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2016 (10) TMI 83 - ANDHRA PRADESH HIGH COURT

2016 (10) TMI 83 - ANDHRA PRADESH HIGH COURT - TM - Imposition of penalty under Section 53(3) of the A.P. Value Added Tax Act, 2005 - milling of paddy - sale of rice - difference between turnover reported in the returns and turnover reported in the audited books of accounts - alternative remedy of appeal - under-declaration of tax - Sections 53(1) and 53(3) of the Act - is imposition of penalty justified was there any wilful attempt to avoid tax? - Held that: - The distinction between Sections 5 .....

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Deputy Commissioner, in proceedings under Article 226 of the Constitution of India - petition dismissed - decided against petitioner. - Writ Petition No.25437 of 2016 - Dated:- 6-9-2016 - RAMESH RANGANATHAN AND SRI U.DURGA PRASAD RAO, JJ For The Petitioner : Sri P.Balaji Varma For The Respondent : Sri S.Suri Babu, Spl. Standing Counsel ORDER: (Per the Honble The Acting Chief Justice Ramesh Ranganathan) The proceedings under challenge in this writ petition is the order passed by the Appellate De .....

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e was a huge variation, between the turnover reported in the returns and in the audited books of accounts, for the tax period 2013-14 and 2014- 15. The petitioner invoked the jurisdiction of this Court by way of W.P.No.1858 of 2016 which was dismissed by order dated25.01.2016 on the ground that the petitioner had the alternative remedy of preferring an appeal to the Appellate Deputy Commissioner. The petitioner approached the Appellate Authority who dismissed the appeal on 30.05.2016. Consequent .....

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ition, the appellate authority dismissed the appeal affirming the order of penalty passed by the assessing authority. In the show cause notice, proposing imposition of penalty under Section 53(3) of the Act, the 1st respondent stated that, even though the dealer had admitted their sales turnover in their audited trading and P&L account for the years 2013-14 & 2014- 15, and had also uploaded the utilised waybills information into C.T. Department website, the said sale turnover was not rep .....

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r reply to the said show cause notice, the petitioner stated that the audit officer had levied tax of ₹ 24,85,358/- based mainly on the way bills without considering whether the dealer had actually received the sale consideration; they did not receive any sale consideration in respect of the way bills alleged to have been issued; the control order required the dealer to supply 75% of its milled rice, and the balance could be sold in the open market; with an intention to supply the entire r .....

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t, on the strength of the recorded evidence like invoices, waybill utilization and the audited trading and P&L account; the objection of the dealer in this regard was untenable; the dealer had, themselves, stated that the figures adopted in their books of accounts were inflated, and hence tax should be levied on the actual sales as per Section 4 of the Act; it was clear from the waybill utilisation statement that the dealer had effected sales only to VAT dealers, and the sales turnover talli .....

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ler had, intentionally, not reported the sales turnover in their monthly VAT 200 returns with a view to evade the legitimate tax due to the department; a demand was raised accordingly; and this clearly showed wilful neglect on the part of the dealer in not reporting the sales turnover in their monthly returns. After extracting Section 53 of the Act, in its entirety, the 1st respondent held that, from the aforesaid findings, it was established that the petitioner had intentionally under-declared .....

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ad noticed that there was a huge variation in the sales turnover, for the years 2013-14 and 2014-15, between the books of accounts and the VAT 200 returns; the audit officer had determined a variation in the sales turnover during the period April, 2013 to August, 2015; he levied tax @ 5%, amounting to ₹ 24,85,358/-, on the under-declared sales turnover of ₹ 4,97,07,157/-; there was force in the finding of the assessing officer that the petitioner had intentionally not recorded the sa .....

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etitioner was liable to be imposed penalty @100% under Section 53(3) of the Act. Sri P.Balaji Varma, learned counsel for the petitioner, would submit that, while every under-declaration of tax by a dealer is liable for penalty under Section 53(1) of the Act, it is only where the under-declared tax is established to be on account of commission of fraud or wilful neglect, would Section 53(3) of the Act be attracted, enabling the respondents to impose penalty of 100% of the under-declared tax; the .....

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, placed on Section 53 of the Act, by the revenue would result in every error, in the return filed by the dealer, attracting Section 53(3) of the Act; such an interpretation would render Section 53(1) of the Act redundant; and it is only in cases where the Revenue is able to establish the mala fide conduct of a dealer, in wilfully and deliberately under-declaring tax in the returns filed by them, can they levy penalty under Section 53(3) of the Act. Learned counsel would rely on Sree Krishna Ele .....

