Andhra Pradesh High Court - Amravati

Sudhakar Traders vs The State Of Andhra Pradesh on 25 April, 2023

          HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
                    W.P.Nos.6599 and 6601 of 2023
Between:
M/s. Sudhakar Traders, Kurnool,
Rep. by its Proprietor Sri Saye Sudhakar,
S/o Sri Krishnamurthy, Aged about 34 years,
Kurnool, Andhra Pradesh.

                                                                   .. Petitioner

And

The State of Andhra Pradesh,
Rep. by its Principal Secretary to Government,
Revenue (CT-I) Department,
Velagapudi, Amaravati, Guntur District,
Andhra Pradesh and two others.

                                                                .. Respondents

DATE OF JUDGMENT PRONOUNCED: 25.04.2023

SUBMITTED FOR APPROVAL:

HON'BLE SRI JUSTICE U. DURGA PRASAD RAO HON'BLE SMT. JUSTICE VENKATA JYOTHIRMAI PRATAPA

1. Whether Reporters of Local newspapers Yes/No may be allowed to see the Judgments?

2. Whether the copies of judgment may be         Yes/No
   marked to Law Reporters/Journals?


3. Whether Their Ladyship/Lordship wish to       Yes/No
   see the fair copy of the Judgment?

                                                   _________________________
                                                   U. DURGA PRASAD RAO, J



                                                 ____________________________
                                                 V. JYOTHIRMAI PRATAPA, J
            *HON'BLE SRI JUSTICE U.DURGA PRASAD RAO
                              AND

HON'BLE SMT. JUSTICE VENKATA JYOTHIRMAI PRATAPA

+W.P.Nos.6599 & 6601 of 2023 %25.04.2023

# M/s. Sudhakar Traders, Kurnool, Rep. by its Proprietor Sri Saye Sudhakar, S/o Sri Krishnamurthy, Aged about 34 years, Kurnool, Andhra Pradesh.

.. Petitioner

And

$ The State of Andhra Pradesh, Rep. by its Principal Secretary to Government, Revenue (CT-I) Department, Velagapudi, Amaravati, Guntur District, Andhra Pradesh and two others.

.. Respondents

<GIST:

>HEAD NOTE:

! Counsel for petitioner: Sri M.V.K. Murthy, learned Senior Counsel representing Sri M.V.J.K. Kumar

Counsel for respondents: Learned Government Pleader for Commercial Taxes -II, representing respondents 1 and 3 and learned Government Pleader for Home representing 2nd respondent.

? CASES REFERRED:

MANU/GJ/2542/2019 HON'BLE SRI JUSTICE U. DURGA PRASAD RAO AND HON'BLE SMT. JUSTICE VENKATA JYOTHIRMAI PRATAPA

Writ Petition Nos.6599 & 6601 of 2023

COMMON ORDER: (Per Hon'ble Sri Justice U. Durga Prasad Rao)

W.P.No.6599/2023 and 6601/2023 are filed by the petitioner

challenging the notices in Form GST ASMT-10 dated 28.02.2023 issued

by 2nd respondent under Rule 99 of the A.P. Goods and Service Tax

Rules, 2017 (for short, 'the AGPST Rules') r/w Section 61 of the A.P.

Goods and Service Tax Act, 2017 (for short, 'the AGPST Act) calling for

explanation of the petitioner with regard to the discrepancies found in

respect of the returns submitted by the petitioner for the tax period April

2019 to March 2020 and April 2020 to March 2021 respectively.

2. The petitioner is engaged in supply of iron and steel purchased

from the resident registered taxable persons. The petitioner is a registered

dealer under the APGST Act and an assessee on the file of 3rd respondent

herein. While so, the petitioner submitted its returns for the taxable

period April 2019 to March 2020 and April 2020 to March 2021. The 3rd

respondent, on having received alert note vide R.C.No.158/C/2020 dated

21.12.2022 from the Regional Vigilance & Enforcement Officer / 2 nd

respondent, scrutinized the aforesaid returns and found the suppression of

sales turnover in the returns submitted by the petitioner for both the

taxable periods and accordingly, issued notices of intimation dated

28.02.2023 regarding the discrepancies in Form GST ASMT-10 under

Rule 99(1) of the AGPST Rules r/w Section 61 of the APGST Act and

called for the payment of the due tax / explanation within fifteen days of

the receipt of the notice.

Hence, the instant two writ petitions.

3. Heard Sri M.V.K.Murthy, learned Senior Counsel representing Sri

M.V.J.K. Kumar, learned counsel for petitioner, and learned Government

Pleader for Commercial Tax-II representing the respondents 1 & 3, and

learned Government Pleader for Home representing 2nd respondent.

