CITY TEX PRIVATE LIMITED A2 BHARATI APARTMENTS P&T COLONY VIJAYAWADA KRISHNA DISTRICT REPRESENTED BY ITS MANAGING DIRECTOR M SURENDRA BABU Vs. COMMERCIAL TAX OFFICER AUTO NAGAR VIJAYAWADA KRISHNA DISTRICT

JUDGEMENT

(1.) The petitioner-company is engaged in the business of manufacture of cotton terry towelling fabrics. It is registered on the rolls of the first respondent under the Andhra Pradesh Value Added Tax Act, 2005 ("the VAT Act"). For the year 2006-07, the petitioner filed returns in VAT form 200 disclosing purchases, sales and input-tax credit availed of and output tax payable. The petitioner claims that he is entitled for tax refund of Rs. 4,09,427. The returns under the Central Sales Tax Act, 1956 ("the CST Act") were also filed in CST VT forms for 2006-07 disclosing export sales of terry towels, taxable at zero rate. They claimed exemption of inter-State sales as falling under entry 45 of the First Schedule to the VAT Act. In pursuance of authorization issued by the second respondent, the Deputy Commercial Tax Officer (DCTO), Benz Circle, Vijayawada, conducted audit of the accounts of the petitioner on January 20, 2009, for the periods from April 1, 2006 to November 30, 2008. By order dated February 27, 2009, the DCTO disallowed the input-tax credit on the goods for which exemption was claimed and by applying formula A x B/C as per rule 20 of the Andhra Pradesh Value Added Tax Rules, 2005 ("the VAT Rules") disallowed the input-tax credit for an amount of Rs. 2,73,966. Thereafter, in exercise of powers u/s 32 of the VAT Act, the second respondent issued a show-cause notice proposing to revise the order of the DCTO, dated February 27, 2009. He proposed to levy tax on the sales turnover of cotton terry towelling fabrics on the premise that the petitioner claimed exemption on the sales turnover on the terry towels in the guise of terry towelling fabrics. The petitioner submitted objections to the show-cause notice on June 23, 2010. While the matter is pending, at that stage, the first respondent issued show-cause notice dated November 23, 2009 under the CST Act for the year 2006-07; the petitioner filed objections on December 16, 2009 and thereafter the first respondent passed the assessment order dated March 30, 2011 demanding Rs. 1,97,065 towards CST duly giving credit to the tax paid. Assailing the same, the dealer has filed the instant writ petition.

(2.) It is contended by the dealer that the impugned order dated March 30, 2011, was served on the petitioner on June 29, 2011 and that the same is antedated. The impugned order is beyond the period of limitation prescribed u/s 21(3) of the VAT Act and it was passed only to deny the refund claim made by the petitioner. It is further contended that the first respondent did not establish the fact that the petitioner sold the cotton terry towels in the guise of cotton terry towelling fabrics and the fabrics sold by the petitioner falls under entry 45 of the First Schedule to the VAT Act and therefore exempted from VAT. The order was passed without verifying the record and without considering the issues raised by the petitioner. The impugned order is contrary to the circular issued by the Commissioner of Commercial Taxes, whereunder the inter-State sales of textiles will be treated as exempted under the VAT Act even if the buying dealers are not able to produce C forms.

(3.) At the state of admission itself, the first respondent has filed counter-affidavit opposing the writ petition. It is submitted that the petitioner has effective alternative remedy and the writ petition is filed without availing of the remedy which is not maintainable. The first respondent would further submit that the petitioner claimed exemption for the goods "cotton terry towelling fabrics" falling under entry 45 of the First Schedule to the VAT Act and also on the input-tax credit on the purchase value of the cone cotton yarn (raw material) purchased within the State from the registered dealers. They also claimed refund of tax in VAT 200 return filed for the month of March, 2009. During the audit, it was noticed that the assessment for the year 2006-07 under the CST Act was not finalized. Therefore, a show-cause notice was issued on June 23, 2010 proposing to levy tax at 10 per cent on the inter-State sales turnover of cotton terry towels treating the goods as falling under entry 52 of the Fourth Schedule to the VAT Act. The petitioner submitted objections. Duly considering all the objections, the first respondent passed orders raising demand for CST of Rs. 1,97,065. The petitioner is neither registered with the Central Excise and Customs Department nor has paid additional excise duty to claim exemption under the VAT Act. Entry 52 originally read as "readymade garments". By G.O. Ms. No. 1564, dated August 17, 2005, it was amended with effect from August 18, 2005 to read as "readymade garments, bed sheets, pillow covers, towels, blankets, travelling rugs, curtains, crochet laces, zari, embroidery articles (and all other made ups)". The bracketed portion was omitted with effect from March 1, 2009 and the items "bed sheets, pillow covers, towels, blankets, travelling rugs, curtains, crochet, zari and embroidery articles" were omitted with effect from May 1, 2009 and no tax was levied from that day.