2010 (12) TMI 1117 - HC - VAT and Sales Tax

Validity of rule 59(1) of the Andhra Pradesh Value Added Tax Rules 2005 questioned - Held that -Reading sections 3A and 78(1) 2(a) and (m) of the VAT Act and rule 59(1) Sl. No. 4(ii)(b) and (d) leads to the conclusion that the Government appointed various officers to perform various functions within their territorial jurisdiction or in the whole of Andhra Pradesh. The Government can also authorize the Commissioner as well as Additional/Joint Commissioners and Deputy Commissioners to entrust powers and functions to such officers say for instance for the purpose of assessment to CTOs and DCTOs. Further rule 59(1) Sl. No. 4(2)(b) and (d) does not in any manner exceed the delegated power. Therefore if the Deputy Commissioner authorizes any of the officers to undertake assessment within the territorial jurisdiction or within the division the same does not vitiate the assessment made by such officer. A VATdealer cannot complain that the assessment having not been made by the CTO or the Assistant Commissioner having territorial jurisdiction the assessment made by any of the officers author ized by the Deputy Commissioner is illegal. Such an argument would ignore the various provisions of the VAT Act and the VATRules. Thus no hesitation in rejecting the plea that the definition of assessing authority in section 2(4) of the VAT Act plays a crucial role in so far as exercise of the powers by the authority prescribed for the purpose of sections 20 and 21 or for that matter any authority prescribed under the VAT Act. The Commissioner as defined in section 2(8) derives all or any powers by reason of the delegation under the notification vide G.O. Ms. No. 1163 dated August 14 2006 published in A.P. Gazette Part I Extraordinary 463A dated August 14 2006. Under this the Government empowered the Commissioner to empower any officer working under his control to exercise any powers within such area or areas or the whole of State of Andhra Pradesh.

Issues Involved:
1. Validity of Rule 59(1) of the Andhra Pradesh Value Added Tax Rules, 2005.
2. Ultra vires nature of sub-sections (3) and (4) of Section 17 of the Andhra Pradesh Value Added Tax Act, 2005.
3. Jurisdiction of the assessing authority under the Andhra Pradesh Value Added Tax Act, 2005.
4. Violation of principles of natural justice in the assessment orders.

Detailed Analysis:

1. Validity of Rule 59(1) of the Andhra Pradesh Value Added Tax Rules, 2005:
The petitioners challenged the validity of Rule 59(1) of the VAT Rules, arguing that it confers assessment powers on officers not designated as assessing authorities under Section 2(4) of the VAT Act. The court examined whether Rule 59(1) conforms to the statute and whether it is arbitrary or irrational. It was held that the rule-making power under Section 78 of the VAT Act allows the Government to prescribe duties and powers of officers. Rule 59(1) does not exceed the delegated power and is intra vires the Act. The court emphasized that the delegation of power to the Commissioner to authorize officers for assessment is valid and does not violate the legislative intent.

2. Ultra vires nature of sub-sections (3) and (4) of Section 17 of the Andhra Pradesh Value Added Tax Act, 2005:
In W.P. Nos. 13015 and 13019 of 2009, the petitioners argued that sub-sections (3) and (4) of Section 17 are ultra vires Section 17(2) of the VAT Act. The court noted that Section 17(2) does not limit the power of the Government to make rules under Section 78. Sub-sections (3) and (4) of Section 17 were found to be within the legislative competence and consistent with the overall scheme of the Act. The court held that these provisions are not ultra vires and are necessary for the effective implementation of the VAT system.

3. Jurisdiction of the assessing authority under the Andhra Pradesh Value Added Tax Act, 2005:
The petitioners contended that the assessments were made by officers without jurisdiction, as they were not authorized by the Commissioner under Section 2(4) of the VAT Act. The court clarified that the power to appoint and assign functions to officers is vested in the Government under Section 3A. The Government's notification (G.O. Ms. No. 1163) empowers the Commissioner to authorize officers for assessment. The court held that the assessments made by officers authorized by the Deputy Commissioner or the Commissioner are valid and within jurisdiction.

4. Violation of principles of natural justice in the assessment orders:
The petitioners argued that the assessment orders violated principles of natural justice as they were passed without proper notice and opportunity to be heard. The court examined the procedural compliance in issuing notices and conducting audits. It was found that the petitioners were given opportunities to file objections and present their case. The court held that there was no violation of natural justice, and the assessment orders were passed following due process.

Conclusion:
The court upheld the validity of Rule 59(1) of the VAT Rules and sub-sections (3) and (4) of Section 17 of the VAT Act. It confirmed the jurisdiction of the assessing authorities as authorized by the Commissioner or Deputy Commissioner. The court also found no violation of principles of natural justice in the assessment orders. The writ petitions were dismissed, affirming the legality and procedural correctness of the assessments under the Andhra Pradesh Value Added Tax Act, 2005.

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