Karnataka High Court
M/S Infinite Builders And Developers vs The Additional Commissioner Of ... on 30 May, 2013
Bench: D.V.Shylendra Kumar, B.S.Indrakala
IN THE HIGH COURT OF KARNATAKA
AT BANGALORE
Dated this the 30th day of May, 2013
PRESENT
THE HON'BLE MR JUSTICE D V SHYLENDRA KUMAR
AND
THE HON'BLE MRS JUSTICE B S INDRAKALA
STA Nos. 59 of 2009 & 75-85 of 2013
C/w
STA Nos. 60 of 2009 & 86-96 of 2013
BETWEEN:
M/S INFINITE BUILDERS
AND DEVELOPERS
NO.6, GM PEARL, I STAGE,
I PHASE, BTM LAYOUT,
BANGALORE - 560 068
(BY ITS PROPRIETOR
MR GULAM MUSTAFA
AGED ABOUT 37 YEARS) ... COMMON
APPELLANT
[By Sri G Sarangan, Sr. Counsel for
Sri T N Keshava Murthy, Adv.]
AND:
THE ADDITIONAL COMMISSIONER
OF COMMERCIAL TAXES
ZONE II, GANDHINAGAR
BANGALORE - 560 009 ... COMMON
RESPONDENT
[By Sri T K Vedamurthy, AGA]
2
STA NOs 59 OF 2009 & 75-85 OF 2013 ARE FILED UNDER
SECTION 66 (1) OF THE KARNATAKA VALUE ADDED TAX ACT,
2003 AGAINST THE ORDER DATED: 16.03.2009 PASSED IN NO.
SMR/KST/DVO-II/CR-58 TO 94/08-09, T-823/08-09 ON THE FILE
OF THE ADDL. COMMISSIONER OF COMMERCIAL TAXES, ZONE-
II, GANDHINAGAR, BANGALORE, SETTING ASIDE THE RULING OF
THE ADVANCE RULING AUTHORITY AND ETC.,
STA NOs 60 OF 2009 & 86-96 OF 2013 ARE FILED UNDER
SECTION 66 (1) OF THE KARNATAKA VALUE ADDED TAX ACT,
2003 AGAINST THE ORDER DATED: 16.03.2009 PASSED IN NO.
SMR/KST/DVO-II/CR-58 TO 94/08-09, T-823/08-09 ON THE FILE
OF THE ADDL. COMMISSIONER OF COMMERCIAL TAXES, ZONE-
II, GANDHINAGAR, BANGALORE, SETTING ASIDE THE RULING OF
THE ADVANCE RULING AUTHORITY AND ETC.,
THESE APPEALS COMING ON FOR HEARING, THIS DAY,
SHYLENDRA KUMAR J., DELIVERED THE FOLLOWING:
JUDGMENT
The assessee is a registered dealer under the provisions of Karnataka Value Added Tax Act, 2003 [for short, the Act]. The assessee claims to be carrying on the activity of land developer and builder and selling constructed buildings to purchasers through a tripartite agreements entered into amongst the assessee, owner of the land and the purchasers. The assessee had carried on such activity during the years 2005-06 and 2006-07 3 i.e. for the period from 1-4-2005 to 31-3-2006 and 1-4- 2006 to 31-3-2007.
2. Under the scheme of the Act, monthly returns of the turnover is required to be filed by the registered dealers and in so far as the year 2005-06 is concerned, the assessee, though had filed such monthly returns, had claimed its tax liability as nil for all the 12 months. The assessee has filed nil returns even for the period April to November, 2006.
3. The assessee, though had taxable turnover during this period, has taken the stand that in the wake of the law laid down by this court in the case of MITTAL INVESTMENT CORPORATION vs ADDITIONAL COMMISSIONER OF COMMERCIAL TAXES [(2011) 121 STC 14] was under the impression that such transfer of constructed buildings is not one attracting tax, under the Act. The assessee pleaded ignorance of the reversal of this view taken by this court by the Supreme Court in the 4 case of K RAHEJA DEVELOPMENT CORPORATION vs STATE OF KARNATAKA [(2005) 141 STC 298], as per the judgment dated 5-5-2005 and claims to have blissfully filed return indicating nil tax liability upto the period mentioned above.
4. The legal position was otherwise and there was liability for the payment of tax in respect of the transaction in the nature of work contract not only in terms of Section 12(1) of the Act, but also the law as understood on analogous provision relating to liability of a dealer in respect of value of the goods involved in transfer of goods in the execution of works contract.
