2016 (6) TMI 631 - HC - VAT and Sales Tax

E-Fraud - Andhra Pradesh Value Added Tax, 2005 (AP VAT) - validity of assessment order - principle of natural justice - E-way bills were generated in the name of petitioner, but in fact they were not generated by the petitioner from the AP VAT portal. - The main endeavor of the learned counsel for the petitioner is that the petitioner is not liable to pay VAT and CST as the petitioner did not generate the E-way bills except two CST E-way bills referred above on 19.05.2015 and 09.06.2015, more particularly, when those E-way bills were generated by the third party and criminal complaint was filed against the person who hacked the Commercial Taxes Website and generated E-way bills. Held that - The complaint filed against unknown, but during investigation, arrested the accused on suspicion, produced before the Magistrate along with remand report may at best, the allegation made against those persons, for commission of alleged offence, till it is proved beyond reasonable doubt before the criminal court, it is difficult to accept the contention of the petitioner. Therefore, in those circumstances, the petitioner who was provided with user ID and password and maintaining privacy of the account as per the norms affixed by the Central Government, the petitioner cannot be exonerated from liability to pay tax on the turnover covered by E-way bills which was generated by the petitioner. Therefore, we find no ground to exercise judicial discretion to grant any relief in this writ petition. - Writ petition dismissed.

Issues Involved:
1. Jurisdiction and legality of the Assessment Order.
2. Alleged hacking and misuse of E-way bills.
3. Compliance with principles of natural justice.
4. Availability of alternate remedy.
5. Petitioner's liability for tax despite alleged third-party interference.

Issue-wise Detailed Analysis:

1. Jurisdiction and Legality of the Assessment Order:
The petitioner challenged the Assessment Order No.43116 dated 27.11.2015, arguing it was without jurisdiction, arbitrary, and violated principles of natural justice. The petitioner, a registered dealer from 01.01.2015, claimed that while still in the process of setting up the business, received a notice alleging unauthorized generation of 105 E-way bills. The court found that the petitioner, having registered as a dealer, was subject to the jurisdiction of the first respondent under the AP VAT Act, 2005. The assessment was based on the turnover declared in the E-way bills, which the petitioner did not reflect in the monthly returns, thus justifying the jurisdiction and legality of the order.

2. Alleged Hacking and Misuse of E-way Bills:
The petitioner contended that the E-way bills were generated by unknown persons who hacked the official website. The investigation revealed that the accused had hacked the Commercial Taxes Department's website. However, the court noted that the petitioner admitted to generating two E-way bills for machinery purchases and failed to report the alleged hacking immediately. The court found the petitioner's claim of hacking unconvincing, emphasizing that the petitioner had accessed the account and generated E-way bills, thus holding the petitioner liable for the transactions.

3. Compliance with Principles of Natural Justice:
The petitioner argued that the Assessment Order was passed without sufficient time and consideration of the reply to the show cause notice. The court observed that the first respondent had issued a show cause notice and received the petitioner's objections. Despite the petitioner's request to defer the order until the completion of the investigation, the court found that the first respondent acted within the legal framework and provided adequate opportunity for the petitioner to present their case. Thus, the principles of natural justice were deemed to have been followed.

4. Availability of Alternate Remedy:
The respondents contended that the petitioner had an effective alternate remedy under Section 31 of the AP VAT Act, 2005, and thus should not invoke the court's extraordinary jurisdiction under Article 226. The court agreed, noting that the petitioner could have appealed the Assessment Order. Given that the petitioner did not approach the court with clean hands and had not utilized the available statutory remedy, the court found no grounds to grant discretionary relief under Article 226.

5. Petitioner's Liability for Tax Despite Alleged Third-party Interference:
The court held that the petitioner, having been provided with user ID and password, was responsible for maintaining the security of the account. The petitioner’s failure to disclose the transactions in the returns and the subsequent filing of NIL turnover indicated an attempt to evade tax liability. The court emphasized that the petitioner could not avoid tax liability on the pretext of pending criminal proceedings for the alleged hacking. The court concluded that the petitioner was liable to pay tax on the turnover covered by the E-way bills generated.

Conclusion:
The writ petition was dismissed, with the court finding no merit in the petitioner's claims. The court upheld the Assessment Order, stating it was passed within the jurisdiction and in compliance with legal procedures. The petitioner was held liable for the tax despite the allegations of third-party interference, and the court emphasized the availability of an alternate remedy which the petitioner failed to utilize. The case highlighted the importance of adhering to statutory remedies and maintaining the security of user credentials in electronic transactions.

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