M/s.Agarwal Industries Limited V. The Commissioner of Commercial Taxes

SPLA/2/2010

AI Insights

The case involves M/s. Agarwal Industries Limited, the appellant, challenging an order by the Commissioner of Commercial Taxes, the respondent, which sought to revise the appellant's tax assessment for the year 2000-01 under the CST Act. The appellant had previously been granted exemptions on certain consignment sales, which the respondent later sought to re-assess based on findings from new investigations. The appellant contended that the respondent's actions amounted to a second revision of the assessment for the same year, which was not permissible under the law. The court examined whether the respondent was legally entitled to undertake the revision and whether the actions were within the prescribed time limits.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 727484 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 13-02-2013
• Assessment Year: misc
• Other Referred Cases: STATE OF ANDHRA PRADESH V.A.P.DIARY DEVELOPMENT CORPORATION LIMITED, STATE OF MADRAS V.SHREE MURUGAN FLOUR MILLS (P) LIMITED, MANEPALLI VENKATA NARAYANA AND OTHERS v. STATE OF ANDHRA PRADESH, STATE OF ANDHRA PRADESH V. SRI PANDURANGA RICE CONTRACTORS COMPANY, HYDERABAD INSULATED WIRES (P) LTD v. COMMISSIONER OF COMMERCIAL TAXES, HYDERABAD, COMMISSIONER OF INCOME TAX V. ALAGENDRAN FINANCE LTD
• Laws Referred To: Andhra Pradesh General Sales Tax Act, 1957, Central Sales Tax Act, 1956
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: P VARMA
• Assessee Lawyers: S RAVI
• Keywords: Consignment sales; Exemption Claim; F-forms; Jurisdiction; Limitation; Revision of Assessment; Special Appeal
• Section: 23(1); 14; 9(2); 20(1); 20(2); 20(3)

Judgement Text

" *THE HON’BLE SRI JUSTICE GODA RAGHURAM AND THE HONB’BLE SRI JUSTICE M.S RAMACHANDRA RAO + Spl. A No.2 of 2010 # M/s. Agarwal Industries Limited v. The Commissioner of Commercial Taxes, A P, Hyd. % 13-2-2013 !Counsel for the petitioner : Sri S. Ravi, Sr. Advocate Counsel for the Respondents: Sri P. Balaji Varma Spl G.P. for CT Head Note: ? Cases referred: HONOURABLE SRI JUSTICE GODA RAGHURAM AND HONOURABLE SRI JUSTICE M.S.RAMACHANDRA RAO SPL. APPEAL No.2 of 2010 JUDGMENT: (Per Hon’ble Sri Justice M.S.Ramachandra Rao) This Special Appeal is filed under Section 23(1) of the Andhra Pradesh General Sales Tax Act, 1957 (for short “the GST Act”) by the assessee challenging the order dated 13.7.2010 of the respondent. The appellant-assessee is a company registered under the Companies Act, 1956 engaged in the manufacture and sale of vegetable oils, vanaspathi. It is registered as a dealer on the rolls of the Commercial Tax Officer, Gowliguda, Hyderabad during the year 2000-01 and at the time of filing this appeal on the rolls of the Commercial Tax Officer, Special Commodities Circle, Saroornagar Division under the GST Act and also under the Central Sales Tax Act, 1956( for short “CST Act”). It affects sales within the State, CST sales and consignment sales through agents in other States. The Commercial Tax Officer (Int)- III, Enforcement Wing, Hyderabad conducted cross verification of transactions claimed as consignment sales by the appellant for the period 1.4.2000 to 30.6.2000 covering a turnover of Rs.1,05,08,900/- in respect of ten dealers of Tamilnadu and Karnataka and found them to be fictitious. He therefore passed provisional assessment order dated 20.3.2001 disallowing claim for exemption on the entire turnover of Rs.6.80 crores pertaining to the three month period from 1.4.2000 to 30.6.2000. Challenging the same, the appellant preferred appeal to the Appellate Deputy Commissioner ( CT), Secunderabad Division. By order dated 14.6.2001, he allowed the appeal finding fault with the incomplete enquiry conducted by the Assessing Officer and directed him to make a full fledged enquiry into all the transactions relating to the disputed turnover and re-do the assessment afresh after supplying any material that it has gathered in the investigation with the appellant for its rebuttal. Thereupon, the Deputy Commissioner (CT), Abids took up the assessment of the appellant under the CST Act for the year 2000-01. He verified the audit report filed by the appellant as required under the Act and proposed to disallow exemption of Rs.39,89,47,477/- on alleged consignment sales turnover. The basis for the proposal was that the some consignees were not existing or were found not registered on the rolls of the department in the respective states; though the names of some of the consignees tally with registration certificate numbers, the said consignees were not traceable at the addresses furnished by the assessee and the whereabouts