5. Be that as it may, the assessee's premises had been inspected by the intelligence wing of the commercial taxes department on 25-3-2006. It transpires that the intelligence wing noticed that the assessee was not paying any tax by filing incorrect nil tax liability return and on being apprised, it further transpires, the assessee 5 admitted its liability and it paid some amount viz., tentatively a sum of Rs 5.00 lakh on 29-3-2006 itself etc.
6. A second inspection of the premises of the assessee took place on 20-12-2006 by the assistant commissioner of commercial taxes and the assistant commissioner also noticed that the assessee had continued to file nil tax liability returns even up to that date. As a consequence, the matter was followed up departmentally and deputy commissioner of the audit wing visited the premises of the assessee with prior permission and after completing necessary formalities for the purpose of verifying the need for reopening the assessment of the assessee, as the assessee had till then filed nil returns. This was done on 13-11-2007 and this was followed up by issue of reassessment notice under Section 39(1) of the Act on 29- 1-2008. Just two days prior to the audit and verification of the books of account, the assessee had filed what it claims as revised returns for each month of the period 6 from April 2006 to November, 2006. The assessee did not file any revised returns for the period April 2005 to March 2006, which was earlier filed as nil tax liability return and continued to remain same.
7. The assessing officer concluded the reassessment for the years 2005-06 and 2006-07 and determined the tax liability for each of the month during these periods. In the process, the assessing officer rejected the claim of the assessee in respect of input tax rebate as per its revised returns filed during the period April to November 2006. In the wake of filing of false or incorrect returns and not meeting its tax liability in time, the assessing officer also proceeded to levy penalty under Section 72(2) of the Act and interest under Section 36 of the Act for the months in question and 20 different reassessment orders had been passed on 29-1-2008. The assessing officer opined that the assessee having not filed its returns within time, but on the other hand having filed incorrect 7 and false returns, and having not corrected on its own a mistake which it had committed by not filing revised returns within the statutorily permitted period in terms of Section 35(4) of the Act and a claim towards input tax credit being enabled only in respect of the assessees who have filed returns either as per Section 35(1) or Section 35(2) of the Act and that having not been done, held that the assessee was not entitled to claim any input tax credit for the periods in question and concluded the assessment by way of best judgment and levying penalty and interest, as referred to above.
8. The assessee being aggrieved by these orders, preferred appeals under Section 62(6) of the Act to the joint commissioner of commercial axes. The assessee's contention found favour with the appellate commissioner. The appellate commissioner took the view that the assessee though had not produced the list of registered dealers from whom it had made purchases and had paid 8 tax on such purchases and though it had not produced the invoices evidencing the same before the assessing officer, opined that the relief of input tax credit or rebate as provided for in terms of the provisions of Section 10(4) of the Act can be given even otherwise and proceeded to accept not only the list of registered dealers from whom the assessee claimed it had made purchases during the periods in question but also the invoices said to have been issued by those selling dealers and substituted itself for the assessing officer for the purpose of Section 10(4) of the Act and proceeded to determine the tax liability by giving credit to the input tax as claimed by the assessee and proportionately reduced the penalty and interest, as the total tax liability of the assessee gets reduced in view of the exercise undertaken by the appellate commissioner.
9. The revisional authority [additional commissioner of commercial taxes] noticed that the orders passed by the appellate authority is not only erroneous but detrimental 9 to the interest of the revenue and exercising powers under Section 64(1) of the Act, issued show cause notices to the assessee indicating that the order passed by the appellate commissioner is not sustainable; that it is erroneous and prejudicial to the revenue and liable to be set aside, and called upon the assessee to show cause as to why the same should not be set aside and the assessment order restored, as per common notice dated 2-1-2009.
10. The assessee responded by filing its detailed objections to the proposal, claimed that the assessee, in fact, was entitled to input tax credit and filing of return in time or not filing return of turnover in terms of Section 35 of the Act cannot deprive the assessee of its right for claiming input tax credit in terms of the provisions of Section 10 of the Act; that the appellate commissioner had rightly modified the assessment orders passed by the original authority; that the levy of penalty and interest is also not justified; that the appellate commissioner was 10 well within its competence and jurisdiction for acting to give relief of input tax credit to the assessee even for the period April 2005 to March 2006, notwithstanding the assessee having not filed any revised returns or not claiming on its own any input tax credit for determination of the tax liability, but the appellate commissioner having noted the position in the books of accounts, has rightly given the input tax credit etc. Several other objections were also put forth opposing the proposal for revising the appellate order and for restoration of the assessment orders.
