Lease rental tax assessment under section 5-E quashed following Supreme Court precedent on property transfer situs

Telangana HC allowed petition challenging assessment order imposing tax on lease rentals under section 5-E of APGST Act. Following Supreme Court's decision in Mafatlal Industries Ltd. v. Union of India that read down section 5E(b) of A.P. Act 6 of 1957, establishing situs of sale as place where property passes rather than location of goods usage, respondents were directed to review tax assessments for 1995-98. Court ordered refund of Rs. 2,20,880, Rs. 21,17,129, and Rs. 28,35,996 for respective assessment years 1995-96, 1996-97, and 1997-98 within sixty days.

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Issues:
Challenge to assessment orders for assessment years 1995-96, 1996-97, and 1997-98 under APGST Act for imposing tax on lease rentals under section 5-E, request for refund based on the Supreme Court's decision on the constitutionality of section 5E(b).

Analysis:
The petitioner, a paper manufacturer in Tamil Nadu, entered into transactions in Andhra Pradesh, paid taxes based on asset location. Following the Supreme Court's decision in 20th Century Finance Corporation case, the petitioner sought a refund for taxes paid in 1995-96 to 1997-98. The respondents, however, argued against revision, citing lack of appeal against original assessment orders.

The Supreme Court's ruling on section 5E(b) of APGST Act in the 20th Century Finance Corporation case declared it unconstitutional. The court emphasized that a refund claim based on the unconstitutionality of a provision can be made via a writ petition. The power under article 226 must uphold the law, not override it. The petitioner's entitlement to a refund without filing a separate suit was recognized.

The respondents relied on Servet Feeds case to argue against the petitioner's claim for a refund based on another person's case. However, the court distinguished the current case from Servet Feeds, clarifying that the petitioner sought a refund due to the unconstitutionality of the law, not another person's case. The court directed the respondents to refund the taxes paid by the petitioner for the relevant assessment years.

In conclusion, the writ petition was allowed, and the respondents were directed to refund the taxes paid by the petitioner within sixty days. Any pending miscellaneous petitions were closed, and no costs were awarded in the matter.

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