Dismissed

M/S S M Kannappa v. State of Karnataka

Karnataka HC24 Sept 2021CRP/171/2013

Case brief

AI extract

What is this about?

The Bench held that the revision petition filed against the Appellate Tribunal's order denying entry tax deduction was dismissed. The court found the Tribunal justified in distinguishing the Harsha Wheel Movers case and rejecting the assessee's claim due to lack of substantial evidence proving return of goods within six months.

What did the court decide?

The revision petition was dismissed; the questions of law were answered in favour of the revenue and against the assessee.

M/S S M Kannappa Vs State of Karnataka — Karnataka HC (2021) — LawSathi Research

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 24^TH DAY OF SEPTEMBER, 2021

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PRESENT

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THE HON’BLE MRS.JUSTICE S.SUJATHA

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AND

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THE HON’BLE MR. JUSTICE RAVI V. HOSMANI

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C.R.P.No.171/2013

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BETWEEN :

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M/s S.M.KANNAPPA AUTOMOBILES (P) LTD., No.2, Dr. M.H.MARIGOWDA ROAD, NEAR LALBAGH, BANGALORE-560027 REP. BY ITS DIRECTOR Mr. B.MARKANDEYA S/O Mr. BALAKRISHNAIAH AGED ABOUT 63 YEARS. ...PETITIONER

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(BY SRI M.THIRUMALESH, ADV.)

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AND :

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STATE OF KARNATAKA

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REP. BY PRINCIPAL SECRETARY TO GOVERNMENT FINANCE DEPARTMENT, GOVERNMENT OF KARNATAKA VIDHANA SOUDHA, BANGALORE-560001

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COMMISSIONER OF COMMERCIAL TAXES KARNATAKA, VANIJYA THERIGE KARYALAYA GANDHINAGAR, BANGALORE-560009

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JOINT COMMISSIONER OF COMMERCIAL TAXES (APPEALS) DVO-II & IV,

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BMTC BUS TERMINAL COMPLEX, SHANTINAGAR, BANGALORE-560027

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DEPUTY COMMISSIONER OF COMMERCIAL TAXES (TRANSITION 42) SRINIVASA COMPLEX, SESHADRIPURAM, BANGALORE-560020. …RESPONDENTS

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(BY SRI JEEVAN J. NEERALGI, AGA.)

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THIS CRP IS FILED UNDER SECTION 15-A OF KARNATAKA TAX ON ENTRY OF GOODS ACT, 1979, AGAINST THE ORDER DATED 14.09.2012 PASSED IN STA NO.137/2008 ON THE FILE OF KARNATAKA APPELLATE TRIBUNAL, BANGALORE, DISMISSING THE APPEAL FILED UNDER SECTION 13(5) OF KARNATAKA TAX ON ENTRY OF GOODS ACT, 1979.

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THIS PETITION COMING ON FOR ADMISSION, THIS DAY, S. SUJATHA, J ., MADE THE FOLLOWING:

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O R D E R

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This revision petition is filed by the assessee

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under Section 15-A of the Karnataka Tax on Entry of Goods Act, 1979 (‘KTEG Act’ for short) assailing the order passed by the Karnataka Appellate Tribunal at Bangalore, dated 14.09.2012 in STA No.137/2008 raising the following questions of law:-

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“1. In the facts and circumstances of the case of the petitioner, whether the order passed by the Karnataka Appellate Tribunal in STA No.137/2008 dated 14.09.2012 failing to follow

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the judgment of this Hon’ble Court in the case of M/s Harsha Wheel Movers Pvt. Ltd., Bangalore Vs Deputy Commissioner of Commercial Taxes (Assts. 3), Bangalore 2008 (64) Kar. L.J. 100, not materially different from the facts in the case of the petitioner and thus dismissing the appeal filed by the petitioner is justified and sustainable in law?

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2. In the facts and circumstances of the case of the petitioner, whether it was in accordance with law under KTEG Act, 1979 for the Karnataka Appellate Tribunal to have passed the impugned order upholding the entry tax levied on the petitioner in the orders passed by the authorities below on the 145 chassis of motor vehicles sent by M/s Eicher Motors Ltd., Pitampur, Madhya Pradesh, on the ground that M/s Eicher Motors Ltd. did not have any place of business in any of the local areas in Karnataka and that therefore, it was permissible and justifiable for the authorities to have levied the entry tax on the petitioner?

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3. In the facts and circumstances of the case of the petitioner, whether it was authorized under KTEG Act, 1979 for the Karnataka Appellate Tribunal to have upheld the entry tax levied on the petitioner on the 145 chassis

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belonging to M/s Eicher Motors Ltd., Pitampur, Madhya Pradesh on the ground that the petitioner admitted entry tax liability on other raw materials/component parts required for construction of bus bodies and that therefore the petitioner was to be held liable to entry tax also on the 145 chassis sent by M/s Eicher Motor Ltd., to its unit at Bangalore for construction of bus bodies, without establishing that it was the petitioner who brought the chassis or caused to be brought the chassis into the local area of Bangalore City Corporation?

