IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) MONDAY, THE TWELVTH DAY OF SEPTEMBER TWO THOUSAND AND ELEVEN PRESENT THE HONOURABLE SRI JUSTICE GODA RAGHURAM & THE HONOURABLE SRI JUSTICE N. RAVI SHANKAR WRIT PETITION No.5472 of 2011 Between : M/s. Laqshya Hyderabad Airport Media Pvt. Ltd. Shamshabad, Ranga Reddy District. …PETITIONER AND The Commercial Tax Officer, Hyderabad and 2 others. …RESPONDENTS THE HONOURABLE SRI JUSTICE GODA RAGHURAM & THE HONOURABLE SRI JUSTICE N. RAVI SHANKAR WRIT PETITION No.5472 of 2011 ORDER : (PER GR,J) The writ petition is filed for the following reliefs : (i) declare the action of the 3rd respondent in dismissing the appeal filed by the petitioner challenging the order passed by the 2nd respondent in denying the input tax credit through the impugned proceedings dated 28.10.2010 in Appellate Deputy Commissioner order No.2352 in Appeal No.1A/94/08- 09/V served on the petitioner on 31.12.2010; (ii) declare the order passed by the 2nd respondent Dt.10-11-2008 in levying tax under the provisions of APVAT Act for the tax period 2008-09 as without authority of law and jurisdiction in the absence of specific authorization granted by the Deputy Commissioner under Rule 59 of APVAT Rules; and (iii) declare that the petitioner is entitled for input tax credit on the purchase of raw material used in manufacture of flexes as a regular dealer and the Explanation – IV to Section 2(10) has no application to the facts of the case. The petitioner is a Private Limited company and an assessee under the Provisions of APVAT Act, 2005 and Central Sales Tax Act, 1956 (the ‘2005 Act’ and ‘1956 Act’ respectively). The petitioner is in the business of advertisements, hoardings and is an assessee under the Service Tax Act, remitting service tax on the revenue received through advertisements by hiring space for displaying advertisements. For the assessment year 2008-2009 petitioner filed its monthly returns under the 2005 Act and the 1956 Act. Within the said assessment year petitioner purchased Iron and Steel from other States and furnished declarations in Form-C and used the goods for manufacture and erection of Uni Poles which are the basic infrastructure for out-door advertising. It also purchased Vinyl Flex Sheets for printing of advertisements; steel tubes, plates, sections and other goods from locally registered VAT dealers. It has entered into agreements with various companies interested in availing the advertisement services offered by the petitioner. Under these agreements, customers are required to provide the artistic material for incorporation onto the Vinyl posters for installation on the hoardings. The petitioner charges for supply of printed Vinyl posters, a sale taxable under the Provisions of 2005 Act. For the hire charges received for hiring the space on the hoardings the petitioner is paying service tax. The petitioner claims to be entitled for credit of input tax suffered on the raw materials procured locally from registered VAT dealers. The second respondent on the basis of an authorization alleged to have been granted by the territorial Deputy Commissioner inspected the petitioner’s business premises on 11-09-2008 and verified the records. The said respondent issued notice in Form 305A on 22-09-2008 proposing to reject the petitioner’s claim for ITC on the ground that it is not entitled for input since its activities fall under Explanation-IV of Section 2(10). The second respondent also proposed levy of penalty equal to the tax claimed as input credit on the ground of under-declaration; and proposed levy of penalty under Section 10A of the 1956 Act asserting that the petitioner cannot purchase the Iron and Steel required for erection and installation of Uni Poles. The petitioner submitted its objections through representation dated 22-10-2008 and 01-11-2008. However, the second respondent confirmed the levy through orders dated 10-11-2008, imposed penalty under Section 10A of the 1956 Act, and on 19-12-2008 levied penalty under Section 53 of the 2005 Act. Assailing the same the petitioner filed separate appeals before the third respondent on 16-12-2008 and 23-01-2009. The petitioner asserts that no reasonable opportunity or notice was issued scheduling the date of hearing of the appeal filed challenging the levy of tax under the 2005 Act and that no such notice was served either on the petitioner or its counsel. Eventually, the impunged orders were passed by the third respondent on 28-10-2010 dismissing the appeals pertaining to levy of tax and penalty under the 2005 Act. The orders are challenged on several grounds, including that for the impugned order of assessment passed by the second respondent there is no authorization accorded to the second respondent by the territorial Deputy Commissioner in terms of Rule-59(4) authorizing the second respondent to conduct audit or to pass an order of assessment. Reliance is placed on the decision of this court in Balaji Flour Mills v. The Commercial Tax Officer-II, Chittoor[1]. On the point of jurisdiction, the learned Special Government Pleader for Commercial Taxes has obtained instructions and fairly states that there was no authorization to the second respondent to pass order of assessment, as required under Rule-59(4) of the APVAT Rules 2005 and that in the light of the decision in the Balaji Flour Mills the orders of assessment and penalty cannot be sustained. In the light of the submission above, the writ petition is allowed. Accordingly, the assessment order passed by the second respondent dated 10-11-2008 and issued in Form VAT 305 for the period February, 2008 to July, 2008 and the proposal therein to levy penalty under Section 53 of the 2005 Act, read with Rule 25(8) of the APVAT Rules, 2005, cannot be sustained and is accordingly set aside. Consequently, the order of the third respondent dated 28-10-2010, dismissing the petitioner’s appeal, is also liable to be set aside and is accordingly set aside. Since the assessment order dated 10-11-2008 passed by the second respondent is set aside on the point of jurisdiction, it is open to the competent and duly authorized assessing officer to pass a fresh order of assessment following the due process of law and in accordance with law. In the circumstances, however there shall be no order as to costs. ______________________ JUSTICE GODA RAGHURAM ______________________ JUSTICE N. RAVI SHANKAR Date : 12-09-2011 Dsr/ndr THE HONOURABLE SRI JUSTICE GODA RAGHURAM & THE HONOURABLE SRI JUSTICE N. RAVI SHANKAR WRIT PETITION No.5472 of 2011 (Order of the Division Bench delivered by Hon’ble Sri Justice Goda Raghuram) Date : 12-09-2011 Dsr/ndr [1] (2011) VST 40 150 (A.P.)