of the said dealers were not known; that the assessing authorities of the said dealers certified that the said dealers neither filed returns nor paid any taxes to the department; in some cases although the consignees and their registration certificate numbers given by the assessee are tallying, they were found to be doing business in some other commodities other than vegetable oils. The appellant filed objections to the show cause notice and also filed 509 F forms covering the disputed turnover of Rs.39,89,47,477/-. By order dated 15.3.2003, the Deputy Commissioner (CT), Abids Division accepted the F forms filed by the appellant and granted exemption on the turnover relating to the transaction claimed as consignment sales and finally assessed the appellant to a net turnover of Rs.1,77,74,427/- under Section 14 of the GST Act read with Section 9(2) of the CST Act. The Additional Commissioner (CT) Legal vide notice dated 28.10.2006 proposed to revise the order dated 15.3.2003 of thee Deputy Commissioner (CT), Abids Division in exercise of his powers under Section 20(2) of the Act read with Section 9(2) of the CST Act on the ground that the latter failed to verify whether the appellant had complied with requirements of Rule 14(3) of the CST (AP) Rules; that requirements under the said rule are mandatory and it is not sufficient to claim exemption by filing “F” forms and/or proof of dispatch of goods; substantial evidence as required under the said rule was not adduced by the appellant; and therefore exemption on the entire turnover of Rs.39.89 Crores allowed by the assessing authority is proposed to be disallowed and a tax of 10% is proposed to be levied on the turnover of Rs.2,35,760/- which had been assessed by the assessing authority i.e. the Deputy Commissioner @ 4% instead of 10%. The appellant objected to the said show cause notice contending that filing of “F” forms is sufficient to claim exemption towards consignment sales and that filing of information under Rule 14(3) of the CST(AP) Rules is not mandatory. By order dated 28.2.2007, the Additional Commissioner (CT) Legal accepted the contentions of the appellant and dropped the proposed revision on entire turnover considering the judgment of this Court in STATE OF ANDHRA PRADESH V.A.P.DIARY DEVELOPMENT CORPORATION LIMITED [1] and of Madras High Court in STATE OF MADRAS V.SHREE MURUGAN FLOUR MILLS ( P) LIMITED [2] that Rule 14(3) is not mandatory. He confirmed levy of 10% tax on Rs.2,35,760/- instead of 4% as determined by the Deputy Commissioner (CT), Abids in his order dated 15.3.2003. The appellant did not file appeal against this order and it became final. While so, the respondent issued a show cause notice dated 11.5.2009 again referring to investigations done by the department prior to the assessment wherein a turnover of Rs.18.14 Crores covering the entire year alleging the same to be bogus on the ground that the dealers did not exist/denied the transactions; that the assessing authority accepted the “F” forms and granted exemption on the turnover relating to transactions claimed as consignment sales without taking into consideration findings of the enquiry teams; that fresh investigation was done by the department in 2007-08 and 2008-09 to verify the correctness of “F” forms submitted by the appellant in other states and the alleged consignment sales falling in the following four categories comprising Rs.24.38 Crores are laible to be taxed @ 10% : i) Type A – 42 dealers –Rs.10.37 Crores – Non-existing dealers or unregistered dealers or dealers who denied the transactions. ii) Type B – 2 dealers – Rs.92,93,808/- variation between actual value and “F” form value iii) Type C – 21 dealers – Rs.3.52 Crores – “F” forms not genuine. iv) Type D – 82 Forms - Rs.9.55 Crores – “F” forms defective. The appellant filed objections dated 23.6.2009 to the show cause notice dated 11.5.2009 proposing the second revision inter alia contending that : (a) revisional power was already exercised once by the Additional Commissioner who substantially dropped it with regard to exemption under Section 6-A of the CST Act and therefore the question of revising the assessment once again by the respondent does not arise; and (b) there is no power to take up revisional jurisdiction more than once under Section 20 of the GST Act which is also applicable to CST assessments. The appellant also relied upon the decisions of this Court in MANEPALLI VENKATA NARAYANA AND OTHERS v. STATE OF ANDHRA PRADESH [3] a n d STATE OF ANDHRA PRADESH V. SRI PANDURANGA RICE CONTRACTORS COMPANY [4]. It also contended that the revision of assessment, even on merits, is not sustainable and gave detailed explanation as to why