Allowed

M/s. Nano Enterprises. v. The Commercial Tax Officer

Andhra Pradesh HC15 Jun 2021WP/1167/2021

Case brief

AI extract

What is this about?

The Court allowed writ petitions challenging a consequential tax assessment and penalty order. The authority had reversed a remand order directing tax at 5%, and levied tax at 14.5% allegedly due to the petitioner's non-response. The Court found the order violated appellate directions and principles of natural justice.

What did the court decide?

The impugned Assessment Order and Penalty Order are set aside; the 1st Respondent is directed to issue a fresh show cause notice with a reasonable time limit.

M/s. Nano Enterprises. Vs The Commercial Tax… — GST and Indirect Tax | Andhra Pradesh HC (2021)

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HON'BLE SRI JUSTICE U. DURGA PRASAD RAO AND HON’BLE MS JUSTICE J. UMA DEVI

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Writ Petition Nos.946 and 1167 of 2021

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COMMON ORDER: (Per UDPR,J)

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In writ petition No.946 of 2021 the petitioner challenges the consequential assessment order passed by the 1^st respondent vide A.O.No.ZH371120OD31382, dated 28.11.2020 for the tax period April, 2013 to January, 2016 as contrary to the findings and directions contained in the Appellate Deputy Commissioner’s (Tirupathi) order and violative of principles of natural justice.

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While so, writ petition No.1167 of 2021 is filed by the same petitioner challenging the consequential penalty order vide A.O.No.ZH371220OD70734, dated 10.12.2020 for the tax period from April, 2013 to January, 2016 passed by the 1^st respondent pursuant to his consequential assessment order stated supra.

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2. The petitioner’s case succinctly is thus:

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(a) Petitioner is a registered dealer on the rolls of the 1^st respondent doing business of purchase and sale of machinery spares used in manufacturing units of mango pulp industries. The same is liable to tax @ 5% falling under Entry No.102(2) of the IV Schedule to the A.P. VAT Act, 2005. Accordingly, the petitioner paid tax @ 5% per month and submitted returns. (b) While so, the Deputy Commercial Tax Officer-I, Chittoor-I Circle passed Assessment Order for the tax period from April, 2013 to January, 2016 vide A.O. No.29664, dated 30.07.2016 imposing tax on the said goods

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@ 14.5% by treating the same as a unclassified goods. He also passed penalty order vide A.O.No.48458, dated 31.12.2016 imposing penalty equal to tax even though no penalty is warranted.

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(c) Aggrieved by the Assessment and Penalty Orders, the petitioner filed statutory appeals Nos. Nos.83/2017-18 (CTR) and 84/2017-18 (CTR) before Appellate Deputy Commissioner (CT), Tirupathi and the said authority vide its order dated 08.11.2017 while setting aside the assessment and penalty orders, remanded the matters to the 1^st respondent. The Appellate Deputy Commissioner has virtually allowed the appeal by holding that the goods sold by the petitioner are taxable @ 5% falling under Entry No.102(2) of the IV Schedule to the A.P. VAT Act, 2005 and remanded the matter to the 1^st respondent with a direction to verify the veracity of the documents that will be produced by the petitioner before him and then pass fresh orders as per the provisions of the Act. It was directed that the petitioner should produce documentary evidence before the Assessing Authority covering the disputed turnover for verification as and when called for by him. Incidentally, the appeal relating to the penalty was also remanded with the same observations. (d) Pursuant to the remand order, the 1^st respondent issued notice dated 12.12.2017 calling for information and the petitioner submitted a letter dated 27.12.2017 along with necessary record such as sale invoices, purchase invoices and audited statement like balance sheet, profit and loss account etc., for the relevant period. Thereafter, the 1^st respondent issued show cause notice dated 09.11.2020, proposing to impose tax on the said goods once again @ 14.5% by treating them as unclassified goods and called upon the petitioner to file its objections if any within seven days from the date of

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receipt of the said show cause notice by fixing the date of personal hearing as 27.11.2020 at 11:30 AM.

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(e) The show cause notice was served on the petitioner on 25.11.2020 (but not on 20.11.2020 as mentioned in the impugned order). Therefore, the petitioner had seven days time i.e., till 02.12.2020 for filing written objections. However, even before expiry of seven days time granted in the notice, the 1^st respondent has passed impugned Assessment Order vide A.O.No. ZH371120OD31382, dated 28.11.2020 and within short time thereafter, passed impugned penalty order vide A.O.No. ZH371220OD70734, dated 10.12.2020. Thus, the Assessment Order and Penalty Order are violative of principles of natural justice.

