THE COMMERCIAL TAX OFFICER & ORS versus NEERAJA PIPES PVT. LTD. on 15 March 2023

1. The appeal was heard, with consent of counsel for the parties.The appellant, Commercial Tax Officer (hereafter called “the revenue”)is aggrieved by the judgment and order of the Telangana High Court[1], bywhich a writ petition filed by the respondent (hereafter “the assessee”)was allowed.

2. The assessee questioned the revenue, complaining that it didnot provide copies of assessment order for the years 2005-06, 2008-09,2009-10, and 2010-11 under the Andhra Pradesh General Sales Tax Act,1957 (hereafter “APGST Act”). and Telangana State Value Added TaxAct, 2005 (hereafter “VAT Act”) and for not lifting attachment orderdated 03.02.2012 and another, revised attachment order dated 20.02.2018under Form V invoking the provisions of Revenue Recovery Act, 1864(hereafter “the RR Act”), under Section 27 of the VAT Act. The revenuehad issued assessment orders for the assessment years (AYs) 2005-06to 2008-09, 2009-10 and 2010-11, under which ` 1,88,81,000/-,` 2,38,84,000/- and ` 2,21,83,854/- was claimed respectively, as tax dueand payable.

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A3. The assessee argued, before the High Court that the revenue,despite several requests, did not furnish assessment orders, and that itwas not aware of them. Since these orders were allegedly not served,the assessee submitted that it was unable to examine their correctnessand whether they conformed with the provisions of the VAT Act, andfurther to enable it to avail remedies under the statute. The assesseeBalleged that the notice dated 03.02.2012 in Form V under the RR Actinvoking Section 27 of the VAT Act for non-payment of arrears of tax tothe tune of ` 5,59,58,758/- and attaching its various properties, led it tobring to the notice of the authorities that the arrears so reflected in FormV were erroneous. The assessee requested to cancel the said demand,Csince the assessment orders for the year 2001-02 and 2003-04 wererevised on 24.04.2005 resulting in excess tax collection; it requested thatsuch excess tax collected be adjusted for the subsequent demand.According to the assessee, the revenue thereafter did not issue anyfurther notice and after lapse of about six years, issued a revised noticein Form V dated 20.02.2018 showing arrears of tax in a sum ofD` 5,59,78,758/- for the tax periods 2005-06 to 2008-09, 2009-10 and2010-11 and attached land and building (belonging to the assessee) beingSy. No.182 - H.No.7-3-52/1/2 situated at Gaganpahad village, RajenderNagar Mandal, Ranga Reddy district measuring 2,224.05 square yards.The assessee relied on various representations[2] asking the revenue toEcancel the demand and attachment notices.

4. It was also urged that, though the assessee made severalrequests for furnishing copies of assessment orders and also the date ofservice of such orders passed, the revenue maintained silence, andprovided neither. The assessee therefore urged that without effectingFthe service of the assessment orders, as mandated by law, the revenuecould not claim tax shown as arrears, and could not resort to provisionsof the RR Act, attaching its properties.

5. The revenue, in its return, resisted the claim and urged that theassessee engaged itself in the business of manufacturing and selling HRGstrips, sections, and pipes and effected intra-state and inter-state sales.For AY 2005-06 to 2008-09, it was issued with show cause notice inForm VAT 305A on 06.06.2009 proposing to raise a demand of` 1,86,80,708/-. Objections were called for, from the assessee which 2 Dated 18.06.2018, 16.07.2018, 23.08.2018, 24.10.2018, 05.03.2019, 18.06.2019,Hand 04.11.2019.

were not filed till 06.07.2009. Consequently, assessment orders werepassed on 07.07.2009 confirming the tax demand as proposed in theshow cause notice. This assessment order was challenged before theHigh Court in a writ petition[3]; which was disposed of by the court on15.04.2010 permitting the assessee to file objection to the notice in VAT305A dated 06.06.2009 within a period of six weeks from the date, onthe condition that the assessee deposited ` 20 lakhs within four weeksfrom 15.04.2010. However, no deposit of the amount within the periodspecified was made; the assessee also did not file its objections to theshow cause notice, as directed by the court. As a result, the revenueissued proceedings dated 31.03.2011 confirming the demand of tax in asum of ` 1,86,80,708/- as arrived at by assessment order dated07.07.2009. The revenue alleged that the said proceeding was servedon one Mr. Pankaj Agarwal, Director of the company on 31.03.2011itself, which was duly acknowledged.

