* THE HONOURABLE SRI JUSTICE GODA RAGHURAM, and THE HONOURABLE SRI JUSTICE SANJAY KUMAR + WRIT PETITION No: 22266 of 2008 & Batch % THURSDAY , THE SECOND DAY OF APRIL TWO THOUSAND AND NINE # M/s Pulp N.Pack Private Ltd, Tadimalla Nidadavolu (M), W.G.District rep by its Director Mr. B.Raghavendra Rao ... PETITIONER VERSUS $ The Commercial Tax Officer, Nidadavolu Circle, Raidu Nursing Home of Dr. Sri Rama, Bridge Main Road, Nidadavolu, W.G. District and another. ... RESPONDENTS ! Counsel for the Petitioners: MR. S.R.R. VISWANATH ^ Counsel for the Respondents: GP for COMMERCIAL TAX Sri S.R.Ashok, learned Senior Counsel and Sri Ravi S, learned Counsel acted as amicus curiae. Sri K.Raji Reddy, learned Special Standing Counsel for Commercial Taxes and Sri Krishna Koundinya, learned counsel appeared for the respondents on invitation. < GIST > HEAD NOTE ? 1. (1961) 12 STC 357 2. (1942) AC 206 3. (1959) NZLR 996 4. (1962) QB 304 5. (1959) SCR 120 6. (1968) AC 997 7. (1862) 1 B&S 850 8. (1976) AC 239 9. (1985) AC 374 10. (1978) 2 All.E.R. 870 11. (1980) 4 SCC 321 12. (1983) 4 SCC 339 13. AIR 1990 SC 2205 14. AIR 1967 SC 1606 15. (1990) 4 SCC 594 16. AIR 1981 Delhi 190 17. AIR 1974 SC 87 18. (2005) 6 SCC 675 19. (1975) A.P 100 ITR 401 20. (1961) 12 STC 357 21. (1961) 12 STC 816 22. (1991) 82 STC 367 23. (1997) 106 STC 188 24. (1993) 202 ITR 306 (Guj) 25. (2003) 133 STC 534 26. (1998) 150 CTR (P&H) 139 IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) THURSDAY, THE SECOND DAY OF APRIL TWO THOUSAND AND NINE PRESENT THE HON'BLE MR JUSTICE GODA RAGHURAM And THE HON'BLE MR JUSTICE SANJAY KUMAR WRIT PETITION NO : 22266 of 2008 Between: M/s Pulp N.Pack Private Ltd Tadimalla Nidadavote (M) West Godavari District rep.by its Director Sri B.Raghavendra Rao ..... PETITIONER AND 1 The Commercial Tax Officer Nidadavolu Circle Raidu Nursing Home Of Dr.Sri Rama Bridge Main Road Nidadavolu 534301 W.G District 2 The Deputy Commissioner(CT) Eluru Division 25-12-6, 2nd Floor John Street Ushabala Complex N.R pet Eluru .....RESPONDENT(S) Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to issue a writ, order or direction more particularly one in the nature of Mandamus declaring the nonfeasance on the part of the 1st respondent as illegal arbitrary and direct the him to give effect to the orders of the Honourable STAT Visakhapatnam In TA 58/2007 dt 21-1- 2008 and refund the amount of Rs 64,106 along with the interest at 18 per cent per annum for the period of delay beyond 60 days and pass Counsel for the Petitioner: MR.S.R.R.VISWANATH Counsel for the Respondent No.: GP FOR COMMERCIAL TAX WRIT PETITION NO : 22270 of 2008 Between: M/s. Pulp N' Pack Private Ltd., Tadimalla, Nidadavolu Mandal West Godavari District, Rep. by its Director, Sri B.Raghavendra Rao ..... PETITIONER AND 1 The Commercial Tax Officer, Nidadavolu Circle, Raidu Nursing Home of Dr. Sri Rama Murthy, Ramnagar, Palimeeda Old Town, Near Over Bridge, Main Road, Nidadavolu - 534301, W.G.district. 2 The Deputy Commissioner (CT), Eluru Division, 25-12-6, 2nd Floor, John Street, Ushabala Complex, N.R.Pet, Eluru-534006 .....RESPONDENT(S) Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to to issue a writ, order or direction more particularly one in the nature of Mandamus declaring the nonfeasance on the part of the 1st respondent as illegal and arbitrary and direct him to give effect to the orders of the Honorable STAT Visakhapatnam in T.A.57/2007 dated 18-2- 2008 and refund the amount of Rs.79,042/- along with interest at 18 per cent pet annum for the period of delay beyond 60 days and pass Counsel for the Petitioner:MR.S.R.R.VISWANATH Counsel for the Respondent No.: GP FOR COMMERCIAL TAX WRIT PETITION NO : 22297 of 2008 Between: M/s.Pulp N Pack Private Ltd.,Tadimalla ,Nidadavole Mandal West Godavari District, rep.by its Director Sri B.Raghavendra Rao ..... PETITIONER AND 1 The