Andhra HC (Pre-Telangana)
M/S.Vijaya Venkata Durga Oil Traders vs The Commercial Tax Officer, Sivalayam ... on 25 September, 2014
Author: Ramesh Ranganathan
Bench: Ramesh Ranganathan
THE HONBLE SRI JUSTICE RAMESH RANGANATHAN AND THE HONBLR SRI JUSTICE M. SATYANARAYANA MURTHY
WRIT PETITION No.15413 of 2014
25-09-2014
M/s.Vijaya Venkata Durga Oil Traders.Petitioner
The Commercial Tax Officer, Sivalayam Street, Circle, Vijayawada I Division,
Gunadala, Vijayawada, Krishna District and another. .Respondents
Counsel for the petitioner: Sri G. Narendra Chetty
Counsel for respondents:Sri P. Balaji Varma, Spl. Standing
Counsel for Commercial Taxes
<GIST:
>HEAD NOTE:
? Citations:
1) (2013) 9 SCC 753
2) (2013) 57 APSTJ 157 (AP)
3) (1992) 2 SCC 683
4) (1977) 39 STC 478 (SC)
5) (1988) 7 APSTJ 218 (A.P)
6) (2005) STC 130 (Mad)
7) [1955] 1 S.C.R. 941
8) (1985) 3 SCC 398
9) [1969] 1 S.C.R. 317
10) [1949] 1 All. England Reports 108
11) AIR 1978 SC 597
12) (1971) 3 SCC 864 = AIR 1973 SC 205
13) AIR 1984 S.C. 1030
14) (2002) Vol.127 606
15) (2012) 54 APSTJ 133 (AP)
16) (1986) 62 STC 71 (AP)
17) (1996) 103 STC 297
18) AIR 1952 SC 192
19) AIR 1954 SC 440
20) (2002) 4 SCC 638
21) (2007) 9 SCC 461
22) AIR 1977 SC 2149
23) (2008) 2 SCC 280
24) AIR 1966 SC 334
25) AIR 1962 SC 1210
26) AIR 1973 SC 964
27) AIR 1962 SC 1183
28) (2003) 6 SCC 675
29) 1952-1 KB 338
30) AIR 1955 SC 233
31) AIR 1964 SC 477
32) (2004) 3 SCC 682
33) (1958) SCR 1240
34) (2011) 45 VST 195
THE HONBLE SRI JUSTICE RAMESH RANGANATHAN
AND
THE HONBLE SRI JUSTICE M. SATYANARAYANA MURTHY
WRIT PETITION No.15413 of 2014
ORDER (Per the Honble Sri Justice Ramesh Ranganathan)
The assessment order passed by the first respondent on 29.04.2014, for the tax period 2008-09 to January, 2012, is questioned in this Writ Petition as being arbitrary, illegal, without jurisdiction, partly barred by limitation, in violation of principles of natural justice and contrary to the provisions of the A.P. VAT Act, 2005 (hereinafter called the Act).
The petitioner, a proprietary concern, is a registered dealer under the Act and under the Central Sales Tax Act, 1956 on the rolls of the first respondent. They carry on wholesale and retail business in edible oils i.e., groundnut oil, palm oil, sun flower oil, rice bran oil, cotton seed oil etc. It is their case that they purchase edible oils from various registered VAT dealers from all over the State and sell the same within the State; they are entitled to 100% input tax credit, of the tax paid by them to their vendors on the purchases made by them, as per Section 13(1) of the Act; the only condition prescribed therein, for being entitled for input tax credit, is that the dealer should be in possession of the tax invoices issued by the selling VAT dealer; for the earlier tax period 2005-06 and 2006-07 (Part), the first respondent issued assessment and penalty proceedings; the Writ Petition filed thereagainst was admitted and conditional stay was granted; the said Writ Petition is pending; for the subsequent tax period from 2008-09 to January, 2012, the first respondent issued show-cause notice dated 06.03.2014, beyond the period of limitation of four years prescribed under Section 21 of the Act, for a part of the said period; they submitted their reply taking various objections including the ground of limitation; the first respondent passed an assessment order dated 29.04.2014 disallowing input tax credit and raised a demand of Rs.46,78,605/-; the first respondent disallowed input tax credit in respect of edible oils purchased by the petitioner from eight dealers who, at the time of the purchases, were all admittedly real and existing registered VAT dealers in the State with TIN numbers and had issued tax invoices in favour of the petitioner; they had also issued way bills obtained from the Commercial Tax Department; the first respondent held that, though these eight dealers were existing and registered VAT dealers in the State and had issued tax invoices clearly showing collection of tax, they had physically not sold the edible oils to the petitioner, and had only issued paper bills to them; the petitioner had purchased edible oils from outside the State of A.P and had sold the same within the State of A.P; they had used the bills issued by these eight dealers for claiming input tax credit on such sales; this finding of the first respondent is illegal, contrary to the facts, and based on mere assumptions, presumptions and conjectures; the petitioner purchased goods only from local registered VAT dealers; there were no inter-state purchases made by them; M/s.Sri Lakshmi Oil Traders, Jaggaiahpet had delivered groundnut oil to the petitioner through heavy vehicles only, and had issued tax invoices and way bills to them; the petitioner, in turn, had sold palm oil to the said vendor; these transactions were supported by tax invoices and way bills; this is sufficient to claim input tax credit under Section 13(1) of the Act; the first respondent treated this transaction as a bogus transaction; he held that only a paper bill was issued by the vendor without physical delivery of the goods on the ground that firstly, on verification of the vehicle numbers in the Transport Department portal, they were found with the description status and registration status for the vehicles, as data not found, light motor vehicles, two wheelers, tractors etc.; as these vehicles are heavy vehicles, they would not be found under light motor vehicles, two wheelers, tractors category; the other ground is that no payment was made by the petitioner to the vendor for these purchases; as there were some disputes between the petitioner and the said vendor regarding quality of oil, which was later settled, the petitioner had supplied RBD palm oil in lieu of payment; such incidents are common in the nature of their business; with regards purchases from M/s. Sai Kendriya Trading company, Nellore the first respondent disbelieved the same on the ground that, on enquiry from the assessing authority of that dealer, it was informed that, though the said dealer was a registered dealer, he was carrying on business in prawn seeds, aqua culture and not edible oils; the said dealer did business upto June, 2011 and had left the place of business without intimation; on this basis, the first respondent concluded that the said dealer had not made any sales of edible oils to the petitioner, but had issued only sale bills; in the invoices and way bills issued by the dealer, edible oils were clearly mentioned; if there was any violation of the registration certificate by the said dealer, it is for the department to take action against him, but the transaction could not disbelieved; the first respondent further held that, though the purchases by the petitioner from said dealer were made through two different agents, the tax invoices and way bills were signed by a single person i.e., Sri K.L.N. Reddy as the proprietor; on this ground the first respondent had strangely concluded that the transactions were not genuine; another irrelevant ground taken by the first respondent was that the vendor had supplied oil to the petitioner by the same tankers through which they had obtained the same from outside the State; the first respondent also held that, though the vendor was situated at Nellore, payments were made by the petitioner at Proddatur; as per the instructions of their vendor, the petitioner had made payments by bank transfer to the vendors account at Proddatur; this cannot be a ground for rejection of the transaction; in the case of purchases made from M/s. Kaveri Oil Trading Company, Naidupet, the first respondent disbelieved the same on the ground that the selling dealer did not report the sales made to the petitioner, and the whereabouts of the proprietor of the said dealer was not known; these are not valid grounds for disbelieving the transactions; the first respondent disbelieved purchases made from M/s. New Sreenivasa Traders, Piler on the ground that, though the said dealer was a registered dealer, he was dealing in confectionary, atta, maida, dry chillies, tamarind, copra, spices etc; the tax invoices and the way bills issued by the said dealer clearly mentions edible oils; the registration certificate of the said dealer does not contain details of any commodities; in respect of the said dealer and three other dealers viz., SrI Lakshmi Srinivasa Traders, Cumbum, Nellore District, Sri Lakshmi Venkateswara Traders, Nellore and Sri Ganesh Trading Company Tirupati, the assessing authority disbelieved the transactions on the ground that the sale invoices of these four dealers were signed by one person ie Sri Y. Rajendra Prasad; as Sri Y. Rajendra Prasad is the proprietor of the said four concerns, there is nothing wrong in his signing the sale invoices issued by the four concerns; likewise, the first respondent took an objection that Sri K.L.N. Reddy had signed the invoices in respect of two firms viz., Sri Kendriya Trading Company, Nellore and Sri Hari Traders, Tirupati; as the said person was authorised to sign on behalf of the said two firms, there was no basis for the first respondent to disbelieve the transactions; the selling dealers of the petitioner are real and existing; they were registered dealers and had issued sale invoices and way bills to the petitioner; these dealers became liable to pay tax as first sellers; it is for the department to make assessment and collect taxes from them; the duty of the second seller is only to produce the tax invoices issued by a real and identifiable first seller; payment was made by the petitioner to their vendors by way of cheques and RTGS; this is sufficient to prove the genuineness of the transactions; way bills were issued to the dealers by the Commercial Tax Department manually during that period; the dealers had to submit details of utilisation of way bills to their respective assessing authorities; as the vendors of the petitioner had issued way bills, and had submitted utilization statements to their respective assessing authorities, their genuineness could not be doubted; in respect of a part of the period, the assessment order is barred by limitation of four years stipulated under Section 21(3) of the Act; the first respondent is not justified in holding that, as the petitioner had wilfully evaded tax, the period of limitation applicable was six years as per Section 21(5) of the Act; the petitioner had reported their turnover, and had submitted documents such as tax invoices, way bills, payment particulars and all its records; none of these transactions were unreported or suppressed; and it is Section 21(3) and not Section 21(5) which is applicable to them.
