Itc Limited vs The State Of Andhra Pradesh, ... on 10 August, 2022

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Telangana High Court

Itc Limited vs The State Of Andhra Pradesh, ... on 10 August, 2022

Bench: Surepalli Nanda

      THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYAN
                         AND
       THE HON'BLE MRS JUSTICE SUREPALLI NANDA

                WRIT PETITION No.7155 OF 2017

JUDGMENT AND ORDER: (Per the Hon'ble the Chief Justice Ujjal Bhuyan)

      Heard Mr. M.V.K.Moorthy, learned counsel for the

writ petitioner; Mr. P.Govind Reddy, learned counsel for

respondent Nos.1, 2 and 4; and Mr. K.Raji Reddy, learned

counsel for respondent No.3.

2. By filing this petition under Article 226 of the Constitution of India petitioner seeks quashing of recovery proceedings dated 04.02.2017 passed by the second respondent.

3. It may be mentioned that second respondent in the writ proceeding is Commercial Tax Officer, Kurupam Market Circle, Visakhapatnam, Andhra Pradesh, who had passed the order dated 04.02.2017. On the other hand, fourth respondent is the Appellate Deputy Commissioner (CT), Vijayawada, Andhra Pradesh who had passed the order dated 31.05.2019 dismissing the appeal of the 2 petitioner and upholding the order dated 04.02.2017 passed by the second respondent.

4. Petitioner in this proceeding is ITC Limited, Indian Tobacco Division, Visakhapatnam. It is a company registered under the Companies Act, 2013 having its registered office at Kolkata and divisions in different States across the country including at Visakhapatnam in the State of Andhra Pradesh and at Secunderabad, Telangana State.

5. Andhra Pradesh Tax on Luxuries Act, 1987 (referred to hereinafter as 'the Luxuries Tax Act') was enacted for the purpose of levying tax on services provided in the hotels. Subsequently, by way of amendment Section 3A was inserted in the Luxuries Tax Act with effect from 01.08.1996 bringing tobacco and tobacco products within the tax net of the Luxuries Tax Act with effect from 01.08.1996.

6. It is stated that petitioner is engaged in the business of marketing cigarettes. It has branches at 3 Visakhapatnam in the State of Andhra Pradesh and Secunderabad in the State of Telangana. Petitioner got itself registered as a dealer under the Luxuries Tax Act in both the States and thereafter filed monthly returns.

7. Petitioner filed W.P.No.16909 of 1996 before the then combined High Court of Andhra Pradesh at Hyderabad challenging the levy of luxuries tax on tobacco i.e., questioning the constitutionality of Section 3A of the Luxuries Tax Act. However by the judgment and order dated 12.11.1998, W.P.No.16909 of 1996 was dismissed by this Court.

8. The aforesaid judgment and order dated 12.11.1998 was challenged by the petitioner by filing Special Leave Petition (C) No.4846 of 1999. Identical petitions were filed having similar grievance. On 01.04.1999 after civil appeals were registered, Supreme Court passed an interim order directing the dealers to file their returns before the computing authority but the authorities were restrained from taking any action on the returns so filed for recovery of any amount from the dealers during 4 pendency of the appeals. However it was clarified that if the challenge failed, the dealers would be liable to pay the due luxury tax in accordance with the assessments made on the basis of the returns, so filed. It is stated that pursuant to the interim stay granted on 01.04.1999 petitioner stopped paying luxury tax to the State Government since it had stopped collecting such tax from its customers though it continued to file returns before the assessing authority.

9. As stated above, similar petitions were filed before the Supreme Court challenging levy of luxury tax on tobacco. Challenge was more particularly to inserting Section 3A in the statute book. By a common judgment and order dated 20.01.2005, Supreme Court disposed of the batch of cases by declaring Section 3A of the Luxuries Tax Act levying luxury tax on tobacco as unconstitutional. However in view of the submission made on behalf of the State Governments, Supreme Court directed that if the appellants therein had collected any amount towards luxury tax from consumers/ 5 customers after obtaining interim orders from the Supreme Court, they would pay the said amounts to the respective State Governments.