6. The revenue further contended that similarly for AYs 2009-10and 2010-11, assessments under VAT Act were finalized raising a demandof ` 2,38,84,812/- and ` 1,21,83,884/-. Since the assessee did not paythe tax due in the normal course, an urgent notice dated 14.06.2011 wasissued for payment of ` 5,50,58,758/- which included the arrears of taxpayable for the earlier period i.e., 2005-06 to 2008-09. It was claimedthat this urgent notice was served on Mr. Neeraj Agarwal, one of theDirectors of the assessee company on the same day. The arrears shownas due, were not paid, resulting in a demand notice in Form IV dated12.09.2011 under the RR Act, before attaching the assessee’s properties.Since there was no response, or compliance, an attachment order dated03.02.2012 in Form V under the RR Act was issued. Even then theassessee did not approach the revenue to seek any relief and insteadremained silent.

7. The revenue also urged that it became aware that the assessee’sbanker, Canara Bank, had issued a notification on 14.08.2011 bringingits immovable properties for sale in public auction to recover the loansextended to it. Under provisions of Section 25 and 26 of VAT Act, thetax arrears have a priority over the dues of the bank. They provide forfirst charge over the properties of the VAT dealer. Therefore, the revenuerequested the petitioner’s banker not to proceed with sale of the property,pursuant to the notification dated 14.08.2011 and also requested it to AB

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Aremit the sale proceeds towards the assessee’s tax arrears, in case saletakes place in public auction. The revenue then approached the HighCourt by filing a writ petition[4] to declare the notification dated 14.08.2011issued by the bank, as illegal and contrary to the provisions of the VATAct. The assessee was arrayed as second respondent in that proceeding.The revenue had specifically averred that the assessment orders wereBserved on the assessee and that those assessment orders had attainedfinality, resulting in the demand of liability getting crystalized. The assesseedid not object to those averments by filing a counter affidavit denyingthe service of assessment order. In that writ proceeding, after an initialinterim order, the High Court, on 13.02.2015, permitted the assessee’sCbanker to proceed with the auction in respect of its director’s properties,but continued the order of restraint of not issuing confirmation of sale inrespect of the company’s property mentioned at serial Nos. 4, 5 and 6 ofthe notification dated 14.08.2011. As a result, the revenue issued revisedattachment notices in Form IV and V on 07.03.2015 and 27.04.2015under the RR Act attaching the immovable property of the assesseeDbeing land admeasuring 2,224.25 square yards and building standingthereon. Even to the said revised attachment proceedings issued in FormIV and V there was no response forthcoming from the assessee company.It was in these circumstances that the revenue issued another notice ofattachment dated 20.02.2018 in Form V, in respect of the property andEserved copy of the said notice on Sri Pankaj Agarwal and Neeraj Agarwali.e., Directors of the assessee company.

8. It was claimed that the assessee then for the first time, submittedrepresentation dated 18.06.2018 for furnishing certified copies ofassessment orders. Similar representations renewing the said requestFare stated to have been made on 24.10.2018 and 05.03.2019. Accordingto the revenue none of the said representations, claimed that theassessment orders passed by the revenue were not served and on theother hand it claimed that “the assessment orders are not availablewith us and our factory is closed long back and above orders are

not traceable in our records”. The revenue averred that the allegationGof not furnishing of copies of assessment orders passed, was an after-thought, to thwart the proceeding initiated by the respondent for recoveryof tax dues. Non-service of assessment orders was not raised in theearlier two writ proceedings and this, it was contended by the revenue,demonstrated absence of bonafides.H4 W.P. No. 25943/2011

