HYDERABAD: In a relief to Andhra Pradesh state, a division bench of the Hyderabad High Court on Friday directed the Centre's service tax department not to enforce its demand for ` 1,500 crore towards service tax and penalties on the state till further orders.
The bench, comprising justices V Ramasubramanian and J Uma Devi, gave this interim direction on a petition filed by AP Beverages Corporation Limited (APBCL) challenging the demand raised by the central service tax department.
In November last year, the principal commissioner of service tax raised the demand, contending that the activities rendered by APBCL in the form of distilleries and retail licensees during the period 2010-11 to 2013-14 as taxable services.
On Friday, AP advocate-general Dammalapati Srinivas contended that the respondent department was not empowered to levy tax on the corporation and urged the court to declare the decision of the respondent as illegal and without jurisdiction. In fact, the levy of service tax by the respondent was contrary to the provisions of the Constitution, he argued.
The bench directed the respondent authorities _ central government and principal commissioner of service tax _ to file their counter affidavits, and adjourned the case by two weeks.
On an earlier occasion, the bench restrained the respondent authorities from taking any coercive steps for recovery of their demand raised against the APBCL towards service tax, secondary and higher education cess.