Karnataka High Court
M/S Universal Media Co., vs The Assistant Commissioner Of ... on 27 February, 2018
Author: S.Sujatha
Bench: S.Sujatha
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 27TH DAY OF FEBRUARY, 2018
BEFORE
THE HON'BLE MRS.JUSTICE S.SUJATHA
W.P.Nos15749/2017 & 53072 - 53082/2017 c/w
W.P.No.51431/2017 (T - RES)
IN W.P.Nos.15749/2017 & 53072 - 53082/2017:
BETWEEN :
M/s UNIVERSAL MEDIA CO.,
A PROPRIETORY CONCERN
HAVING ITS OFFICE AT NO.12,
4TH CROSS, INDIRANAGAR,
MYSURU - 570 010.
REP. BY ITS PROPRIETRIX
Mrs. JAYASHREE RANKA,
W/O BHARATH RANKA,
AGED ABOUT 45 YEARS. ...PETITIONER
(BY SRI HARISH V.S., ADV.)
AND :
1. THE ASSISTANT COMMISSIONER
OF COMMERCIAL TAXES
(AUDIT)-1, SESHADRI BUILDING,
DIWANS ROAD, MYSURU - 570 001.
2. THE COMMISSIONER OF COMMERCIAL TAXES
STATE OF KARNATAKA
VANIJYA TERIGE KARYALAYA,
GANDHINAGAR, BANGALORE - 560 009.
3. THE STATE OF KARNATAKA
DEPARTMENT OF FINANCE
VIDHANASOUDHA
AMBEDKAR VEEDHI,
-2-
BANGALORE - 560 001.
REP. BY ITS PRINCIPAL SECRETARY. ...RESPONDENTS
(BY SRI T.K.VEDAMURTHY, AGA.)
THESE WRIT PETITIONS ARE FILED UNDER ARTICLES
226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO
QUASH THE ORDER OF RE-ASSESSMENT PASSED BY THE R-1
UNDER SECTION 39(1) READ WITH SECTIONS 72(2) AND 36(1)
OF THE KVAT ACT, DATED 27.02.2107 FOR THE TAX PERIOD
OF 2012-13 I.E., ANNX-F AND THE CONSEQUENTIAL DEMAND
NOTICE ISSUED BY THE R-1 IN FORM VAT-180, DATED
27.02.2017, FOR THE TAX PERIOD 2012-13 I.E., ANNX-G.
IN W.P.No.51431/2017:
BETWEEN :
M/s UNIVERSAL MEDIA CO.,
A PROPRIETORY CONCERN
HAVING ITS OFFICE AT NO.12,
4TH CROSS, INDIRANAGARA,
MYSURU - 570 010.
REP. BY ITS PROPRIETRIX
Mrs. JAYASHREE RANKA,
W/O Mr. BHARATH RANKA,
AGED ABOUT 44 YEARS. ...PETITIONER
(BY SRI HARISH V.S., ADV.)
AND :
1. THE COMMISSIONER OF
COMMERCIAL TAXES
STATE OF KARNATAKA
VANIJYA TERIGE KARYALAYA,
GANDHINAGAR,
BANGALORE - 560 009.
2. THE STATE OF KARNATAKA
DEPARTMENT OF FINANCE
VIDHANASOUDHA
AMBEDKAR VEEDHI,
-3-
BANGALORE - 560 001.
REP. BY ITS PRINCIPAL SECRETARY. ...RESPONDENTS
(BY SRI T.K.VEDAMURTHY, AGA.)
THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF
THE CONSTITUTION OF INDIA PRAYING TO DECLARE THAT THE
FLEX AND VINYL PRINTING UNDERTAKEN BY THE PETITIONER
IS LIABILE TO BE TAXED IN ACCORDANCE WITH ENTRY NO.8
OF SIXTH SCHEDULE TO KVAT ACT AT THE RATE OF 5.5% AND
QUASH THAT PART OF THE CLARIFICATION CLARIFYING THAT
PRINTING AND SUPPLY OF FLEX, VINYL AND SIGN BOARDS
AND INSTALLATION IS LIAGLE TO TAX AT 14.5% UNDER ENTRY
NO.23 OF 6TH SCHEDULE, ISSUED BY THE R-1 DATED
11.10.2017 VIDE ANNEX-E.
THESE PETITIONS COMING ON FOR PRELIMINARY
HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
Since common questions are involved in these matters, the same are heard together and disposed of by this common order.