10. After the aforesaid judgment and order dated 20.01.2005, the second respondent issued notice dated 24.11.2005 calling upon the petitioner to pay certain amounts together with interest alleging that petitioner had continued to collect luxury tax after obtaining interim order dated 01.04.1999. Though this was denied by the petitioner, without taking any decision thereon, second respondent filed Contempt Petition (C) No.40 of 2006 against the petitioner before the Supreme Court alleging that petitioner had continued to collect luxury tax from its customers after obtaining interim order on 01.04.1999 but did not pay the same to the State Government in violation of the judgment and order dated 20.01.2005. Petitioner contested the contempt petition. Supreme Court appointed, by consent, M/s.Anandam and Company, Chartered Accountants, as auditors to audit the accounts of the petitioner for the purpose of 6 verifying as to whether petitioner had collected any amount towards luxury tax from its customers after 01.04.1999 till 20.01.2005. Auditor submitted report to Supreme Court on 25.03.2013 opining that petitioner had not collected any luxury tax from its customers. After considering the report of the Chartered Accountants, Supreme Court disposed of the contempt petition on 06.02.2014 observing that there was no reason for any proceeding to be initiated, muchless contempt. However on the request of the second respondent, who was one of the petitioners in the contempt petition, Supreme Court vide the order dated 06.02.2014 permitted the second respondent to issue appropriate show cause notice bringing to the notice of the dealers including the petitioner that they had collected luxury tax from its consumers/customers after obtaining interim orders from Supreme Court but had not paid the same to the State Government. However it was clarified that second respondent and other authorities should furnish all the particulars available with them to enable the dealers to file appropriate reply including on the point of 7 maintainability. Dealers were given liberty that if they felt aggrieved by any order(s) that may be passed by the second respondent and other revenue officials, they could question the same before the appropriate forum.

11. Thereafter second respondent issued show cause notice dated 07.08.2015 to the petitioner claiming an amount of Rs.62.80 crores as allegedly collected by the petitioner towards luxury tax and illegally retaining it. Petitioner denied the allegation vide reply dated 14.09.2015.

12. It may be mentioned that the third respondent had also issued a show cause notice dated 04.09.2014, whereafter revised show cause notice dated 08.12.2016 was issued. In the revised show cause notice, third respondent contended that in view of Section 50 of the Andhra Pradesh Reorganisation Act, 2014, third respondent had the authority to issue notice covering the period and transactions for which second respondent had issued notice on 07.08.2015.

13. Petitioner filed W.P.No.210 of 2017 before this Court questioning the legality and correctness of the revised show cause notice of third respondent dated 08.12.2016. W.P.No.210 of 2017 was dismissed by this Court vide order dated 23.01.2017, whereafter third respondent immediately passed the order on 24.01.2017, which compelled the petitioner to file W.P.No.2905 of 2017 challenging the order dated 24.01.2017. This Court by order dated 30.01.2017 set aside the order dated 24.01.2017 directing third respondent to receive the reply from the petitioner and grant personal hearing.

14. Faced with such a situation, petitioner wrote to second respondent vide letter dated 23.12.2016 to defer the proceedings as similar proceedings had been initiated by the third respondent. Post letter dated 23.12.2016 no communication was received by the petitioner. In the meanwhile, second respondent proceeded and passed the impugned order dated 04.02.2017 affirming the demand raised in the show cause notice dated 07.08.2015. 9

15. According to the petitioner, the amount demanded by the second respondent is covered in the show cause notice dated 08.12.2016 issued by the third respondent.

16. It is alleged that the show cause notice and the impugned order have been issued and passed after more than eleven years from the date the Luxuries Tax Act was struck down by Supreme Court.

17. Assailing the legality and validity of the order dated 04.02.2017 passed by the second respondent, the present writ petition came to be filed.

18. Petitioner also filed an interlocutory application to stay the demand. By the order dated 18.04.2017, a Division Bench of this Court took the view that since the second respondent had passed an order, the third respondent should refrain from passing any order until two issues were resolved, namely, (1) the very liability of the petitioner and (ii) who is entitled to collect. Accordingly the following order came to be passed:

(i) There will be a direction to the petitioner, without prejudice to their contentions in the writ petition, 10 to avail the remedy of a statutory appeal under Section 11(1) of the A.P. Tax on Luxuries Act, 1987 as against the impugned order, within two (2) weeks from the date of receipt of a copy of this order. If an appeal is so filed, the Appellate Authority may condone the delay, entertain the appeal subject to compliance with the prescriptions contained in Section 11(2) and dispose it of in accordance with law, uninfluenced by any observation contained in this order. However, the filing of the appeal will not be taken to be an act on the part of the petitioner subjecting themselves to the jurisdiction of the authorities under the Act. The filing of the appeal will be without prejudice to the contentions of the petitioner in the main writ petition.

