TaxTMI 
TaxTMI 
2017 (5) TMI 127
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....y an order of assessment, will have an effective statutory alternative remedy of appeal. But there are two exceptions to this rule and they are (1) cases where the assessing officer lacks jurisdiction; and (2) cases where principles of natural justice stand violated. 4. In the case on hand the petitioner assails the impugned order on both grounds, viz., lack of jurisdiction and violation of principles of natural justice. For the purpose of convenience let us first take the attack on the ground of lack of jurisdiction. BRIEF FACTS:- 5. The petitioner is a partnership firm engaged in the business of operating Restaurants, cafes and Bakeries. It is registered as a dealer on the rolls of the Assistant Commissioner (Commercial Taxes) LTU, Begumpet Division. 6. In May, 2014 the petitioner entered into a Business Transfer Agreement with a company by name Paradise Food Court Private Limited, agreeing and undertaking to transfer its entire business as an ongoing concern, in consideration of equity shares and compulsorily convertible preference shares being allotted to the partners of the petitioner-firm. Under the agreement all the tangible and intangible assets and all the righ....
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....n of clause (c) under Section 2(6) of the Act; (b) that there could be no sale without a consideration being paid in cash and (c) that an officer discharging the functions conferred by the statute and the Rules is not competent to decide whether a Rule is ultra vires the Act or not. 14. In order to test the correctness of the above contentions, let us now have a look at the relevant provisions of the Act. Section 4(1) of the Act obliges every dealer to pay tax on every sale of goods. Therefore, the liability to pay tax will arise only when there is (1) a sale and (2) of goods. 15. The expression sale is defined in Section 2(28) of the VAT Act, to mean every transfer of property in goods by one person to another in the course of trade or business, for cash, or for deferred payment, or for any other valuable consideration and it includes even the transfer of the right to use. Similarly, the expression goods is defined in Section 2(16) to mean all kinds of moveable properties other than newspapers, actionable claims, stocks, shares and securities and includes all materials, articles and commodities involved in the execution of works contract. 16. Two important things are to b....
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...., adventure or concern shall be deemed to be business; (iii) A sale by a person whether by himself or through an agent of agricultural or horticultural produce grown by himself or grown on any land whether as owner or tenant in a form not different from the one in which it was produced, save mere cleaning, grading or sorting does not constitute business; 19. What the assessing officer has done in this case is to take the consideration fixed under the Business Transfer Agreement for every item of asset, as the sale of individual items of goods including goodwill and confirmed the demand made in the show cause notice. Therefore, it is clear that even the Assessing Officer could not regard the transfer of business as a sale, but split such transfer as involving the sale of individual items. 20. But a careful look at the Telangana State VAT Act, 2005 would show that (1) every sale of goods is made chargeable to tax under Section 4(1); (2) every purchase of taxable goods in the course of business, is made chargeable to tax under Section 4 (4); (3) every works contract is made chargeable to tax, to the extent of the value of the goods at the time of incorporation of suc....
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.... appearing in Section 2(1)(bbb) of the APGST Act. The definition of the expression business in Section 2(1)(bbb) contained two clauses which are exactly in pari materia with clauses (a) and (b) of Section 2(6) of the Telangana VAT Act, 2005. 25. Therefore, after noting that the interpretation given by the Supreme Court in State of Gujarat v. Raipur Manufacturing Co. Ltd. (1967) 1 SCR 618, to the word business, underwent a change after the insertion of the definition under Section 2(1)(bbb) by way of amendment with effect from 01.04.1966, the Full Bench of this Court took into account various decisions and eventually came to the conclusion that the transfer of entire business undertaking together with the moveable properties, even if it involves sale of goods, cannot be regarded as a sale in the course of business by the dealer. 26. After the decision of the Full Bench in Coromandal Fertilizers Limted, the State Government brought an amendment under Amendment Act No.19/2000 with effect from 01.04.2000. By the said Amendment sub-clause (iii) was inserted under Section 2(1)(bbb) of the APGST Act, 1957. This section 2(1)(bbb) of the A.P.General Sales Tax Act,1957, as it stood bef....
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....us Service Private Ltd. AIR 1964 Madras 136, Mr.Govind Reddy contended that when an amending Act alters the language of the statute, the alteration must be taken to have been made deliberately. 29. But the above contention loses sight of one important aspect. As we have pointed out earlier, sale of business as a whole is not made taxable even now under the charging provision. It is only the sale of goods which is chargeable under Section 4(1). The definition of the expression sale would apply to a case only if the sale takes place in the course of trade or business, as per section 2(28). A business in entirety, cannot be sold in the course of trade or business, as there will be no business left thereafter, to deal with. Therefore, the amendment brought forth to the definition of the expression business could not have changed the dynamics of the game, when the charging provision and the definition of the expression sale remained the same. Hence the reliance placed upon the decision of the Full bench of the Madras High court in Natesa Mudaliar, is completely misplaced. 30. Another important aspect to be noted is that any dealer who sells goods is also entitled to Input Tax Cred....
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.... the power conferred by Section 78 read with Clause 21 of Section 2 of the Telangana VAT Act, 2005. Sub-section (2) of Section 78 lists out the matters in respect of which a provision may be made in the Rules. Therefore, the fact that the rule was validly issued in exercise of a power conferred by statute, cannot be denied. 36. A careful look at the reason for Rule 36 being inserted, which cannot be correlated to anyone of the matters enumerated in Clauses (a) to (r) of sub-section (2) of Section 78, will show that in the entire Telangana VAT Act, 2005, the only place where a transfer of business as a whole is spoken about, is Section 13(5)(b). Under Section 13(5)(b) of the Act, no Input Tax Credit shall be allowed on the transfer of a business as a whole. Therefore, this is an indication to the fact that the transfer of a business as a whole is not chargeable to tax under Section 4(1) merely on the ground that a transfer of business would naturally involve the sale of goods of the business. It is only with a view to keep the transfer of a business as a whole, out of the purview of the charging provision that input tax credit is denied under section 13(5)(b) and Rule 36 has been....
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....tory Rule goes contrary to the provisions of the Act. The law in this regard is well settled by a decision of a 3-member Bench of the Supreme Court in Commissioner of Sales Tax v. Indra Industries (2000) 9 SCC 66. In the said case, the sales tax authorities raised a contention that a Circular issued by the Commissioner was contrary to law. But the Supreme Court rejected the said contention in paragraph-3 of its judgment, as follows: 3. A circular by tax authorities is not binding on the courts. It is not binding on the assessee. However, the interpretation that it thereby placed by the taxing authority on the law is binding on that taxing authority. In other words, the taxing authority cannot be heard to advance an argument that is contrary to that interpretation. 41. But it is contended by Mr. M.Govind Reddy, learned Special Standing Counsel appearing for the Department, that if a Circular is contrary to the provisions of the Statute, the Statute will prevail and that the Departmental authorities cannot go beyond the Statutory prescription. In support of this contention, the learned Special Standing Counsel relied upon a series of decisions, which we shall advert to now. ....