M/S.D. Rama Kotiah And Co. vs. The State Of Andhra Pradesh

Held

The Court held that while Section 74(1) of the APGST Act requires a show cause notice for the recovery of penalty equivalent to the tax specified, Section 74(5) of the same Act enables a person chargeable with tax to pay 15% penalty on their own ascertainment before service of notice under Section 74(1). However, the Court clarified that Section 74(5) does not obligate the dealer to pay 15% penalty without a show cause notice being issued. It is an option for the assessee to avoid higher penalties. The power of the assessing authority to recover penalty is only after issuing a notice calling upon the petitioner to show cause. Therefore, the impugned order, to the extent it called upon the petitioner to pay penalty at 15% without a show cause notice, was set aside. The Court found it unnecessary to examine the order on other grounds as they were not challenged. The respondent was not disabled from issuing a penalty notice and recovering penalty in terms of Section 74(1).

Facts

The petitioner challenged an order dated 20.08.2018, passed by the Assistant Commissioner for the tax period March 2018. The order directed the petitioner to pay tax and penal interest. The petitioner argued that this was illegal as it was issued without an assessment order under Section 61 of the APGST Act and without a show cause notice. The impugned order demanded payment of penalty at 15% along with interest under Section 50 read with Section 79(5) of the APGST Act and Rule 143 of the APGST Rules, failing which recovery proceedings under Section 79 would commence. The petitioner admitted liability for tax and interest but contested the 15% penalty due to the absence of a show cause notice.

Key Issues

1. Whether the order passed by the Assistant Commissioner on 20.08.2018, directing the petitioner to pay tax and penal interest without issuing an assessment order under Section 61 of the APGST Act and without issuing a show cause notice, is illegal, arbitrary, and without jurisdiction, specifically concerning the demand for 15% penalty? Petitioner's Contention: The petitioner contended that any proceedings for the recovery of penalty must be preceded by a show cause notice, which was admittedly not issued in this case. They argued that Section 74(5) of the APGST Act, which allows for payment of 15% penalty, is an enabling provision for the assessee to pay voluntarily before a notice, not an obligation to pay without a notice. Revenue's Contention: The judgment records no specific argument from the revenue or State.