Until a period of two weeks from the date of receipt of a copy of this order, the impugned demand shall not be enforced, so that the petitioner is able to file an appeal and also seek a stay before the Appellate Authority under Section 11(1) of the Act; and

(ii) till the issue is finally decided, the 3rdr respondent is refrained from passing any order.

19. From the above, it is seen that a direction was issued to the petitioner to avail the remedy of appeal under Section 11(1) of the Luxuries Tax Act against the impugned order dated 04.02.2017. The appellate authority was directed to decide the said appeal on merit. It was clarified that filing of the appeal would be without prejudice to the contentions of the petitioner in the writ petition and also would not be taken to be an act on the 11 part of the petitioner subjecting itself to the jurisdiction of the authorities under the Luxuries Tax Act. For a period of two weeks, it was directed that the impugned demand should not be enforced to enable the petitioner to file appeal to seek stay before the appellate authority. Till the issue was finally decided, the third respondent is refrained from passing any order.

20. Third respondent has filed counter affidavit as well as interlocutory application for vacating the stay. According to the third respondent, petitioner's unit at Visakhapatnam and its other unit at Hyderabad got amalgamated with ITC, Bhadrachalam, Khammam District with effect from 01.04.2004 as per orders of this Court dated 08.02.2002 in Company Petition No.197 of 2001.

20.1. Petitioner had challenged the vires of Section 3A of the Luxuries Tax Act in so far levy of luxury tax on cigarettes was concerned in W.P.No.16909 of 1996. The said writ petition was heard along with other writ petitions raising similar challenge. By the judgment and 12 order dated 12.11.1998 this Court dismissed all the writ petitions upholding constitutional validity of Section 3A of the Luxuries Tax Act.

20.2. Against the aforesaid judgment and order, petitioner and others approached the Supreme Court by filing Special Leave Petitions which were thereafter converted to civil appeals. It is stated that on 01.04.1999 Supreme Court while issuing notice had passed an interim order to the effect that petitioner and others should register themselves before the authorities under the Luxuries Tax Act and on disposal of the civil appeals if it was found that petitioner and others had collected luxury tax after obtaining interim order from the Supreme Court, they should pay the said amount to the State Government.

20.3. Petitioner and the Hyderabad unit filed monthly returns before the assessing authorities at Visakhapatnam and at Hyderabad for the assessment years 1999-2000 to 2004-2005 disclosing the turnovers relating to supply of cigarettes.

20.4. Subsequently Supreme Court allowed the civil appeals by the judgment and decree dated 20.01.2005 declaring Section 3A as unconstitutional. Judgment and order of this Court was set aside. However, Supreme Court observed that if the petitioner and others had charged luxury tax from customers after obtaining interim orders on 01.04.1999, they would have to pay the said amount to the State Government.

20.5. According to the third respondent, petitioner had collected luxury tax post 01.04.1999. Therefore, notices were issued by the respective assessing authorities seeking payment of tax by the petitioner. Assessing authorities of Visakhapatnam and Hyderabad filed contempt petition before Supreme Court alleging violation of the judgment and order dated 20.01.2005 by the petitioner. However, the contempt petition was disposed of on 06.02.2014 permitting the assessing authorities to issue show cause notice to the petitioner of having collected luxury tax from its consumers/customers but not paying the same to the State Government. All 14 particulars were directed to be furnished in the show cause notice.