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year 2014-15, as against the actual turnover of ₹ 1.73 crores, the petitioner had declared a turnover of only ₹ 26.65 lakhs; the petitioner had utilised 54 VAT way bills for around ₹ 4.97 crores; it was only because an audit was conducted, and the books of accounts wereverified, did the undisclosed turnover come to light; the only contention put forth, in justification for such under-declaration, is that the petitioner did not receive the sale consideration; liability to tax un .....

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under, also provide for correction of any bona fide error on the part of the dealer providing for a revised return to be filed within six months; in the present case, no revised return was filed; it is only when the audit officer verified the books of accounts, did the suppression of a substantial part of the turnover, in the returns filed by the petitioner-dealer, come to light; the distinction between Section 53(1) and Section 53(3) of the Act is that the former is attracted when there is a bo .....

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ke note of the relevant provisions both under the Act and the Rules. Section 2(36) of the Act defines tax period to mean a calendar month or any other period as may be prescribed. The rule making authority has not prescribed any other period and, consequently, the tax period continues to remain a calendar month. Section 20 of the Act relates to returns and self-assessments and, under sub- section (1) thereof, every dealer, registered under Section 17 of the Act, shall submit such return or retur .....

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Section 21, every return shall be subject to scrutiny to verify the correctness of calculation, application of correct rate of tax and input tax credit claimed therein, and the full payment of tax payable for such tax period. Section 20(3)(b) of the Act stipulates that, if any mistake is detected as a result of the scrutiny made as specified in clause (a), the authority prescribed shall issue a notice of demand in the prescribed form for any short payment of tax or for recovery of any excess inp .....

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d the full payment of tax payable for such tax period. The correctness of the turnover, declared by the dealer in the return, is not subjected to examination in proceedings under Section 20 of the Act. Assessments are governed by Section 21 of the Act and, under Sub-Section (3) thereof, where the prescribed authority is not satisfied with a return filed by the VAT dealer, 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 da .....

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d the return, which the dealer is required to file, is for each tax period of one month. In the absence of any assessment being made, the return so filed is deemed to be the assessment. The jurisdiction which the assessing authority exercises under Section 21(3) and (4) of the Act is only where, on verification, he is satisfied that the return is incorrect or incomplete, or he decides to conduct a detailed scrutiny of the accounts based on the information available, or on any other basis. In the .....

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rcent of such under-declared tax; and (ii) where the under declared tax is more than ten percent of the tax due, a penalty shall be imposed at twenty five percent of such under- declared tax. It is not in dispute that, in the present case, the under-declaration of tax by the petitioner is far more than 10% of the tax due and therefore, even if the respondent had invoked Section 53(1) of the Act, the petitioner would have been liable to be imposed a penalty of 25% of the under-declared tax. Secti .....

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that the dealer is required to pay the under-declared tax with interest due on the late payment, Section 53(2) of the Act prohibits the Revenue from imposing any penalty as long as the dealer, prior to detection by the prescribed authority, voluntarily declares that the tax, due for a tax period, is under-declared and he pays the tax due along with interest. Section 53(3) of the Act stipulates that any dealer who has under-declared tax, and where it is established that fraud or wilful neglect h .....

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proceedings pursuant to an elaborate audit of the petitioners books of accounts.In the present case, it is only after the books of accounts of the petitioner were audited, that the huge variation, between the turnover as disclosed in the books of accounts and the turnover declared in the monthly returns, come to light. The fact that the petitioner had disclosed a far less turnover in their monthly returns, as compared to the actual turnover as recorded in their books of accounts, is not in dispu .....

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der Section 53(3) of the Act. The question which necessitates examination, in this writ petition, is whether, in the present case, it is established that under-declaration of tax by the petitioner is because of wilful neglect; and whether the respondents were justified in invoking Section 53(3) of the Act, and imposing 100% penalty on the petitioner herein. Section 53(3) of the Act requires the intent of the dealer, to under-declare tax, to be wilful i.e the dealer must have knowingly, deliberat .....

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turnover declared by the petitioner in their monthly returns, came to light only on an audit of their books of accounts, and on verification of the turnover disclosed in the way bills utilised by them. It only after the petitioners accounts were audited, did it result in their being subjected to assessment proceedings, and levy of tax under the Act. As noted hereinabove, both the assessing and appellate authorities have, after giving elaborate reasons for their conclusion, held that petitioner .....

