2014 (10) TMI 600 - HC - VAT and Sales Tax

Court dismisses petition challenging VAT assessment; petitioner misled court, faces costs.

The court dismissed the writ petition challenging an assessment order under the A.P. VAT Act, 2005, finding the petitioner ineligible for exemption under ... Exemption from payment of tax - Exemption to sub-contractor - Suppression of facts - Abuse of Court - Contempt of Court - Held that:- petitioner received the show- cause notice dated 12.08.2013 on 14.08.2013. It is also not in dispute that no reply was filed thereto by the petitioner before the first respondent, prior to the assessment order being passed on 31.08.2013. The petitioner claims to have submitted their objections, vide letter dated 30.08.2013, not to the first respondent, but to the office of the second respondent on the same day. The letter dated 30.08.2013 contains initials, which the Learned Counsel for the petitioner contends is the signature of the person, in the office of the 2nd respondent, who received the said letter. The letter does not even bear the stamp or seal of the office of the second respondent. The writ affidavit is silent regarding the name and identity of the person who is alleged to have received the said letter. The petitioners contention that their employee had, by mistake, delivered the said letter to the office of the second respondent cannot be readily accepted as, even subsequent thereto, in the correspondence between the petitioner on the one hand and respondents 1 to 3 on the other, no reference is made to their having submitted their objections, to the show cause notice dated 12.08.2013, on 31.08.2013. The affidavit, filed in support of the Writ Petition, makes no mention of any of the events which took place subsequent to the assessment order dated 31.08.2013. As is evident from the facts narrated hereinabove, the petitioner was repeatedly called upon to pay the tax due; proceedings under Section 29 of the Act was instituted; and both the petitioners bankers and the contractee i.e. SRMT were called upon to pay, the amounts due from them to the petitioner, directly to the 2nd respondent. The petitioner received the assessment order dated 31.08.2013 on the same day. It is only after several letters were issued calling upon them to pay the demanded amount, and proceedings under Section 29 of the Act were initiated for recovery of the arrears, did the petitioner make an application on 19.02.2014 seeking payment of the tax and penalty in instalments. The Deputy Commissioner (CT) granted instalments by his proceedings dated 05.03.2013. The petitioner was required to pay the first instalment on 25.03.2014. Suppressing all the facts, subsequent to the assessment order dated 31.08.2013 including their having sought for and being granted instalments for payment of the tax with penalty, the petitioner invoked the jurisdiction of this Court under Article 226 of the Constitution of India on 20.03.2014, and obtained an interim order of stay on 21.03.2014. While every abuse of the process of the Court may not necessarily amount to Contempt of Court, abuse of the process of the Court calculated to hamper the due course of a Judicial proceeding, or the orderly administration of justice, is Contempt of Court. It may be that certain minor abuses of the process of the court may be suitably dealt with as between the parties or in some other manner. But it may be necessary to punish as a contempt, a course of conduct which abuses and makes a mockery of the judicial process, and which thus extends its pernicious influence beyond the parties to the action and affects the interest of the public in the administration of justice. The public have an interest, an abiding and a real interest, and a vital stake in the effective and orderly administration of justice, because, unless justice is so administered, there is the peril of all rights and liberties perishing. The Court has the duty of protecting the interest of the public in the due administration of justice and, so, it is entrusted with the power to commit for Contempt of Court, not in order to protect the dignity of the Court against insult or injury as the expression 'contempt of Court' may seem to suggest, but to protect and vindicate the right of the public that the administration of justice shall not be prevented, prejudiced, obstructed or interfered with. Deceiving the Court by deliberately suppressing a fact, or giving false facts, may be a punishable contempt. Certain acts of a lesser nature may also constitute an abuse of process as, for instance, initiating or carrying on proceedings which are wanting in bonafides. In such cases the court has extensive alternative powers to prevent an abuse of its process. Where the Court, by exercising its powers under rules of court or its inherent jurisdiction, can give an adequate remedy, it will not in general punish the abuse as a contempt of court. On the other hand, where an irregularity or misuse of process amounts to an offence against justice, extending its influence beyond the parties to the action, it may be punished as a contempt. Both on merits and for abuse of process of Court, the Writ Petition is liable to be, and is accordingly, dismissed. While initiation of contempt proceedings for such misrepresentation and suppression of facts is in order, we refrain from doing so and, instead, dismiss the Writ Petition with exemplary costs of ₹ 25,000/- which the petitioner shall pay to the State Government within four weeks - Decided against assessee. Issues Involved:1. Legality of the assessment order dated 31.08.2013.2. Alleged contravention of Article 265 and principles of natural justice.3. Alleged abuse of the process of the court.Detailed Analysis:I. Legality of the Assessment Order Dated 31.08.2013:The petitioner challenged the assessment order under Section 4(7)(b) or (c) of the A.P. VAT Act, 2005, arguing it should be under Section 4(7)(d) or (a). Section 4(7)(b) and (c) of the Act, amended by Act 21 of 2011, stipulate a composition tax rate of 5% for works contracts. Section 4(7)(d) provides a composition tax rate of 5% on 25% of the amount received for construction and selling of residential apartments, with an exemption for sub-contractors if the main contractor opts for this composition.The petitioner, a contractor for SRMT, claimed exemption as a sub-contractor under Section 4(7)(d). However, the court found no evidence that SRMT was engaged in both construction and selling of residential apartments or that SRMT opted for composition under Section 4(7)(d). The agreement between the petitioner and SRMT identified SRMT as the owner and the petitioner as the contractor, not a sub-contractor. Consequently, the petitioner was not entitled to the exemption under Section 4(7)(d).The petitioner also argued that they should be taxed under Section 4(7)(a) if composition under Section 4(7)(d) was inapplicable. However, having opted for composition, they could not revert to Section 4(7)(a). The court upheld the assessment under Section 4(7)(b) and (c), finding the petitioner's contentions without merit.II. Alleged Contravention of Article 265 and Principles of Natural Justice:Article 265 prohibits the levy or collection of tax without authority of law. The court found the assessment order was in accordance with the Act and Rules, not violating Article 265. The petitioner failed to submit a reply to the show-cause notice dated 12.08.2013, which undermined their claim of a violation of natural justice. The court held the assessment order was not in violation of principles of natural justice.III. Alleged Abuse of the Process of the Court:The court examined the records and found the petitioner had acknowledged the tax liability through a letter dated 24.08.2013 and sought instalments for payment. The petitioner suppressed these facts and misrepresented their case, claiming their Managing Director was unaware due to illness. The court found the medical certificate dubious and noted the General Manager (Finance) had handled the correspondence, not a lower-rung employee as claimed.The court concluded the petitioner deliberately misled the court, constituting an abuse of the judicial process. The court emphasized that misleading the court and suppressing material facts are serious offenses, warranting dismissal of the petition.Conclusion:The court dismissed the writ petition on both merits and for abuse of the judicial process, imposing exemplary costs of Rs. 25,000 to be paid to the State Government within four weeks. The court refrained from initiating contempt proceedings but highlighted the gravity of the petitioner's conduct.