9. The impugned order noticed that the VAT Act stipulates themanner and method of service of notices and orders on the assessee;Rule 64 of the Telangana VAT Rules[5] (“the rules”) prescribes theprocedure thereunder. The court held that an order by the revenue to beconsidered as validly served, would have to be only in the mannerprescribed under the Rules and that since the assessee is a company, itwas governed by Rule 64(1)(b) in terms of which any notice or an orderpassed can be considered as validly served under any one of the modes,namely - (i) if the same is personally served on the nominated person; or(ii) it is left at the registered office of the person or person’s address forservice of notices under the Act; or (iii) it is left at or sent by registeredpost to any office or place of business of that person in the State; and(iv) where it is returned unserved, if it is put on board in the office oflocal chamber of commerce or trader’s association. It was held that sofar as the assessment order dated 31.03.2011 for AY 2005-06 to 2008-09 were concerned, the material placed on record showed that the orderwas served on the assessee, represented by its Director Mr. PankajAgarwal, who was deponent to the affidavit in the writ petition. Thecourt held that the service of the order passed for AY 2005-06 to 2008-09 could not be called in question; since the assessee did not questionthe assessment order, it has attained finality.

10. So far as AY 2009-10 and 2010-11 are concerned, the revenue’scontention with respect to the admission by the assessee in its pleadingsin the previous writ petition was rejected:

5 “64. Mode of Service of orders and notices

(1) Unless otherwise provided in the Act, or these Rules, a notice or other documentrequired or authorized under the Act or these Rules to be served shall be considered assufficiently served,- (a) on a person being an individual other than in a representative capacity if,-

(i) it is personally served on that person ; or

(ii) it is left at the person’s usual or last known place of residence or office or businessin the State; or

(iii) it is sent by registered post to such place of residence, office or business, or to theperson’s usual or last known address in the State; or (b) on any other person if,-

(i) it is personally served on the nominated person ; or

(ii) it is left at the registered office of the person or the person’s address for service ofnotices under the Act; or (iii) it is left at or sent by registered post to any office or placeof business of that person in the State; (iv) where it is returned unserved, if it is put onboard in the office of local chamber of commerce or traders association.

(2) The certificate of service signed by the person serving the notice shall be evidenceof the facts stated therein.”

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A“the said contention urged does not hold water, since thechallenge in the said Writ Petition filed by the respondent aspetitioner was in relation to a notification issued by thepetitioner’s banker bringing to auction the properties of thepetitioner for recovery of loans advanced to it wherein therespondent, as petitioner, sought to claim priority over suchBassets being a crown debt. The dispute in the said Writ Petitionis primarily between the respondent as petitioner and the bank.Thus, the claim of the respondent in the counter affidavit thatthe petitioner herein did not choose to file a counter affidavittherein raising the said plea would not preclude the petitionerCfrom taking the said plea in the present proceeding.”[6]

11. The impugned order also held that the revenue did not haverecord evidencing the service of assessment order on the assessee forAY 2009-10 and 2010-11 by any of the modes prescribed under Rule64(1)(b). It was noted that Section 42 of the VAT Act mandates anDassessee to maintain the record minimum for a period of six years fromthe end of the year, however, the revenue in whom the power of revisionis vested, claimed that the record was not traceable even though it hadonly been 10 years since the relevant period. It was held that if suchstatement were to be accepted, it was not clear on what basis revisednotices in Form IV and V were issued on 07.03.2015 as well as noticeEof attachment in Form V dated 20.02.2018 under the RR Act, claimingarrears of tax from the assessee for the above said period. Noting thatnothing prevented the revenue from issuing certified copies of the orderspursuant to the request made by the assessee on 18.06.2018 (just aboutfour months after revised Form V notice was issued on 20.02.2018), the Fassessee’s stance is justified.

12. On the basis of this reasoning, the impugned judgment wasdelivered. Since the revenue was unable to show how the service ofassessment orders for AY 2009-10 and 2010-11, was effected and when,the attachment notice issued in Form V dated 20.02.2018 invoking theGRR Act for recovery of a sum of ` 5,59,58,758/- was set aside. Thecourt, however, clarified that it was open for the revenue to initiaterecovery proceedings afresh only to the extent of arrears of tax due forthe period 2005-06 to 2008-09 as crystalized under order dated 31.03.2011

H6 Paragraph 32 of impugned High Court judgment.

in accordance with law, by excluding the tax arrears shown as due forthe period 2009-10 and 2010-11.

