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2025 DIGILAW 993 (TS)

SOL PHARMACEUTICALS LTD v. State Of AP

2025-09-08

NARSING RAO NANDIKONDA, P.SAM KOSHY

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JUDGMENT : Narsing Rao Nandikonda, J. This Tax Revision Case is filed by the petitioner-Assessee under Section 22 (1) of the Andhra Pradesh General Sales Tax Act, 1957 (for short, ‘APGST Act’) aggrieved by the order, dated 08.10.2007, in T.A.No.142 of 2000 passed by the learned Sales Tax Appellate Tribunal, Andhra Pradesh, Hyderabad. 2. The brief facts of the case are that petitioner - M/s.SOL Pharmaceuticals Limited at Dwarkapuri Colony, Hyderabad, is a public limited company incorporated under the Companies Act. It is dealing with manufacturing and sale of drugs in bulk quantity and its formulations. They are registered dealers on the rolls of the Commercial Tax Officer, Khairtabad, Hyderabad, before whom the petitioner-company filed its returns on monthly turnover. It is stated that during the Assessment Year 1990-1991, the assessee company disclosed the Gross turnover at Rs.22,71,79,150.00 claimed as exemption on total turnover of Rs.19,61,05,250.00 and accordingly Assessment order was passed by the Commercial Tax Officer through proceedings, dated 30.12.1993 on the following turnovers: Gross turnover : Rs.22,71,79,150/- Netturnover : Rs.3,10,73,900/- 3. It is stated that the Deputy Commissioner (CT), Punjagutta Division, Hyderabad, has proposed revision of assessment exercising power under Section 20 (2) of the APGST Act and issued a show-cause notice, dated 05.02.1997 to the petitioner on the ground that there are suppression of turnovers compared to Annual Report of the company. It is stated that the petitioner-company has become sick due to severe financial crisis faced by the company and the registered office of the company was under seizure by the Provident Fund authorities in the year 2001, where the entire records of the company are lying. Therefore, the petitioner could not file its objections within the stipulated time objecting the proposed revision by the Deputy Commissioner (CT). It is stated that vide order, dated 05.03.1998, the Deputy Commissioner (CT) has confirmed the proposed levy and accordingly levied tax on the additional turnover of Rs.6,81,37,930/- on the ground of alleged suppression of sale of drugs and medicines. It is also stated that the Deputy Commissioner has also levied tax on the turnover of Rs.50,69,180 alleging that the said turnover represents sale of Exim Scrips ignoring the fact that the said turnover represents incentives received by the petitioner from the Government under the Scheme called ‘Cash compensatory Scheme/ cash Incentive on exports, which was introduced for promoting exports from the State of A.P. 4 . It is further stated that the Deputy Commissioner has also levied tax on a turnover of miscellaneous receipts Rs.1,55,870/- without verifying the nature of the receipts. As the said turnover does not represent sale of any goods exigible to tax under the provisions of the Act. It is submitted that in pursuance of the revision orders passed by the Deputy Commissioner (CT), the Commercial Tax Officer passed consequential order, dated 23.03.1998 arriving the net turnover as Rs.10,44,36,880/- which resulted in an additional demand of Rs.53,02,928/-. 5. It is averred that challenging the revisional order passed by the Deputy Commissioner (CT), dated 05.03.1998, the petitioner has filed an appeal before the learned Sales Tax Appellate Tribunal, which was dismissed vide impugned order, dated 08.10.2007 on the alleged ground that the petitioner could not produce necessary evidence before the revisional authority though it was referred to BIFR during the year 1998. Challenging the same, the present transfer revision case is filed. 6. Learned counsel for the petitioner contended that the revision made by the Deputy Commissioner (CT) is unwarranted without authority of law and jurisdiction and also in violation of principles of natural justice. That no part of the turnovers in dispute is exigible to tax either under the APGST or CST Acts, since it represents sale turnovers of bulk drugs pertaining to the unit of State of Karnataka. Since the petitioner disclosed the entire turnovers of the company in its Annual Report instead of showing the turnover of the unit of State of Karnataka in the Final Assessment; that the turnover in dispute relates to the unit of the petitioner in the State of Karnataka, no part of the disputed turnover is exigible to tax under the provisions of APGST Act. That levy of tax on a turnover of Rs.50,69,180/- is not tenable, since it does not represent any sale turnover of Exim scrips as alleged and it is only the amount of incentives received from the Government under the scheme called ‘Cash Compensatory Scheme.’ That since matter is pending before BIFR, the petitioner could not submit that objection to the show-cause notice, but the learned Tribunal dismissed the contention of the petitioner and dismissed the appeal. The learned Tribunal also failed to appreciate the contention of the petitioner that the registered office of the company has been seized by the provident fund authorities. The learned Tribunal also failed to appreciate the contention of the petitioner that the registered office of the company has been seized by the provident fund authorities. The petitioner company has become sick and there was no staff during the said period and even the staff and records are under the custody of Provident Fund authority. The revision order passed by the Deputy Commissioner (CT) is an ex parte order. The Tribunal did not conduct any enquiries to verify the correctness of the claim and has confirmed the levy only on the ground that the petitioner did not respond to the revision show-cause notice. That the disputed turnover of the petitioner’s unit is relating to the State of Karnataka, tax cannot be levied on the ground that the petitioner failed to produce the copies of assessment order made in the State of Karnataka. Since the petitioner company has become sick and not having any staff and also handicapped because of attachment and seizure of unit by the Provident Fund Authority, the petitioner could not respond. That the Tribunal also failed to appreciate that since the petitioner is a SICK unit and is registered under the provisions of SICA Act , it is entitled for protection under Section 22 of the SICA Act and the Tribunal ought to have considered deferring the proceedings instead of proceeding to dispose of the appeal. 