2006 (6) TMI 480 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to assessment order and notice issued in form VAT 305; Alleged under-declared tax and penalty; Jurisdiction of penalty imposition; Simultaneous assessment and penalty proceedings.

Analysis:

The case involved a challenge to an assessment order and a notice issued in form VAT 305. The petitioner claimed to have submitted monthly returns and paid the tax due after claiming input tax credit. The respondent issued a notice of assessment proposing to assess the petitioner for under-declared tax and levy a penalty equivalent to 100% of the alleged under-declared tax amount. The main issues raised were factual, concerning whether tax was due, under-valuation, and payment of deficit tax. The court noted that the petitioner had an efficacious remedy by way of appeal regarding the assessment.

Regarding the penalty imposition, the court referred to section 53 of the Andhra Pradesh Value Added Tax Act, 2005, which requires penalty imposition only in cases of fraud or wilful neglect. The notice in form VAT 305A demanded tax including a penalty without establishing fraud or wilful neglect. The court held that the penalty imposed was without jurisdiction. The respondent argued that assessment and penalty must come together as prescribed in form VAT 305, but the court emphasized that penalty of 100% cannot be imposed without proving fraud or wilful neglect and providing a reasonable opportunity for the dealer to be heard.

The court cited a Full Bench judgment to discuss simultaneous assessment and penalty proceedings. While acknowledging the possibility of simultaneous levy, the court cautioned against it as it may deny the dealer the opportunity to use assessment findings to defend against the penalty. Ultimately, the court allowed the writ petition to quash the penalty imposed but permitted the respondent to initiate penalty proceedings if advised. The petitioner was advised to seek alternate remedies available in law regarding the assessment.