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(f) The impugned order is contrary to the observations and findings of the Appellate Deputy Commissioner, inasmuch as, the Appellate Authority in the remand order, clearly held that the goods sold by the petitioner are liable for tax @ 5% as they fall under Entry No.102(2) of the IV Schedule to the

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A.P. VAT Act, 2005. Therefore, while passing the consequential Assessment Order, the 1^st respondent was bound to follow the said remand directions and impose tax @ 5% only and he had no jurisdiction to once again impose tax @ 14.5% treating the subject goods as unclassified goods.

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Hence, the two writ petitions.

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3 . In writ petition No.946 of 2021 the 1^st respondent filed counter inter alia contending thus:

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(a) Firstly, it is contended that the writ petition is not maintainable in as much as, an efficacious and alternative remedy of appeal is available to him. Nextly, it is contended that the allegations in the writ petition that the 1^st

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respondent violated the principles of natural justice by passing the impugned assessment order without waiting till expiry of the notice period is palpably false. The show cause notice dated 09.11.2020 was served on the petitioner’s address at his principal place of business on 20.11.2020 through RPAD vide postal receipt No.RN434230352IN, Chittoor post office. It is submitted that in the cause title of the writ petition, the petitioner has shown his principal place of business as his address. The dealer failed to avail the opportunity of personal hearing fixed on 27.11.2020, despite having received the show cause notice on 20.11.2020. Hence, final orders were passed on 28.11.2020 confirming the proposals made in the show cause notice and levied tax for an amount of Rs.3,54,847/-. Incidentally, a copy of the show cause notice dated 09.11.2020 was also marked to the personal address of the proprietor, which was admittedly served on the petitioner on 25.11.2020. Having received the same, the petitioner did not make any attempt either to file objections or seek the date of personal hearing adjourned by appearing before the authority on 27.11.2020. Thus, the petitioner was seeking to mislead this court by brandishing an order for cancellation of registration dated 30.04.2019 without actually filing in Court along with his writ petition or pleading the same in the writ petition, probably in a misconceived idea to show that he is no longer available in the principal place of business. However, as stated supra, the address of the petitioner shown in the cause title belies his claim. It is further contended that the Assessment Order is not contrary to the remand direction of the Appellate Deputy Commissioner as alleged. Hence, the petitioner failed to make out any case for him. The assertion of the petitioner that goods

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purchased and sold by him are taxable @ 5% falling under Entry No.102(2) of the IV Schedule to the A.P. VAT Act, 2005 is false and misconceived. The petitioner failed to produce any document disclosing the sale details to whom they have effected sales to know the consignee’s name and to determine the nature of industry/commodity even though sufficient time was granted to the petitioner.

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(b) It is also contended that the petitioner’s assertion that the Appellate Deputy Commissioner (CT), Tirupathi virtually allowed his appeal holding that the goods sold by the petitioner are taxable @ 5% falling under Entry No.102(2) of the IV Schedule to the A.P. VAT Act, 2005 and formally remanded the matter to the Assessing Authority with a direction to verify the veracity of the documents that will be produced by the appellant is not correct. Petitioner failed to produce any document disclosing the sale details to wh they have effected sales to know consignee’s name and to determine the nature of industry/commodity even though sufficient time was granted to the petitioner. Such a determination will definitely bear on the claim of the petitioner that goods purchased and sold by him are taxable @ 5% only.

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(c) Pursuant to the remand order of the appellate authority, the 1^st respondent issued notice dated 12.12.2017 calling for the information, in response to which, the petitioner submitted a letter dated 27.12.2017 along with sales invoices, purchase invoices, balance sheet and profit and loss accounts for the relevant period. However, later on, the petitioner by taking time, has not filed information required for finalization of the case in pursuance to the direction of Appellate Deputy Commissioner. Hence, a show cause notice dated 09.11.2020 was issued to him stating that he has not

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filed sales invoices and other information to dispose of the case. Since the petitioner failed to file reply and also appear for personal hearing, the 1^st respondent passed final orders on 28.11.2020. He thus prayed to dismiss the writ petitions.

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4. Heard Sri G. Narendra Chetty, learned counsel for the petitioner and Government Pleader for Commercial Taxes representing respondents.