Commercial TAx officer, Nidadavolu circle, Raidurg Nursing Home of Dr.Sri Rama Murthy, Ramnagar Palimeeda Old Town, Near Over Bridge, Main Road Nidadavolu-534301,W.G.District 2 The Deputy Commissioner (CTY), Eluru Division 25-12-6,2nd floor, John street, Ushabala complex N.R.Pet,Eluru-534006 .....RESPONDENT(S) Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to issue a writ order or direction more particularly one in the nature of mandamus declaring the nonfeasance on the part of the 1st respondent as illegal, and arbitrary, and direct him to give effect to the orders of the Honorable STAT Visakhapatnam in TA.No.59/2007 dated 18.2.2008 and refund the amount of Rs.69,723/- along with interest at 18 per cent per annum for the period of delay beyond 60 days and pass Counsel for the Petitioner:MR.S.R.R.VISWANATH Counsel for the Respondent No.: GP FOR COMMERCIAL TAX WRIT PETITION NO : 22306 of 2008 Between: M/s. Pulp N' Pack Private Ltd., Tadimalla, Nidadavole Mandal, West Godavari District, Rep. by its Director, Sri B. Raghavendra Rao ..... PETITIONER AND 1 The Commercial Tax Officer, Nidadavolu Circle, Raidu Nursing Home of Dr. Sri Rama Murthy, Ramnagar, Palimeeda Old Town, Near Over Bridge, Main Road, Nidadavolu, W.G. District. 2 The Deputy Commissioner (CT) Eluru Division, 25-12-6, 2nd Floor, John Street, Ushabala Complex, N.R. Pet, Eluru-534 006 .....RESPONDENT(S) Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to issue a writ order or direction more particularly one in the nature of Mandamus declaring the nonfeasance on the part of the 1st Respondent as illegal and arbitrary and direct him to give effect to the Orders of the Honorable STAT Visakhapatnam in T.A 60/2007 dt. 18-2- 2008 and refund the amount of Rs. 92,361/- along with interest at 18 per cent per annum for the period of delay beyond 60 days and pass such other order or orders as deemed fit and proper in the facts and circumstances of the case. Counsel for the Petitioner:MR.S.R.R.VISWANATH Counsel for the Respondent No.: GP FOR COMMERCIAL TAX WRIT PETITION NO : 22385 of 2008 Between: M/s. Pulp N'Pack Pvt. Ltd. Rep. by its Dir., Sri. B. Raghavendra Rao Tadimalla, Nidadavolu Mandal, W.G. Dist. ..... PETITIONER AND 1 The Commercial Tax Officer Nidadavolu Circle Ram Nagar, Palimeeda Old Town, Near Over Bridge, Main Road, Nidadavolu - 534 301, W.G. Dist. 2 The Dpty. Commissioner (CT) Eluru Division, 25-12-6, 2nd Floor, John Street, Ushabala Complex, N.R. Pet, Eluru - 534 006. .....RESPONDENT(S) Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to issue a writ, order or direction more particularly one in the nature of Mandamus declaring the nonfeasance on the part of the 1st Respondent as illegal and arbitrary and direct him to give effect to the orders of the Hon'ble STAT Visakhapatnam in T.A.61/2007 dated 21-1- 2008 and refund the amount of Rs.3,96,927/- along with interest at 18 per cent per annum for the period of delay beyond 60 days. Counsel for the Petitioner:MR.S.R.R.VISWANATH Counsel for the Respondent No.: GP FOR COMMERCIAL TAX WRIT PETITION NO : 22386 of 2008 Between: M/s. Pulp N' Pack Private Ltd., Tadimalla, Nidadavole Mandal, West Godavari District, Rep. by its Director, Sri B. Raghavendra Rao ..... PETITIONER AND 1 The Commercial Tax Officer, Nidadavolu Circle, Raidu Nursing Home of Dr. Sri Rama Murthy, Ramnagar, Palimeeda Old Town, Near Over Bridge, Main Road, Nidadavolu, W.G. District. 