Karnataka High Court
State Of Karnataka vs M/S Zuari Industries Ltd on 22 July, 2010
Bench: N.Kumar, B.V.Nagarathna
T mg T
IN THE HIGH comm' OF KARNATAKA AT
Dated this the 2230' day of July, '7' A'
PRESENIV V
THE I-ION'BLE MR. " is 'A
1wD _ _ _ , .
THE HON'BLE ms. V} r¢,A§ARATHNA
N0 .-- ($f" 2 {). O8. _ '
B ETWEEN :
State of 'V
Represented its7':S'ec_ret§iry .
Finance 1Z¥epartn1'en't~ _ ' '
Vidhana. Soudha V_ __ T'
Banga1or'e --1 V = V ...Petitio11er
~{1é§y snf T N Vedamurthy, HCGP)
M;?s_.T'z:u;:*1<i 11{:'i'u'Stries L1;d.,
Jubilee _B'ufi,d1hg, 3rd Floor
45;" ---Mu._seIr1 " Road
BaI1g8 1OIf€ -- 560 001 ...Responc1ent
{By Sri G. Rabinathan & M. Thirurnaiesh,
Advocates)
I\)
This STRP is filed under Section 23(1) of the KST Act
against the judgment and order dated 28~2-2008 passed in
STA Nos. 46/2001 and 47/2001 on the file of the Karnataka
Appellate Tribunal, Bangalore, allowing the appeals. '
This STRP coming on for hearing this day.,~«~~_?\l';_" J
made the following:
9__.13_1L§___l$...
The revenue has preferred this r'eVision,."challengingvthe
order passed by the Kamatakas.t,.Appellatefl'ribuna1;, lurhich has
set aside the order passed by.th'e'ap;pellate authority as well as
the Assessing Officer. gnet deflect 'there is no liability
on the'-.__part~ of to pay the amount under Section
18--AA Karnatakahlsnales Tax Act, as per the forfeiture
order; "Hence, "th_erevis:ion has been filed by the State.
respondent is the manufacturer of various
brands varieties of fertilizers. The respondent is a registered dealer under the provisions of the Karnataka Sales 9' 1957, for short, hereinafter referrer to as "the Act". .9 "the assessment years. 1994-95 and 1995-96, the "respondent collected tax as per Form No-3 and Form No--4 in a sum of Rs.2,58,48,158--OO and Rs.4,0l,76,658--O0 respectively. Subsequently, they filed a revised return of in Form No.4 for both the years, as a sequel to the the Allahabad High Court in case of RASHT _ FERTILIZERS, reported in 101 STTC 457'; :ti<1lew'-siaid 9' judgment it was held that an exempted value and the._tuVr:*nover. The element of tax was rewdcrrlgedgh Jheinglyilgdcollected for both the assessment yearsvin questior'. the value of the subsidy of assessment year 1994-95 and - the assessment year 1995-96.
Accordingly, claimed the difference of tax as showri in original Form No---4 and revised Form No--4 at and Rs.21,73,76_O--OO for the assessment A 1-994-95-lend 1995-96.
3. ~.A:"'I'Ahe assessee had collected taxes on the subsidy a1nour1"t--~l)y including the said taxes as part of turnover as per in and original annual return. The taxes so collected ....beir1g Karnataka Sales Tax and surcharge were collected from 4 dealers/ distributors by separately charging in the sale invoices. The dealers / distributors were aware about payment oftaxes by them even on subsidy amount. The price,..onydchperriipcal fertilizers which has been collected from the""-farin_ers dealers/distributors had includedmh tiiet subsidy and therefore the price of was paid by the farmers. th.e'ca:sell"i:the'V assessee was not Permitted to retain itgis not their amount which is amountlof' from the farmers in the chain of sales and revenue. Instead of declaring ._ andbpyayirigp"oyer. __ the same to the Department, the assessee "preferred the above amount by shifting the taxes on subs'idyVamount as collected to the basic price of the ch_e'Inic"al& fertilizers as per the revised annual return. Thus in effeiéf illegally appropriated the taxes collected on the subsidy' amount. Therefore, a show cause notice was issued under "Section l8--AA of the Act. The assessee filed objections. at contended that the Assessing Officer has considered the ...-:iforesaid contentions and passed an order and therefore the question of reconsidering the same would not arise. They it/.