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e 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 in writ proceedings. It must, however, be borne in mind that a finding of fact recorded by the Tribunal cannot be challenged in writ proceedings on the ground that the relevant and material evidence adduced before the Tribunal was insufficient or inadequate to .....

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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 (2004) 3 SCC 682 ). The findings of fact, recorded both by the assessing authority and the Appellate Deputy Commissioner, are not even contended by the petitioner to be either perverse or as based on no evidence. The orders passed by the assessing and appellate authorities cannot be said to .....

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aid error must, on the whole, be of such a character as would satisfy the test that it is an error of law apparent on the face of the record. If a statutory provision is reasonably capable of two constructions, and one construction has been adopted by the inferior Court or Tribunal, its conclusion may not always be open to correction in Writ proceedings. Whether or not the impugned error is an error of law, and an error of law which is apparent on the face of the record, must always depend upon .....

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rd is that they had not received the sale consideration. The liability to pay tax under the Act is on the transfer of title to the goods, and not when consideration for the sale is received. Even if no consideration is received, it would nonetheless be a sale as long as the title to the goods has been transferred by the seller to the buyer. No other defence has been put forth by the petitioner in justification of their having under-declared tax. In the facts of the present case, and in the light .....

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books. Where certain items which are not included in the turnover are disclosed in the dealers own account books, and the assessing authorities includes these items in the dealers turnover disallowing the exemption penalty cannot be imposed. The penalty levied stands set aside... The aforesaid observations of the Supreme Court are relied upon by Sri P.Balaji Verma, Learned Counsel for the petitioner, to contend that, as long as the turnover is disclosed in the books of accounts, failure of the d .....

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ed steps. Judgments are an authority for what they decide. A word here or a word there, should not be made the basis for inferring inconsistency. (Sri Konaseema Co-operative Central Bank Ltd v. N. Seetharama Raju AIR 1990 AP 171 (FB)). Observations of Courts should not be taken out of context, and must be read in the setting in which they appear to have been stated. Judges interpret the words of statutes. Their words are not to be interpreted as statutes. Circumstantial flexibility, one addition .....

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contrary. Both Section 53(1) & (3) of the Act confer jurisdiction on the assessing authority to impose penalty for under-declaration of tax. As the assessee is required to declare their sales turnover, and the tax payable thereon, in their monthly returns, and as the Act does not mandate that, in each and every case, an assessment order should be passed, accepting the contention that no penalty can be levied if the turnover is disclosed by the dealer in their books of accounts, would only e .....

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nt justifying imposition of penalty either under Section 53(1) or under Section 53(3) of the Act. In Uniworth Textiles Limited (2013) 9 SCC 753, on which also reliance is placed on behalf of the petitioner, Section 28 of the Customs Act, and the proviso thereto, was under consideration. The proviso to Section 28(1) stipulated that it is only where duty has not been levied, by reason of collusion or wilful mis-statement or suppression by the person concerned, would the extended period of limitati .....

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ot wilful and yet constitutes a permissible ground for the purpose of the proviso to Section 11-A of the Act; mere failure to declare, did not amount to wilful suppression; there must be some positive act from the side of the assessee to find wilful suppression; mere non-disclosure of certain items, assessable to duty, does not tantamount to mala fides; there could be a bona fide belief on the part of the assessee that duty was not liable to be paid, but that per se did not prove that there was .....

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s- statement or suppression of fact or contravention of any provision, is not sufficient to attract the extended period of limitation; the emphasis of the proviso was the intention to evade payment of duty; in each of the cases it would have to be seen as a fact whether there had been a non-levy or short-levy, and whether that has been by reason of collusion or any wilful mis-statement or suppression of facts by the importer or his agent or employee; for the operation of the proviso, the intenti .....

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the specific intent to do something the law forbids, or with the specific intent to fail to do something the law requires to be done..; an inference of bonafide conduct in favour of the appellant was required to be drawn as he laboured under the very doubt which formed the basis of the issue before them, and had to be decided; the burden of proof, of proving malafide conduct under the proviso to Section 28, lay with the Revenue; in furtherance of the same, no specific averments found mention in .....

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753 is therefore misplaced. The distinction between Sections 53(1) and 53(3) of the Act is evident. Section 53(1) is attracted in cases where the under- declaration of tax has arisen on account of a bona fide error on the part of the dealer. Instances of a bona fide error, attracting Section 53(1) of the Act, readily come to mind. A dealer may be under the bona-fide belief that he is liable to tax at the Nil rate under Schedule I to the Act, or at a lesser rate of tax under Schedule IV to the A .....

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