2. Facts in brief are that the petitioner is engaged in the business of flex, vinyl printing and signboards. The nature of activity undertaken by the petitioner is one of works contract since it involves both material and labour and not sale simpliciter which would involve only material/goods alone and no labour. -4- Petitioner was an assessee under the Karnataka Sales Tax regime also. Pursuant to Karnataka Value Added Tax Act, 2003 ['Act', for short] coming into force, petitioner filed an application under Section 59[4] seeking clarification in as much as rate of tax applicable on printing and supply of flex, vinyl, signboards and installation. The Respondent No.1-Commissioner of Commercial Taxes issued clarification dated 11.10.2017, clarifying that printing and supply of Flex, Vinyl and signboards and installation is a works contract liable to tax at 14.5% from 1.8.2002 to 30.6.2017 under Entry 23 of Sixth Schedule subject to deduction available under Rule 3[2] of the Karnataka Value Added Tax Rules, 2005. Being aggrieved by this clarification as well as assessment orders passed by the prescribed Authority, the Assessee is before this Court.
3. Learned Counsel appearing for the Assessee submits that the activity of the petitioner is a works -5- contract and falls under Sl. No.8 of Sixth Schedule to the Act liable to tax at the rate of 5.5% for the relevant assessment year, whereas Respondent No.1- Commissioner of Commercial Taxes held that the said activity of the petitioner falls under Sl. No.23 of Sixth Schedule and liable to tax at 14.5% which is wholly unjustifiable and contrary to the legislative intent. A reading of Sl. No.8 'printing; block making' by the Commissioner of Commercial Taxes as a whole, ignoring the semi-colon inserted by the legislature with an intention to read the two activities as different and distinct being lost sight of, the clarification of the Commissioner of Commercial Taxes calls for interference by this Court. In support of his contentions, learned Counsel placed reliance on the Judgment of the Allahabad High Court at Lucknow Bench in the case of 'SHRI KANT TRIPATHI v. STATE OF U.P.' reported in 1987 SCC Online All 120. -6-
4. On the other hand, learned counsel appearing for the respondent-revenue, placing reliance on the Division Bench Judgment of this Court in the case of 'MMT [INDIA] PVT. LTD., v. STATE OF KARNATAKA' reported in 2004 [137] STC 257 as well as 'M/S. REPROMEN OFFSET PRINTERS PVT. LTD., v. THE STATE OF KARNATAKA' In STA No.14/2015 [DD-26.04.2016] submitted that the activity or the contract for flex, vinyl printing and installation effected by the petitioner falls under Sl. No.23 of Sixth Schedule. It is submitted that the posters, vinyl hoardings, printed fabric banners, flex banners, bill boards etc., which are items essentially used for publicity as against private use by any person has to be construed as a contract falling under Sl. No.23 of Sixth Schedule to the Act.
5. I have given my anxious consideration to the arguments advanced at the Bar and perused the material on record.
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6. It is not in dispute that the activity carried on by the petitioner is a works contract liable to tax under Section 4[1][c] of the Act. The only question is what is the rate of tax applicable to the contract/activity of the petitioner for flex, vinyl printing and installation. It is apt to refer to the relevant description of works contract and rate of tax prescribed under Sixth Schedule to the Act. Sl.No.8 'printing; block making' attracts levy of tax @ 5.5%, Sl.No.23 relates to all other works contract not specified in any of the above categories including composite contracts with one or more of the above categories liable to tax at 14.5% during the relevant period. It is thus clear that Sl.No.8 refers to printing; block making. That means printing and block making being two different and distinct activities has to be read with disjunction or without any inter-relation between the two activities. If it is mere printing or mere block making, certainly it falls under Sl.No.8 -8- with rate of tax at 5.5%. It is also profitable to refer to the Judgment of the full Bench of Allahabad High Court wherein at paragraph-28, it is held thus:
"28. These principles are equally relevant to the present case. The said proviso consists of two parts which are separated by a 'semi- colon' mark in between. The 'Semi-colon' has been put immediately after the word 'accordingly; By the 'semi-colon' mark, the first part of the proviso comes to, an end and a further sentence begins with the word 'so Again it is followed by a comma' mark. If we recall the rules of English grammar, 'semi-
colon represents a pause of greater importance than that shown by the comma. It is 'sued to separate the clauses of compound sentence. It is also used to separate a series of loosely related clauses, each, however, is independent of the other. The two parts of the proviso separated by a 'semi-colon' are not inter-connected or inter-linked with each other. The 'semi-colon' mark followed by a word 'so' with 'comma' thereafter, appears to have been deliberately used by the Rule -9- making authority with a view to separate the first part from the second part of the proviso."
