* THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No.19619 of 2011 % 27.8.2011 # M/s.Sri Venkateswara Animal Health Products, Vijayalakshmipuram, Bapatla, represented by its Proprietor, P.Ram Prasad, S/o.P.L.Narayana Rao ... Petitioner VERSUS $ The Deputy Commercial Tax Officer-I, Madanapally. ... Respondent < GIST: > HEAD NOTE: ! Counsel for Petitioner: Sri M.V.J.K.Kumar ^Counsel for Respondent: Sri P.Balaji Varma ? Cases referred THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No.19619 of 2011 August 27, 2011 Between: M/s.Sri Venkateswara Animal Health Products, Vijayalakshmipuram, Bapatla, represented by its Proprietor, P.Ram Prasad, S/o.P.L.Narayana Rao ... Petitioner AND The Deputy Commercial Tax Officer-I, Madanapally … Respondent THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No.19619 of 2011 ORDER: (Per Hon’ble Sri Justice V.V.S.Rao) The petitioner, a proprietary concern, is a registered dealer under the Andhra Pradesh Value Added Tax Act, 2005 (the VAT Act) on the rolls of the Commercial Tax Officer (CTO), Bapatla. It is in the business of manufacturing and marketing veterinary medicines. Having purchased 20 barrels of Pongamia oil[1] from M/s.Makam Industries, Gowribidanur, Karnataka for their business, the petitioner was transporting the same on 09.5.2011. The vehicle carrying the goods was checked by the respondent, who detained both the vehicle and the goods on the ground that they were not accompanied by advance way bill in Form-X or Form 600, and that the driver of the vehicle had failed to produce the record of the goods vehicle, the trip sheet and/or log book as prescribed under Section 48(b) of the VAT Act. The petitioner’s authorized representative (AR) appeared before the respondent on 10.5.2011. As there was urgency to meet the requirement of supply of veterinary medicines to the Animal Husbandry department, the AR got the vehicle and the goods released by paying Rs.22,056/- towards tax and penalty. A show cause notice dated 10.5.2011 was issued by the respondent calling upon the petitioner to file objections for the assessment of tax at 4% on the value of the goods. Another show cause notice was issued on the same date proposing to levy penalty, equivalent to two times of the tax due, under Section 45(7) of the VAT Act. The AR gave a consent letter admitting lapse, and expressing willingness to pay the tax and penalty. Accordingly two separate orders were passed on the same day: one levying an amount of Rs.7,352/- towards tax at 4% on the value of the goods, and the other levying penalty of Rs.14,704/-. In this writ petition, the petitioner seeks a writ of mandamus to declare the action of the respondent, in detaining the goods vehicle bearing No.AP 07 TU 9209 and 20 barrels of Pongamia oil on 09.5.2011 at Madanapally check post and releasing them only after payment of the tax and penalty, as arbitrary, illegal, and as being contrary to the provisions of the VAT Act. A consequential direction is sought for refund of the tax and penalty. At the stage of admission itself, the respondent filed counter affidavit opposing the writ petition. He submits that when there are efficacious alternative remedies available under the VAT Act, a writ petition would not lie. On 09.5.2011 a surprise check was conducted at Madanapally bypass road. The offending vehicle was transporting Pongamia oil from Gowribidanur of Karnataka to Bapatla; the driver of the vehicle produced sale bill and another document issued by the seller of the petitioner. On verification, it was noticed that TIN number, mentioned on the sale bill, belonged to another dealer. The driver did not produce the advance way bill in duplicate as required under Section 45(2)(b) of the VAT Act as well as Rule 55(2) of the Andhra Pradesh Value Added Tax Rules, 2005 (the VAT Rules). The driver also failed to produce the vehicle records/trip sheet/log book as required under Section 48(b) of the VAT Act. In view of these discrepancies, notice in Form VAT 610 dated 09.5.2011 was issued proposing to detain the goods. The same was served on the driver. On 10.5.2011 the AR of the petitioner appeared before the respondent. He was served with a notice calling upon the petitioner to file objections to the proposed levy of tax. The petitioner neither filed objections nor produced the way bill, but filed a letter admitting guilt. Therefore, the order was passed levying tax. As the irregularities committed were admitted, another notice was issued for levying penalty calling upon the petitioner to file objections within seven days. The petitioner filed a letter accepting liability, and expressed their willingness to pay the tax and penalty. Therefore, another order was passed levying penalty. The Counsel for the petitioner submits that