M/s.Telemart Shopping Network Private Limited, V. Commercial Tax Officer, Malkajgiri Circle,

WP/29793/2012

AI Insights

The case revolves around a writ petition filed under Article 226 of the Constitution of India, challenging a clarification issued by the 6th respondent, which was alleged to be contrary to Section 67(2)(i) of the Andhra Pradesh Value Added Tax Act, 2005 (APVAT Act). The petitioner, a dealer in gold-coated pendants and Ayurvedic medicines, contested the tax rate applied to his products following an audit and subsequent assessment orders. The court examined whether the impugned order was legally sustainable and whether the petitioner had exhausted all alternative remedies before seeking judicial review under Article 226.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 733005 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 02-02-2014
• Assessment Year: misc
• Other Referred Cases: Tirupati Chemicals, Vijayawada & another Vs Deputy Commercial Tax Officer (VMU-I) No.1 Division, Vijayawada and others, M/s Agarwal Industries Pvt Ltd., Vs. The Commercial Tax Officer, Special Commodities Circle, Saroornagar, Hyderabad and another, Commissioner of Income Tax and others Vs. Chhabil Dass Agarwal
• Laws Referred To: Constitution of India, Andhra Pradesh Value Added Tax Act, 2005
• Result in Favour of: Respondent
• Court: HIGH COURT
• Department Lawyers: NOT SPECIFIED IN THE DOCUMENT
• Assessee Lawyers: NOT SPECIFIED IN THE DOCUMENT
• Keywords: Advance ruling; Assessment Order; Clarification; Value Added Tax; Writ of Mandamus
• Section: 226; 67(2); 67(2)(i)

Judgement Text

" THE HON’BLE SRI JUSTICE ASHUTOSH MOHUNTA AND THE HON’BLE SRI JUSTICE M. SATYANARAYANA MURTHY WRIT PETITION No.29793 of 2012 ORDER: (Per the Hon’ble Sri Justice M. Satyanarayana Murthy) This writ petition is filed under Article 226 of Constitution of India for issue of Writ of Mandamus setting aside the Clarification issued by the 6th respondent herein in CCT’s Ref.No.PMT/P&L/A.R.Com/84/2011, dated 18.07.2012, as contrary to Section 67(2)(i) of the Andhra Pradesh Value Added Tax Act, 2005 (for short “the APVAT Act”). 2. It is alleged that the petitioner is a dealer in Gold coated Pendants called Hanuman Kavach, Matha Kavach, Sai Kavach, Shiva Shakti Kavach, etc., and Ayurvedic Medicines and is an assessee on the rolls of the 1st respondent. The petitioner remitting VAT on the gold coated items @ 4% treating the same as classifiable under Entry 96 of the IV Schedule to the APVAT Act eligible to tax @ 4% and in respect of Ayurvedic Products, tax has been paid @ 4%, treating the same as falling under Entry 88 of IV Schedule to the APVAT Act. 3. Basing on the authorization issued by the 2nd respondent, the 3rd respondent conducted audit of Value Added Tax (VAT) on all the accounts of the petitioner company for the assessment period from April 2008 to March 2009, and passed assessment of Value Added Tax in Form VAT 305, dated 17.07.2010, subjecting the turnover of the above products to tax @ 12.5% and raised a demand of Rs.20,80,654/-. 4. Against the said assessment order, the petitioner filed an appeal before the 4th respondent through proceedings dated 11.10.2011, in Appeal No.S/46/2010-11-VAT was pleased to remand the case to the 1st respondent, who is a territorial assessing authority with a direction to take into consideration, the detailed contentions raised by the petitioner and his findings on the same and examine the issue afresh and pass necessary orders. 5. In pursuance of the directions of the 4th respondent, the 1st respondent issued notice of assessment of Value Added Tax in Form VAT 305A, dated 06.02.2012 and proposed to subject the turnover scored by the petitioner to tax @ 12.5%, ignoring the directions of the 4th respondent. Thereupon, the petitioner made a representation to the 7th respondent by its letter, dated 28.02.2012, seeking clarification on products dealt by the petitioner. A copy of the same was marked to the 1st respondent requested to defer the assessment proceedings till the clarification issued by the 7th respondent. 6. As the matter stood thus, the 5th respondent in exercise of powers vested in him under Section 32(2) of the APVAT Act, issued a show cause notice, dated 23.04.2012, proposing to revise the appeal order of the 4th respondent. The said revision is still pending adjudication before the 5th respondent. 