Allowed

M/S Swamy Agencies v. the Asst Commissioner

Andhra Pradesh HC21 Sept 2023WP/6625/2021

Case brief

AI extract

What is this about?

This writ petition challenges an assessment order denying the petitioner's eligibility for GST composition levy and an attachment notice. The court held that turnover under the preceding VAT regime must be considered for composition eligibility and set aside orders based on an erroneous turnover calculation in the assessment notice.

What did the court decide?

Impugned assessment order, appellate order, and attachment notice were set aside and the matter remanded to the assessing authority to pass orders afresh.

M/S Swamy Agencies Vs the Asst Commissioner — Income Tax | Andhra Pradesh HC (2023)

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HONOURABLE SRI JUSTICE U.DURGA PRASAD RAO AND HON’BLE SMT. JUSTICE VENKATA JYOTHIRMAI PRATAPA

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Writ Petition No.6625 of 2021

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ORDER :( Per Hon’ble Smt. Justice Venkata Jyothirmai Pratapa)

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The Challenge in this Writ Petition is against the proceedings dated 23.01.2021, passed by the 2^nd respondent as arbitrary and in violation of principles of natural justice and consequently, set aside the said order and the attachment notice dated 11.02.2021, issued by 1^st respondent attaching the bank account of the petitioner lying with 4^th respondent demanding the tax of Rs.10,05,650/- SGST and Rs.10,05,650/- as CGST.

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The case of the petitioner succinctly :

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Petitioner is a proprietary concern engaged in the business

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of Stainless steel articles and home appliances situated at Parvathipuram of Vizianagaram District. Petitioner is a registered dealer under A.P.VAT Act, 2005 (For short „Act‟) and later registered on the rolls of the 1^st respondent under GST Act, 2017. First respondent completed the assessment of the petitioner firm for the tax period April-2017 to March-2019, dated 25.02.2020 and the same was served on the petitioner on the very same day. The

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UDPR,J & VJP,J

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Respondent No.1 passed the assessment proceedings holding that petitioner has chosen registration as regular since migrated to GST w.e.f., 01.07.2017. Thereafter, petitioner opted to pay the tax under the composition w.e.f. 01.10.2017, by filing GSTR-4 returns and paid tax @ 1%. The assessing authority i.e., first respondent having observed that petitioner has crossed thresh hold limit of one crore aggregate turn over during the year 20172018 held that he is not eligible to pay tax under the composition. Assessing authority assessed the appellant under composition for the period from 01.07.2017 to 21.03.2018. For the remaining period, appellant was assessed as regular dealer.Accordingly, the assessing authority levied tax amount of Rs.20,11,300/-.

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(b) The petitioner preferred statutory appeal before the 2^nd respondent in Form GST APL-1 electronically on 16.03.2020, as prescribed under Section 107 of A.P. GST Act r/w. Rule (108) (1) of A.P. GST Rules. Respondent No.2 dismissed the appeal. He failed to consider the specific contention of the petitioner that the turnover relatable to the period 01.04.2017 to 30.06.2017, under VAT Act, amounting to Rs.20,52,478/- cannot be computed under the GST regime. Respondent No.2 passed order holding that turn over would be computed basing on the financial year

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and petitioner is not eligible for composition, since he crossed the turnover of one crore at thresh hold. Appeal lies before the GST tribunal against the order passed by the 2^nd respondent but tribunal is yet to be constituted in the state of Andhra Pradesh. Assessment order is not valid since issued without electronically generated DIN number. The aggregate turnover of the appellant has never crossed Rs.1,00,00,000/- and it is only Rs.86,64,041/during the period from 01.07.2017 to 31.03.2018. Hence the levy of higher tax is not tenable.

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(c) As per section 67 (1) of GST Act, 2017 joint commissioner is the authority to conduct inspection as proper officer. Respondent No.1failed to grant reasonable opportunity to the petitioner to place his contention before him hence, it is a case of violation of principles of natural justice.

