2020 (2) TMI 1249 - HC - VAT and Sales Tax

Demand of Differential Tax - activation and installation charges of DTH Set-Top Box (STB) called Digicomp collected by the petitioner at the time of installation of DTH set-top box - denial of input tax credit availed on the goods which were sold by the petitioner - It is the contention of the petitioner that it was paying service tax on installation and activation charges and therefore the petitioner cannot be made liable to pay VAT on such activation and installation charges under the provisions of the TN VAT Act, 2006. HELD THAT - It is noted that the petitioner was not only providing DTH service to its subscribers on which it was paying service tax, it was also collecting activation and installation charges at the time installation and activation of the DTH services - During the assessment year 2013-14, the petitioner claims to have stopped selling DTH Set-Top Box and started offering it as part of DTH service. However, in the impugned order for the said assessment are also the clauses in the agreements for the previous period have been relied upon. It is further noticed that there may have been transfer of right to use of the dish net antenna, cable and accessories and later set top box as well. It is not clear from the impugned order and the notices issued by this order to the petitioner whether any proposal was made to collect VAT from the petitioner under section 4 of the TN VAT Act, 2006 as the petitioner had primafacie, transferred the right to use in favour of the subscribers. There is also no clarity on the issue relating to denial of credit. There is also no clear discussion in the impugned orders as to whether the petitioner has paid service tax on the activation installation charges on the whole or part of the amount. Case remitted back to the respondent to pass fresh order on merits within a period of 3 months from date of receipt of a copy of this order - petition allowed by way of remand.

Summary

Issues involved:
Challenge to impugned orders for multiple assessment years regarding VAT on activation and installation charges of DTH Set-Top Box, denial of input tax credit, and liability to pay VAT.

Analysis:
1. The petitioner, engaged in DTH services, challenged orders for assessment years 2009-10 to 2013-14 regarding VAT on activation and installation charges of DTH Set-Top Box and denial of input tax credit. The petitioner used to sell Set-Top Boxes and collect one-time charges for activation and installation, claiming input tax credit on the boxes purchased.

2. The respondent contended that VAT was payable on activation and installation charges of the Set-Top Box, proposing denial of input tax credit. The respondent argued that the petitioner, by collecting charges for loss or damage, indicated a sale had occurred. The petitioner, however, argued that it paid service tax on these charges, making it exempt from VAT under the TN VAT Act, 2006.

3. The court noted that the petitioner transitioned to offering Set-Top Boxes as part of the service provided, leading to confusion in the assessment. The impugned order lacked clarity on whether VAT was to be collected under section 4 of the TN VAT Act, 2006, considering the transfer of right to use to subscribers. Additionally, there was ambiguity on the denial of credit and service tax payment on activation charges.

4. The court found errors in the impugned order and remitted the case back to the respondent for a fresh order within 3 months. The quashed orders were to be treated as show cause notices, with the respondent given 60 days to respond. A speaking order was to be passed within 120 days, ensuring the petitioner's representation in the process.

5. The writ petitions were disposed with these directions, emphasizing the need for a clear, lawful decision in the reassessment. No costs were awarded in this matter.