2021 (6) TMI 1042 - HC - VAT and Sales Tax

Principles of Natural Justice - fruit pulp industries - classified under Entry No.102(2) of the IV Schedule to the A.P. VAT Act, 2005 or not - validity of assessment order and penalty order - HELD THAT - The admitted facts in these cases are that aggrieved by the initial Assessment Order No.29664, dated 30.07.2016 imposing tax on the sale of goods @ 14.5% for the tax period April, 2013 to January, 2016 and also against imposing of penalty vide Assessment Order No.48458, dated 31.12.2016, the petitioner filed appeals Nos.83/2017-18 (CTR) and 84/2017- 18 (CTR). The Appellate Deputy Commissioner passed order dated 08.11.2017, a perusal of which shows that the Appellate Authority was convinced that the disputed goods sold by the appellant (writ petitioner) were used exclusively by the fruit pulp industries for the treatment of material i.e., fruits and food etc., and it cannot be considered as unclassified item, as they fall under Entry No.102 vide Sl.No.2 of the IV Schedule of the A.P. VAT Act, 2005 - the Appellate Deputy Commissioner remitted the appeal back to the Assessing Authority with a direction to verify the veracity of the documents that will be produced by the appellant before him and then pass fresh orders as per the provisions of APVAT Act, 2005 and the appellant shall produce the documentary evidence before the Assessing Authority covering the disputed turnover for verification as and when called for by him. It is clear from the appellate order that the Appellate Deputy Commissioner has fixed the rate of tax at 5% and remanded the matter only to verify the records to be produced by the appellant and to come to a conclusion with regard to actual turnover. Post remand scenario - HELD THAT - Admittedly the 1st respondent issued notice dated 12.12.2017 calling the petitioner to produce relevant documents/information in support of their contentions within seven days from the date of receipt of the said notice. Having received the notice on 15.12.2017, the petitioner filed some record relating to purchases and trading account for the years 2013-14, 2014-15 and 2015-16 vide covering letter dated 27.12.2017 and has not filed further information. The impugned Assessment Order and Penalty Order is set aside with a direction to the 1st respondent to issue a fresh show cause notice to the petitioner to his principal business address by giving reasonable time therein for filing records and there upon - petition allowed.

Summary

Issues Involved:
1. Validity of the consequential assessment order.
2. Validity of the consequential penalty order.
3. Alleged violation of principles of natural justice.
4. Compliance with the Appellate Deputy Commissioner’s directions.

Detailed Analysis:

1. Validity of the Consequential Assessment Order:
The petitioner contested the assessment order dated 28.11.2020, arguing it was contrary to the Appellate Deputy Commissioner’s findings and directions. The Appellate Deputy Commissioner had previously held that the goods sold by the petitioner were taxable at 5% under Entry No.102(2) of the IV Schedule to the A.P. VAT Act, 2005. The petitioner claimed the 1st respondent was bound to follow this directive and had no jurisdiction to impose a 14.5% tax rate again by treating the goods as unclassified.

2. Validity of the Consequential Penalty Order:
The petitioner also challenged the penalty order dated 10.12.2020, which was issued following the contested assessment order. The petitioner argued that the penalty was unwarranted and that the 1st respondent did not have the authority to impose it under the circumstances.

3. Alleged Violation of Principles of Natural Justice:
The petitioner claimed that the assessment order was passed without waiting for the expiry of the notice period, thus violating principles of natural justice. The show cause notice dated 09.11.2020 was allegedly received by the petitioner on 25.11.2020, giving him until 02.12.2020 to file objections. However, the assessment order was passed on 28.11.2020, before the expiry of this period.

4. Compliance with the Appellate Deputy Commissioner’s Directions:
The petitioner argued that the 1st respondent failed to comply with the Appellate Deputy Commissioner’s directions, which had remanded the matter for verification of documents and finalization of turnover, with the clear instruction that the tax rate should be 5%. The petitioner contended that the 1st respondent should have only verified the records and calculated the turnover, not reassessed the tax rate.

Court’s Findings:

On the Validity of the Consequential Assessment Order:
The court found that the Appellate Deputy Commissioner had indeed directed that the goods sold by the petitioner were taxable at 5% and remanded the matter only for verification of records and turnover. The 1st respondent was expected to follow these directions strictly. The court noted that the 1st respondent’s decision to impose a 14.5% tax rate again was contrary to the appellate order.

On the Validity of the Consequential Penalty Order:
The court held that since the assessment order itself was found to be flawed, the penalty order based on it was also invalid. The penalty was imposed without proper jurisdiction and contrary to the directions of the Appellate Deputy Commissioner.

On the Alleged Violation of Principles of Natural Justice:
The court acknowledged the petitioner’s claim that the show cause notice was received on 25.11.2020, giving him until 02.12.2020 to file objections. The assessment order was passed prematurely on 28.11.2020, thus violating the principles of natural justice by not allowing the petitioner the full period to respond.

On Compliance with the Appellate Deputy Commissioner’s Directions:
The court emphasized that the 1st respondent was bound to follow the appellate order, which had clearly fixed the tax rate at 5% and remanded the matter only for verification of turnover. The 1st respondent’s action of reassessing the tax rate was beyond the scope of the remand directions.

Conclusion:
The court allowed the writ petitions, setting aside the impugned assessment and penalty orders. It directed the 1st respondent to issue a fresh show cause notice to the petitioner, allowing reasonable time for filing records. The 1st respondent was instructed to consider the records and, after affording a personal hearing to the petitioner, pass a fresh assessment order in compliance with the Appellate Deputy Commissioner’s directions. No costs were awarded, and any pending interlocutory applications were closed.