In his counter-affidavit, the first respondent states that the petitioner is a registered dealer carrying on business in the sale of edible oils such as groundnut oil, pamolein, rice bran oil etc; based on the authorisation dated 19.12.2011 issued by the Deputy Commissioner, he had visited the business premises and had verified the books of accounts produced by the petitioner; on verification, it was noticed that input tax credit claimed by the petitioner, in respect of seven dealers, was not in accordance with law; the handwriting in all the invoices was one and the same, and most of the invoices were issued by Sri Y. Rajendra Prasad and Sri K.L.N. Reddy who are third parties; in all these transactions, the petitioner made payments to the dealers in their accounts maintained at Proddatur, though none of the above firms were located at Proddatur; as he suspected their genuineness, he had issued a show-cause notice dated 06.03.2014 proposing to disallow input tax credit claimed by the petitioner; he had issued the show-cause notice after obtaining necessary authorisation from the Deputy Commissioner (CT) on 03.03.2014; the petitioner submitted their reply to the show-cause notice on 10.04.2014 and 24.04.2014; after examining their reply, and after giving them a hearing on 25.04.2014, he had passed the assessment order on 29.04.2014; the petitioner wilfully evaded tax due to the revenue; in such a case Section 21(5) of the Act allows a period of six years, for finalisation of assessment, from the date of filing of the return; the assessment is within the period of limitation; the Commercial Tax Officer, Nandigama Circle, after visiting the place of business of M/s. Sri Lakshmi Oil Traders, Jaggaiahpet, reported that no business activity was being carried on thereat; the report was submitted by him after contacting neighbours and relatives of the proprietor of the firm; no cash payments were made on the said purchases by the petitioner, but only book adjustments were made on the last day of the financial year to close the account; the petitioners contention that there was some dispute between them and the said vendor regarding quality of oil which was later settled, and they had supplied RBD Palm Oil to the said vendor in lieu of payment, is without any basis; in his objection to the show-cause notice, the petitioner has not raised any such contention; this contention is merely an afterthought; the petitioner has not produced any evidence of movement of goods showing receipt of RBD Palm Oil by M/s. Lakshmi Oil Traders, Jaggaiahpet; the petitioners contention, that Sri Y. Rajendra Prasad is the proprietor of (1) Sri Lakshmi Srinivasa Traders, Cumbum, Nellore District; (2) Sri Lakshmi Venkateswara Traders, Nellore; (3) Sri Ganesh Trading Company, Tirupati and (4) M/s. New Sreenivasa Traders, Pileru and there was nothing wrong in his signing the sale invoices issued for all above said four firms, is not tenable; the petitioners contention, that Sri K. L.N.Reddy was authorised to sign on behalf of both Sai Kendriya Trading Company and Sri Hari Traders, is also not tenable; the petitioner has not produced any documentary evidence in support of this claim; the handwriting in all the invoices is one and the same; this shows that all the invoices were obtained by the petitioner from one source only; different registrations, tax invoices and entries in way bills are all false, and as such are invalid; this also confirms the reports of the territorial officers that no business transactions were carried on at the registered place of business, and the goods have not originated from the places shown in the way bills; all these invoices and way bills are, therefore, liable to be treated as invalid; 35 transit sale transactions were verified with reference to GIS system data of VATIS, and it was found that the said lorries/tankers had been transporting edible oils from outside the State of Andhra Pradesh to other States through A.P. duly taking transit passes at entry check posts and surrendering the same at the exiting check posts; while the vehicles were on their inter-State movement, the same lorry/vehicle numbers were found on the sale invoices/way bills issued by the assessee through which they claimed to have transported edible oil to local registered dealers in Andhra Pradesh; as per the VATIS, the transit passes were surrendered and the tankers crossed the State border; in such a case, the petitioner could not have taken delivery of those tankers and resold the same; it cannot even be assumed that some local dealer took delivery of those goods, and resold them to the petitioner, as the said vehicle had crossed the State border by that time; the petitioner has not furnished any details of the first sellers of these goods in the State or of the invoices/way bills issued by them etc; these facts establish that the commission agent at Proddatur, the petitioner, and the alleged proprietors who had issued tax invoices to the petitioner, have all joined together to evade taxes due to the revenue; and there are no merits in the Writ Petition.
Sri V. Bhaskar Reddy, Learned Counsel appearing for Sri Narendera Chetty, Learned Counsel for the petitioner, put forth his submissions on the illegality of the assessment order. Sri P. Balaji VErma, Learned Special Standing Counsel for Commercial Taxes, appeared on behalf of the respondents. It is convenient to examine the contentions, urged by Learned Counsel on either side, under different heads.
I. EXTENDED PERIOD OF LIMITATION UNDER SECTION 21(5) OF THE ACT:
Sri V. Bhaskar Reddy, Learned Counsel appearing for the petitioner, would submit that the assessment is barred by limitation for a part of the period; even if the contents of the show- cause notice show wilful evasion of tax, it is only if Section 21(5) of the Act is specifically referred to in the show-cause notice can action be taken thereunder; and the show-cause notice should mention that jurisdiction under Section 21(5) of the Act is being exercised. Learned Counsel would place reliance on Uniworth Textiles Ltd. v. CCE ; and Gunisetty China Gunna Raju Traders, Visakhapatnam v. CTO, Visakhapatnam .
On the other hand, Sri P. Balaji Varma, Learned Special Standing Counsel for Commercial Taxes, would submit that sub- section (5) of Section 21 is not an independent provision, and is merely an extension of Section 21(3); the requirements of Section 21(5) must be read into Section 21(3); if the dealer is not able to provide satisfactory proof that there was no wilful evasion of tax, then the period of limitation gets extended; if an allegation of wilful evasion is made in the show-cause notice, the assessee files his reply thereto and an assessment order is passed holding that there was no wilful evasion, then the limitation gets reduced to four years, otherwise it would remain six years; if, on the other hand, a case of wilful evasion is made out, then assessment can be passed within six years; in the present case, the period taken up for assessment is six years i.e., from 2008-09, and the show-cause notice was issued on 06.03.2014; the petitioner also understood it as such, and that is why he contended that the limitation was four years; and failure to refer to Section 21(5) of the Act, in the show- cause notice, is per-se immaterial.
With regards the petitioners claim that the assessment for the years 2008-09 and 2009-2010 was barred by limitation, the first respondent, in the order of assessment dated 29.04.2014, held that limitation of four years is applicable to general cases, but was not applicable to cases of wilful evasion i.e., where a VAT dealer indulges in wilful evasion of taxes; in such cases six years is the period of limitation under Section 21(5) of the Act; since the petitioner had resorted to wilful evasion of tax as stated in the show cause notice, the assessment proposed for 2008-09 and 2009-10 was also within limitation.
In Gunisetty China Gunna Raju Traders, Visakhapatnam2 it was fairly conceded before the Division Bench, by the learned Special Government Pleader for Commercial Taxes, that the assessment from April 2005 to May, 2009 was beyond the period of four years mentioned under Section 21(4) of the Act. In these circumstances, the impugned assessment for the period from April 2005 to May, 2009 was declared by the Division Bench as illegal and barred by limitation, and it was left open to the assessing authority to initiate fresh proceedings of assessment for the period from June, 2009 onwards. The judgement in Gunisetty China Gunna Raju Traders, Visakhapatnam2, was based on a concession and, in the absence of any declaration of law therein, does not constitute a precedent binding on a coordinate Bench.
In Uniworth Textiles Limited1, the scope of the proviso to Section 28(1) of the Customs Act, 1962 fell for consideration. The proviso reads as under:
Provided that where any duty has not been levied or has been short- levied or the interest has not been charged or has been part-paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful misstatement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter, the provisions of this sub- section shall have effect as if for the words one year and six months, the words five years were substituted.
The Supreme Court held:
..Moreover, this Court, through a catena of decisions, has held that the proviso to Section 28 of the Act finds application only when specific and explicit averments challenging the fides of the conduct of the assessee are made in the show cause notice, a requirement that the show cause notice in the present case fails to meet. In Aban Loyd Chiles Offshore Ltd. Commissioner of Customs : (2006) 6 SCC 482), this Court made the following observations:
21. This Court while interpreting Section 11-A of the Central Excise Act in Collector of Central Excise v. H.M.M. Ltd. (supra) has observed that in order to attract the proviso to Section 11-A(1) it must be shown that the excise duty escaped by reason of fraud, collusion or willful misstatement of suppression of fact with intent to evade the payment of duty. It has been observed:
2..Therefore, in order to attract the proviso to Section 11- A(1) it must be alleged in the show-cause notice that the duty of excise had not been levied or paid by reason of fraud, collusion or willful misstatement or suppression of fact on the part of the assessee or by reason of contravention of any of the provisions of the Act or of the Rules made thereunder with intent to evade payment of duties by such person or his agent. There is no such averment to be found in the show cause notice. There is no averment that the duty of excise had been intentionally evaded or that fraud or collusion had been practiced or that the assessee was guilty of wilful misstatement or suppression of fact. In the absence of any such averments in the show-cause notice it is difficult to understand how the Revenue could sustain the notice under the proviso to Section 11-A(1) of the Act.
22. It was held that the show cause notice must put the assessee to notice which of the various omissions or commissions stated in the proviso is committed to extend the period from six months to five years. That unless the assessee is put to notice the assessee would have no opportunity to meet the case of the Department. It was held:
2.....There is considerable force in this contention. If the department proposes to invoke the proviso to Section 11-
A(1) , the show-cause notice must put the assessee to notice which of the various commissions or omissions stated in the proviso is committed to extend the period from six months to 5 years. Unless the assessee is put to notice, the assessee would have no opportunity to meet the case of the department. The defaults enumerated in the proviso to the said sub-section are more than one and if the Excise Department places reliance on the proviso it must be specifically stated in the show-cause notice which is the allegation against the assessee falling within the four corners of the said proviso....
26. Hence, on account of the fact that the burden of proof of proving mala fide conduct under the proviso to Section 28 of the Act lies with the Revenue; that in furtherance of the same, no specific averments find a mention in the show cause notice which is a mandatory requirement for commencement of action under the said proviso; and that nothing on record displays a willful default on the part of the appellant, we hold that the extended period of limitation under the said provision could not be invoked against the appellant (Emphasis supplied) Both under the proviso to Section 28(1) of the Customs Act, and Section 11(A) of the Central Excise Act, the period of limitation gets extended where duty has been evaded by reason of fraud or collusion or wilful mistake or suppression of facts. It is in this context that the Supreme Court, in Uniworth Textiles Limited1, held that the show-cause notice must put the assessee to notice, of which of the various omissions or commissions stated in the proviso was committed, to extend the period of limitation from six months to five years; and, unless the assessee is put to notice, he would have no opportunity to meet the case of the Department. Unlike the aforesaid provisions of the Customs Act and the Central Excise Act, wherein the period of limitation gets extended in cases where non-levy of duty is by reason of (1) fraud; (2) collusion; (3) wilful mistake or (4) suppression of facts, Section 21(5) of the Act extends the period of limitation in cases where a dealer has committed wilful evasion of tax.
Section 21 of the A.P. Vat Act, 2005 relates to assessment. Section 21(3) stipulates that where the authority is not satisfied with a return filed by the VAT dealer, or the return appears to be incorrect or incomplete, he shall assess, to the best of his judgment, within four years of the due date of the return or within four years of the date of filing of the return whichever is later. Section 21(4) enables the authority prescribed, based on any information available or on any other basis to conduct a detailed scrutiny of the accounts of any VAT dealer and where any assessment, as a result of such scrutiny, becomes necessary such assessment shall be made within a period of four years from the end of the period for which the assessment is to be made. Section 21(5) stipulates that, where any wilful evasion of tax has been committed by a dealer, an assessment shall be made to the best of his judgment by the authority prescribed within a period of six years of the date of filing of the return or the first return relating to such offence.
If the allegations in the show-cause notice, accepted as true, show that the dealer had committed wilful evasion of tax, and the findings recorded in the assessment order establish that the assessee had wilfully evaded tax, it would suffice to extend the period of limitation in terms of Section 21(5) of the Act notwithstanding that the show-cause notice does not refer to Section 21(5) and does not specifically use the words wilful evasion of tax. It is, therefore, necessary for us to refer to the contents of the show-cause notice.
Pursuant to an audit of the books of accounts of the petitioner, the first respondent issued a notice on 06.03.2014 calling upon them to show cause why input tax credit claimed by them, on the purchase of edible oil from the following eight dealers, should not be disallowed.
1. M/s. Sri Lakshmi Oil Traders, Jaggaiahpet TIN 28181482898
2. M/s. Sai Kendriya Trading Company, Nellore TIN 28346047745
3. M/s. Sri Kaveri Oil Trading Co, Naidupet, Gudur TIN 2885793173
4. M/s. New Sreenivasa Traders, Piler, Madanapalle Circle TIN 28095002352
5. M/s. Sri Lakshmi Sreenivasa Traders, Cumbum, Nellore TIN
6. M/s. Lakshmi Venkateswara Traders, Nellore TIN 28194403169
7. Sri Ganesh Trading Company, Tirupati TIN 28523165675
8. Sri Hari Traders, Tirupati Tin 28152054520 The show cause notice gives details of the purchases which the petitioner claimed to have made from each of the eight dealers; and the reports received from the concerned Commercial Tax Officers. In so far as M/s. Sri Lakshmi Oil Traders, Jaggaiahpet is concerned, the Commercial Tax Officer, Nandigama Circle is said to have stated in his report that the dealer had issued fraudulent sales tax invoices to accommodate input tax credit to the petitioner and to enable them to avoid payment of output tax at their end; the vehicle numbers, through which the goods were said to have been supplied by Sri Lakshmi Oil Dealers to the petitioner, were verified on the Road Transport Department portal and were found with the description data not found, Light Motor vehicles, Two wheeler, tractors etc; as these goods were sold in bulk, they could not have been transported in the said vehicles; it was evident that transfer of property had not taken place; bill trading may have taken place to support input tax credit and to avoid payment of output tax; and on visiting the business premises, mentioned in the registration record, it was found that, except a painting board in the said premises, no business activity was being conducted thereat by the proprietor Sri Jammula Gowri Shankar. The show cause notice also records that, on verification of the petitioners ledger, it came to light that no monetary payment was made, but sale bills (RBD Palm Oil) were raised on 28.03.2009 and 31.03.2010 i.e., one year after the purchase transaction; when the dealer was not existing at the registered place of business, they could not have bought goods from the petitioner or taken delivery thereof; the petitioner was not eligible to claim input tax credit as the selling dealer was involved in fraudulent issue of invoices without transfer of property; and they had acted in collusion with the above said dealer, and had wrongly claimed input tax credit for which they were not eligible.
