M/S. Lohiya Edible Oils Private Limited vs. Joint Commissioner (CT) Legal

HON'BLE SRI JUSTICE U. DURGA PRASAD RAO AND HON’BLE MS. JUSTICE J. UMA DEVI

Writ Petition No.19975 of 2020

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

The petitioner seeks a writ of certiorari quashing the revision order passed by 1st respondent in CCT’s Ref.No.LII(1)/46/2017 dated 24.03.2020 for the tax period April, 2014 to February, 2016 passed under Section 32 of the Andhra Pradesh VAT Act, 2005 (for short, ‘the VAT Act’) as being without juri iction, perverse, in violation of the principles of natural justice and travelling beyond the show cause notice.

(a) The petitioner is a dealer under the VAT Act and it is engaged in the business of vegetable oil.

(b) The 2nd respondent assessed the petitioner under the VAT Act for the period 2014-15 & 2015-16 vide order dated 31.03.2016. On completion of the assessment, the 2nd respondent restricted the Input Tax Credit (ITC) and worked out the same and rejected the excess claim for the period 2014-15 in a sum of Rs.8,97,564/- and a sum of Rs.2,53,478/- for the year 2015-16 and ultimately arrived at the tax liability of Rs.11,77,779/- which the petitioner paid without any objection.

(c) While so, the 3rd respondent issued a notice dated 14.02.2017 to the petitioner referring the assessment order passed by

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2nd respondent and alleged that the petitioner has not filed any evidence in support of its claim of ITC and called for the details of purchases and ITC claimed by the petitioner. He also called for the Balance Sheet and Profit & Loss account for the year ending March, 2015. The petitioner accordingly submitted all the required information vide its letter dated 28.02.2017. Thereafter, the 3rd respondent issued a pre-revision show cause notice dated 23.01.2019 under Section 32(2) of the VAT Act proposing to revise the assessment order of 2nd respondent. In the show cause notice, he arrived at the turnover for the period 2014-15 & 2015-16 as follows:

2014-15:

Rs.435,03,15,044

Rs. 38,08,93,180

Rs. 456,44,51,044

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Total sales : Rs. 929,56,59,268

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2015-16:

Rs.456,30,74,490

Rs. 9,08,55,153

Rs. 598,43,14,430

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Total sales : Rs.1063,82,44,073

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It is alleged that the 2nd respondent has wrongly adopted the sales turnover of the petitioner as Rs.515,32,29,554/- for the year 2014-15

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and Rs.536,85,57,543/- for the year 2015-16 which resulted in excess allowance of ITC. The 3rd respondent recalculated the ITC by applying the Formula A x B/C to further restrict the ITC by a sum of Rs.85,84,795/- for the year 2014-15 and Rs.80,23,559/- for the year 2015-16. The petitioner was directed to submit its objections to the revision proposal. The petitioner submitted its reply dated 13.06.2019 before the 3rd respondent and explained that the turnover adopted in the revision show cause notice and those adopted by the 2nd respondent are at variance. The petitioner requested 3rd respondent to verify the facts and drop the revision and also requested to afford an opportunity of personal hearing.

(d) While the matter stood thus, the petitioner attended before 3rd respondent on 08.05.2019 and 13.06.2019 for enquiry. Thereafter, the petitioner did not receive any communication from 3rd respondent. However, surprisingly 1st respondent assumed juri iction in the matter and issued a final personal hearing notice to the petitioner to appear before him on 17.03.2020. The petitioner appeared before 1st respondent assuming that he was officiated in the capacity of 3rd respondent and reiterated the submissions made in his reply with the hope that its objections would be taken into consideration before passing of the order. However, 1st respondent proceeded to confirm the revision by order dated 24.03.2020 confirming the liability as proposed in the notice. In the impugned order, the 1st respondent has wrongly observed that the total sales scored by the petitioner during

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the period 2014-15 is Rs.929,56,59,268/-, but the 2nd respondent adopted the component ‘C’ being total turnover as Rs.515,32,29,554/- for restricting the ITC. The said observation of the 1st respondent is contrary to the findings of the 2nd respondent. The total turnover component ‘C’ adopted by 2nd respondent is Rs.920,86,59,268/- but not Rs.515,32,29,544/-. The later figure is nowhere found in the order of 2nd respondent.

(e) The difference between the amount shown as total turnover in the assessment order and the revision show cause notice is Rs.8,70,00,000/- which, according to the petitioner, represents the high sea sales and will not form part of the turnover for construing the components “B” and “C” as per Rule 20(10) for applying the formula. The petitioner precisely pointed out this aspect. However, the 1st respondent failed to deal with this contention at all in the impugned order. On the other hand, the 1st respondent proceeded with the assumption that the 2nd respondent adopted Rs.515,32,29,554/- as component “C” for working out the eligible ITC. It is submitted that the 2nd respondent did not adopt the component “C” as Rs.515,32,29,554/- but adopted Rs.920,86,59,268/-. Therefore, the 1st respondent has misconstrued the turnovers, while confirming the revision. Though the burden lies on the 1st respondent to substantiate the revision figures, however, the burden was placed on the petitioner.

