Andhra HC (Pre-Telangana)
Vaibhav Laminates vs Deputy Commercial Tax Officer Iv on 3 November, 2004
Equivalent citations: (2008)11VST887(AP)
Author: Bilal Nazki
Bench: Bilal Nazki
JUDGMENT Bilal Nazki, J.
1. The petitioner is a registered dealer engaged in purchase and sale of laminated sheets. He is an assessee for the purpose of sales tax. The petitioner's assessments were being made every year under the provisions of the Andhra Pradesh General Sales Tax Act, 1957 and the Central Sales Tax Act, 1956 (hereafter referred to as "the State Act" and "the Central Act", as the case may be). According to the petitioner, he has been paying taxes on the sale turnovers registered in the books of account and disclosed to the department in the monthly returns. The laminated sheets were also liable to tax at the rate of 12 per cent in terms of the relevant entry No. 17A of the Sixth Schedule to the Act which provides levy of tax at every point of sale. The laminated sheets were not liable to tax at the point of purchase. The petitioner submitted that he effected inter-State purchases of laminated sheets from one M/s. Durban Ltd., in Gujarat and inter-State purchase was covered by relevant documents, viz., invoice issued by the consignor, lorry receipt and advance way bill of the petitioner and the said consignment was being carried in goods vehicle bearing No. AP 9 V 1576 of Bombay Andhra Transport Organisation. While the vehicle was carrying the goods during the course of inter-State trade or commerce in transit, it was inspected on July 26, 2004. The inspection, according to the petitioner, revealed that transportation of laminated sheets was covered by Invoice No. 153, dated July 22, 2004 issued by the manufacturer. According to the instructions issued by the Commissioner of Commercial Taxes through a circular, every dealer who was purchasing laminated sheets from outside the State was supposed to issue advance way bills and accordingly the consignment was covered by way bill. According to the petitioner, no irregularities or defects or omission were found by the inspecting authorities in regard to the transportation of the goods. However, the respondent issued a detention notice on July 27, 2004. It is submitted that there is no power under the State sales tax law to detain the goods, though the power is vested with the authorities to seize the goods and take further action thereafter including confiscation, if found that the goods were not accounted for. As such the notice issued on July 27, 2004 was without authority of law. The petitioner further submitted that having found no defect or irregularity in the documents accompanying the goods, the respondent maintained that the sale price of the goods contained in the sale bill was less than the prevailing market price in the State of Andhra Pradesh, therefore the goods were detained with the vehicle pending enquiry and a notice has been issued on July 27, 2004 to the driver of the vehicle Mr. Jafar. It is further submitted that the excise duty-cum-invoice challan No. 153 issued by the outside State supplier mentions the basic excise duty as well as the cess levied under the provisions of the Central Excises and Salt Act, 1944. The respondent, on July 26, 2004, issued a notice to the petitioner requesting him to quote the price/value at which he intends to sell the goods covered by the invoice for taking necessary action in the matter. The petitioner further contended that though he was under no obligation, yet showing respect to the sovereign State, he submitted a letter on July 29, 2004 indicating the proposed sale price which was inclusive of sales tax payable at 12 per cent and other expenses. But the respondent detained the consignment on July 27, 2004 and entrusted the detained goods only on August 10, 2004 to the Central Warehouse. It is submitted that the action of the respondent in detaining the goods with vehicle was without authority of law. It is contended that even if it is assumed that the power of seizure of goods could also authorise the respondent to detain the goods, nevertheless such action was arbitrary, improper and unjust as the documents were not defective. It is also contended that the goods vehicle along with the goods could not be detained for an alleged suspicion that the sale price charged by the manufacturer in other State for the goods sold to the petitioner was less than the local market price in Hyderabad. The question of under invoicing of goods would only arise if the petitioner had sold the goods in Andhra Pradesh, but the goods were detained while they were in transit. Section 38 of the State Act clearly prohibits the applicability of the provisions of the State Act to inter-State purchases or sales, as the case may be. It is also contended that the authorities of the department have no power to detain the goods and the provisions of the Central Act cannot be invoked by the authorities of the department in exercise of power under the State Act as the inter-State sale cannot be interfered with by the authorities under the State Act. In these circumstances the writ petition was filed and a direction was sought that the respondent should release the goods, i.e., laminated sheets to the petitioner.
2. Counter-affidavit was filed by the respondent-Deputy Commercial Tax Officer, in which he submitted that while he was discharging his official duties duly undertaking the vehicular traffic check on July 27, 2004 at M.J. Market, near Osmanganj, Hyderabad, he inspected a lorry bearing No. AP 9 V1576 which contained laminated sheets. The driver of the vehicle was asked to produce the documents relating to the consignment in question. The driver produced the documents. The documents revealed that the price shown for the goods, i.e., laminated sheets was far below the market price. Therefore, in his opinion, there was a prima facie case against the petitioner about his indulgence in clandestine activity and in resorting to suppression of turnover for the purpose of evading sales tax on the true value of the goods. Therefore for further verification into the matter, a detention notice was issued on July 27, 2004 in exercise of the powers vested under Section 29 of the State Act. Thereafter an enquiry was made which revealed the following results:
(a) According to the invoice produced by the driver the vehicle is said to be carrying 760 laminated sheets whose price is shown far below the prevailing market price. But on physical verification, it was revealed that the lorry was carrying 1167 laminated sheets. Out of this 1167 laminated sheets, documents for only 760 sheets was available that too with low sale price when compared to prevailing market price. In respect of balance 407 sheets, it is absolutely not covered by any documents. But for the timely inspection, the petitioner would have sold this 407 sheets without knowledge of the department and thereby would have evaded rightful taxes due to the State. However, separate action is being taken in respect of these goods under Section 29(6B) of the APGST Act.
