HYDERABAD: The Telangana High Court on Friday dismissed the plea of the tobacco division of the ITC Limited to quash recovery proceedings worth Rs 62.80 crore issued by the commercial tax department, Visakhapatnam circle of Andhra Pradesh, in 2017.
The commercial tax officials of Visakhapatnam had stated that the ITC retained the said amount with it, after it had collected luxury tax under the provision of Andhra Pradesh Tax on Luxuries Act 1987 on cigarettes from its consumers between 1999 and 2005.
The Warangal range had issued a separate notice to the ITC in 2016, asking why it should not recover Rs 314.39 crore luxury tax collected after March 1, 1999, in Telangana state.
The court observed that it would not be appropriate to restrain the commercial tax department of Warangal from issuing proceedings to collect luxury tax for the period of 1999 to 2005. However, as the proceedings issued by the Warangal officials were not under challenge, the court did not issue orders over the petition.
Andhra Pradesh Tax on Luxuries Act, 1987 was enacted for the purpose of levying tax on services provided in hotels. Subsequently, in 1996, tobacco and tobacco products were brought within the purview of luxury tax.
In 2005, the Supreme Court declared levying luxury tax on tobacco as unconstitutional. However, it directed that if the manufacturers had collected any amount towards luxury tax from consumers/customers, they would pay the said amounts to the respective state governments.
In relation to the controversy over non-payment of collected luxury tax between 1999 and 2005 by manufacturers, the Supreme Court, in 2014, ordered the states to proceed for recovery. Based on the order, commercial tax departments from both states initiated recovery proceedings.
In the petition filed by ITC against the commercial tax department Visakhapatnam range, the Telangana High Court said it had no jurisdiction to decide the matter, hence dismissed it. The bench clearly stated that it had not dismissed the case on merits and the ITC could approach the appropriate forum of that jurisdiction.
