Telangana High Court
M/S.Madhucon Project Limited vs Sales Tax Appellate Tribunal on 9 October, 2023
Author: P.Sam Koshy
Bench: P. Sam Koshy
THE HONOURABLE SRI JUSTICE P. SAM KOSHY
AND
THE HONOURABLE SIR JUSTICE LAXMI NARAYANA ALISHETTY
Tax Revision Case No.8 of 2008
Tax Revision Case No.9 of 2008
Tax Revision Case No.10 of 2008
Tax Revision Case No.11 of 2008
and
Tax Revision Case No.12 of 2008
COMMON ORDER :(per the Hon'ble Sri Justice P. Sam Koshy) The instant Tax Revision Cases arise from a common order passed by the Sales Tax Appellate Tribunal, Andhra Pradesh, at Hyderabad pertaining to the same assessee, and point of contention and grounds raised to challenge the impugned order in all these five tax revision cases being common, they are heard together and decided by this Common Order.
2. Heard Mr. S. Dwarakanath, learned Senior Counsel appearing on behalf of the petitioners and Mr. K. Raji Reddy, learned Senior Standing Counsel for Commercial Tax, for the respondents.
3. For the sake of convenience, the facts in Tax Revision Case No.8 of 2008 are discussed hereunder.
4. Tax Revision Case No.8 of 2008 is filed by the petitioner against the order of assessment and the remaining four Tax Revision Cases are filed assailing the order of the appellant-Deputy Commissioner, confirming the penalty imposed by the assessing authority. Page 2 of 15
5. The point of contention in the instant case is : (a) whether the petitioners are entitled to avail purchase of cement at a concessional rate, i.e., at the rate of 4% instead of 16% under the provisions of Section 5-B of the Andhra Pradesh General Sales Tax Act, 1957 (for short, 'the Act'); and (b) whether the order of penalty passed by the assessing authority and confirmed by the Appellate Deputy Commissioner under Section 7-A of the Act was justified particularly when Section 5-B itself provides for a penal provision. The assessment orders involved in the present five Revisions are of the years 2001-02, 2002-03, 2003-04 and 2004-05.
6. The brief facts relevant for the adjudication of the disputes in the present batch of Revisions are that the petitioner-assessee is engaged in the business of executing works contract within the erstwhile composite State of Andhra Pradesh. For the purpose of operation of the business, the petitioner had filled up Capital G-1 Form as is required under Section 5-B of the aforesaid Act. In the said form, the petitioner had shown cement as one of the raw materials used. For the purpose of getting registered with the Commercial Tax Department, the petitioner filled up Capital G2 Registration Form, and later on, the petitioner was granted G2 Certificate by the Commercial Tax Department. With the aid of G2 Certificate, the petitioner was allowed to purchase cement at a concessional rate against "G" forms Page 3 of 15 which was required to be furnished by the appellant at the time of purchase. The Government has been issuing notices from time to time in respect of goods which are "eligible" or "not eligible" for the concessional rate of tax under Section 5-B of the Act. In order to get G2 registration certificate, a dealer has to apply in Form-G1 specifically mentioning the description of the goods proposed to be manufactured and also describe the raw materials, component parts, required for the purpose of manufacture of the said finished product.
7. The State Government on 17.07.2001, in partial modification of Notification-II in G.O.Ms.No.739 Revenue (CT.II) Department, dated 17.10.2000, published a list of goods mentioned in the said notification which would not be eligible for concessional rate of tax under Section 5-B of the Act vide G.O.Ms.No.496 Revenue (CT.II) Department, dated 17.07.2001 (for short, 'the G.O.'). In the said G.O., item No.10 was "cement". Subsequently, on an inspection at the business premises of the assessee, it was learned that petitioner had been purchasing cement against G-Forms in spite of the said G.O. deleting the item "cement" from the list of goods eligible for being purchased at a concessional rate.
8. The assessing authority subsequently issued a show-cause dated 03.02.2005 seeking explanation as to why "cement" and "ready- mix concrete" (R.M.C.) be not deleted from the G2 registration Page 4 of 15 certificate. Subsequent to the show-cause notice, the petitioner submitted his reply raising various contentions which stood decided against petitioner vide proceedings dated 28.02.2005. Against the said proceedings, the petitioner preferred appeal before the Appellate Deputy Commissioner which too stood dismissed by the Appellate authority vide order dated 18.05.2007 and which was further confirmed in appeal by the Sales Tax Appellate Tribunal in T.A.No.724 of 2007 leading to the filing of present Tax Revision Case No.8 of 2008. Meanwhile, since the petitioner had been found purchasing cement at concessional rate of tax in spite of the above referred G.O. dated 17.07.2001, wherein "cement" was included in the list of goods which would not be entitled for being purchased at a concessional rate, the assessing authority imposed penalty against the petitioner to the tune of three (03) of times the difference of tax payable by the petitioner. The order of penalty was also challenged before the Appellate Dy. Commissioner who too confirmed the penalty order which led to filing of appeal by the petitioner before the Sales Tax Appellate Tribunal, Andhra Pradesh, at Hyderabad in Tribunal Appeal No.866 of 2005 and batch. However, the Tribunal also confirmed the penalty order and also the order of the Appellate Dy. Commissioner leading to filing of present Tax Revision Cases.