11. The matter was elaborately heard before the revisional authority and the revisional authority after exhaustive examination of the factual background, reassessment orders, order of the appellate commissioner and the relevant case law, opined that the assessee was not entitled to the input tax credit for the period from April 2005 to November 2006 and set aside the order of 11 the appellate commissioner for the months covering this period and restored the orders passed by the assessing officer.
12. However, in so far as the months of December 2006 to March 2007, the assessing officer though had denied input tax credit to the assessee for the reason that the assessee had not produced the list of registered dealers and invoices and the appellate commissioner had taken a common view in respect of this period also viz., that the assessee is entitled for such input tax credit on the basis of the material placed before the assessing officer, the revisional authority, nevertheless, has not disturbed this order of the appellate commissioner giving input tax credit for the period December 2006 to March 2007 and that is the reason as to why though the orders are common, both by the appellate commissioner and the revisional authority for the entire period from April 2005 to March 2007, the subject matter of these appeals by the 12 assessee is confined to the liability relating to the tax period from April 2005 to November 2006, and arguments addressed accordingly.
13. The stand of the appellant-assessee is again as contended before the appellate commissioner and the revisional authority; that input tax credit is given to an assessee as a matter of substantive right in determination of tax liability of the assessee; that it is not any benefit or concession given to an assessee; that assuming that the assessee had not filed either its returns or revised returns strictly in compliance with the requirement of Section 35 of the Act, Section 10 of the Act, under which the input tax credit is claimed or allowed, having not made any reference to the provisions of Section 35 of the Act i.e. provision relating to filing of returns, a non-compliance with the requirement of Section 35 of the Act cannot come in the way of allowing input tax credit to an assessee who 13 has actually paid such tax under the provisions of Section 10 of the Act.
14. The matter was taken up for hearing and we have heard Sri G Sarangan, learned senior counsel along with Sri T N Keshava Murthy, for the appellant-assessee and Sri T K Vedamurthy, learned AGA, appearing for the respondent-revenue.
15. Learned counsel for the appellant-assessee took us through the scheme and the object of the Act and the scheme of determination of tax liability under the Act, with its difference between the output tax and input tax i.e. tax liability being determined by giving input credit from output tax liability and therefore the input tax credit is an essential ingredient of the determination of tax liability and in this regard have also referred to the definition of 'tax invoice' in Section 2(32) of the Act, 'tax turnover' in Section 2(34) and also the charging Section 4 of the Act, scheme of the determination of tax liability as 14 indicated in Section 10 of the Act, as to either Section 10 not making any reference in Section 35 or Section 35 not referring to Section 10, by reading these statutory provisions and the provisions of Section 38(2), particularly the provision enabling passing of best judgement orders on the failure of the assessee to file returns, sub-sections (3) and (4) of Section 38 of the Act and the factum of the assessee having filed revised returns though belatedly as on 12-1-2007 covering the period from April 2006 to November, 2006.
16. What is urged is that these returns though belated were before the assessing officer prior to passing of the best judgement orders which were passed on 29-1-2008. Submission is that when the assessing officer had placed reliance on the books of accounts of the assessee for the purpose of passing of best judgement assessment orders, the assessing officer could not have ignored the entries relating to the input tax credit earned by the assessee, in 15 the sense that the books did reveal that the assessee having made purchases and having paid tax on such purchases for the periods in question and therefore submits that the assessing officer could not have ignored this relevant material while passing best judgement assessment orders.
17. A good number of authorities are relied upon to contend that in a circumstance where an assessee is acting in a bona fide manner and has not indulged in acting in a deliberate suppression or evasion, levy of penalty and interest is not warranted. Reliance is also placed on a Single Judge decision of this court in the case of INDIA HERITAGE FOUNDATION vs STATE OF KARNATAKA [(2008) 18 VST 376 (KARN] to submit that even a belated return should be looked into and acted upon. Reliance is also placed on the judgment of a Division Bench of this court in the case of STATE OF KARNATAKA vs K BOND POLYMERS [2012 (73) KLJ 16 429], to submit that this court has taken the view that even in a matter of considering the claim for refund, the authorities should not adopt a too technical an approach and that when the assessee has, in fact, earned the input tax credit and when it is part of the scheme of determination of tax liability, that should not be denied to the assessee only based on technicalities such as filing delayed return or not filing of material particulars of the same before the assessing officer, though so contemplated under the statutory provisions.