2 The Deputy Commissioner (CT) Eluru Division, 25-12-6, 2nd Floor, John Street, Ushabala Complex, N.R. Pet, Eluru-534 006 .....RESPONDENT(S) Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to issue a writ order or direction more particularly one in the nature of Mandamus declaring the nonfeasance on the part of the 1st Respondent as illegal and arbitrary and direct him to give effect to the Orders of the Honorable STAT Visakhapatnam in T.A 64/2007 dt. 21-1- 2008 and refund the amount of Rs. 9,41,607/- along with interest at 18 per cent per annum for the period of delay beyond 60 days and pass such other order or orders as deemed fit and proper in the facts and circumstances of the case. Counsel for the Petitioner:MR.S.R.R.VISWANATH Counsel for the Respondent No.: GP FOR COMMERCIAL TAX WRIT PETITION NO : 22404 of 2008 Between: M/s. Pulp N' Pack Private Ltd., Tadimalla, Nidadavole Mandal, West Godavari District, Rep. by its Director, Sri B. Raghavendra Rao ..... PETITIONER AND 1 The Commercial Tax Officer, Nidadavolu Circle, Raidu Nursing Home of Dr. Sri Rama Murthy, Ramnagar, Palimeeda Old Town, Near Over Bridge, Main Road, Nidadavolu, W.G. District. 2 The Deputy Commissioner (CT) Eluru Division, 25-12-6, 2nd Floor, John Street, Ushabala Complex, N.R. Pet, Eluru-534 006 .....RESPONDENT(S) Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to issue a writ order or direction more particularly one in the nature of Mandamus declaring the nonfeasance on the part of the 1st Respondent as illegal and arbitrary and direct him to give effect to the Orders of the Honorable STAT Visakhapatnam in T.A 62/2007 dt. 21-1- 2008 and refund the amount of Rs. 5,42,882/- along with interest at 18 per cent per annum for the period of delay beyond 60 days and pass such other order or orders as deemed fit and proper in the facts and circumstances of the case. Counsel for the Petitioner:MR.S.R.R.VISWANATH Counsel for the Respondent No.: GP FOR COMMERCIAL TAX WRIT PETITION NO : 22405 of 2008 Between: M/s. Pulp N' Pack Private Ltd., Tadimalla, Nidadavole Mandal West Godavari District, Rep. by its Director, Sri. B.Raghavendra Rao ..... PETITIONER AND 1 The Commercial Tax Officer, Nidadavolu Circle, Raidu Nursing Home of Dr. Sri. Rama Murthy, Ramnagar Palimeeda Old Town, Near Over Bridge, Main road, Nidadavolu-534 301, W.G.District. 2 The Deputy Commissioner (CT), Eluru Division, 25-12-6, 2nd floor, John Street, Ushabala Complex, N.R.Pet, Eluru-534 006. .....RESPONDENT(S) Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to issue a writ, order or direction more particularly one in the nature of writ of Mandamus declaring the nonfeasance on the part of the 1st respondent as illegal and arbitrary and direct him to give effect to the orders of the Honourable STAT Visakhapatnam in T.A.63/2007 dated 21- 1-2008 and refund the amount of Rs. 6,47,005/- along with interest at 18 per cent per annum for the period of delay beyond 60 days and pass such Counsel for the Petitioner:MR.S.R.R.VISWANATH Counsel for the Respondent No.: GP FOR COMMERCIAL TAX In all these cases Sri S.R.ASHOK, learned Senior Counsel and Sri Ravi S, learned Counsel assisted the court as amicus curiae. In addition to Sri S.R.R. Viswanath, Sri K. RAJI REDDY, learned Special Standing Counsel for Commercial Taxes and Sri KRISHNA KOUNDINYA, learned Counsel appeared for the respondents on invitation. The Court made the following common order: THE HON’BLE SRI JUSTICE GODA RAGHURAM AND THE HON’BLE SRI JUSTICE SANJAY KUMAR W.P.NO. 22266 of 2008 & Batch COMMON ORDER: Orders passed in exercise of the power to withhold refunds under Section 33-C of the Andhra Pradesh General Sales Tax Act, 1957 (for short ‘the Act of 1957’) is challenged in this batch of writ petitions. M/s Pulp N’Pack Private Limited, Nidadavolu, West Godavari District, is the common petitioner in these writ petitions. It is a Small Scale Industry (SSI) engaged in the trade of pulp moulded egg trays, corrugated boxes and waste paper. It was assessed to tax under the provisions of the Act of 1957 and the Central Sales Tax Act, 1956 (for short ‘the Act of 1956’) for the assessment years 2001-02 to 2004-05. The petitioner claimed exemption from tax liability under both the enactments insofar as its turnover pertaining to second sales of pulp moulded egg trays was concerned