Karnataka High Court
M/S Elbit Medical Diagnostics Ltd vs Addl Commissioner Of Commercial Taxes on 27 July, 2012
Bench: K.Sreedhar Rao, B.Manohar
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 27TH DAY OF JULY 2012
PRESENT
THE HON'BLE MR.JUSTICE K.SREEDHAR RAO
AND
THE HON'BLE MR. JUSTICE B.MANOHAR
STA NO.69/2010
BETWEEN:
M/S.ELBIT MEDICAL DIAGNOSTICS LTD.,
NO.6/1, INFANTRY ROAD,
BANGALORE - 560 001.
(REP BY MR.VIJAY.K.PAUL,
SR.VICE PRESIDENT). .... APPELLANT
(BY SRI.ATUL K ALRU, ADV)
AND:
ADDL.COMMISSIONER OF COMMERCIAL TAXES,
(APPEALS), ZONE - 1,
KAVIKALIDASA ROAD,
GANDHI NAGAR,
BANGALORE - 09. ....RESPONDENT
(BY SRI.N.SHIVAYOGISWAMY, ADV)
STA FILED U/S.66 (1) OF THE KARNATAKA VALUE
ADDED TAX ACT, 2003, AGAINST THE REVISION ORDER
DATED: 27.7.2010 PASSED IN NO.ZAC-/BANG/SMR.16/10-
11, ON THE FILE OF THE ADDL.COMMISSIONER OF
COMMERCIAL TAXES, ZONE-1, BANGALORE, REJECTING
THE OBJECTIONS AS UNTENABLE, SETTING ASIDE THE
APPEAL ORDER AND RESTORING THE PENALTY ORDER
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UNDER SECTION 53 (12), ACCORDINGLY CONCLUDING
THE REVISION PROCEEDINGS.
THIS APPEAL IS COMING ON FOR HEARING THIS
DAY, B.MANOHAR J., DELIVERED THE FOLLOWING:
JUDGMENT
This appeal is filed under Section 66(1) of Karnataka Value Added Tax, 2003 (the 'KVAT Act' for short) being aggrieved by the order dated 27-7-2010 passed by the Additional Commissioner of Commercial Taxes, Bangalore in ZAC-1/BNG/SMR/16/10-11 setting aside the order dated 5-12-2009 passed by the First Appellate Authority and confirming the order passed by the Check Post Authorities.
2. The appellant is a company running diagnostic center at Bangalore rendering medical diagnostic services. It was not registered under the KVAT Act since it is not a dealer as defined under Section 2(12) of KVAT Act. The appellant has purchased second hand 'Millennium MPR Single Head spect gamma camera (hereinafter referred to as 'Gamma Camera') from M/s. Spect Lab Nuclear Medicine Services, Pune for a sale consideration of Rs.24,00,000/-. The said Spect Lab 3 Medicine Services, Pune is also not registered under KVAT Act as it was rendering only medical services, hence, it has not raised the tax invoices. Originally, by M/s. Spect Lab Nuclear Medicine Services purchased the said goods from M/s. Wipro GE Medical Systems Limited, Whitefield, Bangalore on 25-9-2001 for a sale consideration of Rs.70,00,000/-. The said Gamma Camera was repurchased by the appellant for a sale consideration of Rs.24,00,000/-. It was transported from Pune to Bangalore through M/s.Supreme Transports by road along with necessary documents. The said lorry was intercepted at Arasinakunte Check Post on 27-7-2009. Inspite of producing necessary documents, the said Gamma Camera was attached on the ground that sale invoice has not been produced and notice under Section 53(12) of the KVAT Act was issued proposing to impose penalty of Rs.2,88,000/-.
3. Pursuant to the notice issued by Check Post Authorities, the authorised representatives have produced the necessary documents. Inspite of the same, penalty of Rs.1,92,000/- was imposed. Being aggrieved by the order 4 passed by the Check Post Authorities, the appellant preferred an appeal before the First Appellate Authority. The First Appellate Authority after considering the documents produced by the appellant by its order dated 5-12-2009 allowed the appeal and set aside the order of imposing penalty under the KVAT Act. However, the Additional Commissioner of Commercial Taxes issued notice under Section 64(1) of the KVAT Act for initiation of Suo-motu Revisional Proceedings on 24-6-2010. In pursuance to the said notice, the appellant appeared and filed detailed statement of objections and also made available necessary documents in support of their claim. However, Revisional Authority held that the appellant failed to produce necessary documents as required under Section 53(2) of the KVAT Act. The driver of the lorry has not carried necessary documents as required under Section 157(1) of the KVAT Rules. Instead of producing the sale invoice, the debit invoice was produced and name of the consignee was also not found and it is a clear case of evasion of tax. Accordingly, allowed the revision petition and set aside the order dated 5-12-2009 passed by 5 the First Appellate Authority restoring the order of imposition of penalty by the Check Post Authorities. Being aggrieved by the order dated 27-7-2010, the appellant has filed this appeal.
