Telangana High Court Upholds Mayuri Film's Tax Benefit, Says Unrescinded Notification Can't Be Overridden

The Telangana High Court on 24 July held that a tax concession granted through a Government notification cannot be withdrawn merely because a new entry is introduced in a tax schedule, unless the notification granting the benefit is expressly withdrawn, superseded or rescinded.

A Division Bench of Justices P. Sam Koshy and Suddala Chalapathi Rao upheld the concessional sales tax benefit claimed by Mayuri Film Distributors on the sale of audio cassettes, holding that the Government Order granting the concession continued to operate during the relevant assessment year. It held:

“...The mere amendment of an entry in the First Schedule cannot, by necessary implication, nullify a concession granted under a statutory notification. Admittedly, G.O.Ms.No.252, dt.19.05.1995, had not been rescinded during the relevant assessment year. Consequently, the introduction of Entry 10 in the First Schedule by G.O.Ms.No.910, dt.31.12.1999, did not have the effect of withdrawing the concessional rate granted to electronic goods, as was held by the learned STAT.”

The dispute arose during the assessment year 2000-01 when Mayuri Film Distributors, a dealer engaged in the distribution of audio cassettes, claimed the concessional rate of sales tax available under G.O.Ms. No. 252 dated 19 May 1995.

The Government Order issued under Section 9(1) of the Andhra Pradesh General Sales Tax Act granted a concessional rate of tax to specified electronic goods based on the classification made by the Electronics Commission of India. Audio cassettes were included in the classification of electronic goods and dealers claimed the benefit of the reduced tax rate.

The Revenue contended that after the introduction of Entry 10 in the First Schedule to the Andhra Pradesh General Sales Tax Act from 1 January 2000, audio cassettes became taxable at 12%, and the earlier concession was no longer available.

The Sales Tax Appellate Tribunal rejected the Revenue's contention and held that the Government Order granting the concession remained valid as it had not been rescinded. The Revenue challenged the Tribunal's order before the High Court.

The High Court observed that the Electronics Commission of India had classified audio cassettes as electronic goods and that the Government had relied on the same classification while issuing the concession notification.

It held that a notification granting a tax concession has an independent legal effect and continues to remain in force until it is specifically withdrawn or rescinded. The Court held that the mere amendment of the First Schedule could not take away the benefit granted under the earlier Government Order. The Bench observed:

“Since the Government Order was neither withdrawn nor superseded, the benefit granted thereunder could not be denied merely due to the introduction of Entry 10 in the First Schedule to the Act…”

Accordingly, the High Court dismissed the Tax Revision Case filed by the Revenue and upheld the order of the Sales Tax Appellate Tribunal granting the concessional rate of tax to Mayuri Film Distributors.

For the Petitioner/Revenue: Sri Swaroop Oorila, Special Government Pleader for State Tax.

For the Respondent/Assessee: Sri Tarun Chadha, representing Sri Karthik Ramana Puttamreddy, Advocate.