Telangana High Court dismisses ITC Ltd’s plea on luxury tax demand notice

HYDERABAD: The Telangana High Court on Friday dismissed ITC Limited’s plea seeking to quash the demand notice issued by the Commercial Tax Officer, Visakhapatnam, Andhra Pradesh, for payment of Rs 62.80 crore as luxury tax and a similar notice issued by the Assistant Commissioner, Warangal, Telangana.

In the undivided state of AP, under the Luxuries Tax Act 1987, officials charged taxes on hotel services. On August 1, 1996, Section 3A of the Luxuries Tax Act was amended, including tobacco and tobacco products under its purview.

The petitioner, a tobacco marketing industry, having offices in Visakhapatnam in Andhra Pradesh and Secunderabad in Telangana filed a writ in the Andhra Pradesh High Court in Hyderabad, contesting the imposition of a luxuries tax on cigarettes and disputing the legitimacy of Section 3A of the Luxuries Tax Act.

The High Court then dismissed the writ petition in 1996. The petitioner challenged this at the Supreme Court by filing a Special Leave Petition.After hearing a similar batch of petitions, the Supreme Court ruled that Section 3A of the Luxuries Tax Act, which imposes a luxury tax on cigarettes, is unconstitutional.

However, in the light of the State Governments’ plea, the Supreme Court ruled that if the appellants had received any money towards luxury tax from consumers/customers after obtaining interim orders from the Supreme Court, they would pay the same sums to the respective State governments.

Following that, the respondents filed show cause notices to the petitioner, alleging that the petitioners wrongfully retained Rs 62.80 crore collected as the luxury tax. The petitioner rejected the charge.

Counsel for the petitioner submitted that the purported show cause notice and the impugned order were issued and passed more than eleven years after the Supreme Court knocked down the Luxuries Tax Act.
After hearing both the arguments, a bench of the High Court comprising Chief Justice Ujjal Bhuyan and Justice N Nanda decided not to proceed with the current writ proceedings.

The bench, however, said: “We have not made any judgments on the merit. The petitioner might appeal both the February 4, 2017 ruling and the May 31, 2019 appellate order before the proper forum with jurisdiction. As a result, the writ petition is rejected, and the prior interim ruling is reversed.”

HYDERABAD: The Telangana High Court on Friday dismissed ITC Limited’s plea seeking to quash the demand notice issued by the Commercial Tax Officer, Visakhapatnam, Andhra Pradesh, for payment of Rs 62.80 crore as luxury tax and a similar notice issued by the Assistant Commissioner, Warangal, Telangana. In the undivided state of AP, under the Luxuries Tax Act 1987, officials charged taxes on hotel services. On August 1, 1996, Section 3A of the Luxuries Tax Act was amended, including tobacco and tobacco products under its purview. The petitioner, a tobacco marketing industry, having offices in Visakhapatnam in Andhra Pradesh and Secunderabad in Telangana filed a writ in the Andhra Pradesh High Court in Hyderabad, contesting the imposition of a luxuries tax on cigarettes and disputing the legitimacy of Section 3A of the Luxuries Tax Act. The High Court then dismissed the writ petition in 1996. The petitioner challenged this at the Supreme Court by filing a Special Leave Petition.After hearing a similar batch of petitions, the Supreme Court ruled that Section 3A of the Luxuries Tax Act, which imposes a luxury tax on cigarettes, is unconstitutional. However, in the light of the State Governments’ plea, the Supreme Court ruled that if the appellants had received any money towards luxury tax from consumers/customers after obtaining interim orders from the Supreme Court, they would pay the same sums to the respective State governments. Following that, the respondents filed show cause notices to the petitioner, alleging that the petitioners wrongfully retained Rs 62.80 crore collected as the luxury tax. The petitioner rejected the charge. Counsel for the petitioner submitted that the purported show cause notice and the impugned order were issued and passed more than eleven years after the Supreme Court knocked down the Luxuries Tax Act. After hearing both the arguments, a bench of the High Court comprising Chief Justice Ujjal Bhuyan and Justice N Nanda decided not to proceed with the current writ proceedings. The bench, however, said: “We have not made any judgments on the merit. The petitioner might appeal both the February 4, 2017 ruling and the May 31, 2019 appellate order before the proper forum with jurisdiction. As a result, the writ petition is rejected, and the prior interim ruling is reversed.”