there was no voluntary payment of tax and penalty by the petitioner as the goods were detained along with the vehicle and, as there was urgency, the petitioner paid the tax and penalty. Therefore, the petitioner cannot be said to have accepted the contravention or irregularity. The collection of tax and penalty, by the respondent, is highly arbitrary as deprecated by the judgment of a Full Bench of this Court in Ambica Lamp House v CTO[2]. Per contra, the Special Counsel for Commercial Taxes submits that the levy of the tax and penalty was preceded by the notices as contemplated under Section 45(7) of the VAT Act; the AR received the show cause notice but gave a consent letter expressing willingness to pay the tax and penalty; and, therefore, the action of the respondent is not tainted with any illegality. The facts are not in serious dispute. The petitioner was transporting Pongamia oil from Gowribidanur of Karnataka to Bapatla. It was checked on 09.5.2011 at Madanapally, and it was found that the driver was not carrying the records of the goods vehicle, advance way bill in duplicate as required under Section 45(2)(b) and Section 48 of the VAT Act. The respondent issued show cause notice bearing GC No.36/11-12, dated 10.5.2011. On the same day, the assessment order was passed. In addition, the respondent also issued a penalty show cause notice bearing POR/ 36/2011-12, dated 10.5.2011 which was followed by the order levying penalty equivalent to two times of the tax due. The assessment order refers to the consent letter dated 10.5.2011. Likewise the penalty order refers to the willingness letter dated 10.5.2011 of the dealer. Indeed the Special Counsel has produced before us a photocopy of the consent/willingness letter. In this letter, the petitioner’s AR accepted the irregularity and offered to pay the tax and penalty. The petitioner does not dispute the fact of their AR having given the letter. The petitioner, however, contends that the collection of tax and penalty from the petitioner simultaneously, as evidenced by the “receipt for payment of money in cash” (receipt No.B4530708), is illegal. To appreciate the controversy, it is necessary to refer to the provisions of Chapter VII (Sections 45 to 48) of the VAT Act. Section 48 requires every owner or other person in-charge of a goods vehicle or a vessel to carry with him, (i) bill of sale or tax invoice or delivery note; (ii) log book or goods vehicle record or trip sheet; and (iii) any other document as may be prescribed by the Rules relating to the goods under transport. These documents shall contain such particulars as may be prescribed. Rule 55 of the VAT Rules prescribes the documents which are to be carried while transporting the goods. Section 47 of the VAT Act requires every vehicle carrying the goods to obtain a transit pass from the officer-in-charge of the first check post, and deliver it to the officer-in-charge of the last check post while exiting from the State of Andhra Pradesh. Section 46 of the VAT Act empowers any officer, not below the rank of Deputy Commercial Tax Officer, to enter into and search the office, carrier, or bailee or the person-in- charge of the goods and the records to whom the goods were delivered for transmission if such carrier or bailee keeps the goods in any office, shop, godown or any other place. In such an event, the carrier or bailee or person-in-charge of the goods shall provide all facilities to the searching official for examination and inspection, and produce the bill of sale or delivery note and other documents. Section 45 of the VAT Act has nine sub-sections. This section, in a somewhat comprehensive manner, deals with establishment of check posts, obligation of a driver or any other person-in-charge of the goods vehicle to stop the vehicle at the check post for the purpose of preventing evasion of tax, the consequences that would follow for non- production of documents in proof of payment of tax and other matters. An analysis of Section 45 of the VAT Act would reveal the following. The Government or the Commissioner, with a view to prevent or check evasion of tax in the State, may, by notification, direct the setting up of a check post or the erection of a barrier, or both, at such place or places as may be notified. While passing the check post the driver or any other person-in-charge of the goods vehicle shall stop the vehicle, and shall keep it stationary as long as may be necessary, and allow the officer-in- charge of the check post to examine the contents in the vehicle and inspect all the records relating to the goods carriage, which are in the possession of such driver or the person for the purpose of ascertaining whether the goods are taxable, and whether tax has been paid thereon. When the vehicle is checked with this object two things are possible, namely, (i) the tax payable had been paid, and (ii) the tax payable is not paid. These two situations are dealt with by sub-section (3) of Section 45 of the VAT Act, which reads as under. 