2013 (1) TMI 698 - HC - VAT and Sales Tax

Tax audit - Documentary evidence ignored - revision initiated - Held that - It was the duty of the first respondent to consider all the material adduced by the petitioner in support of its case that it is immune from the exercise of revisional powers. The first respondent had been negligent and failed to properly discharge his duty, in having ignored the material filed on August 17, 2011 by the petitioner along with the letter dated July 27, 2011. In view of the fact that the impugned orders dated May 31, 2012 relating to the tax periods April, 2009-July, 2009 and August, 2009-March, 2010 were passed by the first respondent without noticing and adverting to the material filed by the petitioner before him on August 17, 2011 vide the letter dated July 27, 2011 with enclosures, both the impugned orders for the above tax periods are set aside. The matter is remitted to the first respondent, who shall now afford a personal hearing to the petitioner/its authorized representative, consider all the material filed by the petitioner in support of its case that it is immune from the exercise of revisional power and thereafter pass orders afresh. The petitioner is also given liberty to file any further material in support of its case. Both the writ petitions are allowed.

Issues Involved:
1. Exemption claims for SEZ sales, AMC charges, installation and erection charges, inter-State sales, high sea sales, and transit sales.
2. Input-tax credit claims.
3. VAT audit and assessment orders.
4. Show-cause notices and proposed revisions by the first respondent.
5. Alleged non-compliance with notices and procedural fairness.
6. Consideration of material evidence and revisional powers.

Detailed Analysis:

Exemption Claims:
The petitioner, M/s. Sterling and Wilson Limited, filed monthly returns for the periods April 2009-July 2009 and August 2009-March 2010, claiming exemptions for SEZ sales, AMC charges, installation and erection charges, and inter-State sales. For April 2009-July 2009, exemptions claimed were Rs. 2,94,20,169 for SEZ sales, Rs. 76,16,954 for AMC charges, Rs. 1,89,40,254 for installation and erection charges, and Rs. 3,60,252 for inter-State sales. For August 2009-March 2010, the exemptions claimed were Rs. 4,44,22,616 for SEZ sales, Rs. 2,04,53,493 for AMC charges, Rs. 9,80,04,640 for installation and erection charges, Rs. 56,95,060 for high sea sales, and Rs. 5,35,32,616 for transit sales. The petitioner did not claim any input-tax credit for works executed for SEZ units.

VAT Audit and Assessment Orders:
The first respondent authorized VAT audits for the periods in question. The second respondent conducted the audits and passed orders on October 1, 2009, and March 28, 2011, respectively, accepting the turnovers and granting exemptions for inter-State and SEZ sales. The orders confirmed the levy of taxes at various rates and held that labour charges, service tax collections, and AMC receipts were not liable to tax under the A.P. VAT Act, 2005.

Show-Cause Notices and Proposed Revisions:
The first respondent issued show-cause notices on December 7, 2011, proposing to revise the second respondent's orders, citing that they were prejudicial to the interests of the Revenue. For April 2009-July 2009, the first respondent proposed to withdraw exemptions for labour charges and service tax collected, and to assess gross receipts to Rs. 23,55,13,205, taxing Rs. 17,66,34,904 at 12.5%. For August 2009-March 2010, the proposed revisions included withdrawing exemptions for various charges and sales, assessing gross receipts to Rs. 71,52,25,754, taxing Rs. 52,10,78,447 at 12.5% and 14.5%.

Alleged Non-Compliance and Procedural Fairness:
The petitioner contended that the first respondent's statement that the petitioner had not responded to notices was incorrect. The petitioner claimed to have appeared in person and requested additional time to produce records. The first respondent, however, passed ex parte orders on May 31, 2012, confirming the proposed revisions, citing non-compliance by the petitioner.

Consideration of Material Evidence:
The petitioner argued that it had submitted a reply on July 27, 2011, with necessary details, which was received by the first respondent's office on August 17, 2011. The first respondent initially failed to acknowledge this submission in his counter-affidavit but later admitted the oversight, offering an unconditional apology.

Judgment:
The court found that the first respondent failed to consider the material evidence submitted by the petitioner, thus neglecting his duty. Consequently, the impugned orders dated May 31, 2012, were set aside. The matter was remitted back to the first respondent for a fresh hearing, allowing the petitioner to present additional material. The writ petitions were allowed with costs of Rs. 1,000 each, payable to the petitioners within four weeks.

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