Life Tax On Vehicle Should Be On The Cost, Excluding GST And Cess: Andhra Pradesh High Court Directs Refund

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

The bench of Justice V. Sujatha has observed 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.

The assessee or petitioner has purchased the Hyundai Venue. At the time of purchase, the petitioner paid 14% CGST and 14% SGST. The petitioner paid a compensation cess under the provisions of the Goods and Service Tax Act, of 2017.

The petitioner was forced to pay 14% towards the tax allegedly levied under Section 3 of the Andhra Pradesh Motor Vehicles Taxation Act, 1963, R/w 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, and the petitioner cannot be deprived of any property except by the authority of law. Therefore, no tax can be levied, collected, or demanded by the respondent registering authorities unless they are explicitly and clearly authorized under the Act.

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 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 4 weeks.

Advocate Yashodhan argued for the petitioner. 

Case Title: Valluru Pavan Chand Versus State of AP

Citation: 2023 LiveLaw (AP) 29

Case No.: Writ Petition Nos.12089 Of 2019 and 3049 Of 2021

Date: 13/06/2023

Click Here To Read The Order