Contentions of parties

13. The revenue contends that the impugned order is in error. Itsprincipal submission is that the assessee was an established concern,and had, in the past, occasion to contest its liability, even in respect ofthe same assessments. Notice of this court is drawn to the previous writpetition initiated by the assessee, whereby the court had remitted thematter for fresh consideration, and permitted filing of objections, despitewhich the assessee did not participate in the proceedings, leading tofresh orders. Likewise, it was submitted that when a compositeattachment order was made, and the revenue had gone to the court,filing a writ petition, it had specifically stated the extent of the assessee’sliabilities, which the latter did not dispute. It never alleged non-service oforders, or that it was unaware of proceedings leading to those orders. Inthese circumstances, its plea that it was not served with orders, couldnot be entertained; even otherwise, that was not the subject matter of itsrepresentations. Having regard to all these factors, the assessee wasestopped from contending that the attachment orders were vitiated inlaw.

14. Counsel for the assessee relied on the findings of the HighCourt, and stated that the revenue’s arguments are meritless, with respectto service of assessment orders. It was submitted that Rule 64, relied onby the High Court is unambiguous, as every assessee has a right toexpect service of assessment orders upon it, to enable it to seek appellateor revisional remedies. Even otherwise the correctness of assessmentorders and their compliance with law, required service of orders, in termsof the two enactments. Without resorting to the precondition of suchnotice, the revenue could not have sought recourse to the RR Act andattached the assessee’s properties. Therefore, the findings in theimpugned order were justified and in accordance with law.

Analysis and conclusions

15. The High Court’s reasoning is based entirely on the effect ofRule 64 of the rules. There can be no doubt that when any statutory oradministrative order, visits a citizen or entity with adverse consequences,such an order has to be served upon the concerned person; especiallyso, when that order is appealable or subject to revision by higher A

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Aauthorities. That is the substance of the requirement under Rule 64. TheHigh Court, in the present case, drew a distinction between two periods;for AY 2005-06 to 2008-09 it was held that the assessments could not becalled in question. So far as AY 2009-10 and 2010-11 were concerned,the court held that the attachment orders were invalid, since theassessment orders were not served.B

16. The findings of the High Court, on the facts would not normallyhave required a second look by this court; however, the peculiarcircumstances of this case compel scrutiny. After the disposal of thewrit petition filed by the assessee (on 15.04.2010) concededly, it madeno attempt to file objections or even deposit the amounts the court hadCrequired it to. As a regular dealer, it had filed returns not only for AY2005-06 to 2008-09 but also later periods (i.e., AY 2009-10 and 2010-11). However, if its contentions were to be believed, it made no attemptto ascertain the fate of its assessments for those periods. Moreimportantly, the assessee’s banker had attached and sought to bring toDsale, its properties. At that stage, the revenue approached the High Court,seeking to enforce its first charge, under provisions of the APGST Actand the Telangana VAT Act; the assessee was a party (secondrespondent) in those proceedings. In those proceedings, specifically, theliabilities of the assessee were pleaded. It however did not deny thoseaverments, nor contended that the assessment orders were not servedEupon it. Further, it alleged that its representations seeking copies ofassessment orders were not replied to by the state. The revenue however,pointed out to the High Court, that the representations never alleged thatassessment orders were not served and that the attachments weretherefore not compliant with provision of law.F17. In Amina Bi Kaskar (D) by LRs. v. Union of India & Ors.[7]this court had occasion to deal with complaints of non-service of notice,which led to forfeiture of property. The court held that the conduct ofthe party is relevant, and in the facts of that case, denied relief:

“16. In the light of the aforementioned finding of fact recordedGby the Tribunal and affirmed by the High Court, we do notconsider it necessary to examine the question thoughvehemently argued by Dr Rajeev Dhavan, learned SeniorCounsel for the appellants, namely, whether in a given caseservice of the order on the appellants’ lawyer is proper or not H7 (2018) 16 SCC 266

and whether the service on the appellants’ minor daughterwas in accordance with the procedure prescribed underSection 22 of SAFEMA or not.