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5. The prime argument of learned counsel for the petitioner is that the Appellate Deputy Commissioner, Tirupathi has virtually allowed his appeal challenging the initial Assessment Order and held that the disputed goods sold by the writ petitioner are used exclusively for the fruit pulp industries and therefore they cannot be considered as unclassified goods and rather they fall under Entry No.102(2) of the IV Schedule to the A.P. VAT Act, 2005 and leviable @ 5%. Of course, the Appellate Authority has remanded the matter to the 1^st respondent with a direction that the writ petitioner shall produce the relevant records with regard to the actual turnover and the fresh Assessment Orders have to be passed by the 1^st respondent. Learned counsel emphasized that since the Appellate Authority has confirmed that the goods sold by the petitioner are exigible to tax @ 5% only, no further discussion and decision on the rate of tax applicable is necessary from the 1^st respondent. What was only required was that the 1^st respondent has to verify the records produced by the petitioner and arrive at the total turnover and levy the tax thereon @ 5%. Learned counsel further argued that the 1^st respondent, pursuant to the Appellate Order, issued notice and the petitioner produced some records. Thereafter, again the 1^st respondent issued show cause notice dated 09.11.2020, surprisingly, expressing the view that he was

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going to levy tax @ 14.5% and called for certain records and fixed the date of personal hearing as 27.11.2020. However, the said notice was received by the petitioner only on 25.11.2020 and as per the said notice, though he had 7 days time to submit his objections and records, however, all of sudden the 1^st respondent passed the impugned consequential Assessment Order dated 28.11.2020 as if the petitioner has not responded to the notice and failed to produce the record. In the said Assessment Order, he imposed tax @ 14.5%, which is unjust and illegal. Learned counsel argued that the impugned order fell foul of law inasmuch as it did not conform to the appeal direction, besides, the order violated the principles of natural justice as the same was passed even before the expiry of notice period. He thus prayed to allow the writ petitions. 6. Per contra, the learned Government Pleader for Commercial Taxes representing respondents, while supporting the impugned orders, would argue that the show cause notice dated 09.11.2020 was sent by RPAD to the address of principal place of business of the petitioner’s firm, which was received on 20.11.2020. In the said notice, it was clearly mentioned that the personal hearing was fixed on 27.11.2020 at 11:30 A.M. It was further clearly mentioned that the petitioner has not filed relevant information i.e., their sale details as to whom they have effected the sales to know the consignee’s name and also their nature of industry/commodity and in that view, the 1^st respondent has no other option except to propose tax @ 14.5% treating that the petitioner has effected sale of machinery, spares and brushes covered by HSN Code 9603.50.00 which is not enumerated in any of the schedule-I to IV and thereby falls under residuary schedule-V of A.P VAT

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Act and liable to tax @ 14.5%. He further argued that while so narrating, the petitioner was requested to file his objections along with proof of documentary evidence in support of their contention by 27.11.2020. He vehemently argued that in spite of receiving the notice on 20.11.2020 and noting the contents of the show cause notice, the petitioner did not evince any interest to file his objections and relevant documents or at least to appear and seek for further time if required. In that background, in unavoidable circumstances, the 1^st respondent passed the impugned consequential Assessment Order and thereafter the penalty order. He thus submitted that there was no legal flaw in the orders impugned and prayed to dismiss the writ petitions.

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7. The point for consideration is whether there are merits in the writ petitions to allow.

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8. We gave our anxious consideration to the respective submissions of either counsel. The admitted facts in these cases are that aggrieved by the initial Assessment Order No.29664, dated 30.07.2016 imposing tax on the sale of goods @ 14.5% for the tax period April, 2013 to January, 2016 and also against imposing of penalty vide Assessment Order No.48458, dated 31.12.2016, the petitioner filed appeals Nos.83/2017-18 (CTR) and 84/201718 (CTR).

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9. The Appellate Deputy Commissioner passed order dated 08.11.2017, a perusal of which shows that the Appellate Authority was convinced that the disputed goods sold by the appellant (writ petitioner) were used exclusively by the fruit pulp industries for the treatment of material i.e., fruits and food etc., and it cannot be considered as unclassified item, as they

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fall under Entry No.102 vide Sl.No.2 of the IV Schedule of the A.P. VAT Act, 2005. On discussion of several decisions on legal aspects, the Appellate Authority has pellucidly held thus:

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“ In view of the above discussions and cited case laws, I have gone through the orders of Honble Addl. Commissioner (CT) Legal., A.P., Hyderabad in the case of Nazeer Fabricators, Chittoor and Nova Tech Enterprises, Chittoor and considering the facts of the case, material placed and the Apex Court decision, High Court decision, and STAT decision as stated supra, and other decisions relied by the appellants, I find the disputed goods sold by the appellants used exclusively by the fruit pulp industries for the treatment of materials, i.e., Fruits and food etc., and it cannot be considered as unclassified item, as they fall under Entry 102 vide Sl.No.2 of the Fourth schedule of the APVAT Act, 2005 and leviable at the rate of 5%.”

