AP General Sales Tax Act| Revision Does Not Lie On A Question Of Fact: Andhra Pradesh HC

The Andhra Pradesh High Court has highlighted that under the Andhra Pradesh General Sales Tax Act 1957, revision does not lie on a question of fact.

In that context, the Bench of Justice Ravi Nath Tilhari and Justice Kiranmayee Mandava observed that, "It is evident from a bare reading of Section 22(1), that the revision lies to this Court against the order of the Appellate Tribunal on the ground either that a question of law has not been decided or a question of law has been erroneously decided."

Advocate KP Amarnath reddy appeared for the petitioner, and Government Pleader Shreyas Reddy appeared for the respondent.

The petitioner, a registered dealer under the AP GST Act, 1957, and the Central Sales Tax Act, 1956, was involved in the manufacture and sale of polythene bags. For the assessment year 1995-96, the petitioner reported a gross turnover of Rs. 28,62,770/-. The Commercial Tax Officer (CTO) of Madanapelli issued notices to the petitioner for the production of books for assessment purposes, but the petitioner did not respond.

On 05.11.1996, the Regional Vigilance and Enforcement Officer (RVEO) in Kurnool inspected the petitioner’s business premises. The inspection revealed that the purchase bills for secondary transactions of polythene bags from M/s. Modi Plastic Industries and M/s. Sundar Plastics, both in Hyderabad, were dubious. The suppliers were not registered dealers with the Commercial Tax Department, and their registration numbers belonged to M/s. Ramakrishna Tea Trading Company. The invoices lacked supporting waybills, vehicle numbers, and payment details, and the invoices from M/s. Sundar Plastics were unsigned.

The CTO issued a pre-assessment show cause notice, which was received by a partner in the petitioner’s firm, Sri S. S. Babu. The petitioner requested a 30-day extension but failed to produce the required books. Consequently, the Assessing Authority confirmed the pre-assessment notice, levying a demand of Rs. 2,76,090/-. A note was added to the assessment proceedings indicating that a penalty under Section 7-A(2) of the AP GST Act, 1957, would be initiated separately.

The petitioner filed an appeal against the assessment order, which was allowed, leading to a remand for a fresh assessment. The CTO issued a new assessment order, and the petitioner paid the assessed tax. However, the CTO separately imposed a penalty of Rs. 2,53,000/- under Section 7-A(2) without receiving a response to the show cause notice. This penalty, which was five times the tax due, was set aside by the Appellate Deputy Commissioner, who noted that penalties could only be levied post-assessment if the dealer had suppressed turnover.

The Joint Commissioner (CT) Legal overturned the Appellate Deputy Commissioner’s decision, reinstating the original penalty order. The Special Tribunal for Tax Appeals (STAT) partially allowed and partially dismissed the petitioner’s appeal. It upheld the imposition of the penalty but reduced it from five times to three times the tax due, considering the initial penalty excessive for a first-time offense.

The petitioner argued that the penalty under Section 7-A(2) could not be levied for mere possession of the allegedly false bills without their production before the Assessing Authority. The petitioner contended that the recovery of purchase bills during the RVEO inspection would not attract Section 7-A(2) since no exemption was claimed using false bills.

Conversely, the respondents argued that the petitioner claimed exemption on part of the turnover as a second sale, which was not entitled to exemption. He maintained that detecting false bills warranted penalty proceedings under Section 7-A(2).

The High Court observed that, "The revision has no force. The STAT has neither failed to decide a question of law nor has decided the question of law before it erroneously. No case for interference is made out."

Subsequently, the case was dismissed.

Cause Title: M/s. Sri Balaji Industries vs State of Andhra Pradesh

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