Page 5 of 15
9. Learned counsel for the petitioner contended that the order passed by the Appellate Dy. Commissioner in deleting "cement" from G2 registration certificate was bad in law. Firstly, the petitioner had specifically declared before the authorities that "cement" was a raw material and that he was using it for the execution of works contract and RMC for which cement is again raw material for preparation of ready-mix concrete and thus, he was justified in purchasing cement at concessional rate. He further contended that even otherwise, as per G.O. also the petitioner would be entitled to purchase cement at concessional rate for the reason that the said G.O. excluded applicability of the G.O. on cement to those manufacturers who manufactured finished goods like asbestos sheets, pipes, paint manufacturers using white cement or hallow bricks.
10. According to him, since petitioner was also purchasing cement for the purpose of manufacturing ready-mix concrete which is finished product so far as petitioner is concerned, therefore, as per the said G.O. also petitioner is entitled for purchase cement at concessional rate. He further contended that in any way petitioner had G2 registration certificate permitting him to purchase cement at concessional rate, therefore, it cannot be said that petitioner had violated any provision of law and that "cement" stood deleted from the said G2 registration certificate only w.e.f. 28.02.2005. Therefore, Page 6 of 15 under no circumstances can the petitioner be asked to pay the difference of the tax up till 28.02.2005 and at the same time since petitioner had a valid G2 registration certificate for purchasing cement at a concessional rate up to 28.02.2005, the petitioner cannot be penalized for having purchased cement at a concessional rate up to 28.02.2005.
11. So far as the order of penalty being bad, learned counsel for the petitioner contended that the entire proceedings drawn for the penalty is again bad in law for the reason that the proceedings initiated for levying penalty against the petitioner was under Section 7-A(2) whereas, it was not the case of the respondent that petitioner had purchased with false bill or a false voucher or a false certificate or a false declaration or any other false and fake document enabling him to be taxed at a reduced rate. On the contrary, the case of respondent itself is that petitioner was not entitled for levy of concessional tax under Section 7-B and if the provision of Section 5-B(1) was misused, the penalty proceedings could had been only under Section 5-B(2) which in the instant case has not been done and the notice issued for penalty itself was under Section 7-A(2) which in the instant case is not attracted at all. Therefore, the entire penal proceedings itself is per se bad, illegal and liable to be set aside.
Page 7 of 15
12. Learned counsel for the petitioner further contended that since the petitioner rightly or wrongly had a valid G2 registration certificate issued from a competent authorized authority and the item "cement" getting deleted from the said registration certificate only w.e.f. 28.02.2005, under no stretch of imagination, according to petitioner, can he be penalized and the order of penalty on this ground also is liable to be set aside.
13. Per contra, learned Senior Standing Counsel for the respondent- State opposing the petition, contended that when once the Government had issued the G.O. on 17.07.2001 and which was well within the knowledge of the petitioner, there was no reason why the petitioner should have purchased cement against the G Forms and the authorities, therefore, were justified in issuing the impugned assessment order and penalty proceedings disentitling the petitioner from purchase of cement at reduced rate. According to him, the fact that petitioner had deliberately purchased cement under "G" forms, in spite of having knowledge of the same, stands established from the purchase of cement by the petitioner even after issuance of the show- cause notice at the first instance on 03.02.2005. Thus, it cannot be said that petitioner was not aware of the G.O. dated 17.07.2001 or cement being excluded from the goods which could be purchased at a concessional rate.
Page 8 of 15
14. Referring to proviso clause to G.O. dated 17.07.2001, learned Senior Standing Counsel for the respondent-State strongly contended that the proviso clause to the said G.O. would not be applicable to the petitioner as petitioner is not a manufacturer of any finished product like those mentioned in the proviso clause, and therefore, the assessment order and the penalty order both are fully justifiable in respect of purchase of cement beyond 17.07.2001.