7. The petitioner specifically contended that the sales of products dealt by it to dealers situated within the State of Andhra Pradesh as well as out side dealers. One of the dealer by name “M/s OM Enterprises”, Haripuri Colony, Saroornagar, Hyderabad, who is an assessee on the rolls of the Commercial Tax Officer, Saroornagar Circle, applied for clarification on the products sold by it, which are purchased from the petitioner before the Authority for Clarification & Advance Ruling, the 6th respondent herein. During pendency of the advance ruling on the application submitted by M/s OM Enterprises, the assessment orders were issued during pendency of the clarification, the order is void, and in fact, no application shall be entertained in view of the bar under Section 67(2) of the APVAT Act, where the contentions raised in the application is already pending before any officer or authority of the Department or Appellate Tribunal or any Court. Hence, the assessment is void runs contra under Section 67(2) of the APVAT Act, and thereby, the order is unsustainable in law. It is further contended that the petitioner is left with no other alternative and efficacious remedy, hence, prayed the Court for the relief stated above. 8. Learned counsel for the respondent opposed the petition only on the ground that the points urged before this Court by the writ petitioner in the petition can be decided by the competent authority i.e., Appellate Authority under the APVAT Act, and there is no allegation that the alternative remedy available is not sufficient to decide the real controversy and in the absence of such allegation in the affidavit annexed to the petition, the writ petition is not maintainable as an alternative, efficacious and effective remedy is available under the APVAT Act, by way of an appeal and prayed to dismiss the petition. 9. Learned counsel for the 7th respondent filed counter- affidavit denying the material allegations specifically contending that the primary objective behind creating the provision under Section 67(2) is to facilitate the dealers, who have certain doubts regarding their tax liability, to seek clarification in advance from the Commercial Taxes Department so that they are well aware of the tax liability and avoid future liability arising out of the statutory assessments. As per these provisions, a dealer can approach the Advance Ruling Authority for seeking clarification. However, it may happen that sole dealer might be already under process of assessment or appeal before the Appellate Authorities under the APVAT Act 2005. The dealer in order to preempt Assessing Authority or Appellate Authority in passing the necessary orders may seek the clarification under Section 67 of the APVAT Act, 2005. In order to preempt such attempts, a provision was made under Section 67(2)(i) of the APVAT Act, and not to admit such request, where the issue is already pending before the Assessing or Appellate Authorities. 10. From plain reading of Section 67(1) and (2) of the APVAT Act, it is clear that such prohibition is against the dealer, is not an assessee against Advance Ruling Authority. The dealer is barred from seeking advance rulings when his issue is pending before the Assessing Authority or the Appellate Authority. Therefore, the impugned order passed by the Assessing Authority is not against purport of Section 67(2)(i) of the APVAT Act. 11. He also relied on para-33 of the same judgment relied on by the counsel for the petitioner i.e., Tirupati Chemicals’s case (supra 1) and that the order is not illegal in view of the above judgment, and prayed for dismissal of the petition. 12. During the course of arguments, the learned counsel for the petitioner would submit that during pendency of advance ruling on the application submitted by M/s OM Enterprises, the order passed by the respondents in CCT’s Ref.No.PMT/P&L/A.R.Com/2005, dated 18-7-2012 is abi nitio void and runs contra to Section 67(2)(i) of the APVAT Act and placed reliance on the judgment reported in Tirupati Chemicals, Vijayawada & another Vs Deputy Commercial Tax Officer (VMU-I) No.1 Division, Vijayawada and others[1]. 13. During the course of arguments, the learned counsel for the respondents reiterated the contentions as raised in the counter. 14. Considering the above contentions raised by the learned counsel for the writ petitioner and the Government, the points that arise for consideration are as follows: 1). Whether the impugned order passed under challenge dated 18-07-2012 in CCT’s Ref. No.PMT/P&L/A.R.Com/2005 is contrary to Section 67(2) (i) of the APVAT Act, if so, liable to be set aside? 