Karnataka High Court
M/S Hilltop Granites Pvt Ltd vs The Additional Commissioner Of ... on 10 August, 2012
Equivalent citations: 2013 (2) AKR 407
Bench: K.Sreedhar Rao, B.Manohar
1
IN THE HIGH COURT OF KARNATAKA, BANGALORE
DATED THIS THE 10TH DAY OF AUGUST, 2012
PRESENT
THE HON'BLE MR. JUSTICE K.SREEDHAR RAO
AND
THE HON'BLE MR. JUSTICE B.MANOHAR
S.T.A. No.41 OF 2010
BETWEEN:-
M/s. Hilltop Granites Pvt. Ltd.,
14/1, Bannerghatta Road,
Near MICO Back gate,
Bangalore-560030,
(By Nitesh Giria, Director, 35 years).
Appellant
(By Sri T.N. Keshavamurthy, Advocate)
AND:-
1. The Additional Commissioner of Commercial Taxes,
Zone-1, Vanijya Therige Karyalaya,
Gandhinagar,
Bangalore - 560 009.
2. The State of Karnataka,
Rep. by the Principal Secretary to Government,
Finance Department,
Vidhana Soudha,
Bangalore - 560 001.
Respondents
(By Sri Shivayogiswamy, AGA)
2
This S.T.A. is filed U/s.24(1) of the Karnataka Sales
Tax Act, against the Revision Order dated 30.06.2010 passed
in No.ZAC-1/BCD/SMR-09/10-11, on the file of the Addl.
Commissioner of Commercial Taxes, Zone-I, Bangalore,
restoring the penalty order U/s.5-A(2)(v) and setting aside
the appeal order on the matter. Accordingly, concluding the
revision proceedings.
This appeal is coming on for hearing this day,
SREEDHAR RAO, J., delivered the following:
JUDGMENT
The appellant - assessee is a granite dealer. The Assessee purchased raw granites, processed them and sold dressed and finished products. The transaction pertains to assessment year 1996-97. The assessee in the return showed the processing activity as a manufacture and sought tax concession U/s.5A of KST Act. The assessing authority found that processing of raw granite does not amounts to manufacturing activity and held that benefit of concessional tax U/s.5A is not entitled to. The Assessing Authority initiated the proceedings for levy of penalty and accordingly levied the penalty U/s.5A3(iii) of KST Act. The provisions of Section 5-A(3) which is relevant for consideration are extracted for convenient reference.
3"5-A. Taxation of Industrial Inputs (1) xxxx xxxx xxxx (2) xxxx xxxx xxxx (3) If any person -
(i) not having his manufacturing unit inside the State, purchases any inputs by furnishing a declaration under the first proviso to sub-section (1) or pays tax on purchase of inputs under sub-section (2);
or
(ii) having his manufacturing unit inside the State and having purchased any inputs by furnishing a declaration under the first proviso to sub-section (1) or paying tax on purpose of any inputs under sub-section (2), sells away such inputs contrary to such declaration or condition, the assessing authority, after giving such person a reasonable opportunity of being heard, shall, by order in writing, impose upon him by way of penalty a sum, which shall not be less than the amount of tax leviable under Section 5 on the sale of the inputs so purchased or tax leviable under clause (b) of sub-section (3) of Section 5 or Section 6 on the inputs so purchased, but which shall not exceed one and half times the amount of such tax;
(iii) having his manufacturing unit inside the State and having purchased any inputs by furnishing a declaration under first proviso to sub-section (1) or having paid tax on any inputs under sub-section (2), uses such inputs contrary to such 4 declaration or, the assessing authority, after giving such person a reasonable opportunity of being heard, shall, by order in writing, impose upon him by way of penalty a sum which shall not be less than twice the amount of tax leviable under Section 5 or 6 but not exceeding two and half times the amount of such tax on the inputs so purchased.
Provided that no penalty shall be levied under this sub-section after a period of eight years from the close of the year to which the purchase relates."
2. This Court had admitted the appeal to consider the questions of law as mentioned in para 15 of the appeal memo which are as follows:-
"(a) Whether in the facts and circumstances of the case it could be held that rough granite blocks and polished granite tiles and slabs obtained from processing of rough granite blocks are different commercial goods in trade parlance, considering the nature of processing involved, character, end use and the substantial value addition of the end product?
(b) Whether the activity of the appellant in transformation of rough granite blocks into polished granite tiles and slabs by employing sophisticated hi-tech heavy machinery and human skill could be considered to be a 'manufacturing activity' going by the distinctive name, use, character and the price structure involving substantial value addition of the end product and the tests laid down by the Hon'ble 5 Apex Court and this Hon'ble Court and by giving a new dimension to the meaning of the word 'manufacturing' to meet the present industrial concepts?
(c) Whether in the facts and circumstances of the case the first respondent is legally justified in holding that the appellant mis-used Form 37 declarations and therefore liable to penalty under Section 5A(3)(iii) of the Act?
(d) Whether the levy of penalty under Section 5A(3)(iii) of the Act in respect of assessment year 1996-97 under appeal is legally justified in the facts and circumstances of the case, when similar penalty levied in respect of the previous assessment year 1995-96 and the subsequent assessment year 1997-98 has been set aside by the Appellate Tribunal as not legally justified and the said Order of the Tribunal has not been appealed against by the State and has thus become final?
(e) Whether the impugned revision order dated 30-6-10 as in Annexure-A restoring the penalty order dated 21.3.2005 as in Annexure-B passed by the assessing authority by considering the same as having been passed under Section 5A(2)(v) of the Act and not under Section 5A(3)(iii) of the Act is legally justified?
(f) Whether the first respondent is authorized in proceedings under Section 22A(1) of the Act to improve or re-write the penalty order as one passed under Section 5A(2)(v) of the Act and proceeding to revise the said order under Section 22A(1) of the Act?
(g) Whether the impugned revision order dated 30.06.2010 is otherwise legally 6 justified in the facts and circumstances of the case?"
3. After hearing the parties, the following question of law are framed:-
i) Whether the assessee has violated the declaration furnished by him and is liable to suffer penalty U/s.5A(3) of the KST Act?
4. The Division Bench of this Hon'ble Court in the case of M/s.Foredge Granite Pvt. Ltd. in STRP 58 of 1991 has held that processing of raw-granite does not amount to manufacturing activity. But, that proposition is beside point.
The Section 5A(3) envisages two types of cases. The first situation being a person having no manufacturing unit, purchases the inputs by making false declaration under sub-
Section(1) to have the benefit of concessional tax. In the second case, a person having manufacturing unit, purchases inputs by furnishing declaration under sub-Section(1) and pays only concessional tax. Later on, sells away such inputs contrary to such declaration. In both the cases, the person can be levied penalty after being given opportunity. In the 7 instant case, Section 5A(3)(i) of K.S.T. Act does not apply, because the assessee has got a manufacturing unit. In the instant case, he has sold the granite after processing.
Processing of granite may not be the manufacturing activity.
But however, the assessee has not violated the provisions of Section 5A(1) and 5A3(ii), in other words, has not sold the goods in violation of the declaration. Therefore, levy of penalty is bad in law. The appeal is allowed.
Sd/-
JUDGE Sd/-
JUDGE NM*