Karnataka High Court
M/S Vip Industries Ltd vs State Of Karnataka on 24 April, 2018
Equivalent citations: AIRONLINE 2018 KAR 1446
Author: S.Sujatha
Bench: S.Sujatha
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 24TH DAY OF APRIL, 2018
BEFORE:
THE HON'BLE MRS. JUSTICE S.SUJATHA
WRIT PETITION No.17005/2018 (T - RES)
BETWEEN:
M/s. VIP INDUSTRIES LTD.,
No.104, SRI SHIVALAYA COMPLEX
17TH C MAIN, 5TH BLOCK
KORAMANGALA, BENGALURU-560095.
REP. BY ITS BRANCH COMMERCIAL HEAD
Mr. SANDEEP P. JOGDANDE
S/O SRI PADMAKAR JOGDANDE
AGED ABOUT 33 YEARS. ... PETITIONER
[BY SRI G.RABINATHAN, ADV.]
AND:
1. STATE OF KARNATAKA
REP. BY PRINCIPAL SECRETARY
TO GOVERNMENT
FINANCE DEPARTMENT
GOVERNMENT OF KARNATAKA
VIDHANA SOUDHA
BENGALURU-560001.
2. COMMISSIONER OF COMMERCIAL TAXES
KARNATAKA, VANIJYA THERIGE
KARYALAYA-1, GANDHINAGAR,
BENGALURU-560009.
3. DEPUTY COMMISSIONER OF
COMMERCIAL TAXEX [AUDIT]-2.4
DVO-2, ROOM No.606, 6TH FLOOR
VTK-2, B BLOCK, 80 FEET ROAD
NEAR NATIONAL GAMES VILLAGE
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KORAMANGALA
BENGALURU-560047. ...RESPONDENTS
[BY SRI T.K.VEDAMURTHY, AGA)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA, PRAYING TO SET ASIDE
THE REASSESSMENT ORDER IN T.NO.2484/2017-18 PASSED
BY DEPUTY COMMISSIONER OF COMMERCIAL TAXES, [AUDIT]-
2.4, THE THIRD RESPONDENT HEREIN, UNDER SECTIONS
39(1), 47, 72(2) AND 36 OF KVAT ACT, 2003 FOR THE TAX
PERIODS IN THE YEAR 2011-12 LEVYING TAX, PENALTY AND
INTEREST TOTALLING TO Rs.2,24,48,973 AND DEMANDED FOR
PAYMENT IN THE NOTICE OF DEMAND ISSUED IN FORM VAT
180 - ANNEXURE-C AND ETC.
THIS PETITION COMING ON FOR PRELIMINARY HEARING,
THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER
Learned Additional Government Advocate is permitted to accept notice on behalf of the respondents.
2. Petitioner has challenged the reassessment order dated 31.03.2018 passed by the Respondent No.3 relating to tax periods April 2011 to March 2012 as well as the notice of demand issued in Form VAT-180 at Annexure-C to the writ petition.
3. Petitioner is a company incorporated under the Companies Act, 1956/2013 and a dealer registered -3- under the Karnataka Value Added Tax Act, 2003 ['Act', for short] and Central Sales Tax Act, 1956. The petitioner carries on business in VIP brand luggages - soft, hard and moulded luggages. Relating to the tax period April 2011 to March 2012, the case of the petitioner for reassessment was assigned to the Respondent No.3 herein. It is the grievance of the petitioner that the Respondent No.3 issued final notice dated 24.03.2018 proposing to pass reassessment order under Section 39[1] of the Act for the period in question, providing three days opportunity to the petitioner- company to file objections, failing which action deemed fit shall be confirmed. It is the contention of the petitioner that the letter dated 26.03.2018 filed before the Respondent No.3 requesting for time upto 30.03.2018 for production of all the required documents and clarifications and filing reply to the final notice came to be rejected on the ground that reassessment was getting time barred and opportunity of being heard -4- provided is sufficient. The Respondent No.3 proceeded with the reassessment proceedings, passed the reassessment order dated 31.03.2018 and issued the notice of demand in Form VAT 180. Aggrieved by the same, the petitioner has filed this writ petition.
4. Learned Counsel Sri. K. Rabinathan, appearing for the petitioner would submit that a proposition notice dated 14.06.2017 was issued by the prescribed authority under Section 39[1] read with Sections 36 and 72[2] of the Act for the tax period in question, proposing to tax the claim of exemption made by the petitioner, in as much as, input tax claim is concerned, for which petitioner pointed out that no such input tax claim was made by the petitioner and the return filed, disclosing no local purchase and input tax claim, was brought to the notice of the prescribed authority, who in turn has not proceeded further. However, surprisingly, final notice dated 24.03.2018 -5- came to be issued providing three days time to reply to the said notice wherein two factors, namely, disallowing sales return as well as treating the difference of excess tax collection were proposed to tax. These proposals were not subject matter of the earlier notice. It is only by way of final notice, these transactions were proposed to tax, for which reasonable opportunity was required to be provided by the prescribed authority. Proceeding to conclude the reassessment, rejecting the request of the petitioner to provide an opportunity till 30.03.2018 is in violation of the principles of natural justice and such an order passed contrary to the principles of natural justice is prima facie null and void and deserves to be set aside.