the appellant should not be held liable to tax respect of transactions of Type A to D mentioned above. The appellant also filed evidence in support of its submissions and furnished additional information sought for by the respondent. Thereafter, the respondent passed the impugned order dated 13.7.2010 upholding his jurisdiction to pass it on the ground that he did not exercise revisional power earlier and therefore a second revision by a higher officer can be done; that he was revising the order of the Additional Commissioner dated 28.2.2007 for the year 2000- 01 under the CST Act and bringing turnovers to tax as proposed in the show cause notice; and distinguished the judgments cited by the appellant on the ground that they were cases where the same officer took up the second revision. He confirmed the levy as proposed in the show cause notice dated 11.5.2009 issued by him, increased the consignment sale turnover by Rs.11.30 crores ( Type A and Type B transactions mentioned above ); disallowed exemption on consignment sales turnover of Rs.3.52 crores plus Rs.9.55 crores ( Type C and Type D transactions mentioned above ) ; and levied tax thereon. Challenging the same, the present appeal is filed by the appellant. Heard Sri S. Ravi, learned Senior Counsel appearing for Sri S. Dwarakanath, learned counsel for the appellant and Sri P. Balaji Varma, learned Special Government Pleader for Commercial Taxes for the respondent. The learned Senior Counsel for the appellant contended that the order of the respondent is without jurisdiction; that it amounts to a second revision of assessment for the same year which is prohibited by law; that the proposal in the show cause notice dt.11.5.2009 and order of the respondent seeks to disturb the order of the Deputy Commissioner (CT), Abids dated 15.3.2003 while purporting to revise the first revisional order of the Additional Commissioner dt. 28.2.2007; that the order of the respondent is barred by time since it is beyond the period of four years prescribed in the statute as the respondent, under the guise of revising the order of the Additional Commissioner dated 28.2.2007, virtually revised the order of the Deputy Commissioner (CT), Abids dated 15.3.2003; in any event, even on merits, the order of the respondent is erroneous and unsustainable. The learned Special Government Pleader however contended that the order of the respondent is valid in law; that the respondent had jurisdiction to undertake revision under Section 20 of the GST Act read with Section 9(2) of the CST Act; that the respondent had only revised the order of the Additional Commissioner dated 28.2.2007 and not order of the Deputy Commissioner (CT), Abids dated 15.3.2003; exercise of power by the respondent is not barred by limitation of four years prescribed by the statute; that even on merits, order of the respondent does not suffer from any error. He therefore prayed that the appeal be dismissed. We have noted the respective contentions of the parties. In the impugned order dated 13.7.2010 the respondent has sustained his power to revise on the ground that he had not previously exercised his jurisdiction under Section 20 of the GST Act and was exercising revisional jurisdiction under Section 20(1) of the Act for the first time; that under Section 9(2) of the CST Act read with Section 20(1) of the GST Act, he is empowered to revise the revision orders passed by any of the subordinate officers including Joint Commissioner (CT) and Additional Commissioner (CT); that he proposed to revise the discharge proceedings of the Additional Commissioner (CT) Legal; and therefore the proposal for revision and the revision order are within the ambit of Section 20 (1) of the GST Act. He also held that in MANEPALLI VENKATA NARAYANA (3 SUPRA) and SRI PANDURANGA RICE MILL CONTRACTORS CO. (4 SUPRA ), it was held that a second revision for the same assessment year in the case of the same dealer cannot be taken up; that the said decisions would apply only if orders of revision are passed by the same revisional authority; and since that is not the position in the present case, the said decisions do not apply. Section 20(1), (2) and (3) of the GST Act states as follows : \"Sec.20: Revision by (Commissioner of Commercial Taxes) and other prescribed authorities:- (1) The Commissioner of Commercial Taxes may suo motu call for and examine the record of any order passed or proceeding recorded by any authority, officer or person subordinate to it, under the provisions of this Act, including sub- section (2) of this section, and if such order or proceeding recorded is prejudicial to the interests of revenue, may make such enquiry, or cause such enquiry to be made and