2). Whether any effective, efficacious and alternative statutory remedy is available to the petitioner, if so, without exhausting statutory remedies, can this Court exercise extraordinary power of judicial review under Article 226 of Constitution of India? In Re. POINT No.1: 15. The main contention of the learned counsel for the writ petitioner is that when M/s OM Enterprises filed an application seeking “Advance Ruling”; the assessment order, dated 18.07.2012, is illegal in view of the pendency of Advance Ruling representation by OM Enterprises. In fact, earlier an order dated 17.07.2010 was passed by the Commercial Tax Officer, Malkajgiri Circle, Hyderabad, making the writ petitioner liable to pay tax at Rs.1,15,270/- for the period from April 2008 to March 2009 @ 12.5% and the same was challenged before the Appellate Commissioner. However, the Appellate Commissioner set aside the order on 11.10.2011, and the case is remanded back to the Assessing Authority for passing fresh order. In pursuance of the said order, ACTO issued the impugned notice dated 06.02.2012 under Rule 25(5) of the APVAT Rules in Form VAT 305-A assessing the tax at Rs.1,15,270/- @ 12.5% on the goods sold. Against this assessment, the writ petitioner submitted a representation to clarify the rate of tax on the commodity “Pendants” with the image of the Deity under the APVAT Act, dated 28.02.2012, and again addressed a letter requesting the Commercial Tax Officer to defer the proposed assessment in view of pendency of the Advance Ruling on the representation of M/s OM Enterprises. But the Commercial Tax Officer issued a show cause notice on 23.04.2012 to file objections within 15 days of receipt of this revision show cause notice issued under Section 32(2) of the APVAT Act, 2005 and to avail personal hearing on 05.06.2012 at 11.30 a.m., and it is pending. 16. As seen from the material on record on 28.10.2011, M/s OM Enterprises submitted a representation calling for advance ruling from Advance Ruling Authority and it is still pending. Thus, the main contention of the writ petitioner is that when advance ruling representation is pending, which is submitted by M/s OM Enterprises, the assessment order passed by the Commercial Tax Officer is illegal and it is contrary to Rule 67(2)(i) of the APVAT Act. 17. Section 67 of the APVAT Act deals with Clarification and Advance Ruling. Section 67(2) of the APVAT Act created an interdict to entertain any application about Advance Ruling, when an application is already pending before any officer or authority of the Department or Appellate Tribunal or any Court or when it relates to a transaction or issues, which is designed apparently for the avoidance of tax. That means, no application shall be entertained seeking for advance ruling, when similar application is pending on the same issue and it is not a bar to pass any assessment order, and it is only a bar in entertaining similar applications calling for Advance Ruling. 18. However, the learned counsel for the writ petitioner placed reliance on the judgment of Tirupati Chemicals’s case (supra 1), wherein, a Division Bench of this Court held in para-33 as follows: “It is in furtherance of this object that Sections 67(2) and (3) of the Act respectively prohibit the ARA, and the officers or authorities in the commercial taxes department, from entertaining an application seeking clarification, or to decide any issue for which an application has been made by an applicant under the Section and is pending before the ARA. The words “question” and “issue” are used inter-changeably in Sections 67(2) and (3), and mean the same. The effect of these two provisions is that the applicant-dealer is required to seek a clarification from the ARA prior to assessment proceedings being initiated against him, or before an appeal is filed either before the appellate authority or the STAT. Likewise the ARA is prohibited from giving a clarification when the quasi judicial/judicial authorities under the Act have already initiated appropriate proceedings for, in such an event, the clarification given by the ARA would no longer be an advance ruling, and would fetter exercise of quasi judicial functions under the Act” 19. However, according to the same judgment, a Division Bench of this Court observed at para-38 as follows: “It is no doubt difficult for the quasi judicial authorities under the Act, and the assessee- dealers, to be aware of whether or not a matter is pending before the ARA, and likewise for the ARA to know whether quasi judicial proceedings were initiated in respect of other dealers under the Act in respect of similar goods or transaction for which a clarification is sought by the applicant-dealer. While that may necessitate rules being amended to make provisions for intimation, of admission of an application before the ARA, to the Commissioner, who in turn can, in exercise of his powers under Section 77 of the Act, issue instructions to all the assessing and other quasi-judicial authorities under the Act, (officers if the commercial taxes department subordinate to the Commissioner), regarding pendency of an application before the ARA, it would not justify a construction of Section 67(4)(ii) contrary to its plain language, for hardship cannot be a ground for construction of a provision which does not suffer from ambiguity.” 