contended that they have not collected any taxes' on the subsidy amount. Therefore the notice issued for . forfeittire of the amount which they had not received, wotiid not'. fact, they also filed returns showingthat not ¢o11e¢t'ea taxes on subsidy. They also gave trexampivestiiin"writing*--to" show how no tax Was collected onttthez subsidy the order of the Assessing of the same, the Assessing the assessee had designed their claim aeway gave an impression that they . ., "discrepancy. Though in case of certain chemical fertilizersfliti that whatever the amounts they have ''worked'" within that price was not Violative of pr_ovEstons_t:of._Section 18 of the Act. The maximum retail price 'same in€:1udiAng"'the tax component had been passed on to the _ con.sunfiei's(namely, farmers. In this process the assessee had .reali.ae'd 'taxes on subsidy from the farmers which could not it been retained by them and cannot also be added up to t V. the basic price of the product. In the result, they were in clear Violation of Section l8{l){b) of the KST Act 1957. Accepting i/it this, due to changed position of law, they could have either remitted or should not have claimed the adjustxnentyyoftaiges as per revised annual return. Therefore the ogbjections :..w'ere bvlh" " ' " t ' ' over--ruled assessing officer and the proposal.. farfeiteureuof tax collected on subsidy was up held and jan--_ord_er. f'0rfeitinpg::the".., aforesaid amount for the saidtwo yearswas passed.
4. Aggricved. p_the_7said A the assessee preferred an appeal to the Addl.Joint Commercial Taxes (Appeals). 'appellate aLi.tho'rity9.byvalreasoned order pointed out wor.l<Ving"'Qu'tppf1g_u1?es*that the assessee had collected taxes on '=.+.he subsidy' anditltwas impermissible to add that tax collected to thefllbasic price of the products and therefore it V' disn1is'sed_'t11e appeal. Aggrieved by the same, the assessee A to the Karnataka Appellate Tribunal.
V. . 4j'..-The Tribunal on appreciation of the facts held that the sale? proceeds realized by the assessee were the amounts as Net Invoice Values or MRP inclusive of tax but V' excluding subsidy. The tax amounts Comprised Within the Net l/, Invoice Values would be the basic tax, surcharge and cess payable on sale prices excluding subsidy. That the;"~ass.essee met the difference in the cumulative incidence"
between the taxes comprised the--'N'et::'Inyoic'eV &?TalueJ"-- excluding subsidy and the sale prices:1'inclusiVle-.lof' sui§Sid3<1:i_'out of the subsidies received from Goverr1rnent,"A..there _:was no collection of taxby way of tax or'purp_orting be way of tax _ from any purchasing dealer. 'l._Such"p_ayrnents by the appellant, therefore, fell outside o'f"sub.4,section (I) of Section
18. Therefo_re:V, 35$-essment for two years, 1994-95 -in actuality involve collection of tax in excelss 0f"the'.'p~ayable on the sale prices of fertilizers exclgusive of subflsivdy and therefore the assessee could not be held td.__corn1nitted any contravention of sub--section (1) of olfyvthe Act, so as to be attracted by the forfeiture ' provision sub-section (3) of Section 18-AA of the Act. .Therefo--re the Tribunal set aside the orders passed by the lower "[5V':iL1J£~l'i'OrifZi€S and granted the benefit claimed by the assessee. = .._..fXggrieved by the said orders, the revenue has filed this revision.
