Karnataka High Court
M/S Clix Finance India Pvt Ltd vs State Of Karnataka on 13 March, 2018
Author: S.Sujatha
Bench: S.Sujatha
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 13TH DAY OF MARCH, 2018
BEFORE:
THE HON'BLE MRS. JUSTICE S.SUJATHA
WRIT PETITION No.10776/2018 (T-RES)
BETWEEN:
M/s CLIX FINANCE INDIA PVT. LTD.,
(FORMERLY KNOWN AS
M/s CLIX FINANCE INDIA UNLIMITED)
NO.1251, B WING 14TH FLOOR,
MITTAL TOWER, M.G.ROAD,
BENGALURU-560001
REP. BY ITS VICE PRESIDENT
VIKAS AGGARWAL. ... PETITIONER
[BY SRI N.VENKATARAMAN, SENIOR COUNSEL A/W
SRI TUSHAR JASWAR, FOR SRI RAGHURAM CADAMBI &
SRI C.K.NANDAKUMAR, ADVS.]
AND:
1. STATE OF KARNATAKA
REP. THROUGH ITS FINANCE SECRETARY,
VIDHANA SOUDHA,
BANGALORE-560001
2. THE DEPUTY COMMISSIONER
OF COMMERCIAL TAXES (AUDIT-5.1)
DIVISIONAL VAT OFFICE-V,
5TH FLOOR, B-BLOCK, VTK-2
RAJENDRANAGARA,
KORAMANGALA,
BANGALORE-560047
3. COMMISSIONER OF COMMERCIAL TAXES
'B' BLOCK, SOUTH ZONE,
-2-
KORAMANGALA,
BANGALORE-560034 ...RESPONDENTS
[BY SRI T.K.VEDAMURTHY, AGA.)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE
IMPUGNED REASSESSMENT ORDER DATED 21.12.2017 VIDE
ANNEX-G, THE IMPUGNED NOTICE OF DEMAND DATED
21.12.2017 VIDE ANNEX-H AND IMPUGNED RECTIGFICATION
ORDER DATED 05.03.2018 VIDE ANNEX-R AND ETC.
THIS PETITION COMING ON FOR PRELIMINARY HEARING
IN 'B' GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER
Petitioner has called in question the legality and correctness of the reassessment order dated 21.12.2017 and the notice of demand of even date, inter alia, challenging the rectification order dated 5.3.2018 at Annexures-G, H & R respectively.
2. Petitioner, M/s. Clix Finance India Pvt. Ltd., formerly known as M/s. GE Capital Services India Limited, is engaged in lending and leasing business which includes purchasing, financing and leasing of plant and machinery, IT products, furniture and fixtures, passenger vehicles etc.,. The petitioner is -3- registered under the provisions of the Karnataka Value Added Tax Act, 2003 ['Act', for short].
3. It is contended that the petitioner in the course of its business enters into lease agreements for providing passenger vehicles. The pattern of business of the petitioner is such that it buys vehicles from the dealers and pays tax on such purchases and thereafter leases the same to the end user/its customers. The value added tax paid by the petitioner on purchase of the vehicles from such dealers is taken as an input tax credit which is said to have been adjusted against the petitioner's output tax liability. Apart from this, petitioner is engaged into equipment lease activity during the relevant assessment period i.e., 2012-13.
4. It transpires that the respondent-Authority visited the petitioner's place of business for inspection and sought certain details/clarification such as purchase invoices, retail invoices etc. It is contended -4- that, in response to the details sought by the respondent-Authority, the petitioner submitted the required material documents, audited financial statements, lease rental register, purchase register etc. During the assessment proceedings, certain material documents are said to have been submitted along with the reply. The Prescribed Authority proceeded to conclude the re-assessment under section 39[1] of the Act, denying input tax credit claimed by the petitioner- assessee on the ground that no purchases are made in the name of the petitioner-company. Accordingly, demand is made with the applicable interest and penalty to the tune of Rs.11,67,10,384/-. Being aggrieved by the said re-assessment order, the petitioner is before this court.
