HC Upholds VAT Liability on Diesel Used in Telecom Towers; Vodafone Fails to Prove Tax-Paid Purchases

M/s Vodafone South Limited, engaged in providing mobile telecommunication services, installed mobile towers across Uttar Pradesh to ensure uninterrupted network connectivity. For a continuous power supply, diesel generator sets were installed at these tower sites. The assessee entered into agreements with service providers for the operation and maintenance of these generator sets, including refuelling of diesel. During assessment for A.Y. 2008-09 under the UP VAT Act, the Assessing Authority found that although payments were made to service providers for diesel consumption, no VAT had been shown as paid on such diesel purchases. Treating the assessee as having purchased diesel from unregistered dealers, VAT and entry tax were levied. The additions were upheld by the Commercial Tax Tribunal, leading to the present revisions before the High Court.

Issue Before HC: Whether diesel consumed by service providers in operating generator sets for telecom towers can be treated as taxable purchases by the assessee under the UP VAT Act when the assessee fails to prove that such diesel was purchased from registered dealers and had already suffered tax.

HC’s Decision: The Hon’ble High Court dismissed the revisions and upheld the levy of VAT. The Court held that once the assessee admitted payment to service providers for running diesel generator sets, the burden squarely lay on the assessee to establish, through cogent documentary evidence, that the diesel used was purchased from registered dealers within the State and had already suffered VAT. Mere reliance on contractual agreements with service providers was held insufficient.

The Court noted that at no stage were bills, invoices, or purchase details produced to demonstrate tax-paid procurement. Since the proceedings were regular assessment proceedings and not reassessment, the onus remained on the assessee. As there was no proof, the tax authorities were right in treating the diesel as purchases from unregistered dealers and levying VAT.

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