ARUL MURUGAN TRADERS Vs. STATE OF ANDHRA PRADESH

JUDGEMENT

(1.) THIS is an appeal filed against the Revisional Orders of Additional Commissioner (CT) (Legal), Office of Commissioner of Commercial Taxes, Andhra Pradesh, Hyderabad in CCTs Ref.No.L.III(3)/962/2006 -1, dated 3 -4 -2009. In this appeal, the appellant disputed levy of penalty of Rs. 49,59,358/ -. The appellant is M/s. Arul Murugan Traders, Tadukupeta. It is on the rolls of Commercial Tax Officer, Puttur. The Commercial Tax Officer levied penalty for the assessment years 1999 -2000, 2000 -01 & 2001 -02. The appellant deals in groundnuts and groundnut seeds. The appellant claimed exemption on the turnover of groundnuts stating that they are not any last purchasers in the State of Andhra Pradesh. It also claimed by the appellant that they have sold the groundnut seeds to Sri M. Chakka Venkata Subbaiah of Galiveedu. The appellant claimed that Chakka Venkata Subbaiah is a registered dealer in Andhra Pradesh and filed an affidavit to that effect as required under Rule 17A(2). The Department made enquiries and the enquiries revealed that Chakka Venkata Subbaiah of Galiveedu is not at all a registered dealer under APGST Act. Hence, the Commercial Tax Officer found that the Affidavits filed by the appellant are not genuine observing that the purchaser is a fictitious dealer and found that the affidavits are void under law. It is also observed by the Commercial Tax Officer that the bills and said documents produced by the appellant in support of their claim obviously fabricated. It is observed that the burden cast upon the dealer under Section 7A has not been discharged by the appellant. Hence, a reassessment had been made for the above three years. During the course of re -assessment, personal hearing was granted to the assessee. Hence, the Commercial Tax Officer contemplated to levy penalty under Section 14(8) of the APGST Act, 1957 and issued show cause notice proposing to levy penalty equivalent to five times of the tax due. The appellant claimed that the buyers are existing persons. It is also contended that there is movement of goods to the buyers and that they received the payment. The objections were rejected and penalty was levied. Appeals were preferred before the Appellate Deputy Commissioner (CT), (FAC), Kurnool. The Appellate Deputy Commissioner by his order dated 21 -9 -2005 allowed the appeals. Before the Appellate Deputy Commissioner the appellant filed letter of Chakka Venkata Subbaiah of Galiveedu admitting purchase of groundnut seeds from the appellant and also about issue of affidavit. They also filed certificate of residence of Chakka Venkata Subbaiah of Galiveedu issued by the Panchayat Secretary, Galiveedu Gram Panchayat, Kadapa district. So much so the affidavit issued by Chakka Venkata Subbaiah was also filed to the effect that they purchased ground not seeds from the appellant. In addition to it, a notarized affidavit of Chakka Venkata Subbaiah having purchased groundnut seeds was also filed. After considering the above documents, the Appellate Deputy Commissioner observed that the appellants have discharged their initial burden since the recorded evidence produced by the appellants indicates that Sri Chakka Venkata Subbaiah, Galiveedu is real and existing persons who has certified that he had purchased groundnuts from the appellant and further observed that this irresistible evidence supports that the sale of Sri Chakka Venkata Subbaiah was in fact made by the appellant. Ultimately, he allowed the appeals.

(2.) THE Additional Commissioner (CT) (Legal), Hyderabad having observed that the orders passed by the Appellate Deputy Commissioner were prejudicial to the interests of revenue by exercise of powers under section 20(2) of the APGST Act issued pre -revision show cause notice calling for the objections of the assessee. The assessee filed its objections vide letter dated Nil received on 31 -3 -2009 stating that the appellant is not the last purchasing dealer but Sri Chakka Venkata Subbaiah is the last purchaser and hence tax has to be collected from Chakka Venkata Subbaiah and consequently penalty cannot be levied against him. However, the Additional Commissioner rejected the contentions of the appellant and confirmed the revision, thereby restoring the orders of penalty passed by the Commercial Tax Officer, Puttur dated 31 -12 -2004. Aggrieved by the same, the present appeal is preferred.

(3.) THE learned Revisional Authority ought to have seen that item 6 of the third schedule to the APGST Act during the material time inter alia provided for incidence or levy of tax on groundnuts @ 4% as an item of declared goods and the liability is fastened at purchase point namely when purchased by an oil miller other than a decorticating miller in the State and in other cases by the last purchaser in the State and thus perusal of the legislative entry clearly established fastening the liability to tax of ground nuts @ 4% only. Section 5 contemplates that every dealer shall pay a tax under this Act for each year. Sub -section (4) of the said charging section placed an embargo saying that in respect of the same transaction, the buyer or the seller but not both liable to pay tax. The learned Revisional Authority misaddressed the whole issue as the basis adopted for revision of the appeal order is indisputably on the charge of tax on a registered dealer alone which is totally incorrect and contrary to the language employed in the charging section and on the other hand the charging section admittedly placed the liability to tax on the dealer but not on the registered dealer alone and as such to say that a dealer liable to tax on purchase of groundnuts is real, existing and bonafide, evidence is required to be adduced which was in fact done and therefore when the purchasing dealer M/s. Chakka Venkata Subbaiah of Galiveedu was existing, real and identifiable dealer, though for various reasons unconcerned to the appellant, the Registration Certificate of the said dealer was cancelled. The cancellation of the registration of Mr. Chakka Venkata Subbaiah from 1 -4 -1999 is not the decisive factor to alter or change the incidence or levy in terms of the legislative entry as Item -6 of III Schedule provided for the levy of tax on groundnuts at the last purchase point by a dealer. Section 2(e) defines 'Dealer' to mean any person who carries on the business of buying, selling, supplying or distributing the goods directly or otherwise whether for cash or for deferred payment is called as a dealer and therefore the evidence placed by the appellant in the form of affidavits given by Chakka Venkata Subbaiah of Galiveedu clearly established the factum of purchase of groundnuts by the said dealer. When once the appellant proved the purchase of groundnuts to a dealer who is the last one in the State, the appellant cannot be fastened with the liability to tax. Invoking Rule 17B on the part of the Revisional Authority is a grave error since Rule 17B deals with agency transactions. Here, the relationship between the appellant and Mr. Chakka Venkata Subbaiah is not that of a principal and agent.