With regards M/s. Sai Kendriya Trading Company, Nellore, the show cause notice records the report of the Commercial Tax Officer, Nellore that they had taken VAT registration for carrying on business in prawn seeds and aqua culture, but not for edible oils; the office records revealed that they had carried on business upto June, 2011 and had left the place of business without intimation; it was evident that the dealer had made sales of bills only; they had neither reported the turnover nor had they paid taxes to the department; it was clear that they had not sold edible oils to the petitioner; and the input tax credit claimed by them ought to be disallowed. The show cause notice further records that, on verification of the tax invoices and way bills attached thereto, it was clear that the petitioner had not purchased goods directly from M/s. Sai Kendriya Trading Company, Nellore, but through their agents at Proddutur i.e., M/s. Sree Sai Trading Company, Proddutur and M/s. Sadguru Trading Co, Proddutor; though the agents were different, all the invoices and way bills were signed and issued by one single person i.e., Sri K.L.N. Reddy as the proprietor of M/s. Sai Kendriya Trading Company; this showed involvement of third parties in the transactions, instead of the registered VAT dealer; the way bills enclosed with the tax invoices showed that the goods were consigned from Nellore to Vijayawada; the CTO, Nellore had reported that only sale of bills had taken place, and not of goods; the entries in the way bills, that the goods were consigned from Nellore to Vijayawada, were also incorrect; the said way bills were used with the malafide intention of causing revenue loss to the Government; the petitioner had made all payment, in favour of M/s. Sai Kendriya Trading Company, Proddutur instead of M/s. Sai Kendriya Trading Company, Nellore though the tax invoices made no mention of the existence of a branch at Proddutur nor were there any instructions on the said tax invoice for payment to be made in favour of Proddutur Branch only; it was evident that the petitioner did not purchase goods from the registered VAT dealer, but from a third party; the tax invoices were also issued by a third party which had no validity and sanctity; while the way bills enclosed to the invoices showed that goods were consigned from Nellore to Vijayawada, the General Information Service (GIS) data showed that, in a large number of cases, the vehicle had passed through the State by obtaining transit passes; the vehicles had entered the State through one check post and had exited from another; curiously, during the very same period, the sales invoices raised in the name of M/s. Sai Kendriya Trading Company showed that edible oil been sold by using the same tanker, and was delivered to the petitioner; this data showed that the goods were not actually consigned from Nellore to Vijayawada, but was coming from out of the State; the petitioner was the first seller in the State; and they had claimed input tax credit, producing false tax invoices, in connivance and collusion with agents at Proddutur.
With regards Sri Kaveri Oil Trading Co. Naidupet, the show cause notice records that the CTO, Gudur circle had stated in his report that they had made undisclosed bogus transactions with the petitioner; they had not reported the sale transactions effected by them to the petitioner; on visiting their place of business, and on enquiry with their neighbours, it came to light that the whereabouts of the proprietor was not known; on further verification of the invoices produced by the petitioner it was noticed that they had not purchased goods directly from M/s. Kaveri Oil Trading Company, Gudur but through M/s. Sree Sai Trading Company, Proddutur and M/s. Sadguru Trading Company, Proddutur; the payments made against these purchases were in favour of M/s. Sri Kaveri Oil Trading Company, Proddutur branch instead of Sri Kaveri Oil Trading Company, Naidupet; the tax invoices made no mention of the existence of a branch at Proddutur nor were there any instructions, on the said invoices, that payment should be made in favour of Proddutur branch; it was evident that the petitioner did not purchase the goods from a registered VAT dealer, but from unknown persons; to cover up the same, the petitioner had produced tax invoices issued by third parties; the said tax invoices had no validity and sanctity, and the input tax credit claimed against those purchases were liable to be rejected; the way bills, enclosed to the said invoices, showed that the goods were consigned from Gudur to Vijayawada; the GIS data, in respect of the vehicles which were said to have carried edible oils to the petitioner, showed that the vehicles were only passing through the State by obtaining transit passes; they had entered the State from one check post and had exited from another; however, during that period, Kavery Oil Trading Company had raised invoices against the petitioner and had sold oil using the same tanker; the petitioner also claimed to have taken delivery of oil from the said tanker; the entries made in the way bills, that the goods moved from Gudur to Vijayawada, was incorrect as they had come from out of the State at the relevant point of time; the tax invoices and way bills were misused; it was a colourable exercise adopted to cause revenue loss to the government; it was evident that the petitioner did not purchase goods from a registered VAT dealer, but from unknown persons; to cover up the same, they had produced tax invoices issued by a third party; the said tax invoices had no validity and sanctity; and the input tax claimed against the invoices was liable to be rejected.
With regards M/s. New Sreenivasa Traders, Piler, Chittoor District, the show cause notice records the report of the CTO, Madanapalle that they had not reported the turnover regarding sales made by them to the petitioner; they had obtained registration as a VAT dealer on 01.10.2008 for carrying on business in confectionary, atta, maida, dry chillies, tamarind, copra and spices; on verification of the invoices it was noticed that the petitioner had not purchased goods directly from M/s. New Srinivasa Traders, Piler but through agents i.e., M/s. Sree Sai Trading Co., Proddutur and M/s. Sadguru Trading Co. Produtur; the tax invoices and way bills were signed and issued by Sri Y. Rajendra Prasad who had issued invoices for other dealers also; the petitioner had made all payments in favour of New Sreenivasa Traders, Proddutur instead of New Sreenivasa Traders, Piler, Chittoor District; the tax invoices did not refer to the existence of a branch at Proddutur nor were there any instructions thereon for payment to be made at Proddutur branch only; it was evident that the petitioner did not purchase goods from the registered VAT dealer; to cover up the same, they had produced tax invoices issued by a third party in the name of the registered dealer; and hence the said input tax invoices had no validity and sanctity.
With respect to Sri Lakshmi Srinivasa Traders, Cumbum, the show cause notice records that the invoices were not issued by Sri Lakshmi Srinivasa Traders, but were signed and issued by Sri Y. Rajendra Prasad on behalf of M/s. Sadguru Trading Co. Proddutur/Sree Sai Trading Co., Proddutur who were not the registered dealer; Sri Y. Rajendra Prasad had signed and issued tax invoices for other firms also; these transactions were not accounted for in the returns of the registered VAT dealer; the tax invoices issued by third parties had no validity and sanctity; and the petitioner had not produced any evidence to show that they had made payment directly to the registered VAT dealer.
With regards Sri Lakshmi Venkateswara Traders, Nellore, the show cause notice records the report of the CTO, Nellore that they had made false sales to the petitioner; they hardly effected any sales; on a visit of their premises, the proprietor of the firm was nowhere to be found; on enquiry, the neighbours informed that his whereabouts were not known; verification of the invoices showed that they were also signed and issued by Sri Y. Rajendra Prasad for M/s. Sadguru Trading Co, Proddutur/Sree Sai Trading Co., Proddutur acting as agents in the transactions; the petitioner did not produce any evidence to show that he made payment directly to the registered VAT dealer only; and the tax invoices produced by the petitioner was not issued by the registered dealer, but by a third person, and did not have sanctity and validity.
With regards Sri Ganesh Trading Company, Tirupati the show cause notice records that, on verification of the invoices filed by the petitioner, it was noticed that they were not signed and issued by the registered VAT dealer but were signed and issued by Sri Y. Rajendra Prasad on behalf of M/s. Sadguru Trading Co, Proddutur/Sree Sai Trading Co., Proddutur who were not registered VAT dealers; Sri Y. Rajendra Prasad had signed and issued tax invoices for other firms also; these transactions were not accounted for in the returns of the registered VAT dealer; the petitioner had not produced any evidence to show that they had made payment directly to the registered VAT dealer; and the tax invoices issued by third parties had no validity.
With regards Sri Hari Traders, Tirupati, the show cause notice records that all the invoices, and the way bills attached thereto, were signed and issued by Sri K.L.N. Reddy identifying himself as the proprietor of M/s. Hari Traders, Tirupati; M/s. Sadguru Trading Co. Proddutur/Sree Sai Trading Co., Proddutur had acted as agents in these transactions; the same K.L.N. Reddy had signed and issued tax invoices of M/s. Sai Kendriya Trading Company, Nellore also; these invoices were not accounted for in the monthly returns by the selling dealer; the tax invoices issued by third parties had no validity and sanctity; the petitioner had not produced any evidence to show that he had made payment directly to the registered VAT dealer; and hence the input tax credit claimed was proposed to be rejected.
The show cause notice also records the exercise of verification undertaken by the 1st respondent of certain sale transactions of the petitioner with the vehicle numbers in the GIS. The first respondent states that, as per the books of accounts of the petitioner, they were purchasing edible oils within the State of Andhra Pradesh only; while they had obtained CST registration also, they had never recorded having purchased edible oil from outside the State of Andhra Pradesh; the petitioner owned certain transport oil tanker vehicles 1). AP 16 W 4666, 2). AP 37V 2582,
3). AP 16 X 9569 and 4). AP 16 TV 9569 which were regularly utilised by them for transportation of edible oils; on verification of the books of accounts, along with the used triplicate copy of their way bills, certain lorry numbers were identified as having been used by the petitioner for transportation of edible oils sold by them to dealers in Andhra Pradesh; details of said vehicles, along with those of other oil tankers, were verified with the GIS system data of Value Added Tax Information Service (VATIS); it was found that the said lorries/tankers had been transporting edible oils from outside the State of Andhra Pradesh to other States through AP, duly taking transit passes at the entry check posts and surrendering them at the exit check posts; and, while the vehicles were on their inter-state movement, the same lorry/vehicle numbers were found on the sale invoices/way bills issued by the petitioner through which they had transported and sold edible oils to local registered dealers of A.P. The show cause notice gives details of the movement of lorries along with the transit passes as per GIS data, and the information of the sales invoices, by way of two statements i.e., Statement Nos.1 and 2.