(f) Similarly, for the year 2015-2016, 5% ITC on goods was adopted by the 2nd respondent as Rs.2,39,18,452/- but in the impugned

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order, the 1st respondent adopted Rs.1,58,84,702/-. So also, the 1st respondent assumed that the 2nd respondent adopted Rs.536,85,57,542/- as total turnover instead of Rs.1063,82,44,073/-. This figure is wrong because, even in the show cause notice of the 3rd respondent, the total turnover for the year 2015-2016 is taken as Rs.1063,82,44,073/-. All the above figures were brought forth for the first time in the impugned order without putting the petitioner on notice. The burden was also placed on the petitioner to place cogent material evidence to drop the proceedings. When the 1st respondent adopted the figures contrary to the assessment order and the show cause notice of the 3rd respondent, he ought to have issued revised show cause notice with figures and calculations to enable the petitioner to submit its objections.

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revision proceedings under Section 32(2) of the VAT Act, still he ought to have issued a fresh show cause notice to the petitioner to put him on guard. Further, there are a number of variations in figures adopted by the 1st respondent and the pre-revision show cause notice and the assessment order. The petitioner has given reply as against the pre-revision show cause notice dated 23.01.2019 challenging the excess figures shown by the 3rd respondent. Be that it may, he would argue, if the 1st respondent wanted to or proposed to introduce new figures, the duty casts on him to issue a fresh show cause notice mentioning therein the proposed figures arrived at by him in the revision, and give an opportunity to the petitioner to submit its explanation/objections. However, that exercise was not done by the 1st respondent and therefore, the impugned order is liable to be set aside. To buttress his argument that failure to mention the basis for the levy of tax will entail the final order illegally for violation of principles of natural justice, as no opportunity to show cause as to why such a tax is not excisable, he relied upon BGR Energy Systems Limited v. Assistant Commissioner, Commercial Taxes, Large Tax Payer Unit1. He also relied upon Sumo Foods Private Limited v. Commercial Tax Officer2. 5. Learned Government Pleader for Commercial Taxes in his turn opposed the writ petition stating that the petitioner, if aggrieved by the revisional order, has the remedy of appeal before the appellate

1 MANU/AP/0066/2009 = (2009) 2 SVST 391 (AP) 2 MANU/AP/1087/2005 = (2006) 43 APSTJ 75

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Tribunal under Section 33 of the VAT Act and hence, the writ petition itself is not maintainable. He would further submit that the impugned order was passed after issuing notice and inviting the objections and therefore, there was no violation of principles of natural justice.

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juxtaposed with the show cause notice, we are constrained to hold that the observation of 3rd respondent regarding the sales turnover is not correct. In the assessment order, the 3rd respondent observed the total sales for the period 2014-15 as Rs.9,20,86,59,268/- but not Rs.515,32,29,554/- as observed by 2nd respondent. Similarly, for the tax period 2015-16 the 3rd respondent in his assessment order arrived at the total sales at Rs.1,097,96,98,384/- but not Rs.536,85,57,543/- as observed by 2nd respondent. So, the observation to the extent mentioned aforesaid is not correct and it is not known how the 2nd respondent have come across such figures.

(a) The petitioner submitted its explanation dated 13.06.2019. Be that it may, the 1st respondent took over the revision proceedings and ultimately confirmed the ITC as proposed to be restricted in the pre-revision show cause notice. It was observed by the 1st respondent that the petitioner failed to produce cogent material evidence to drop the revision. We noticed, as rightly observed by the petitioner, 1st respondent has not mentioned the reasons for coming to conclusion that the proposed revision was correct in all aspects though the turnovers for the tax period 2014-15 and 2015-16 as mentioned supra were wrongly cited by 3rd respondent. The petitioner was not put to notice as to how in the assessment order the 2nd respondent has taken the turnover for the period 2014-15 as Rs.515,32,29,554/- and for the year 2015-16 as Rs.536,85,57,543/-. Hence, in our view, the petitioner was heavily prejudiced.

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(b) In the case of BGR Energy Systems Limited (1 supra), the Division Bench of the High Court of Andhra Pradesh observed that the failure to indicate the basis for levy of tax under the A.P. VAT Act in the show cause notice falls foul of the audi alteram partem rule, the impugned assessment order being set aside on the ground of violation of principles of natural justice. In the case of Sumo Foods Private Limited (2 supra) also, similar view was expressed.

As a sequel, interlocutory applications pending, if any, shall stand closed. __________________________ U. DURGA PRASAD RAO, J

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J. UMA DEVI, J 23.02.2021 MVA/CBS