Enhanced penalty needs prior notice of fraud or wilful neglect; defective notice vitiates the penalty order.

A writ petition challenging the jurisdiction to impose maximum penalty was maintainable despite the availability of an appellate remedy, because the dispute concerned the legality of enhanced penalty on admitted facts. A penalty under section 53(3) of the Andhra Pradesh Value Added Tax Act could not be sustained where the show-cause notice did not allege fraud or wilful neglect in under-reporting turnover. The absence of that factual foundation deprived the assessee of proper notice and breached natural justice, and the later reliance on an inadequate explanation could not cure the defect. The impugned penalty was quashed, with liberty to proceed afresh by issuing a proper notice.

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Issues: (i) Whether the writ petition should be declined on the ground of availability of an appellate remedy under the Andhra Pradesh Value Added Tax Act. (ii) Whether a penalty order imposing higher penalty under section 53(3) of the Andhra Pradesh Value Added Tax Act could be sustained when the show-cause notice did not allege fraudulent or wilful neglect in under-reporting turnover.

Issue (i): Whether the writ petition should be declined on the ground of availability of an appellate remedy under the Andhra Pradesh Value Added Tax Act.

Analysis: The challenge went to the jurisdiction to impose maximum penalty on the admitted facts. In such a situation, the availability of an appeal did not bar writ scrutiny, and the matter was not relegated to the alternative remedy.

Conclusion: The writ petition was maintainable despite the appellate remedy.

Issue (ii): Whether a penalty order imposing higher penalty under section 53(3) of the Andhra Pradesh Value Added Tax Act could be sustained when the show-cause notice did not allege fraudulent or wilful neglect in under-reporting turnover.

Analysis: The penal provision required a factual foundation of fraud or wilful neglect in the notice itself before higher penalty could be imposed. The notice in question contained no such allegation and therefore did not give the assessee adequate notice to answer the charge that could attract enhanced penalty. The subsequent reliance on absence of a plausible explanation could not cure the defect in the notice.

Conclusion: The penalty order was unsustainable and liable to be set aside for want of proper notice and breach of natural justice.

Final Conclusion: The impugned penalty was quashed, while the department was left free to proceed afresh by issuing a proper show-cause notice in accordance with law.

Ratio Decidendi: An enhanced penalty under a provision requiring fraud or wilful neglect cannot be imposed unless the show-cause notice first alleges the factual basis for such misconduct; absence of that foundation vitiates the order for breach of fair procedure.

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