Allowed

M/S Apple Industries Ltd. v. State of Ap Before Stat Hyd

Telangana HC20 Dec 2012TRC/271/1998

Case brief

AI extract

What is this about?

In a tax revision, the High Court quashed a penalty order imposed on a company for filing nil returns regarding lease rentals. The Court held that since the petitioner had filed returns, albeit with zero turnover, penalty under Section 15(4) for non-filing did not apply. The revision was allowed while noting hypothetical liability for wilful concealment under Section 14(8).

What did the court decide?

The impugned order of the Tribunal confirming the penalty order dated 28.12.1995 is quashed and the penal liability is effaced.

M/S Apple Industries Ltd. Vs State of Ap Before Stat Hyd — Cheque Dishonour | Telangana HC (2012)

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THE HON’BLE SRI JUSTICE GODA RAGHURAM

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AND

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THE HON’BLE SRI JUSTICE M.S. RAMACHANDRA RAO

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TRC No.271 of 1998

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M/s. Apple Industries Limited

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V The State of A.P.

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THE HON’BLE SRI JUSTICE GODA RAGHURAM AND THE HON’BLE SRI JUSTICE M.S. RAMACHANDRA RAO

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TRC NO.271 OF 1998

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Order : ( Per Sri GR, J )

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Heard Sri S. Dwarakanath, learned counsel for the petitioner and Sri P. Balaji Verma, learned Special Government Pleader for Commercial Taxes.

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This revision under Section 22(1) of the Andhra Pradesh General Sales Tax Act, 1957 ( for short “the Act”) is preferred against the order dated 30.3.1998 passed by the Sales Tax Appellate Tribunal, Andhra Pradesh, Hyderabad rejecting TA No.461 of 1996.

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The petitioner is a public limited company inter alia in the business of private finance and leasing. In the course of its business, the Andhra Pradesh State Electricity Board ( for short “the Board”) approached the petitioner for finance. The

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petitioner purchased certain equipment from the Board through a conveyance deed dated 30.9.1994 for Rs.29,99,96,315/and leased back the equipment to the Board in consideration of rentals to be paid by the Board as per the schedule of the agreement between the parties. Under the terms of agreement, it was agreed between the parties that as the equipment leased to the Board by the petitioner had already suffered Sales Tax under the provisions of the Act, the same would not be liable to further tax under Section 5-E of the Act. Though the transaction of lease of equipment by the petitioner to the Board was exigible to tax under the provisions of Section 5-E of the Act, initially returns were filed by the petitioner disclosing “nil” returns (insofar as the lease rentals component is concerned), in accordance with the understanding under the agreement. In the agreement the Board appears to have stipulated that if it obtains exemption from tax on the lease transaction, the petitioner shall refund the Sales Tax component which was included in the rentals paid by the Board to the petitioner and a consequent undertaking was

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also furnished by the petitioner to that effect, to the Board, on 30.4.1994.

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The petitioner filed ‘nil” returns respect of the lease transactions with the Board, on 16.5.1995, 21.6.1995, 18.7.1995, 12.8.1995, 18.9.1995 and 16.10.1995 in respect of the tax periods of April, May, June, July August and September, 1995 respectively. These returns had however disclosed other receipts which were leviable to tax and taxes were paid thereon. On this score there is no dispute between the Revenue and the petitioner. The dispute pertains only to the liability to tax and to the penalty on account of failure to pay tax on lease rental receipts from the Board.

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The Revenue issued a notice dated 7.9.1995 calling for details from the petitioner based on agreements with the Board. On receipt of the notice, the petitioner filed a revised return on 19.10.1995 and paid tax of Rs.17,09,987/- on the lease rental component, conceding its liability under Section 5-E of the Act.

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Thereafter, a notice proposing penalty under Section 15(4) (a) of the Act was issued on

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26.10.1995 proposing levy of penalty in an amount equivalent to the tax liability assessed and in fact remitted by the petitioner. The petitioner objected to the proposal contending inter alia that since it has filed “nil” returns ( in respect of the lease rental component as adverted to above) there was no liability to tax nor a corresponding penalty liability, particularly under Section 15(4)(a) of the Act.

