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2012 (3) TMI 389 - HC - VAT and Sales TaxCertificate in form L1 cancelled on the ground that the petitioner is not eligible to opt for composition in relation to electrical works contracts - Held that - There is no dispute that the scheme of payment of tax by way of composition under section 5G of the Act can be availed of only by the dealers whose category of works contracts is not notified as ineligible for the scheme. There is no dispute that by G.O. Ms. No. 787, under section 5G(2) of the Act the Government notified all types of the electrical contracts as ineligible for the composition. The permission granted in form L1 to the petitioner, therefore, was ultra vires. Thus as initial permission granted by the CTO permitting composition was ultra vires and therefore, it is to be treated as void ab initio. When an order is void ab initio and the decision so declared, it is effective from the date it was originally issued by the authority without sanction of law. Tax revision dismissed.
Issues Involved:
1. Validity of the cancellation of the L1 certificate. 2. Retrospective effect of the cancellation of the L1 certificate. 3. Applicability of the composition scheme under Section 5G of the Andhra Pradesh General Sales Tax Act, 1957, to electrical works contracts. Detailed Analysis: 1. Validity of the Cancellation of the L1 Certificate: The petitioner, a works contracts company, was initially granted a certificate in form L1 on December 26, 1998, which allowed them to opt for the composition of tax payable under Section 5G of the Andhra Pradesh General Sales Tax Act, 1957. However, on December 14, 2001, the Commercial Tax Officer (CTO) cancelled this certificate on the grounds that the petitioner was not eligible to opt for composition in relation to electrical works contracts. The Joint Commissioner (Legal) later revised the appellate order, declaring the L1 certificate void ab initio. The Sales Tax Appellate Tribunal (STAT) upheld this decision, stating that the L1 certificate was mistakenly issued and void ab initio, making its retrospective cancellation a formality. 2. Retrospective Effect of the Cancellation of the L1 Certificate: The petitioner's counsel argued that the cancellation of the L1 certificate should only operate prospectively and not affect the assessments already completed. However, the court held that the permission granted in form L1 was ultra vires due to the Government's notification under Section 5G(2) of the Act, which excluded electrical works contracts from the composition scheme. Consequently, the initial permission was void ab initio and had no legal effect from the date it was issued. The court emphasized that a void order is null from its inception and does not require prospective application. 3. Applicability of the Composition Scheme Under Section 5G: Section 5G of the Act allows dealers executing works contracts, except those notified by the Government, to opt for a composition scheme to pay tax at a reduced rate. The Government, through G.O. Ms. No. 787, dated September 21, 1996, explicitly excluded all types of electrical contracts from this scheme. Therefore, the petitioner, engaged in electrical works contracts, was not eligible for the composition scheme. The court highlighted that the taxing statute must be interpreted strictly, and benefits of exemptions or concessions must be clearly established by the taxpayer. The court referenced the Supreme Court's decision in Commissioner of Central Excise v. Hari Chand Shri Gopal, emphasizing the need for strict compliance with statutory requirements to claim tax exemptions or concessions. Conclusion: The court dismissed the tax revision cases, affirming that the initial permission granted to the petitioner under form L1 was ultra vires and void ab initio. The retrospective cancellation of the L1 certificate was upheld, and the petitioner was not entitled to the composition scheme for electrical works contracts as per the Government's notification. The court reiterated the principle of strict interpretation of taxing statutes and the necessity for taxpayers to demonstrate clear eligibility for any exemptions or concessions.
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