Andhra Pradesh High Court - Amravati
Namburi Venkata Santosh, vs The State Of Andhra Pradesh, on 30 June, 2021
IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
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WRIT PETITION No.12437 OF 2021
Between:
Namburi Venkata Santosh,
S/o.Rajam Raju, Aged about 33 years,
Occ:Business, R/o.MIG 384, APHB Colony,
Babametta, Vizianagaram-2. --- Petitioner.
And
The State of Andhra Pradesh,
Rep. by its Principal Secretary,
Revenue (Commercial Tax) Department,
Secretariat, Velagapudi,
Amaravathi,
Guntur District and three others. --- Respondents.
DATE OF ORDER PRONOUNCED : 30.06.2021
SUBMITTED FOR APPROVAL:
HON'BLE SRI JUSTICE JOYMALYA BAGCHI
AND
HON'BLE SRI JUSTICE K.SURESH REDDY
1. Whether Reporters of Local Newspapers
may be allowed to see the order? Yes/No
2. Whether the copy of order may be
marked to Law Reporters/Journals? Yes/No
3. Whether Their Lordships wish to
see the fair copy of the order? Yes/No
________________________
JOYMALYA BAGCHI, J
________________________
K.SURESH REDDY, J
JB, J & KSR, J
* HON'BLE SRI JUSTICE JOYMALYA BAGCHI
AND
* HON'BLE SRI JUSTICE K.SURESH REDDY
+ WRIT PETITION No.12437 OF 2021
% 30.06.2021
# Between:
Namburi Venkata Santosh,
S/o.Rajam Raju, Aged about 33 years,
Occ:Business, R/o.MIG 384, APHB Colony,
Babametta, Vizianagaram-2. --- Petitioner.
And
The State of Andhra Pradesh,
Rep. by its Principal Secretary,
Revenue (Commercial Tax) Department,
Secretariat, Velagapudi,
Amaravathi,
Guntur District and three others. --- Respondents.
! Counsel for the Petitioner : Smt.T.V.Sridevi
^ Counsel for Respondents : Sri C.Sekhar
(Government Pleader for
Commercial Tax)
< Gist:
> Head Note:
? Cases referred:
This Court made the following:
JB, J & KSR, J
HON'BLE SRI JUSTICE JOYMALYA BAGCHI
AND
HON'BLE SRI JUSTICE K.SURESH REDDY
WRIT PETITION No.12437 OF 2021
ORDER: (Per Hon'ble Sri Justice Joymalya Bagchi)
1. Order, dated 16.11.2020, passed by respondent No.3 in AO
No.ZH3711200D26989, imposing tax liability to the tune of Rs.3,06,130/-
for the assessment year 2014-15 and the consequential penalty and
urgent notices dated 16.11.2020 and 16.03.2021 respectively have been
challenged by the petitioner-assessee.
2. Petitioner is a private bus operator and is assessed under the
jurisdiction of respondent No.3/Commercial Tax Officer. On the basis of a
vigilance report, which showed that the petitioner had let out 4 vehicles
bearing registration Nos.AP35U7798, AP35U7578, AP35Y1229 and
AP35Y1238 to APSRTC in Vizianagaram Region for the periods 2014-15
to 2016-17 but had not registered himself under the A.P. Value Added Tax
Act, 2005 (for short, 'the VAT Act') and submitted hire charges turnover, a
show-cause notice proposing levy of tax at the rate of 1% of the hire
charges for the aforesaid years by treating the dealer as TOT dealers was
served upon the petitioner. Subsequently, the assessing authority noticed
that the rate of tax ought to be levied at 14.5% as per Section 4(8) of the
VAT Act. Accordingly, a revised show-cause notice, dated 31.08.2020,
was served upon the petitioner. In response to the revised show-cause
notice, the mother of the petitioner submitted a written representation and
claimed that her son, the petitioner herein, who is presently residing at
United Kingdom, was the owner of two vehicles bearing registration
Nos.AP35Y1229 and AP35Y1238 but had subsequently sold the said
JB, J & KSR, J
vehicles. The other two vehicles bearing registration Nos.AP35U7798 and
AP35U7578 does not belong to the petitioner or his family members. It
was further claimed therein as per the directions of the Commissioner, tax
at the rate of 1% of the hire charges had been paid and from April, 2016
onwards. In conclusion of the proceedings, the assessing authority came
to a finding that the petitioner was the owner of the vehicles and had let
out the said vehicles for the assessment period 2014-15. With regard to
the rate of tax leviable on the petitioner, the assessing authority, after
referring to Section 4(8B) of the VAT Act read with Rule 17A came to a
finding that the petitioner was not entitled to the lower rate of tax as he
had not complied with the aforesaid provisions. Accordingly, the tax
liability to the tune of Rs.3,06,130/- was assessed on the petitioner for the
assessment year 2014-15.
3. Mrs.T.V.Sri Devi, learned counsel for the petitioner, assailing the
aforesaid order submits that the initial show-cause notice had been issued
to levy tax at the rate of 1% on the hire charges upon the petitioner. After
expiry of the limitation period, the assessing authority, without any factual
foundation of wilful evasion of tax, invoked Section 21(5) of the VAT Act
and raised a claim of tax at the rate of 14.5%. She contends the revised
show-cause notice is barred by limitation as there is no factual foundation
averred therein with regard to wilful evasion of tax a 'condition precedent'
for the purpose of invoking Section 21(5) of VAT Act. She also argued that
there is no finding in the impugned order with regard to wilful evasion of
tax. On the other hand, the materials on record show that the petitioner
was instructed by the tax authorities to pay tax at the rate of 1% on the
hire charges. Subsequently the tax authorities altered their view and after
expiry of period of limitation period under sub-section (4) of Section 21 i.e.,
JB, J & KSR, J
4 years raised a claim at the rate of 14.5% upon hire charges by illegally
invoking sub-section (5) of Section 21 of VAT Act.