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4. In the facts and circumstances of the case of the petitioner, the order passed by the Karnataka Appellate Tribunal in STA No.137/2008 impugned herein in having failed to appreciate the documentary evidences produced by the petitioner for 145 Nos. of chassis belonging to M/s Eicher Motors Ltd. To have been sent out of his unit within a period of six months and consequently to have denied deduction of the total value of Rs.3,19,00,000 relating to the 145 chassis from the total value, authorized by rule 9- A(3) of KTEG Rules, 1979?”

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The assessee is a company incorporated

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under the Companies Act, 1956 and a dealer registered

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under the KTEG Act. The assessee operates a body building unit and is engaged in the business of bus bodies on chassis of motor vehicles belonging to its customers. This is the second round of litigation. The assessee submits that during the assessment years 1993-94, M/s Eicher Motors Ltd., having one of its places of business in Pitampur, Madhya Pradesh brought in 145 numbers of motor vehicle chassis to the place of assessee for construction of bus bodies on them. The customers themselves arrange for the chassis to be delivered to the assessee for construction of bus bodies. The assessee having constructed the bus bodies on the said chassis within a period of six months, the said constructed vehicles with the chassis were moved to Madhya Pradesh driven by the drivers employed by M/s. Eicher Motors Ltd., Placing reliance on the provisions of the Karnataka Tax on Entry of Goods Rules, 1979 (‘KTEG Rules’ for short), learned counsel appearing for the assessee submitted that the entire

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value of 145 numbers of chassis was not amenable to levy of entry tax.

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In the first round of litigation, the

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assessment order was passed on 20.07.1996 levying entry tax at 5% on 145 chassis in terms of Sl.No.43 of the Notification No.FD 69 CET 92 (II) dated 30.04.1992 and the matter has reached up to this Court. This Court in CRP No.4402/2002, remanded the matter to the Assessing Authority for passing a de novo assessment order vide its order dated 12.10.2006. Pursuant to the said order of remand, the Assessing Authority has passed the order on 22.05.2007 levying tax at the rate of 5% on the value of 145 chassis. On further appeal filed before First Appellate Authority, the order came to be modified levying entry tax at the rate of 1% as against 5% levied by the Assessing Authority. Being aggrieved by the said levy of tax at the rate of 1%, the assessee preferred appeal before the Tribunal. The

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Tribunal has dismissed the said appeal. Hence, this

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revision petition.

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Learned counsel for the assessee argued that

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the Tribunal erred in confirming the order of the First Appellate Authority misconstruing the judgment of this Court passed in M/s Harsha Wheel Movers (P) Ltd.,

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Bangalore vs. Deputy Commissioner of Commercial Taxes (Assessment – 3), Bangalore reported in 2008 (64) Kar.LJ 100 . Learned counsel vehemently argued that the matter is squarely covered by the judgment of this Court in M/s Harsha Wheel Movers (P) Ltd., supra. Applying the same, no entry tax would be made applicable to the transaction in question. M/s. Eicher Motors Ltd., had supplied the chassis for construction of bus body. Invoices were made available before the authorities to establish that the constructed bus on the said chassis supplied by M/s. Eicher Motors Ltd., were returned within a period of six months, in terms of Rule

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9 –A(2) of the KTEG Rules, the said transaction could

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not be exigible to levy of tax. The Tribunal has failed to consider these vital aspects. Thus, the order of the Tribunal suffers from perversity and illegality.

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Learned AGA appearing for the revenue

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justifying the impugned orders submitted that no material evidence was placed on record to establish that 145 chassis were returned to M/s. Eicher Motors Ltd., within six months to claim deduction under Rule 9-A(2) of the KTEG Rules. The case of M/s Harsha Wheel

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Movers (P) Ltd., supra, is not applicable to the facts of the present case since the assessee is the importer of the goods into the local area from M/s. Eicher Motors Ltd., Pitampur, Madhya Pradesh. In M/s Harsha Wheel

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Movers (P) Ltd., supra, the chassis were imported by the KSRTC and the assessee therein has built the body. Both the KSRTC and the assessee being located in the same local area and it was established therein that

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KSRTC has caused the entry of chassis into the local area, this court has held that sub-section (2) of Section 3 of the KTEG Act is not attracted and the said judgment is not applicable to the facts of the present case. The Tribunal having meticulously examined these aspects rightly dismissed the appeal. Thus, the questions of law deserves to be answered in favour of the revenue.