20. In any view of the matter, there is no quarrel regarding the legal position referred above, but the bar contained under Section 67(2)(i) of the APVAT Act is only against entertaining the similar applications, but not a bar against passing an order of assessment. In fact, in the instant case on hand, the assessment proceedings were already issued earlier on 17.07.2010 and the same was challenged before the Appellate Commissioner. However, the Appellate Commissioner remanded the matter with certain directions. Again, the assessment order was issued by following guidelines of the Appellate Commissioner and later the Appellate Commissioner issued a revision notice under Section 13(2) of the Act calling for objections and affording an opportunity for personal hearing and the same is pending as on today, as admitted by the writ petitioner, as per allegations made in the affidavit. In view of pendency of the representation before the Appellate Commissioner, the bar is only against entertaining the representation for Advance Ruling. Therefore, the impugned assessment order passed by the Commercial Tax Officer is not against Section 67(2) of the APVAT Act. Hence, the contention of the petitioner is without any subsistence and the contention raised by the learned counsel for the petitioner is against purport of Section 67(2) of the APVAT Act. On the other hand it is evident that the initial assessment order was passed long prior to representation of OM enterprises calling for Advance Ruling, that apart the letter submitted by petitioner seeking clarification indicates that to avoid tax liability designed by filing representations. Hence it attracts Section 67(2) (ii) of the APVAT Act, on this ground also the contention of petitioner cannot be sustained. Hence, we find no force in the contentions raised by the learned counsel for the writ petitioner and thereby it is difficult for this Court to consider the request of the petitioner to declare the assessment order in CCT’s Ref. No. PMT/ P&L/A.R.Com/ 84/2011, dated 18.07.2012 as arbitrary, void and illegal. In Re. POINT No.2: 21. One of the main contentions raised by the learned counsel for the respondent is that when an appeal is provided to the Appellate Commissioner under Section 31 of the APVAT Act without exhausting effective, efficacious and statutory alternative remedy, this Court cannot exercise its extraordinary power of judicial review under Article 226 of Constitution of India. In view of specific contentions, we feel that it is appropriate to refer the legal position for better appreciation. In M/s Agarwal Industries Pvt Ltd., Vs. The Commercial Tax Officer, Special Commodities Circle, Saroornagar, Hyderabad and another[2] , a Division Bench of this Court held as follows : “It is axiomatic that a writ petition would not, ordinarily, be entertained where alternative remedy of appeal is provided by the statute. Though that is not explicit, the exercise of power of judicial review under Article 226 of the Constitution of India is always subject to certain limitations; one such being the availability of effective efficacious alternative remedy. When the tax statutes create the hierarchy of appellate/second appellate and revisional authorities as well as quasi judicial Tribunals to adjudicate grievances and give effective redressal, ignoring all such remedies, the writ petition would not, ordinarily, be entertained straightaway. Liberal approach dehors the settled law would result in adding to bulging dockets of the High Court. In Salam Khan v Tamil Nadu Wakf Board, Chennai[3][7], His Lordship Sri Justice Markandey Katju (as He then was), dealt with this aspect of the matter and made the following observations. No doubt, alternative remedy is not an absolute bar to the filing of writ petitions, but at the same time it is well settled that writ jurisdiction is discretionary jurisdiction and when there is an alternative remedy, ordinarily a party must resort to that remedy first before approaching this court. Entertaining writ petitions straight away without insisting that a party should first avail of the alternative remedy is an over liberal approach which has caused immense difficulties to the High Courts in the country because they have added to the huge arrears. The Courts have already become overburdened by this over liberal approach instead of following the settled legal principle that a writ petition should ordinarily be dismissed if there is an alternative remedy. The High Courts in India are already tottering and reeling under the burden of massive arrears which have flooded the dockets of the Court, and such kind of over