2023 (3) TMI 59 - HC - VAT and Sales Tax

Court upholds Section 17(5)(b) AP VAT Act exception for interstate dealers. Penalties under Section 53.

The court upheld the validity of Section 17(5)(b) of the AP VAT Act, ruling that it is an exception for interstate dealers to register as VAT dealers. It ... Constitutional Validity of Section 17(5)(b) of AP VAT Act and charging Section 4(2) of AP VAT Act - ultra vires to Section 17(2)(3)(4)(7) - petitioner is to be assessed as ToT dealer only for his single transaction of purchase of goods from outside the State and for that single transaction or not - time limitation under Section 21(4) of the AP VAT Act - penalty can be imposed at 25% only on the tax due as per Section 49 of AP VAT Act or not - maintainability of writ petition. Whether Section 17(5)(b) without reference to quantum of turnover is ultra vires to Section 17(2)(3)(4)(7) as well as charging Section 4(2) of AP VAT Act and liable to be struck down? - HELD THAT:- When Section 17 is comprehensively studied, it does not appear that 17(5)(b) has totally negated the operation of Sub Sections (2)(3)(4) and (7), rather it has limited their operation by carving out an exception. In other words, Sub Sections (2)(3)(4) and (7) are still operable so long as they do not fall within the groove of exception. Therefore, the petitioner cannot contend that Section 17(5)(b) has taken away the right conferred under Sub Sections (2)(3)(4) and (7). We find no conflict or inconsistency between sub-section (5) and other sub-sections and therefore, vires of Section 17(5) cannot be questioned. Whether the petitioner is to be assessed as ToT dealer only for his single transaction of purchase of goods from outside the State and for that single transaction the petitioner shall be assessed to tax as a casual trader under relevant provisions of the AP VAT Act? - HELD THAT:- A tax is imposed for public purpose for raising general revenue of the State. As per Article 366(28) of the Constitution of India, the term “taxation” includes the imposition of any tax or impost, whether general or local or special and the tax shall be construed accordingly. The term “impost” means a compulsory levy. Since imposition of tax involves a compulsory levy or exaction of money by Government, the same is not permissible except by or under the authority of a statutory provision. The petitioner shall be treated as a TOT dealer only irrespective of his involvement in a single transaction of purchase from outside the State. The said single transaction of purchase is concerned, the same is liable to be taxed under Section 6 of the CST Act, 1956 but not under the provisions of AP VAT Act, 2005 for the reason that as per Section 5 of AP VAT Act, the said Act has no application to impose tax on sale or purchase of any goods which took place outside the State. The petitioner cannot be treated as casual trader also for the reason that U/s 2(7) of AP VAT Act a casual trader is a person who carries on occasional transactions of a business nature involving buying, selling or distribution of goods in the State, whether as petitioner made a single purchase from outside the State. Whether the assessment for the period April, 2013 to July 2014 is barred by limitation under Section 21(4) of the AP VAT Act? - HELD THAT:- According to the petitioner the impugned Assessment for the period April, 2013 to July, 2014 is barred by limitation under Section 21(4) of AP VAT Act since the assessment for the aforesaid period exceeded four years. The plea cannot be accepted, for the reason that for the aforesaid period, the petitioner has wilfully underdeclared his sales turnover and evaded payment of the tax to a tune of Rs.3,030/-. Therefore, following Section 21(5) of the AP VAT Act the 3rd respondent has rightly levied the tax. It is relevant at this juncture to mention that for the subsequent period also, for any undervaluation of sales and consequent evasion of tax, the petitioner will be liable to pay tax at 1% as a TOT dealer but not 14.5% as a VAT dealer Whether penalty can be imposed at 25% only on the tax due as per Section 49 of AP VAT Act? - HELD THAT:- The petitioner shall be treated as TOT dealer only but not as VAT dealer. As such, he need not pay tax as a VAT dealer. Consequently, Section 49 of the Act which deals with penalty for failure to registration does not apply to the instant case. On the other hand, the petitioner for his act