AP VAT Act — Assessment — Show cause notice — Service — Vacated business premises
A.P. Value Added Tax Act, 2005 — Assessment — Show cause notice — Dealer vacating registered place of business without intimation — Service at registered address and residential address — Validity — No violation of natural justice.
Paras 4–6
Held, when a registered dealer vacates the place of business without informing the jurisdictional authority as required under the Act and Rules, service of notice at the registered address and residential address of partners satisfies the requirement of due service. Failure to respond thereafter cannot be projected as violation of principles of natural justice.
AP VAT Act — Input Tax Credit — Burden of proof
A.P. Value Added Tax Act, 2005 — Input Tax Credit — Claim without production of books of accounts or tax invoices — Burden on dealer — Disallowance justified.
Paras 6–8
Held, the burden to substantiate claim of input tax credit lies squarely on the dealer. In the absence of production of books of accounts or tax invoices either before the assessing authority or appellate authority, disallowance of ITC is justified.
AP VAT Act — Circular trading — Bogus transactions
AP VAT Act — Circular trading — Claim of ITC without actual movement of goods — Findings by authorities — Interference under Article 226 not warranted.
Paras 6–8
Held, where the record discloses involvement of the dealer in circular bill trading among related entities and claim of ITC without supporting invoices, the High Court will not interfere with concurrent findings of statutory authorities in writ jurisdiction.
Penalty — AP VAT Act — 100% penalty
AP VAT Act — Penalty — 100% penalty — Camouflaged transactions — Failure to produce evidence — Levy upheld.
Paras 8–9
Held, initiation of penalty proceedings and levy of 100% penalty is justified where transactions are camouflaged and the dealer fails to substantiate ITC claims with documentary evidence.
Writ Jurisdiction — Article 226 — Natural justice
Constitution of India — Article 226 — Alleged violation of natural justice — No prejudice shown — Non-production of documents — Writ petitions liable to dismissal.
Paras 8–9
Held, a plea of violation of principles of natural justice cannot be sustained when the petitioner, despite service of notice and opportunity, fails to produce material evidence either before the authorities or before the Court.
II. FACTS (AS RECORDED BY THE COURT)
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The petitioner is a registered dealer under the AP VAT Act, 2005, engaged in purchase and sale of waste paper (Para 2).
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The petitioner claimed that due to losses it stopped business and vacated the registered premises in January 2016 (Para 2).
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An assessment order dated 14-06-2016 was passed raising a demand of Rs.1,09,11,318/-, disallowing input tax credit for failure to produce books of accounts (Paras 2–3).
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A penalty order dated 27-06-2016 levying 100% penalty was also passed (Para 3).
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The petitioner contended that it did not receive the show cause notice dated 26-05-2016, as the business premises was vacated (Para 4).
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The respondents asserted that notices were issued to both registered business address and residential address of partners, and that the managing partner sought time but failed to produce records (Paras 4–6).
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The statutory appeal against the assessment order was dismissed on 25-07-2025, confirming the findings (Paras 2, 7).
III. ANALYSIS OF FACTS AND LAW
(As undertaken by the High Court)
A. Service of Show Cause Notice
The Court held that vacating the registered business premises without informing the authorities does not invalidate service of notice. Notices were issued to registered and residential addresses, and the managing partner had participated during audit proceedings (Paras 4–6).
B. Failure to Produce Records
Despite opportunities at assessment, appellate, and writ stages, the petitioner failed to produce books of accounts or tax invoices. The Court treated this failure as fatal to the claim of ITC (Paras 6–8).
C. Circular Trading and ITC Claim
The appellate authority’s finding that the petitioner was involved in circular trading with related firms, claiming ITC without invoices, was accepted. The High Court declined to re-appreciate such findings in writ jurisdiction (Paras 7–8).
D. Penalty Proceedings
Given the nature of transactions and absence of supporting evidence, the levy of 100% penalty was found justified (Para 8).
E. Natural Justice Argument
The Court rejected the plea of violation of natural justice, holding that absence of prejudice and non-production of evidence disentitled the petitioner from relief (Paras 8–9).
IV. RESULT
Both W.P. No.23374 of 2025 (assessment) and W.P. No.23216 of 2025 (penalty) were dismissed.
No costs were awarded. Pending applications stood closed (Para 9).
V. OPINION
(Reasoned, doctrinal)
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The judgment reinforces the principle that statutory compliance by registered dealers is mandatory, particularly regarding intimation of change or closure of business.
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It reiterates that input tax credit is a concession, not a vested right, and must be strictly proved by documentary evidence.
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The Court correctly limits writ jurisdiction where findings are evidence-based and concurrent.
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The decision serves as a strong precedent against misuse of ITC through circular trading and against invoking natural justice as a substitute for proof.
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