IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) FRIDAY, THE SIXTH DAY OF MARCH TWO THOUSAND AND NINE PRESENT THE HON'BLE MR JUSTICE V.ESWARAIAH and THE HON'BLE MR JUSTICE VILAS V. AFZULPURKAR WRIT PETITION NO : 4699 of 2009 Between: Hindustan Coca Cola Beverages Pvt Ltd., 44-69 Moulali, Hyderabad, rep.by its Authorized Signatory Shaik Ali Pasha Executive -Legal ..... PETITIONER AND The Assistant Commissioner (CT) LTU, Saroorngar Division, Namaplly,Hyderabad .....RESPONDENT 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 an appropriate writ order or direction more particularly in the nature of writ of mandamus declaring the order of assessment dated 3.2.2009 passed by the Assistant Commissioner (CT) LTU Saroornagar Division, Nampally, Hyderabad as illegal, and arbitrary, and set aside the same declaring Rule 16(3) and 28(3) (b) of AP .VAT Rules to the extent they command the dealers to mandatorily issue credit notes in respect of discount and not by way of gift of products at 'O' rate as illegal, arbitrary, and ultravires Entry -54 of List -II of VII Schedule to the Constitution of India and accordingly struck down the same declare the order dated 26.2.2009 passed by the respondent in so far as it curtails the time allowed to the petitioner to pay the demanded tax to 24 days instead of the statutory period of 30 days as illegal, arbitrary and without jurisdiction and consequently set aside the same and to grant stay of all further proceedings in pursuance of demand of penal interest dated 3.3.2009 issued in Form VAT 205 by the respondent and pass such other orders. Counsel for the Petitioner: MR.S.CHAKRAPANI Counsel for the Respondent No.: GP FOR COMMERCIAL TAX The Court made the following : THE HON’BLE SRI JUSTICE V.ESWARAIAH AND THE HON’BLE SRI JUSTICE VILAS V. AFZULPURKAR W.P.NO.4699 OF 2009 ORDER: (Per Vilas V. Afzulpurkar, J.) Against the assessment order dated 3.2.2009 passed by the Assistant Commissioner (Commercial Taxes) LTU, Saroornagar Division, Nampally, Hyderabad, the petitioner has filed the present writ petition questioning the validity of Rule 16(3) and 28(3)(b) of APVAT Rules (hereinafter for short referred to as ‘the Rules’), declaring the same to the extent they command the dealers to necessarily issue credit notes in respect of discount and not by way of free gifts as illegal, arbitrary and ultra vires Entry 54 of List of VII Schedule to the Constitution of India and to strike down the same and consequently declare the assessment order dated 3.2.2009 and the consequential order dated 26.2.2009 passed by the respondent as illegal and arbitrary. We have heard the learned senior counsel appearing for the petitioner and the learned Special Government Pleader appearing for the respondent. Elaborate submissions have been made by the learned senior counsel on various aspects of the impugned assessment order and contended that the very understanding and interpretation of Rule 16(3) as well as Rule 28(3)(b) of the Rules and the order made by the assessing authority is absolutely erroneous. He contends that it is not for the Department to stipulate what a dealer must charge and include in the invoice particularly in cases where goods are given free of cost to the retailer and the subject matter of the present assessment only concerns the free gift of products or free discounts which are allowed by the dealer to the retailer. The learned senior counsel contended that since no amount is charged by the dealer on the goods parted with free of cost, it cannot be construed as a ‘sale’ and as such demanding of VAT from the petitioner is totally arbitrary. The learned counsel also relies upon advance ruling issued under Section 67 of APVAT Act 2005 (hereinafter for short referred to as ‘the Act’) in the proceedings of the Authority for Clarification and Advance Ruling in CCT’s Ref.No.PMT/P&L/ A.R.Com/197/2005, dated 2.8.2005. The learned counsel also contended that in the said proceedings it was specifically held that free issues are not taxable and VAT need not be recovered at the applicant’s end for free issues under trade scheme. Though the said document was produced before the assessing authority and the same was acknowledged, vide petitioner’s letter dated 7.2.2009, the same was ignored. The learned senior counsel also relies on the relevant entry under which free drink manufactured by the petitioner is charged particularly after the amendment to Entry 107. The learned senior counsel also contends that fruit drinks continue to find their place in Entry 107(b) of Schedule IV, but aerate fruit drinks