45. Establishment of check posts.-- (3) If on such examination and inspection it appears:- (a) (i) that the tax, if any payable in respect of the sale or purchase of the goods carried, has been paid; or (ii) that the sale or purchase of the goods carried has, for the purpose of payment of tax been properly accounted for in the documents referred to in clause (b) of sub-section (2); the said officer shall release the goods vehicle or vessel with the goods carried; (b) (i) that the tax, if any, payable in respect of the sale or purchase of the goods carried has not been paid; or (ii) that the sale or purchase of the goods carried has, for the purpose of payment of tax not been properly accounted for in the documents referred to in clause (b) of sub-section (2); and if the said officer is satisfied, after making such enquiry as he deems fit, that with a view to prevent the evasion of tax payable in respect of the sale or purchase of the goods, carried, it is necessary to detain the goods he shall detain the goods and direct the driver or any other person in-charge of the goods vehicle or vessel to pay such tax, or to furnish security for an amount equal to two times the amount of tax payable in such form and in such manner and to such authority as may be prescribed, on behalf of the person liable to pay such tax. Section 45(3)(a) of the VAT Act requires the officer at the check post to release the goods vehicle with the goods carried, if tax has been paid on the sale or purchase, or the purpose of payment of tax is properly accounted for in the documents referred to in Section 45(2)(b) of the VAT Act. Under Section 45(3)(b) of the VAT Act, if the tax payable has not been paid or the sale or purchase of the goods for the purpose of payment of tax has not been properly accounted for, the officer, after making such enquiry, shall detain the goods and direct the driver or any other person-in-charge to pay such tax or to furnish security for an amount equal to two times the amount of tax payable to the prescribed authority, on behalf of the person liable to pay the tax. If tax is paid and security is furnished, the goods shall be released forthwith (Section 45(4) of the VAT Act). If tax is not paid or security is not furnished, as per Section 45(6) of the VAT Act, the officer-in-charge of the check post shall detain only so much of the goods as are approximately equal in value to the amount of the tax directed to be paid or security directed to be furnished, as long as may reasonably be necessary. In case the goods are to be detained for more than three days, the check post officer shall have to obtain permission from the next higher authority. At this stage, it is relevant to read Section 45(7) of the VAT Act. It reads as follows. 45. Establishment of check posts.-- (7)(a) Where goods are carried without paying tax, if any, payable or goods are carried without being properly accounted for in the documents referred to in clause (b) of sub- section (2), the said officer shall collect the tax payable on the goods so carried and in addition levy a penalty not exceeding two times the amount of tax payable on such goods after giving a reasonable opportunity to the person likely to be effected, against the proposed penalty; (b) Any such officer shall have power to seize and confiscate any goods where such goods are carried in the goods vehicle without any documents or covered by fictitious documents: Provided that before taking action for the confiscation of goods under this sub-section, the officer shall give the person affected an opportunity of being heard. Sub-section (7) of Section 45 of the VAT Act empowers the officer empowered by the Government, to levy penalty not exceeding two times the amount of tax payable on the goods. The penalty, however, cannot be levied unless the person likely to be affected is given a reasonable opportunity. The sub-section also empowers the officer to seize and confiscate the goods, after giving an opportunity of being heard, if the goods were carried in the vehicle without any documents or covered by fictitious documents. If the goods are subject to speedy and natural decay, and no claim is made, the officer may sell the goods in open auction and remit the sale proceeds to the Government treasury. In such an event, the person entitled to such sale proceeds may make an application to the authority prescribed for payment of the sale proceeds after deducting the expenses of sale and other incidental expenses as well as the amount of tax and penalty