w w w . L a w y e r S e r v i c e s . i n



KMC Construction, Hyderabad v/s Assistanat Commissioner, Hyderabad

    Writ Petition No. 20554 of 2020

    Decided On, 07 June 2021

    At, High Court of Andhra Pradesh

    By, THE HONOURABLE MR. JUSTICE M.S. RAMACHANDRA RAO & THE HONOURABLE MR. JUSTICE T. VINOD KUMAR

    For the Appearing Parties: J.V. Rao, M. Govind Reddy, Advocates.



Judgment Text

1. This Writ Petition is filed assailing the action of the respondents in not granting refund of excess tax paid by the petitioner for the tax period 2011-12 and 2012-13, respectively, in a sum of Rs.4,44,62,188/-, pursuant to the order dt. 18.02.2019, in T.A.No.176 of 2016 passed by the Telangana Value Added Tax Appellate Tribunal, Hyderabad (for short, 'the Tribunal ').

2. The petitioner contends that aggrieved by the order dt. 30.05.2016 of the 2nd respondent, passed in excise of revisional powers conferred under Section 32 of the Andhra Pradesh Value Added Tax Act, 2005, as adopted by the State of Telangana (TVAT Act) (for short, 'the Act '), the petitioner had preferred an appeal before the Tribunal, numbered as T.A.No.176 of 2016; that the said appeal was allowed in favour of the petitioner on 18.02.2019, whereby the order of the revisional authority - 2nd respondent, holding that the petitioner is liable to pay tax at the enhanced rate of 5%, as introduced w.e.f 15.09.2011, in respect of ongoing works contracts as against the rate of tax of 4% having opted to pay under the composition scheme provided under the Act, was set aside.

3. The petitioner further contends that, upon the appeal being allowed by the Tribunal, the 1st respondent had passed consequential order, by his proceedings, dt. 15.05.2019, termed as "Revised Assessment Order " giving effect to the order of the Tribunal in T.A.No.176 of 2016, dt. 18.02.2019; that by the said revised assessment order, the total excess tax paid by the petitioner was determined in a sum of Rs.4,44,62,188/-; upon such determination, the petitioner requested for grant of refund of the excess amount of tax paid and had executed an Indemnity Bond undertaking that the petitioner would refund the amount immediately on receipt of demand, if it was detected that the petitioner is not entitled for the said refund as sought for, and submitted the same with the 1st respondent on 20.06.2019 for crediting the excess tax paid to the petitioner 's Bank account; and that despite regular follow up with the 1st respondent, the amount of refund due to the petitioner in terms of the revised assessment order has not been paid.

4. This Court, on 18.11.2020, ordered notice before admission to the respondents, when the learned Standing Counsel appearing for the respondents sought time to get instructions in the matter. On 02.012.2020 and 23.12.2020, time was sought for on behalf of the respondents for filing counter. The case was again listed on 20.01.2021, and as no counter was filed by the respondents, this Court taking note of the admitted fact that the petitioner had been declared to be entitled to a refund of Rs.4,44,62,188/-, pursuant to the order of the Tribunal in T.A.No.176 of 2016, granted one week time to the respondents to credit the said refund amount to the bank account of the petitioner, failing which, this Court directed for the appearance of the 2nd respondent.

5. However, the respondents did not credit the amount to the petitioner 's account as directed by this court, and instead, filed a counter along with a vacate petition, on 26.01.2021. The said counter affidavit has been deposed to by the 1st respondent. By the said counter filed, the respondents sought to justify their action of not refunding the excess tax amount determined to the petitioner, in pursuance of the revised assessment order, dt 15.05.2019, on the ground that the respondent - revenue had preferred a Revision against the order of the Tribunal dt. 18.02.2019 to this Court under Section 34 of the Act and the same is pending. In the counter filed, it is also stated that the 2nd respondent, being the designated authority, in exercise of powers conferred under Section 40(2) of the Act, vide proceedings in RC.No.A7/789/2019 dt. 28.11.2020, permitted the 1st respondent to withhold the refund; and that the present Writ Petition has become infructuous and not maintainable.

6. On 28.01.2021, the 2nd respondent appeared before this Court, when the counter along with the vacate petition filed by the 2nd respondent was taken up. This Court, after taking note of the counter filed, dispensed with the appearance of the 2nd respondent on the subsequent dates, until further orders. Thereafter, the matter underwent few adjournments at the request of the learned counsel appearing for the respective parties to enable them to sort out the issue.