subject to the provisions of this Act, may initiate proceedings to revise, modify or set aside such order or proceeding and may pass such order in reference thereto as it thinks fit. (2) Powers of the nature referred to in sub-section (1) may also be exercised by the Joint Commissioner, the Deputy Commissioner and the Commercial Tax Officer in the case of orders passed or proceedings recorded by authorities, officers or persons subordinate to them. (2-A) The power under sub- section (1) or sub-section (2) shall not be exercised by the authority specified therein in respect of any issue or question, which is the subject-matter of an appeal before, or which was decided an appeal by, the Appellate Tribunal under section 21. (3) In relation to an order of assessment passed under this Act, the powers conferred by sub- sections (1) and (2) shall be exercisable only within such period not exceeding four years from the date on which the order was served on the dealer, as may be prescribed.” No doubt, clause (1) of Section 20 authorizes the respondent to revise revisional order passed by any subordinate officer under sub section(2) of Section 20. The question to be considered in this case is whether the respondent is merely revising the order dated 28.2.2007 passed by the Additional Commissioner (CT) Legal dated 28.2.2007 or he is, in fact. revising order dated 15.3.2003 of the Deputy Commissioner (CT), Abids. When the Additional Commissioner (CT) Legal sought to revise the order of the Deputy Commissioner (CT), Abids under sub section (2) of Section 20, he based his proposal for revision on the premise that mere filing of “F” forms and sale patties etc., was not alone sufficient to claim exemption under Section 6-A of the CST Act and that the appellant had failed to comply with the requirements of Rule 14(3) of the CST (AP) Rules which are mandatory. When the appellant brought to the notice of the Additional Commissioner (CT) Legal that this Court in M/S. A.P. DAIRY DEVELOPMENT CORPORATION LIMTED ( 1 Supra) and the Madras High Court in M/S. SHREE MURUGAN FLOUR MILLS (P) LTD ( 2 Supra) had held that production of “F” forms is sufficient to discharge the burden and unless they are found to be defective in any respect, the assessee was not required to produce any further material other than the evidence of dispatch of goods to claim exemption under section 6-A of the CST Act, he dropped the proposed revision on the ground that the correctness of the “F” forms filed by the appellant for Rs.39,89,47,477/- was neither probed into nor rejected. But when the respondent wanted to undertake revision (vide show cause notice dated 11.5.2009 ), he sought to do so on the ground that the correctness of the “F” forms submitted by the assessee were once again subjected to verification in 2007-08 and 2008-09 by sending teams of officers to other states from where the “F” forms were obtained by the assessee in support of its claim for exemption of consignment sales; that enquiries revealed defects of the type A to D mentioned above; and therefore he wished to again undertake ostensibly revision of the order dated 28.2.2007 of the Additional Commissioner (CT) Legal. In our view, it would have been a valid exercise of revisional power by the respondent if he had undertaken to revise the order dated 28.2.2007 of the Additional Commissioner (CT) Legal on the ground that (a) the two decisions relied upon by the latter were wrong in law or (b) that he did not agree with the said decisions or (c) that the said decisions, on a proper consideration, would be inapplicable to the case of the appellant. But instead of doing so, he undertook the revisional exercise on the basis of fresh enquiries got done by him in 2007-08 and 2008-09 to verify the correctness of the “F” forms submitted by the appellant/assessee obtained by it from dealers in other states in support of its claim for exemption of consignment sales under Section 6-A of the CST Act. It is therefore clear that he is actually doing re- assessment i.e. deciding the correctness of the order of the Deputy Commissioner (CT), Abids dated 15.3.2003 and not a mere revision of the order of the Additional Commissioner of Commercial Taxes (CT) Legal dated 28.2.2007. The fact that the respondent had issued a notice dated 11.11.2009 to the appellant seeking fresh information and production of records such as copies of their accounts in the ledgers of the alleged consignment agents in other states, copies of sale bills raised by the said agents for the stock of vegetable oil received by them from the appellant, copies of assessment orders of the alleged agents under local Sales Tax statutes in other states for the year 2000-01 