7. Heard Sri.V.Siddharth Reddy, learned counsel appearing for the petitioner and Sri Oorilla Swaroop, learned Special Government Pleader appearing for the respondents. 8. After hearing submissions made by learned counsel on either side, the point that arises for consideration in this Tax Revision Case is whether the impugned order passed by the learned Sale Tax Appellate Tribunal, Andhra Pradesh, Hyderabad, is liable to set aside? 9. The main grievance of the petitioner for non-filing of the appeal is that the petitioner company has become SICK unit and it was registered under the provisions of the SICA Act . Therefore, the petitioner is entitled for protection under SICA Act . 9. The main grievance of the petitioner for non-filing of the appeal is that the petitioner company has become SICK unit and it was registered under the provisions of the SICA Act . Therefore, the petitioner is entitled for protection under SICA Act . Further, the turnover where the tax was levied on the alleged ground that the turnover represents sale of Exim Scrips though this turnover does not represent any sale of the goods and only the incentives received from the Government under the scheme called ‘cash compensatory scheme/ cash incentives on exports.’ Therefore levy of tax can be based only on the taxable sale in the hands of the petitioner in the State of Andhra Pradesh either under the APGST and CST Acts. 10. Admittedly, the turnover which is in dispute relates to the unit of petitioner in the State of Karnataka and that no part of turnover in dispute is exigible to tax under the provisions of APGST Act, since it represents sale turnover of Exim Scrips in the State of Karnataka. The petitioner has disclosed the entire turnovers of the company in its Annual Report which includes the turnover of the petitioner’s unit in other States. 11. The learned Tribunal having considered the entire records, has held that in spite of giving several opportunities to the petitioner, the petitioner has not submitted any written objections, the learned Deputy Commissioner (CT) passed order, dated 05.03.1998. It is pertinent to mention here that it is the specific contention of the petitioner that they have not responded to the show-cause notice for the reason that the petitioner approached BIFR during the year 1988 and proceedings were pending. Further, since the petitioner company has become SICK and no staff members and management were available for searching of resources, as such they could not responds to the impugned orders against which appeal was filed. 12. This Bench is of the opinion that the learned Tribunal as well as revisional authority confirmed the order considering the fact that the unit has become SICK. This clearly shows that the revisional authority without giving an appropriate opportunity to the petitioner has proceeded further and confirmed the proposed revision. 12. This Bench is of the opinion that the learned Tribunal as well as revisional authority confirmed the order considering the fact that the unit has become SICK. This clearly shows that the revisional authority without giving an appropriate opportunity to the petitioner has proceeded further and confirmed the proposed revision. The order under appeal is also erroneous on the ground that the petitioner could not reply to the show cause notice for the reason that the registered company’s have been seized by the Provident Fund authorities and also the matter is pending before the BIFR. Though it is contention of the petitioner that there was a ground taken before the appellate authority, no such ground was taken. Therefore, an error committed by the revisional authority and the Tribunal while considering the turnover of the petitioner in respect of the unit in the State of Karnataka that too basing on the Annual Report of the company. The contention of the petitioner is that levy of tax cannot based on Annual Report when the sale is inexigible in the hands of the petitioner either under APGST or Sales Tax Act and on the said ground also the appeal filed by the petitioner deserves to be allowed. 13. The other ground is that the petitioner is entitled for protection under Section 22 of the SICA Act . But the Tribunal did not consider the same and disposed the appeal which is also an error committed by the Tribunal. Thus, this Bench is of the opinion that the Tribunal was not justified in dismissing the appeal on the ground that the petitioner did not produce any evidence in support of the disputed turnover of Rs.6,81,37,930/- which represents the turnover of the petitioner unit in the State of Karnataka. The Tribunal was not justified in considering the exemption scrips. Therefore, the petitioner categorically contended that levy of tax under APGST Act on the turnover was without considering that is a cash incentives received by the petitioner under cash compensatory incentive scheme. It is also contended that on this ground also the revision filed by the petitioner deserves to be allowed. Therefore, the impugned order is liable to set aside. 14. Accordingly, the Transfer Revision Case is allowed setting aside the order, dated 08.10.2007, in T.A.No.142 of 2000 passed by the learned Sales Tax Appellate Tribunal, Andhra Pradesh, Hyderabad. It is also contended that on this ground also the revision filed by the petitioner deserves to be allowed. Therefore, the impugned order is liable to set aside. 14. Accordingly, the Transfer Revision Case is allowed setting aside the order, dated 08.10.2007, in T.A.No.142 of 2000 passed by the learned Sales Tax Appellate Tribunal, Andhra Pradesh, Hyderabad. There shall be no order as to costs. Miscellaneous petitions, if any, pending shall stand closed.