IN THE HIGH COURT OF ANDHRA PRADESH :: AMARAVATI (Special Original Jurisdiction) THURSDAY, THE TWENTIETH DAY OF FEBRUARY TWO THOUSANDAND TWENTY FIVE PRESENT THE HON’BLE THE CHIEF JUSTICE SRI DHIRAJ SINGH THAKUR AND HON’BLE SRI JUSTICE R RAGHUNANDAN RAO WRIT PETITION NO: 8092 OF 2022 Between: M/S Paradise Bar and Restaurant, 13/13/461, 0pp. Sampurna Lodge, Mayur Road (Railway Feeder Road), Ananthapuramu, Anantapuramu District, A.P. Rep. by its Proprietor, A. Thirumala Reddy. ...PETITIONER Lodge Circle, R.F. AND The State of Andhra Pradesh, Represented by the Principal Secretary to the Government, Revenue (CT) Department, A.P. Secretariat, Velagapudi,Guntur District, A.P. The Assistant Commissioner (ST), (FAC), Anantapuramu Circle-1, Anantapuramu Division, P.A.R. Heights, Gooty Road, Anantapuramu, Anantapuramu District, A.P. 1. 2. ...RESPONDENTS Petition under Article 226 of the Constitution of India is filed praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue an appropriate writ, order or direction more particularly in the nature of Writ of mandamus declaring Section 4(9)(c) of the AP VAT Act, 2005, as it stood prior to its amendment w.e.f. 08-09-2016, as illegal, improper, incorrect, unconstitutional, violative of articles 14, '•9('l)(g), 21 of Constitution of India as discriminatory, arbitrary, unfair, contrary to Section 2(38) of the AP VAT Act, 2005 as also infringing Article 265 and consequently to set aside the same or interpret it so as to mean % that the exempted/non-taxable turnover cannot be included while computing total turnover, and consequently set aside the impugned Assessment vide AAO No. ZH370122OD96456, dated 06-01-2022 Order and read with the dated 25-02-2022' fl Rectification Order vide AAO No. ZH370222OD65814 passed by the Second Respondent in Form VAT 305 for the Tax Period 07/2010 to 12/2015 after declaring that the taxable turnover was estimated manner and also that it is barred by an arbitrary and unsustainable limitation. in 3 )( s lA NO: 1 OF 2079 Petition under Section 151 CPC is filed circumstances stated in the affidavit fiied in support of the petition, the High Court may be pleased to grant stay of all further praying that in the proceedings, including vide AAO No. read with the Rectification Order collection of tax, pursuant to the impugned Assessment Order ZH37P1220D96456, dated 06-01-2022 vide AAO No. ZH370222OD65814, dated 25-02-2022, passed by the Second Respondent in Form VAT 305 for the Tax Period 07/2010 12/2015 pending disposal of the above Writ Petition. to Counsel for the Petitioner: SRI G NARENDRA CHETTY Counsel for the Respondents: GP FOR COMMERCIAL The Court made the following: ORDER TAX 1 HCJ &RRR, J W.P.No.8092/2022 APHC010128862022 IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI (Special Original Jurisdiction) [3446] IivuHAoicU| DAY OP FEBRUARY TWO THOUSAND AND TWENTY FIVE , THE PRESENT HONOURABLE THE CHIEF JUSTICE DHIRAJ SINGH THAKUR THE HONOURABLE SRI JUSTICE R RAGHUNANDAN RAO WRIT PETITION NO: 8092/2028 Between: ...PETITIONER M/s Paradise Bar And Restaurant AND ...RESPONDENT(S) The State Of Andhra Pradesh and Others Counsel for the Petitioner: 1. G NARENDRA CHETTY Counsel for the Respondent(S): 1. GP FOR COMMERCIAL TAX The Court made the following ORDER: (Per Hon’ble Sri Justice R. Raghunaadan Rao) Heard Sri G. Narendra Chetty, learned counsel appearing for the petitioner and learned G.P. for Commercial Tax, appearing for respondents. The petitioner, who was running the business of a Bar and 2. Restaurant in Ananthapur Town, had registered himself as a dealer. 2 HC J &RRR, J W.P.No.8092/2022 under the A.P. Value Added Tax Act, 2005 (for short ‘the Act’), with effect from, 31.12.2015. The Commercial Tax Officer (CT) (FAC), Circle-I, Ananthapur, on the basis of an authorization of the Deputy Commissioner (CT), Anantapuramu Division in ADMIB, dated 21.12.2015, had inspected the restaurant and bar of the petitioner and conducted a specific audit, on 31.12.2015. In the course of this inspection and audit, the Deputy Commissioner (CT), recovered incriminating material relating to the business of the petitioner for the period July, 2014 to October, 2015. An assessment order was passed against the petitioner, assessing the petitioner to tax of Rs.61,13,078. This assessment was challenged before the erstwhile High Court