7. After the matter was adjourned on 28.01.2021, the 1st respondent filed a second counter affidavit, on 01.02.2021, wherein the 1st respondent justified the action in not refunding the excess tax paid by the petitioner as determined by the Revised assessment order on the ground that the Revision preferred by the respondents to this Court in TREVC No.29 of 2019 is pending consideration and before the said revision is decided, if the amount of excess tax is refunded, the same would be nothing but predicting the outcome of the decision, besides defeating the purpose of filing of the Revision. By the said counter, the 1st respondent also claimed that a letter dt. 09.09.2019 was addressed by him to the 2nd respondent, who, in turn, addressed a letter, dt. 05.11.2020, to the 3rd respondent recommending to withhold the refund due to the infractions on the part of the assessee as noted therein. Based on the report furnished by the 1st and 2nd respondents, it is stated that the 3rd respondent approved the recommendation to withhold the refund on 28.11.2020 and the same was informed to the assessee on 02.12.2020.

8. Upon the said counter along with the annexures being filed into this Court, the petitioner contended that the claim of the 1st respondent in the counter affidavit that various tax amounts are due from the petitioner as one of the reason for withholding the excess tax paid, is in fact an incorrect statement, since the amounts which are being shown as due and payable have either been annulled by higher authorities ' orders or have already been recovered by the 1st respondent by issuing garnishee proceedings in the form of attachment from a third party, viz., National Highways Authority of India, Delhi, even before he forwarded the letter dt. 09.092019 to the 2nd respondent and thus, the invocation of provisions of Section 40(2) of the Act by the respondents to deny the refund due to the petitioner is wholly unjustified.

9. The 1st respondent thereafter filed a third counter affidavit sworn to on 12.02.2021, wherein he had stated that the reason stated by him in his letter dt. 09.09.2019 seeking approval for withholding the refund under Section 40(2) of the Act, is on the ground that there were certain payments due from the petitioner. He claimed that he failed to mention that these demands have been collected, on the account of assessee, by taking recourse to third party attachment and he failed to mention the same due to oversight. By the third counter affidavit, while admitting that the amounts which are claimed to be due from the petitioner have been recovered, the 1st respondent however sought to justify the action in not refunding the excess tax determined, on the ground that in the event the Revision filed before this Court goes against the petitioner, it would become difficult for the Government to recover the amount refunded based on the previous demeanor of the petitioner.

10. Heard learned Counsel for the petitioner and Sri. M. Govind Reddy, learned Special Standing Counsel appearing for the respondents.

11. Firstly, the practice of filing multiple counters by the respondents, without seeking leave of the Court for filing such additional counters as and when the claims made in the counter affidavit filed are shown to be incorrect, cannot be countenanced. The respondents owe a duty to this Court to verify the records thoroughly before they depose to the counter affidavit and place all the material along with the counter so that the pleadings are complete and not by doing a piecemeal job, to ensure judicial time of the Court is not wasted by adjourning the matter. This is of further importance particularly in matters involving financial implications, as any omission would cause loss to the State exchequer and similarly, a tax payer - citizen is entitled to the amounts due to it in timely manner, so as to arrange its affairs.

12. The 1st respondent, while in the first counter sought to justify his action of not refunding the excess tax paid as determined on the ground of pendency of TREVC, by the second counter affidavit filed, sought to justify such non-payment, on the ground that there are certain tax amounts due from the petitioner. The time gap between the first and second counter affidavits as deposed to by the 1st respondent is of five days i.e. 25.01.2021 and 30.01.2021. Thereafter, within further gap of

13. days, the 1st respondent filed another counter affidavit stating that due to oversight he has failed to mention that the amounts which are claimed to be due from the petitioner as a ground seeking approval from the 2nd respondent for withholding refund by invoking the powers conferred under Section 40(2) of the Act, vide letter dt. 09.09.2019, have in fact been recovered by way of garnishee proceedings issued to third parties.

From the material placed before this Court, it is evident that the amounts which the 1st respondent had claimed as due from the petitioner have in fact been paid and acknowledging the receipt, the 1st respondent himself had withdrawn Garnishee notices, long before letter dt. 09.09.2019 was addressed to the 2nd respondent. This only goes to show the casual and callous approach of the 1st respondent in dealing with finances of the State as well as of tax payer - citizen, casting an apprehension on the capabilities of the 1st respondent to be a tax administrator, which power is bestowed on him.

13. Though it is claimed that the 1st respondent having addressed letter dt. 09.09.2019 to the 2nd respondent indicating therein the reasons for withholding the refund, the 2nd respondent did not choose to take any action thereon by according approval by forming an opinion independently of the recommendations of the 1st respondent. However, on 05.11.2020, the 2nd respondent has forwarded the said proposal received from the 1st respondent to the 3rd respondent - Commissioner of Commercial Taxes requesting the 3rd respondent to permit to withhold the refund under Section 40(2) of the Act read with Rule 59(1)(13)(iv) of the Telangana Value Added Rules, 2005 (for short, 'the Rules '), since the refund is more than Rs.10,00,000/-. The communication dt. 05.11.2020 addressed by the 2nd respondent to the 3rd respondent has not been placed before this Court.

