APHC010165242026 IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI (Special Original Jurisdiction) [3529] MONDAY,THE TWENTY SECOND DAY OF JUNE TWO THOUSAND AND TWENTY SIX PRESENT THE HONOURABLE SRI JUSTICE R RAGHUNANDAN RAO THE HONOURABLE SRI JUSTICE T.C.D.SEKHAR WRIT PETITION NO: 13446/2026 Between: 1. M/S. BALAJI STEELS AND CEMENTS,, D.NO. 15/337/98, OPP. SAL BABA TEMPLE, VENKATARAMANAPURAM, MINI BYPASS ROAD, NELLORE - 524003, S.P.S.R. NELLORE DISTRICT, ANDHRA PRADESH SRI. MODERN MALLIKARJUNARAO, S/O. VENKATESWARLU, AGED ABOUT 64 YEARS. ...PETITIONER AND 1. THE COMMERCIAL TAX OFFICER, NELLORE-LLL CIRCLE, NELLORE, ANDHRA PRADESH -524001 2. THE DEPUTY COMMERCIAL TAX OFFICER, O/O. THE COMMERCIAL TAX OFFICER-LL NELLORE, ANDHRA PRADESH. 524001 3. THE APPELLATE ADDITIONAL COMMISSIONER ST, TIRUPATI, CHITTOOR DISTRICT, ANDHRA PRADESH.517501 4. STATE OF ANDHRA PRADESH, REP BY ITS PRINCIPAL SECRETARY, REVENUE (CT) DEPARTMENT, VELAGAPUDI, AMARAVATHI, GUNTUR DISTRICT, ANDHRA PRADESH. 522237 5. UNION OF INDIA, REP. BY ITS SECRETARY MINISTRY OF FINANCE, 4TH FLOOR, A-WING, SHASTRI BHAWAN, NEW DELHI- 110001. 2 ...RESPONDENT(S): Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased topleased to issue an appropriate writ, order or direction particularly in the nature of Writ of MANDAMUS declaring the action of the 1st Respondent i.e. the Commercial tax Officer, Nellore -III in passing the assessment order for the periods 2016-17 and 2017-18 disallowing the input tax credit on the ground that possession of invoice and claim of ITC in VAT returns is not solely a basic ground to allow input tax credit, contrary to sections 13, Rule 20 , Rule 16 and passed without application of mind and on presumptions and assumptions, contrary to the appeal order and without verification of any of the documents filed as illegal, arbitrary, improper, unethical, unfair, and highhanded, contrary to the principles of natural justice and contrary to the provisions of the APVAT Act and rules and notification No. 2201 Revenue -CT-II Department dated 20-09-2005, violative of articles 14, 19(1)(g), 21, 265 and 300-A of the Constitution of India and consequently to set aside the same and pass IA NO: 1 OF 2026 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased Pleased to stay all further proceedings pursuant to the impugned order dated 24-02-2026 pending disposal of the writ petition. Counsel for the Petitioner: 1. M V J K KUMAR Counsel for the Respondent(S): 1. GP FOR COMMERCIAL TAX 3 The Court made the following Order: (Per Hon’ble Sri Justice R. Raghunandan Rao) Heard Sri M.V.J.K.Kumar, learned counsel for the petitioner and the learned Government Pleader for Commercial Tax appearing for respondent Nos.1 to 4. 2. The petitioner deals in Steel and Cement products. In the course of his business, he has purchased various goods and had subsequently resold the same. The petitioner while purchasing the goods is said to have paid his seller tax at the rate of 14 ½ % and sought set off guantum of tax paid as Input Tax Credit (ITC) under the APVAT Act. The period of this set of is 2016-2017 and 2017-2018 (till June, 2017). 3. This claim of the petitioner was rejected by the assessing authority on the ground that the petitioner had subsequently received discounts on the purchase price and as such was not entitled to claim Input Tax Credit at the rate of 14 ½ % on the ostensible sale price quoted in the VAT returns. The assessing authority relied upon the Income Tax returns filed by the petitioner showing a discounted rate of purchase. 4. The assessing authority, on the aforesaid basis, rejected the Input Tax Credit claimed by the petitioner, to that extent. Aggrieved by the said order of assessment, the petitioner is said to have filed an appeal before the appellate authority who remanded the matter back to the assessing authority, along with other issues. Thereafter, the assessing authority again passed a fresh order of 4 assessment, dated 24.02.2026. However, the assessing authority reiterated to the stand that the petitioner was not entitled to that part of Input Tax Credit which relates to the discount obtained by the petitioner from his seller. 