5. Learned Additional Government Advocate appearing for the respondents, justifying the impugned order, would submit that for the tax period relating to April 2011 to March 2012, Form 275 was issued on 13.2.2015. Thereafter, proposition notice dated -6- 14.06.2017 was issued. Petitioner submitted books of accounts on 30.11.2017. Based on such books of accounts, final proposition notice dated 24.03.2018 was issued and was served through e-mail on the same day to the petitioner. The petitioner sought time on 26.03.2018 till 30.03.2018. However, no further reply/ objection was filed as sought for. Hence, finally, the prescribed authority had no other option, but to conclude the reassessment proceedings on the available material which cannot be faulted with. Thus, it is submitted that adequate opportunity was provided to the petitioner to reply to the proposition notice and the same has not been availed by the petitioner. In the circumstances, petitioner has to be relegated to the Appellate Authority for redressal of its grievance and the writ petition is not maintainable.
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6. I have given my anxious consideration to the arguments advanced at the Bar and perused the material on record.
7. Learned counsel appearing for the petitioner has placed on record the notice dated 14.06.2017 issued by the prescribed authority under Section 39[1] read with Sections 36 and 72[2] of the Act relating to the tax period 2011-12 which has been referred to in the impugned reassessment order on which much emphasis is placed on, by the learned Additional Government Advocate to contend that the notice issued on 24.03.2018 is the final notice which is pursuant to the notice dated 14.06.2017.
8. I have carefully examined the contents of the notice dated 14.06.2017. The same is extracted hereunder for ready reference.
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"Please take notice that M/s VIP Industries Ltd TIN-29450051611 is a registered dealer under KVAT Act. The
assessee is filing the returns in LVO-LVO 060
- Bengaluru. In terms of assignment note issued by the Commissioner of Commercial Taxes (K), Bangalore, the case has been allotted for audit for the period 2011-12 under the KVAT Act. Hence, a notice u/s. 52(1) of the Act Form VAT-275 was issued and served to assessee for production of books of accounts under KVAT Act. You have failed to comply with the notice.
On verification of your monthly returns for the year 2011-12, it is reflected that you have claimed input in every month. But failed to produce of local registered dealer purchases. Hence, the same input claim is hereby propose to reject & also reject claim of other exemption & propose to tax. The proposition notice issued as under;
Tax period - 2011-12
Total Turnover 461584919-00
Less: Taxes Collected 56187561-00
Taxable Turnover 405397358-00
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Proposed
Taxable @ 14% 56755630-00
Lsss: Input Credit NIL
Total Payable Proposed 56755630-00
In addition to above Penalty & Interest as per 72(2) & 36(1) is also applicable. And e- Sugam utilization needs to reconciliation or else, the differential turnover shall be to tax."
9. The contents of final notice dated 24.03.2018 is extracted by the prescribed authority in the reassessment order which reads as under:
"The Company has provided statements of goods returned which are not accessible to read the contents and it is a mere summary of the goods returned and incomplete. Not submitted the actual supporting documents in support of the claim which is required as under upto 2012 as per the section which is reproduced as under:
30. Credit and Debit Notes-
(1) Where a tax invoice has been issued for any sale of goods and within six months
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from the date of such sale the amount shown as tax charged in that tax invoice is found to exceed the tax payable in respect of the sale effected, the registered dealer effecting the sale shall issue forthwith to the purchaser a credit note containing particulars as prescribed.
(2) Where a tax invoice has been issued for sale of any goods and the tax payable in respect of the sale exceeds the amount shown as tax charged in such tax invoice, the registered dealer making the sale, shall issue to the purchaser a debit note containing particulars as prescribed.
(3) Any registered dealer who receives or issues credit notes or debit notes shall modify his return for the period in which the credit note or debit note is issued and pay any tax due on such return.
If not reverted, the same shall be treated as taxable sales On verification of monthly returns filed by the company has variation in payment of taxes
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as admitted in its returns. The Form VAT 240 also has the excess collection of taxes and the company is required to file the revised return if at all there is legal claim of not paying as admitted. No such aspects are identifiable in the returns. Therefore the company is required to comply as per the section which is reproduced from the act book as under:
4.7 Payment and disbursement of amounts wrongly collected by dealer as tax.-
(1) Subject to Section 30, where any amount is collected by way of tax or purporting to be way of tax from any person by any dealer, whether knowingly or not, such dealer shall pay the entire amount so collected, to the prescribed authority within twenty days after the close of the month in which such amount was collected, notwithstanding that the dealer is not liable to pay such amount as tax or that only a part of it is due from him as tax under this Act.