5. Learned Senior Counsel Sri. Venkataraman representing Sri. C.K. Nanda Kumar, Counsel for the petitioner, would submit that the sole ground on which -5- the reassessment order has been passed, denying the input tax credit claimed by the assessee is for the reason that none of the purchase invoices are in the name of the petitioner-company. The impugned assessment order has been passed without considering the reply filed by the assessee along with the material documents. The finding of the Assessing Officer is ex facie perverse as it is apparent and clear from the invoices that the name of the petitioner is clearly mentioned as lessor. The basis for fastening the huge tax liability of Rs.5,79,55,138/- with penalty of Rs.57,95,514/- and interest of Rs.5,29,59,732/- amounting to Rs.11,67,10,384/- is arbitrary and unsustainable. In order to point out the mistake committed by the Prescribed Authority in not appreciating the invoices raised by the selling dealer in a proper perspective, which was apparent on the face of the record, rectification application was filed along with the copies of 574 invoices, particulars of the same -6- coupled with the details for showing names of lessor and lessee in the invoices, letter of the selling dealer disclosing the collected output tax remitted to the Government, particulars of the lessee, agreement executed with the lessee, registration of the vehicles to be made in the name of the employees of the lessee- company, details of the rental receipts, tax amount paid on the lease rentals etc., However, the Assessing Authority without appreciating the same, in a brazen manner, held that the credit is not available to the petitioner. None of these documents are considered and addressed by the Assessing Authority. The said mistake being apparent on the face of the record, again these documents were placed along with the rectification application under Sections 69[1] and 69[2] of the Act. The Prescribed Authority failed to consider the same for the second time while rejecting the rectification application. Thus, it is submitted that alternative remedy is not a bar for this Court to exercise -7- discretionary and extraordinary jurisdiction under Articles 226 and 227 of the Constitution of India, when there is an error apparent on the face of the record. Non assigning of the reasons by the quasi judicial authority is nothing but violation of principles of natural justice. The respondents-authorities have considered the same issue for nearly three assessment years and have dropped the proceedings, input tax credit was allowed appreciating the transaction of the petitioner as a lessor/owner of the vehicle purchased. It is submitted that pursuance to the provisions of the Motor Vehicles Act, 1988, petitioner was made to adopt the lessor- lessee design in the invoice. Placing reliance on the Judgment of the Hon'ble Apex Court in the case of 'INDUSTRIAL CREDIT AND DEVELOPMENT SYNDICATE LIMITED v. COMMISSIONER OF INCOME TAX, MYSORE AND ANOTHER' reported in [2013] 3 SCC 541, it was argued that the petitioner has to be construed as owner of the vehicles purchased. It is only -8- for the purpose of complying with the provisions of the Motor Vehicles Act, 1988 ['Act', 1988 for short] which mandates that during the period of lease, the vehicle to be registered in the name of the lessee, the same was adopted. On conclusion of the lease period, vehicle shall be registered in the name of the lessor as owner. The provisions of Act, 1988 leaves no choice to the lessor except to allow the vehicle to be registered in the name of the lessee. Thus, though the vehicle was registered in the name of the lessee or employee of the lessee, no inference can be drawn from the registration certificate as to ownership or the legal title of the vehicle.
6. It is submitted that for the tax periods, April 2010 to March 2011 on the very same issue appeals were preferred by the assessee before the Appellate Authority-Joint Commissioner of Commercial Taxes (Appeals), Bangalore who has considered all these -9- aspects and decided the appeals on 28.2.2018 directing the respondent-Prescribed Authority to delete the tax, interest and penalty restricting the entire input tax claimed by the petitioner and to issue revised demand notice after considering the payments made, if any. In view of the appeal being allowed, the stance of the Prescribed Authority requires to be interfered with. It is submitted that in the circumstances, relegating the petitioner to the Appellate forum would defeat the purport of the Act giving a premium to the Prescribed Authority to arbitrarily demand the tax, interest and penalty without assigning any reasons muchless valid reasons. It is submitted that the procedure adopted by the authority in the decision making process warrants interference. Learned counsel has placed reliance on the Division Bench Judgment of this court in the case of Paharpur Cooling Towers Ltd. -v- Asst.
