Dismissed

M M Pattanshetty v. the Commissioner of Commercial Taxes

Karnataka HC25 Jan 2019STA/100001/2015

Case brief

AI extract

What is this about?

The High Court held that the Commissioner of Commercial Taxes could not initiate revisional proceedings barred by limitation against a regular assessment order when under appeal regarding a separate protective assessment order. The impugned order setting aside the protection of a previous time-barred revision of the regular assessment was sustained, and the matter was remanded for fresh considerat

What did the court decide?

Appeal dismissed; matter remanded to the Additional Commissioner of Commercial Taxes for de nova proceedings under Section 64(1) of the KVAT Act.

M M Pattanshetty Vs the Commissioner of… — Civil Procedure and Limitation | Karnataka HC (2019)

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STA No.100001/2015

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IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH

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DATED THIS THE 25^TH DAY OF JANUARY, 2019

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PRESENT

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THE HON’BLE MRS. JUSTICE B.V. NAGARATHNA

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AND

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THE HON’BLE MR. JUSTICE BELLUNKE A.S.

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SALES TAX APPEAL No.100001 OF 2015

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BETWEEN:

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M M PATTANSHETTY MANJUNATH TRADERS, ANKALGI, DIST: BELAGAVI

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... APPELLANT

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(By Sri.M.N.SHANKARAGOWDA ADV. AND SRI.H.R.KAMBIYAVAR ADV.)

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AND:

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THE COMMISSIONER OF COMMERCIAL TAXES VTK BUILDING, GANDHI NAGAR, BENGALURU

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... RESPONDENT

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(By SMT. VEENA HEGDE, AGA)

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THIS STA IS FILED UNDER SECTION 66(1) OF THE KARNATAKA VALUE ADDED TAX ACT 2003, PRAYING TO SET ASIDE THE ORDER OF CCT DATED 10.11.2014 IN NO.KVAT/SMR/CR-6/14-15 IN THE APPELLANT'S CASE, IN THE INTEREST OF JUSTICE AND EQUITY.

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THIS APPEAL COMING ON FOR ORDERS THIS DAY, NAGARATHNA J., DELIVERED THE FOLLOWING:

STA No.100001/2015

J U D G M E N T

This appeal assails order No.KVAT/SMR/CR6/14-15 dated 10.11.2014 passed in suo motu revisional proceedings of the Commissioner of Commercial Taxes (Karnataka), Bengaluru under Section 64(2) of the Karnataka Value Added Tax Act, 2003 (hereinafter referred to as ‘the KVAT Act’ for the sake of convenience).

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Briefly stated, the facts are that the appellant is a registered dealer under the provisions of the KVAT Act engaged in the business of buying and selling of oil seeds, oil and oil cake. For the period from 01.04.2006 to 30.11.2006, the Deputy Commissioner of Commercial Taxes (Int.), North Zone, Sadashivanagar, Belagavi, on the basis of the information gathered and by visiting the appellant’s premises, passed a protective Assessment Order on 15.03.2007 under Section

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38(5) of the KVAT Act for the period. By the said order, the input tax claimed by the appellant was withdrawn on the premises that the two suppliers, namely M/s.SVS Enterprises and M/s. SR Commercials, Challakere colluded with the appellant, even though there was no movement of goods from the supplier to the appellant.

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Aggrieved by the said order passed by the Intelligence Wing of the Department, appellant filed a first appeal before the Joint Commissioner of Commercial Taxes (Appeal) in KVAT AP No.233/2006-07/B-121, which was allowed on 19.04.2007. The appellate authority set aside the order passed by the Intelligence Authority.

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Subsequently, the Additional

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Commissioner of Commercial Taxes exercising his revisional powers issued notice dated 13.11.2009 under Section 64(1) of the KVAT Act proposing to revise the aforesaid appellate order passed in the

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appellant’s case. In response thereto, appellant filed his objections on 25.11.2009. The Additional Commissioner of Commercial Taxes on 04.12.2009 passed a revisional order setting aside the appellate order thereby restoring the protective Assessment Order dated 15.03.2007.

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In the meanwhile, the Deputy Commissioner of Commercial Taxes (Audit)-3, Belagavi on 17.10.2007 passed a re-assessment order under Section 39 of the KVAT Act for the period from April 2006 to March 2007. In consequence to the directions issued by the revisional authority, the Deputy Commissioner of Commercial Taxes (Enforcement) North Zone, Belagavi, reframed the order under Section 38(5)(a) of the KVAT Act.

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Feeling aggrieved by the order passed by the Additional Commissioner of Commercial Taxes dated 04.12.2009, the appellant had

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preferred STA No.501/2010 before this Court, which remanded the matter to the revisional authority to dispose off the revision in accordance with law.