placing reliance on G.O.Ms.No. 1091 Rev. (CT-II) Department dated 31.10.1994. It was the case of the petitioner that it had purchased pulp moulded egg trays from Small Scale Industries (SSIs) in the State and had in turn subjected them to intra and inter state second sales. The petitioner claimed tax exemption in respect of this turnover relying on the aforestated G.O. The Commercial Tax Officer, Nidadavolu Circle, Nidadavolu, the first respondent in these cases, accepted its claim and granted exemption as sought. However, the Deputy Commissioner (Commercial Taxes), Eluru, the second respondent, exercised revisional jurisdiction under the Statute and held that the petitioner was not entitled to such exemption as the same was available only to a manufacturer- cum-seller of pulp moulded egg trays. Thereupon, demand notices were issued to the petitioner by the first respondent under both the enactments assessing to tax the turnover relating to second sales of pulp moulded egg trays. Aggrieved thereby, the petitioner approached the Sales Tax Appellate Tribunal (‘the STAT’), Visakhapatnam, by way of independent appeals. The appeals filed under the Act of 1957 were numbered as T.A.Nos. 57, 58, 59 and 60 of 2007 while the appeals under the Act of 1956 as T.A.Nos. 61, 62, 63 and 64 of 2007. As required by the statute, the petitioner deposited Rs.3,05,232/- being 25% of the disputed tax under the Act of 1957 for the four assessment years viz, 2001-02 to 2004- 05 and Rs.25,28,421/- towards 25% of the disputed tax under the Act of 1956 for the same four assessment years, towards deposits required to be made as a condition precedent to preferring an appeal, hereinafter referred to as the ‘deposits’. The STAT, Visakhapatnam, by its orders dated 21.01.2008 and 18.02.2008 allowed the appeals filed under the Act of 1957 and the Act of 1956 respectively. Consequently, the petitioner made an application on 17.04.2008 seeking refund of the deposits. As there was no response from the Revenue, the petitioner filed these writ petitions complaining of non-feasance on the part of the respondent authorities inasmuch as Section 21(2) third proviso of the Act of 1957 which applied to the deposits made by the petitioner under the Act of 1957 and the said provision read with Section 9(2) of the Act of 1956 applied to the deposits made under the Act of 1956, required the respondent authorities to refund the deposits within sixty days from the date of receipt of the order passed by the appellate authority allowing the appeals. The first respondent filed individual counter affidavits in the cases, admitting the facts narrated above. He recorded the fact that the Department had preferred Revisions before this Court against the appellate orders passed by the STAT, Visakhapatnam, and the said Revisions, being TrevC No. 83 of 2008 and batch, were pending consideration before this Court. He stated that pursuant to the order of the STAT, Visakhapatnam, consequential orders of refund dated 29.10.2008 had been passed by him giving effect to the said orders. In view of the pendency of the Revisions before this Court, it is stated, the respondents though had issued orders of refund on 29.10.2008, felt that the refund would not be feasible and would adversely affect the Revenue. Accordingly, the first respondent having obtained the previous approval of the second respondent, passed orders on 01.11.2008 invoking the power under Section 33-C of the Act of 1957 and withheld the refund of the deposits. Separate orders were passed in this regard in all the cases on the same date. The petitioner filed rejoinders to the above counters stating that Section 33-C had no application to the facts of the instant case as it was clearly covered by provisions of the third proviso to Section 21(2) of the Act of 1957. The petitioner also pointed out that it had filed the present