THE HONOURABLE SRI JUSTICE GODA RAGHURAM AND THE HONOURABLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No. 23708, 23709 and 23718 of 2009 Dated: 6-11-2009 Between: Maheshwari Oil Industries Pvt. Ltd., rep. by its Director Satyanarayana Bhangadia …Petitioner and The Commercial Tax Officer, Special Commodities Circle, Saroornagar Division, Hyderabad …Respondents Common order: (Per RR, J) Since common questions arise for consideration in all these three writ petitions, they were heard together and are being disposed of by a common order. It would suffice, for disposal of these writ petitions, if the facts stated in W.P.No. 23708 of 2009 are taken note of. The petitioner, a private limited company, is engaged in the manufacture and sale of oils by solvent extraction process. It is registered on the file of the respondent. In the year 1981, the petitioner had established a solvent extraction plant, as Plant I in Mailardevpally Village, for the manufacture and sale of various oils with extraction capacity of 200 MTs per day. Subsequently, in the year 1992, it also set up a second plant with an extraction capacity of 220 MTs per day. The petitioner claims to be purchasing raw material from within the State for Plant No.I and from outside the State for the purposes of extraction of oil in its second plant. The petitioner also claims to be maintaining separate godowns, tanks, stock registers for Units I and II and that they never allowed purchase of raw materials, and also of oils, by Units I and II to intermingle with each other at any point of time. For the assessment years 2006-07, 2007-08 and 2008-09, the petitioner claims to be following the same practice of utilizing input tax credit entitlement in respect of Unit I as against the output tax relatable to Unit I only. The petitioner would contend that, since raw material has been purchased from outside the State for Unit II, there was no question of seeking adjustment of input tax credit in relation to output tax of Unit II, that oil extracted from Unit II was being sent, as consignment transfers, to places outside the State for being sold thereat, and, as there was no inter- state or intra-state sales from Unit II, the question of liability of output tax within the State, in relation to Unit II, did not arise. The respondent issued notice dated 29-5-2009 alleging that the petitioner had claimed excess input tax credit, as a result of which, there was a shortfall in the tax paid by them of Rs.1,08,89,427-00 for the assessment years 2006-07, 2007-08 and 2008-09 (up to December, 2008). The petitioner was called upon to file their objections and show cause as to why penalty should not be levied under the AP VAT Act, 2005. In their reply dated 27-7-2009, the petitioner stated that the raw material procured for Unit II, was being distinctly used for manufacture and sale of oil dispatches outside the State, that the entire input tax credit was relatable to Unit I alone and, as such, it was adjustable only against the output tax of Unit I. The petitioner also contended that, since accounts and stocks were maintained distinctly for Units I and II, the question of applying the formula A X B/C for apportioning input tax credit did not arise. The petitioner was given an opportunity of personal hearing on 24-8-2009 wherein they are said to have reiterated the same plea which they had taken in their objections filed earlier. They also filed written submissions in their defence. The respondent held that it was not practically possible to maintain separate stocks of raw material and process it separately to obtain finished products in Units I and II distinctly. He passed three distinct orders on 24- 9-2009, for each of the years, restricting the petitioner’s entitlement for input tax credit applying the formula A X B/C after taking the input tax credit as applicable both for Units I and II. Aggrieved thereby, the present writ petitions. It is evident from the assessment orders, that the respondent did not inspect the petitioner’s factory premises. He has also not assigned any reasons for his conclusion that it was impossible to maintain separate stocks of raw material or process them separately to obtain finished products in respect of Units I and II distinctly. It is only, after a detailed inquiry and physical verification of the records, could the respondent have come to the conclusion that stocks of raw material were not maintained separately or that they were not processed separately to obtain finished products in respect of Units I and II distinctly. No such exercise has been undertaken by the respondent. It is also not preceded by a physical verification of the units or the records maintained by the petitioner herein. We, consider it appropriate, therefore, to set aside the impugned order and remand the matter back to the respondent for consideration afresh. The respondent shall put the petitioner on notice, informing them of the basis of his conclusion that the petitioner has not maintained stocks of raw material, or processed the finished goods, separately in respect of Units I and II. The respondent shall, after receipt of the objections from the petitioner and after affording them an opportunity of personal hearing, pass orders afresh in accordance with law. The writ petitions are allowed and the impugned orders are set aside after hearing both Sri S.R.Ashok, learned Senior Counsel appearing for the petitioner and Sri P.Balaji Varma, learned special standing counsel for commercial taxes. No costs. ___________________________ GODA RAGHURAM, J ________________________________ RAMESH RANGANATHAN, J 6th November, 2009. GRR