14. In the proceedings issued by the 3rd respondent, vide CCT Reference No.A(1)/90/2019 dt. 28.11.2020, the ground on which the 2nd respondent requested to permit to withhold the refund, is stated as - "The department has preferred an appeal before the Hon 'ble High Court of Telangana in TREVC No.29 of 2019, in consonance to the judgment of the AP High Court in W.P.No.4977, dt 24.07.2019 between BSNL V/s. STATE OF ANDHRA PRADESH ". The 3rd respondent by the proceedings dt. 28.11.2020, referred herein above, having regard to the powers conferred under Section 40(2) of the Act, formed an opinion that the "grant of refund is likely to affect the revenue adversely, the authority prescribed may withhold the refund till such time by the prescribed authority for withholding of refunds under Section 40(2) ", and permitted the 2nd respondent to withhold the refund.

15. Perusal of the proceedings dt 28.11.2020 issued by the 3rd respondent, does not indicate any material fact having been considered by the said authority independent of the recommendation of the 1st respondent as forwarded by the 2nd respondent, to form an opinion that the grant of refund would affect the revenue adversely, for according permission to withhold the refund. On the other hand, the proceeding dt. 28.11.2020, except mentioning the preferring of TREVC No.29 of 2019 and extracting the provisions of Section 40(2) of the Act and Rule 59(1) of the Rules, does not indicate any independent opinion being formed by the 3rd respondent for according permission to the 2nd respondent to withhold the refund.

16. A reading of Section 40(2) of the Act shows that the authority prescribed in order to withhold the refund is required to form an opinion that the grant of refund is likely to adversely affect the Revenue.

However, the proceeding dt. 28.11.2020 is conspicuously absent of any such opinion being formed by the prescribed authority, who in this case is the Commissioner - 3rd respondent.

17. The endeavor and effort on the part of the respondents in not granting refund to the petitioner appears solely to be on the ground of pendency of the Revision before this Court. Merely because the decision rendered by the Tribunal is not acceptable to the respondents and they having preferred a Revision to this Court, the respondents cannot grant to themselves stay of operation of the order of the Tribunal by such non refund. Though such a power is vested with the authority under Section 40(2) of the Act, the same is required to be exercised by the prescribed authority by recording reasons and not on the ground of mere pendency of TREVC.

18. It is to be noted that the issue of withholding of refund by invoking and exercising power under Section 40(2) of the Act on account of pendency of Tax Revision Case, is no longer res integra. A Division Bench of this Court in BSNL V/s. STATE OF ANDHRA PRADESH1 , had elaborately considered the scope of Section 40(2) of the Act, the circumstances in which the refund can be withheld and held that :

"19. Though Section 40(2) of the AP VAT Act empowers the concerned authority to withhold the amount of refund, such power is not unfretted power vesting with the concerned officer of the revenue. Once the said power is given to an authority, such power has to be exercised with discretion. There must be sound reasons for which the amount payable to an assessee - citizen is to be withheld. "

"20. Though there is no provision in the Section that reasons should be recorded for withholding the amount of refund, in our opinion, it becomes obligatory on the part of the Deputy 1 (2009) 49 APSTJ Page 66=(2009) 25 VST 511 (AP) Commissioner to record reasons before according approval for withholding the amount of refund. "

This Court further held that:

"21. In normal circumstances, once the assessee succeeds in the litigation, the respondent authorities are bound to refund the amount of tax, which was collected from the assessee. Simply, because an appeal is filed, the authorities would not be empowered to withhold the amount of refund. So as to see that interest of the State is protected, the Legislature has enacted Section 40(2) of the AP VAT Act, but the power granted to withhold the amount vested with the assessing officer has to be exercised with the approval of the Deputy Commissioner. Before granting approval, the Deputy Commissioner, in our opinion, is duty bound to consider the facts of the case and record the reasons for which he would like to give his approval for withholding payment of the amount belonging to the assessee. The reasons must be just and proper. "

"22. The Deputy Commissioner must come to the conclusion that by not withholding the amount of refund, the State would be adversely affected because the State might not be in a position to recover the said amount. The assessee is doing well in business for several years, he is having sufficient assets and there is no possibility of the assessee vanishing into the air without making payment of tax, in our opinion, the Deputy Commissioner, cannot give his approval for withholding the refund. In any case, the Deputy Commissioner must record reasons before granting approval so that in the event of decision of the Deputy Commissioner being challenged, the higher authority or the concerned Court can look into the justification given by the Deputy Commissioner for giving an opinion for withholding payment of the amount belonging to the assessee. "

