2019 (1) TMI 769 - HC - VAT and Sales Tax

Rate of tax - mobile charger sold along with the phone - composite unit or separate entity - notification bearing No.FD 40 CSL 2005 (III) dated 31.03.2015 - Punjab Value Added Tax Act, 2005 - Whether the Mobile Phone Charger whether sold as a composite product along with the phone or separately post 01.04.2015 can be charged at a rate higher than 5.5%? - Held that - The order impugned suffers from non-application of mind. The respondent No.1 cannot adjudicate with regard to the issue as to whether the State Government is entitled to reduce the rate of tax. The variation of the tax rates being within the domain of the State Government, respondent No.1 erred in not confirming his actions to the notification. The impugned order at Annexure-C insofar as it relates to levying tax on mobile charges at 14.5% is set aside and the matter is remitted back to the Authority for re-assessment in the light of the notification bearing No.FD 40 CSL 2005 (III) dated 31.03.2015 - petition allowed by way of remand.

Summary

Issues:
- Dispute regarding tax imposition rate contrary to state government notification
- Interpretation of notification reducing tax rate on mobile chargers
- Adjudication on whether mobile phone chargers sold as composite product or separately post 01.04.2015 can be taxed at a rate higher than 5.5%
- Authority's obligation to follow state government notifications and circulars

Analysis:

Issue 1: Dispute regarding tax imposition rate contrary to state government notification
The petitioner challenged the tax imposition by respondent No.1 at a rate contrary to the notification issued by the State Government under a specific notification. The petitioner contended that the tax rate on mobile chargers was reduced to 5.5% by the government notification dated 31.03.2015, applicable from 01.04.2015. The petitioner argued that the mobile chargers should be taxed at the reduced rate as specified in the notification.

Issue 2: Interpretation of notification reducing tax rate on mobile chargers
The petitioner emphasized that the government notification dated 31.03.2015, coupled with a circular from the Commissioner of Commercial Taxes, clearly indicated a reduction in the tax rate on mobile chargers to 5.5% from the earlier 14.5%. The petitioner presented the circular to demonstrate that the reduced tax rate applied to mobile phone chargers, whether sold as an accessory or separately, post the specified date.

Issue 3: Adjudication on whether mobile phone chargers sold as a composite product or separately post 01.04.2015 can be charged at a rate higher than 5.5%
The court considered whether mobile phone chargers, whether sold as a composite product along with the phone or separately after 01.04.2015, could be subject to a tax rate higher than 5.5%. The court highlighted that the officers of the Department were bound by the notifications issued by the State Government and the circulars from the Department. It was emphasized that the respondent No.1 had misread the issue and misdirected himself by not adhering to the notification's provisions.

Issue 4: Authority's obligation to follow state government notifications and circulars
The court concluded that the respondent No.1 erred in not confirming his actions to the notification reducing the tax rate on mobile chargers. The court held that the variation of tax rates fell within the domain of the State Government, and the respondent No.1's decision to levy tax at 14.5% was set aside. The matter was remitted back to the Authority for re-assessment in line with the notification dated 31.03.2015. The court clarified that the order was specific to assessments post the notification and did not address other contentions raised by the petitioners.

This judgment highlights the importance of adherence to government notifications and circulars in tax matters and clarifies the correct tax rate applicable to mobile chargers post the specified date.