18. It is also urged that the first appellate authority could not have remanded the matter to the assessing officer for examination of these facts yet again and as such acted upon on its own and nothing wrong in it.
19. On the other hand, Sri. Vedamurthy, learned Government Pleader appearing on behalf of the respondents would strongly defend the order passed by the Commissioner exercising revisional jurisdiction to 17 reverse the order passed by the appellate authority - Joint Commissioner of Commercial Taxes, Bangalore.
20. Mr. Vedamurthy has also taken us through the scheme of the Karnataka Value Added Tax Act, 2003 and has in particular drawn our attention to the sequence of events starting from 25.03.2006 and during this inspection by the Intelligence Wing of the Department, it had been noticed that the appellant had filed returns indicating 'Nil' tax liability for the period from April 2005 up to the date and points out that the appellant in fact did not dispute the liability and paid some provisional amount towards tax liability, but nevertheless, did not file revised returns; that the second inspection was conducted on 20.12.2006 by the Assistant Commissioner of the Department and it was yet again noticed that the tax liability in terms of the turnover had not been disclosed in the returns, but on the other hand, the assessee had continued to file 'Nil' returns; that in fact it 18 was only on 12.1.2007 the assessee purported to file revised returns only for the period from May 2006 to December 2006 and no revised returns for the earlier period was filed though the assessee was aware of and had admitted the tax liability; that the returns were in fact filed only one day prior to the Deputy Commissioner going through the books of accounts of the assessee after following necessary procedure as a consequence of which notice under section 39 of the Act was issued for reopening of the assessee's assessments for the period from 1.4.2005 up to the date.
21. In this background, what is submitted is that the assessee in fact never filed revised returns for the earlier period even after the inspection and 'Nil' returns remained so up to the month of April 2006; that even for the subsequent months, returns filed were not true and correct, but grossly under stated in the turnover; that the assessee never acted with any bonafides for disclosing the 19 true and correct turnover of his business so also taxable turnover.
22. Mr. Vedamurthy would submit that while it is no doubt the manner of availment of input credit by deducting the same against the output tax liability is provided for under section 10 of the Act, but the assessee has not complied with the requirements of section 10 of the Act also, particularly, by not giving full or proper particulars for the purpose of claiming input tax credit and to get it reduced from the total tax liability.
23. Our specific attention is drawn to sub-section [4] of section 10 of the Act which mandates that unless a dealer while filing returns and claiming deduction towards input tax as tax invoices, debit notes or credit notes in relation to sale and evidence of the input tax is based by enclosing the tax invoices issued by the serving dealer in favour of the assessee, the mandatory requirement which is not followed and not complied with by the assessee, the 20 assessee cannot get the benefit of deduction of input credit is the submission of Sri. T K Vedamurthy.
24. In this regard, Sri. T K Vedamurthy has also taken us through the provisions of sections 35, 36, 37, 38, 39 and 40 of the Act and particularly section 40 of the Act providing for the period of limitation. With reference to the period of limitation, what is submitted is that the period of limitation stipulated under the Act operates both against the revenue and against the assessee and the assessment not concluded within the permitted period gets time barred and likewise an assessee not complying the requisite compliances within the stipulated time also loses the benefit of such compliance as stipulated in the Act and within time.
25. Mr Vedamurthy has also drawn our attention to Rule 37 of the Karnataka Value Added Tax Rules, 2005 [for short, the Rules], providing for the tax period for the purpose of filing of returns and Rule 38 indicating the 21 manner of filing returns with particulars and proof of the input tax credit etc. With reference to these statutory provisions, what is very emphatically urged by Mr VedamMurthy is that under the scheme of the Act, only manner of claiming credit for the input credit is by filing returns and as permitted in law; that in a return the assessee cannot put forth claim for input credit as that is not what is contemplated under the Act. Submission is that if the assessee does not put forth a claim for deduction of input tax credit while computing the tax liability as indicated in the return filed by the assessee, it cannot be claimed independently, as it has to be done by determining the tax liability.
26. It is also submitted that under the scheme of the Act, the dealer himself is given liberty to determine his tax liability and indicate that in the returns by claiming appropriate rebate or deductions and the liability indicating the return is taken to be a deemed assessment, 22 unless it is found by the revenue that the registered dealer has either failed to file a return or has not acted in response to a notice issued in terms of sub-section 2 of Section 38 of the Act, the terms of the best judgment can be resorted to. It is therefore submitted that where the assessee-dealer justifies the confidence reposed by disclosing true particulars of his turnover, output tax and input tax, it amounts to compliance on the part of registered dealer in the requirements of the enactment, but where it is found that tax liability as disclosed falls short of the tax liability, it has to be determined following the best judgment assessment.