Commissioner of Commercial Taxes (Audit),
- 10 -
Yeshwanthpur, Bangalore and another reported in 2015 (86) VST 546.
7. Learned Addl. Government Advocate appearing for the respondent referring to the decision of co-ordinate Bench of this court in the case of M/s TTP Technologies Pvt. Ltd. -v- State of Karnataka in W.P.No.57922-933/2016 DD 10.11.2016 would submit that once the assessment or re-assessment order was passed, even though the petitioner has filed rectification application it does not absolve nor does it bar the assessee to avail the regular remedy of appeal available under the provisions of the KVAT Act. Principles of natural justice is well settled, the scope and extent of application of principles cannot be extended elastically to bring forth each and every grievance of the assessee as hit by the principles of natural justice. Petitioner without exhausting the alternative and efficacious remedy available under the Act, cannot rush to this
- 11 -
Court. Learned AGA has filed statement of objections in support of his contention and would point out that registration certificate of the vehicle stands in different names other than the petitioner. Department is oblivious of any other transaction of the petitioner. It is submitted that the assessee has devised a design to claim the input tax credit to which it is not entitled to, as the name of the petitioner is not figuring in the tax invoice referred to by the petitioner. The Assessing Authority was justified in denying the input tax credit and demanding tax, interest and penalty.
8. I have given my anxious consideration to the arguments advanced by the learned counsel appearing for the parties and perused the material on record. It is the case of the department that an investigation was conducted and as per the report submitted by the Investigation Officer tax invoices does not bear the name of the petitioners. One such tax invoice is
- 12 -
referred to in the said report. The very same tax invoice referred to by the Investigation authority is made available before this court by the Assessee to highlight that the names of the lessee M/s Nokia Siemens Networks Private Limited, as well as the lessor- petitioner herein, has figured in the said tax invoice. It is also not in dispute that output VAT at 14.5% has been determined and collected by the selling dealer vide tax invoice. It is also apparent from the record that the selling dealer has remitted the said collected output tax to the department in addition to confirming that M/s GE Capital Services India has purchased the vehicle vide invoice No.RMT130000058. The only ground for denying the input tax by the Appellate Authority is that none of the purchases are found in the name of the assessee company. It is apt to refer to the reasons assigned by the Prescribed Authority in one paragraph for denying the input tax credit which reads thus:
- 13 -
"Further, on verification of the purchase details submitted for the tax period April 2012 to March 2013 and input tax credit claimed, it is noticed that purchases are not effected by the assessee company, as the purchasing dealers are shown in different names and not the assessee company in the purchase invoices. As such, the assessee company is not eligible to avail the input tax credit. The dealer who effected purchases by him from local registered dealers, on such purchases the assessee is eligible to avail input tax credit and the invoices must in the name of the purchasing dealers. In the instant case, it is evident that none of the purchases are in the name of the assessee company, as such, the assessee company is not eligible for input tax credit on the purchases declared by them. Hence, as already proposed in this office notice dated 28.10.2017, entire input tax credit availed by the assessee company is restricted and the re-assessment proceedings under Section 39[1] of the KVAT Act, 2003 for the tax period April 2012 to March 2013 are concluded as under:
xxxx xxxx."
