IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) WEDNESDAY, THE THIRTYFIRST DAY OF MARCH TWO THOUSAND AND TEN PRESENT THE HON'BLE MRS. JUSTICE T.MEENA KUMARI AND THE HON'BLE MR JUSTICE NOOTY RAMAMOHANA RAO WRIT PETITION NO : 7 2 6 5 of 2010 Between: M/s. Cavinkare Private Limited, 54-9-38, Municipal Ward 31/1, Auto Nagar, Vijayawada, Krishna district, Represented by its Sr.Fin.& Accounts Officer, Mr.D. Venkitachalam … Petitioner V/s. The Assistant Commissioner (CT), LTU, Vijayawada Division, Krishna district & Anr. … Respondents Counsel for the Petitioner : Sri S.Dwarakanath Counsel for the Respondents: Sri P. Balaji Varma Spl. S.C. for C.T. THE HON'BLE MRS. JUSTICE T.MEENA KUMARI AND THE HON'BLE MR JUSTICE NOOTY RAMAMOHANA RAO WRIT PETITION NO : 7 2 6 5 of 2010 O R D E R : {Per the Hon’ble Smt. Justice T.Meenakumari} Seeking a writ of mandamus to set aside the order dated 18-3-2010 passed by the second respondent as illegal, arbitrary and contrary to law and consequently to restrain the first respondent from taking any coercive steps for recovery of the balance disputed tax pursuant to the said notice for the period from November 2008 to August 2009 under the A.P. Value Added Tax Act, 2005 pending disposal of the appeal before the second respondent and to pass such other suitable orders as this court may deems fit and proper in the circumstances of the case, the present writ petition has been filed. 2. The present writ petition has been filed by the Senior Finance & Accounts Officer representing the petitioner company, M/s. Cavinkare Private Limited, Vijayawada, which is engaged in the business of manufacture and sale of cosmetics and also food products. It is stated that the petitioner company has two divisions; viz., Personal Care Division for Cosmetics and for Foods Division, where masala powders and vermicelli are manufactured and sold. It is stated that the petitioner company is a VAT dealer and on the rolls of the first respondent under the provisions of APGST Act and having purchased the goods from another VAT dealer is entitled to claim Input tax credit and also adjust it against the output tax payable on its sales. Accordingly, the Input tax credit relatable to both the divisions is being taken and by applying A x B/C as prescribed under Rule-20, where ‘A’ is the input tax credit, ‘B’ is the taxable turnover and ‘C’ is the total turnover. It is stated that the proportionate Input tax credit is arrived at to be adjusted against the tax payable by the petitioner. Thus, the petitioner has been filing its returns and claiming input tax credit on the said basis. 3. It is stated that during the period from November 2008 to August 2009, the returns were filed claiming input tax credit to an extent of Rs.31,81,320-00 in respect of both the divisions, where business is being carried on. But the first respondent issued a show cause notice in Form No.VAT-305A on 16-9-2009 after verification of the books of accounts claiming that in respect of the foods division, apart of it is sold within Andhra Pradesh and remaining is sold outside the State of Andhra Pradesh after stock transfer. While in personal care division the goods are sourced from other branches or manufacturing locations outside Andhra Pradesh but the entire output is sold within Andhra Pradesh. Further there is no input tax credit available for cosmetics division since there are no corresponding purchases in relation to that division. Accordingly, the respondents denied the input tax credit in respect of cosmetics division on the whole. As far as the food division is concerned, the purchases of packing material and chilly powder used for packing or manufacturing the pickles and vermicelli was considered as eligible subject to application of the formula A x B/C as relatable to the food division only. Accordingly, the respondents proposed to restrict the Input tax credit by treating one of the divisions as ineligible and the food division as eligible but by application of the formula. The Assessing Officer referred to Rule 20, sub-rule (6) for the proposition made in the notice. Accordingly, the respondents arrived at the excess claim as Rs.15,97,060-00. In pursuance thereof, the petitioner filed its objections through letter dated 21- 9-2009 and 01-10-2009 respectively contending inter alia that the procedure adopted by the first respondent is not correct, since the Input tax credit has to be claimed under section 13 read with Rule 20 by taking the entire results of the company as a whole but not division-wise. But there is no provision in the VAT Act requiring a VAT dealer to take Input tax credit division-wise. It is stated that the petitioner is required to club the Input tax credit of all divisions, taxable turnover of all divisions and total turnover of all divisions, since both divisions form part of a Company as a single entity. Further it is stated that the calculations were done erroneously and that even assuming the methodology adopted in the notice is to be followed, the excess input tax credit is only Rs.11,66,611-00 and detailed workings were submitted to that effect. 4. It is further stated that the first respondent by an order dated 21-10-2009 confirmed the view taken by him in the show cause notice by treating the food division and the personal care division as independent units and applying the first limb of Rule 20 (6). 5. Aggrieved by the order passed by the first respondent, the petitioner filed an appeal before the second respondent together with an application of stay of collection of the disputed tax, after considering 12.5% paid in a sum of Rs.1,99,633/- in terms of the proviso to Section 31 of the AP VAT Act. The second respondent by order dated 18-3-2010 dismissed the stay application observing that there is no prima facie case for grant of stay. The first respondent issued a notice dated 25-3-2010 serving the Xerox copy of the order of the second respondent refusing to grant stay and demanded the petitioner to pay the balance within three days. Now the first respondent is threatening to take coercive steps for recovery of the above stipulated sum. 6. Heard the learned counsel for the petitioner and the learned Special Standing Counsel for Commercial Taxes. 5. In the facts and circumstances of the case, we are of the opinion that the writ petition can be disposed of at the stage of admission directing the petitioner to deposit half of the tax amount due, as per the impugned order, within a period of four weeks from the date of receipt of a copy of the order and the respondents are directed not to take coercive step for recovery of the disputed tax, pending finalisation of the appeal by the Appellate Deputy Commissioner (CT) Vijayawada, the second respondent herein. It is made clear that the amount paid, if any, shall be given credit to the above stipulated sum. 6. With these directions, the writ petition is disposed of. No order as to costs. _____________________ Justice T.Meena Kumari ___________________________________ Justice Nooty Ramamohana Rao March 31, 2010. I s L THE HONOURABLE SMT. JUSTICE T. MEENA KUMARI AND THE HONOURABLE SRI JUSTICE NOORTY RAMAMOHANA RAO WRIT PETITION No. 7 2 6 5 OF 2010 Judgment of the Division Bench delivered by the Hon'ble Smt. Justice T. Meenakumari) Circulation Entry No. 1 4 Date: 31-03-2010 COMPUTER No. 43 Court Master: I s L