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Pursuant to the directions issued by this Court in the aforesaid appeal, Additional Commissioner of Commercial Taxes through its counsel had addressed arguments. On 31.12.2013, the Additional Commissioner of Commercial Taxes in SMR.No.ADCOM/Z2/SMR/KVAT/BGM/CR-08/2013-14 passed an order dropping the suo motu proceedings on the ground

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that the order of final assessment had been passed under Section 39 of the KVAT Act dated 17.10.2007 and that the said proceedings had been barred by limitation, as under Section 64(3) of KVAT Act, such a proceeding could not be initiated. However, Commissioner of Commercial Taxes issued notice dated 09.06.2014 under

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Section 64(2) of the KVAT Act proposing to revise the revisional order dated 31.12.2013. The appellant filed a detailed reply to the same.

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On hearing the appellant, the Commissioner of Commercial Taxes by order dated 10.11.2014 in No.KVAT/SMR/CR-06/2014-15 confirmed the proposals made in the notice dated 09.06.2014 by setting aside the revisional order dated 31.12.2013 passed by the Additional Commissioner of Commercial Taxes, Zone-II, Bengaluru. Feeling aggrieved by the order dated 10.11.2014, the appellant has preferred this appeal.

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Though this appeal was admitted on

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07.11.2015, as no substantial question of law was raised by this Court, on hearing the learned counsel for the respective parties, we hold that the following substantial question of law would arise in this appeal:

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“ 1) On the facts and in the circumstances of the case, whether the Commissioner of Commercial Taxes is right in setting aside the revisional order dated 31.12.2013 passed under Section 64(1) of the KVAT Act, wherein the revisional proceedings were dropped on the ground that there was delay in initiating the revisional proceedings with respect to the assessment order dated 17.10.2007 ? ”

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We have heard learned counsel Sri.M.N.Shankaragowda for the appellant and Smt.Veena Hegde, learned Additional Government Advocate for the respondent and perused the material on record.

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The detailed narration of facts above would not require reiteration. What emerges from the facts and contentions of learned counsel for the respective parties is that by judgment dated

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31.10.2012 passed by a co-ordinate Bench of this Court in STA No.501 of 2010, the matter was remanded to the revisional authority to reconsider the entire matter afresh in accordance with law, after taking into consideration the effect of the matter of Regular Assessment passed under Section 38(1)(a) of KVAT Act on 17.10.2007 (Annexure ‘G’).

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On remand, the Additional Commissioner of Commercial Taxes by order dated 31.12.2013, has held that the proceedings taken up in respect of final Assessment Order being quashed under Section 38(1)(a) of KVAT Act, the protective Assessment Order and first appellate order in respect of such protective order have become nonest. The said observation is contrary to the judgment passed by a co-ordinate Bench of this Court, firstly, because the co-ordinate Bench itself had set aside the impugned orders in the said

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appeal and secondly, on setting aside the impugned orders, the co-ordinate Bench had remanded the matter to the Additional Commissioner of Commercial Taxes to reconsider the whole case on taking note of the final Assessment Order being passed in the case. Therefore, those orders could not be considered as non-est.

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Secondly, when the matter has been remanded by a co-ordinate Bench of this Court, the Additional Commissioner of Commercial Taxes could not have held that the revisional proceedings under Section 64(1) of the KVAT Act was not initiated within a period of four years from the date of passing of the regular Assessment Order dated 17.10.2007 and therefore, the said proceeding was time barred.

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It is emphasized that what had to be considered by the Additional Commissioner of

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Commercial Taxes was as per the direction issued by the co-ordinate Bench of this Court on remand of the matter. The direction was not to initiate revisional proceedings with regard to a regular Assessment being made. Therefore, the Commissioner of Commercial Taxes, by the impugned order dated 10.11.2014 passed under Section 64(2) of the KVAT Act, has rightly set aside the order dated 31.12.2013 passed by the Additional Commissioner of Commercial Taxes and remanded the matter to him for de nova proceedings under Section 64(1) of the KVAT Act in the light of the observations made in his order.

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Further, this Court had observed that the revisional authority to reconsider the entire matter afresh in accordance with law, which means that the revisional authority had to consider the regular Assessment Order and to consider the protective order in light of the regular Assessment

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Order. The revisional authority could not proceed at a tangent and deviate from the directions issued by this Court. The remand was a limited remand to the revisional authority to look into the regular assessment for the purpose of revision and its effect in accordance with law. Further, assessment under Section 38(1)(a) of the KVAT Act and protective Assessment Order under Section 38(5) of the KVAT Act operate in different fields. Section 38(1)(a) of the KVAT Act deals with deemed accepted assessment based on monthly returns filed whereas the protective assessment is undertaken to assess a dealer in special circumstances independent of other Sections relating to the assessment or reassessment. A protective order is not a provisional Assessment Order. It is in a way a final order insofar as the subject to which it relates. Further, what was assailed before this Court was the protective Assessment Order and

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the matter was remanded by this Court in respect of tax period from 01.04.2006 to 30.11.2006 only, which was the period in respect of which the protective Assessment Order was passed. This Court did not say in so many words that the protective order had merged with the regular Assessment Order dated 17.10.2007. This Court only directed consideration of the protective Assessment Order. Hence, the question of limitation for revising the Assessment Order dated 17.10.2007 under Section 38(1)(a) of the KVAT Act did not arise on the basis of doctrine of merger . As already noted, the protective Assessment Order and the reassessment order were passed in different fields in different spheres. In the circumstances, the revisional authority by order dated 10.11.2014 was justified in setting aside the order passed by the Additional Commissioner of Commercial Taxes on 31.12.2013 and remanding the matter to the said authority for

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de nova proceedings under Section 64(1) of the KVAT Act.