5. Sri M.V.J.K.Kumar, learned counsel appearing for the petitioner would rely upon G.O.Ms.No.2201, Revenue (CT-II), dated 29.12.2005 wherein the Government had substituted the following in Rule 16(3)(e) in the following manner: “(f) wherever any credit notes are to be issued for discounts or sales incentives by any VAT dealer to another VAT dealer after issuing tax invoice, the selling VAT dealer shall pass a credit note without disturbing the tax component on the price in the original tax invoice, so as to retain the quantum of input tax credit already claimed by the buying VAT dealer as well as not to disturb the tax already paid by the selling VAT dealer. For example: if 100 TVs are sold @ Rs.10,000/- each, amounting to Rs.10,00,000/-, the original tax charged @ 12.5% is Rs.1,25,000/-. If the discount of 10% is offered subsequently based on fresh purchases, the selling dealer can pass on the benefit of Rs.1,00,000/- for the price without disturbing the tax component of Rs.1,25,000/-. The buying dealer will not alter the input tax credit already claimed amounting to Rs.1,25,000/-. The selling VAT dealer will not claim reduction in output tax liability consequent to lowered price offered.” 6. Learned counsel for the petitioner would contend that this aspect has not been considered by the assessing authority and the order of assessment is in violation of the aforesaid G.O issued by the Government. 7. The learned Government Pleader on the other hand, would contend that the impugned order passed by the assessing authority is in accordance with 5 the said Circular inasmuch as Rule 16(2) of the APVAT Act and relies upon the following passage in the impugned order, which reads as under: “Further, Rule 16(2) of the APVAT Act allowed to deduct discounts when they issued in invoice, Rule 16(2)(a) of the APVAT Act 2005 states that all amounts allowed as discount provided such discount is allowed in accordance with the regular practice of the VAT dealer, or is in accordance with the terms of a contract or agreement entered into in a particular case and provided also that accounts show that the purchaser has paid only the sum originally charged less the discount. Rule 28 of APVAT Rules 2005 states that Credit notes in respect of any annual discounts and price adjustments when the accounts are settled between seller and buyer, then Input tax credit is to be restricted accordingly. The Hon‟ble High Court of Karnataka in the case of TV Sundaram Ayengir vs. State of Karnataka (2010) 32 VST 489 and the Hon‟ble High Court of Kerala in the case of Ultra Tech Cement vs. State of Kerala 2010 had held that „Discount would be allowable as deduction from price only if it is shown in invoice’.” 8. To the mind of this Court, the said observation may not be appropriate inasmuch as the question before this Court is whether the petitioner was entitled to claim Input Tax Credit on the entire VAT paid by the petitioner to his seller irrespective of the discount received by the petitioner. However, the assessing authority went on the basis that a discount would not be allowable on the deduction from price unless it is shown in the invoice. This view does not appear to be correct. The Rule does not provide that only discounts shown in the invoice can be considered. 9. In the circumstances, it would only be appropriate that the matter is remanded back to the assessing authority to reconsider his decision in the light of the rule brought in by G.O.Ms.No.2201, dated 29.12.2005. 6 10. Accordingly, this Writ Petition is disposed of by setting aside the order of impugned assessment order, dated 24.02.2026 and the matter is remanded back to the assessing authority to pass fresh orders keeping in view the amendment to the Rules by way of G.O.Ms.No.2201, dated 29.12.2005 and the same has to be done after affording an opportunity of hearing to the petitioner and at the earliest, preferably within three (3) months from the date of receipt of a copy of this order. There shall be no order as to costs. As a sequel, pending miscellaneous applications, if any, shall stand closed. ________________________ R. RAGHUNANDAN RAO, J _________________ T.C.D. SEKHAR, J Date: 22.06.2026 KA 7 THE HONOURABLE SRI JUSTICE R RAGHUNANDAN RAO THE HONOURABLE SRI JUSTICE T.C.D.SEKHAR WRIT PETITION NO: 13446/2026 Date: 22.06.2026 KA