have been excluded. It is also contended that carbon dioxide is not mixed, but the process of carbon cleansing is misunderstood by the assessing officer as if it amounts to adding of carbon dioxide to the said product and based on the aforesaid mistake the assessing officer has overcharged the said goods instead of at about 4% with which it is chargeable. The learned special Government Pleader for the respondent supported the impugned assessment order by raising fundamental objection that even according to the petitioner he is only aggrieved by the interpretation of the impugned rules of the assessing officer and in fact an appeal lies against the assessment order and invocation of the extraordinary jurisdiction of this Court under Article 226 of the Constitution is totally unwarranted. He also submits that the advance ruling on which the petitioner is placing reliance was filed before the assessing officer after the assessment order dated 3.2.2009, as such the same has not been taken into consideration by the assessing officer. In the above controversy, it is to be appreciated that the advance ruling on which reliance is placed by the learned senior counsel clearly holds that the free issues are not taxable and therefore VAT need not be recovered at the applicant’s end for free issues under trade scheme. Prima facie, we are of the opinion that the said ruling if applied to the facts of the present case the entire liability imposed on the petitioner in the impugned order with regard to such items of free gift of products would not become taxable in the hands of the petitioner. Secondly, so far as levy of tax on the fruit drink on the ground that they are aerated drinks also requires an appropriate examination of manufacturing process and prima facie, the view of the assessing officer that carbon treatment is equivalent to the mixing of carbon dioxide appears to be incorrect. The petitioner has already paid the tax on the said fruit drink at the rate of 4%. There is no controversy in that regard and only the additional tax imposed by treating the said drink, as aerated drink, is the issue. Be that as it may, we are not able to comprehend nor satisfied with any of the grounds urged by the petitioner challenging the validity of the impugned rules as to how the impugned rules can be declared as illegal and arbitrary, particularly as petitioner places reliance on very same rules in the light of the advance ruling given by the Authority for Clarification and Advance Ruling. If the rules are wrongly interpreted by the assessing officer in spite of correct interpretation as is made by the Advance Ruling Authority in the order referred to above, we see no substance in the challenge to the impugned rules. Consequently, we see no reason to entertain this writ petition under the extraordinary jurisdiction and it would be appropriate to relegate the petitioner to efficacious alternative remedy available to the petitioner by way of approaching the appellate authority. The learned senior counsel for the petitioner further submits that keeping the view huge quantum of demand and the pressure of recovery, the petitioner needs protection till he approaches the appellate authority along with application for stay till the appellate authority passes appropriate order on the stay application or on the appeal. We feel that the said request is reasonable and interests of justice would be met if we direct that no coercive steps shall be taken against the petitioner till the appellate authority considers and dispose of the application for stay and/or the appeal moved by the petitioner against the assessment order. In the circumstances, the writ petition is disposed of with the following directions: 1. The petitioner is permitted to file an appeal before the appellate authority against the impugned order of assessment dated 3.2.2009 within a period of two weeks from today along with an application for stay. 2. The appellate authority shall consider and dispose of the application for stay and/or the appeal itself, by passing a reasoned order after giving due opportunity to the petitioner thereon and communicate the same to the petitioner. 3. Till such time, the appellate authority considers and passes the order as directed above, no coercive steps be taken against the petitioner for recovery of the amount disputed by the petitioner in pursuance of the impugned order of assessment dated 3.2.2009. The writ petition is disposed of with the above directions. ________________ V.ESWARAIAH, J. _________________________ VILAS V. AFZULPURKAR, J. 6.3.2009 kpr