Karnataka High Court
M/S Punj Lloyd Limited vs The Deputy Commissioner on 10 April, 2018
Author: S.Sujatha
Bench: S.Sujatha
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 10TH DAY OF APRIL, 2018
BEFORE
THE HON'BLE MRS.JUSTICE S.SUJATHA
WRIT PETITION NO.23930 OF 2016(T-RES)
AND
WRIT PETITION NOS.29724-29734 OF 2016(T-RES)
BETWEEN:
M/S.PUNJ LLOYD LIMITED
A COMPANY INCORPORATED UNDER THE COMPANIES ACT
1956,
NO.3/1, 1ST FLOOR, LANGFORD ROAD,
BENGALURU - 560 025
REPRESENTED BY ITS TAXATION EXECUTIVE,
MR.WASEEM JABBAR KHAN,
S/O MR.AMAN ULLA KHAN,
AGED ABOUT 30 YEARS. ... PETITIONER
(BY SRI HARISH V.S., ADVOCATE)
AND:
1. THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES
AUDIT - 4.4, VAT DIVISION-4, ROOM NO.205
4TH FLOOR, VANIJYA TERIGE KARYALAYA-2,
NEAR NATIONAL GAMES VILLAGE, KORAMANGALA,
BENGALURU - 560 047.
2. THE COMMISSIONER OF COMMERCIAL TAXES
KARNATAKA,
VANIJYA TERIGE KARYALAYA,
GANDHINAGAR,
BENGALURU - 560 009.
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3. THE STATE OF KARNATAKA
MINISTRY OF FINANCE,
AMBDEKAR VEEDHI,
BENGALURU - 560 001
REPRESENTED BY ITS PRINCIPAL SECRETARY.
... RESPONDENTS
(BY SRI T.K.VEDA MURTHY, AGA)
THESE WRIT PETITIONS ARE FILED UNDER ARTICLES
226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO
QUASH THE IMPUGNED ASSESSMENT ORDER PASSED BY R1
UNDER SECTION 39(1) OF THE KVAT ACT DATED 31.03.2016
FOR THE ASSESSMENT PERIOD APRIL 2009 TO MARCH 2010
I.E., ANNEXURE-D AND THE CONSEQUENTIAL NOTICE OF
DEMAND ISSUED BY THE R1 IN FORM VAT 180, DATED
31.03.2016 FOR THE TAX PERIOD APRIL 2009-MARCH 2010 I.E.,
ANENXURE-E ETC.,
THESE WRIT PETITIONS COMING ON FOR PRELIMINARY
HEARING IN 'B' GROUP THIS DAY, THE COURT MADE THE
FOLLOWING:
ORDER
Heard the learned counsel for the respective parties.
2. Since common issues are involved in these writ petitions, the matters are taken up together and disposed of by this common order.
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3. It is the contention of the learned counsel for the petitioner that the petitioner has been maintaining the books of accounts and filing the Monthly Returns in Form VAT-100 from time to time and Annual Returns in Form VAT-240 as contemplated under the Karnataka Value Added Tax Act, 2003 ('KVAT Act' for short). The Enforcement Wing had conducted inspection of the business premises of the petitioner. Based on the intelligence report, the first respondent issued a proposition notice under Section-39(1) of the KVAT Act, relevant to the tax period April'2009 to March'2010 and proceeded to conclude re-assessment based on the figures contained in the VAT-240 filed by the petitioner. Similarly, Notices under Section-39(1) of the KVAT Act was also issued relating to the tax period April'2010 to March'2011.
4. It is the contention of the petitioner that during the relevant tax periods, the petitioner had 4 incurred labour and like charges and did claim the deduction under Rule-3(2)(l) of the Karnataka Value Added Tax Rules'2005 ('KVAT Rules' for short).
5. Respondent No.1-Prescribed Authority concluded the reassessment for the relevant period under Section-39(1) of the KVAT Act allowing the deduction of 30% of the works contract in terms of Rule-3(2)(m) of the KVAT Rules, rejecting the claim of the petitioner of the deduction under Section-3(2)(l) of the KVAT Rules'2005. Consequently, demand notices were issued by respondent No.1. Hence, these petitions.
6. Learned counsel Sri.Harish V.S., appearing for the petitioner would contend that in the reply submitted by the assessee-petitioner, it was respectfully submitted before respondent No.1 that if the Officers intend to verify the vouchers in the office of the petitioner, the same shall be arranged at the convenient 5 time and date of the Prescribed Authority, as it is practically difficult for the assessee-petitioner to carry the entire voluminous books of accounts. In the alternative, they opted to furnish the vouchers for verification relating to the particular expenses required by the Prescribed Authority. Thus, it is submitted that the labour and other like charges are very much ascertainable from the books of accounts and supported by the documentary evidence. However, owing to the voluminous documents occupying large space, it was practically difficult for the petitioner to produce the same before the Prescribed Authority. It is submitted that the petitioner is not avoiding the submission of the books of accounts and vouchers to substantiate its claim regarding the deduction of labour and other charges under Rule-3(2)(l) of KVAT Rules. 6
7. In this regard, a rectification application under Section-69 of KVAT Act has been filed relating to the tax period April'2009 to March'2010, which is pending consideration before the Prescribed Authority. Thus, it is submitted that the Prescribed Authority concluded the reassessment creating huge tax liability by rejecting the claim of the petitioner to deduct the labour and like charges under Rule-3(2)(l) of the KVAT Rules, which requires to be considered by this Court, as there is denial of natural justice.
