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VAT unconstitutionally paid eligible for refund: P & H HC

The Petitioner, M/s Idea Cellular Ltd., paid the VAT on the transactions of activation of SIM cards, since earlier in case of State of UP v. Union of India, Supreme Court held the activity of activation of SIM cards as exigible to VAT.

CA Sumit Grover

The taxability on activation of SIM has been a long disputed issue, which attained finality post verdict of Hon’ble Supreme Court of India in case of BSNL v Union of India, in 2006.

However, the issue arose as to what would be the consequence of the amount paid as VAT prior to the said judgment
Recently, similar issue came up before Hon’ble High Court of Punjab & Haryana in the matter of Idea Cellular Limited v. Union of India
The Petitioner, M/s Idea Cellular Ltd., paid the VAT on the transactions of activation of SIM cards, since earlier in case of State of UP v. Union of India, Supreme Court held the activity of activation of SIM cards as exigible to VAT. However, post verdict in case of BSNL, the same was outside the purview of VAT. Therefore, petitioner demanded the refund of VAT so paid, as the same was outside the authority of law under article 265 of Constitution of India.
The respondent contended that the BSNL judgment is prospective in nature. Moreover, the state is not empowered to grant refund u/s 20 of Haryana VAT Act in such a case. And the direction for refund shall be the case of unjust enrichment, which is prohibited by law.
Hon’ble High Court held that BSNL judgment is applicable since inception & can’t be construed as prospective in nature.
Further, when the tax has been collected in the absence of authority of law, the High Court is empowered to issue writ for directing refund to the petitioners.
Accordingly, the amount of VAT paid shall be transferred to the Service Tax Department of Union.
Comments:  The said judgment has acted as a breather for the industry and it is expected that other cases on the same ground are disposed of in favor of the assesses, in order to avoid unnecessary hardship.
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