2017 (4) TMI 1392 - HC - VAT and Sales Tax

Levy of Luxury Tax - whether the petitioner collected any amount towards luxury tax during the period from 01-04-1999 to 20-01-2005? - Held that - If the petitioner had in fact collected luxury tax from its customers as contended by the respondents 2 and 3 the same is liable to be collected only by one of the two respondents. It is entirely a matter between the respondents 2 and 3 as to whether one of them is entitled to take the whole amount or whether the amount collected from the petitioner should be apportioned as between them. The dispute as to which of the respondents 2 and 3 is entitled to collect the amount cannot lead to an absurd situation where both of them could proceed against the petitioner and collect it. In the case on hand the 2nd respondent has now passed an order. Therefore the 3rd respondent should refrain from passing any order until two issues namely (1) the very liability of the petitioner; and (2) who is entitled to collect are resolved in a manner known to law. Petition disposed off.

Summary

Issues Involved:
1. Legality of the demand for luxury tax.
2. Jurisdiction of the authorities to issue the demand.
3. Collection and retention of luxury tax by the petitioner.
4. Parallel proceedings by authorities from two different states.
5. Directions and compliance with Supreme Court orders.

Issue-wise Detailed Analysis:

1. Legality of the Demand for Luxury Tax:
The petitioner challenged the demand for luxury tax amounting to Rs. 62,80,29,344/- collected from its customers between March 1999 and December 2004. The Andhra Pradesh Tax on Luxuries Act, 1987, was enacted to mobilize additional resources by imposing a tax on luxuries in hotels and lodging houses. The petitioner initially complied with the tax requirements but stopped paying after an interim order by the Supreme Court on 01-04-1999, which directed that no recovery action would be taken during the pendency of the appeals. The Supreme Court, in a decision dated 20-01-2005 (Godfrey Philips (I) Ltd. v. State of U.P.), struck down the levy of luxury tax on tobacco products as unconstitutional but mandated that any collected tax should be remitted to the government.

2. Jurisdiction of the Authorities to Issue the Demand:
The petitioner argued that the Commercial Tax Officer, Visakhapatnam (2nd respondent), lacked the authority to demand the luxury tax. This issue was complicated by the Andhra Pradesh Reorganisation Act, 2014, which led to the creation of a new state, Telangana. Consequently, both the Commercial Tax Officer, Visakhapatnam, and the Assistant Commercial Tax Officer, Warangal Division, Telangana, issued notices for the same amount. The court highlighted the need to resolve which authority had the jurisdiction to collect the tax.

3. Collection and Retention of Luxury Tax by the Petitioner:
The Supreme Court-appointed auditors, M/s. Anandam and Co., reported that the petitioner did not collect any luxury tax during the specified period. However, the Commercial Tax Officer, Visakhapatnam, issued a show cause notice on 10-08-2015, alleging that the petitioner collected and retained Rs. 62.80 crores from its customers. The petitioner denied these allegations, and the Supreme Court's final order on 06-02-2014 allowed the authorities to issue show cause notices with all particulars for the petitioner to respond.

4. Parallel Proceedings by Authorities from Two Different States:
The court noted the absurdity of both the Commercial Tax Officer, Visakhapatnam, and the Assistant Commercial Tax Officer, Warangal Division, Telangana, proceeding against the petitioner for the same tax amount. The court emphasized that only one authority should collect the amount, and the dispute between the two authorities should not result in double jeopardy for the petitioner. The court directed that the 3rd respondent (Telangana) should refrain from passing any order until the issues of liability and entitlement to collect the tax are resolved.

5. Directions and Compliance with Supreme Court Orders:
The court directed the petitioner to avail the remedy of a statutory appeal under Section 11 (1) of the A.P. Tax on Luxuries Act, 1987, within two weeks. The Appellate Authority was instructed to condone the delay and dispose of the appeal in accordance with the law, uninfluenced by any observations in this order. The court also ordered that the impugned demand should not be enforced for two weeks, allowing the petitioner to file an appeal and seek a stay. The 3rd respondent was refrained from passing any order until the issue is finally decided.

Conclusion:
The court provided a detailed analysis of the historical background, jurisdictional issues, and compliance with Supreme Court directives. It directed the petitioner to file a statutory appeal and restrained the 3rd respondent from taking further action until the appeal process is completed. The court's orders aimed to ensure a fair resolution of the dispute without subjecting the petitioner to multiple demands for the same tax amount.