Eastern Condiments (P) Limited vs Assistant Commissioner (CT)

M. Satyanarayana Murthy, J.—This writ petition is filed for issuing of writ of mandamus declaring the action of the 1st respondent in passing the impugned order dated 06.05.2014 in ''Form'' for the years 2011-2012 under the Andhra Pradesh Value Added Tax Act (for short the ''APVAT Act) as illegal, arbitrary, high-handed and without any authority. The petitioner is a registered dealer and assessee under the provisions of APVAT Act. For the years 2011-2012 the petitioner through its monthly returns has reported the turnovers scored by it and has paid the applicable taxes. The assessment was completed vide order dated 21.03.2013 adopting fair market value under Section 2(15) to the turnover of branch transfers though it has no relevance to the facts of the case since the value adopted for branch transfer of the goods by the petitioner can never be the price at which the goods are sold in the local market. The 1st respondent by adopting the fair market value for arriving the estimated value of the goods stock transferred also restricted the input credit arrived under declaration of tax without any basis. The said order was challenged by the petitioner before the 2nd respondent in appeal. The 2nd respondent allowed the appeal vide order dated 17.07.2013, remanded the matter to the 1st respondent with a direction to re-assess after obtaining necessary authorization in terms of Rule 59, without going into the merits in the contentions of the petitioner/assessee.

In pursuance of the direction of the 2nd respondent, the 1st respondent obtained authorization and issued show cause notice dated 22.11.2013 and the petitioner/assessee submitted its objections on the proposed assessment. But the 1st respondent without considering any of the objections passed the impugned order against the purport of the direction given by the 2nd respondent vide order dated 17.07.2013. Hence, the order is illegal arbitrary and prayed to set aside the order dated 06.05.2014.

At the stage of admission, heard the argument of learned counsel for the petitioner and learned Special Standing Counsel for the Sales tax at length.

Learned counsel for the petitioner mainly contended that the observations of the 2nd respondent are clear that the assessment was mechanical and without any authorization, directed the 1st respondent to reassess the tax after considering the objections. But the 1st respondent without considering the purport of the direction of the 2nd respondent issued show cause notice and passed the impugned order again mechanically and none of the objections raised by the petitioner/assessee were considered. Therefore, the impugned order is parse flagrant violation of the direction given by the 2nd respondent and against the principles of natural justice and finally prayed to set aside the order.

The learned Special Standing Counsel for the Sales Tax, contended that the order is appealable and without exhausting the remedy of appeal, this writ petition is not maintainable and prayed to dismiss the same.

Considering the rival contentions and the material available on record, the points that arise for consideration is:

Whether the impugned order passed by the 1st respondent is strict adherence to the direction given by the 2nd respondent dated 17.07.2013 in Appeal No. S/07/13-14 if so, whether the order was passed in accordance with the principles of natural justice, if not be set aside?

POINT:

As seen from the material available on record the 1st respondent issued show cause notice but without authorization as required under Rule 59 of the Rules under the APVAT Act, but passed the impugned assessment order for the tax period 2011-2012 and the same is carried in appeal before the 2nd respondent.

Upon considering the material on record, the 2nd respondent passed the following order:

"In view of the above Judgments, the audit officer cannot take up audit and assessment mechanically. He has to conduct audit as per the authorization of the Deputy Commissioner (CT) and take up assessment after further authorization to do so. Therefore, I have no hesitation to hold that the audit officer has no jurisdiction to make the present assessment without separate authorization to make the assessment from the concerned Deputy Commissioner. Since the impugned order does not stand before law on the legal ground of jurisdiction itself, I feel that there is no need to go into the other aspects of the case. Hence, the impugned order is set aside and the appeal is remanded."

On receipt of the order passed by the 2nd respondent, the 1st respondent issued show cause notice after obtaining authorization for assessment from Deputy Commissioner (CT), Secunderabad. On receipt of the same, the petitioner filed objections before the 1st respondent to the show cause notice, which was set aside by the 2nd respondent. But the 1st respondent without considering any of the objections passed the impugned order dated 06.05.2014, as if he was directed only to obtain authorization of the Deputy Commissioner and to pass the orders. The specific observations in the order are extracted for better consideration:

"In this connection the dealer company attention is drawn to the para No. 1, wherein it was clearly stated that ''Further the remand direction given by the Appellate Deputy Commissioner (CT) Secunderabad is based only on authorisation for assessment and not on merits of the case and thus the show cause notice is being issued on the findings of the VAT 305 order after obtaining for authorization for assessment from Deputy Commissioner (CT) Secunderabad in ADM IC No. 20131112305290 dt. 12.11.2013".

In the last but one para of the order the 1st respondent observed as follows:

"In the circumstances stated above, the contentions/objections raised by the dealer company to the show cause notice are not considerable. If the consequential order is passed considering the dealer objections, it would be contrary to the directions of Appellate Deputy Commissioner (CT) Secunderabad."

As seen from the impugned order passed by the 1st respondent, it is clear that he did not consider any of the objections raised by the petitioner/assessee in reply to the show cause notice. At the same time, the 2nd respondent did not consider the objections but allowed the appeal only on the ground that the 1st respondent did not obtain any authorization as required under Rule 59 of the APVAT Rules, directed to conduct audit as per authorization from Deputy Commissioner (CT) Secunderabad, but that does not mean that the order is to be passed mechanically again without considering the objections raised by the petitioner/assessee. When show cause notice was issued calling for objections, it is the duty of the 1st respondent to consider the objections and pass appropriate orders. The order passed by the 2nd respondent does not say anything that the remand is only for the limited purpose of obtaining authorization. Therefore, passing mechanical order which is impugned in this writ petition is totally in contravention of principles of natural justice and in utter disregard of the direction given by the 2nd respondent. Hence, the same is liable to be set aside.

One of the contentions of the counsel for the respondents is that appeal is not maintainable against the impugned order before the 2nd respondent, without exhausting statutory remedy by way of appeal, available under the APVAT Act, this writ petition is not maintainable. No doubt, a statutory remedy is provided by way of appeal under the provisions of the APVAT Act, but that does not oust the jurisdiction of this Court to exercise extraordinary power of judicial review when the 1st respondent passed, an order in violation of principles of natural justice and violation of the directions given by the 2nd respondent. It is settled law that when any order is passed against the principles of natural justice, this Court can exercise its extraordinary power of judicial review and set aside the order. The remedy by way of appeal is not a statutory bar.

Considering the facts and circumstances of the case, and the way in which the impugned order is passed by the 1st respondent, we find that the order is illegal and contrary to the directions given by the 2nd respondent and the impugned order does not stand to legal scrutiny. Therefore, we find that the impugned order is illegal and the same is hereby set aside holding this point in favour of the petitioner and against the respondents.

In the result, the Writ Petition is allowed setting aside the impugned order dated 06.05.2014 passed by the 1st respondent and remanded the matter to the 1st respondent with a direction to consider each and every objection raised by the petitioner, in the objections filed to the show cause notice and pass appropriate order, in accordance with law. Miscellaneous Petitions pending, if any, shall stand closed. There shall be no order as to costs.