessment, could not be applied to their case. The High Court held that the reassessment notices were bad in law as all relevant material was before the authorities during the original assessment, and there was no fresh material to justify reassessment.

The respondents argued that the petitioner had remedies available under the Act, such as appeal and revision, and thus a writ petition challenging the reassessment was not maintainable. However, the Court found that the reassessment was not valid as it was solely based on the judgment in the Nokia case, which did not apply to the petitioner's situation. The Court emphasized that a subsequent judgment cannot be used to disturb past assessments that have been concluded.

Furthermore, the Court analyzed the legal implications of the case, highlighting that the intention of the parties in a composite contract determines how a product is to be taxed. In this case, the petitioner's intention was to sell the mobile phone alone, not the mobile charger supplied with it. The Court also noted that the impugned notices were pre-meditated, similar to the situation in the Oryx Fisheries case, and awarded costs to the petitioner for having to challenge the illegal notices.

In conclusion, the High Court allowed the writ petition, quashed the reassessment notices and orders, and awarded costs to the petitioner. The Court emphasized that assessments should not be reopened based on judgments that do not apply to the specific factual circumstances of the case.