Karnataka High Court
Sap India Private Limited vs The State Of Karnataka on 11 September, 2012
Bench: K.Sreedhar Rao, B.Manohar
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 11TH DAY OF SEPTEMBER 2012
PRESENT
THE HON'BLE MR. JUSTICE K.SREEDHAR RAO
AND
THE HON'BLE MR. JUSTICE B.MANOHAR
WA NOS.3320-3332/2012(T-RES)
BETWEEN:
SAP INDIA PRIVATE LIMITED
SALARPURIA SOFTZONE
WING A, 2ND FLOOR, TOWER-B
SARJAPUR OUTER RING ROAD,
BELLANDUR POST,
BANGALORE - 560 103. ...APPELLANT
(BY SRI.NAGESHWAR RAO FOR SRI.P.DINESH, ADV)
AND :
1. THE STATE OF KARNATAKA
FINANCE DEPARTMENT
VIDHANA SOUDHA
BANGALORE-560 001
REP BY ITS SECRETARY.,
2. THE ASSISTANT COMMISSIONER OF
COMMERCIAL TAXES, (AUDIT-41),
DVO-IV, BANGALORE.
3. COMMISSIONER OF COMMERCIAL TAXES,
STATE OF KARNATAKA
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VANIJYA TERIGE KARYALA,
M.S.BUILDING
BANGALORE- 560 001. ...RESPONDENTS
(BY SMT.S.SUJATHA, AGA)
WRIT APPEALS ARE FILED U/S 4 OF THE KARNATAKA
HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER
PASSED IN THE WRIT PETITION 12772-784/12 DATED 5/6/12.
THESE WRIT APPEALS ARE COMING ON FOR FINAL
HEARING THIS DAY, K.SREEDHAR RAO.J., MADE THE
FOLLOWING:
ORDER
The assessee has functional units at Ahmedabad and at Bangalore. The assessee sells software products to its customers at Bangalore. The assessee has contended that the sale has taken place from Ahmedabad to various customers and that no part of sale is effected from Karnataka branch. It is also contended that the authorities at Karnataka have no jurisdiction to assess the tax under the CST Act. The Assessing Officer rejected the contention of the assessee holding that the software is developed at Bangalore and that the materials made available by assessee indicate that the sales are effected from the State of Karnataka and the situs of sale is from Karnataka. Therefore held that the Assessing Officer has jurisdiction to assess the tax.
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2. The assessee had also taken a plea that the assessment is barred by limitation. The Assessing Officer rejected the said contention also. The Joint Commissioner in Appeals set aside the order of the Assessing Officer and held that the situs of sale is in State of Gujarath and not in State of Karnataka. The Revisional Authority exercised the power of suo-motu revision and issued notice to the assessee.
3. The assessee being aggrieved by issuance of notice filed writ petitions before this court in W.P.No.19443/2011 and other connected cases. This Court in paragraph 9 made the following observations and disposed of the writ petitions.
9. In the result, the writ petitions succeed and they are accordingly allowed. The notice at Annexure-E dated 17.03.2011 in WP.No.21414/2001 is quashed. Similarly, the order at Annexure-H dated 13.4.2011 in W.P.No.19443/2011 is also hereby quashed. It is made clear that this order will not preclude the Revenue from filing the appeals challenging the order of the Appellate Authority before the Sales Tax Appellate Tribunal, Karnataka, as provided under section 63 of the Act. If the appeals as above are filed by the Revenue within a period of four weeks from the date of receipt of a copy of this 4 order, the Tribunal is directed to receive the same without raising objection as to limitation subject to compliance of other statutory provisions and dispose of the same in accordance with law. No costs.
4. The Revenue, in view of the observations made in the above paragraph, filed cross-objections in the appeal filed by the assessee. The Revenue also filed I.A.No.I seeking stay of the order of refund passed by the Appellate Authority. The Appellate Tribunal had granted stay order. The assessee being aggrieved by the stay order, filed writ petitions contending that the Tribunal had no jurisdiction to entertain the application for stay and grant any stay order, in view of the provisions contained in Section 51 of the Karnataka Value Added Tax Act (hereinafter referred to as 'KVAT Act'). The learned Single Judge found that under Section 15 of the Karnataka Appellate Tribunal Act, 1976 (hereinafter referred to as 'Act of 1976'), the Tribunal is empowered to frame regulations. As per regulation No.15, the Tribunal had jurisdiction to grant stay order. However, set aside the order of stay and remanded the matter for fresh consideration. The assessee being aggrieved by the said order has filed these appeals for different monthly assessments. 5
5. Sri.Nageswara Rao, learned counsel appearing for the assessee strenuously contended that the provisions of Section 15 of the Act of 1976 expressly makes it clear that the Tribunal can frame regulations with regard to practice and procedure of the Tribunal only when there is absence of express provisions in the relevant enactment. The counsel refers to Section 51 of the KVAT Act, which reads as under:
"51. Power to withhold refund in certain cases (1) Where an order giving rise to refund is the subject-matter of an appeal or further proceeding or where any other proceeding under this Act is pending, and the authority competent to grant such refund is of the opinion that the grant of refund is likely to adversely affect the revenue, such authority may, with the previous approval of the Commissioner, withhold the refund till such time as the Commissioner may determine.