of Andhra Pradesh, by way of W.P.No.38999 of 2016, which came to be allowed and the order of assessment were set aside by order,dated 12.02.2019, and the case was remanded to the original assessing authority for reassessment. This order was passed on the ground that the authorization given to the Deputy Commissioner, Guntakal was not available in a valid format. Thereafter, the Deputy Commissioner, Ananthapur Division, 3. authorized the Commercial Tax, FAC, Circle-I to conduct the assessment of the petitioner. The assessing officer issued a show cause notice, dated 23.07.2021, calling upon the petitioner to show cause as to why the turnover of the petitioner for the period July, 2014 to October, 2015 3 HC J &RRR, J W.P.No.8092/2022 should, not he assessed to tax. This show cause notice was returned. However, the petitioner filed written objections to the show cause notice subsequently. The main contentions raised by the petitioner were that the estimate of turnover made by the assessing officer, in the show cause notice, is not based on any appropriate material and extrapolation of turnover on the basis of the incriminating material, is not permissible; the restaurant part of the business was handled by a third party, who supplied food directly to the customers and as such the turnover relating to the supply of food cannot be added to the turnover of the petitioner; even otherwise, the rate of tax that could have been levied against the petitioner on the sale / supply of food would only be 4% or 5% and not 12 14% as sought by the assessing officer. 4. The assessing officer, after consideration of these objections. passed an order of assessment, dated 06.01.2022 assessing the tax payable by the petitioner as Rs.61,13,078/-. As there was an earlier payment of Rs. 15,00,000/- which had not been taken into account, the petitioner had moved an application, for amendment of the amount due. A rectification order, dated 25.02.2022, was passed and the tax payable was reduced to Rs.46,13,078/-. 5. Aggrieved by the initial order, dated 06.01.2022, and rectification order, dated 25.02.2022, the petitioner has approached this Court by way of the present writ petition. 4 HCJ &RRR, J W.P.No.8092/2022 Sri G. Narendra Chetty, learned counsel appearing for the petitioner would reiterate the earlier arguments raised before the 6. assessing authority. The first contention of the petitioner is that the assessing 7. officer, on the basis of some alleged incriminating material, has extrapolated the turnover, discovered in the incriminating material, to the entire period of assessment and such an extrapolation is not permissible, in the absence of any further material, which supports such an extrapolation. This contention cannot he accepted.When incriminating material, demonstrating that certain turnovers have not been included in the reported turnovers, is discovered, it would be open to the assessing authority, to extrapolate such turnover to period of assessment. That would be the very nature of a best judgment assessment. In the present case, the petitioner, except objecting to such a method of assessment, has not chosen to produce books of accounts or any material to demonstrate such a turnover had not occurred. In the absence of any such material, the best judgihent 8. exercise carried out by the assessing authority cannot he set aside. Accordingly, the turnover of Rs. 1,02,20,407/- towards sale of food for the period from July 2014 to October 2015 does not require any modification. 5 HC J &?RRR, J W.P.No.8092/2022 4 The second contention of the petitioner that he had no part of the restaurant business and a third party had conducted this business, cannot also be accepted in the light of the fact that the petitioner had not given any details of the alleged third party, except giving a vague name. Further, the Excise Act, under which the petitioner had obtained a bar hcence, itself provides that a bar requires to have service of food also. In the circumstances, the contention of the petitioner that the sale of food in the bar run by the petitioner was conducted by a third party, is not acceptable. 