15. So far as the penalty proceedings initiated under Sub-Section (2) of Section 7-A, learned Senior Standing Counsel for the respondent- State contended that Sub-Section (2) of Section 7-A was wrongly mentioned instead of Sub-Section (2) of Section 5-B. According to him, on account of quoting wrong provision of law by itself would not vitiate the entire penalty proviso in the afore-given factual and admitted backdrop so far as petitioner having purchased cement against G Forms at a concessional rate even after issuance of G.O. dated 17.07.2001 and further even after issuance of show-cause notice dated 03.02.2005. Thus, the learned Senior Standing Counsel for the respondent-State prayed for dismissal of the Revisions as there is a concurrent finding of fact by two of the authorities below including the Sales Tax Appellate Tribunal, Hyderabad.
16. Having heard the contentions put forth on either side, the admitted facts are that the petitioner being engaged in the business of Page 9 of 15 executing works contract, the petitioner having got registered under Section 5-B of the Act. The petitioner also obtained G2 registration certificate allowing it to purchase cement at a concessional rate under Section 5-B of the Act, the State Government vide G.O. dated 17.07.2001 added "cement" in the list of goods which could not be purchased at a concessional rate, and the said G.O. has not been challenged and is still in force from 17.07.2001 onwards. Based on the G2 registration certificate the petitioner continued purchasing cement against G Forms at a concessional rate which was detected in an inspection that was conducted somewhere in the year 2005. Immediately, a show-cause notice was issued to the petitioner on 03.02.2005. Even after issuance of the said show-cause notice, the petitioner continued to purchase cement against the G Forms at a concessional rate.
17. From the aforesaid factual matrix of the case, prior to issuance of the G.O. dated 17.07.2001, cement was one of the item which was eligible to be purchased at a concessional rate. It was in this context that the authorities at the earliest time had issued the G2 registration certificate permitting the petitioner to purchase cement at a concessional rate. However, after issuance of the G.O. dated 17.07.2001, the petitioner was not entitled for purchase of cement at a concessional rate. In spite of this, petitioner continued to purchase Page 10 of 15 cement at a concessional rate against the G Forms. True, it is went unnoticed at the hands of the respondent so far as permitting the petitioner to purchase cement at a concessional rate even though the G.O. was in force since 17.07.2001. Therefore, the petitioner, beyond 17.07.2001, could not have purchased cement at a concessional rate and petitioner continued to purchase cement against the G Forms basing on the G2 registration certificate issued much before 17.07.2001.
18. It would be relevant at this stage to take note of the proviso to G.O. dated 17.07.2001 so far as cement is concerned which for ready reference is being reproduced hereunder, viz., "Provided further that the purchase of cement by manufacturers of finished goods like Asbestos sheets, Pipes, Paint manufacturers using White Cement, Hallow Bricks are eligible for concessional rate of tax under Section 5B if those manufacturers use the Cement purchased by them as raw material to produce finished goods for sale."
19. A plain reading of the aforesaid proviso would clearly give an indication that when a purchase of cement is made by a manufacturer of a finished good like asbestos sheets, pipes, paint manufacturers, hallow bricks, it would be eligible for purchase of cement at a concessional rate. The petitioner was not a manufacturer of any finished goods like the ones mentioned in the preceding paragraph. The Government of India, Ministry of Finance, Department of Revenue itself vide their Circular No.237 of 1996, while clarifying as to whether Page 11 of 15 the product "ready-mix concrete" can be classified as a finished product or not, held that "ready-mix concrete" is a material in a wet process state and is not a finished product like block or pre-caste tiles, beams, etc. and had, thus, clarified that all pending disputes and assessments on the issue may be settled in the light of the aforesaid guidelines.
20. In the light of the aforesaid instructions of the Central Government, it can be clearly inferred that the proviso to G.O. dated 17.07.2001 would not be applicable to the petitioner. Therefore, we are of the considered opinion that the assessing officer, the appellate authority and the Sales Tax Appellate Tribunal were justified by holding that the petitioner is liable to pay tax on cement at its normal rate and not at the concessional rate. We do not find any ambiguity or illegality so far as the order passed by the Sales Tax Appellate Tribunal in confirming the order of the Appellate Dy. Commissioner so also that of the Assessing Authority. The said issue whether the petitioner is entitled for purchase of cement at a concessional rate under Section 5- B in the teeth of G.O. dated 17.07.2001 stands answered in the negative against the petitioner. Accordingly, Tax Revision Case No.8 of 2008 is dismissed.
