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TMI Blog2014 (9) TMI 453X X X X Extracts X X X X X X X X Extracts X X X X ..... ales as falling under entry 45 of the First Schedule to the VAT Act. In pursuance of authorization issued by the second respondent, the Deputy Commercial Tax Officer (DCTO), Benz Circle, Vijayawada, conducted audit of the accounts of the petitioner on January 20, 2009, for the periods from April 1, 2006 to November 30, 2008. By order dated February 27, 2009, the DCTO disallowed the input-tax credit on the goods for which exemption was claimed and by applying formula A x B/C as per rule 20 of the Andhra Pradesh Value Added Tax Rules, 2005 ("the VAT Rules") disallowed the input-tax credit for an amount of Rs. 2,73,966. Thereafter, in exercise of powers under section 32 of the VAT Act, the second respondent issued a show-cause notice proposing to revise the order of the DCTO, dated February 27, 2009. He proposed to levy tax on the sales turnover of cotton terry towelling fabrics on the premise that the petitioner claimed exemption on the sales turnover on the terry towels in the guise of terry towelling fabrics. The petitioner submitted objections to the show-cause notice on June 23, 2010. While the matter is pending, at that stage, the first respondent issued show-cause notice dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Duly considering all the objections, the first respondent passed orders raising demand for CST of Rs. 1,97,065. The petitioner is neither registered with the Central Excise and Customs Department nor has paid additional excise duty to claim exemption under the VAT Act. Entry 52 originally read as "readymade garments". By G.O. Ms. No. 1564, dated August 17, 2005, it was amended with effect from August 18, 2005 to read as "readymade garments, bed sheets, pillow covers, towels, blankets, travelling rugs, curtains, crochet laces, zari, embroidery articles (and all other made ups)". The bracketed portion was omitted with effect from March 1, 2009 and the items "bed sheets, pillow covers, towels, blankets, travelling rugs, curtains, crochet, zari and embroidery articles" were omitted with effect from May 1, 2009 and no tax was levied from that day. The first respondent would further submit that after audit, the DCTO finalized the assessment on September 20, 2006; the petitioner paid the tax and penalty determined by the authority and therefore he cannot raise any objection if assessment under the CST Act for 2005-06 is undertaken by the first respondent. The petitioner accepted the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod of three years from the expiry of the year to which the assessment relates. Section 14(4) of the APGST Act, however, enables reassessment when it is found the dealer was assessed at a rate lower than the applicable rate or the turnover escaped assessment. The VAT Act came into force from April 1, 2005. Under section 20 thereof read with rule 23 of the Andhra Pradesh Value Added Tax Rules, 2005 ("the VAT Rules"), every registered VAT dealer shall have to submit return along with proof of payment of tax within 20 days after the end of the tax period. "Tax period" is defined in section 2(36) as to mean the calendar month or any other period prescribed. If a return is filed within the prescribed time, it shall be accepted as his assessment. But under section 21, if the assessing authority is not satisfied, he shall assess the VAT within four years of due date of return or within four years of the date of filing of the return whichever is later. As rule 23 read with section 2(36) requires a VAT dealer to file return within 20 days after the end of the tax period, the assessing authority can undertake assessment within four years from the date of filing of the return or otherwise as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the declarations in form F received by him from the transferee of the goods to whom he transferred goods otherwise than as a result of sale; (v) an extract of columns (5) to (13) of the register in form CST IV, maintained by him. (Sub-rules (2) and (3) omitted here as not relevant) 14A. (4): If no return is submitted for any month or quarter, as the case may be, before the due date or if the return submitted appears to be incorrect or incomplete, the assessing authority shall after making such enquiry as he considers necessary and after giving the dealer an opportunity of proving the correctness and completeness of the return where one has been submitted, determine the turnover to the best of his judgment, and provisionally assess the tax or taxes payable for the month or quarter, as the case may be and shall serve upon the dealer a notice in form CST VII and the dealer shall pay the sum demanded at the time and in the manner specified in the notice: Provided that if for any reason the determination of provisional assessment of tax or taxes payable for any month or quarter is not completed on or before the receipt of the return for the succeeding month or quarter, as the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessing authority may also be exercised by the appellate or revising authority, subject to the same limitations and conditions as are applicable in the case of assessing authority." Unlike section14(1) of the APGST Act and section 20 of the VAT Act, the CST Act does not specifically prescribe any period of limitation for undertaking the assessment of CST payable by a registered dealer. As already noticed supra, by virtue of section 9(2) of the CST Act all the provisions of the State law, relating to the sales tax would also apply to assessment of CST. Further the Central Rules also do not prescribe any period of limitation but rule 11(1) thereof stipulates that the period of turnover in relation to any dealer liable to pay CST shall be the same as the period in respect of which he is