writ petitions before this Court on 13.10.2008 and it was only then that the respondent authorities had issued the refund orders on 29.10.2008, and immediately thereafter exercised jurisdiction under Section 33-C on 01.11.2008 and withheld the refunds lawfully due to the petitioner. The petitioner further contended that the said orders were without application of mind and were violative of the principles of natural justice as the petitioner was not given an opportunity of hearing before the passing of the said orders. The petitioner was permitted to amend its prayer in the writ petitions taking note of subsequent development. The petitioner now challenges the validity of the orders dated 01.11.2008 passed by the first respondent withholding the refund in exercise of the powers conferred by Section 33-C of the Act of 1957. As the matter involved the examination of the scope and extent of the powers of the Revenue to withhold refunds under Section 33-C of the Act of 1957 and such determination is of far reaching import and consequence, we deemed it appropriate to seek the assistance of learned Senior Counsel, Sri S.R. Ashok and learned counsel Sri S. Ravi. Heard Dr. S.R.R. Viswanath, learned counsel for the petitioner, Sri K.Raji Reddy, learned Special Standing Counsel for Commercial Taxes and the learned Amicus Curiae. The contentions on behalf of the petitioner are – Sec.33A to 33F were inserted in the Act of 1957 by Act 16 of 1963 w.e.f. 1.8.1963. These provisions are thus to be read in conjunction with the substantive provisions of Sec.33 which deal with refund of tax or license fee. Further, the 3rd proviso to Sec. 21(2) which was added by Act 3 of 2002 w.e.f. 20.11.2001 enjoins the assessing authority to refund the amounts (of Twelve and half; Twenty-five; or Fifty percent of the difference of tax assessed by the assessing authority or revisional authority, as the case may be, and the tax admitted and paid by the appellant), required to be deposited as the condition precedent to entertainment of an appeal, with simple interest calculated @ 18% p.a. if the refund were not made within sixty days from the date of receipt of an order passed u/Secs. 19 or 21. In the context of provisions of Sec. 21(2) and 33 of the Act of 1957 (referred to above), the ‘pre-deposit’ made preceding an appeal would not be covered by the provisions of Sec.33C and may not be withheld. While the interest payable on the ‘pre-deposit’ amount [qua the third proviso to Sec. 21(2)] is 18% p.a. if the refund is made beyond sixty days from the date of receipt of an order passed u/Secs. 19 or 21, the interest payable qua Sec. 33F(2) on the refund withheld u/Sec.33C is at 12% pa, and that too after a period of six months from the date of the order referred u/Sec. 33C and till the date of the refund. Therefore the provisions of Sec.33C cannot be construed as applicable to refund of the amounts deposited as a condition precedent to an appeal u/Sec. 21(2). The amounts payable towards tax are remitted into the consolidated fund of the Union or of the appropriate State u/Art. 266 of the Constitution while u/Art. 284 the deposits made into any court to the credit of any cause, matter etc., would be paid into the public account of the Union or of the State. Further the deposits made as a condition precedent for filing an appeal are pursuant to a statutory prescription qua the legislative field under Entry 65 of List-II in the Seventh Schedule to the Constitution, while tax and license fees collected are traceable to the legislative power derived under Entry 54 of the said List. Thus the character of the ‘pre- deposit’ is substantially distinct from a tax paid. The power to withhold refund under Section 33-C does not include the refund of ‘pre-deposit’ made under Section 21(2) of the Act of 1957. At oral hearing, though not pleaded, it was also urged that