20.6. In the meanwhile, State of Andhra Pradesh was bifurcated on 02.06.2014 and the new State of Telangana was carved out in terms of the Andhra Pradesh Reorganization Act, 2014. It is contended that in terms of Section 50 of the aforesaid Act, third respondent is entitled to take steps for recovery of luxury tax collected within the State of Telangana. Consequently on and from 02.06.2014 third respondent has got territorial jurisdiction to proceed against the petitioner. Accordingly notice was issued on 04.09.2014 to which petitioner filed objection that third respondent would have jurisdiction only under the Telangana Value Added Tax Act, 2005 but not under the Luxuries Tax Act. In the light of the objection, the matter was re-examined and upon coming to the conclusion that the third respondent would be the assessing authority, revised show cause notice dated 08.12.2016 was issued proposing recovery of luxury tax of Rs.314,39,51,958.00 collected after 01.04.1999. 15 20.7. This was challenged by the petitioner before this Court in W.P.No.210 of 2017. The same was dismissed on 23.01.2017. Petitioner was directed to file objection to the revised show cause notice dated 08.12.2016, whereafter third respondent was directed to pass appropriate order(s) in accordance with law. However, third respondent had already passed final orders on 24.01.2017 because the dismissal order dated 23.01.2017 was received only on 23.02.2017. Petitioner again filed a writ petition i.e., W.P.No.2905 of 2017 wherein this Court vide order dated 30.01.2017 set aside the order dated 24.01.2017 directing the third respondent to follow the directions contained in the order dated 23.01.2017 in W.P.No.210 of 2017.

20.8. While the matter stood thus, second respondent pursuant to his notice dated 07.08.2015 passed final orders on 04.02.2017 for recovery of Rs.62.80 crores from the petitioner. This has been impugned in the present proceedings, wherein interim order was passed on 18.04.2017 as already extracted above. 16 20.9. Third respondent has contended that interim order dated 18.04.2017 is contrary to the order dated 23.01.2017 passed in W.P.No.210 of 2017 and reiterated vide order dated 30.01.2017 in W.P.No.2905 of 2017. It is stated that it is the third respondent who is the assessing officer of the petitioner and not the second respondent who ought not to have passed the order dated 04.02.2017. Thereafter third respondent has made averments relating to its entitlement to collect luxury tax.

21. Fourth respondent i.e., the Appellate Deputy Commissioner (CT), Vijayawada has filed counter affidavit. From the aforesaid affidavit, it appears that against the recovery order dated 04.02.2017 passed by the second respondent, petitioner had preferred appeal before the fourth respondent in terms of the order of this Court dated 18.04.2017 under Section 11(1) of the Luxuries Tax Act. It further appears that the appeal was dismissed vide the order dated 31.05.2019 by affirming the recovery order.

22. Rejoinder affidavit has been filed by the petitioner. Petitioner has questioned the appellate order dated 31.05.2019 as a mere reproduction of the order passed by the second respondent. There is no independent application of mind. Thereafter the rejoinder affidavit deals with the merit of petitioner's contention that it did not collect any luxury tax post 01.04.1999 and therefore it is not liable to pay any amount to the respondents.

23. On the basis of the pleadings and other materials on record, the short point which arises for consideration is whether this Court would have the territorial jurisdiction to entertain the writ petition assailing the order dated 04.02.2017 passed by the second respondent?

23.1. Corollary to the above the question would be as to whether this Court would have the territorial jurisdiction under Article 226 of the Constitution of India against the appellate order dated 31.05.2019 passed by the fourth respondent upholding the order dated 04.02.2017 passed by the second respondent?

24. Submissions made by learned counsel for the parties are on pleaded lines. However, those have been duly considered.

25. We have already noted that constitutionality of Section 3A of the Luxuries Tax Act was questioned before this Court in a writ proceeding. The challenge was repelled vide the judgment and order dated 12.11.1998, whereafter the matter travelled to the Supreme Court. Supreme Court had passed an interim order on 01.04.1999 directing the dealers including the petitioner to file their returns under the Luxuries Tax Act but the authorities were restrained from taking any action on the returns so filed during pendency of the appeals before Supreme Court. However it was clarified that if the appeals were dismissed the dealers would be liable to pay the due luxury tax in accordance with assessments made on the basis of the returns so filed.

26. By a common judgment and order dated 20.01.2005 Supreme Court declared Section 3A of the 19 Luxuries Tax Act levying luxury tax on tobacco as unconstitutional. However Supreme Court clarified that if the appellants had collected any amount towards luxury tax from the consumers/customers after the interim order was passed by the Supreme Court on 01.04.1999, they would have to pay the said amounts to the respective State Governments.

