Reliance Communications' plea against Andhra tax dismissed
Tuesday, 30 September 2008, 12:14 Hrs
New Delhi: The Supreme Court Monday dismissed a lawsuit by Anil Ambani-promoted Reliance Communications challenging an Andhra Pradesh High Court order asking it to pay the state government one-third of the 430 million value added tax (VAT) imposed on the sale of its recharge vouchers. A bench headed by Justice S.B. Sinha dismissed the lawsuit and asked the high court to dispose of within four weeks the company's plea against the state government order for imposing VAT on its recharge vouchers and various value added services. The high court had asked Reliance Communication to first pay one-third of its tax liability to the government before Sept 30. It said it would adjudicate its plea only after the money was paid. The Andhra Pradesh government has imposed 4 to 12.6 percent VAT on Reliance Communication mobile telephone recharge vouchers and various types of value-added services provided by it. Though a single bench of the high court suspended the recovery of tax from Reliance, a division bench of the same court modified the order and turned it into an interim stay. The bench ruled that the interim stay would continue only if Reliance paid one-third of its tax liabilities on or before Sep 30 and that the order would stand cancelled in case the company defaulted. Reliance challenged the levying of the tax, contending its get-started-kit (GSK) was like a recharge voucher and was meant to activate the account and connection of a subscriber. It contended that like recharge vouchers, GSKs become waste paper after activation of connection and, therefore, were identical to recharge vouchers. Hence, they could not be treated as "goods" on which VAT is imposed, the company maintained. Recharge vouchers and GSKs cannot be considered to be "goods" as these only served as an advance collection mechanism for the fee charged by the service provider and would not fall within the meaning of "goods" as defined in the Andhra Pradesh VAT Act, Reliance contended. Similarly, value added Services like SMS, ringtones and games were pure services and thus, beyond the definition of the term "goods", the company said.