the C.T.O., Nidadavolu, had no jurisdiction to pass an order u/Sec. 33C of the Act of 1957. After the repeal of the Act of 1957 by the promulgation of the A.P. Value Added Tax Act 2001 (‘VAT Act’), Sec. 80(2) of the VAT Act r/w Rule 59(6) of the AP Value Added Tax Rules,2005 enjoins that only the Deputy Commissioner of the Division concerned where the refund does not exceed Rs.10 lakhs and the Joint/Additional Commissioner in the O/o Commissioner of Commercial Taxes where the refund exceeds Rs.10 lakhs, could exercise authority for withholding such refund. That the several orders dated 01.11.2008 (impugned in the writ petitions), passed by the 1st respondent invoking the power under Section 33C of the Act of 1957 (withholding the refund of the pre-deposit amounts), do not set out any or relevant reasons for exercise of the discretion and for arriving at the opinion that the grant of refund is likely to adversely affect the revenue and are therefore unsustainable. Contentions by the learned Amicus : Sri S.R. Ashok, learned Senior Counsel : The power (to withhold refund) must be exercised with circumspection and responsibility and not merely on the ground or for the mere reason that an appeal or proceedings under the Act of 1957 is pending. Though the amount involved for refund may in a given circumstance constitute a sufficient ground to infer adversity to the interest of the revenue, there need be guidelines or policy instructions contouring the exercise of such discretion by the authority. Different authorities, in the absence of contouring guidelines are seen to arrive at varying and dissimilar conclusions as to what constitutes a sufficient ground warranting an inference of adversity to the interest of revenue. The exercise in practice has become arbitrary and whimsical. The competent authority must independently apply the mind, weigh the pros and cons of withholding the refund. Withholding of the refund not only prejudicially affect an assessee but also visits the exchequer with pejorative consequences and therefore the taxpayer since the exchequer would be mulcted with the interest burden upon delayed refund and eventually proves counter productive to the interest of the revenue. The authority must therefore be satisfied, prima facie, that the facts and circumstances of a particular case warrant withholding of the refund. Such application of mind preceding the formation of an opinion to withhold refund must be reflected in an order passed under Section 33-C. The track record of the assessee concerned i.e., that the assessee would be likely to evade the process of law rendering it difficult for the revenue to recover the amounts in the event of the State succeeding in a pending appeal/proceedings may be a relevant circumstance for exercise of the power under Section 33-C. On this aspect the order passed must reflect a prima facie assessment that the revenue would be subject to difficulty in recovering the dues. The assessment as to adversity to the interest of the revenue involves complex factors which must be examined and evaluated on a case to case basis by the concerned authority. The reasons underlying such individualized exercise of power on a rational assessment of the factors, must be set out in the order so as to obviate the possibility of arbitrariness and irrational subjectivity. Since the provisions of Sec.21(2) including the third proviso thereto specify the amounts to be deposited as a condition precedent to the entertainment of an appeal, as a percentage of the difference of tax ordered by the appellate or revisional authority as the case may be, even a ‘pre-deposit’ partakes the character of a tax. The amount of ‘pre- deposit’ is also covered by Section 33-C. The only distinction between the refund of tax on the one hand and the ‘pre-deposit’ on the other is that the interest burden upon the revenue