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3. CONTENTION OF THE RESPONDENTS :

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As per Section 73 and 74 of A.P. GST Act, 2017, respondent No.1 has got jurisdiction to pass impugned order. Petitioner opted to pay tax as composite dealer from 01.10.2017. After giving ample opportunity to the petitioner, the appellate authority dismissed the appeal confirming the assessment order passed on

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25.02.2020. Tax period means the period for which, the return is required to be furnished. For monthly return, tax period is one calendar month, for a quarterly return tax period is one quarter comprising three (03) months, such as April-June, JulySeptember, October-December and January-March and for annual return, the tax period is financial year.

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(b) Computation of aggregate turn over for the financial year 2017-2018 is justified. Joint Commissioner (ST) of the division is authorized to empower the proper officer to assess correct tax payable by registered person, in case of any ambiguity found in the returns filed. In the present case, though the petitioner‟s business crossed the thresh hold mark, they did not choose regular tax scheme with a view to evade tax. Petitioner appeared before the assessing officer, but not filed any written objections. After hearing authorized representative of the petitioner, the appellate authority passed final orders. The question of violation of principles of natural justice doesn‟t arise in this case. Prays for dismissal of the petition.

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UDPR,J & VJP,J

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Heard Sri C.Sanjeeva Rao, learned counsel for

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petitioner and learned G.P. for commercial tax-1 for the respondents.

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Learned counsel for the petitioner would submit that the orders passed by the respondents are improper and in correct. Respondents having accepted the option exercised by the petitioner to pay the tax at one percent of the total turnover in terms of the composite scheme, cannot turn around and reject the option exercised and consequently direct the petitioner to

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pay GST as per the regular rates. He would further argue that Section 10 (1) of the Act doesn‟t reveal inclusion of turnover under VAT regime for the purpose of determining the tax payable. The provisions of GST Act are not retrospective in operation and that the word preceding financial year has no relevance for the tax paid for the financial year 2017-2018. Respondent No.1 has no jurisdiction to pass assessment order, without giving proper opportunity to the petitioner, the impugned orders are passed.

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Refuting the above submissions, learned Government Pleader would submit that, the option exercised by the petitioner in web portal cannot be accepted without verification. In the GST

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regime filling of the returns based on a self-declaration. It doesn‟t mean that the authorities have accepted the scheme opted by the petitioner. Having regard to the fact that, the GST regime came into effect from 01.07.2017, naturally it took some time for the officials to process all the options exercised by the dealers. Learned counsel further submits that, had the intention of the legislature was to exclude the provisions of the VAT Act, or make the provisions of GST prospective in operation, they would have made a reference to that effect in section 10 of the GST Act itself. In the absence of the same, it cannot be said that the word „ preceding year ‟ excludes turn over declared during the VAT regime.

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At this juncture it is beneficial to refer the Judgment of Hon‟ble Apex Court, which is a guiding precedent for appreciating the issue relating to tax. In MC Dowell & Company Limited Vs. The Commercial Tax Officer¹ namely, that “there is no equity about a tax, there is no presumption as to a tax, nothing is to be read in and nothing is to be implied”. Keeping in mind, the observations referred to supra, we shall now proceed to discuss the meaning of the word „preceding year‟. Learned

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1 AIR 1986 SC 649

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Government Pleader for Commercial Taxes to buttress their contention placed reliance on the order passed by the co-ordinate bench of this Court in Writ petition No.10350 of 2020, dated 11.11.2020, wherein a question that fell for consideration was the meaning of the word „ preceding financial year ‟ appearing in section 10 (1) of the Act. It is apt to mention that after the advent of GST regime, transitional provisions are introduced with the object of allowing seamless flow of credit and the supplies under the GST Regime, which have already suffered tax once, do not suffer tax again.

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It is necessary to extract the relevant paras in the

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order:

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“8. In order to appreciate the same, it will be useful to refer to Section 10(1) of the AP GST Act, which is as under:

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“10. Composition levy

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(1) Notwithstanding anything to the contrary contained in this Act but subject to the provisions of sub-sections (3) and (4) of section 9, a registered person, whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees may opt to pay, in lieu of the tax payable by him under sub-section (1) of section 9, an amount of tax calculated at such rate as may be prescribed, but not exceeding,-

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Rate of Tax of Composition levy

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(a) one percent of the turnover in State in case of manufacturer,

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(b) two and a half percent of the turnover in State in case of persons engaged in making supplies referred to in clause (b)of paragraph 6 of Schedule II; and

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(c) half percent of the turnover in State in case of other suppliers, subject to such conditions and restrictions as maybe prescribed :

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Provided that the Government may, by notification, increase the said limit of fifty lakh rupees to such higher amount, not exceeding one crore and fifty lakh rupees, as may be recommended by the Council.