liberal approach has only multiplied this problem manifold. If this approach is further continued a time will surly come when the High Courts will find it impossible to function. All this has happened because unfortunately some Courts have departed from well-settled legal principles. (emphasis supplied) There cannot be any dispute that as laid down by the two Judge Bench of the Supreme Court in Whirlpool Corporation v Registrar of Trade Marks, Mumbai[4][8], the alternative remedy does not operate as a bar in at least three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principles of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. But a three Judge Bench in C.A.Abraham v Income Tax Officer[5][9] held that the remedy under Article 226 cannot be invoked by an assessee abandoning the remedy provided by the statute. 22. In instant case on hand a revision pending before the Appellate Commissioner under Section 13(2) of the APVAT Act against the assessment order issued by the Commercial Tax Officer and no appeal is preferred as is provided under Section 31(1) of the APVAT Act and that too there is no allegation that the alternative remedy available to the petitioner is ineffective or non- efficacious in the entire affidavit. In the absence of any allegation in the affidavit that the alternative remedy is ineffective, the Court cannot entertain a petition under Article 226 of Constitution of India and this Court cannot exercise its extraordinary power of judicial review under Article 226 of Constitution of India. 23. The Supreme Court in a recent judgment reported in Commissioner of Income Tax and others Vs. Chhabil Dass Agarwal[6] held as follows: “the bar to entertain a writ petition under Article 226 of Constitution of India, despite availability of the remedy by way of an appeal is only a self imposed limitation and unless there is no material to show that the remedy by way of appeal is in effective the Court cannot entertain the writ petition. Non-entertainment of petitions under writ jurisdiction by the High Court when an efficacious alternative remedy is available is a rule of self- imposed limitation. It is essentially a rule of policy, convenience, and discretion rather than a rule of law. It is within the discretion of the High court to grant relief under Article 226 despite the existence of an alternative remedy, however, the High court must not interfere if there is an adequate efficacious alternative remedy available to the petitioner and he has approached the High court without availing the same unless he has made out an exceptional case warranting such interference or there exist sufficient grounds to invoke the extraordinary jurisdiction under Article 226. However, when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation. In the instant case, the Act provides complete machinery for the assessment/re- assessment of tax, imposition of penalty and for obtaining relief in respect of any improper orders passed by the Revenue Authorities, and the Assessee could not be permitted to invoke the writ jurisdiction when he had adequate remedy open to him by an appeal to the Commissioner of Income Tax (Appeals). Assessee in the instant case neither described the available alternative remedy under the Act as ineffectual and non-efficacious nor has the High court ascribed cogent and satisfactory reasons to have exercised its jurisdiction in the facts of instant case. Writ court accordingly, as held, should not have entertained the Writ Petition. Appeal accordingly was allowed with liberty to the respondent, if he so desires, to file an appropriate petition/appeal against the orders of re-assessment passed under Section 148 of the Act within time stipulated.” 24. The above principle is applicable to the present facts of the case directly as the affidavit of writ petitioner is totally absent about inefficacious of alternative statutory remedy. Hence, by applying the principle laid down by the Apex Court, the petition is liable to be dismissed. 25. In view of the above, the Writ Petition is dismissed with liberty to the petitioner, if he so desires, to file an appropriate petition/appeal against the assessment order. There shall be no order as to costs. Miscellaneous petitions pending, if any, shall stand closed. __________________________________ JUSTICE ASHUTOSH MOHUNTA. _________________________________________ JUSTICE M. SATYANARAYANA MURTHY. Date : -02-2014 Gvl THE HON’BLE SRI JUSTICE ASHUTOSH MOHUNTA AND THE HON’BLE SRI JUSTICE M. SATYANARAYANA MURTHY WRIT PETITION No.29793 of 2012 Date : -02-2014 Gvl [1] A.P.Sales Tax Journal Vol.52 page.48 [2] W.P.No.2653 of 2009 [3][7] AIR 2005 Madras 241 [4][8] AIR 1999 SC 22 = (1998) 8 SCC 1 [5][9] AIR 1961 SC 609 [6] 2013 (10) Scale 326 "