On the basis of these statements, the 1st respondent opined that the vehicles had been passing with transit passes, as required under Rule 58 of AP VAT Rules, 2005, from one State to another State (i.e., the sale transactions by a dealer of one State to a dealer in another State both of whom were outside the State of A.P) duly passing through A.P. State, with edible oil, on the transit dates; on verification of the Form 616 covered transactions, it was observed that the petitioner was using the same lorries/tankers for sale of edible oils in the State with invoices and way bills raised by them during the same dates or during the period of transit movement of the vehicles to the other State; the same oil tanker cannot transport edible oil at one point of time i.e., on the same date to Tamil Nadu State and other States, as also to local dealers; such transactions are possible only on paper; it was evident that the petitioner was taking delivery of edible oil, coming from out of the State, without disclosing out of State purchase of edible oil; they had obtained bogus tax invoices through agents at Proddutur, and were claiming input tax credit with the malafide intention of benefiting therefrom; the petitioner was restricting payment of output tax, in the shadow of local purchases, claiming input tax credit though they were the first seller in the State; right from the initial stage of these transactions, the petitioners contention was to evade payment of the legitimate tax due to the State exchequer, by adopting dubious methods; failure to report the out of the State purchases in their regular books showed that the petitioner had not maintained true and correct accounts as required under Section 42(1) read with Rule 29 of the A.P. VAT Act and Rules; the returns, submitted under Section 20(1) as self assessment, were not in accordance with the provisions of the Act; as per Section 13(3)(a) of the Act, a dealer is entitled to claim input tax credit under Section 13(1) on the date the goods are received by him, provided he is in possession of a tax invoice; Section 2(35) defines tax invoice to mean a sales invoice, containing such details as are prescribed, issued by one VAT dealer to another VAT dealer; this implies that an invoice would be valid only if and when it is issued by a VAT dealer; if the invoice has been issued by a person other than a VAT dealer, it has no validity and sanctity; as per Section 55(2) of the A.P. VAT Act, any VAT dealer who issues a false tax invoice, or receives and uses a tax invoice knowing it to be false, shall be liable to pay a penalty of 200% of the tax shown in the false invoice; and, as such, the input tax credit claimed by the petitioner for Rs.46,78,605/- was liable to be disallowed.
The show-cause notice dated 06.03.2014 alleges that M/s. Sri Lakshmi Oil Traders, Jaggaiahpet had issued fraudulent sales tax invoices to accommodate input tax credit to the petitioner, and to enable them to avoid payment of output tax at their end; transfer of property had not taken place; the whereabouts of the proprietor of the selling dealer was not known; the petitioner was not eligible to claim input tax credit as the selling dealer was involved in fraudulent issue of invoices without transfer of property; and the petitioner had acted in collusion with the above said dealer, and had wrongly claimed input tax credit for which they were not eligible. With regards M/s. Sai Kendriya Trading Company, Nellore, the show cause notice alleges that the said dealer had taken VAT registration for carrying on business in prawn seeds and aqua culture, but not for edible oils; they were not carrying on any business after June, 2011; the dealer had made sales of bills only and had not sold edible oils to the petitioner; the petitioner had not purchased goods directly from M/s. Sai Kendriya Trading Company, Nellore, but through their agents at Proddutur; the way bills enclosed with the tax invoices showed that the goods were consigned from Nellore to Vijayawada; the GIS data showed that, in a large number of cases, the vehicle had passed through the State by obtaining transit passes; the very same vehicle, which had entered the State through one check post and had exited from another, were shown to have transported edible oil from the selling dealer to the petitioner; this showed that the goods were not actually consigned from the selling dealer to the petitioner; the goods came from outside the State; and, though the petitioner was the first seller in the State, they had claimed input tax credit producing false tax invoices in connivance and collusion with agents at Proddutur. Similar allegations are made with respect to the edible oil which the petitioner claimed to have purchased from Sri Kaveri Oil Trading Co. Naidupet, M/s. New Sreenivasa Traders, Piler, Sri Lakshmi Srinivasa Traders, Cumbum, Nellore District, Sri Ganesh Trading Company, Tirupati and Sri Hari Traders, Tirupati. The show-cause notice concludes by stating that the petitioner had taken delivery of edible oil coming from outside the State, without disclosing the out of State purchase of edible oil; they had obtained bogus tax invoices, through agents at Proddutur, and were claiming input tax credit with the malafide intention of benefiting therefrom; they were restricting payment of output tax, in the shadow of local purchases, claiming input tax credit though they were the first seller in the State; and, right from the initial stage of these transactions, the petitioners intention was to evade payment of the legitimate tax due to the State exchequer, by adopting dubious methods.
From these allegations it is clear that the case of the revenue is that the petitioner had, through dubious and illegal means, claimed input tax credit which they were not entitled to; and had, thereby, evaded payment of output tax legitimately payable by them to the State. The show-cause notice uses the word evade. The allegations in the show-cause notice, when read as a whole, are that evasion of tax by the petitioner is wilful, and not a mistake or an accidental omission. We are satisfied, therefore, that present case falls under Section 21(5) of the Act. As long as the source of power, to extend the period of limitation, is traceable to a statutory provision, the mere fact that the specific provision has not been referred to in the show-cause notice is of little consequence. If the power to do an act or pass an order can be traced to an enabling statutory provision, then, even if that provision is not specifically referred to, the act or order shall be deemed to have been done or made under the enabling provision. (Pine Chemicals Ltd. v. Assessing Authority ). If the contents of the show cause notice show that the assessee had committed wilful evasion of tax, it matters little that Section 21(5) not been quoted therein.
The jurisdiction to make assessment, under Section 21(5) of the Act, is only if the assessee has committed wilful evasion of tax. The contents of the show cause notice should show that the assessee is alleged to have committed wilful evasion of tax, in which case alone would the assessee have a reasonable opportunity to show cause there against. Mere reference to Section 21(5) or use of the words wilful evasion of tax in the show cause notice would not suffice in the absence of the contents of the show cause notice making out a case of the assessee having committed wilful evasion of tax. Further, after receipt of the reply to the show cause notice, the findings recorded in the assessment order should also show that the assessee had committed wilful evasion of the tax for it is only then can the assessing authority be said to have jurisdiction to assess the assessee to tax under Section 21(5) of the Act. As noted hereinabove, the show cause notice alleges that the assessee has committed wilful evasion of tax. The findings recorded by the first respondent in the assessment order, which shall be referred to later in this order, also establish that the petitioner had committed wilful evasion of tax. As the ingredients of Section 21(5) are attracted, we see no reason to hold that the assessment, made for the tax period 2008- 09 and 2009-10, is beyond the period of limitation. II. IS FAILURE OF THE ASSESSING AUTHORITY, TO SUMMON THE SELLING DEALERS, FOR THEIR CROSS-EXAMINATION BY THE ASSESSEE, IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE?
Sri V. Bhaskar Reddy, Learned Counsel appearing on behalf of the petitioner, would submit that the petitioner was not give an opportunity to cross-examine the selling dealers despite a specific request that they be so permitted; and failure of the 1st respondent to summon the selling dealers, for cross-examination by the petitioner, is in violation of principles of natural justice. Learned Counsel would rely on State of Kerala v. K.T. Shaduli Yousuff ; Machilipatnam Consumer Cooperative Society Ltd. v. The State of A.P , and T.M. Rajaganapathi Traders v. CTO, Salem .
With regards the petitioners claim that summons should be issued to their selling dealers, for their cross-examination by the petitioner, to find out the truth whether they had made delivery of goods or not, the first respondent held, in the assessment order, that the petitioner had not said anything about M/s. Sree Sai Trading Company, Proddutur and M/s. Sadguru Trading Company, Proddutur, though their names were shown as agents in all the tax invoices which were issued; they had also not furnished any explanation for transfer of funds to Proddutur branch alone; if the sellers were really genuine, they were carrying on business at the registered place of business, and the petitioner had purchased goods from registered dealers only, they should have explained why they had transferred amounts/issued cheques to Proddutur branch; the tax invoices did not refer to the existence of a branch, of the respective selling dealers, at Proddutur; there was no instruction on the tax invoices that the funds be transferred to Proddutur branch; the petitioner had also not explained how the same person could sign and issue invoices of different firms located in different places, posing himself as the proprietor of those firms, and how an invoice signed and issued by a third person could be accepted as a tax invoice issued by the registered VAT dealer; the burden to prove that these invoices were signed and issued by the registered VAT dealer was on the petitioner; the question of summoning the selling dealer for cross-examination did not, therefore, arise; and, in the absence of any specific reply, it had to be concluded that fictitious tax invoices were issued by third parties, and funds had also gone into their accounts.
Before examining whether failure of the first respondent to summon the existing dealers, for cross-examination by the petitioner, is in violation of principles of natural justice, let us refer to the judgments cited in this regard. Section-54 of the Tamil Nadu General Sales Tax Act vests the assessing authority with all the powers conferred on a Court by the Code of Civil Procedure for the purpose of summoning and enforcing the attendance of any person and examining him on oath or affirmation as well as compelling the production of any document. It also enables action being taken in the event the summoned person fails to attend or produce the document called for. The Madras High Court, in T.M. Rajaganapathi Traders6, held that the respondent was not inclined to exercise all the powers vested in him under Section 54 of the Tamil Nadu General Sales Tax Act; he was rest content merely with issuing the summons and stating that, since the concerned dealer failed to appear, he had no other alternative except to pass orders based on the available materials on hand; the respondent failed to realise that, in the event of such helplessness being recorded by him, he could, at best, not have relied upon any of the material which were relatable to the said dealer for the purpose of determining the tax liability on the petitioner; in the absence of the concerned dealer being examined, it would not be proper for the respondent to rely on those materials to fasten liability on the petitioner; and, in such circumstances, there was no other go except to set aside the impugned order and direct the respondent to hold the proceedings afresh, exercising all the powers that were vested in him under Section 54 of the Tamil Nadu General Sales Tax Act in order to ensure the presence of the dealer concerned for being offered for cross examination by the petitioner, without which there would be no scope for the respondent to rely on the material relating to the said dealer to determine the petitioners tax liability. Unlike in T.M. Rajaganapathi Traders6, the assessing authority, in the present case, did not issue any summons to the dealers, from whom the petitioner claimed to have purchased edible oils, to be present before him for being subjected to cross-examination by the petitioner. Though such a request was made, it was not acceded to. Whether failure to summon the alleged selling dealers for cross-examination is in violation of principles of natural justice shall be examined hereinafter.
Section 17 (3) of the Kerala Sales Tax Act, under which the assessment to sales tax had been made on the assessee in K.T. Shaduli Yusuff4, provided as follows:
"If no return is submitted by the dealer under subsection (1) within the prescribed period, or if the return submitted by him appears to the assessing authority to be incorrect or incomplete, the assessing authority shall, after making such enquiry as it may consider necessary and after taking into account all relevant materials gathered by it, assess the dealer to the best of its judgment:
Provided that before taking action under this sub-section the dealer shall be given a reasonable opportunity of being heard and, where a return has been submitted, to prove the correctness or completeness of such return."
While examining the scope of Section 17(3), more particularly its proviso, the Supreme Court held:-
.It is clear on a plain natural construction of the language of this provision that it empowers the Sales Tax Officer to make a best judgment assessment only where one of two conditions is satisfied: either no return is submitted by the assessee or the return submitted by him appears to the Sales Tax Officer to be incorrect or incomplete. It is only on the existence of one of these two conditions that the Sales Tax Officer gets the jurisdiction to make a best judgment assessment. The fulfilment of one of these two pre-requisites is, therefore, a condition precedent to the assumption of jurisdiction by the Sales Tax Officer to make assessment to the best of his judgment. Now, where no return has been submitted by the assessee, one of the two conditions necessary for the applicability of section 17, subsection (3) being satisfied, the Sales Tax Officer can, after making such inquiry as he may consider necessary and after taking into account all relevant materials gathered by him, proceed to make the best judgment assessment and in such a case, he would be bound under the proviso to give a reasonable opportunity of being heard to the assessee. But in the other case, where a return has been submitted by the assessee, the Sales Tax Officer would first have to satisfy himself that the return is incorrect or incomplete before he can proceed to make the best judgment assessment. The decision making process in such a case would really be in two stages, though the inquiry may be continuous and uninterrupted: the first stage would be the reaching of satisfaction by the Sales Tax Officer that the return is incorrect or incomplete and the second stage would be. the making of the best judgment assessment. The first part of the proviso which requires that before taking action under sub-section (3) of section 17, the assessee should be given a reasonable opportunity of being heard would obviously apply not only at the second stage but also at the first stage of the inquiry, because the best judgment assessment, which is the action under section 17, sub-section (3), follows upon the inquiry and the "reasonable opportunity of being heard" must extend to the whole of the inquiry, including both stages. The requirement of the first part of the proviso that the assessee should be given a "reasonable opportunity of being heard" before making best judgment assessment merely embodies the audi alterem partem rule and what is the content of this opportunity would depend, as pointed out above, to a great extent on the facts and circumstances of each case. The question debated before us was whether this opportunity of being heard granted under the first part of the proviso included an opportunity to cross-examine Haji Usmankutty and other wholesale dealers on the basis of whose books of accounts the Sales Tax Officer disbelieved the account of the assessee and came to the finding that the return submitted by the assessee were incorrect and incomplete. But it is not necessary for the purpose of the present appeals to decide this question since we find that in any event the assessee was entitled to this opportunity under the 'second part of the proviso.