4. Vehemently remonstrating the impugned notices, learned Senior

Counsel would firstly argue that there is no provision authorizing the

Director of Vigilance & Enforcement in the State to conduct inspection of

the business premises of a registered dealer under GST law. Therefore,

the impugned notices issued by 3rd respondent on the strength of the alert

note forwarded by 2nd respondent is a gross infraction of the GST law and

on that ground alone the impugned notices are liable to be set aside as

they are based on the unauthorized alert notes. He alternatively argued

that even assuming for argument sake that the 2nd respondent has power

to inspect the premises of the petitioner still he cannot himself forward

any alert notes to the 3rd respondent for the reason that under Section 72

of the APGST Act, whenever the Chief Commissioner required the

assistance of any public officers for implementation of the provisions of

the APGST Act, he may call upon to do so and on his requisition the

Government may by notification empower and require any class of

officers other than the officers mentioned in sub-section (1) of Section 72

to assist the proper officers in implementation of the Act. Learned

counsel while referring to Section 72 would strenuously argue, in the

instant case there is no material to show that either the Chief

Commissioner issued any requisition to the Government seeking

assistance of the 2nd respondent being the Regional Vigilance &

Enforcement Officer or the Government issued any notification to that

effect. Therefore, the impugned notices fell foul of the canons of law.

(a) Secondly, learned Senior Counsel argued that Section 67 of the

APGST Act is the relevant provision which enables a Proper officer not

below the rank of Joint Commissioner or any officer authorized by him to

inspect any place of business of the taxable person on the ground that he

has suppressed any transaction relating to supply of goods or services or

claimed Input Tax Credit in excess of his entitlement or indulged in

contravention of any of the provisions of the Act or engaged in business

of transporting goods or keeping the goods which escaped payment of tax

etc. Learned Senior Counsel would submit that in the instant case, in the

impugned notices the 3rd respondent has not stated anything about the

authorization issued to him by the Joint Commissioner to either conduct

the inspection or to issue the impugned notices. Since the notices suffer

the vice of lack of authorization under Section 67, they are illegal and

unsustainable and liable to be set aside. In this regard he placed reliance

on Prakashsinh Hathisinh Udavat v. State of Gujarat1.

(b) Nextly, learned Senior counsel would argue that in spite of the

representation dated 02.03.2023 requesting 3rd respondent to

communicate copy of the report along with the alleged incriminating

material stated to be forwarded to him by the 2nd respondent, except the

pre-prepared stock inventory, the 3rd respondent has not forwarded the

inspection report of the 2nd respondent and other incriminating material

and thereby the petitioner was deprived of valuable opportunity to submit

MANU/GJ/2542/2019

an effective explanation / objections to the impugned notices. He thus

prayed to allow the writ petitions.

5. Per contra, learned Government Pleader for Commercial Taxes-II

while supporting the impugned notices and opposing the writ petitions

argued that in the instant case the impugned notices in Form GST ASMT-

10 were issued by following the procedure under Rule 99(1) r/w Section

61 of the APGST Act but not under Section 67(1) or (2) of the APGST

Act. In expatiation, referring to Section 67 he would submit that

whenever a Proper Officer not below the rank of Joint Commissioner has

reason to believe that a taxable person has suppressed any transaction

relating to supply of goods or services or claimed input tax credit in

excess of his entitlement or indulged in contravention of the provisions of

the GST Act or rules to evade tax, then he may authorize in writing any

officer of the State tax to inspect the premises of such assessee under sub-

section (1). He would further submit, pursuant to such inspection, if he

has reason to believe that any goods are liable for confiscation or any

documents or books or things useful for the proceedings under this Act

are secreted, then as per sub-section (2) he may authorize in writing any

other officer of the State tax to search and seize such goods or documents.