8. In support of his contentions, the learned counsel has placed reliance on the Division Bench judgment of this Court in the case of M/S.PAHARPUR COOLING TOWERS LIMITED VS. THE ASSISTANT COMMISSIONER OF COMMERCIAL TAXES (AUDIT)-1.3 AND ANOTHER, passed in Writ Appeal Nos.989- 1009/2015, disposed off on 18.03.2015. 7
9. The learned AGA appearing for the respondents stoutly objecting to the arguments addressed by the learned counsel for the petitioner would contend that sufficient opportunity was provided by the Prescribed Authority to produce the books of accounts. Despite the same, no books of accounts were produced to substantiate the claim of the petitioner. In the circumstances, the Prescribed Authority having no other option in the absence of the books of accounts, proceeded to conclude the assessment in terms of Rules-3(2)(m) of the KVAT Rules, deducting 30% of labour and other like charges, which cannot be faulted with.
10. It is submitted that the judgment referred to by the learned counsel for the petitioner is not applicable to the facts of the present case, since there is no denial of opportunity violating the principles of natural justice, which was the basis on which the 8 Division Bench of this Court proceeded to quash the reassessment order and remitted the matter for fresh consideration.
11. I have given my anxious consideration to the arguments advanced by the learned counsel appearing for the parties and perused the material on record.
12. The only question involved in these writ petitions is, whether respondent No.1 i.e., the Prescribed Authority is justified in concluding the reassessment proceedings rejecting the claim of the petitioner to deduct the labour and other like charges under Section-3(2)(l) of the KVAT Rules?
13. It is trite that the burden lies on the petitioner-assessee to prove his case inasmuch as the claim made under Rule- 3(2)(l) of the KVAT Rules. In terms of Rule-3(2)(l) of KVAT Rules, all amounts actually expended towards labour charges and other like charges 9 not involving any transfer of property in goods in connection with the execution of works contract including charges incurred for erection, installation, fixing, fitting out or commissioning of the goods used in the execution of a works contract, shall be entitled to the deduction. When such charges are not ascertainable from the books of accounts maintained by a dealer in terms of Rule-3(2)(m) of the KVAT Rules, 30% of the value of the contract shall be deductible towards labour and like charges.
14. It is only for the reason that no books of accounts were produced before the Prescribed Authority, the reassessment proceedings are concluded under Rule-3(2)(m) of the KVAT Rules. It is discernable from the reply filed by the petitioner to the proposition notice issued by the Prescribed Authority that the assessee has maintained proper books of accounts and it is only due to the copious size of the books of 10 accounts, it would be practically difficult to produce the entire books of accounts, had requested the Prescribed Authority to examine the books of accounts at the business premises of the petitioner or else to insist for the specific expenses incurred relating to which the books of accounts can be produced. A cartload of books of accounts requires to be examined by the Prescribed Authority to ascertain the genuineness of the claim made by the petitioner, inasmuch as the deduction of labour and like charges under Rule-3(2)(l) of the KVAT Rules. It is the contention of the petitioner that notwithstanding the voluminous size of the books of accounts maintained by the petitioner, they are willing to place the same before respondent No.1-Prescribed Authority and to that effect the rectification application has already been filed relating to the tax period April'2009 to March'2010, which is pending consideration.
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15. In the circumstances as narrated above, it cannot be said that the petitioner has not maintained the books of accounts or not willing to produce the books of accounts. As such, relegating the petitioner to avail the alternative remedy by filing an appeal cannot be justified. It is only for the limited purpose of providing an opportunity to the petitioner to produce the books of accounts before the Prescribed Authority to avail the deduction under Section-3(2)(l) of the KVAT Rules as claimed, this Court deems it proper to set- aside the order impugned herein and remit the matter to the Prescribed Authority to examine the books of accounts and arrive at a decision.
16. Hence, the impugned orders at Annexures-D and E are set-aside. The matter is remanded to the Prescribed Authority - respondent No.1 to reconsider the matter afresh after providing an opportunity to the 12 petitioner to produce the books of accounts. The petitioner shall appear before the respondent No.1 - Prescribed Authority on 23.04.2018 along with the books of accounts. The Prescribed Authority shall examine the same and a decision shall be taken in accordance with law after hearing the petitioner, in an expedite manner.
With the aforesaid observations, the writ petitions stand disposed of, with costs of Rs.10,000/- (Rupees Ten Thousand Only), payable by the petitioner to the Karnataka State Legal Services Authority, Bengaluru, within a period of two weeks from today.
Sd/-
JUDGE JJ