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Having held so, the Appellate Deputy Commissioner remitted the appeal back to the Assessing Authority with a direction to verify the veracity of the documents that will be produced by the appellant before him and then pass fresh orders as per the provisions of APVAT Act, 2005 and the appellant shall produce the documentary evidence before the Assessing Authority covering the disputed turnover for verification as and when called for by him.

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10. As rightly argued by the learned counsel for the petitioner, it is clear from the appellate order that the Appellate Deputy Commissioner has fixed the rate of tax at 5% and remanded the matter only to verify the records to be produced by the appellant and to come to a conclusion with regard to actual turnover.

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11. Now, coming to the post remand scenario, admittedly the 1^st respondent issued notice dated 12.12.2017 calling the petitioner to produce relevant documents/information in support of their contentions within seven days from the date of receipt of the said notice. Having received the notice on 15.12.2017, the petitioner filed some record relating to purchases and trading account for the years 2013-14, 2014-15 and 2015-16 vide covering letter dated 27.12.2017 and has not filed further information.

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(a) Then the bone of the contention is with regard to the issue of show cause notice dated 09.11.2020. According to the 1^st respondent, he issued show cause notice dated 09.11.2020 to the petitioner by RPAD both to the address of principal place of business as well as to his residence. So far as the notice to the principal place of business is concerned, according to the 1^st respondent, it was served to the said address on 20.11.2020 vide postal track record consignment details, a copy of which is filed along with counter. It shows that the consignment No.RN434230352IN, Chittoor post office was delivered on 20.11.2020. The contention of the 1^st respondent is that in spite of receiving the show cause notice, wherein the date of personal hearing was fixed as 27.11.2020 at 11:30 AM, the petitioner did not respond and having no other go the 1^st respondent passed the impugned consequential Assessment Order dated 28.11.2020 treating that the machinery sold by the petitioner falls under unclassified goods in Schedule-V and levied tax @ 14.5%.

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(b) Whereas, the contention of the petitioner is that the show cause notice addressed to him was received by him on 25.11.2020, whereunder he was having time of seven days i.e., till 02.12.2020 to submit his objections,

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however, the impugned order came to be passed on 28.11.2020 itself by depriving opportunity to file objections. The petitioner too filed a copy of postal track record consignment sheet which shows the consignment No.RN434230366IN was delivered on 25.11.2020. Thus, the dichotomy is that while the petitioner relies upon the show cause notice served to his address which was received by him on 25.11.2020, the 1^st respondent rests on show cause notice sent to the principal place of business of the petitioner which was served on 20.11.2020 itself. Whatever be the reason, the pity is that the object of remand was not properly served. As stated supra, the Appellate Authority remanded the matter with a direction that the petitioner shall produce the relevant records relating to his turnover and the 1^st respondent shall consider the same and fix turnover and levy tax @ 5%. However, in view of the skirmish over the issuance of show cause notice, the assessment was not finalized in the way it was directed by the Appellate Authority. It is true that the petitioner has not given proper explanation as to why he has not responded on receipt of the show cause notice at his principal business address. However, in our considered view, on that ground, the petitioner should not be penalised and precluded from submitting the records and if so, the object of Appellate Order will be defeated.

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12. Accordingly, two writ petitions are allowed setting aside the impugned Assessment Order and Penalty Order with a direction to the 1^st respondent to issue a fresh show cause notice to the petitioner to his principal business address by giving reasonable time therein for filing records and there upon, the petitioner shall produce the relevant record and

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the 1^st respondent shall consider the same and after affording personal hearing to the petitioner, pass a fresh Assessment Order in terms of the directions contained in the order of Appellate Deputy Commissioner expeditiously. No costs.

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As a sequel, interlocutory applications, if any, pending for consideration shall stand closed.

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_________________________ U. DURGA PRASAD RAO, J

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______________ J. UMA DEVI, J

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15^th June, 2021 krk

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THE HON'BLE SRI JUSTICE U.DURGA PRASAD RAO

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