27. Mr Vedamurthy would also submit that the returns that was filed by the assessee were all found not true or proper and therefore, there was need for reopening of the assessment and on such reopening, the liability was determined in terms of the provisions of the Act and it 23 was found that the liability was much more than what had been disclosed or claimed by the dealer.
28. Learned Government Advocate would submit that the assessing officer was fully justified in denying the input tax deductions, as information and material had not been placed before the assessing authority in the return filed.
29. It is also submitted by the learned Government Advocate that there is absolutely no bona fides on the part of the dealer in continuing to file nil returns even after the inspection and awareness on the part of the dealer about his tax liability. It is therefore submitted that as the true and correct tax liability was determined only by reopening, the assessing officer was also justified in levying penalty and interest, as assessee had not acted with bona fides and had not disclosed true particulars of his turnover.
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30. Mr Vedamurthy has placed reliance on a judgment of a Division Bench of this court rendered in the case of M/S TOTAL ENVIRONMENT BUILDING SYSTEMS PVT.
LTD. vs THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES (W.A.3481-3492/2009 disposed of on 7.10.2009) wherein it has been categorically held that even in matters where a doubt is raised as regards to the correctness of the earlier decision by the Supreme court and the matter is referred to a Larger Bench, the law that Supreme court had declared earlier prevails, to submit that the law as it had been declared by Supreme Court in the case of K RAHEJA DEVELOPMENT CORPORATION [supra] holding that the turnover of a dealer relating to construction activities, in the transfer of property pursuant to a contract is liable to tax insofar as value of the goods involved in the execution of the works contract is concerned. It is therefore urged that there is absolutely no bona fides on the part of the appellant/assessee in 25 claiming that it was under the bona fide impression that there was no tax liability.
31. Mr Vedamurthy would also place reliance on a Division bench decision of High Court of Jharkhand at Ranchi in the case of BHARAT COAL PRODUCT vs STATE OF JHARKHAND AND OTHERS ((2006) 146 STC
102) to the effect that the Assessing Officer is justified in acting on the earlier return, if a revised return filed does not disclose the basis and is not supported by particulars and material facts and evidence etc. It is therefore submitted that Assessing Officer was justified in not acting upon a claim for deduction of input tax, as neither particulars of the registered dealer had been furnished by the assessee nor proof of payment of tax to the registered dealers.
32. Specific attention is drawn to sub-section 4 of Section 45 of the Act to submit that a revised return to be filed by an assessee after furnishing a return under the 26 Act should be voluntary and discovered by the assessee himself to be acted upon by the assessing officer and not in pursuance of any inspection and discovery by the authorities about the short filing on the part of the assessee. It is also pointed out that the time limit that has to be adhered to and the longer period of 6 months for filing a revised return will be available only if so permitted by the prescribed authority and not otherwise.
33. It is therefore submitted that the first appellate authority had acted erroneously and without jurisdiction by virtually re-writing the provisions of Section 10(4) of the Act read with Section 35(4) of the Act; that the first appellate authority has acted contrary to the statutory provisions in allowing the appeals and the order also being prejudice to the interest of the revenue, the commissioner was justified in revising the orders which were both erroneous and prejudicial to the revenue and in 27 restoring the order of the assessing officer to the extent indicated in the order of the commissioner.
34. It is in this background of such submissions and the statutory provisions, these appeals are required to be examined.
35. Section 4 of the Act which creates the liability to tax provides the rates of tax. Insofar as the present situation is concerned, it is governed by Section 4(1)(c) of the Act, which reads as under:
4. Liability to tax and rates thereof:-
(1) Every dealer who is or is required to be registered as specified in Section 22 and 24, shall be liable to pay tax, on his taxable turnover, xxx
(c) in respect of transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract specified in column (2) of the Sixth Schedule, subject to Sections 14 and 15 of the Central Sales Tax Act, 1956 (Central Act 74 of 1956), at the rates specified in the 28 corresponding entries in column (3) of the said schedule.
The nature of work carried on by the assessee is not in doubt and it is a works contract relating to sale of apartments involving construction of buildings etc.
