2020 (7) TMI 674 - HC - VAT and Sales Tax

Completion of assessment - levy of tax on gross and net turnovers - taxability under CST Act - Petitioner contended that the turnover that had been declared in the monthly VAT 200 returns were the service charges, which the petitioner received in the State of Telangana, on which the petitioner is paying service tax under the Finance Act, 1994 - HELD THAT - When the petitioner had specifically raised a contention that the petitioner has no turnover, which is taxable under the CST Act, 1956, and what was declared by it in the monthly VAT returns is service tax, which the petitioner is receiving in the State of Telangana for allowing Telecom Operators to use the tower facilities erected by it in the State, on which the petitioner was paying service tax under the Finance Act, 1994, the 1st respondent is expected to advert to the said contentions and deal with it in the impugned assessment order. However, the 1st respondent has not done so, while passing the impugned assessment order. The matter is remitted back to the 1st respondent to consider afresh the objections filed by the petitioner - Petition allowed by way of remand.

Summary

Issues:
Assessment order under CST Act, 1956 for the assessment year 2015-16 challenged by petitioner regarding turnover calculation and tax liability.

Analysis:
The petitioner, a Company engaged in Telecom Tower Installation Services, challenged the assessment order passed by the 1st respondent under the CST Act, 1956 for the assessment year 2015-16. The petitioner contended that the turnover reflected in the exempt sales column represented rentals received, on which service tax had already been paid. The petitioner argued that since there were no inter-state sales, branch transfers, or export sales, a NIL assessment order should have been passed. However, the 1st respondent rejected these contentions in the assessment order, leading to the petitioner filing a writ petition challenging the same.

The petitioner further argued that the show cause notice was issued by one officer but the assessment order was passed by a different officer, and the objections raised by the petitioner were not considered. The petitioner emphasized that its activities involved erecting towers in Telangana and leasing them to mobile phone operators, with no other interstate sales. The petitioner maintained that the turnover declared in monthly VAT returns represented service charges subject to service tax under the Finance Act, 1994. The petitioner claimed that the 1st respondent hurriedly passed the assessment order to avoid limitation issues, without adequately addressing the petitioner's contentions.

In response, the Special Counsel for Commercial Taxes representing the respondents stated that the 1st respondent was willing to reconsider the matter as the assessment order did not address the petitioner's objections. The High Court noted that the 1st respondent failed to consider the petitioner's argument that the turnover was not taxable under the CST Act, 1956, and that the declared turnover in VAT returns was related to service tax received in Telangana. Consequently, the High Court allowed the writ petition, setting aside the assessment order and remitting the matter back to the 1st respondent for fresh consideration. The 1st respondent was directed to provide a personal hearing to the petitioner and pass a reasoned order in accordance with the law. No costs were awarded, and any pending miscellaneous petitions were closed as a result of the judgment.