1988 (6) TMI 301 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the petitioner knowingly issued or produced a false bill, voucher, declaration, or other document to evade tax.
2. Whether the penalty proceedings are barred by limitation.

Detailed Analysis:

1. Whether the petitioner knowingly issued or produced a false bill, voucher, declaration, or other document to evade tax:
The petitioner, South India Agencies, Hyderabad, claimed exemption on a turnover of Rs. 60,98,149.10, asserting it represented second sales of asbestos cement sheets purchased from Hyderabad Asbestos Cement Industries. However, an inspection in 1983 revealed that asbestos cement sheets worth Rs. 7,48,595.34 were purchased from Vallabh Nagar, Haryana, making them first sales in the State and not exempt from tax. The assessing authority issued a notice on 12th March 1984, proposing a penalty under section 7-A(2) of the Andhra Pradesh General Sales Tax Act for furnishing false particulars to evade tax. The petitioner did not respond to the notice, leading to a penalty of three times the tax evaded (Rs. 53,805.31).

The court found that the petitioner did not disclose that some purchases were made outside the State, which rendered the sales taxable. The petitioner argued that it was under a bona fide impression that purchases from the Vallabh Nagar factory, part of Hyderabad Asbestos Cement Industries, were also exempt. However, the court noted that the petitioner, a well-established firm, should have known the distinction between intra-state and inter-state purchases and their tax implications. The court concluded that the petitioner knowingly produced a false document to support its tax exemption claim, satisfying the requirements of section 7-A(2).

2. Whether the penalty proceedings are barred by limitation:
The petitioner argued that penalty proceedings should be initiated within a reasonable time, analogous to the four-year limitation period for reopening assessments under section 14 of the Act. The court examined section 7-A, which specifies that action must be taken "on detecting such issue or production" of false documents. The court emphasized that while proceedings should be initiated within a reasonable time after detection, there is no fixed limitation period under section 7-A.

In this case, the detection occurred on 19th April 1983, and the show cause notice was issued on 12th March 1984, within one year of detection. The court found this interval reasonable, especially since the detection was made by an authority other than the assessing authority. The court rejected the contention that the penalty proceedings were initiated after an unreasonable delay.

Conclusion:
The court dismissed the tax revision case, upholding the penalty imposed on the petitioner for knowingly producing false documents to evade tax and ruling that the penalty proceedings were initiated within a reasonable time after detection. The petition was dismissed without any order as to costs.