(b) The consignment was not supported by advance way bill.
(c) The present lorry did not undergo any check at the various check posts situated en-route. The check-post authority (CT Department) did not have any occasion to check the consignments as the lorry was not apparently stopped at the designated check-posts. The petitioner by-passed check post.
(d) It is submitted that the facts make it clear that the petitioner has mala fide intention to suppress the true turnover in the documents with a view to evade sales tax. The general practice in the trade is found to under state the values of the goods at far below the prevailing market value with a view to evade tax on true value of the goods. The extent of under invoicing is found to the extent of 100 per cent as is evident from the fact that a laminated sheet of 8 x 4 having thickness of 1 mm purchased from outside the State at a bill value of Rs. 180 is being sold at Rs. 400 per sheet. But the sale of the same sheet is being disclosed in invoices being issued by the dealer at Rs. 220 to Rs. 240. In order to safeguard the revenue of the State it was decided by the department to purchase these goods from the petitioner duly paying the price he desired. Accordingly the petitioner was requested to submit his quotation indicating the price at which he would be prepared to sell these goods normally to any other customer.
3. It is also submitted in the counter that the petitioner filed a letter on July 29, 2004 quoting a price of Rs. 220 per laminated sheet excluding sales tax at 12 per cent. It is submitted that the petitioner having given the quotation has committed himself to sell the goods to the department at the rate indicated in the quotation. In the normal trade practice every dealer who issues a quotation for the sale of goods would readily come forward to effect sale, if the quotation given by him is accepted by the purchaser. However in the present case, for obvious reasons, the petitioner went back on the quotation given by him as he knew that the price quoted by him was far below the prevailing market price. It is further submitted that the petitioner purchased the goods, according to the papers, at Rs. 180 per laminated sheet of 8 x 4 having a thickness of 1 mm and he quoted the price of Rs. 220. The petitioner now could not complain any financial loss as the department was offering the price quoted by him. The department has also accepted the offer given by the petitioner to purchase the laminated sheets at the rate of Rs. 220 per sheet and accordingly the petitioner was requested to raise a sale bill in favour of Joint Commissioner (Enforcement) along with advance cash receipt voucher. The petitioner having received the said notice did not respond. Subsequently a notice was issued to him on August 18, 2004. It is submitted that Section 38 of the State Act has no application to this case. It is further submitted that the petitioner was afforded personal hearing on August 21, 2004. However he did not appear personally, but sent a letter dated August 21, 2004 stating therein that the personal hearing was useless in view of the matter pending in the High Court.
4. The learned Counsel for the petitioner has argued that Section 38 of the State Act prohibits applicability of the provisions of the State Act to inter-State purchases or sales and therefore the whole exercise made by the respondent was without authority of law. He also contends that the goods which were in the course of inter-State trade or commerce in transit and were not delivered to the petitioner, could not be made subject-matter of the jurisdiction of the authorities under the State Act and detention of the goods was as such illegal. In this connection, he relied on various judgments of the Supreme Court. Section 38 of the State Act lays down:
38. Act not apply to sales or purchases outside the State, in the course of import or export, etc.: Nothing contained in this Act shall be deemed to impose or authorise the imposition of a tax on the sale or purchase of any goods, where such sale or purchase takes place,-
(i) out side the State; or
(ii) in the course of the import of the goods into, or export of the goods out of the territory of India; or
(iii) in the course of inter-State trade or commerce.
Explanation: The provisions of Chapter II of the Central Sales Tax Act, 1956 (Central Act 74 of 1956), shall apply for the purpose of determining when a sale or purchase takes place in the course of inter-State trade or commerce or outside a State or in the course of import or export.
5. Section 28A of the State Act lays down, 28A. Acquisition of the goods: (1) Where the authority prescribed has reason to believe that any goods of a fair market value exceeding five thousand rupees have been sold or purchased by a dealer, to or from another dealer or person, as the same may be, for a consideration which is less than fair market price of the goods and that consideration for such sale or purchase as agreed to between the parties has not been truly stated in the invoice or delivery challan or any other document relating thereto, with the object of facilitating the reduction or evasion of the tax payable under this Act, the authority prescribed may, subject to the provisions of this Section initiate proceedings for the acquisition of such goods.
(2) The powers conferred under Sub-section (1) shall be exercised by the prescribed authority in respect of goods sold or purchased which, are in transit or in the possession of the seller or buyer or their agents.
...