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Provided further that a person who opts to pay tax under clause (a)or clause (b) or clause (c) may supply services (other than those referred to in clause (b) of paragraph 6 of Schedule II;), of value not exceeding ten per cent of turnover in the State in the preceding financial year or five lakh rupees, whichever is higher.”

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A reading of Section 10 (1) of A.P. GST Act, 2017 would indicate that notwithstanding anything contrary to the provisions of the Act, but, subject to Sub-Sections (3) and (4) of Section 9, a registered person, whose aggregate turnover in the “preceding financial year” does not exceed fifty lakh rupees may opt to pay tax as prescribed, but not exceeding 1% of the turnover in State in case of manufacturer; 2 ½ % of the turnover in State in case of persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II; and ½ % of the turnover in State in case of other suppliers.

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Sub-Section (3) of Section 10 postulates that the option availed of by a registered person under sub-section (1) shall lapse with effect from the day on which his aggregate turnover during a financial year exceeds the limit specified under sub-section (1).

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From the above it is pellucid that option exercised by the registered person under sub-Section (1) of Section 10 would lapse if his aggregate turn over during the financial year exceeds the limit prescribed under Sub-Section (1). While a reading of Section10 (1), inter alia, would show that where the aggregate

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UDPR,J & VJP,J

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turnover in the preceding financial year does not exceed Rs.50 lakhs, the registered tax payer may opt to pay tax as prescribed, but not exceeding 1% of the turnover in State in case of manufacturer; 2½ % of the turnover in case of persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II; and ½ % of the turnover in State in case of other suppliers.”

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In the instant case, the dispute in so far as interpretation of the word „previous financial year‟ arose only for the financial year 2017-2018, as the GST regime commenced from 1.7.2017. If the intention of the legislature was that the turnover of the financial year under GST regime is only to be taken into consideration, then there would have been a clarification of the word „preceding financial year‟. Section 10 (1) of the Act would not carry any meaning if such an interpretation, as sought by the petitioner, is given, namely, the turnover in the VAT regime has to be excluded while computing the tax liability. If such a narrow interpretation to Section 10(1) is given, as observed earlier, many of the businessmen would not only escape payment of GST for the year 2017-2018, though the self-declaration made is incorrect or false, but also end up paying minimum GST though their turn over is on a higher side. It is to be noted here that word „preceding financial year‟ is appearing at more than one place in Section 10 itself, hence, it cannot be said that there was any error in usage of the word “preceding” in Section 10. The legislature was conscious enough, when the word „preceding‟ was used before the word 10 „financial year‟ in Section 10(1) and also in the second proviso to Section 10(1)(c), while extending benefits under a scheme. The legislature in its wisdom observed that such a benefit can be extended to those whose turn over in the previous financial year does not exceed Rs.50 lakhs. Therefore, the word „preceding‟ appearing before the word „financial year‟ cannot be ignored and if done, one would doing mockery of the words „financial year does

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UDPR,J & VJP,J

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not exceed Rs.50 lakhs‟. Therefore, to fix a parameter for extending the benefits under the scheme and for payment of less tax in case of manufacturers and for those engaged in making supplies, the legislature thought it fit to take into account the turnover of the previous financial year. In so far as the financial year 2017-2018 under GST regime is concerned, the preceding financial year would be 2016-2017 under the VAT regime. The collection of tax under the GST Act, 2017 is not in addition to the provisions of VAT, but, this is being introduced as a substitute to VAT Act to deal with both goods and services, so as to maintain uniformity across the length and breadth of the country. This has been introduced to meet the requirements under the recommendations of the GST council, in which all the States and Union territories are the stakeholders.

