2014 (9) TMI 453 - HC - VAT and Sales Tax

Validity of assessment order passed - Denial of refund claim - Bar of limitation - whether it is a deemed assessment under rule 14(5A) or assessment under sub-rules (6) and (7), if an assessing officer undertakes assessment on the ground that the turnover escaped assessment to tax, it shall be within the period prescribed under sub-rule (8) - held that - The patent difference in the language used in the phrase if no assessment is made within a period of four years from the date of filing of the return used in sub-rule (5A) and the phrase within a period of four years from the expiry of the year to which the turnover relates appearing in subrule (8)(b) make it very clear that an assessment undertaken under rule 14A(8)(b) should be within four years from the expiry of the year to which the turnover relates. In that view of the matter, the submission made by the petitioner that except in regard to the returns filed for the months of March, 2007, the assessment in respect of returns for the months of April 2006-March 2007 is barred by limitation cannot be accepted. The returns for the months of April, 2006 to March, 2007 or the returns relate to the turnover of the financial year 2006-07, and therefore, the assessment order passed on March 30, 2007, is well within the limitation. It is not barred by limitation. The feeble submission that the impugned assessment order was antedated has not been substantiated and therefore, we reject the same. We accordingly hold that the impugned assessment order dated March 30, 2011 is not barred by limitation as per rule 14A(8) of the State Rules. Section 7 of the VAT Act exempts goods listed in the First Schedule from VAT. As per entry 45 it is cotton fabrics which are exempted and not towels. Towels fall under entry 52 of the Fourth Schedule. Therefore whenever a dealer seeks exemption for cotton fabrics as falling under entry 45 of the Fourth Schedule it is for the assessment officer to enquire into the same. In this case, it is neither disputed nor denied by the petitioner that the CTO, Autonagar Circle, Vijayawada, inspected the petitioner s machinery and found that they were producing terry towels. Secondly in their objections filed after receiving show-cause notice the petitioner admitted of effecting sales of cotton terry towels. Further it was found that most of the sales were made to hotels and proposed that the petitioner was converting the fabric into towels and selling them. It is a question of fact and ordinarily in writ jurisdiction, it cannot be interfered with. Further the petitioner had an effective alternative remedy of filing appeal before the Appellate Deputy Commissioner. They waited for four months and chose to file writ petition challenging the impugned order. In this background, we are afraid we do not find any merit in the impugned assessment order. Decided against assessee.

Summary

Issues Involved:
1. Whether the impugned assessment is barred by limitation.
2. Whether the impugned assessment is in accordance with law.

Issue-wise Detailed Analysis:

1. Question of Limitation:

The court examined whether the assessment order dated March 30, 2011, was barred by limitation as prescribed under section 21(3) of the Andhra Pradesh Value Added Tax Act, 2005 (VAT Act). The court noted that section 9(2) of the Central Sales Tax Act, 1956 (CST Act) mandates that the machinery and method of assessment of CST shall be in accordance with the provisions of the general sales tax law of the State. Rule 14A of the Central Sales Tax (Andhra Pradesh) Rules, 1957 (State Rules) specifies that if the return is filed within the prescribed time and is in order, it shall be accepted as self-assessment, subject to adjustment of any arithmetical error. However, the assessing authority can undertake assessment within four years from the date of filing of the return if the turnover has escaped assessment or was under-assessed.

The court held that the impugned assessment order was not barred by limitation. The assessment for the financial year 2006-07 was completed within the prescribed period of four years from the expiry of the year to which the turnover relates. The court rejected the petitioner's contention that the assessment was antedated and concluded that the assessment order dated March 30, 2011, was within the limitation period as per rule 14A(8) of the State Rules.

2. Question of Validity of Assessment:

The petitioner claimed exemption from CST on the basis that the goods sold were "cotton terry towelling fabrics," which fall under entry 45 of the First Schedule to the VAT Act and are exempt from VAT. The assessing authority, however, treated the goods as "cotton terry towels" taxable under entry 52 of the Fourth Schedule to the VAT Act. The court noted that the petitioner did not furnish the necessary declaration forms to support the claim of exempt sales and that the turnover was not supported by C forms.

The court observed that the petitioner's factory was producing cotton terry towels in different lengths and that most of the sales were made to hotels and traders. The CTO verified the petitioner's machinery and confirmed that the petitioner was producing terry towels. The court held that the petitioner's claim of exemption under entry 45 of the First Schedule was not tenable as the goods manufactured were cotton terry towels, which fall under entry 52 of the Fourth Schedule and are taxable.

The court also noted that the petitioner did not pay Central excise duty from April 2005, and therefore, the goods manufactured could not be exempt under the VAT Act. The court concluded that the impugned assessment order was valid and in accordance with the law. The petitioner had an effective alternative remedy of filing an appeal before the Appellate Deputy Commissioner but chose to file a writ petition instead.

Conclusion:

The writ petition was dismissed, and the court upheld the validity of the assessment order dated March 30, 2011, as it was neither barred by limitation nor contrary to the law. The petitioner was directed to bear the costs.