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(2) If default is made in payment of the amount in accordance with sub-section (1), -
(a) the whole of the amount outstanding on the date of default shall become immediately due and shall be a charge on the properties of the dealer;
(b) the dealer liable to pay the amount shall pay interest at the rate of 1(One and a quarter per cent) of such amount for each month with the interest calculated under clause [b] of this sub-section shall be recoverable in the manner specified in Section
42. (3) Notwithstanding anything contained in this Act, or in any other law for the time being in force, any amount paid or payable by any dealer under sub-section [1], shall, to the extent it is not due as tax be forfeited to the Government and be recovered from him and such payment or recovery shall discharge him of the liability to refund the amount to the person from whom it was collected.
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(4) Where any amount is paid or recovered by or from any dealer under sub-section [1] or [3], a refund of such amount or any part thereof can be claimed from Government by the person from whom, it was realized by way of tax provided an application in writing in the prescribed form is made to the Commissioner, within two years from the date of the order of forfeiture. On receipt of any such application, the Commissioner shall hold such inquiry as he deems fit and if the Commissioner is satisfied that the claim is valid and admissible, and that the amount so claimed as refund is actually paid or recovered, he shall refund the amount or any part thereof, which is found due to the person concerned. (5) For the purpose of sub-section [2], non- payment during any period during which recovery of any amount due under this Section is stayed by an order of any authority or Court in any appeal or other proceedings disputing such amount, shall be deemed to be
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a 'default', unless the appeal or other proceeding is allowed by such Authority.
THREE DAYS OF OPPORTUNITY IS PROVIDED TO COMPLY ABOVE SECTIONS FAILING WHICH THE ACTION DEEMED FIT SHALL BE CONFIRMED."
10. A reading of these two notices makes it clear that difference of excess tax collection and disallowance of sales return was raised for the first time in the notice dated 24.03.2018, to subject the said transaction to tax under the provisions of the Act. It is apparent that three days of opportunity was provided to the petitioner- company to file objections if any or to comply the discrepancies pointed out in the said notice. Learned Additional Government Advocate appearing for the revenue has placed before the Court the letter of the petitioner-company dated 26.03.2018 requesting the prescribed authority to grant time till 30.03.2018 to give reply or comply with the notice dated 24.03.2018. In
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the said letter, the prescribed authority has observed as under:
"As per the Endorsement, the order shall be concluded, since it pertains to barred by limitation of time for assessment"
Sd/-
26/03/2018"
11. It is, thus, clear that no time was provided as sought for, by the petitioner till 30.03.2018. Final reassessment order is passed on 31.03.2018.
12. It is settled legal principle that principles of natural justice has to be complied with by quasi judicial authority while concluding the assessment/ reassessment. Providing of such opportunity is not a mere formality, reasonable opportunity has to be provided so that the assessee gets reasonable time to meet the contents of the notice or comply with the discrepancies pointed out in the notice. Indisputably,
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assessment proceedings were pending from 13.02.2015 when Form 275 was issued by the prescribed authority. The proposed tax in terms of the notice dated 24.03.2018 is based on fresh grounds which were not adverted to, by the prescribed authority in the earlier proposition notice. If so, providing three days time to the assessee cannot be construed as reasonable opportunity at any stretch of imagination. It is, in order to conclude the reassessment as the limitation may come in the way of the prescribed authority to conclude the reassessment, request of the assessee to grant time till 30.03.2018 is also rejected. In the circumstances, the order of reassessment impugned herein cannot be held to be legal, providing of reasonable opportunity being lacking, contrary to the fundamental principles of justice delivery system.
13. It is well settled by now that alternative remedy is not an absolute bar to entertain the writ
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petition under Articles 226 and 227 of the Constitution of India when the principles of natural justice are violated. As narrated above, the principles of natural justice being violated in passing the reassessment order impugned herein, relegating the petitioner-assessee to the appellate remedy would not be justifiable.
14. Hence, in the facts and circumstances of the case, this Court is of the considered opinion that the impugned order cannot be sustained. Consequently, demand notice deserves to be quashed. Accordingly, reassessment order as well as demand notice at Annexure-C are quashed. The matter is remitted to the prescribed authority-Respondent No.3 to reconsider the matter after providing reasonable opportunity to the petitioner in accordance with law. Petitioner shall file objections to the notice dated 24.03.2018 within a period of ten days from today and on such objections being filed by the petitioner, the same shall be
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considered by the Respondent No.3-prescribed authority in accordance with law and reassessment order shall be passed in an expedite manner.
With the aforesaid observations, writ petition stands disposed of.
Sd/-
JUDGE AN/-