The second part of the proviso lays down that where a return has been submitted, the assessee should be given a reasonable opportunity to prove the correctness or completeness of such return. This requirement obviously applies at the first stage of the enquiry before the Sales Tax Officer comes to the conclusion that the return submitted by the assessee is incorrect or incomplete so as to warrant the making of a best judgment assessment. The question is what is the content of this provision which imposes an obligation on the Sales Tax Officer to give and confers a corresponding right on the assessee to be afforded, a reasonable opportunity "to prove the correctness or completeness of such return". Now, obviously "to prove" means to establish the correctness or completeness of the return by any mode permissible under law. The usual mode recognised by law for proving a fact is by production of evidence and evidence includes oral evidence of witnesses. The opportunity to prove the correct- ness or completeness of the return would, therefore, necessarily carry with it the right to examine witnesses and that would include equally the right to Cross-examine witnesses examined by the Sales Tax Officer. Here, in the present case, the return filed by the assessee appeared to the Sales Tax Officer to be incorrect or incomplete because certain sales appearing in the books of Hazi Usmankutty and other wholesale dealers were not shown in the book's of account of the assessee. The Sales Tax Officer relied on the evi- dence furnished by the entries in the books of account of Hazi Usmankutty and other wholesale dealers for the purpose of coming to the conclusion that the return filed by the assessee was incorrect or incomplete. Placed in these circumstances, the assessee could prove the correctness and completeness of his return only by showing that the entries in the books of account of Hazi Usmankutty and other whole- sale dealers were false, bogus or manipulated and that the return submitted by the assessee should not be disbelieved on the basis of such entries, and this obviously, the assessee could not do, unless he was given an opportunity of cross-examining Hazi Usmankutty and other wholesale dealers with reference to their accounts. Since the evidentiary material procured from or produced by Hazi Usmankutty and other wholesale dealers was sought to be relied upon for showing that the return submitted by the assessee was incorrect and incomplete, the assessee was entitled to have Hazi Usmankutty and other wholesale dealers summoned as witnesses for cross-examination. It can hardly be disputed that cross-examination is one of the most efficacious methods of establishing truth and exposing falsehood. Here, it was not disputed on behalf of the Revenue that the assessee in both cases applied to the Sales Tax Officer for summoning Hazi Usmankutty and other wholesale dealers for cross-examina- tion, but his application was turned down by the Sales Tax Officer. This act of the Sales Tax Officer in refusing to summon Hazi Usmankutty and other wholesale dealers for cross-examination by the assessee clearly constituted in- fraction of the right conferred on the assessee by the second part of the proviso and that vitiated the orders of assessment made against the assessee..
The first part of the proviso to Section 17(3) of the Kerala Sales Tax Act, which fell for consideration in K.T. Shaduli Yousuff4, required the dealer to be given a reasonable opportunity of being heard. The second part of the proviso required the dealer to be given a reasonable opportunity to prove the correctness or completeness of the return. While the Supreme Court held that the requirement of being given a reasonable opportunity of being heard, in the first part of the proviso to Section 17(3), merely embodied the audi alterem partem rule and it was not necessary for them to examine whether the opportunity of cross-examination was part of the reasonable opportunity of being heard under the first part of the proviso, the assessee was entitled to an opportunity of cross-examination under the second part of the proviso.
Rule 25 of the A.P. VAT Rules, 2005 (hereinafter called the Rules) relates to assessment. Rule 25(5) stipulates that, where any return filed by the VAT dealer appears to the authority prescribed to be incorrect or incomplete that authority prescribed shall assess the tax payable to the best of his judgment on Form VAT 305 after affording a reasonable opportunity to the petitioner in Form VAT 305A. The said Rule requires the prescribed authority to serve upon the VAT dealer an order of the tax assessed, the penalty and interest due, on Form VAT 305. Form VAT 305-A is the notice of assessment of VAT whereunder the assessee is given an opportunity to file written objections, along with documentary evidence if any, within seven days of the notice, if they have any objection to the proposed assessment. Form VAT 305 is the assessment of VAT and this order is required to be passed after taking into consideration the objections filed by the assessee to the notice issued in Form VAT 305-A. Rule 25(5) of the Rules merely requires the prescribed authority to afford a reasonable opportunity to the dealer in Form Vat 305-A. Rule 25(5) of the Rules requires the prescribed authority to afford a reasonable opportunity to the dealer. The reasonable opportunity to be provided in terms of Rule 25(5) is akin to the first part of the proviso to Section 17(3) of the Kerala Sales Tax Act. A requirement, similar to the second part of the proviso to Section 17(3) of the Kerala Sales Tax Act whereunder the assessee is required to be given a reasonable opportunity to prove the correctness or completeness of the return, is absent in Rule 25(5) of the Rules. The contention that an opportunity of cross-examination is one of the facets of a reasonable opportunity of being heard, and that in all cases, where such a request is made, such an opportunity should be automatically provided does not, therefore, merit acceptance.
In M/s. Machilipatnam Consumer Cooperative Society Ltd.5, the appellant was a cooperative society carrying on business in rice and other consumable goods. It purchased rice from certain dealers. The assessing authority, on inspection and investigation, came to the conclusion that the said dealers were not genuine, and the assessee had manoeuvered to obtain certain bills to escape liability to tax. The assessee placed information before the CTO by means of challans etc. to prove that the aforesaid persons were genuine. The CTO refused to believe the evidence and imposed penalty. Against the order of penalty, the appellant preferred an appeal and the appellate authority set aside the order of penalty. Thereafter the Commissioner (CT), exercising the powers of revision under Section 20 of the Act, cancelled the order of the Appellate Deputy Commissioner and restored the order of CTO levying penalty. In his revisional order the Commissioner held that enquiries were made by the Department and a statement was recorded from the proprietor of the dealer who denied the genuineness of the sales, and from the proprietor of another dealer which disclosed that only paper bills were issued without sales. Before the High Court, the appellants contended that, in view of the evidence adduced by them regarding first sales suffering tax, they should have been given an opportunity to meet the information in possession of the Department; and to establish that the statements, allegedly recorded by the department, were not true. It is in this context that the Division Bench of this Court held:
The revisionary powers of the Commissioner under section 20 were pressed into service in this case and the order of the Appellate Deputy Commissioner was revised without following the elementary course of justice to ensure that the assessee is not called upon to suffer a consequence on the basis of information gathered behind his back. The least that the Commercial Tax Officer should have done in this case was to confront the assessee with the statements recorded from the persons on whom reliance was placed, tender those persons for cross-examination of the assessee and based on such evidence arrive at a proper conclusion. Instead as a revisionary authority he straightaway came to the conclusion that there was default on the part of the assessee in proving the matter under consideration. We are unable to appreciate the action taken by the Commissioner in this case.
(emphasis supplied) A Tax officer is not fettered by technical rules of evidence and pleadings. He is entitled to act on material which may not be accepted as evidence in a court of law. That does not, however, absolve him from the obligation to comply with principles of natural justice. (K.T. Shaduli Yusuff4; Dhakeswari Cotton Mills Ltd. v. Commissioner of Income Tax, West Bengal ). Rules of natural justice are not statutory rules. They are not cast in a rigid mould nor can they be put in a legal strait-jacket. They are not immutable but flexible. These rules can be adapted and modified by statutes and statutory rules. (Union of India v. Tulsiram Patel ). The rules of natural justice are not a constant: they are not absolute and rigid rules having universal application. There are no rules which have universal application to every kind of inquiry and every kind of tribunal. The requirement of natural justice must depend on the circumstances of the case, the nature of the inquiry, the rules under which the tribunal is acting, the subject matter that is being dealt with, and so forth. But whatever standard is adopted, one essential is that the person concerned should have a reasonable opportunity of presenting his case. (K.T. Shaduli Yusuff4; Suresh Koshy George v. The University of Kerala ; Russel v. Duke of Norfolk ). Rules of natural justice are not embodied rules. What particular rule of natural justice should apply to a given case must depend to a great extent on the facts and circumstances of that case and the framework of the law. Whenever a complaint is made before a Court that some principle of natural justice has been contravened, the Court has to decide whether observance of that rule was necessary for a just decision on the facts of the case. (Maneka Gandhi v. Union of India ; Suresh Koshy George9; D.F.O., South Kheri v. Ram Sanehi Singh ). It should not proceed as if there are inflexible rules of natural justice of universal application. Each case depends on its own circumstances. Rules of natural justice vary with the rules prescribed by the legislature. (M/s. Chingleput Bottlers v. M/s. Majestic Bottling Co. ).
One of the rules which constitutes a part of the principles of natural justice is the rule of audi alterem partem which requires that no man should be condemned unheard. This rule which requires an opportunity to be heard to be given to a person likely to be affected by a decision is also, like the genus of which it is a species, not an inflexible rule having a fixed connotation. It has a variable content depending on the nature of the inquiry, the framework of the law under which it is held, the constitution of the authority holding the inquiry, the nature and character of the rights affected and the consequences flowing from the decision. It is, therefore, not possible to say that, in every case, the rule of audi alterem partem requires that a particular specified procedure should be followed. It may be that in a given case the rule of audi alterem partem may import a requirement that witnesses whose statements are sought to be relied upon by the authority holding the inquiry should be permitted to be cross-examined by the party affected while in some other case it may not. The procedure required to be adopted for giving an opportunity to a person to be heard must necessarily depend on the facts and circumstances of each case. (K.T. Shaduli Yusuff4).
The statements of persons recorded, and the information gathered, behind the back of an assessee cannot be used against him unless copies thereof are made available to him and, if such a request is made and the circumstances of the case so require, such persons are summoned for cross-examination. The show cause notice, in the present case, refers to various reports received from different commercial tax officers. It is not even the petitioners case that they should have been afforded an opportunity to cross- examine the commercial tax officers on whose reports reliance was placed by the assessing authority. On the other hand, in their reply to the show cause notice, the petitioner specifically requested the assessing authority to issue summons to the dealers, from whom they claimed to have purchase goods, for cross-examination to find out the truth whether they had made physical delivery or not. During the course of hearing we asked Sri V. Bhaskar Reddy, Learned Counsel appearing on behalf of the petitioner, whether the petitioner had sought to cross-examine the different commercial tax officers whose reports were relied upon by the assessing authority. Learned Counsel, while fairly stating that the petitioner had not so requested, would, however, contend that the selling dealers ought to have made available for cross-examination by the petitioners.