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Hence, we find no illegality in taking into consideration the previous year‟s turn over (under VAT regime) for the purpose of extending benefits under the composite scheme or for collecting taxes and penalty.

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In the light of the discussion and finding as to word „ preceding financial year’ as per section 10 (1) of the Act, it is clear that, the preceding financial year would be 2016-2017 under the VAT Regime for the financial year 2017-2018, under GST regime is concerned. Hence the argument advanced by the learned counsel for the petitioner regarding the application of Section 10 (1) of A.P. GST Act falls to ground.

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UDPR,J & VJP,J

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9. Learned counsel for the petitioner took us to the

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assessment order passed by the first respondent, vide order dated

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25.05.2020:

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Turnover as per the returns filed: 2018-2019

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April 2018 to June 2018 : Rs.13,40,424-00 2. July 2018 to September 2018 : Rs.29,62,392-00 3. October 2018 to December 2018 : Rs.29,67,447-00 4. January 2018 to March 2018 : Rs.20,29,185-00 ----------------------Total turnover reported : Rs.92,99,448-00

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Turnovers as per Books of Accounts:

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S.No.	Taxable supplies	Turnover	CGST	SGST	Total
1	12%goods	6854437	411266	411266	822532
2	18%goods	3331731	299856	299856	599712
3	28%goods	1261411	176598	176598	353195
	Total	1,14,47,579	887720	887720	1775439

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Output tax due : Rs.17,75,439/-.

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Turnover as per books of account : Rs.1,14,47,579-00 Turnover as per GSTR-4 returns : Rs.92,99,448-00 Difference turnover : Rs.21,48,131-00

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Accordingly, the assessing authority arrived the turnover of

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Rs.21,48,131/- showing it as differential turn over and imposed

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tax for the said amount under SGST and CGST commenting that

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UDPR,J & VJP,J

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the dealer willfully suppressed the turn over with an intention to avoid the tax.

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Learned counsel for the petitioner brought it to the notice of the court that, while calculating turn over for the period 2018-2019, the authorities committed a glaring mistake. They have calculated the turn over for the 4^th quarter as Rs.20,29,185/instead of correct GSTR 4 filed by them for January-2019 to March-2019 as Rs.41,85,639/-.

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Learned authority mistakenly took the turn over for January-2018 to March-2018, which does not fall for the financial year April-2018 to March-2019. Learned counsel in the rejoinder at para 9 clearly mentioned that the assessment order suffers from grave infirmity since the turn over for the period January2018 to March-2018 i.e., Rs.20,29,185/- was taken, as against the turn over Rs.41,85,639/- for January-2019 to March-2019. Therefore, the total turnover for the tax period April-2018 to March-2019 as per the GSTR-4 returns the correct turnover is Rs.1,14,55,902/-, whereas, the order was passed by showing the wrong turn over instead of actual turn over.

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UDPR,J & VJP,J

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In support of his contention, learned counsel filed along with rejoinder the documents, which are uploaded in the web portal for the relevant quarters. The appellate authority failed to observe the same in the impugned orders. No contra material placed before this Court. The assessment order passed by the first respondent is vivid on this point. For the computation of turn over for the year 2018-2019 is concerned, as rightly argued by the learned counsel it must be April-2018 to June-2018 first quarter, July-2018 to September-2018 second quarter, October2018 to December-2018 3rd quarter, then January-2019 to March2019 4^th quarter. Instead of doing the same, assessing authority has wrongly taken the 4^th quarter as January-2018 to March-2018 in the place of January-2019 to March-2019.

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Accordingly, this Writ petition is allowed. Impugned order passed by the 1^st respondent, which was confirmed by the 2^nd respondent and the consequential attachment notice issued to the 4^th respondent are hereby set aside. The matter is remanded to the 1^st respondent for passing orders afresh according to law by giving opportunity of personal hearing to both parties. No costs.

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UDPR,J & VJP,J

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As a sequel thereto, miscellaneous petitions, if any, shall

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stand closed.

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U. DURGA PRASAD RAO,J

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VENKATA JYOTHIRMAI PRATAPA, J