liable to submit returns under the State law. The Central Rules have been made in exercise of the powers under section 13(1) of the CST Act. Section 13(3) empowers the State Government to make Rules not inconsistent with the provisions of the CST Act and the Central Rules. As the CST Act or the Central Rules are silent with regard to the limitation, one has to look to the State Rules alone and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which only means those cases falling under sub-rules (5) and (5A) which speak of self-assessment and deemed assessment. The counsel for the petitioner would strongly rely on sub-rule (5A) of rule 14A in support of the plea that the impugned assessment is barred by limitation. We are afraid we cannot accept the submission. In our opinion it only deals with deemed assessment and lays down that if no assessment is made within a period of four years from the date of filing of the return, such deemed assessment would be final. The period of limitation is specifically dealt with by sub-rule (8). If this construction is not adopted it would amount to giving extended meaning to legal fiction in sub-rule (5A) which is not permissible rule of interpretation. A legal fiction is a legislative device created for a specified and definite purpose of clarifying the context or a situation for the purpose of applicability or inapplicability or some times for enlarging the scope of the provision. It is not necessary to refer to the case law which is galore. Suffice to extract hereinbelow the passage from the recent Full Bench judgment dated November 25, 2011 of this court to which both of us are m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct should be given to both. The rule of harmonious construction is well-settled. Where there are two provisions in an enactment which cannot be reconciled, they should be interpreted in a manner to give effect to both (Venkata Ramana Dora v. State of A.P. AIR 1958 SC 555 and Sultana Begum v. Prem Chand Jain AIR 1997 SC 1006; [1997] 1 SCC 373). While doing so, it is trite, all the provisions of the Act must be read together. Similarly all the sub-sections or sub-rules should also be read together while harmonizing the effect of the provision. In Ankamma Trading Company v. Appellate Deputy Commissioner (CT) [2011] 44 VST 189 (AP); [2011] 53 APSTJ 1, a Division Bench of this court to which one of us is a member (VVSR,J) explained this principle which we may quote hereunder (pages 223 and 224 in 44 VST): "A harmonious construction of a provision, which subserves the object and purpose for which the provision is intended to serve, is permissible provided it does not cause violence to the language of the provision, (Oxford University Press v. Commissioner of Income-tax [2001] 247 ITR 658 (SC); AIR 2001 SC 886, Administrator, Municipal Corporation, Bilaspur v. Dattatraya Dahankar AIR 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnover during the period from 1st April of the preceding year to 31st March of the succeeding year, be it the turnover in relation to a month, a quarter or a year, is found to have escaped assessment or deemed to have assessed incorrectly, the competent officer can undertake assessment within four years from 31st March of the year relevant during which the whole or any part of the turnover escaped assessment. The submission of the counsel that the period of four years as contemplated under section 14A(8)(b) of the CST Act shall have to be reckoned from the expiry of each month of the year cannot be accepted on plain construction of the said rule. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the VAT Act, as the petitioner took input-tax credit under the VAT Act on the entire purchase value of the cotton procured from within the State. Be it noted that if the cotton fabric is exempt from VAT, the petitioner should have restricted the input-tax credit on the purchase value of the cotton applying the formula AxB\C but they did not do so leading to inference that they sold "cotton terry towels" falling under entry 52 of the Fourth Schedule. Further most of the sales were made to hotels and traders and, therefore, the items sold is cotton terry towels and not fabric. The CTO, Autonagar Circle, Vijayawada verified machinery of the dealers and noticed that the petitioner was producing cotton terry towels in different lengths. The CTO also relied on the fact that the entire export sales disclosed by the dealers were in respect of cotton terry towels only. Accordingly while treating the export sales as exempt from tax, the CTO levied tax at 10 per cent on inter-State sales not covered by C forms as well as other sales and raised demand for Rs. 1,97,065. The counsel for the petitioner would contend that the petitioner is a dealer manufacturing and marketing terry towelling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central excise registration stood cancelled with effect from April, 2005. His plea, therefore, that the goods manufactured by it are exempted as they are covered by the relevant chapter heading in Central excise tariff cannot be accepted. There is no denial of the fact that by G.O. Ms. No. 1564, dated August 17, 2005, entry 52 of the Fourth Schedule to VAT Act was amended with effect from July 17, 2005 bringing the towels under entry 52 of the Fourth Schedule. We quote hereunder entry 45 of the First Schedule and entry 52 of the Fourth Schedule as they appeared at the relevant time. I Schedule Entry 45 Cotton fabrics, manmade fabrics, woollen fabrics and textile made ups. IV Schedule Entry 52 Readymade garments (bed sheets), pillow covers, towels, blankets, travelling rugs, curtain, . . . laces, terry embroidery articles and all other made ups. 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 asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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