2023 (10) TMI 723 - HC - VAT and Sales Tax

Concessional rate of duty - execution of works contract - purchase of cement - taxable at the rate of 4% or 16% under the provisions of Section 5-B of the Andhra Pradesh General Sales Tax Act, 1957 - legality of penalty order passed by the assessing authority and confirmed by the Appellate Deputy Commissioner under Section 7-A of the Act - assessment orders of the years 2001-02, 2002-03, 2003-04 and 2004-05. HELD THAT - Prior to issuance of the G.O. dated 17.07.2001, cement was one of the item which was eligible to be purchased at a concessional rate. It was in this context that the authorities at the earliest time had issued the G2 registration certificate permitting the petitioner to purchase cement at a concessional rate. However, after issuance of the G.O. dated 17.07.2001, the petitioner was not entitled for purchase of cement at a concessional rate. In spite of this, petitioner continued to purchase cement at a concessional rate against the G Forms - the petitioner, beyond 17.07.2001, could not have purchased cement at a concessional rate and petitioner continued to purchase cement against the G Forms basing on the G2 registration certificate issued much before 17.07.2001. The proviso to G.O. dated 17.07.2001 would not be applicable to the petitioner. Therefore, the assessing officer, the appellate authority and the Sales Tax Appellate Tribunal were justified by holding that the petitioner is liable to pay tax on cement at its normal rate and not at the concessional rate - The said issue whether the petitioner is entitled for purchase of cement at a concessional rate under Section 5B in the teeth of G.O. dated 17.07.2001 stands answered in the negative against the petitioner. Penalty order - HELD THAT - Though the State has taken a plea that there is some misquoting or wrong quoting of the provision, nonetheless, the petitioner never had an occasion of defending himself in a penalty proceedings under Section 5-B(2). What is also required to be appreciated is that Section 7-A(2) and Section 5-B(2) are both independent penal provisions. Separate proceedings have to be drawn for each of the provisions. In the instant case, there does not seem to be any corrigendum or rectification order issued by the respondent for treating the notice under Section 7-A(2) as notice under Section 5-B(2) either before imposing of the penalty or subsequently, except for the admission on their part in the reply in Writ Petition No. 14484 of 2005. Since the petitioner never had an occasion to defend himself under Section 5-B(2), the entire proceedings initiated against the petitioner so far as imposing penalty is concerned under Section 7-A(2) stands vitiated as the petitioner has taken a stand that the penalty to be imposed against the petitioner was not under Section 7-A(2) but under Section 5-B(2) - the orders passed by the Sales Tax Appellate Tribunal, Andhra Pradesh, at Hyderabad confirming the order of penalty by the Appellate Dy. Commissioner and the Assessing Authority is improper and unjustified and therefore, the same deserves to be and are accordingly set aside. Tax revision disposed off.

Summary

Issues Involved:
1. Entitlement to purchase cement at a concessional rate under Section 5-B of the Andhra Pradesh General Sales Tax Act, 1957.
2. Justification of penalty imposed under Section 7-A of the Act.

Summary:

Issue 1: Entitlement to Concessional Rate for Cement Purchase

The primary contention was whether the petitioners were entitled to purchase cement at a concessional rate of 4% instead of 16% under Section 5-B of the Andhra Pradesh General Sales Tax Act, 1957. The petitioner, engaged in executing works contracts, had obtained a G2 registration certificate, which initially allowed the purchase of cement at a concessional rate. However, the State Government issued a G.O. on 17.07.2001, which excluded cement from the list of goods eligible for concessional tax rates. Despite this, the petitioner continued purchasing cement at the concessional rate, leading to the assessment and penalty orders.

The court noted that the proviso to the G.O. dated 17.07.2001 allowed concessional rates only for manufacturers of finished goods like asbestos sheets, pipes, and hollow bricks, which did not apply to the petitioner. The court concluded that the petitioner was not entitled to purchase cement at a concessional rate post the G.O. dated 17.07.2001. Thus, Tax Revision Case No. 8 of 2008 was dismissed.

Issue 2: Justification of Penalty Imposed

The penalty imposed was challenged on the grounds that the proceedings were initiated under Section 7-A(2), which pertains to false documentation, whereas the issue was related to the misuse of Section 5-B(1). The court observed that the penalty proceedings should have been under Section 5-B(2), which deals with the misuse of concessional tax provisions. The State admitted to a clerical error in quoting the wrong section.

The court held that the petitioner never had an opportunity to defend against a penalty under Section 5-B(2) and that Section 7-A(2) and Section 5-B(2) are independent provisions requiring separate proceedings. Consequently, the penalty orders were set aside, and Tax Revision Case Nos. 9, 10, 11, and 12 of 2008 were allowed.

Conclusion:

Tax Revision Case No. 8 of 2008 was dismissed, affirming that the petitioner was not entitled to the concessional rate for cement purchases post the G.O. dated 17.07.2001. Tax Revision Case Nos. 9, 10, 11, and 12 of 2008 were allowed, setting aside the penalty orders due to procedural errors in quoting the wrong penal provision.