(2) The dealer shall be paid interest under sub-section (1) of Section 50 on the amount of refund ultimately determined to be due to the dealer as a result of such proceedings for the period commending from the expiry of thirty five days from the date of the order referred in sub-section (1) to the date of refund.6
6. With reference to the said provision, it is argued that when the legislature has invested a power in the authorities under the Act to withhold the refund, it was not necessary for the Revenue to approach the Tribunal for stay order. Section 51 being an express provision empowering the authorities to withhold refund, the jurisdiction of the Tribunal to grant stay in such matters would be unnecessary and rather it would be superfluous.
7. Per contra, Smt.S.Sujatha, learned Additional Government Advocate appearing for the respondent-State submitted that the power to withhold refund under Section 51 is only an optional remedy available to the Department. The authority who should grant refund is of the opinion that grant of refund is likely to adversely affect the revenue. Such authority may with the prior approval of the Commissioner withhold the refund. Section 51, in other words, does not take away the power of the Tribunal to grant stay and it cannot be argued that Section 51 is in conflict with the regulations framed by the Tribunal under Section 15 of the Act of 1976. She further contended that Section 51 of the KVAT Act is not applicable to the proceedings pending before the Tribunal. 7
6. Section 63(5)(c) of the KVAT Act reads as follows:
"If as a result of the appeal any change becomes necessary in the assessment, which is the subject matter of the appeal, the Appellate Tribunal may authorise the prescribed authority to amend the assessment, and the prescribed authority shall amend the assessment accordingly and thereupon, any amount over paid by the dealer shall be refunded to him without interest, or any additional amount of tax due from him shall be collected in accordance with the provisions of the Act, as the case may be."
8. With reference to the said provisions it is argued that if the power is exercised under Section 51, it will have an adverse impact on the Revenue. In the sense, the refund has to be granted along with interest. When the entire order of the Appellate Authority is in dispute, if the same is modified, then the State will not incur the liability to pay interest on part of the refund, if any to be made. In view of the distinct implications of law, it cannot be said that the Tribunal has no jurisdiction to grant stay in the matter and it was well within the legal propriety of the State to seek stay from the Tribunal. In that view, the order of remand made by the learned Single Judge need not be interfered with.
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9. On stern submissions made at the Bar and on going through the provisions of the KVAT Act , there is a categorical legislative declaration, which invests powers in the authorities under the Act to withhold the refund. The authority competent to refund may withhold the refund by passing a formal order on the ground that it is adverse to the Revenue, provided he has to seek prior approval of the Commissioner. The legislative provision empowers the departmental authorities to withhold the refund and when such power is invested in the authorities by law, it was totally unnecessary for the authorities to go before a Judicial Authority to seek for stay. The powers of judicial authority can only be invoked when the executable order requires imperative compliance on the part of the State. When the Department can withhold the refund by making a formal order on the ground that it is adverse to the revenue, it is wholly unnecessary to approach the Tribunal for stay.
10. The intention to obtain the stay order appears to be for some deeper reasons. If the authorities under Section 51 of the Act, withhold the refund by passing the formal order, the Department will have to pay interest on the refund. In the appeal filed by the department if there is any modification or change in the order. The 9 State will not incur liability to pay interest. Perhaps, with a view to avoid payment of interest, the State has approached the Tribunal for grant of stay which is wholly unnecessary for the State when it is possible for the revenue authorities by their own order can withhold the refund. In that view the Tribunal need not have entertained the application for grant of stay when the authorities themselves have got effective remedy under the Act to withhold the refund.
11. When provisions of Section 51 of the Act gives express powers to the authorities under the Act to withhold the refund, regulations framed by the Tribunal in that regard by exercise of power under Section 15 of the Act would be wholly redundant and superfluous. The regulations could be framed only in the absence of express provisions made in the Act or Rules. When the Act makes express provision regarding the powers of the authorities to stay the refund by their own order, the Tribunal in such circumstances need not frame the regulation investing power in itself to stay the order of refund by exercise of power U/s.15 of the Act is not tenable. 10
12. In that view of the matter, the appeal is allowed. The appeal by the assessee before the Tribunal appears to be untenable exercise. The assessee when he succeeded in the appeal before the Appellate Authority, he cannot file an appeal against such order only on the ground that on the question of limitation an adverse finding is given against him.
13. The Cross Objections filed by the assessee should be construed as appeal and should be disposed of in accordance with law within four months from the date of receipt of copy of this order.
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JUDGE Sd/-
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