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In support of his contentions, learned counsel for the appellant has relied upon the following judgments:

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(i) The Assessing Authority, Amritsar and Another Vs. Shri Om Parkash Seth , [1969] 24 STC 282; [Shri Om Parkash Seth]

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(ii) Venkateswara & Co. Vs. Deputy Commercial Taxes Officer , [2003] 133 STC 606; [Venkateswara & Co.]

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(iii) Jaipur Udyog Ltd. Vs. Commercial Taxes Officer, Special Circle, Ajmer , [1979] 44 STC 456; [Jaipur Udyog Ltd.]

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17. In the case of Shri Om Parkash Seth ,

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it was held that proceedings for fresh assessment taken by an assessing authority in pursuance of the directions made by the Commissioner while disposing of a revision petition under 21(1) of the

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Punjab General Sales Tax Act, 1948, setting aside the order of assessment and ordering the assessing authority to make a fresh assessment in accordance with law are governed by the period of limitation prescribed in sub-sections (4), (5) and (6) of section 11 or section 11-A of the Act. It is open to the Commissioner to redetermine the quantum of turnover liable to tax while exercising revisional powers but once he decides to direct the assessing authority to make a reassessment in accordance with law, the proceedings for reassessment would be fresh proceedings governed by the period of limitation prescribed in Section 11-A.

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The facts of this case are distinct from the facts in the instant case as narrated in detail above. Therefore, the aforesaid judgment is not applicable to the present case.

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In the case of Venkateswara & Co. , it

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was held that the period prescribed for exercising the power of revision is five years from the expiry of the year to which the tax relates. On the date the impugned notice had come to be issued, this period of five years had elapsed. The question is whether the order of the Appellate Assistant Commissioner could be availed of to save the limitation prescribed by the statute. If there had been a lacuna in the initiation of proceeding in that it was initiated beyond the time prescribed, that lacuna will certainly deprive the authority concerned of the jurisdiction to exercise the power of revision as per section 16 of the Act. This proposition squarely comes into play and militates against the impugned notice. The order of the Appellate Assistant Commissioner cannot extend the period of limitation. The respondent cannot be clothed with jurisdiction to exercise the power of revision under section 16 of the Act beyond time,

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merely because the Appellate Assistant

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Commissioner chose to direct him to issue a fresh notice.

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19. In the case of Jaipur Udyog Limited , it

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was held that the service of a valid notice within the period of limitation is a condition precedent for assuming jurisdiction for assessment under Section 12 of the Act considered therein, namely Rajasthan Sales Tax Act, 1954. If the assessing authority failed to issue a notice which was valid in the eye of law, the said authority could not acquire jurisdiction to re-assess a dealer under the provisions of Section 12 of Act therein. That the findings of the Board of Revenue therein to the effect that notice issued to the assessee under Section 12 of the said Act was invalid, was binding on the assessing authority and he could not given a fresh notice on the basis of the earlier proceedings. Subsequent notice issued by the

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assessing authority could not, therefore, be said to have been issued in continuation of the earlier notice.

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The facts in the aforesaid cases are quite distinct from the present case. In the last of the aforesaid cases ( Jaipur udyog Limited ), it has been held that the proceedings for reassessment or fresh proceedings which are governed by the period of limitation prescribed under the relevant Act which is not the issue in the instant case.

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Similarly, in the cases of Shri Om

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Parkash Seth and Venkateswara & Co. , it has been held that the assessment cannot be taken up beyond the period of limitation. The same would not apply to the present case as what is being considered in the present case is not reassessment but revision of protective assessment order already concluded for the period from

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01.04.2006 to 30.11.2000, which was a subject matter of appeal, revision and further appeal before this Court. This Court remanded the case for fresh consideration in accordance with law. Therefore, the point on limitation does not arise at all in this case.

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We find no infirmity in the impugned order at Annexure ‘A’. Accordingly, we answer the substantial question of law against the appellant and in favour of the respondent. There is no merit in this appeal and the appeal is hence dismissed.

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Since the parties are represented by their respective counsel, they are now directed to appear before the concerned Additional Commissioner of Commercial Taxes, (Zone)-II, Bengaluru, on 25.02.2019 at 03.00 p.m. without expecting any separate notices from the said authority. It is needless to observe that the said

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authority shall dispose off the Revision under Section 64(1) of the Act in accordance with law.

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Sd/JUDGE

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Sd/JUDGE

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RK/-