"24. The Deputy Commissioner, or, in the instant case, the Commissioner of Commercial Taxes, must form an opinion that the grant of refund "is likely to adversely affect the revenue ". For forming such an opinion, he must consider all relevant facts and record the reasons. In the instant case, no reason has been recorded by the Commissioner of Commercial Taxes before granting his approval. "

"In our opinion, mere filing an appeal or revision would not justify the revenue to withhold the payment of refund under the provisions of Section 40(2) of the A.P. Vat Act. There must be some other factor which would weigh against the assessee which the respondent authorities want to exercise their power under Section 40(2) of the A.P. Vat Act. "

19. The facts in the present case are no different. The 2nd respondent, basing on the inputs received as sent by the 1st respondent, vide letter dt. 09.09.2019, had requested the 3rd respondent to accord permission to withhold the refund due to the petitioner, and the 3rd respondent, by proceedings dt. 28.11.2020 noting the pendency of the TREVC and the provisions of Section 40(2) of the Act and Rule 59 of the Rules, granted such permission to withhold. No material is placed before this Court to show that either the 2nd respondent or the 3rd respondent, dehors the report of the 1st respondent, considered any other relevant material facts for forming an opinion that grant of refund would adversely affect the Revenue for seeking or according the permission, as the case may be. The exercise of power under Section 40 of the Act, in the above manner, by the 3rd respondent, or the 2nd respondent, would only show that there is no independent application of mind by either of the authorities, and without assigning any valid reason, the prescribed authority has accorded approval by exercising powers under Section 40(2) of the Act, merely based on the inputs provided by the 1st respondent. Such a course of action by the 3rd and 2nd respondents cannot be held to be correct, so as to stand judicial scrutiny.

20. In the facts of the present case, such independent consideration by the 2nd or 3rd respondents was necessary, having regard to the fact that, in the third counter affidavit deposed to by the 1st respondent, it is stated that he had failed to mention about the amounts, which are claimed to be due from the petitioner as a ground for recommending to withhold the refund, have already been recovered by initiation of Garnishee proceedings from the third parties. Since, the 2nd and 3rd respondents have acted on such recommendation of the 1st respondent, who has failed to discharge his function as a tax administrator, the action of the 2nd and 3rd respondents in approving such recommendation of the 1st respondent, is no less a failure and the 3rd respondent had acted in abdication of the powers conferred on the said authority under the Act.

21. Despite this Court interpreting analogous provision under the erstwhile Andhra Pradesh General Sales Tax Act, 1957, in the case of PULP N ' PACK PRIVATE LIMITED V/s. COMMERCIAL TAX OFFICER (2009) 48 APSTJ 205 = (2009) 23 VST 573 and holding that the prescribed authority assessing is required to exercise power independent of the recommendations of the authority, the respondents continue to adopt the approach of merely approving the recommendations of the assessing authority, which practice has been deprecated by this Court in the BSNL 's case (supra), while dealing with the provisions of Section 40(2) of the Act. The above said decisions of this Court binds the authorities in the State, under Article 215 of the Constitution of India, being a Court of record, any disobedience in not following the law laid down by this Court, would amount to contempt of this Court being committed.

22. A Division Bench of this court in STATE OF A.P. V/s. COMMERCIAL TAX OFFICER (1988) 68 STC 177 (A.P.) by referring to the decision of the Hon 'ble Supreme Court in EAST INDIA COMMERCIAL CO. LTD. V/s. COLLECTOR OF CUSTOMS AIR 1962 SC 1893 wherein in para 29 of the judgement of Subba Rao,J. ( as his Lordship then was) speaking for the majority held -

"We therefore, hold that the law declared by the highest court in the State is binding on authorities or Tribunals under its superintendence, and that they cannot ignore it either in initiating a proceeding or deciding on the rights involved in such a proceeding".

in paras 15 and 16 of the judgement held that –

"If any authority or Tribunal refuses to follow any decision of this Court on the above grounds it would be clearly guilty of committing contempt of this Court and is liable to be proceeded against.

16. We have come across innumerable instances where the authorities below, especially authorities entrusted with the collection of taxes and excise duties, refused to follow the decisions of this Court on the ground that appeals were either filed or steps were being taken to file appeals, and raised fantastic tax demands and initiated proceedings for recovery of such taxes. The result was that this Court was flooded with innumerable writ petitions. We need hardly observe that all this is totally irregular and should have been avoided. We cannot help putting on notice all the authorities concerned that this Court would not hesitate to take stern action for contempt if decisions of this Court are disregarded unless the operation of the judgments of this Court is suspended by the Supreme Court ".

