The Supreme Court has stayed the tax recovery demand of over Rs 317 crore raised by the Karnataka tax department on Antrix Corporation, the commercial arm of Indian Space Research Organisation, for the value added tax (VAT) arrears payable for July 2008 to March 2014.
A Bench led by Justice Prashant Kumar sought response from the state tax department on an application by Antrix and posted the matter for further hearing in August.
Antrix in its plea sought modification/clarification that such stay of recovery also extends to subsequent periods of dispute i.e., August 2008 to March 2014. The PSU said that it was constrained to move the fresh application since the interpretation of the Karnataka Commercial Taxes department was that the stay of recovery ordered by the SC was only for the period April 2005 to July 2008 and not for subsequent periods.
Additional solicitor general N Venkatraman, appearing for Antrix, argued that the apex court in 2010 had stayed the recovery of tax demand for April 2005 to July 2008. Now, the subsequent demand had been raised on June 9 requiring the company to discharge the liability within seven days even though the apex court was seized of the matter, he added.
Antrix further said that its appeal had also raised an important issue which had far reaching implications on tax jurisprudence – whether the transaction in question was liable to VAT or Service Tax, “consequently raising a question as to whether the competence to tax the transaction was with the State of Karnataka or the Central Government.”
According to the plea, Antrix’s held a bona fide belief that the transaction was amenable to service tax and had remitted the entire liability to the Central government. However, the Karnataka government initiated several proceedings for recovering VAT from Antrix, it stated, adding that this is a not a case of “willful suppression or evasion of tax with malafide intent.”
To the contrary, full liability of service tax stands discharged by Antrix, it added.
The state tax authorities had in 2008 issued show cause notices to Antrix asking it as to why the turnover related to rental receipts towards lease of space segment capacity in the transponders should not be taxed under the provisions of the Karnataka VAT Act as constituting the transfer of the right to use goods.
Subsequently, various demand notices issued to the company were stayed by the SC in 2010, and the case is still pending.
Source #ETa