17. If the appellants had the knowledge of the order passedagainst them and which they admit to have as per their ownadmission mentioned above, pursuant to which they filedappeals, then in our opinion, so-called irregularity in themanner of effecting the service of the order on them, etc. wasof no consequence and cannot be termed as illegal per se (iffound to exist though denied by the Revenue).”

In Sri Budhia Swain & Ors. v. Gopinath Deb & Ors.[8] similarly,the court observed as follows:

“As already noted the appellants sought for review or recallof the order from the O.E.A. Collector solely by alleging thatthe notice which was required to be published in the localitybefore settling the land in favour of the respondent No. 1 wasnot served in accordance with the manner prescribed by law.The appellants did not plead ‘non-service of the notice’ butraised objection only with regard to ‘the manner of serviceof the notice’. The High court had called for and perused therecord of the O.E.A. Collector and noted that the notice wasissued on 15.12.1963 inviting public objection. The noticewas available on record but some of its pages were missing.The O.E.A. Collector had noted in his order dated 23.2.1966as under :- ‘It is only due to missing of some pages of the proclamation-including the last page over which the report of the processserver was there, a scope was available to the objectors tofile this petition. Under the above circumstances, it is notnecessary to issue another proclamation and entertainfurther objection since the case is being heard and goingto be finalised on 14.3.66.’

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Airregularity in the proceedings but certainly not a fact strikingat the very jurisdiction of the authority passing the order.

The Appellate Authority, i.e., the ADM has in his ordernoted two other contentions raised by the appellants, viz., (i)the application for settlement by the respondent No. 1 wasBnot filed within the prescribed time, and (2) the applicationshould have been treated as an application for lease andshould not have been treated as a claim case.

None of the two pleas was raised by the appellants intheir pleadings. None of the two was urged before O.E.A.CCollector. Therefore, there was no occasion to consider thosepleas. Still we may make it clear that none of the two pleascould have been a ground for recalling the order which wasotherwise within the jurisdiction conferred on the O.E.A.Collector...”

D18. In the present case, arguendo if the assessee was unaware,in the first instance regarding the issuance of assessment orders againstit, at least when the revenue filed a writ petition (W.P. No. 25943/2011)complaining about Canara Bank’s proposal to auction the assessee’sproperties, it had impleaded the assessee too. In the pleadings, therewas a specific mention about the assessment orders, them having becomeEfinal, and why those demands had to be given primacy as revenue dues,over and above the bank’s dues. The assessee was served in those writproceedings; however, it did not dispute the revenue’s contention. This,in the opinion of the court is a telling aspect, as it highlights the assessee’sconduct in deliberately choosing to keep quiet, even when it could haveFraised a grievance.

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19. Moreover, the assessee also did not dispute that it had notreceived the copies of assessment orders, in those writ proceedings.Further, it did not seek copies of the assessment orders, in therepresentations addressed to the revenue after the second attachmentGorder was issued, on 20.02.2018. In these circumstances, the assessee’scontentions that the attachment orders were unenforceable, becausethe assessment orders were not served on it, are untenable. The HighCourt, with due respect, fell into error, in holding that since the subjectmatter of the revenue’s writ petition (W.P. No. 25943/2011) was different,the assessee could not be faulted for highlighting that it had not received H

THE COMMERCIAL TAX OFFICER & ORS. v. NEERAJA PIPES937PVT. LTD. [S. RAVINDRA BHAT, J.]

a copy of the assessment order. In fact, the entire premise of that writpetition was that the assessee owed tax dues, to the extent of` 5,59,58,758/- and that the bank could not sell the assessee’s properties.

20. In the light of the foregoing discussion, the revenue’s appealhas to succeed. The impugned judgment and order are therefore, setaside. As a result, the attachment notice in Form V dated 20.02.2018, isrevived and it is open to the revenue to recover the dues owed, as perthe said notice. The present appeal is allowed. There shall be no orderon costs.

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Nidhi Jain(Assisted by : Shashwat Jain, LCRA)

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