36. Section 10 of the Act which spells out as to what is output tax, input tax and net tax, virtually provides the manner of determination of tax liability under the Act. Section 10 reads as under:
10. Output tax, input tax and net tax:-
(1) Output tax in relation to any registered dealer means the tax payable under this Act in respect of any taxable sale of goods made by that dealer in the course of his business, and includes tax payable by a commission agent in respect of taxable sales of goods made on behalf of such dealer subject to issue of a prescribed declaration by such agent.
(2) Subject to input tax restrictions specified in Sections 11, 12, 14, (17 and 18), input tax in relation to any registered dealer means the tax 29 collected or payable under this Act on the sale to him of any goods for use in the course of his business, and includes the tax on the sale of goods to his agent who purchases such goods on his behalf subject to the manner as may be prescribed to claim input tax in such cases.
(3) Subject to input tax restrictions specified in Sections 11, 12, 14, 17, 18 and 19, the net tax payable by a registered dealer in respect of each tax period shall be the amount of output tax payable by him in that period less the input tax deductible by him as may be prescribed in that period and shall be accounted for in accordance with the provisions of (this Act).
(4) For the purpose of calculating the amount of net tax to be paid or refunded, no deduction for input tax shall be made unless a tax invoice, debit note or credit note, in relation to a sale, has been issued in accordance with Section 29 or Section 30 and is with the registered dealer taking the deduction at the time any return in respect of the sale is furnished, except such tax paid under sub-section (2) of Section 3.
(5) Subject to input tax restrictions specified in Sections 11, 12, 14, 17, 18 and 19, where under sub-section 30 (3) the input tax deductible by a dealer exceeds the output tax payable by him, the excess amount shall be adjusted or refunded together with interest, as may be prescribed.
37. Sub-section 4 of Section 10 mandates that for the purpose of calculating the net tax to be paid or refunded, no deduction for input tax will be made unless tax invoices, debit note, credit note in relation to a sale has been issued in accordance with Section 29 or Section 30 of the Act and is with the registered dealer taking the deduction at the time any return in respect of sale is furnished etc.
38. Section 35 speaks of returns under the scheme of voluntary assessment as embedded hereunder, "As a return filed by the assessee within the prescribed time and in the manner provided is deemed to be the assessment." This read with Section 38 provides for a deeming of the return as the assessment.
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39. Section 39 of the Act provides for reassessment of tax and Section 40 for limitation of assessment. Rule 38 specifies the scheme of monthly return in respect of assessee whose tax period is monthly. Rule 37 says that tax period is entirely depending on the turnover. In the present case, there is no dispute that in so far as the assessee is concerned, it is a calendar month. Rule 38 provides for furnishing of monthly returns and the manner of furnishing the same.
40. Even as submitted by the learned counsel for the appellant and also the learned Government Advocate, the value added tax is virtually a tax on addition made to the cost which goes into the hands of a dealer as the assessee in the normal course and if he complies with all the mandatory provisions of the Act will be given input rebate in respect of taxes which he has already paid at the time of purchase through a registered dealer and therefore, can claim adjustment in respect of his tax liability and 32 therefore, tax liability is described as net tax i.e. output tax minus input tax and registered dealer is so enabled to collect what is known as output tax from his purchasers.
41. The scheme of the Act does indicate that a dealer virtually stands in the position of the State for the purpose of claiming credit to the input tax from the output tax. When once an assessee has deducted the amount of input tax from the output tax the remainder, which is the net tax, is bound to be paid by the dealer as the assessee is enabled to retain the tax he has himself paid earlier to his selling registered dealer. It is in this background the Act has provided for certain statutory and mandatory requirement as is found in Sections 10 and 35 of the Act. The manner of claiming input tax, rebate or credit is therefore regulated by the statutory provisions. The requirements are that the assessee who filed the returns at the first instance for claiming any input tax rebate or reduction should disclose the same in 33 the returns filed with full particulars of registered dealer from whom purchases are effected by the assessee. Dealers' names are to be furnished along with return and proof of payment of tax in the form of invoices issued by the selling registered dealers should also accompany the same.
42. In the present case, it is not in dispute that all the requirements were not fulfilled by the assessee for the period involved in the appeals viz., from April 2005 to March 2006 - subject matter of appeals in STA 59/2009 - and from April 2006 upto November 2006 - the subject matter of appeals in STA 60/2011.