4. Sri.Atul K.Alur, learned counsel appearing for the appellant contended that the order passed by the Revisional Authority is contrary to law. The appellant has not registered under the KVAT Act and they are not doing any business nor they are dealers. They have purchased the second-hand Gamma Camera from M/s. Spect Nuclear Medicine Services, Pune. The appellant is in the business of rendering diagnostic services. Hence, the appellant is not liable to pay any tax. Further, the seller is also not a dealer or doing any business. The appellant was also not registered under the Act. In view of that, they have issued debit note dated 24-7-2009. The following documents have been produced before the Check Post Authorities, when the said lorry was intercepted:
(i) LR of M/s. Supreme Transport Organization Pvt. Ltd., bearing No.20349 dated 24-7-2009;
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(ii) Receipt issued by Dr.Solav, M/s. Spect Lab, Pune for having received a sum of Rs.24,00,000/- towards the sale of Gamma Camera including all accessories;
(iii) Debit note dated 24-7-2009 issued by Dr.Solav, M/s.Spect Lab, Pune in favour of the appellant-company;
(iv) Letter issued by the appellant-company addressed to whomsoever it may concern;
(v) Invoice No.21006137 dated 25-9-2001 issued by M/s. Wipro GE Medical System Ltd., Whitefield, Bangalore in favour of Dr.Srikant V Solav of M/s.Spect Lab, Pune having sold Gamma Camera System for Rs.70,00,000/-
The Check Post Authorities held that they are bound to pay the tax solely on the ground that no tax invoice or sale bill for movement of the goods from Pune to Bangalore was produced and neither consignor nor consignee is the registered dealer under the respective State VAT Act. Accordingly imposed penalty of Rs.1,92,000/- which is contrary to law. The Appellate Authority, on an appeal filed by the appellant set aside the said order. However, Suo- motu Revision was invoked by the Additional Commissioner by issuing notice. The Revisional Authority without 7 considering the document has passed the order, which is contrary to law. There is no such intention of evading of the tax, since the original invoice of the year 2001 issued by M/s.Wipro GE Medical System is already produced. The Revisional Authority misunderstood and misread the provision of the Act and sought for setting aside the same.
5. Sri.N.Shivayogi Swamy, the Additional Government Advocate appearing for the respondent argued in support of the order passed by the Revisional Authority and also produced the circular dated 26-10-2005 issued by the Commissioner of Commercial Taxes, Bangalore. He further contended that transportation of the materials for transaction not attracting tax under the Value Added Tax, the Transporter has to obtain prior permission from the Competent Authorities. In the instant case, for transportation of Gamma Camera, no prior permission has been obtained. Further the transportation of Gamma Camera is an inter-State transportation and no tax has been paid either in Maharashtra or in Karnataka State. There is no infirmity in the order passed by the Check Post Authority 8 as well as the Revisional Authority and sought for dismissal of the appeal.
6. We have carefully considered the arguments addressed by the learned counsel for the parties.
7. The records clearly disclose that the appellant is not a dealer or a businessman. The appellant is running a Medical Diagnostic Center at Bangalore. The appellant purchased the second hand Gamma Camera from M/s.Spect Lab Nuclear Medicine Services, Pune after paying the sale consideration of Rs.24,00,000/-. Originally, the said Camera was manufactured in Bangalore and it was purchased by M/s. Spect Lab Nuclear Medicine Services, Pune for a sale consideration of Rs.70,00,000/-. At that time, the purchaser had paid the taxes. It is not in dispute that the appellant is not carrying on trade in any goods so as to hold that the appellant is carrying on business activities as defined under Section 2(6) of the Act. When the appellant is not carrying on business activities, it cannot be said that the appellant is a dealer as defined under Section 2(12) of 9 the Act. The business means an activity of carrying on trade, commerce or manufacture and including any transaction of sale or purchase of goods effected in connection with or in ancillary or incidental to the main activity of trade carried on in furtherance of gain or profit. In the instant case, none of the ingredients of business is found. On the other hand, the appellant is rendering services in the field of curing ailment and diagnosing the diseases of the patients. For such activities, the appellant has purchased the Gamma Camera for scanning from outside the State from another service provider. Hence, the activities of the appellant cannot be treated as business.
8. The dealer has been defined under Section 2(12) of the Act. Dealer means any person who carries on business of buying, selling, supplying or distributing goods, directly or otherwise whether for cash or deferred payment or for commission, remuneration or other valuable consideration. In the instant case, the appellant cannot be treated as a dealer. Necessary documents have been produced before the Check Post Authorities, the question of producing the sale 10 bill and tax invoice does not arise since it is purchased from one service provider to another service provider. The debit note has been produced. Dr.Srikant Solav has issued receipt for Rs.24,00,000/- and also debit note. Further, the original invoice dated 25-9-2001 issued by M/s. Wipro GE Medical System Ltd., was also produced. The Check Post Authorities without taking into consideration all these aspects of the matter has imposed the penalty, the First Appellate Authority set aside the said order. However, the Revisional Authority doubted the transaction and set aside the order passed by the First Appellate Authority and upheld the order passed by the Check Post Authorities imposing penalty. The circular dated 26-10-2005 issued by the Commissioner of Commercial Tax cannot be applicable to the present case, since it is only the internal correspondence between the Joint Commissioner and Commissioner of Commercial Tax and it was not a published gazette or any other mode made known to the general public. 11
9. We find that both seller and buyer are not the dealers or doing any business, both are running Medical Diagnostic Centers. The appellant purchased the second-hand Gamma Camera and it was transported in accordance with law along with necessary documents. The documents produced by the appellant clearly disclose that there is no provision for paying the tax for the second hand Gamma Camera purchased by the appellant. The documents produced by the consignor and consignee clearly disclose that there is no evasion of tax, since they do not come under the definition of dealer or business people, they need not register under the Act. When the consignee is not a dealer, obviously, his registered number will not be mentioned in the delivery note. Hence, the Check Post Authority is not justified in insisting upon the appellant to produce the registration number of the consignee. Since the appellant is not doing any business and they are rendering services for medical treatment to the patients, the question of paying the tax does not arise. Hence, the order passed by the revisional authority cannot be sustained.
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10. Accordingly, we pass the following:
ORDER The appeal is allowed. The order dated 27-7-2010 passed by the Revisional Authority is set aside and the order dated 5-12-2009 passed by the Joint Commissioner of Commercial Taxes, (Appeals) Bangalore is restored.
Sd/-
JUDGE Sd/-
JUDGE mpk/-*