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We have carefully considered the rival submissions of the learned counsel for the parties and perused the material placed on record.

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Sections 3(1) and 3(2) of the KTEG Act reads

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thus:

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“ 3. Levy of tax. - (1) There shall be levied and collected a tax on entry of any goods specified in the First Schedule into a local area for consumption, use or sale therein, at such rates not exceeding five percent of the value of the goods as may be specified retrospectively or prospectively by the State Government by

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Notification, and different dates and different rates may be specified in respect of different goods or different classes of goods or different local areas.”

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xxxxxx

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“(2) The tax levied under sub-section (1) shall be paid by every registered dealer or a dealer liable to get himself registered under this Act [or the Central Government or a State Government other than the State Government of Karnataka] who brings or causes to be brought into a local area the goods whether on his own account or on account of his principal or any other person or who takes delivery or is entitled to take delivery of such goods on its entry into a local area.”

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Sub-Section (1) of Section 3 of the KTEG Act

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is the charging Section. The incidence of tax is entry of any goods specified in the First Schedule into a local area for consumption, use or sale therein. Sub-section (2) of Section 3 of the KTEG Act postulates that the tax levied under sub-section (1) of Section 3 shall be paid by

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every registered dealer or a dealer liable to get registered under the KTEG Act who brings or causes to be brought into a local area, the goods on his own account or on account of his principal or any other person or who takes delivery or who is entitled to take delivery of such goods on its entry into local area. The person who takes delivery or is entitled to take delivery of the goods specified in the First Schedule would be also significant for fixing the levy of tax under the KTEG Act.

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In terms of the explanation to sub-section (2)

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of Section 3 of the KTEG Act, where the goods are taken delivery of on its entry into a local area or brought into a local area by a person other than a dealer, the dealer who takes delivery of the goods from such person shall be deemed to have brought or caused to have brought the goods into the local area.

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10. Rule 9-A(2) of the KTEG Rules reads thus:-

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“(2) All amounts received from the seller in respect of the goods returned to them by the dealer shall be deducted from the purchase price liable to tax provided that the goods were returned within a period of six months from the date of delivery of the goods and the accounts show the date on which the goods were returned and the date on which and the amount for which the refund was received.”

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11. In M/s Harsha Wheel Movers (P) Ltd.,

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supra, the dispute was who caused entry of chassis into the local area and thereby liable to pay entry tax for causing the entry of chassis. In that context, the Coordinate Bench of this Court has held that the authorities by mis-appreciation of the facts of the case, have wrongly called upon the assessee to pay the tax and accordingly set aside the order of the authorities as well as the Tribunal in levying/confirming the tax. The Tribunal has distinguished the case of M/s Harsha Wheel Movers (P) Ltd., holding that KSRTC was also

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located in the same local area where the chassis were sent to M/s Harsha Wheel Movers (P) Ltd., for the purpose of body building. In the present case, on investigation, it was reported by the departmental authorities confirming that M/s Eicher Motors Ltd., do not have any business places in any of the local areas within the State of Karnataka. In this regard, the Appellate Authority has returned a finding that the assessee has failed to produce stock register with relevant entries made, inward and outwards register and gate pass with relevant date and invoice and declined to interfere with the order of the Assessing Authority.

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The Assessing Authority has recorded that

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the invoices produced by the assessee would not be suffice to come to a conclusion that the chassis were moved out of the local area within six months as contended by the assessee, as some of the invoices were

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dated after issuance of excise gate pass and vice-versa in some invoices. There was huge difference in the date of invoice and the gate pass which was not satisfactorily explained. No other material evidence like check-post documents for having moved the chassis or chassis built with body were produced to prove the physical movement of goods to a different State. Further, no agreement entered into between the dealer and M/s. Eicher Motors Ltd., the relevant document was placed. In the absence of these material documents, both the authorities have denied the claim of deduction as sought for. Given the circumstances, at any stretch of imagination, the view expressed by the Assessing Authority confirmed by the Appellate Authority and the Tribunal cannot be held to be untenable.

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It is well settled legal principle that the

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burden of proof lies on the assessee to claim deduction. If such burden is not discharged with substantial

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material to prove its claim, no exception can be found with the action of the authorities in denying the claim of deduction. The Tribunal, the last fact finding authority, has also examined these aspects in extenso and has given a finding against the assessee. The pure question of fact cannot be considered as the question of law to adjudicate upon the dispute between the parties. On considering the provisions of law vis-à-vis the findings of the authorities, we find no ground to interfere with the order impugned.

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Accordingly, we answer the questions of law in favour of the revenue and against the assessee.

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In the result, the revision petition stands

dismissed.

Sd/JUDGE

Sd/JUDGE

PMR

M/S S M Kannappa v. State of Karnataka

Case brief

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M/S S M Kannappa v. State of Karnataka

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