6. The learned Counsel for the revefnucf,jsuhrni_t'ted that as is clear from the invoice, it is not levied and collected on the aiiipountgiplijnclusive. However while selling the prodauctsllthey of subsidy of Rs.l0,00O~0Q\'.:IEfi1erefore.V_ 'obvious that proportionate tax on :.givVen.deduVctiovn to. That is what is collected by asAses'see .".;/j_Ljf-lbstorners, which they have no rightfto'reytainiiasa is passed on to the customers. Tlierefore neither entitled to refund or adjustment, they are liable to pay amount to the Deparitmelnt. »--
V' _ "Per contra, the learned Counsel for the assessee submitted.v,_tliav'tw"as is clear from the invoice, the money which ' J thew have «jicollected from the consumers is after giving it n deduction to the subsidy. They have not collected any tax. As it such', they are not liable to pay any amount to the Department terms of the impugned order passed by the Assessing Officer. '
8. In the light of the aforesaid feats rfiaral contentions, the short point that arises for this revision is:
" Whether the dssessee has Colleetetttvsales tax on the subsidy not paassedihn the said collectetdfl ifiepartment as conteg_'tde__d by .0
9. H _orci¥§'f:f to"»:--tppreeié£te these rival contentions, we intend to extract Afinexhfcgfg, the invoice on which the learned Counsel fofthe a.s';:es'5;_ee"~1'e1ies upon. L _ 1 Egddfict 0' De"script"ion' jCbde Tones Bags Rate] Amount ' ' 'L , Tonne Rs.
26:0} 04 10,000 200 10280.00 102800.00 . V. Tax .. Surcharge 2.000% 2055.00 . R.T.C. 15,000% 309.00 _ '-_C'uh'eessi0n 5,000% 103.00 ; (Subsidy) 1000.00 10000.00 Net invoice value 95268.00 g/0
10. The aforesaid figures indicate the basic the fertilizers as Rs.1,02,800-O0. Rs.2056~00-00,.?§is'.':3{§9--;(iO-.._.€§i11d Rs.103--OO are the tax component of i:i'1e'= price' Rs.1,02,800--OO. Rs. 1o,0oo--oo is the seubsiudyt "arneiiiatg-ssggrhigii is"
to be deducted out of Rs. 1,O3:,'8Q.V()~0CV)'.e.V_"I'hat Rs.95,268-00 is arrived at. the amount is deducted, the tax afc-3rtes:aiud:'=ai1.dount of 'Ai{sd.1O,O0O-O0 is not deducted on_arriving._a_t:-.Net Tax is collected on Rs.1,02,8€,§Cj§Q0.,:w1iereas;x .sh'Vou1dV':have been collected on Rs. 1,Q2;soo 'Rs: 'io}o0o§'oo; ie, on Rs.92,800--0O.
11. -. ' Ther*efore,"itc_Ais.. obvious from the aforesaid figures that the contention" theassessee that they have not collected ex facié'ir1_correct. Once they have collected tax in excess 'cf,H:w'h:at_'is'zprescribed under law, they have passed on the .bi,afdefi the customers. If at all, it is the customers who are entitled to refund and not the assessee. In View of it essub-section {4} of Section 18~AA of the Act, the assessee has no ' 'urigiit to retain the said amount. Under the said subsection any " Wamount paid or payable by any deaier, to the extent it is not L due as tax can be forfeited by the State Government and recovered from the dealer and such payment or recoiieiufyypyvould discharge the dealer of the liability to refund person from Whom it was collected; ""l'herefr_)reorderfpas.seCij by the Assessing Officer directing'the.'_Apa'svseslseV§§ the difference in the amounttvivpjimthichfthey and which they have actually paid~lisv-_s'tri_etlylinvaccoirdance with law. The Tribunal cornI'f1iu.edi_ in proceeding on the assumption' thatittax' the net amount excluding is collected before Thus though subsidy amount is deducted on subsidy is not deducted.
Therefore the"di_fference in amount which the assessee has no is now ordered to be paid to the Department by the forfeit.u_reV.f'por'der. Therefore, the Tribunal was not justified in interfeifingfévith the well considered order passed by the First ' Appellate Authority as Well as the Assessing Officer. In that if of the matter, the order of the Tribunal cannot be M » sustained. Hence. we pass the following order: D The order passed by the Assessing Officer asfirgnfinned by the appellate authority is restored. Parties QWH costs.