6. Sub-section (2) of Section 28A specifically empowers the authorities to exercise the power under Sub-section (1) in respect of goods sold or purchased which are in transit or in the possession of the seller or buyer or their agents.
7. Now coming to the judgments relied on by the learned Counsel for the petitioner, the judgment of the Supreme Court reported in Ashok Leyland Ltd. v. State of Tamil Nadu [2004] 134 STC 473, in our view, would not be of any assistance to us because the controversy before the Supreme Court was altogether different than the controversy we have. It was interpretation of Section 69 of the Central Sales Tax Act (74 of 1956) which was the bone of contention before the Supreme Court.
8. Another judgment on which reliance has been placed is Ramanadh Poultry Farms v. Assistant Commercial Tax Officer [1999] 114 STC 140 (AP). This was a case where the goods were covered by genuine documents evidencing the purchase outside State and tax was sought to be collected at check-post. The Andhra Pradesh High Court held that it was not permissible. The question before the court was in para 2, The petitioners are doing poultry business. It is their case that the supplements or ingredients needed for poultry feed are purchased from registered dealers outside the State of Andhra Pradesh and the said goods are brought to their poultry farms in the course of inter-State purchase. It is also their case that such consignments are supported by valid documents such as way bills. The petitioners submit that the ingredients so purchased are meant for use in poultry feed for the purpose of captive consumption. The collection of tax on the goods so purchased at the check-post as if there was a taxable sale within the State is being assailed in these writ petitions.
9. Even in this case the High Court upheld the power of the authorities under Section 29 of the State Act. In para 5 the High Court noted:
We find force in the contention of the petitioners that so long as the consignments of poultry feed or ingredients of poultry feed that are being transported from outside the State are covered by genuine documents evidencing the inter-State sale and purchase, the check-post officials have no jurisdiction to collect the tax in advance as if the sale had taken place. It is a different matter if the check-post officer, on a perusal of the relevant documents, comes to the conclusion that the documents are spurious or that the consignment of the goods is not supported by the requisite documents evidencing bona fide purchase from a registered dealer. Even in such a case, the check-post official is expected to record the reasons and arrive at a finding on the basis of a summary enquiry as per the relevant provisions contained in Section 29 of the Act read with Rules 46 and 47 of the Andhra Pradesh General Sales Tax Rules, 1957. We make it clear that tax collection at the check-post cannot be resorted to on the presumption that the goods are likely to be sold clandestinely and the tax will be evaded by the petitioners. If the poultry feed or poultry feed ingredients are sold clandestinely and the taxable turnover is suppressed by the dealers, the sales tax authorities are not powerless to take necessary steps to make best judgment assessment and to levy penalties. But, an anticipatory collection of tax on the presumption that the dealers are likely to resort to clandestine sales at a later point of time is not warranted under the provisions of the Act.
10. The learned Counsel for the petitioner also relied on a judgment reported in Check Post Officer, Coimbatore v. K.P. Abdulla and Bros. . Even in this case the Supreme Court upheld the power of the authorities under the Act to confiscate the goods carried in vehicle without prescribed documents. This judgment is also not relevant for the purpose of the present case.
11. Even otherwise, after an offer was made to the petitioner that his goods will be purchased and he should quote the price, he categorically accepted the offer and quoted a price, i.e., Rs. 220 per laminated sheet + 12 per cent APGST. Nothing has been said by the petitioner about this offer and his acceptance except saying. "The petitioner though under no obligation, yet showing respect to the sovereign State, submitted a letter on July 29, 2004 indicating the proposed sale price which is stated to be inclusive of sales tax payable at 12 per cent and other expenses".
12. The letter dated July 26, 2004 which was addressed by the department to the petitioner is quoted below:
The attention of M/s. Vaibhav Laminates old Tophkana, Hyderabad, is invited to the invoice No. 153, dated July 22, 2004 for Rs. 1,34,508 issued by M/s. Durclam Ltd., Rajpur (N.G.) through which sold 768 decorative laminated sheets.
In this connection M/s. Vaibhav Laminated old Tophkana, Hyderabad are requested to quote the price/value at which intend to sell the goods covered by the invoice for taking further necessary action in the matter....
13. To this letter, the petitioner gave his reply on July 29, 2004 which reads as under:
We have received your notice dated C.C.T. ENFT. RC No. D.C.T.O. IVth/LAMINATED SHEETS/2004, dated July 26, 2004. Herewith we are giving our quotation of sale price of laminated sheets as per below:
24cm x 12cm Laminated Sheets Rs. 220 per sheet + 12 per cent APGST.
14. The letter written by the department asking the petitioner to quote the price was unambiguous as also the reply given by the petitioner. There is another facet of the case. The petitioner in this writ petition claims only 760 laminated sheets and there is invoice only for 760 sheets, but in the counter-affidavit it is submitted that while checking the vehicle the respondent found 1167 laminated sheets being carried by vehicle.
15. Therefore the petitioner is entitled to a price at the rate of Rs. 220 per sheet + sales tax for 760 laminated sheets alone as he had not claimed all 1167 laminated sheets.
16. The writ petition is accordingly disposed of. No costs.