1995 (11) TMI 392 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legitimacy of reassessment under section 14(4)(cc) of the Andhra Pradesh General Sales Tax Act, 1957.
2. Validity of the penalty imposed under section 7A(2) of the Andhra Pradesh General Sales Tax Act, 1957.

Issue-wise Detailed Analysis:

1. Legitimacy of Reassessment:
The petitioner, a registered dealer in liquors, was initially assessed for the year 1980-81 with an exemption on second sales of liquor and beer. However, the assessing authority later reopened the assessment, alleging that the petitioner had engaged in fictitious sales and purchases with Raj Trading Company, Vijayawada, and S.S. Wine Palace, Visakhapatnam, to evade tax. The reassessment added a turnover of Rs. 6,86,840 to the first sale turnover of beer.

The petitioner contested the reassessment, arguing that the excise officials' endorsements on transport permits and the receipt of payments by "account payee" bank drafts were ignored. The court found that the assessing authority had sufficient material to conclude that the alleged first sales were fictitious. The court noted that the petitioner admitted there was no transport of goods and that the transactions were merely book entries. The court rejected the petitioner's argument, stating that the reassessment was not based on a mere change of opinion but on material gathered from inspections and way-bills, which indicated no real movement of goods. The court upheld the reassessment, stating that the assessing authority had the jurisdiction to reopen the assessment under section 14(4)(cc) based on material outside the assessment record.

2. Validity of the Penalty:
The Tribunal upheld the penalty imposed under section 7A(2) of the Act, which was reduced to two times the tax leviable. The petitioner argued that section 7A(2) was not applicable and that the penalty should have been levied under section 14(8)(1). The court found that the petitioner knowingly produced false purchase bills from Raj Trading Company and S.S. Wine Palace to support the claim for exemption. The court noted that the petitioner admitted that no actual movement of goods took place and that the sales and purchases were effected only by book entries. The court stated that the fictitious sales and purchases were part of a design to depict first sales as second sales to avoid tax. The court held that the bills produced by the petitioner were false and that section 7A(2) was rightly invoked. The court dismissed the petitioner's contention that the department's acceptance of bills in the assessment of Raj Trading Company should bind the present case, stating that one mistake need not lead to another. The court upheld the penalty, finding no grounds to interfere with the Tribunal's order.

Conclusion:
The court dismissed both tax revision cases, upholding the reassessment and the penalty imposed on the petitioner. The court found that the petitioner engaged in fictitious transactions to evade tax and that the reassessment and penalty were justified based on the material gathered during inspections. The court emphasized that the assessing authority had the jurisdiction to reopen the assessment under section 14(4)(cc) and that the penalty under section 7A(2) was correctly imposed.