The show cause notice dated 06.03.2014 refers to the reports received by the first respondent from various commercial tax officers. With regards Sri Lakshmi Oil Traders, Jaggaiahpet, Krishna District, the CTO, Nandigama circle, in his report dated 30.04.2012, informed that he had visited the business premises mentioned in the registration report; no business activity was taking place therein; he had conducted a panchanama; the neighbours had stated that they had never seen any business activity and no business was being conducted by the proprietor Sri Jammula Gowri Shankar except for a painting board in the said premises. With respect to M/s.Sai Kendriya Trading company, Nellore, the CTO Nellore III, in his report dated 04.07.2012, informed that, on verification of the office record, it wa found that the dealer had carried on business upto June, 2011, and had left the place of business thereafter without intimation; and it was clear that the dealer had made sales of bills only, and had neither reported the turnover nor had paid tax to the Government. With respect to M/s.Kaveri Oil Trading Company, Naidupet, the CTO, Gudur circle, in his report dated 07.07.2012, informed that, when they visited the place of business and on enquiry with the neighbours regarding the firm/proprietor of the firm or any authorized person, it was revealed that the whereabouts of the proprietor was not known. With regards M/s.New Sreenivasa Traders, Piler, the CTO, Madanapalle, by his report dated 16.02.2013, informed that the dealer had not reported the turnover for the period from February, 2009 till date. With regards Sri Lakshmi Venkateswara Traders, Nellore, the CTO, Nellore, in his report dated 25.06.2013, informed that, on visit of the dealers premises, the proprietor of the firm was nowhere to be found; and, on enquiry, the neighbours had informed that his whereabouts were not known. It is evident, therefore, that the aforesaid selling dealers were neither carrying on business nor were their whereabouts known. Failure of the first respondent to summon dealers, (who were not even carrying on business in the said premises and whose whereabouts were not known), for being subjected to cross-examination by the petitioner cannot be said to be in violation of principles of natural justice. As the said dealers were not even available for examination by the concerned commercial tax officers, the question of making them available for cross-examination by the petitioner does not arise.
III. WOULD PRODUCTION OF A TAX INVOICE BY ITSELF, AND WITHOUT ANYTHING MORE, REQUIRE A DEALER TO BE EXTENDED THE BENEFIT OF INPUT TAX CREDIT? IS THE ASSESSING AUTHORITY PROHIBITED FROM ENQUIRING WHETHER OR NOT THE SELLING DEALER HAD SOLD THE GOODS FOR WHICH INPUT TAX CREDIT WAS BEING CLAIMED?
Sri V. Bhaskar Reddy, Learned Counsel appearing for the petitioner, would submit that the eight dealers, from whom the petitioner had purchased edible oils, are real and existing registered VAT dealers on the rolls of the commercial tax department; these eight dealers issued tax invoices showing sale of edible oils to the petitioner, and collection of tax from them; they had also issued way bills obtained from the commercial tax department; payment, for the said purchases, was made by the petitioner through cheques and RTGS in the name of the selling dealers; these eight selling dealers had not denied the sales made by them to the petitioner; non-reporting of sales, and non-payment of tax by the selling dealers, cannot be a ground for shifting the burden of tax on to the petitioner who is the second seller in the State; for claiming input tax credit, the second seller is only required to produce tax invoices issued by the first seller as per Section 13(1) of the Act; and where the first seller, a real and existing registered dealer, issues tax invoices and has not denied sale of edible oil to the petitioner, the department cannot treat such transactions as bogus transactions. Learned Counsel would rely on B. Narasaiah & Co. v. State of A.P. (AP) and Harsha Jewellers v. CTO, Punjagutta Circle, Hyderabad , in this regard.
With regards the petitioners claim that their sellers were duly registered and had filed monthly returns, which were produced in support of their claim of Input Tax Credit, and they had discharged the burden of proof for claiming ITC, the assessing authority, in the assessment order dated 29.04.2014, held that the invoice and way bills were not signed and issued by the registered VAT dealer, but by third parties; some of the tax invoices/waybills, of different VAT dealers, were signed and issued by the same person which could not happen in normal business conditions; they had no validity and sanctity and were liable to be rejected; the tax invoices produced by the petitioner, in support of their claim that the purchases effected by them were eligible for input tax credit, were all false invoices; hence input tax credit was proposed to be restricted; and the proposal in the show cause notice was being confirmed.
In The State of Andhra Pradesh v. Thungabhadra Industries Ltd. a Division Bench of this Court held that the twin tests to be applied, to determine whether the assessee is entitled to exemption of turnover from tax, were (1) the first seller should be a real and identifiable dealer within the State and (2) mere non- payment of tax by the first seller within the State does not shift the liability to pay tax on the second seller; in disposing of the matter, the Tribunal had rightly applied the said tests and, on the facts and circumstances of the case after verifying the records, granted relief in respect of the purchases made by the assessee from real and identifiable sellers within the State whose registration number was mentioned in the bills; in respect of some other dealers whose registration numbers were mentioned, the Deputy Commissioner had disallowed the exemption for want of sufficient record; on verification by the Tribunal they were found to be real and identifiable dealers and, therefore, the Tribunal had granted exemption; in respect of some others, even the Tribunal came to the conclusion that, although certain registration numbers of the dealers were mentioned in the bills, they were not real and identifiable dealers within the State and disallowed the exemption claimed by the assessee; in so far as the assessee's claim was allowed by the Tribunal, the department had filed T.R.C, and in so far as the assessee's claim was disallowed the assessee had filed T.R.C; and both the T.R.Cs. must be dismissed.
In B. Narasaiah & Co.14 a Division Bench of this Court held:-
.. This Court in State of A.P. v. Thungabhadra Industries Ltd. dealing with a claim of registered dealer, who claimed as a second seller of groundnut oil, taxable at the first point of sale within the State of Andhra Pradesh, under the provisions of the Act, laid down two principles to allow the exemption. They are (1) that the first seller should be a real and identifiable dealer within the State ; and (2) that mere non-payment of tax by the first seller within the State does not shift the liability to pay tax on the second seller. In the light of these principles laid down by this Court, with which we are in respectable agreement, when we look at the facts of this case, it cannot be said that the petitioner failed to establish that he made the purchase from a real and identifiable dealer within the State. There is no controversy that Bantu Chinnaiah & Co., Nizamabad, is a registered dealer under the provisions of the Act and its identity is also not in dispute. As rightly pointed out by the learned Special Government Pleader for Taxes, it is true that there is no satisfactory evidence placed before the Tribunal or before us to show that the vendor of the petitioner filed returns including the sale of turmeric in the turnover. However, the department assessed the tax on the gross turnover of Rs. 8,85,500 and determined the tax of Rs. 63,313.25 paise. The reason that the vendor of the petitioner did not pay the assessed tax cannot be a valid ground to disallow the claim of the petitioner. We say this because under the statute, if the vendor is alone is liable to be taxed and if he fails to discharge the said liability, it is always open for the authorities under the Act to proceed against him and recover the same by the mode known to law. But that circumstance can never be a valid and tenable ground to disallow the exemption claimed by the petitioner. .
(emphasis supplied) In Harsha Jewellers, Hyderabad15, a Division Bench of this Court, relying on Thungabhadra Industries Ltd.16; and Sri Ramanjaneya Groundnut Factory v. CTO, Kadiri , held that the principles laid down therein was afortiori applicable since Section 13(1) of the Act entitled input-tax credit to the VAT dealer for the tax charged in respect of all purchases of taxable goods made by that dealer during the tax period; failure on the part of M/s. Karat 24 (selling dealer) to file returns or remit the tax component of the sales made to the petitioner could not per se be a ground to deny input-tax credit; the impugned order of assessment did not assert that the invoices produced by the petitioner were fraudulent or had not been issued by M/s. Karat 24 or that the purchaser did not in fact obtain the invoices from the registered dealer; and it was also not disputed, and in fact was conceded in the order of assessment, that the registration of M/s. Karat 24 was cancelled on February 28, 2010, i.e., after the transaction in question occurred, whereunder the petitioner purchased bullion from the registered dealer and had produced the vouchers.
Section 13 of the Act relates to credit for input tax and under sub-section (1) thereof, subject to the conditions if any prescribed, an input tax credit shall be allowed to the VAT dealer for the tax charged in respect of all purchases of taxable goods, made by that dealer during the tax period, if such goods are used in the business of the VAT dealer. Section 13(3) enables a VAT dealer to claim (a) input tax credit, under sub-section (1), on the date the goods were received by him provided he was in possession of the tax invoice. Section 14 relates to tax invoices and, thereunder, a VAT dealer, making a sale liable to tax to another VAT dealer, shall issue, at the time of sale, the tax invoice in such form as may be prescribed. Section 2(35) of the Act defines tax invoice to mean a sales invoice containing such details as may be prescribed, and issued by a VAT dealer to another VAT dealer. Section 2(43) defines VAT dealer to mean a dealer who is registered for VAT.
Rule 26 of the Rules relates to invoices and, under sub-rule (1) thereof, the invoices, bills or cash memoranda issued by a dealer shall be serially numbered for each year; and, in the case of the dealer, each of such invoice issued shall contain the particulars referred to in the said Rule. Among the particulars which a tax invoice is required to contain are (d) the date on which the invoice is issued; (e) the description of the goods supplied (f) the quantity or volume of the goods sold; (g) the basic price of the goods, the rate of tax, the amount of the tax, and the total sale price which is the sum of the basic price and tax amount. Rule 27 relates to tax invoice and, under sub-rule (1) thereof, a tax invoice, specified in Section 14, is required to contain the details specified in the said Rule. Among the details referred in Rule 27(1) are (d) the serial number of the invoice and the date on which the invoice is issued; (e) the date of delivery of the goods; (f) the description of the goods supplied; (g) the quantity or volume of the goods sold; (h) the rate of tax for each category of goods; (i) the basic price of goods sold, the rate of tax, amount of tax and the total sale price which is the sum of the basic price and the tax amount. Rule 27(4) stipulates that input tax credit shall be claimed only against an original tax invoice. Section 55 of the AP VAT Act relates to penalty for issue of a tax invoice and for the use of false tax invoices. Under Section 55(2) any VAT dealer, who issues a false tax invoice or receives and uses a tax invoice, knowing it to be false, shall be liable to pay a penalty of 200% of the tax shown on the false invoice. The case of the Revenue is that the petitioner had received and used tax invoices knowing it to be false.
The entitlement of a VAT dealer to claim input tax under Section 13(1) of the Act, in view of Section 13(3) thereof, is only if he is in possession of a tax invoice. A valid tax invoice, in view of Section 2(35) of the Act, (1) must contain the details prescribed by Rules; (2) should have been issued by a VAT dealer to another VAT dealer. In view of the requirement of Section 14 of the Act, it is only in cases where there is a sale of goods, liable to tax under the Act, by one VAT dealer to another is the former required to issue a tax invoice to the latter. Among the details, required to be furnished in the tax invoice in terms of Rule 27(1), are the description of the goods supplied and the quantity or volume of the goods sold. The mere fact that the dealer is in possession of the tax invoice does not preclude the assessing authority from ascertaining whether the selling dealer had, in fact, sold goods to the purchasing dealer; whether there was physical delivery of such goods; whether the tax invoice was issued by a registered VAT dealer; whether or not the transactions of sale are genuine, etc. If, on enquiry, the assessing authority is satisfied, on the basis of the material evidence on record, that there has been no sale of goods, or the tax invoice was not issued by the VAT dealer, or there was no physical delivery of goods, or inter-state purchases had been suppressed and bogus tax invoices raised as if the said goods had been purchased by the dealer within the State, he can deny the assessee the benefit of input tax credit.
The benefit of input tax credit is given to avoid the cascading effect of levy of sales tax at multiple points of sale. A dealer, carrying on business in the purchase and sale of goods, is entitled to claim deduction of the tax paid by him, (while purchasing goods from a VAT dealer within the State), from the tax which he collects from the dealer to whom he has sold the goods; and to pay only the differential tax (the difference between output tax and the input tax). To the extent input tax credit is fraudulently claimed, there is a wilful evasion of tax payable by the assessee, as he has only paid the differential tax, and not the tax collected by him on the sale of goods to another.
