Katuri Medical College and Hospital vs Commercial Tax Officer and Others

M.S. Ramachandra Rao, J.—Heard Sri V. Bhaskar Reddy, learned counsel for the petitioner and Sri P. Balaji Varma, learned Special Government Pleader for Commercial Taxes. The petitioner challenges the garnishee order dated December 7, 2012 issued by the second respondent u/s 29 of the Andhra Pradesh Value Added Tax Act, 2005 (for short, "the Act") to the fifth respondent-bank directing the latter to pay a sum of Rs. 25,86,668 comprising tax and penalty for the period April 1, 2008 to September 30, 2011 under the Act and also seeks consequential orders.

The petitioner is a charitable trust registered in 1991 and had established a medical college and hospital in 2001 at Katuari Nagar, Edulapalem Village, Guntur Rural Mandal, Guntur District. It is also registered as a dealer under the Act on the rolls of the first respondent.

On November 24, 2011, the second respondent, pursuant to an authorization allegedly granted by the territorial Deputy Commissioner conducted audit of accounts of the petitioner for the period April 1, 2008 to September 30, 2011. A show-cause notice in form 305A dated December 26, 2011 was issued by the second respondent proposing to levy tax on allegedly under-declared turnover for the above period. Subsequently assessment order was passed on January 23, 2012 and an order dated March 13, 2012 levying penalty was also passed on the ground that the petitioner intentionally under-declared tax.

Aggrieved by the orders of assessment and penalty, the petitioner filed appeals before the third respondent. It also filed applications seeking stay of collection of balance tax and penalty. But the stay applications were dismissed by the third respondent by separate non-speaking orders dated May 22, 2012 and June 7, 2012 in respect of tax and penalty, respectively.

Challenging the orders of the third respondent, the petitioner filed revision petitions before the fourth respondent and sought stay of recovery of the balance disputed tax and penalty. These revision petitions are stated to be still pending before the fourth respondent and no orders are passed thereon even though the petitioner has filed written submissions before the said authority.

In the meantime, on December 7, 2012, the impugned garnishee order invoking section 29 of the Act was issued by the second respondent directing the fifth respondent-bank (where the petitioner has an account) to remit Rs. 25,86,668 towards balance disputed tax and penalty. Immediately the petitioner approached second respondent and submitted a representation dated December 8, 2012 informing him about pendency of the appeals and revision petitions and requested him to revoke the garnishee proceedings and await the orders of the fourth respondent in the revisions. But the second respondent endorsed on the petitioner''s representation that the petitioner has more funds in the bank than required for meeting the disputed demands and therefore he, need not revoke the garnishee proceedings. It is contended by the petitioner that under coercion, the fifth respondent was compelled to transfer the above amount from the accounts of the petitioner on December 8, 2012.

The petitioner contends that the actions of the respondents in (a) rejecting the stay petitions in the appeals without passing a speaking order; (b) not disposing of the revision petition filed on June 23, 2012 till date; (c) issuing garnishee proceedings dated December 7, 2012 and recovering disputed demand and penalty on December 8, 2012 rendering the revision proceedings infructuous; are arbitrary and illegal; consequently the impugned garnishee proceedings dated December 7, 2012 be set aside; and the amounts deducted from the petitioner''s bank account be directed to be remitted back to the petitioner''s credit in the said bank account.

In the counter-affidavit, the second respondent sought to justify the issuance of garnishee order dated December 7, 2012 on the ground that the petitioner was liable to pay the same once it''s stay applications in the appeals filed before the third respondent were dismissed; that a circular was issued by the Commissioner of Commercial Taxes in CCT''s Ref No. L.III(1)/1362/94 dated March 11, 1996 directing that there is no bar in collecting disputed tax and penalty amounts when revision petitions are pending before the Additional Commissioner (CI) and Joint Commissioner (Legal) challenging the orders dismissing stay petitions by the first appellate authorities and that the decision of this court in Anab-e-Shahi Wines and Distilleries Private Limited Vs. Appellate Deputy Commissioner, Secunderabad Division, Nampally, Hyderabad and Others, , staying recovery of disputed tax and penalty wherever stay applications are pending before first appellate authorities, has no application.

Admittedly the stay applications filed by the petitioner in the appeals preferred by it before the third respondent were dismissed by non-speaking orders (which conduct by such appellate authorities has been deprecated time and again by this court) and the revision petitions filed by the petitioner challenging the same are pending before the fourth respondent. It is not known why the fourth respondent has kept the revision petitions filed on June 23, 2012 before him pending till date without passing orders even though written submissions are stated to have been filed before him. The basis of the principle in Anab-e-Shahi Wines and Distilleries Private Limited Vs. Appellate Deputy Commissioner, Secunderabad Division, Nampally, Hyderabad and Others, , is that if recoveries of disputed tax or penalty are made where stay application is pending before the appellate authorities, the appeal itself would be rendered infructuous and that the assessee who is aggrieved by an order of assessment has been given a statutory right of appeal which cannot be rendered infructuous by being forced to pay the disputed tax or penalty pending the appeal. We see no reason why the said principle cannot be extended to a situation where the first appellate authority rejects the stay application and a revision is preferred by the assessee before the revisional authority seeking stay of the disputed tax and penalty. We see no statutory basis for the circular issued by the Commissioner of Commercial Taxes dated March 11, 1996 and are of the view that the Commissioner had no jurisdiction to issue the said circular and thereby restrict or interfere with the exercise of the revisional jurisdiction by the revisional authorities. Therefore it would have been just and proper for the second respondent to await the disposal of the revision petitions by the fourth respondent before initiating proceedings for recovery of the disputed tax and penalty. His action in recovering the amounts pending disposal of the revision petitions before the fourth respondent has made the said revisions infructuous. We strongly deprecate this conduct of the second respondent and hold the same to be arbitrary and high-handed.

For the above reasons, we set aside the impugned garnishee notice dated December 7, 2012, issued by the second respondent; direct the second respondent to immediately remit the sum of Rs. 25,86,668 to the bank account of the petitioner in the fifth respondent-bank; set aside the non-speaking orders dated May 22, 2012 and June 7, 2012 passed by the third respondent rejecting the stay applications filed by the petitioner in the appeals challenging the orders of assessments and penalty; and direct the third respondent to pass fresh and reasoned orders on the applications within a period of four weeks from the date of receipt of a copy of this order. Pending disposal of the stay applications afresh by the third respondent, the second respondent shall not take any steps to recover the disputed tax and penalty. Since the series of arbitrary exercises of power; of the third respondent in passing orders dated May 22, 2012 and June 7, 2012 without any reasons; of the fourth respondent in failing to dispose of revisions filed on June 23, 2012; and of the second respondent in issuing the garnishee notice dated December 7, 2012 have gravely and avoidably prejudiced the petitioner and have given rise to this avoidable writ petition, we consider it appropriate to allow this writ petition with costs of Rs. 10,000 payable to the petitioner. Accordingly, the writ petition is allowed with costs in terms mentioned above.