27. Second respondent filed contempt petition against the petitioner before the Supreme Court alleging that petitioner had continued to collect luxury tax from its customers after the interim order was passed on 01.04.1999, but that was not paid to the State Government, which was in violation of the judgment and order dated 20.01.2005. In the course of the contempt proceeding, Supreme Court appointed chartered accountants to audit the accounts of the petitioner to verify as to whether petitioner had collected any amount towards luxury tax from its customers after 01.04.1999 till 20.01.2005 when the judgment was delivered declaring Section 3A of the Luxuries Tax Act as 20 unconstitutional. The auditors submitted report, whereafter Supreme Court disposed of the contempt petition on 06.02.1994. Relevant portion of the order dated 06.02.2014 reads as under:

In the report filed by the Auditors/Chartered Accountants a clean chit is given to the contemnors/respondents. However, the petitioners dispute the report of the auditors/Chartered Accountants. In the matters of this nature, in our opinion, it may not be appropriate for us to initiate any proceedings, much less proceedings under contempt against the respondents. In that view of the matter, we decline to grant the relief sought for by the petitioners in these contempt petitions. The contempt petitions are disposed of accordingly.

However, we permit the petitioners to issue appropriate show cause notice(s) to the respondents, inter alia, bringing to their notice collected luxury tax from consumers/customers, but have not paid the same to the State Government. We make it clear that in the show cause notice the petitioners will furnish all the particulars available with them to the respondents, so that the respondents can furnish appropriate reply to the petitioners.

After receipt of the show cause notice(s), the respondents are at liberty to take out all such contentions which are available to them, including certain contentions raised in these proceedings apart from maintainability. They are also at liberty to place reliance on the report of the Auditors/Chartered Accountants. After receipt of the reply to the said show 21 cause notice, the petitioners will consider the same and pass appropriate orders in accordance with law after affording opportunity of hearing to the respondents. If, for any reason, the respondents are aggrieved by the orders that may be passed by the petitioners, they are at liberty to question the same before an appropriate forum.

28. From the above, it is seen that Supreme Court had permitted the petitioners therein i.e., taxing authorities including the second respondent to issue appropriate show cause notices furnishing all the particulars as to collection of luxury tax etc. Petitioner and others were granted liberty to raise all contentions available with them while submitting reply. After receipt of reply, the taxing authorities were directed to consider the same and pass appropriate order(s) in accordance with law after complying with the principles of natural justice. If the petitioner and others felt aggrieved by the orders that may be passed by the taxing authorities, they were given liberty to question the same before the appropriate forum.

29. When the third respondent issued a revised show cause notice dated 08.12.2016 the same came to be 22 challenged by the petitioner before this Court in W.P.No.210 of 2017. This Court by the order dated 23.01.2017 dismissed the writ petition. It was held as follows:

18. It appears from the material papers filed before us that the revised show cause notice issued by the 2nd respondent in this writ petition covers two units, one located within the jurisdiction of the CTO, Sarojini Devi Road Circle, Hyderabad, demanding a tax in an amount of Rs.251,59,22,641/- and another relating to the 2nd unit within the jurisdiction of the CTO, Kurupam Market Circle, Visakhapatnam, making a demand to the tune of Rs.62,80,29,344/-. It also remains a matter of record that the CTO, Kurupam Road Circle, who is the 4th respondent herein, has actually issued a separate notice dated 07.08.2015, demanding luxury tax to the tune of Rs.62,80,29,344/-, in relation to the unit at Visakhapatnam.

19. Admittedly, the show cause notice issued by the Commercial Tax officer, Visakhapatnam, dated 07.08.2015, has been challenged separately by way of another writ petition. But it is yet to come up for hearing.

Therefore, if the claims of both the Commercial Tax Officers are actually sustainable in law, assuming that they are sustainable, the petitioner can always raise a valid point that there cannot be overlap of the claims. There cannot be two demands by two different authorities in respect of one liability. But that is a matter that does not strike at the root of the issue of jurisdiction of the respondent. Therefore, the second contention of the learned counsel for the petitioner also does not appeal to us to entertain the writ petition, especially at the stage of 23 show cause notice, when the Supreme Court has granted liberty to whoever it is to issue show cause notice and proceed further. Therefore, we find no justification to entertain the writ petition at this stage.

