2015 (11) TMI 160 - HC - VAT and Sales Tax

Supreme Court Invalidates Entry Tax on Telecom Goods

The Supreme Court allowed the writ petition challenging the levy of Entry Tax under the U.P. Tax on Entry of Goods Into Local Areas Act, 2007. The Court ... Levy of Entry Tax under the provisions of the U.P. Act of 2007 - Demand of interest - Held that:- From a perusal of the assessment order that the department has imposed the tax liability on the goods imported by the Company treating it to be a 'machinery'. The petitioner has disputed the liability of tax under the Act from the very outset and has contended that the goods imported by the petitioner are 'electrical equipments' and not a 'machinery' and was, therefore, not liable to pay any tax. On the other hand the department contends that the petitioner had challenged the vires of the Act of 2007. The validity of the entry tax was upheld by the High Court and consequently, the petitioner was required to deposit the entry tax along with returns which was legally due and payable. Since the same was not deposited, the tax would be deemed to be the admitted tax in view of Section 8(1) of the Act read with Section 33 of the U.P. VAT Act. Even though the vires of the Act of 2007 had been upheld, the petitioner nonetheless disputed the liability of payment of tax under the Act of 2007 on the ground that the petitioner was importing 'electrical equipments' and that the petitioner was not liable to pay any tax as it was not a 'machinery'. This fact, that the petitioner has disputed its liability under the Act is not disputed by the respondents. The fixation of the liability under the Act of 2007 in the assessment orders are being contested by the petitioner in the appeal. We are consequently of the opinion that since the petitioner has disputed its liability from the very inception, the same cannot be treated to be the admitted tax for the purpose of Section 8(1) of the Act read with Section 33(2) of the U.P.VAT Act. Thus, for the purpose of imposition of interest, the provisions of Section 8(1B)of the U.P.Act read with Section 33(4) of the U.P. VAT Act would be applicable for the purpose of determining the interest liability. - Decided in favour of assessee. Issues Involved:1. Levy of Entry Tax under the U.P. Tax on Entry of Goods Into Local Areas Act, 2007.2. Determination of interest payable on the disputed tax amount under the U.P. Trade Tax Act, 1948 and the U.P. Value Added Tax Act.Issue-wise Detailed Analysis:1. Levy of Entry Tax under the U.P. Tax on Entry of Goods Into Local Areas Act, 2007:The petitioner, a telecom service provider licensed under the Indian Telegraph Act, challenged the levy of Entry Tax under the U.P. Act of 2007. The High Court upheld the vires of the Act, but the Supreme Court issued an interim order requiring the petitioner to deposit 50% of the tax liability and furnish a bank guarantee for the balance. The petitioner complied with this order. Assessment and reassessment orders for various years were passed, treating the imported goods as 'machinery' and determining tax liability accordingly. The petitioner has contested these assessments, arguing that the goods are 'electrical equipment' and not 'machinery,' thus not liable for the tax.2. Determination of Interest Payable:The core issue is the calculation of interest on the disputed tax amount. The petitioner argues that interest should be determined under Section 8(1B) of the U.P. Trade Tax Act read with Section 33(4) of the U.P. VAT Act. The Department contends that interest should be calculated under Section 8(1) of the Trade Tax Act read with Section 33(2) of the U.P. VAT Act. The Supreme Court in Pepsico India Holdings Limited vs. Commissioner of Trade Tax held that interest becomes payable from the date the tax became due, not from the date of the judicial verdict. The Court emphasized that 'tax admittedly payable' under Section 8(1) includes tax disclosed in accounts or admitted in returns. However, the petitioner has consistently disputed the tax liability, arguing that the imported goods are not 'machinery.'Legal Precedents and Interpretation:- Pepsico India Holdings Limited vs. Commissioner of Trade Tax: Interest on tax becomes payable from the date it became due.- Commissioner of Sales Tax vs. Satna Cement Works: Disputed tax cannot be treated as 'admitted tax' for interest calculation under Section 8(1).- Commissioner of Sales Tax vs. Hindustan Aluminium Corporation: 'Tax admittedly payable' includes tax disclosed in accounts or admitted in returns.Court's Findings and Conclusion:The Court found that since the petitioner has disputed the tax liability from the outset, it cannot be treated as 'admitted tax' under Section 8(1) of the Trade Tax Act. Therefore, for the purpose of imposing interest, the provisions of Section 8(1B) of the Trade Tax Act read with Section 33(4) of the U.P. VAT Act are applicable. The impugned order dated 22.9.2015 was quashed, and the Deputy Commissioner was directed to redetermine the interest in accordance with these provisions after giving due opportunity of hearing to the petitioner.Judgment:The writ petition is allowed, and the Deputy Commissioner (Assessment), Commercial Tax, Khand-10, Meerut, is directed to redetermine the interest in accordance with the provisions of Section 8(1B) read with Section 33(4) of the U.P. VAT Act.