Andhra Pradesh High Court: Life Tax is Collected on the Net Invoice Price from Sale of Vehicle and Not on Ex-Showroom Price

Andhra Pradesh High Court: Life Tax is Collected on the Net Invoice Price from Sale of Vehicle and Not on Ex-Showroom Price

The Andhra Pradesh High Court has observed that life tax is to be collected from the vehicle owner upon the sale based on the net invoice price of the vehicle and not upon the ex-showroom price of the vehicle.

The single judge Justice V. Sujatha has ruled that the life tax can be levied only on the cost of the vehicle under the 6th schedule of the A.P. Motor Vehicles Taxation Act, 1963.

In the present case, the assessee or petitioner had purchased the Hyundai Venue. At the time of purchase, the petitioner paid 14% Central Goods and Services Taxes (CGST) and 14% State Goods and Services Tax (SGST). The petitioner paid a compensation cess under the provisions of the Goods and Service Tax Act, of 2017.

The petitioner claimed that he was forced to pay 14% towards the tax allegedly levied under Section 3 of the Andhra Pradesh Motor Vehicles Taxation Act, 1963, Read with Schedule VI and Andhra Pradesh Motor Vehicles Taxation Rules, 1963, on the price shown in the invoice, which was inclusive of Central GST, State GST, and Cess.

The petitioner contended that the authority did not have any power to collect tax on the basis of “net invoice price,” which was inclusive of CGST, SGST and compensation cess as well. Articles 265 and 300-A of the Constitution of India provide that no tax shall be levied or collected except by the authority of law. Therefore, no tax could be levied, collected, or demanded by the respondent registering authorities unless they are explicitly and clearly authorized under the Act.

Per contra, the department contended that the life tax on motor cars is levied on the cost of the vehicle as per the Sixth Schedule to the Fourth Proviso of Section 3(2) of the Andhra Pradesh Motor Vehicles Taxation Act, 1963. The cost of the vehicle is the actual consideration paid by the purchaser on the purchase of the motor vehicle from the dealer. This consideration also includes IGST and compensation cess under GST, which comprise the total amount paid by the purchaser. As such, the cost of the vehicle cannot be seen as excluding some part of the amount (consideration) paid by the purchaser. Hence, life tax is to be paid on the total invoice cost of the vehicle.

The Court referred the decision passed in the case of R.N. Hemendranath Reddy vs. State of Telangana, wherein the Court had observed that life tax is to be collected from a vehicle owner produced for registration upon the sale based on the net invoice price of the vehicle and not upon the ex-showroom price of the vehicle.

Thereby, the Court upheld that life tax can be levied only on the ‘cost of the vehicle’ under Sixth Schedule to the A.P. Motor Vehicles Taxation Act, 1963, unless the contrary is carved out by way of notification in that behalf. In the absence of any notification in that behalf, life tax can be levied only on the ‘cost of the vehicle.’

The Court observed, “the cost of the vehicle cannot be seen as excluding some part of the amount (consideration) paid by the purchaser. Hence, life tax is to be made on the total invoice cost of the vehicle.”

Averting to the present case, the Court noted that the total invoice price was Rs. 31,50,000 which was the consideration paid by the petitioner.

It was also clear that the petitioner had purchased the vehicle in the year 2019 and had filed the present writ petition in the same year, which was admittedly within the period of limitation prescribed in the Limitation Act, 1963, viz., three years.

In view of the observations, the Court while allowing the petition directed the levy of Life Tax on the cost of the motor vehicle excluding Central GST, State GST, and Cess and directed a refund of the amount that was collected in excess of the life tax payable by the petitioners under the Sixth Schedule to the Act on the invoice sale price within a period of four weeks.