20. Hence the writ petition is dismissed. It is open to the petitioners to file their objections to the show cause notice within a period of fifteen days, and thereafter, it will be open to the respondent to proceed in accordance with law and in accordance with the order of the Supreme Court. While passing final orders, the concerned authority shall deal with all the issues, uninfluenced by any of the observations made before us, limited for the purpose of disposal of this writ petition.

30. Thus this Court held that the revised show cause notice was issued on liberty being given by Supreme Court. Therefore there was no justification to entertain the challenge to the said show cause notice. In so far the jurisdiction of the Commercial Tax Officer, Visakhapatnam or for that matter Assistant Commissioner of Commercial Taxes, Warangal is concerned, view taken by this Court was that - that is a matter which does not strike at the root of the issue of jurisdiction of the taxing authorities.

31. This is the factual backdrop of the case on which we are called upon to answer the question so framed. 24 Before we answer the question so framed, we find that by the impugned order dated 04.02.2017 passed by the second respondent it has been determined that petitioner had collected Rs.62,80,29,344.00 as luxury tax during the period from March, 1999 to December, 2004 but retained the same taking shelter of the interim order of the Supreme Court dated 01.04.1999. Therefore, petitioner was directed to pay the said amount to the second respondent within 30 days failing which recovery proceedings would be initiated.

32. This Court passed an interim order dated 18.04.2017 directing the petitioner to avail the remedy of statutory appeal under Section 11(1) of the Luxuries Tax Act against the order dated 04.02.2017 without prejudice to the contentions of the petitioner raised in the writ petition. Further the third respondent has been restrained from passing any order.

33. On due consideration we find that the above interim order of this Court is contrary to the order dated 23.01.2017 passed by this Court in W.P.No.210 of 2017 25 whereby challenge to the show cause notice issued by the third respondent was dismissed. This Court had made it clear that it would be open to the taxing authorities to proceed in accordance with law and in terms of the order of Supreme Court.

34. This now brings us to the question framed supra. In the writ petition the only challenge made is to the order dated 04.02.2017 passed by the second respondent i.e., Commercial Tax Officer, Visakhapatnam. Admittedly the said officer is beyond the territorial jurisdiction of this Court. The said order has been affirmed in the appeal by the fourth respondent vide the order dated 31.05.2019. Fourth respondent is the Appellate Deputy Commissioner (CT), Vijayawada, which is also outside the territorial limits of this Court.

35. Whatever may be the litigation history of the case, as of now and in so far the present petition is concerned, the challenge is to the order dated 04.02.2017 passed by the second respondent. We are afraid we cannot entertain and continue with the present proceeding against an authority which is situated outside the territorial 26 jurisdiction of this Court. Since the order dated 04.02.2017 has been affirmed in appeal it would be open to the petitioner to make further challenge or to carry forward the challenge before the higher forum but certainly not before this Court. It is not for this Court to take a decision as to whether petitioner had collected any luxury tax from 01.04.1999 to 20.01.2005 within the present State of Telangana or within the present State of Andhra Pradesh. To answer such a question would require determination of various factual aspects which the High Court exercising writ jurisdiction would not like to enter upon. In any case, it is the contention of the petitioner that it had stopped collecting luxury tax from its customers post 01.04.1999 and as such it is not liable to pay any luxury tax either to the second respondent or to the third respondent. Thus, from the perspective of the petitioner the stand is the same. Since it has not collected luxury tax, it is not liable to pay such tax, be it to the second respondent or to the third respondent. In the circumstances, to restrain the third respondent to perform its statutory duties following the liberty granted 27 by the Supreme Court would not be justified. That apart, no action of the third respondent is under impugnment in the present writ proceeding. Therefore, no order against the third respondent is warranted.

36. That being the position we are not inclined to continue further with the present writ proceeding. However, we have not expressed any opinion on merit. It would be open to the petitioner to challenge the order dated 04.02.2017 as well as the appellate order dated 31.05.2019 before the appropriate forum having jurisdiction.

37. Consequently, the writ petition is dismissed. Interim order passed earlier stands vacated. However, there shall be no order as to costs.

Miscellaneous applications, pending if any, shall stand closed.

______________________________________ UJJAL BHUYAN, CJ ______________________________________ SUREPALLI NANDA, J 10.08.2022 Pln

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