Learned Government Pleader would thus submit that section 67(1) and

(2) would apply when the assessee acted in contravention of the

provisions of the Act to evade tax and such attempts came to the notice of

the proper officer not below the rank of Joint Commissioner. Then in

order to ascertain the truth of the information, at first he may authorize an

officer to inspect the premises of the assessee and later authorize an

officer of the State tax to search and seize incriminating goods or

documents as the case may be. In such an event, learned Government

Pleader would submit, the officer of the State tax who proceeds for

inspection or search and seize shall require the prior authorization of the

proper officer not below the rank of Joint Commissioner. However, in

the instant case, the proceedings were undertaken and impugned notices

were issued not under Section 67 of the AGPST Act but by following

Rule 99(1) r/w Section 61 of the Act. As per Section 61, after an

assessee makes self-assessment and files returns for the relevant tax

period, the Proper Officer, under Section 61 of the APGST Act, may

scrutinize returns and related particulars furnished by the registered

person to verify the correctness of the returns and inform him of the

discrepancies noticed and seek his explanation thereto. Learned

Government Pleader would strenuously argue that in the instant case, the

petitioner has filed its returns for the tax period April 2019 to March 2020

and April 2020 to March 2021. However, on receiving the alert note from

the statutory authority i.e., the Regional Vigilance & Enforcement

Officer, Kurnool, pointing out the suppression of sales turnovers, the 3rd

respondent in order to seek clarification from the petitioner issued the two

impugned notices asking him to either pay the demanded tax if he does

not wish to challenge the notices or submit its objections within the

stipulated time. Learned Government Pleader would argue in vehemence

that the 3rd respondent is well within his powers and jurisdiction to issue

the impugned notices and the petitioner cannot clamour that the 3rd

respondent cannot act upon the alert note forwarded by 2nd respondent on

one hand and issue the impugned notices without authorization on the

other. He thus prayed to dismiss the writ petitions.

6. While so, learned Government Pleader for Home representing the

2nd respondent while producing the copy of the G.O.Ms.No.504 dated

25.11.1997 issued by the General Administration (V&E-A) Department,

would submit that in the said G.O., the role of the Vigilance and

Enforcement Department has been delineated, as per which one of the

tasks of the Vigilance & Enforcement Department is to prevent the

leakage of revenues due to the Government and in that context, the 2 nd

respondent and his officials while inspecting the premises of the

petitioner found stock variation and also sale of material without issuing

invoices / bills and therefore, after obtaining the statement from the

petitioner, forwarded alert note to the 3rd respondent for taking necessary

action to prevent evasion of the tax. Learned Government Pleader would

thus submit that the 2nd respondent has authority to inspect the premises

of the petitioner and forward the alert note to 3rd respondent and his acts

are thus just and legal.

7. The points for consideration are:

(1) Whether the 2nd respondent has no statutory authority to inspect the premises of the petitioner and forward alert note to the 3rd respondent regarding the suppression of sales turnover and other deficiencies and 3rd respondent cannot act upon the said alert note and issue impugned notices dated 28.02.2023 to the petitioner?

(2) Whether the impugned notices are unsustainable in law for want of authorization from the Proper Officer under Section 67 of the APGST Act and hence liable to be set aside?

8. Point No.1: We gave our anxious consideration to the above

respective arguments of either side. Admittedly, the impugned notices

dated 28.02.2023 were issued by the 3rd respondent on the strength of the

alert note dated 21.11.2022 forwarded by the 2nd respondent stating that

during his inspection of the premises of the petitioner, his team found sale

of iron and binding wire by the petitioner without issuing any invoices /

bills and thus suppressed the sales turnover to avoid the tax. The 3rd

respondent in his turn issued the impugned notices dated 28.02.2023 and

instructed the petitioner to either pay the demanded tax within 15 days or

submit his objections by 14.03.2023.

9. Be that as it may, a perusal of the G.O.Ms.No.504, General

Administration (V&E-A) Department, dated 25.11.1997 produced by

learned Government Pleader for Home shows that the Vigilance &

Enforcement Department was constituted by the Government of A.P. vide

G.O.Ms.No.269, General Admin (SC.D) Department dated 11.06.1985 to

conduct enquiries / investigations into specific allegations affecting

public interest and to take effective measures through its own machinery

and achieve several objectives, one of which is prevention of leakage of

revenues due to the Government. In the said G.O., it is further stated that

the V&E Department is expected to carry out vigilance functions where

Government spending is involved and enforcement functions in respect of

the revenues due to the Government. The Head Office of V&E was

reconstituted into following four wings vide office order No.283, G.A

(V&E) Department dated 03.08.1995:

(a) Revenue Wing

(b) Engineering wing

(c) Development works Wing

(d) Natural Resources wing Each of these wings is headed by the Joint / Additional Director. Further,

the officers working in V&E Department have jurisdiction and powers

throughout the State of Andhra Pradesh in respect of matters to which the

Executive Authority of the State extends. The jurisdiction of the V&E

Department extends to all departments of the Government, State Public

Sector undertakings, State Government companies, all local bodies like

Municipalities and Zilla Parishads. Finally it is stated in the aforesaid

G.O. that all the administrative departments of the Government shall

extend necessary cooperation to the V&E Department.

10. Thus, the above G.O. pellucidly tells that the enforcement

functions of the V&E Department inter alia are to safeguard revenues

due to the Government and in that context it is permeable in all the

departments including the Tax department. We agree with the submission

of the learned Government Pleader for Home that in the matter of

protection of revenue due to the Government in the form of taxes, the

officials of the V&E Department, if need be, can make inspection in the

premises of taxable traders. During course of such inspection if the

officials of the V&E Department found the attempts of such traders in

evasion of tax, they can pass on the information to the concerned tax

department. In our view, it is an exchange of information between two

statutory authorities for safeguarding the revenue due to the Government.