9. It is the specific case of the assessee that to be governed under the Act, 1988, (Act, 1988 for short) more particularly under Section 2(30) of the Act, 1988, lessee has to be shown as the registered
- 14 -
owner for all practical purposes. Petitioner has purchased the vehicles and has leased out to the lessee company, the registration certificate is issued in the names of employees of the lessee company. However, learned AGA has furnished the sample of invoices and the respective registration certificates standing in the name of third parties. In the circumstances, it is for the Departmental authorities to examine whether the contentions of the assessee is acceptable or not. No such exercise has been done by the Prescribed Authority to examine whether the registration certificate is standing in the name of the employee of the lessee company and whether the same can be accepted for the purposes of refunding/adjusting input tax credit under the Act. It is also not in dispute that the lessee has been regularly paying taxes on the leased rentals in terms of the leased agreement executed. Though this is a subsequent transaction both requires to be examined by the Prescribed Authority to ascertain the
- 15 -
genuineness of the claim made by the petitioner. Merely for the reason that the petitioner's name is shown as lessor in the tax invoice, it cannot be out rightly rejected to deny the input tax credit and create huge demands. No finding is given by the Prescribed Authority as to whether the tax invoices are in conformity with the Rules prescribed.
10. Ordinarily this court would not have interfered with the assessment or re-assessment orders allowing the assessee to circumvent the alternative remedy available under the Act but when the error is apparent on the face of the record or no reasons are assigned by the Authority for arriving at a decision it can be held that it is nothing but violation of the principles of natural justice. As observed by the co- ordinate Bench of this Court in the case of TTP Technologies Pvt. Ltd's case referred to supra by the learned counsel for the department, where reference is
- 16 -
made to the Judgment of the Hon'ble Apex Court, In Board of Control for Cricket -v- Cricket Association of Bihar reported in (2016) 8 SCC 535 it has been held as under:
"15. Recently, Hon'ble the Chief Justice T.S.Thakur in the Hon'ble Supreme Court in the case of In Board of Control for Cricket v. Cricket Assn. of Bihar [(2016) 8 SCC 535], on the compliance with the principles of natural justice, has held as under:-
"Principles of natural justice, it is well settled, are not codified rules of procedure. Courts have repeatedly declined to lay down in a straitjacket, their scope and extent. The extent, the manner and the application of these principles depends so much on the nature of jurisdiction exercised by the court or the tribunal, the nature of the inquiry undertaken and the effect of any such inquiry on the rights and obligations of those before it. The
- 17 -
extent of the application of the principles also depends upon the fact situation of a given case".
11. It is true that the co-ordinate Bench of this court has observed that the Judgment of Paharpur Cooling's case supra, is a judgment in persona and is not a Judgment in rem. However, it is categorically observed that it is a discretion vested with the court about entertaining the writ petition. From the aforesaid, it is crystal clear that principles of natural justice depends upon the fact situation of a given case. There is no hard and fast rule. Scope and extent of principles of natural justice cannot be laid down in a straight jacket formula. The action of the quasi judicial authority in arriving at a decision without assigning any reasons, not considering the documents or the reply filed by the petitioner cannot be countenanced. There is no whisper inasmuch as the reply filed by the assessee in the re-assessment order. The rectification application
- 18 -
also resulted with the same treatment of not disclosing the mind of the Prescribed Authority in coming to a conclusion. It is imperative that decision making process is subjected to judicial review rather than the decision. In the circumstances, relegating the petitioner to Appellate Forum would not be appropriate in rendering the substantial justice. Hence this court is of the considered view that justice would be sub-served in remanding the matter to the Prescribed Authority setting aside the impugned re-assessment order and demand notices.
12. Hence, writ petition is allowed. The matter is remanded to the Prescribed Authority to re-do the re- assessment by providing an opportunity of hearing to the petitioner in accordance with law in an expedite manner.
Petitioner shall appear before the Prescribed Authority/respondent No.2 on 26.3.2018 without
- 19 -
expecting any notice. Prescribed Authority shall re- consider the matter and conclude the re-assessment in an expedite manner within a period of four weeks therefrom, by passing a speaking order keeping in mind the observations made above.
All rights and contentions of the parties are left open to be agitated before the Prescribed Authority.
Writ petition stands disposed of accordingly.
Sd/-
JUDGE AN/-, ln.