7. The view of this Court that printing: block making consists of two activities separated by semi- colon mark is independent of the other, these two activities of printing and block making are not inter connected or interlinked with each other is fortified by the full Bench decision of Allahabad High Court. The Judgment referred to by learned Counsel for Revenue in MMT [INDIA] PVT. LTD.,'s case supra, deals with works contract for digital printing i.e., printing on a vinyl film of pictures/images provided on a floppy/compact disc. The question that arose before the Division Bench of this Court was whether such works contract is exigible to tax under Karnataka Sales Tax Act, 1957. In that context, this Court held that clarification issued by the Authority for clarification and advance ruling that digital printing is a works contract
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liable to tax under Section 5B of the Act under Entry 43 of the Sixth Schedule to the Act is justifiable.
8. As aforesaid, it is not in dispute that the contract involved herein is a works contract. That being the situation, this Judgment is not applicable to the facts of the present case. Similarly, in REPROMEN OFFSET PRINTERS' case supra, the Division Bench of this Court was considering whether posters, vinyl hoardings, printed fabric banners etc., which are used for publicity can be brought under Entry-71 are altogether different from that of items with the Assessee for which the rates are fixed by the Advance Ruling Authority by way of clarification. This Judgment is also not applicable to the facts of the present case for the reason that the question involved herein is not related to liability of tax under Entry 71 of Third Schedule to the Act as sale simpliciter. The activity being works
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contract as admitted by the revenue, the same do not fall under Entry 71 of Third Schedule.
9. Considering the entries applicable as aforesaid, the next question would be whether the activity carried on by the Assessee is mere printing or does it include composite contract with one or more categories specified in Sixth Schedule. The contract referred to by the Assessee is flex, vinyl, signboards and installation. The Commissioner of Commercial Taxes ought to have examined whether the installation work carried on by the assessee is a composite contract attracting Sl. No.23 of the Sixth Schedule to the Act. The Commissioner proceeded on the ground that the contract falls under Entry 23 of the Sixth Schedule without assigning any valid reasons. In the circumstances, this Court is of the considered opinion that the Respondent No.1-Commissioner of Commercial
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Taxes shall examine this aspect and a decision shall be taken in accordance with law.
10. In the result, the Commissioner's clarification impugned at Annexure-E to Writ Petition No.51431/2017 is quashed. The matter is remanded to Respondent No.1-Commissioner of Commercial Taxes to examine the issue in the light of the observations made as aforesaid and take a decision in accordance with law in an expedite manner, in any event not later than four weeks from the date of receipt of certified copy of this order. All rights and contentions of the parties are left open. In view of the clarification of the Commissioner being set aside, the assessment orders passed by the prescribed Authority based on the said clarification also requires to be set aside and is accordingly set aside.
11. The matter is remanded to the prescribed Authority to re do the assessment in accordance with law, based on the decision to be taken by the
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Commissioner of Commercial Taxes in the light of the observations made by this Court as narrated above.
12. It is made clear that the remand order is made to the Commissioner of Commercial Taxes to ascertain in as much as the activity carried on by the Assessee falls under Sl. No.8 or 23 of the Sixth Schedule.
In the result, writ petitions stand disposed of as indicated above.
Sd/-
JUDGE AN/-