The Value Added Tax (VAT) cannot be imposed on service of terminalling and storage of LPG under the Tamil Nadu Value Added Tax (TNVAT) Act since the same is already subjected to Service Tax, Madras High Court ruled.
A division bench of the Court was hearing a petition filed by M/s SHV Energy Pvt. Ltd against the VAT orders passed by the Madras High Court.
The petitioners in the present case, provides services of terminalling and storage of LPG at Tuticorin Port for which it pays service tax under the head ‘storage and warehousing’ under the Finance Act.
The VAT department of the State held that activities amounted to transfer of right of usage of goods and therefore, the petitioners are liable to pay VAT on the same. Consequently, it passed assessment orders levying Value Added Tax with respect to the consideration received by the company for its services to BPCL.
Before the High Court, the petitioners strenuously contended that there was no transfer of property in goods in the case. There are no deliverable goods in existence. The storage houses of the petitioner were permanent structures and hence not ‘goods’. Also, the services were not exclusive to BPCL. Hence there was no transfer of ownership happening. Except the specific contracts mentioned in Article 366(29A) of the Constitution of India, other composite contracts cannot be split up to tax the sales element in it and their contract was not a contract covered by Article 366(29A).
Quashing the impugned orders, Justice Sivagnanam observed that the petitioner-Assessee cannot be made to suffer two levies of sales tax and service tax.
Upholding the contentions taken by the petitioner, the Court observed that the question would be as to whether the petitioner could be made to suffer two levies, namely, sales tax and service tax. “The third respondent has failed to address the important aspect raised by the petitioner by contending that they having discharged, they cannot be directed to pay VAT for the same transaction.”
Read the full text of the Order below.
