Sri Balaji Filling Station vs Appellate Deputy Commissioner of Commercial Taxes and Another

V.V.S. Rao, J.—The petitioner, who is a registered dealer under the Andhra Pradesh Value Added Tax Act, 2005 (the Act), under the rolls of the second respondent, was assessed to tax u/s 4(8) of the Act for the assessment years 2005-06 and 2006-07. By order dated October 4, 2008, the petitioner was advised to pay the assessed tax of Rs. 1,66,003. Aggrieved thereby, the petitioner preferred an appeal u/s 31(1) of the Act before the first respondent. By the impugned order dated October 11, 2010, the appellate authority dismissed the appeal, but in purported exercise of power u/s 31(4)(a) of the Act enhanced the rate of tax from four per cent to 12.5 per cent on the disputed turnover. This order is assailed in the writ petition mainly, on the ground that the order is passed in contravention and ignorance of rule 42 of the Andhra Pradesh Value Added Tax Rules, 2005 (the Rules). The Rule relied on reads as under.

Appellate or revisional authority may enhance tax payable by a dealer,--Where the tax as determined by the authority prescribed appears to the appellate authority u/s 31 or to the revising authority u/s 32 to be less than the correct amount of tax payable by the dealer, the appellate or revising authority shall, before passing orders, determine the correct amount of tax payable by the dealer after issuing a notice to the dealer and after making such enquiry as such appellate or revising authority considers necessary.

A plain reading of section 31(4)(a) of the Act and rule 42 of the Rules leaves no doubt that it is well within the competence of the appellate authority either to confirm, reduce, enhance or annul the assessment or penalty or both. However, as mandated by rule 42 of the Rules the issue of notice to the dealer for enhancing or determining correct amount of tax is condition precedent for exercising the power u/s 31(4)(a) of the Act. This is conspicuous by its absence, a fact of which is not denied by the special counsel for the respondents.

As the impugned order ex facie suffers from a defect; indeed though curable--while setting aside the same, we remit the matter to the first respondent with an observation that all the pleas that may be taken by the petitioner shall be considered by the appellate authority while disposing of the matter, preferably, within a period of eight weeks in accordance with law after issuing notice. The writ petition is disposed of accordingly.