Telangana High Court
M/S.Vision Ventures P ... vs State Of Ap., Revenue Dept., ... on 16 November, 2022
Bench: Ujjal Bhuyan, C.V. Bhaskar Reddy
THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYAN
AND
THE HON'BLE SRI JUSTICE C.V.BHASKAR REDDY
W.P.No.21798 of 2006
ORDER: (Per the Hon'ble the Chief Justice Ujjal Bhuyan)
Heard Mr. S.Suribabu, learned counsel for the petitioner and
Mr. K.Raji Reddy, learned Senior Standing Counsel, Commercial
Tax for the respondents.
2. By filing this petition under Article 226 of the Constitution
of India, petitioner seeks quashing of the order of assessment of
Value Added Tax (VAT) dated 16.11.2006 passed by respondent
No.3 for the tax period from September, 2005 to August, 2006 in
proposing to levy differential tax @ 8.5% amounting to
Rs.14,07,065.00, penalty of Rs.3,30,605.00 and interest of
Rs.59,691.00.
3. Petitioner before us is a private limited company engaged in
the business of executing works contract. It was registered with
respondent No.3 under the Telangana Value Added Tax Act, 2005
(briefly 'the VAT Act' hereinafter).
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4. Petitioner had entered into a contract with M/s.Visakha
Urban Development Authority, Visakhapatnam for construction of
residential houses at Visakhapatnam. In the course of executing
the said work, petitioner had purchased goods both within the then
composite State of Andhra Pradesh as well as outside the State of
Andhra Pradesh. Such goods were thereafter used in the execution
of the work.
5. For the assessment periods 2005-06 and 2006-07, petitioner
had opted for composition under Section 4(7)(c) of the VAT Act in
respect of works contract executed by it by filing the requisite form
and accordingly paid tax @ 4% on the total contractual
consideration received for the aforesaid assessment period.
Respondent No.3 had issued notice of assessment dated 15.09.2006
for the period from September, 2005 to August, 2006 and called
upon the petitioner to pay further tax of Rs.14,07,065.00. The
aforesaid tax was levied on the interstate purchase of goods based
on the amendment brought in to sub-section (7) of Section 4 of the
VAT Act with effect from 29.08.2005. On various grounds, the
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same came to be challenged before this Court in this writ petition.
When order of assessment dated 16.11.2006 came to be passed, the
same also came to be challenged.
6. By the order dated 27.10.2006, the writ petition was admitted
for hearing. Thereafter, respondents have filed counter-affidavit.
When the matter was listed on 02.11.2022, learned counsel for the
petitioner submitted that after filing of the writ petition, two
judgments have been rendered by the then combined High Court
of Andhra Pradesh which squarely cover the present case. The two
decisions are Delta Lubricants, Vijayawada v. Deputy
Commercial Tax Officer1 and Sri Balaji Flour Mills v.
Commercial Tax Officer2.
7. Pursuant to the order of this Court, petitioner has filed a
memo bringing on record the above two decisions. In Delta
Lubricants, Vijayawada v. Deputy Commercial Tax Officer (1
supra), a Division Bench of this Court while not interfering with
the order of assessment, however set aside the penalty imposed on
(2006) 43 APSTJ 27
2010 SCC Online AP 1187
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the ground that in the same order of assessment, penalty could not
have been imposed.
8. However, it is Sri Balaji Flour Mills v. Commercial Tax
Officer (2 supra) which is directly on the issue before us.
Paragraph 47 of the said decision is relevant and the same is
extracted hereunder:
Of all these, the assessment of the category in the above
paragraph (d), may be considered as one pursuant to an audit. As
audit cannot be taken up without prior authorization of the
Deputy Commissioner concerned as per Rule 59(1)(7),
necessarily there ought to be a further authorization to undertake
assessment. Although under Section 21(4) the authority
prescribed can take up assessment, reading Section 43 of the
VAT Act and Rule 59(1)(4)(ii)(b) and (d) and 59(7) of the VAT
Rules, the only conclusion would be that, unless and until there
is a separate authorization to undertake assessment, an officer
authorized to audit the accounts of a VAT dealer cannot
undertake assessment. If the rule making authority had intended
that the same officer, who is authorized to audit, can also
undertake assessment either under Rule 25(1) or Rule 25(5),
there would not have been any necessity to separately mention
about 'authority prescribed' for the purpose of assessment and
for the purpose of audit, as seen from Rule 59(1)(4) for the
purpose of assessment and Rule 59(1)(7) for the purpose of
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audit. Therefore, assessment without authorization of the higher
official as specified in Rule 59(1)(4)(ii)(b) and (d) would be
certainly one without authority or jurisdiction and would
contravene not only Section 21(4) but also Rule 59(1).
9. In the aforesaid decision, Division Bench of this Court held
that authorization to audit under Section 43 read with Rule 59(1),
Serial No.7 of the VAT Rules by itself would not enable the audit
officer to undertake assessment. Therefore, the assessment orders
passed by the audit officers were set aside. The matters stood
remitted to the respective audit officers for submitting audit report
as contemplated under Chapter VII of the VAT Audit Manual for
appropriate post audit action.
10. Following the decision of this Court in Sri Balaji Flour
Mills v. Commercial Tax Officer (2 supra), we set aside the
notice of assessment dated 15.09.2006 as well as the order of
assessment dated 16.11.2006 and remand the matter back to the
concerned audit officer for taking necessary consequential steps in
accordance with law.
11. Writ Petition is accordingly allowed. No costs.
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As a sequel, miscellaneous petitions, pending if any, stand
closed.
__________________
UJJAL BHUYAN, CJ
_______________________
C.V.BHASKAR REDDY, J
Date: 16.11.2022
LUR