While the purchasing VAT dealer would not be entitled to claim input tax credit without obtaining a tax invoice from the selling VAT dealer, mere production of a tax invoice would not disable the assessing authority from enquiring whether the sale of goods, referred to in the said tax invoice, is genuine or bogus or whether the said tax invoice has been issued by a registered VAT dealer. While the eight dealers from whom the petitioner claimed to have purchased edible oils were registered VAT dealers, they were not carrying on business; some of them had not even registered themselves as carrying on business in edible oils; the tax invoices in their name were issued by third parties; and neither had they disclosed these sales in their returns nor had they paid tax thereon. While non-payment of tax by a genuine registered VAT dealer may not disentitle the purchasing dealer from claiming input tax credit, the assessing authority would be justified in denying the assessee the benefit of input tax credit where the entire transaction is a sham and goods have neither been transported nor delivered by the selling dealer to the purchasing dealer.
IV. JUDICIAL REVIEW OF AN ASSESSMENT ORDER ADEQUACY OR SUFFICIENCY OF THE EVIDENCE, BASED ON WHICH THE ASSESSING AUTHORITY RECORDED HIS FINDINGS, CANNOT BE GONE INTO:
Sri V. Bhaskar Reddy, Learned Counsel appearing on behalf of the petitioner, would submit that absence of the selling dealers at the business premises, at the time of visit by the officials of the Commercial Tax Department several years after the transactions, cannot a ground for shifting the tax burden on to the petitioner; the statement of the neighbours of some of the selling dealers, that no business activity was being carried on by them, did not entitle the first respondent to shift the tax burden on to the petitioner; the contention of the first respondent that the petitioner had made payment to the vendors at Proddatur, instead of at the places where they were situated, is not a ground for rejecting the transactions; it is only on the instructions of the vendors that the petitioner had made payment by RTGS to the vendors bank account at Proddatur; the fact that the vendors of the petitioner had purchased edible oils from outside the State, and had sold the same to the petitioner using the same oil tanker through which it came from outside the State for delivery to the petitioner, did not make the sales by their vendors bogus transactions; the vendors of the petitioner, after receiving the goods and as they had already received orders from the petitioner, could have instructed the same vehicle to deliver the goods to the petitioner instead of unloading the same and re-loading it into another vehicle; in fact, after receiving the same, sometimes the petitioner also instructed the same vehicle to deliver edible oil to their customers, some of whom are government bodies such as A.P. Cooperative Oil Seeds Growers Federation Ltd; assessment was made on mere assumptions, presumptions and conjectures without even an iota of evidence; the selling dealers are in existence; the petitioner had produced tax invoices; payment was made in its entirety, albeit in a different place where the vendor has a bank account; the petitioner discharged the burden of showing that they had received the goods and had made payment to their suppliers through bank account; and, as they had also produced the tax invoices, nothing more was required to be done at their end to claim the benefit of input tax credit.
It must be borne in mind that the petitioner has invoked the jurisdiction of this Court, under Article 226 of the Constitution of India, against the assessment order passed by the first respondent without availing the statutory remedy of appeal. The tax authorities, entrusted with the power to make assessment of tax, discharge quasi- judicial functions, (K.T. Shaduli Yusuff4), and their orders are amenable to judicial review under Article 226 of the Constitution. While a writ of certiorari is the appropriate remedy when the validity of a quasi-judicial order is under challenge, the petitioner has sought a writ of mandamus from this Court. It is necessary for us, therefore, to examine the scope of judicial review, of an assessment order, in writ proceedings.
The Writs, referred to in Article 226, are intended to enable the High Court to issue them in grave cases where the subordinate tribunals or bodies or officers act wholly without jurisdiction, or in excess of it, or in violation of principles of natural justice, or refuse to exercise a jurisdiction vested in them, or there is an error apparent on the face of the record and such act, omission, error or excess has resulted in manifest injustice. (Veerappa Pillai v. Raman and Raman Ltd ; T.C. Basappa v. T. Nagappa ).
"Mandamus" means a command issued to direct any person, corporation, inferior court or Government, requiring him or them to do some particular thing therein specified which appertains to his or their office and is in the nature of a public duty. A mandamus would lie to any person who is under a duty imposed by a statute or by the common law to do a particular act. (Director of Settlements, A.P. v. M.R. Apparao ). A writ of mandamus can be granted only in a case where there is a statutory duty imposed upon the officer concerned and there is a failure on the part of that officer to discharge the statutory obligation. The chief function of a writ of mandamus is to compel the performance of public duties prescribed by statute and to keep subordinate tribunals and officers exercising public functions within the limits of their jurisdiction. It follows, therefore, that in order that mandamus may issue to compel the authorities to do something, it must be shown that there is a statute which imposes a legal duty and the aggrieved party has a legal right under the statute to enforce its performance. (Tirumala Tirupati Devasthanms v. K. Jotheeswara Pillai ; The Bihar Eastern Gangetic Fishermen Cooperative Society Ltd. v. Sipahi Singh ; Oriental Bank of Commerce v. Sunder Lal Jain ; Lekhraj Satramdas Lalvani v. Deputy Custodian-cum-Managing Officer ; Dr. Rai Shivendra Bahadur v. The Governing Body of the Nalanda College and Dr. Umakant Saran v. State of Bihar ). The duty that may be enjoined by a mandamus may be one imposed by the Constitution, a statute, common law or by rules or orders having the force of law. (M.R. Apparao20; Kalyan Singh v. State of U.P. ). In order that a writ of mandamus may be issued, the party asking for the writ must have a legal right to compel the performance of some statutory duty cast upon the authorities. (Oriental Bank of Commerce23). It is not even the petitioners case that the first respondent has failed to perform a statutory duty cast upon him or that the petitioners legal right, except for violation of principles of natural justice, has been adversely affected. The petitioners contention that the first respondent has exceeded his jurisdiction in assessing them to tax for the years 2008-09 and 2009-10, and failure to summon the selling dealers for cross-examination by the petitioner is in violation of principles of natural justice, have been dealt with earlier. The petitioner is, therefore, not entitled for a writ of mandamus from this Court.
Even for a writ of certiorari to be issued, the tests prescribed therefor must be satisfied. Certiorari, under Article 226 of the Constitution, is issued for correcting gross errors of jurisdiction, i.e., when a subordinate court is found to have acted (i) without jurisdiction - by assuming jurisdiction where there exists none, or
(ii) in excess of its jurisdiction by overstepping or crossing the limits of jurisdiction, or (iii) acting in flagrant disregard of law or the rules of procedure or acting in violation of principles of natural justice where there is no procedure specified, and thereby occasioning failure of justice. (Surya Dev Rai v. Ram Chander Rai ). The supervision of the Superior Court, exercised through writs of certiorari, is on two points. One is the area of inferior jurisdiction and the qualifications and conditions of its exercise.
The other is the observance of law in the course of its exercise. These two heads normally cover all the grounds on which a writ of certiorari can be sought. In granting a writ of certiorari the superior Court does not exercise the powers of an appellate Tribunal. It does not review or reweigh the evidence upon which the determination of the inferior Tribunal purports to be based. It demolishes the order which it considers to be without jurisdiction or palpably erroneous but does not substitute its own views for those of the inferior Tribunal. (T.C. Basappa19). The court, issuing a writ of certiorari, acts in exercise of a supervisory and not appellate jurisdiction. One consequence of this is that the court will not review findings of fact reached by the inferior court or tribunal, even if they be erroneous. An error in the decision or determination itself may also be amenable to a writ of certiorari if it is a manifest error apparent on the face of the proceedings, e.g., when it is based on clear ignorance or disregard of the provisions of law. In other words, it is a patent error which can be corrected by certiorari but not a mere wrong decision. (Surya Dev Rai28).
In the exercise of the certiorari jurisdiction, the High Court proceeds on the assumption that a Court which has jurisdiction over a subject- matter has the jurisdiction to decide wrongly as well as rightly. The High Court would not therefore, for the purpose of certiorari, re-appreciate or evaluate the evidence and substitute its own findings in place of those arrived at by the inferior court/tribunal. (Surya Dev Rai28). It is a patent error which can be corrected by certiorari and not a mere wrong decision. Certiorari will not issue as a cloak of an appeal in disguise. It does not lie in order to bring up an order or decision for re-hearing of the issue raised in the proceedings. It exists to correct errors of law when revealed on the face of an order or decision or irregularity or absence of or excess of jurisdiction when shown. (T.C. Basappa19; Rex v. Northumberland Compensation Appellate Tribunal ; Hari Vishnu v. Ahmad Ishaque ).
However extensive the jurisdiction may be, it is not so wide or large as to enable the High Court to convert itself into a Court of appeal and examine for itself the correctness of the decision impugned and decide what is the proper view to be taken or the order to be made. (T.C. Basappa19; Veerappa Pillai18). Findings of fact reached by the inferior Court or Tribunal, as a result of appreciation of evidence, cannot be reopened or questioned in writ proceedings. An error of law which is apparent on the face of the record can be corrected by a writ, but not an error of fact, however grave it may appear to be. In regard to a finding of fact recorded by the Tribunal, a writ of certiorari can be issued if it is shown that, in recording the said finding, the Tribunal had erroneously refused to admit admissible and material evidence, or had erroneously admitted inadmissible evidence which has influenced the impugned finding. Similarly, if a finding of fact is based on no evidence, that would be regarded as an error of law which can be corrected by a writ of certiorari. A finding of fact recorded by the Tribunal cannot be challenged in certiorari proceedings on the ground that the relevant and material evidence adduced before the Tribunal was insufficient or inadequate to sustain the impugned finding. The adequacy or sufficiency of evidence led on a point, and the inference of fact to be drawn from the said finding, are within the exclusive jurisdiction of the Tribunal, and the said points cannot be agitated before a Writ Court. It is within these limits that the jurisdiction conferred under Article 226, to issue a writ of certiorari, can be legitimately exercised. To be amenable to correction in certiorari jurisdiction, the error committed by the authority, on whose judgment the High Court was exercising jurisdiction, should be an error which is self-evident. If it is reasonably possible to form two opinions on the same material, the finding arrived at, one way or the other, cannot be called a patent error. (Syed Yakoob v. K.S. Radhakrishnan ; Ranjeet Singh v. Ravi Prakash ).
The purpose of a Writ of certiorari is only to determine, on an examination of the record, whether the inferior tribunal has exceeded its jurisdiction or has not proceeded in accordance with the essential requirements of the law which it was meant to administer. Mere formal or technical errors, even though of law, will not be sufficient to attract this extra-ordinary jurisdiction. Where the errors cannot be said to be errors of law apparent on the face of the record, but they are merely errors in appreciation of documentary evidence or affidavits, errors in drawing inferences or omission to draw inference or in other words errors which a court, sitting as a court of appeal, could only have examined and, if necessary, corrected and the appellate authority under a statute in question has unlimited jurisdiction to examine and appreciate the evidence in the exercise of its appellate jurisdiction and it has not been shown that in exercising its powers the appellate authority disregarded any mandatory provisions of the law, there is no case for the exercise of the jurisdiction under Article 226. (Surya Dev Rai28; Nagendra Nath Bora. v. Commissioner of Hills Division and Appeals, Assam ).