Therefore, we are unable to accept the contention of petitioner that the 2 nd

respondent has no statutory right to conduct inspection in its premises and

forward the alert note to the 3rd respondent and the latter cannot act upon

such information.

11. We also cannot appreciate the other contention of learned counsel

for petitioner that unless the Chief Commissioner requires the assistance

of any public officer(s) in terms of Section 72(2) of the APGST Act and

the Government issues a notification requiring such class of officer(s) to

assist the Proper Officer, no assistance can be extended by any public

officer as in the instant case. For better appreciation, Section 72 of the

APGST Act is extracted as under:

72. Officers to assist proper officers (1) All officers of Police, Railways, Customs, and those engaged in the collection of land revenue, including village officers, and officers of central tax and officers of the Union territory tax shall assist the proper officers in the implementation of this Act.

(2) The Government may, by notification, empower and require any other class of officers to assist the proper officers in the implementation of this Act when called upon to do so by the Chief Commissioner.

It is true that when the Chief Commissioner requires the assistance of

any other class of officers other than those mentioned in sub-section

(1), he may require such assistance and the Government may issue

notification in that regard. However, apart from that, the Government

with an avowed object constituted V&E Department under

G.O.Ms.No.269 and assigned certain functions, one of which is to

safeguard the revenue due to the Government. In that context, the

officers of the said department can share the relevant information with

the Commercial Tax Department and assist them without any prior

requisition. The powers conferred under G.O.Ms.Nos.269 and 504 are

independent and exclusive and they are in aid to the Tax department

but not in derogation to Section 72(2) and in our view, there is no

conflict between the powers and functions of the V&E Department and

the power of Chief Commissioner to make requisition to the

Government under Section 72(2) of the APGST Act. This point is

answered accordingly.

12. Point No.2: Regarding this point, as rightly argued by the

learned Government Pleader for Commercial Taxes-II, the 3rd

respondent issued impugned notices in terms of Rule 99(1) of the

APGST Rules r/w Section 61 of the APGST Act but not under Section

67 of the Act. As per Section 61, during the scrutiny of the returns and

related particulars submitted by an assessee, if the proper officer finds

any discrepancies, he may seek explanation of the assessee and if such

explanation is found acceptable, no further action shall be taken or

otherwise if the assessee fails to furnish satisfactory explanation or

fails to take the corrective measures in his return in which the

discrepancy is accepted, the Proper Officer may initiate appropriate

action. In the instant case, the 3rd respondent in the light of alert note

forwarded by 2nd respondent, only issued the impugned notices to the

petitioner either to pay the demanded tax if he accepts the

discrepancies or to submit its objections / explanations within the

stipulated time. At this stage, no action was contemplated to inspect

the premises of the petitioner or to search and seize any goods or books

of accounts as contemplated under Section 67 of the Act. As such, in

our view, no authorization is required to the 3rd respondent under

Section 67 of the APGST Act to issue the impugned notices calling for

objections. Therefore, the contention of the petitioner that the notices

became illegal for want of authorization under Section 67 of the

APGST Act is untenable. Consequently the decision in Prakashsinh

Hathisinh Udavat (1 supra) relied upon by the petitioner is of no

avail, as in the said decision the High Court of Gujarat deprecated the

act of Assistant Commissioner in seizing the car and mobile phones of

the petitioner without having any authorization given by the Proper

Officer in terms of Section 67(2) of the Gujarat Goods and Service Tax

Act. Needlesss to emphasize that the present case is of not that ilk.

Thus, Section 67 has no relevancy in the instant case.

13. Be that as it may, a pertinent question will arise here that even

for acting under Rule 99(1) of the APGST Rules r/w Section 61 of the

APGST Act, whether the 3rd respondent requires any authorization.

This question would arise because in Rule 99 as well as in Section 61

the word 'Proper Officer' is employed and it is stated that the Proper

Officer may scrutinize the returns submitted by the registered person.

In this context, Section 2(91) of the APGST Act defines 'Proper

Officer' as follows:

"Proper Officer" in relation to any function to be performed under this Act, means the Chief Commissioner or the officer of the State tax who is assigned that function by the Chief Commissioner."

The 3rd respondent who issued the impugned notices is the Deputy

Commissioner (ST) but not the Chief Commissioner. Therefore, in

order to issue the impugned notices, the 3rd respondent requires the

authorization of the Chief Commissioner assigning the task of issuing

notices under Rule 99 r/w Section 61 of the Act. In the impugned

notices, neither any reference is made about such authorization nor it

was filed separately in the Court. Therefore, we are constrained to

hold that the two impugned notices suffer the vice of lack of

authorization by the Proper Officer i.e., Chief Commissioner.

Therefore, the impugned notices are liable to be set aside. However,

that will not preclude the Chief Commissioner or the officer authorized

by him to issue fresh notices under Rule 99 of the APGST Rules r/w