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2025 (4) TMI 1061 - HC - VAT / Sales TaxChallenge to revisional show-cause notices - power of Revisional Authority under Section 32 of the Telangana Value Added Tax Act 2005 to issue revisional show-cause notices challenging the appellate order passed in favor of the petitioner - HELD THAT - A plain reading of Section 32 (1) of VAT Act makes it clear that the Revisional Authority is competent to initiate proceedings to revise modify or set aside the order. Pertinently the learned counsel for the petitioners has not assailed the show-cause notices on the ground of competence. The provision in no uncertain terms makes it clear that the Revisional Authority is indeed competent to take a different view from the view taken by the Appellate Authority. There are substance in the argument of learned Special Government Pleader for State Tax that scope of interference at the stage of show-cause notice is very limited. The necessary ingredients on which interference can be made at the stage of show-cause notice are absent in the present cases. At the cost of repetition the question of competence/jurisdiction is not involved in the present matters. Whether the appellate order discloses necessary ingredients to show that it is prejudicial to the interest of Revenue or not can also be raised while filing objection/response to the show-cause notice. This is said in view of the principles laid down by the Supreme Court in Mohd. Ghulam Ghouse 2004 (1) TMI 378 - SUPREME COURT . The impugned show-cause notices cannot be interfered with. Resultantly interference is declined. The petitioners may file their reply to the show-cause notices by taking all possible grounds within three weeks from today. The Competent Authority shall consider the reply and decide the matters in accordance with law expeditiously. Conclusion - The revisional show-cause notices issued under Section 32 of the VAT Act are valid and maintainable. Petition disposed off.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court in this batch of petitions are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Competence of the Revisional Authority under Section 32 of the VAT Act to issue revisional show-cause notices The Court examined Section 32(1) of the Telangana VAT Act, which empowers the Commissioner to suo motu call for and examine records of any order or proceeding by subordinate authorities and, if found prejudicial to the interests of revenue, to initiate proceedings to revise, modify, or set aside such orders. The Court emphasized that the provision clearly confers competence on the Revisional Authority to take a view different from that of the Appellate Authority and to initiate revision proceedings accordingly. The petitioners did not challenge the jurisdiction or competence of the Revisional Authority to issue the show-cause notices. Therefore, the Court held that the Revisional Authority was competent to issue the revisional show-cause notices. Issue 2: Scope of judicial interference at the stage of revisional show-cause notice The Court relied heavily on the Supreme Court precedent in Special Director v. Mohd. Ghulam Ghouse, which cautions against High Courts entertaining writ petitions challenging show-cause notices at a preliminary stage. The Supreme Court held that such interference should be limited to cases where the show-cause notice is wholly without jurisdiction or non-est in law. The Court reiterated that the statutory functionaries specially constituted for revision and investigation must not be deprived of their powers to initially decide matters. The Court further observed that the legality and correctness of the show-cause notice can be challenged by the recipient during the proceedings initiated by the notice itself. Accordingly, the Court held that interference at the stage of issuance of the show-cause notice is generally impermissible unless there is a clear lack of jurisdiction or competence. Issue 3: Whether the revisional show-cause notices were cryptic or lacked necessary factual/legal basis The petitioners contended that the show-cause notices were cryptic and did not specify with accuracy how the appellate order was prejudicial to revenue. They relied on the Supreme Court judgment in Malabar Industrial Co. Ltd. to argue that such vagueness warrants interference. The Court distinguished the present case from the Division Bench judgment in M/s. Nice Enterprisers, where the show-cause notice was found to be entirely sketchy and devoid of factual background. In contrast, the Court found the revisional show-cause notices in the present matters to be detailed and not cryptic or vague. Hence, the Court declined to interfere on this ground. Issue 4: Whether petitioners can avoid replying to the revisional show-cause notices on the ground of reliance on the same Supreme Court judgment The petitioners argued that since the Revisional Authority relied on the same Supreme Court judgment which was already considered by the Appellate Authority, they are left without any defense and should not be compelled to file a reply. The Court rejected this argument, noting that the petitioners are free to raise all defenses, including distinguishing or challenging the applicability of the Supreme Court judgment, in their replies to the show-cause notices. The Court emphasized that the show-cause notice is tentative and the petitioners can rely on binding government circulars and memos previously considered by the Appellate Authority. The Court thus underscored the procedural right of the petitioners to respond and present their case before the Revisional Authority. Issue 5: Treatment of binding executive circulars and government memos relied upon by the Appellate Authority The Appellate Authority had granted relief to the petitioner by remanding the matter to the Assessing Authority for fresh verification of claims based on government circulars and memos, holding that imported goods cannot be subjected to tax. The Revisional Authority issued show-cause notices challenging this view, relying on the Supreme Court judgment. The Court observed that the petitioners are entitled to rely on these circulars and memos in their replies to the revisional notices. It is the duty of the Revisional Authority to consider all objections and materials submitted by the petitioners before passing any final order. This preserves the principle that executive instructions and circulars, if binding and relevant, must be duly considered in tax proceedings. 3. SIGNIFICANT HOLDINGS "The Revisional Authority is indeed competent to take a different view from the view taken by the Appellate Authority." "The scope of interference at the stage of show-cause notice is very limited. Unless the show-cause notice was totally non est in the eye of law for absolute want of jurisdiction, writ petitions should not be entertained to stall the investigative process." "The show-cause notice is tentative in nature... Nothing prevents the petitioners to rely on the circulars which were issued by the State Government, if such circulars are in support of the petitioners' claim." "Whether the appellate order discloses necessary ingredients to show that it is prejudicial to the interest of Revenue or not can be raised while filing objection/response to the show-cause notice." "The impugned show-cause notices cannot be interfered with at this stage and the petitioners are directed to file their replies within three weeks." The Court concluded that the revisional show-cause notices issued under Section 32 of the VAT Act are valid and maintainable. The petitioners are entitled to file their replies and raise all defenses, including reliance on government circulars and distinguishing the Supreme Court judgment. The Revisional Authority must consider these replies before passing any final orders. The petitions challenging the show-cause notices at the preliminary stage are dismissed without expressing any opinion on the merits.
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