43. The assessee never filed any revised return in respect of the period from April 2005 to March 2006 nor claimed any input credit return, but, on the other hand only filed nil tax liability return. The assessee persisted and did not file any revised return or anything at all even after inspection, notice etc. In this view of the matter, 34 there was nothing at all before the assessing authority to provide any input tax deduction in favour of the assessee for the entire period from April 2005 to March 2006. So it is urged by the appellant/assessee that even long after the expiry of the period in which the revised return could have been filed, the fact remains that there is no response by filing any revised returns. In such a position, we are of the view that the first appellate authority did go out of its duties and responsibilities and acted out of its jurisdiction to entertain a claim for deduction of input tax rebate in favour of the assessee by accepting some material, purporting it to be based on the books of accounts and the purchase invoices etc and in granting reliefs to the assessee. We find, it is a case of the first appellate authority acting more loyal than the king, even though a claim had not been put forth by the assessee through the returns, the first appellate authority has ventured to allow the appeals and grant relief to the assessee, contrary to statutory provisions! 35
44. For the period from April 2005 to March 2006, the order of first appellate authority was clearly erroneous and definitely prejudicial to the interest of the revenue and the revisional authority has interfered for restoration of the original orders for this period. We find nothing incorrect or erroneous or illegality in acting so and therefore, appeals relating to these periods are necessarily to be dismissed i.e. STA 59/09 is dismissed.
45. Insofar as STA 60/09 is concerned, there is slight variation on the facts, whereas the legal position remains the same. Though the appeal covers the entire year or 12 calendar months, we are required to examine on the aspect of not giving input tax credit or rebate only for the period from April 2006 to November 2006 inasmuch as the revisional authority has not disturbed the input tax rebate as given by the appellate authority for the remaining period. However, it may be relevant only for 36 the purpose of justification of levy of penalty and interest etc are concerned.
46. Even in regard to this period of April 2006 to November 2006 is concerned, the factual position is not very different as it prevailed in the case of returns that had been submitted by the assessee for the period April 2005 to March 2006. The conduct of the assessee in filing nil returns for April 2006 to November 2006 can never be accepted as bona fide, as the assessee, prior to the filing of the return, had been made aware of the tax liability and virtually admitted the same and had paid some provisional amount. Therefore, there is absolutely no bona fides on the part of the assessee in continuing to file nil returns even for this period and claiming no tax liability.
47. The assessee is not a small dealer but with a huge turnover running to crores of rupees. It is not as though the assessee could be accepted to be a novice or ignorant 37 dealer or a small businessman who was ignorant of his responsibility. A return claiming nil tax liability on the face of it appears to be an obvious attempt on the part of the assessee to take undue advantage of the due assessment procedure. The revised returns were filed only after inspection etc. and therefore, cannot be accepted as a voluntary return or bona fide return as the assessee has done it after a good deal of persuasion. It is not known as to what would have been the conduct of the assessee if he was not compelled to do so.
48. In the circumstances we find levy of penalty and interest is fully justified on the difference of tax payable by the assessee. In fact Section 38(3) of the Act, reading as under, provides some clue as to this aspect:
38. Assessment of tax:-
xxx (3) Where an assessment has been made under sub-section (2) and the dealer subsequently furnishes a return for the period to which the assessment 38 relates, the prescribed authority may withdraw the assessment but the dealer shall be liable to penalties and interest as applicable.
49. Even when a revised return or a return subsequently has been made subsequent to passing of the best judgement order, while the original assessment can be withdrawn, best judgement assessment cannot be withdrawn, which, nevertheless does not absolve the assessee from being levied with penalties and interest and they shall continue to be so levied and therefore in the present case there is justification for the levy of penalty and interest. We are of the opinion that the penalty and interest levied on the assessee does not call for any interference in this appeal by us.