23. Another aspect of the matter which also goes to show that the action of the 3rd respondent in seeking to accord approval to withhold refund is an afterthought, is evident from the fact that the petitioner has filed the present writ petition on 12.11.2020, after serving copy of the same on the learned Standing Counsel as required under the Writ Rules of this Court. It is upon the petitioner approaching this Court and filing the above Writ Petition, the respondents have set in motion the process of according approval to withhold the refund by invoking Section 40(2) of the Act, as admittedly, the proceeding of the 3rd respondent is dt. 28.11.2020, - viz., 15 days after the filing of the Writ Petition, and after 'Notice Before Admission ' was ordered by this Court, and the learned Standing Counsel appearing for the respondents sought time to get instructions in the matter on 18.11.2020. Thus, till 18.11.2020, the 3rd respondent had admittedly not exercised powers under Section 40(2) of the Act and could not have issued proceedings on 28.11.2020, while this Court is seized of the matter. On the basis of such approval accorded by the 3rd respondent, the 1st respondent had, in one of the counter affidavits audaciously stated that since, permission under Section 40(2) of the Act, has been accorded, the Writ Petition is liable to be dismissed. The said submission of the 1st respondent is not bonafide, but it is malafide. The endeavor on the part of the 3rd respondent in according sanction to withhold refund by proceedings dt. 28.11.2020, thus, clearly appears to frustrate and make infructuous the Writ Petition filed before this Court, which action of the 3rd respondent cannot be countenanced and calls for being admonished.

24. Further, the above acts of the respondents are also not in consonance with their "Mission Statement " which states that - "The Commercial Taxes department endeavours to transform itself into an enterprise friendly entity and progressive tax administration with focus on greater transparency, fairness and firmness to achieve highest tax efficiency through the use of information Technology combined with best tax practices ".

25. Therefore, this Court is of the view that the action of the 1st respondent in falsely deposing to the counter affidavits filed into this Court as an act of perjury; that the proceeding dt. 28.11.2020 issued by the 3rd respondent without independent exercise of mind and recording reasons therein, as held to be ma

Please Login To View The Full Judgment!

ndatory by this Court in PULP N ' PACK PRIVATE LIMITED and BSNL 's cases (supra) cannot be sustained, apart from being in contempt, liable to be proceeded against. Further, even the infractions, as recorded by the 1st respondent vide letter dt. 09.09.2019, seeking permission to withhold the refund under Section 40(2) of the Act, are unacceptable. 26. This Court is conscious of the fact that the observations made herein above would not be palatable to the respondents, as they claim to be acting in the larger interest of the State. However, it is apposite to refer to the observation of the Supreme Court in UNION OF INDIA V/s. KAMLAKSHI FINANCE CORPORATION LTD (1992) Supp (1) SCC 443 = AIR 1992 SC 711. wherein in para 8 it was held - "8. We have dealt with this aspect at some length, because it has been suggested by the learned Additional Solicitor General that the observations made by the High Court, have been harsh on the officers. It is clear that the observations of the High Court, seemingly vehement, and apparently unpalatable to the Revenue, are only intended to curb a tendency in revenue matters which, if allowed to become widespread, could result in considerable harassment to the assessee-public without any benefit to the Revenue. We would like to say that the department should take these observations in the proper spirit. The observations of the High Court should be kept in mind in future and the utmost regard should be paid by the adjudicating authorities and the appellate authorities to the requirements of judicial discipline and the need for giving effect to the orders of the higher appellate authorities which are binding on them ". 27. In view of the above, the Writ Petition is allowed and the respondents are hereby directed to refund the amount of Rs.4,44,62,188/- as determined by the 1st respondent under Revised Assessment Order dt. 15.05.2019, pursuant to the order of the Tribunal dt. 18.02.2019, by crediting the above said amount to the petitioner 's bank account, within 15 days from the date of receipt of a copy of this order, along with interest due thereon at the rate of 1% per month, as provided under Section 39 of the Act, till the date of credit of the said amount; if the amount is not paid within two weeks as specified above, the amount of further interest which might have to be paid after the above said period shall be recovered from the respondents for causing delay, as the State exchequer should not suffer further on account of the actions of the respondents; and the respondents shall pay costs of Rs.50,000/- (Rupees Fifty Thousand only) to the petitioner. Pending miscellaneous petitions, if any, shall stand closed.
O R