In reply to the show cause notice dated 06.03.2014, the petitioner submitted their objections by their letter dated 24.04.2014. The assessment order records that a personal hearing was provided on 25.04.2014 wherein the petitioner had reiterated the same grounds as were mentioned by them in their letter dated 24.04.2014; and they did not produce any material for the assessing authority to re-consider the findings in the show cause notice. In the assessment order dated 29.04.2014, the first respondent considered the objections of the petitioner that the first respondent had failed to establish the element of fraud or collusion between the selling dealers and the buying dealers, and held that the element of fraud or collusion was clearly established in this case as the dealer had produced invoices, which were found to have been issued by persons other than VAT dealers, based on which input tax was claimed; the cross verification reports, received from the jurisdictional assessing authorities, showed that none of the selling dealers were existing at the given place of business nor were those transactions accounted for in their books; as a purchaser, the petitioner cannot be unaware of these facts more so as the transactions were in lakhs of rupees; in view of the law declared by the Punjab and Haryana High Court in M/s. Gherulal Balchand v. State of Haryana , input tax credit can be denied in the case of fraud; where the supplier of edible oil is found to be a fictitious dealer, trading in bills and not in goods, the purchasing dealer is liable to be considered as the first seller liable to tax.
With regards statement Nos.1 and 2 in the show cause notice, the petitioner had objected thereto contending that the sellers may have purchased edible oil, and sold them to the petitioner as per the tax invoice and way bills issued by them; the sellers had really and physically delivered edible oils to their firm, and the same were sold by the petitioner to dealers in the State; and the assessing authority had failed to establish where the petitioner had obtained edible oils, if the version of the CTO was accepted as true and correct. In dealing with the said objection, the first respondent held that the vehicles, mentioned in Statement No.1, had originated from outside the State and were destined to go outside the State, duly passing through the State of A.P; as per VATIS reports these vehicles had exited from the State of Andhra Pradesh duly surrendering the transit passes; it was therefore not possible for dealers in A.P. to sell the said goods to the petitioner, and for the petitioner in turn to resell the same to local dealers, that too within the transit period; this itself showed that clandestine transactions had taken place; and the petitioners had also not furnished invoice-wise details of the sellers from whom they had purchased the goods.
The case of the assessing authority is that the petitioner had purchased edible oils from outside the State and had sold them within the State. Though they were the first sellers in the State, they had suppressed the inter-state purchases in their books of accounts, secured bogus tax invoices as if they had purchased edible oil from registered VAT dealers within the State, claimed input tax credit on such bogus purchases, reduced the output tax which they would have otherwise been liable to pay, and had thereby wilfully evaded payment of tax liable to be paid by them to the Government.
In order to establish that the petitioner had purchased edible oils from outside the state, the assessing authority had prepared two statements. The first statement was of information regarding vehicles from outside the State which had passed through the State of A.P. to their eventual destination in another State using transit passes. Section 47 of the AP VAT Act relates to transit passes and, thereunder, where a vehicle carrying on goods coming from any place outside the State and bound for any other place outside the State passes through the State, the driver or other person-in-charge of such vehicle shall obtain, in the prescribed manner, a transit pass from the officer-in-charge of the first check post or barrier after his entry into the State, and deliver it to the officer-in-charge of the last check-post or barrier before his exit from the State, failing which it shall be presumed that the goods carried thereby have been sold within the State by the owner or person-in-charge of the vehicle and, accordingly, the tax shall be assessed and penalty, if any, shall be levied in accordance with the provisions of the Act. Under the proviso thereto where the goods carried by such vehicle, after their entry into the State, is transported outside the State by any other vehicle or conveyance, the burden of proving that the goods have actually moved out of the State shall be on the owner or person-in-charge of the vehicle.
Rule 58 of the Rules relates to transit movement. Under sub-rule (1) thereof, in order to obtain a transit pass under Section 47, the driver or the person in charge of the goods vehicle shall submit such documents and furnish such information which may be relevant or necessary to the officer in charge of the check post or barrier after his entry into the State. Rule 58(2) requires the officer-in-charge of the first check post, after examining the documents and after making such enquiries as he deems necessary, to make out a Transit Pass in Form 616 in triplicate, and issue the original and duplicate thereof duly signed by him to the driver or person-charge of the vehicle after obtaining his signature at the end of the declaration provided in the said form. Rule 58(3) requires the driver, or the person-in-charge of the goods vehicle, to carry the original and duplicate copies of the transit pass, and to tender the original copy to the officer-in-charge of the last check post or barrier before his exit from the State. Rule 58(8) requires the original copy of the transit pass, so received by the officer-in-charge of the last check post or barrier, to be sent by him, by Registered Post, to the officer-in-charge of the first check post or barrier within ten days from the date of receipt from the driver or the other person-in-charge of the goods vehicle. Rule 58(9) stipulates that, in case the original copy of the transit pass is not received back within thirty days of its issue, the officer-in- charge of the first check post shall send a report to the Commercial Tax Officer prescribed who shall assess the owner of the goods vehicle as specified in Section 47 of the Act.
A transit pass is issued at the entry check post of a State, for vehicles which pass from outside the State to another outside State, without delivering goods within the State. Issuance of a transit pass indicates that the vehicle is only passing through the State and the goods contained in the said vehicle are not to be sold or delivered within the State. While Statements 1 and 2 of the show-cause notice contains several entries, only four entries have been taken therefrom to show that the very same vehicles, which had obtained transit passes, were used by the petitioner to deliver goods to other dealers within the State of Andhra Pradesh i.e., vehicles which were supposed to be in transit were the vehicles which carried goods sold by the petitioner to a VAT dealer within the State of A.P. Statement No.1 Transit Pass details Sl.
No. Vehicle No. TP No. Date of TP issued Entry Check Post Exit Check Post Amount Rs.
1. GJ3Y8862 149909336933 25.03.2009 Chiragpalli Madanoor 842333
2. GJ6Y6355 1497093404521 26.03.2009 Madanoor Madanoor 837002
3. GJ6Y7395 1497093234961 28.02.2009 Madanoor BV Palem 797040
4. GJ12V7635 1497093234979 28.02.2009 Madanoor BV Palem 807840 Statement No.2 Sales made by the assessee using the same Vehicles Sl.
No. Vehicle No. Invoice No/Date Way bill No. Value (Rs) Name of the Consignee
1. GJ3Y8862 1787/25.03.2009 1578257 892135 Damodara Oil Mill, Kurnool
2. GJ6Y6355 1792/26.03.2009 1578260 884950 Damodara Oil Mill, Kurnool
3. GJ6Y7395 1656/28.02.2009 9827715 828893 AP Co-op Oil Seeds Growers
4. GJ12V7635 1657/28.02.2009 9827711 807840 Damodara Oil Mill, Kurnool The first entry in both the afore extracted statements is a vehicle which obtained transit pass on 25.03.2009 at Chiragpalli check post. The said vehicle exited from Madanoor check post. On the very same day ie 25.03.2009, the said vehicle was used by the petitioner to sell edible oil to Damodara Oil Mill, Kurnool vide Invoice No.1787 dated 25.03.2009 and Way Bill No.1578257. The second vehicle, which obtained the transit pass at the entry check post at Madanoor on 26.03.2009 and exited from the same Madanoor check post, is shown to have been used on the same day i.e 26.03.2009 for sale of edible oil by the petitioner, again to Damodara Oil Mill, Kurnool, vide Invoice No.1792 dated 26.03.2009 and Way Bill No.1578260. The third vehicle obtained transit pass at Madanoor entry check post on 28.02.2009 and exited from B.V.Palem check post. The very same vehicle is shown to have been used by the petitioner on the same day i.e., 28.02.2009 for sale of edible oil to A.P. Cooperative Oil Seeds Growers Federation vide Invoice No.1656 dated 28.02.2009 and Way Bill No.9827715. The fourth vehicle obtained transit pass on 28.02.2009 at Madanoor check post and exited from B.V.Palem check post. This vehicle was shown to have been used by the petitioner on the same day i.e., 28.02.2009 for sale of edible oils to Damodara Oil Mill, Kurnool vide Invoice No.1657 dated 28.02.2009 and Way Bill No.9827711. Based on Statements I & II, the assessing authority concluded that the petitioner had purchased edible oils from outside the State and had sold them to dealers within the State; they were not entitled to claim input tax credit for the sales made by them (being the first seller in the State); and they had suppressed the inter-State purchases.
The genuineness of the sale transactions of the eight dealers, from whom the petitioner claimed to have purchased edible oils and based thereon had claimed input tax credit, were also verified by the assessing authority. The assessing authority found that some of these dealers were not even carrying on business, and the whereabouts of their proprietors were not known; the tax invoices produced by the petitioner showed that the goods had not been purchased directly from M/s. Sai Kendriya Trading Company, Nellore, but through their agents at Proddatur i.e., Sri Sai Trading Company, Proddatur, and M/s.Sadguru Trading Company, Proddatur and were signed by one Sri K.L.N.Reddy. Sri K.L.N.Reddy is shown to have signed tax invoices of Sri Hari Traders, Tirupati also. The tax invoices of Sri Lakshmi Venkateswara Traders, Nellore, M/s. Kaveri Oil Trading Company, Naidupet, M/s. New Srinivasa Traders, Piler, and Sri Lakshmi Srinivasa Traders, Cumbum, were signed by one Sri Y. Rajendra Prasad; the petitioner had not purchased goods directly from the said dealers but through the agents ie M/s.Sadguru Trading Company and Sri Sai Trading Company, Proddatur; and the tax invoices did not show that any of these dealers had a branch at Proddatur necessitating the petitioner having to procure edible oils through their agents at Proddatur.
With regards payment made to these dealers, the assessing authority found that the payments were made not at the registered place of business of these dealers but to their branch account at Proddatur. The assessing authority concluded that neither had these eight dealers supplied goods to the petitioner nor had any payment been made to them; and these transactions were created only to show that the petitioner had purchased goods, not from outside the State, but from dealers within the State so as to claim the benefit of input tax credit. The assessing authority also held that no payment was made to Sri Lakshmi Oil Traders, Jaggaiahpet and an entry was made in the last week of the financial year (i.e., 28.03.2009 and 31.03.2010) more than one year after the purchase of oils, as if the petitioner had, in lieu of payment, sold RBD palm oil to Sri Lakshmi Oil Traders, Jaggaiahpet, though no documentary evidence was produced to show that RBD palm oil was delivered by the petitioner to Sri Lakshmi Oil Traders, Jaggaiahpet.
In the exercise of its jurisdiction under Article 226 of the Constitution of India, this Court would not re-appreciate the evidence on record nor would it substitute its views for that of the assessing authority. Even if two views are possible, and the view taken by the assessing authority, on the evidence on record, is held to be a possible view, interference by this Court would not be justified. While an appellate authority would be entitled to re- appreciate the evidence, and come to a different conclusion on the same material, such an exercise would not be undertaken by this Court in Writ proceedings under Article 226 of the Constitution of India. If the material on record supports the conclusion of the assessing authority, and the findings arrived at by him are such as a reasonable man would arrive at on the material on record, this Court would refrain from interference.
In the present case, the material on record does support the conclusion of the assessing authority that inter-State purchases of edible oils were suppressed and documents were created as if the petitioner had purchased edible oils from dealers within the State and had made payment to them, when, in fact, they had not purchased edible oils from dealers within the State. The conclusion of the assessing authority that this modus operandi was only to illegally claim the benefit of input tax credit, thereby evade payment of the sales tax due to the Government on the sales made by the petitioner to other VAT dealers within the State, and is only to wilfully evade payment of tax, are neither findings based on no evidence nor are such findings perverse. We see no reason, therefore, to exercise jurisdiction under Article 226 of the Constitution of India to interfere with the impugned assessment order.
V. CONCLUSION:
The Writ Petition fails and is, accordingly, dismissed. The miscellaneous petitions, if any pending, shall also stand dismissed. However, in the circumstances without costs.
_______________________________ (RAMESH RANGANATHAN, J) ____________________________________ (M. SATYANARAYANA MURTHY, J) Date: 25.09.2014.