50. Insofar as denial of input tax rebate for the period from April 2006 to November 2006 is concerned, what is urged on behalf of the assessee is that the revised returns have been filed within 6 months from June to November 39 2006. This argument virtually admits that for the periods April and May, they are beyond 6 months. It is therefore examination is required for the period June-November 2006 for the purpose of entitlement of the assessee for the input tax. We notice even here that while the assessee had promptly filed nil returns for this period within the time stipulations as per the Act, he did not care to file any revised returns nor had furnished the full particulars of the purchases made from registered dealers and the proof thereof. The factual position with regard to the compliance with the requirements of sub-section 4 of Section 10 is not forthcoming and though the assessee had filed revised returns for this period, even the revised returns did not contain the particulars of the registered dealer from whom purchases had been made and the actual tax paid on such purchases in the form of tax invoices issued by the selling registered dealers. 40
51. As pointed out by the learned Government Advocate, it is to be noticed that the revised returns were filed almost several months after the filing of the original returns and the actual assessment took place after almost two years after the original inspection and much time gap was there between filing of the returns and revised returns and further interval before passing of the assessment order. The assessee who had appeared before the assessing authority and represented, did not place any material or particulars as had been put forth before the appellate authority at the time of assessment or prior to the assessment. The assessee had ample opportunity for making the same. Notwithstanding the assessee had not fulfilled any compliance of the requirements of the statutory provisions, the particulars of registered dealers from whom purchases had been made had not been furnished, particulars of register etc nor corresponding tax invoices issued by the registered dealers were provided, but only a claim statement was made for 41 claiming credit for input tax on purchases said to have been effected from the dealers. We have already noticed that insofar as the claim for input tax deduction is concerned, the Act mandates strict compliance with the requirements of Section 10 which is reflected in the return as per Section 35 of the Act. While the argument of Mr Keshava Murthy, learned counsel for the appellant- assessee that the revisional authority while has accepted the stand taken by the appellate authority for treating the purchases made by the assessee from registered dealers and unregistered dealers and in fact had accepted the deduction of liability by the first appellate authority in terms of Section 3(2) of the Act, it could not have made any distinction only when it comes to provide input credit in respect of the very purchases depicted from the registered dealers.
52. Mr Vedamurthy, learned AGA, would point out that the liability under Section 3 of the Act is a different 42 liability independent of the liability under Section 4 of the Act and insofar as Section 4 liability is concerned, the determination is only in terms of the other provisions, whereas insofar as Section 3(2) liability is concerned, the analogy drawn by Mr Keshava Murthy is apt, so far as input tax rebate is concerned. The Act expressly provides for statutory compliance, whereas it does not provide so in respect of determination of Section 3 liability.
53. The Act specifically provides for the manner in which the extent of purchases made by an assessee from registered dealer and the claim for corresponding tax made at the time of purchase can be claimed by prescribing a specific mode and that is not complied by the assessee. Therefore, even assuming that the benefit of reduction of Section 3(2) tax liability as given by the appellate authority is not disturbed by the revisional authority, it cannot be a ground for extending such a 43 benefit in respect of input tax rebate either by comparison or otherwise.
54. Insofar as the argument that the revised return having been filed within six months and taking cue from the provisions of Section 38(3) of the Act, the revised return should be accepted and acted upon is concerned, we find this provision is not applicable to the present situation as it arises only in a situation where best judgment assessment is passed because of non-filing of the return as for the periods in question which we are discussing, the assessee had filed nil returns.
55. In so far as Mr Keshava Murthy's submission that in a best judgment assessment, where a return is not accepted and is based on the information as disclosed in the books of accounts etc., the claim in the returns or non-claiming in the returns cannot be of much significance, we find that claim for input tax credit can only be in specified form and not in a generalised form 44 and therefore, the arguments cannot succeed. We have discussed this aspect elaborately as above. Therefore, on comparison of provisions of Section 38(3) of the Act, the benefit cannot be extended by overlooking the statutory requirements under Section 10(4) of the Act read with sub-sections (1) and (4) of Section 35 of the Act.
56. In the circumstances we find that the impugned order passed by the Commissioner setting aside the appellate authority's order for the periods April 2005 to March 2006 and April 2006 to November, 2006 and restoring the assessment order cannot be said to be suffering from any illegality or want of jurisdiction and therefore, the appeals to that extent are dismissed. The Judgments relied cannot further the case of the appellant/assessee, as when a statutory provision mandates compliance in a particular manner in examining as to whether the compliance is secured or otherwise a broad based approach is not called for, more 45 so in tax matters, where the liability is strictly as per the sections and compliance, both on the part of the revenue and on the part of the assessee, also should be strictly in terms of the statutory provisions. An assessee pays penalty if it violates the statutory provision and likewise the revenue also loses revenue unless it adheres to the requirements of the statutory provision. It is for this reason we are not impressed by the submission on behalf of the assessee that there was no need for taking a technical approach or hyper technical approach and if the appellate authority had taken a pragmatic and plausible view, the revisional authority should not have disturbed the same or interfered with the same, is not accepted.
57. Appeals dismissed but costs made even.
Sd/-
JUDGE Sd/-
JUDGE *pjk/AN/BRN