9. The third contention of the petitioner is that tax could not have been levied 14.5% in accordance with the provisions of Section 4(9)(c) of the Act, as minimum turnover of Rs.1.5 crores per year was. 10. not available. The turnovers, as calculated by the assessing officer, of the petitioner were a liquor sale turnover of Rs.3,54,29,413/- and food sale turnover Rs. 1,02,20,407/- for the relevant assessment period July, 11. 2014 to October, 2015. Section 4(9) of the Act sets out the rate of tax payable on sale or supply of goods, being food or any other article for human consumption or drink, served in hotels or restaurants, other eating houses or an3rwhere. Sections 4(9)(a) and (b) deal with sale of food for hotels. Section 4(9)Cc) deals with sale or supply of food not falling imder 12. 6 HCJ &RRR, J W.P.No.8092/2022 Section 4 (9)(a) or (b). This clause would be applicable where the annual total turnover is more than Rs.1.5 crores. The turnover relating to sale of food, not falling within the ambit of Section 4(9)Ca), (h) and (c) would fall under (d) where the rate of tax is 5% of the taxable turnover in relation to the sale of food. 13. The term total turnover is defined in Section 2(39) of the Act, as follows: (39) ‘Total turnover’ means the aggregate of sale prices of all goods, taxable andexempted, sold at all of the dealer in the State, places of business includingtransactions falling imder Section 8 of the Act and imder Section 6A of theCentral Sales Tax Act, include the gross receivable towards 1956 and shall also considerationreceived or execution of works contract; The term taocable turnover is defined in Section 2(38) of the 14. Act, as follows: (38) Taxable turnover’ means the aggregate of sale prices of all taxable goods; Explanation-I: For the purpose of a VAT dealer, it shall not include the amount ofVAT paid or payable, but shall include the sale price of zero-rated sales; Explanation-II: The sale price relating to second andsubsequent sale of goods specified in schedule VI shallnot form part of taxable turnover; 7 HGJ &?RRR,J W.P.No.8092/8022 The total tiirnover would be aggregate of sale prices of all 15. goods taxable and exempted, which is taxable turnover and turnover which has been exempted. Exempted turnover has been defined in Section S(14) to mean the aggregate of sale price of goods which has been exempted 16. under the Act. In the present case, the turnover of Rs.4.54 crores, being the turnover relating to sale of alcohol and the turnover relating to sale of 17. food has been taxed. The sale of alcohol, in the State of A.P., under the A.P. VAT Act, was to be taxed under Schedule VI ‘at the point of first sale in the State’. This sale would be the sale between M/s. Andhra Pradesh Beverages Corporation Limited and the petitioner. The subsequent sale of liquor by the petitioner to his customers would not be exigible to tax. In fact, Explanationdl to the definition of ‘taxable turnover’ stipulates that the sale prices relating to second and subsequent sale of goods, enumerated in Schedule VI, shall not form part of ‘taxable turnover’. This would mean that the entire turnover of Rs.4.54 crores, which is on account of sale of alcohol would have to be excluded from the taxable turnover of the petitioner. This would leave a turnover of Rs. 1,02,20,407/-, which is the turnover relating to sale of food. As the turnover in question, is less than Rs. 1.5 crores per year, the same would be taxable only under Section 4(9)(d).To this extent, the 8 HCJ &RRR, J W.P.No.8092/2022 assessment order and the 25.02.2022 would have to stand rectification orders dated 06.01.2022 and modified. 18. Accordingly, this writ aside the assessment order dated dated 25.02.2022 authority to pass fresh petition is partly allowed by setting 06.01.2022 and rectification and remanding the matter back order to the assessing. assessment orders by excluding the turnover Rs.4.64 orores arising out of sale of liquor from the Of turnover on which tax is levied. There shall be no order as to costs. As a sequel, pending miscellaneous applications, if any, shaU stand closed. //TRUE COPY// PRASADA RAO ASSISTANT REGISTRAR To, SECTION OFFICER Anantapuramu Wvision^^p a®R Heihhts'^Gootv^R^'T"''®'^" Anantapuramu District, A.P. ’ ®°°ty Road, Anantapuramu 3. One CC to Sri G Narendra Chetty Advocate [OPUC] Commercial Tax, High Court of Andhra Pradesh. 5. Three CD Copies TF HIGH COURT DATED:20/02/2025 ORDER WP.No.8092 of 2022 ro g 0 6 MAR 2025 | ^ . Curront Section PARTLY ALLOWING THE W.P., WITHOUT COSTS