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Eventually however, the Assistant Commissioner (CT), (Intelligence) No. II, Enforcement Wing, Hyderabad in CCT Penalty Register No.1/1995-96 by order dated 28.12.1995 confirmed the penalty of Rs.17,09,987/-. Aggrieved, the petitioner preferred an appeal unsuccessfully to the Appellate Deputy Commissioner, in Appeal No.627/95-96. The appeal was rejected by the order dated 27.2.1996. The petitioner carried the matter by way of a further appeal to the STAT, Hyderabad in TA No.461 of 1996. By order dated 30.3.1998 the Tribunal concurred with the Primary and Appellate Authorities. Hence the petitioner before this Court aggrieved by the order of the Tribunal.

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It requires to be noticed that in the impugned order the Tribunal while recording at Para “3” that the petitioner had filed returns “reporting nil turnover” has recorded in para 9 that “Admittedly, the appellant (petitioner) did not file the return at all”. The Tribunal therefore concluded that in the circumstances, provisions of Section 15(4-b) comes into play.

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Sri P.Balaji Verma, the learned Special Government Pleader has placed before this Court the communication dated 20.12.2012 received from the Commercial Tax Officer, Basheerbagh Circle, Hyderabad, which reveals that the petitioner had in fact filed returns for the periods April, 1995 to September, 1995 during 16.5.1995 to 16.10.1995 (particulars of the returns filed are already adverted to ).

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Section 15 of the Act deals with the provisions relating to assessment of tax. As per Sub Section (4) thereof, where any dealer who is liable to pay tax fails to submit a return as required by the provisions of the Act or the rules made thereunder or any dealer fails to pay the tax due on the basis

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of the return submitted by him under Section 13 or fails to pay the tax provisionally assessed, such dealer shall be liable to pay by way of penalty at the rate specified therein.

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On a true and fair construction of the provisions of Section 15(4-b), construed in the factual matrix of this case, the legislative trajectory indisputably is that the penal liability under this provision is attracted only where the dealer who is liable to pay tax has failed to submit a return as required by the provisions of the Act.

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In the case on hand, on the basis of the material on record, including the communication dated 20.12.2012 from the Commercial Tax Officer, Basheerbagh, Hyderabad (addressed to the learned Government Pleader) it is also clear that the petitioner had filed returns for the relevant periods but had disclosed “nil” return income in respect of the rental component. The provisions of Section 15(4) are therefore clearly inapplicable.

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The petitioner may perhaps be liable to the penalties specified under Section 14(8) of the Act namely in circumstances where the assessing

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authority is satisfied that the failure of the dealer to disclose the whole or part of the turnover or any other particulars correctly, or to submit the return before the prescribed date, was wilful. But that is only a hypothetical observation. The levy of penalty confirmed by the Tribunal in the present case, is in exercise of the statutory powers under Section 15(4)(a) by the Revenue, a provision which is clearly inapplicable in the facts and circumstances of the case.

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On the aforesaid analysis, the impugned order of the Tribunal dated 30.3.1998 in TA No.461 of 1996 confirming the appellate order dated 27.2.1996 in Appeal No.627/1995-96 which in turn confirmed the order of the penalty dated 28.12.1995 recorded by the Assistant Commissioner (CT), (Intelligence) No.II, Hyderabad is quashed. The penal liability of the petitioner as concurrently recorded by the three authorities stands effaced.

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The Tax Revision Case is allowed as above but in the circumstances without costs.

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_______

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GODA RAGHURAM, J

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________________________ M.S. RAMACHANDRA RAO, J

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Date : 20-12-12 Kk/kvs/scs

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THE HON’BLE SRI JUSTICE GODA RAGHURAM AND THE HON’BLE SRI JUSTICE M.S. RAMACHANDRA RAO

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TRC No.271 of 1998

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Dated 20-12-2012

M/S Apple Industries Ltd. v. State of Ap Before Stat Hyd

Case brief

What is this about?

What did the court decide?

M/S Apple Industries Ltd. v. State of Ap Before Stat Hyd

Case brief

What is this about?

What did the court decide?

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