Court nullifies assessment orders, directs transfer of VAT to Union of India Service Tax Department

The court allowed the writ petition, declaring the assessment orders null and void. It directed the State of Haryana to transfer the VAT collected to the Service Tax Department of the Union of India, clarifying that this transfer would not constitute a full and final discharge of the petitioner's service tax liability, which would be subject to further adjudication.

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Issues: (i) whether VAT collected on activation of SIM cards was without authority of law; (ii) whether writ jurisdiction could be invoked to quash the assessment orders and direct refund despite finality of the orders and absence of statutory refund machinery; and (iii) whether the amount collected by the State could be transferred to the Service Tax Department without attracting unjust enrichment.

Issue (i): whether VAT collected on activation of SIM cards was without authority of law.

Analysis: The controlling constitutional principle is that no tax can be levied or retained except by authority of law. Once the Supreme Court had declared that activation of SIM cards is a service and not a sale, the levy of VAT on that activity ceased to have any statutory foundation. A collection unsupported by the statute is a legal nullity and cannot be justified by the existence of assessment orders.

Conclusion: The VAT collected on activation of SIM cards was without authority of law.

Issue (ii): whether writ jurisdiction could be invoked to quash the assessment orders and direct refund despite finality of the orders and absence of statutory refund machinery.

Analysis: Although a taxing statute may provide a procedure for redress, that general rule yields where the tax itself has been collected without authority of law. Finality of the assessment orders and the absence of an express refund provision in the Haryana Value Added Tax Act, 2003 did not bar relief under Article 226 of the Constitution of India. Where the collection itself is unconstitutional, the High Court can direct restitution notwithstanding that no appeal or revision was filed against the assessments.

Conclusion: Writ relief was maintainable and the assessment orders could be treated as a nullity.

Issue (iii): whether the amount collected by the State could be transferred to the Service Tax Department without attracting unjust enrichment.

Analysis: The transaction was held exigible to service tax, and the State's retention of VAT would result in unconstitutional double taxation. The petitioner's claim was not for an impermissible windfall, but for release of an amount collected by one authority without legal sanction in circumstances where the corresponding service tax liability remained to be determined by the competent authority. Directing transfer of the amount to the Union's Service Tax Department avoided unjust enrichment while preserving the separate adjudication of service tax liability.

Conclusion: The amount could be transferred to the Service Tax Department and the plea of unjust enrichment failed.

Final Conclusion: The petition succeeded, the VAT assessments were declared invalid, and the State was directed to remit the collected amount to the Union's Service Tax Department, without treating such transfer as a final discharge of the petitioner's service tax liability.

Ratio Decidendi: Tax collected without authority of law can be corrected through writ jurisdiction, and final assessment orders or absence of a statutory refund provision do not bar restitution where the levy is constitutionally unsupported.

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