2025 (2) TMI 884 - HC - VAT / Sales Tax

Alcohol sales taxable only at first sale between state corporation and retailer under A.P. VAT Act

The AP HC ruled that under the A.P. VAT Act, alcohol sales are taxable only at the point of first sale between the state corporation and the petitioner. ... Challenge to assessment order - authorization given to the Deputy Commissioner, Guntakal was not available in a valid format - HELD THAT:- In the present case, the turnover of Rs. 4.54 crores, being the turnover relating to sale of alcohol and the turnover relating to sale of food has been taxed. The sale of alcohol, in the State of A.P., under the A.P. VAT Act, was to be taxed under Schedule VI ‘at the point of first sale in the State’. This sale would be the sale between M/s. Andhra Pradesh Beverages Corporation Limited and the petitioner. The subsequent sale of liquor by the petitioner to his customers would not be exigible to tax. Explanation-II to the definition of ‘taxable turnover’ stipulates that the sale prices relating to second and subsequent sale of goods, enumerated in Schedule VI, shall not form part of ‘taxable turnover’. This would mean that the entire turnover of Rs. 4.54 crores, which is on account of sale of alcohol would have to be excluded from the taxable turnover of the petitioner. This would leave a turnover of Rs. 1,02,20,407/-, which is the turnover relating to sale of food. As the turnover in question, is less than Rs. 1.5 crores per year, the same would be taxable only under Section 4 (9) (d). Conclusion - The sale of alcohol was taxed at the point of first sale and subsequent sales were not taxable. Therefore, the turnover from alcohol sales should be excluded from the taxable turnover, leaving only the turnover from food sales, which was below the threshold for the higher tax rate. The matter remanded back to the assessing authority to pass fresh assessment orders by excluding the turnover of Rs. 4.54 crores arising out of sale of liquor from the turnover on which tax is levied - petition partly allowed by way of remand. The High Court of Andhra Pradesh considered a case involving a petitioner who operated a Bar and Restaurant in Ananthapur Town and was registered as a dealer under the A.P. Value Added Tax Act, 2005. The Commercial Tax Officer conducted an audit and assessment, resulting in a tax assessment of Rs. 61,13,078 against the petitioner. The petitioner challenged this assessment, which was initially set aside due to issues with the authorization process. Subsequently, a new assessment was conducted, leading to a revised tax liability of Rs. 46,13,078. Dissatisfied with this outcome, the petitioner filed a writ petition before the High Court.The key issues considered by the Court were:1. Whether the assessing officer's extrapolation of turnover based on incriminating material was justified.2. Whether the turnover related to the sale of food by a third party could be attributed to the petitioner.3. Whether the tax rate applied by the assessing officer was appropriate given the turnover figures.The Court analyzed each of these issues as follows:1. The assessing officer extrapolated the turnover based on incriminating material found during the audit. The petitioner objected to this method but failed to provide evidence to refute the extrapolation. The Court upheld the assessing officer's decision, stating that such extrapolation is permissible in best judgment assessments when supported by incriminating material.2. The petitioner claimed that a third party managed the restaurant business and the turnover from food sales should not be attributed to them. However, the petitioner did not provide sufficient details about this third party, and the Excise Act required bars to serve food. Therefore, the Court rejected this contention.3. The assessing officer applied a tax rate of 14.5%, citing Section 4(9)(c) of the Act, which requires a minimum turnover of Rs. 1.5 crores per year. The turnover figures included sales of alcohol and food. The Court noted that the sale of alcohol was taxed at the point of first sale and subsequent sales were not taxable. Therefore, the turnover from alcohol sales should be excluded from the taxable turnover, leaving only the turnover from food sales, which was below the threshold for the higher tax rate. As a result, the Court set aside the assessment orders and remanded the matter for fresh assessment excluding the turnover from alcohol sales.In conclusion, the Court partly allowed the writ petition, setting aside the assessment orders and directing a fresh assessment excluding the turnover from alcohol sales. No costs were awarded in this matter.This judgment clarifies the principles regarding tax assessments under the A.P. Value Added Tax Act, emphasizing the importance of supporting evidence in challenging assessments and correctly attributing turnover for tax purposes.