Karnataka High Court
M/S Engineers India Limited vs The Deputy Commissioner Of on 4 March, 2016
Author: Anand Byrareddy
Bench: Anand Byrareddy
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 4TH DAY OF MARCH, 2016
BEFORE
THE HON' BLE MR. JUSTICE ANAND BYRAREDDY
WRIT PETITION NO.11151/2016
AND
WRIT PETITION Nos.12130-12140/2016 (T-RES)
BETWEEN
M/S ENGINEERS INDIA LIMITED
A GOVERNMENT OF INDIA UNDERTAKING
MRPL PHASE-III REFINERY PROJECT
KUTHETHOOR, P.O. VIA KATILPALLA
MANGALURU-575030.
REPRESENTED BY ITS DEPUTY
GENERAL MANAGER (F&A)
MR. INDER CHAWLA
S/O LATE MR.S.S. CHAWLA
AGED ABOUT 48 YEARS. ... PETITIONER
(BY SRI. V.S.HARISH-ADVOCATE)
AND
1. THE DEPUTY COMMISSIONER OF
COMMERCIAL TAXES (AUDIT-3) DVO
OFFICE OF DEPUTY COMMISSIONER
OF COMMERCIAL TAXES
VANIJYA THERIGE BHAVANA
MAIDAN ROAD, MANGALURU-575001.
2. STATE OF KARNATAKA
REPRESENTED BY COMMISSIONER OF
COMMERCIAL TAX ... RESPONDENTS
(BY SRI. S.V. GIRIKUMAR - ADDITIONAL
GOVERNMENT ADVOCATE)
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THESE WRIT PETITIONS ARE FILED UNDER ARTICLES
226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO
QUASH THE IMPUNGED ORDER OF RE-ASSESSMENT
PASSED BY THE RESPONDENT UNDER SECTION 39(1) OF
THE KVAT ACT, READ WITH RULE 37(2) OF THE KARNATAKA
VALUE ADDED TAX RULES, 2005, DATED: 2.2.2016, FOR THE
PERIOD APRIL 2009 TO MARCH 2010, I.E., ANNEXURE-X AND
THE CONSEQUENTIAL DEMAND NOTICE ISSUED BY THE
RESPONDENT IN FORM VAT 180, DATED: 2.2.2016 FOR THE
TAX PERIOD 2009-2010 I.E. ANNEXURE-XI AND ETC.
THESE WRIT PETITIONS COMING ON FOR
PRELIMINARY HEARING THIS DAY, THE COURT MADE THE
FOLLOWING:
ORDER
Heard the learned counsel for the petitioner. Government Advocate is directed to take notice.
2. The petition coming on for preliminary hearing is considered for final disposal.
3. The petitioner claims that it is a Government of India undertaking and a registered company engaged in construction and Engineering consultancy services. It is a registered dealer both under the Karnataka Value Added Tax, 2003 and Central Sales Tax Act 1956 (for short 'the CST Act'. It is stated that during the assessment year 2009-10 the petitioner had executed a contract for M/s.Mangalore Refinery Petrochemicals Limited, Mangalore (for short MRPL), phase III turkey project 3 involving design, engineering, procurement, supply construction, installation testing, commissioning and project management services for setting up of a Petro Fluid Catalytic Cracking Unit and other such units after execution of 70% of the value of the contract. There was no other business activity of the petitioner in the State of Karnataka except carrying out contract with the Mangalore Refineries Petrochemical Limited. The petitioner had executed certain portions of work and there were no local purchases or sales effected by the purchaser. Petitioner had however purchased goods by way of inter state sales within the meaning of Section 3(a) of the CST Act and in turn effected transit sales of the goods so purchased by endorsing the lorry receipt copies during the inter state movement of goods in terms of Section 6(2) of the CST Act. The transaction were supported by appropriate statutory certificates in Form C and E1 and had filed returns under the KVAT Act disclosing the above transit sales to the extent of Rs.72.01 crores which was thereafter revised to Rs.95.76 crores and claimed deduction/exemption of the same.
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4. The Joint Commissioner of Commercial Tax (enforcement West Zone, Mangalore) had issued a notice in Form VAT 275 dated 7.3.2011 calling for production of books of accounts and other documents of the petitioner. However, the proceedings were dropped in view of the directions of the Commissioner of Commercial Taxes. Thereafter a notice in Form VAT 275 dated 20.7.2012 was issued by the respondent and yet again another notice dated 20.9.2012 was issued by the respondent to the petitioners. The petitioner did meet the respondent. The petitioner was required to submit the methodology adopted for execution of the contract. The petitioner had explained in detail in writing as to the methodology, the manner of billing, payment to vendors/sub contractors etc. for execution of the project. However, by an endorsement dated 31.7.2015 it was intimated that details of the amount released from MRPL to the petitioner was not produced and vide letter dated 15.11.2012 the petitioner had clarified that goods procured from the State of the Karnataka were resold to MRPL after adding the profit margin and that petitioners had not paid any out put tax 5 and that returns in Form VAT 100 has been filed for the assessment year 2009-10 disclosing turnover of Rs.37.08 crores and claiming exemption on the entire amount without declaring the sub-contractors turnover.
5. The petitioner was therefore, required to produce documents within 7 days from the date of endorsement dated 31.7.2015. The petitioner did responded to the above endorsement explaining the so called discrepancy pointed out by the respondent. Thereafter a notice was issued on 16.11.2015 proposing to levy tax at 12.5% on the turnover of Rs.435.93 crores. The respondent also issued a notice dated 17.11.2015 under Section 9(2) of the CST Act dated 17.11.2015 proposing to disallow the claim of transit sales on a turnover of Rs.72.01 crores on the very same ground that goods are received by the petitioners. The petitioner had filed objections sating that the notice was erred in failing to take cognizance of VAT 100 and 240 filed by the petitioners, amounts reflected under the head cost of EIL represents professional charges and do not represent consideration for transfer of property in goods and that notice has erroneously adopted figures 6 from the monthly statements which are cumulative in nature and do not represent the actual value of goods sold during a particular month. The petitioner thereafter sought further time to file detailed objections. However, the respondent issued endorsement intimating the petitioner that they may file objections on or before 15.12.2015, failing which the proceedings will be continued without further intimation.
6. However, the petitioner did file their reply highlighting several grounds on which the present petition is filed. The respondent having overlooked the same and having not given opportunity of hearing to the petitioners on several aspects of the matter to justify the claim of the petitioners and assessment order having been passed, the petitioners are before this Court.
7. It is sought to emphasize that the original notice did not contain the grounds on which the assessment order has been passed thereby indicating the detailed objections filed by the petitioners and the relevant material produced has been completely over ruled and hence seeks that the entire order is unjustified and therefore, seeks an 7 opportunity of further hearing so that the petitioner is able to place before the authority the pointed out reference to the materials that is relevant which ought to be taken into consideration in having passed the assessment order.
8. The learned Government Pleader though raised serious objection to the petitioner's claim however conceded that if the petitioner has not been given an opportunity of hearing on several aspects of the matter, he could be permitted to make his submission to the concerned authority in due course.
9. Accordingly, the petitions are summarily allowed. The impugned orders are quashed and the matter is remitted to the Assessing Authority for fresh consideration after giving an opportunity of hearing to the petitioner and to consider the material that is pointedly brought to the notice of the petitioner before passing further orders in accordance with law.
The petitioner shall appear before the respondent on 10.3.2016 without any further notice. The petitioner shall implead the Stake of Karnataka as party.
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10. Government Advocate is directed to file memo of appearance within two weeks.
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