showing the turnovers relating to the stocks received from the appellant etc., clearly indicates that the respondent was undertaking a re-assessment of the appellant’s assessment for the year 2000-01 which is impermissible in law. Para 20 to 23 of the order of the respondent dated 13.7.2010 confirms that he is doing a re-assessment only and not a revision of the order of the Additional Commissioner (CT) Legal. The learned Government Pleader was unable to draw our attention to any provision in the Act permitting a re-assessment by the 2nd respondent of assessment of the appellant for the same year. Moreover, sub-section (3) of Section 20 of the GST Act provides that a revision of an order of assessment can be done under sub sections (1) and (2) of the said section only within a period of four years from the date on which the order was served on the dealer. In the present case, the order of assessment by the Deputy Commissioner (CT), Abids was passed on 15.3.2003 and admittedly the respondent had issued the show cause notice proposing revision under sub-section (1) of Section 20 on 11.5.2009 i.e. after six years from the date of the order of assessment. Therefore, the initiation of proposals for revision by the respondent is clearly barred by the law of limitation prescribed in sub - section(3) of Section 20 of the Act. In HYDERABAD INSULATED WIRES (P) LTD v. COMMISSIONER OF COMMERCIAL TAXES, HYDERABAD [5], a Division Bench of this Court held that it is impermissible to levy additional tax under Section 5-A of the GST Act in exercise of revisional powers by the Commissioner when such levy of additional tax was not all proposed by the Deputy Commissioner in the revision notice issued to the assessee; that the illegality, if any, in not imposing additional tax attaches to the original assessment order; if at all, the assessment order had to be revised on the ground that there was failure on the part of the assessing authority to subject the turnover to additional tax under Section 5-A; but, for the obvious reason that the period of limitation prescribed for revising the said assessment order expired long back, the Commissioner had rightly not taken steps for revising the original assessment order; that the Commissioner cannot exercise the powers of reassessment or revision in the year 1989 in respect of the assessment made in the year 1983; and it is incomprehensible as to how the Commissioner could levy additional tax by revising the Deputy Commissioner’s order dropping the proposed revision in respect of surcharge. It held that the proposal to levy additional tax under Section 5-A is beyond the power and jurisdiction of the Commissioner. I n COMMISSIONER OF INCOME TAX V. ALAGENDRAN FINANCE LTD [6], the Commissioner of Income Tax, while exercising revisional powers under Section 263 of the Income Tax Act, 1961, reopened on 29.3.2004, the orders of assessment dated 27.2.1997, 12.5.1997 and 30.3.1998 for assessment years 1994-95, 1995-96, 1996-97 only in relation to the issue of “lease equalization fund” which was not subject of the re- assessment proceedings dated 28.3.2002 ( in respect of some other issues ). The Supreme Court held that, in respect of the issue of “lease equalization fund”, the period of limitation provided for under sub-section (2) of section 263 of the Act would begin to run from the date of orders of the assessment and not from the order of re- assessment dated 28.3.2002 and the revisional jurisdiction, invoked by the Commissioner of Income Tax was beyond the period of two years ( at that time ) from the end of the financial year in which the order sought to be revised was passed, and was wholly without jurisdiction and a nullity. We respectfully follow the above two decisions and hold that the very proposal of the respondent dated 11.5.2009 and the consequential order dated 13.7.2010 are wholly without jurisdiction and barred by limitation prescribed under sub-section (3) of Section 20 of the GST Act as the respondent clearly intended to re-assess the appellant for the assessment year 2000-01, thereby interfering with the order of assessment dated 15.3.2003 of the Deputy Commissioner (CT), Abids while purporting to revise the order dated 28.2.2007 of the Additional Commissioner (CT) Legal, A.P. Accordingly, the Special Appeal is allowed. No costs. ____________________________ JUSTICE GODA RAGHURAM __________________________________ JUSTICE M.S.RAMACHANDRA RAO Date: 13-02-2013 KK THE HONOURABLE SRI JUSTICE GODA RAGHURAM AND HONOURABLE SRI JUSTICE M.S.RAMACHANDRA RAO Spl. Appeal No.2 of 2010 Dated 13-2-2013 [1] 18 APSTJ 204 [2] 142 STC 399 [3] 10 STC 524 [4] 24 APSTJ 247 [5] (1991) 80 STC 99(AP) [6] 2007 (293) ITR 1(SC) "