due in respect of the sale or purchase of the goods in question (Sub-sections (8) and (9) of Section 45 of the VAT Act). A reading of various sub-sections of Section 45 of the VAT Act would show that the Legislature has taken abundant care to safeguard the interest of the Revenue and prevent the evasion of the tax or improper payment of tax. Proper care should also be taken to see that the officers-in-charge of the check posts do not act arbitrarily at their whims and fancies. At the stage of detaining the vehicle, at the stage of demanding tax or security as a condition precedent for release of the goods and vehicle, and at the stage of levying penalty, the officer is required to act reasonably and put the person, likely to be affected, on notice. The empowering provision does not enable the officer-in-charge of the check post to detain every vehicle to levy tax on all the goods and levy penalty in every situation. The question of detaining the vehicle, the goods, levying tax and penalty would arise only when the goods are carried without payment of the tax and/or without proper documentation of the sale or purchase of the goods carried. Even in such a situation, if the driver or person-in-charge of the goods is willing to pay “such tax” (which means, provisionally assessed tax) or to furnish security, the goods cannot be detained. They shall be released and the procedure as contemplated in Rule 56 of the VAT Rules shall be followed. Even when there is a necessity to levy penalty, the officer shall afford “reasonable opportunity to the person likely to be affected”. If the tax is paid for the purpose of release of the goods, or security is furnished, the proceedings under Section 45(7) of the VAT Act for levy of penalty need not be taken in a hurried manner. Even in case of non-payment of tax or non-production of documents, as contemplated under Section 48 of the VAT Act read with Rule 55 of the VAT Rules or in the case of non- production of documents relating to the sale or purchase of the goods carried on, the dealer may have an acceptable defence put forth. The driver or person-in-charge of the vehicle cannot be imputed with the knowledge about these objections. The legislation, in its wisdom, requires the authorized officer at the check post to release the vehicle or the goods on condition of the driver or any other person paying the tax or furnishing security. The officers-in-charge of the check posts cannot act in an arbitrary manner and levy tax and penalty in every case especially when all such officers are required to obtain permission of the next higher authority if the goods are detained for more than three days. In Ambica Lamp House, the complaint was officials of the vigilance wing inspected the business premises of the dealers, levied and collected taxes and compounding fee by using threat or coercion. The Full Bench, having regard to various provisions of the Andhra Pradesh General Sales Tax Act, 1957 and the Andhra Pradesh General Sales Tax Rules, 1957, held that officers of the Commercial Tax department were not entitled to levy and collect tax on the spot by way of cash or post-dated cheques, and that collection of tax as well as compounding fee and penalty on the day of inspection is not in accordance with provisions of the APGST Act. In our considered opinion, the ratio of the Full Bench has no application to the facts on hand. Admittedly, the petitioner’s goods and the vehicle carrying the goods were detained at Madanapally check post. It is not the case of the petitioner that officials of the Vigilance department had visited their business premises, and had collected tax and penalty. The petitioner, therefore, cannot derive any support from the decision of the Full Bench. There is no dispute that the petitioner’s AR, K.Srinivasa Rao, appeared before the respondent on 10.5.2011. While admitting the irregularities committed, he expressed willingness to pay the tax and penalty. Though the show notice was served, he did not choose to file any objections. Admittedly the petitioner had voluntarily paid the tax and penalty, after receiving the show cause notice. Therefore, we do not find any illegality in the respondent’s action. Hence the question of refund would not arise nor are we willing to hold that the levy and collection of tax and penalty is illegal and arbitrary. The writ petition, for the above reasons, fails and is, accordingly, dismissed without any order as to costs. _______________ (V.V.S.RAO, J) ______________________________ (RAMESH RANGANATHAN, J) August , 2011 NOTE: 1. L.R. Copy be marked. 2. Issue C.C. in one week. (By order) YS [1] Oil extracted from the seed of pingamia pinnata (in vernacular, Kanuga) [2] (2005) 142 STC 551 (AP) : 2005 (2) ALD 704 : 2005 (3) ALT 190