4. In response, Sri C.Sekhar, learned Government Pleader for
Commercial Tax, contends that the order is an appealable one. Nowhere
in the written representation did the petitioner gave any explanation why
he had not complied with the statutory requirements under Rule 17A Read
with Section 4(8B) of VAT Act to avail the concessional rate. Hence, there
is no jurisdictional error in the impugned order.
5. From the rival submissions of the parties and the materials on
record, we note that the petitioner had been initially served with a show-
cause notice calling upon him to respond why tax at the rate of 1% on the
hire charges be not imposed. Subsequently, by invoking Section 21(5) of
the VAT Act a revised show-cause notice levying tax at a higher rate i.e.,
14.5% was proposed.
6. Section 21 of the VAT Act provides for the procedure for
assessment of tax in respect of a VAT or TOT dealer, who fails to file
return within the prescribed time. Sub-section (4) of Section 21 inter-alia
provides that such assessment shall be made within a period of 4 years
from the end of the period for which the assessment is made. Sub-section
(5) thereof enlarges the period of limitation to 6 years for making such
assessment to 6 years from the date of filing of the return in the event
there is wilful evasion of tax.
7. Section 21(5) of the VAT Act reads as follows:
"Where any wilful evasion of tax has been committed by a dealer,
an assessment shall be made to the best of his judgment by the
authority prescribed within a period of six years of date of filing of
the return or the first return relating to such offence."
JB, J & KSR, J
8. Hence, a finding there is "wilful evasion of tax" is a condition
precedent to invoke powers under Section 21(5) of VAT Act.
9. In the present case, the assessing authority initially proceeded to
issue show-cause notice upon the petitioner for payment of tax at the rate
of 1% on the hire charges for the assessment year 2014-15.
Subsequently, a revised show-cause notice calling upon the petitioner-
assesse to pay tax at the rate of 14.5% was issued on 31.08.2020 i.e.,
beyond the period of 4 years from the year of assessment. The assessing
authority has chosen to invoke sub-section (5) of Section 21 of the VAT
Act, which provided for an extended period of limitation i.e., 6 years from
the date of return to issue the revised show-cause notice. However, in
order to invoke jurisdiction under Section 21(5) of the VAT Act, it was
incumbent on the assessing authority to allege that there was a wilful
evasion of tax and not a case of mere failure to pay a higher rate of tax.
This being a jurisdictional fact for invocation of powers of assessment
under Section 21(5) of the VAT Act, we have entertained the Writ Petition
to examine the legality of the assessment order notwithstanding existence
of alternative remedy.
10. We have gone through the length and breadth of the revised show-
cause notice served on the petitioner, dated 31.08.2020, wherein it is
averred that the rate of tax was incorrectly fixed at 1% and accordingly the
revised proposal to impose tax at 14.5% was made. There is no averment
in the revised show-cause notice that there was wilful evasion on the part
of the assessee to pay the higher rate of tax. Incorrect application of a
lower rate of tax per se would not amount to a wilful evasion of tax unless
and until factual averments disclosing wilful evasion of tax are made out in
the show-cause notice. Moreover, impugned order is also completely
JB, J & KSR, J
silent on this score. There is no finding that the assessee had wilfully
evaded tax. On the other hand, it refers to the representation of the
mother of the assessee, who claimed tax at the rate of 1% was paid from
2016 as per direction of the Commissioner, Commercial Taxes. No
material to contravene the aforesaid stance has been referred to in the
order impugned. Merely by recording non-compliance of statutory
provisions namely Section 4(8B) of the VAT Act read with Rule 17A of the
Rules, the assessing authority held the dealer was not entitled to a lower
rate of tax. When the assessee having not been put on notice to respond
to the allegation that it had wilfully evaded the tax, the authority could not
have been imposed a higher tax liability by invoking its powers under
Section 21(5) of the VAT Act. In the absence of any factual averment in
the show-cause notice that the assessee had wilfully evaded the tax and
since the order impugned is completely silent on such issue, we hold the
entire proceedings and the impugned order dated 16.11.2020 passed
therein are without jurisdiction and liable to be set-aside.
11. In the light of the aforesaid discussion, we are inclined to set-aside
the impugned order dt.16.11.2020 and the consequential penalty and
urgent notices dt.16.11.2020 and 16.03.2021 respectively.
12. At this stage, learned Government Pleader for Commercial Tax,
seeks leave to issue a fresh revised show-cause notice in the event
further materials disclose wilful evasion of tax by the petitioner. We
choose not to make any comment on such score except observing further
steps, if any, in the matter must be strictly in accordance with law and
subject to the observations made in this order.
JB, J & KSR, J
13. In the result, the Writ Petition is allowed setting aside the impugned
order dated 16.11.2020. Consequently, the penalty and urgent notices,
dated 16.11.2020 and 16.03.2021 are also set-aside. No order as to costs.
14. As a sequel, miscellaneous applications pending, if any, shall stand
closed.
________________________
JOYMALYA BAGCHI, J
________________________
K.SURESH REDDY, J
Date: 30-06-2021
Dsh