Page 12 of 15Tax Revision Case Nos.9, 10, 11 and 12 of 2008 ::
21. As regards penalty orders in these Revisions are concerned, the admitted factual matrix in the instant case is again that the notices issued for the penalty proceedings was under Section 7-A(2). The said proviso is attracted only when a dealer produces a false bill, voucher, declaration, certificate or any other document for a purchase to be effected at a reduced rate. This, in fact, is not the case of the respondent at all. The stand of the respondent all along was that the petitioner was liable to pay penalty under Section 5-B(2). For ready reference, both these two penal provisions would be required to be appreciated and they are reproduced as under, viz., "Section 5-B(2) : If any dealer, --
(i) not having his manufacturing unit within the State purchases any goods by furnishing a declaration under the proviso to sub-
section (1); or
(ii) having his manufacturing unit within the State and having purchased goods by furnishing a declaration under the proviso to sub-section (1) sells such goods contrary to such declaration, the assessing authority, may after giving such dealer a reasonable opportunity of being heard, by order in writing, impose upon him by way of penalty a sum which shall not be less than three times but which may extend to five times the amount of tax leviable on the sale of such goods so purchased."
(2) Where a dealer issues or produces a false bill, voucher, declaration, certificate or other document with a view to support Page 13 of 15 or make any claim that a transaction of sale or purchase effected by him or any other dealer, is not liable to be taxed or is liable to be taxed at a reduced rate, the assessing authority shall on detecting such issue or production, direct the dealer issuing or producing such document to pay as penalty :
(i) in the case of first such detection, three times the tax due in respect of such transaction; and
(ii) in the case of a second or subsequent detection, five times the tax due in respect of such transaction; provided that before issuing any direction for the payment of the penalty under this section, the assessing authority shall give to the dealer an opportunity of making representation against the levy of such penalty."
22. The State Government itself had (in an earlier round of litigation between the petitioner and the State in Writ Petition No.14484 of 2005) in the counter-affidavit filed by it accepted the fact that there was a clerical error inasmuch as quoting proviso to Section 7-A(2) while initiating penalty provision which for ready reference is reproduced as under, viz., "7. ... ... ... These penalty orders were served on the petitioner on 05.03.2005 and 09.03.2005. However, by mistake a wrong provision Section 7-A(2)(ii) was quoted instead of Section 5-B(2)(ii). It is well settled proposition that mere quoting of a wrong provision does not vitiate the proceedings so long as the authority clothes his action under some other provision in the Act. The 1st respondent relies on the decision of the Hon'ble High Court reported in 29 APSTJ."
23. In the given factual backdrop what now seems to be looked into is whether the petitioner ever had an occasion of defending himself in Page 14 of 15 a penalty proceedings for a penalty to be imposed under Section 5(B)(2) in the teeth of the reply filed by the respondent in the aforesaid writ petition, viz., Writ Petition No.14484 of 2005, which stands admitted that the proceedings drawn for penalty was under Section 7-A(2) and not under Section 5(B)(2). Though the State has taken a plea that there is some misquoting or wrong quoting of the provision, nonetheless, the petitioner never had an occasion of defending himself in a penalty proceedings under Section 5-B(2). What is also required to be appreciated is that Section 7-A(2) and Section 5-B(2) are both independent penal provisions. Separate proceedings have to be drawn for each of the provisions. In the instant case, there does not seem to be any corrigendum or rectification order issued by the respondent for treating the notice under Section 7-A(2) as notice under Section 5-B(2) either before imposing of the penalty or subsequently, except for the admission on their part in the reply in Writ Petition No.14484 of 2005.
24. For the aforesaid reasons, since the petitioner never had an occasion to defend himself under Section 5-B(2), the entire proceedings initiated against the petitioner so far as imposing penalty is concerned under Section 7-A(2) stands vitiated as the petitioner has taken a stand that the penalty to be imposed against the petitioner was not under Section 7-A(2) but under Section 5-B(2). Page 15 of 15
25. In view of the same, the orders passed by the Sales Tax Appellate Tribunal, Andhra Pradesh, at Hyderabad confirming the order of penalty by the Appellate Dy. Commissioner and the Assessing Authority is improper and unjustified and therefore, the same deserves to be and are accordingly set aside. Consequently, the impugned penalty orders passed by the Assessing Authority therein are also set aside. The Tax Revision Case Nos.9, 10, 11 and 12 of 2008 are allowed.
26. In the result, Tax Revision Case No.8 of 2008 stands dismissed, and Tax Revision Case Nos.9, 10, 11 and 12 of 2008 stands allowed. No costs.
27. As a sequel, miscellaneous petitions pending if any, shall stand closed.
__________________ P.SAM KOSHY, J ___________________________________ LAXMI NARAYANA ALISHETTY, J Date :: 09.10.2023 Ndr/kkm