of undervaluing the tax as a TOT dealer, shall be liable to pay penalty as per Section 53 of AP VAT Act. Whether the writ petition is not maintainable due to availability of alternative, efficacious remedy of appeal? - HELD THAT:- In Whirlpool Corporation v. Registrar of Trade Marks, Mumbai [1998 (10) TMI 510 - SUPREME COURT] the Apex Court held that the alternative remedy will not operate as a bar in the contingencies namely where the writ petition has been filed for the enforcement of fundamental rights or where there has been a violation of principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. In the instant case the petitioner challenged the validity of Section 17(5)(b) of AP VAT Act. As such the writ is maintainable. The impugned Assessment Order dated 04.08.2018 penalty proceedings dated 23.11.2018 and Appellate Order dated 22.10.2020 are hereby set aside - Petition allowed. Issues Involved:1. Validity of Section 17(5)(b) of the AP VAT Act.2. Assessment of the petitioner as a TOT dealer or VAT dealer for a single interstate purchase.3. Limitation period for assessment under Section 21(4) of the AP VAT Act.4. Imposition of penalty under Section 49 of the AP VAT Act.5. Maintainability of the writ petition due to availability of alternative remedy.Detailed Analysis:1. Validity of Section 17(5)(b) of the AP VAT Act:The petitioner challenged Section 17(5)(b) of the AP VAT Act, arguing it is ultra vires to Sections 17(2), (3), (4), and (7) and Section 4(2) of the Act. The court held that Section 17(5)(b) is an exception to Subsections (2), (3), and (4), and does not negate their operation but limits it. The court applied the rule of harmonious construction, stating that Section 17(5)(b) carves out an exception for dealers making interstate purchases or sales, requiring them to register as VAT dealers regardless of turnover. Thus, the provision is valid and not inconsistent with other sections.2. Assessment as TOT Dealer or VAT Dealer:The petitioner argued that a single interstate purchase should not compel VAT registration, as Section 17(5)(b) uses the plural 'purchases or sales.' The court agreed, interpreting the plural terminology strictly, meaning more than one transaction is required for VAT registration. The court emphasized the strict construction of tax statutes, stating that if the legislature intended a single transaction to trigger VAT registration, it would have explicitly stated so. Thus, the petitioner should be treated as a TOT dealer for his single interstate purchase.3. Limitation Period for Assessment:The petitioner claimed the assessment for April 2013 to July 2014 was time-barred under Section 21(4). The court disagreed, noting the petitioner willfully underdeclared sales turnover, invoking Section 21(5) for evasion cases. Therefore, the assessment was within the permissible period, but the petitioner should be taxed as a TOT dealer, not a VAT dealer.4. Imposition of Penalty:The petitioner contended that even if liable for VAT registration, the penalty should be 25% under Section 49, not 100%. The court held that since the petitioner is a TOT dealer, Section 49 does not apply. Instead, penalties for undervaluation should be imposed under Section 53 of the AP VAT Act.5. Maintainability of the Writ Petition:The respondents argued the writ petition was not maintainable due to the availability of an alternative remedy. The court cited precedent, stating writs are maintainable when fundamental rights are enforced, principles of natural justice are violated, jurisdiction is questioned, or vires of an Act is challenged. Since the petitioner challenged the validity of Section 17(5)(b), the writ petition was maintainable.Conclusion:The writ petition was allowed, and the impugned Assessment Order dated 04.08.2018, penalty proceedings dated 23.11.2018, and Appellate Order dated 22.10.2020 were set aside with the following directions:1. Section 17(5)(b) of the AP VAT Act is valid.2. The petitioner, a TOT dealer, is not required to register as a VAT dealer for a single interstate purchase.3. The assessment for the period mentioned is not barred by limitation but must be revised to treat the petitioner as a TOT dealer.4. Penalties should be imposed under Section 53 for undervaluation, not Section 49.5. The 3rd respondent must pass a fresh Assessment Order treating the petitioner as a TOT dealer. No costs were imposed.Pending interlocutory applications were closed.