Dismissed

M/S Mamatha Enterprises v. State of Karnataka

Karnataka HC24 Sept 2021STRP/153/2018

Case brief

AI extract

What is this about?

Revision petitions filed by a partnership firm against Tribunal orders upholding ex-parte assessment notices. The High Court held defects in service to a married daughter were untenable as dinner of marriage does not cease family status. The Court affirmed the Tribunal's view that authorities cannot adjudicate partnership deed validity and placed burden of proof for tax collected deductions on the

What did the court decide?

Revision petitions dismissed; Tribunal orders upheld finding burden of proof on assessee for deductions.

M/S Mamatha Enterprises Vs State of Karnataka — GST and Indirect Tax | Karnataka HC (2021)

¶1

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

¶2

DATED THIS THE 24^TH DAY OF SEPTEMBER, 2021

¶3

PRESENT

¶4

THE HON’BLE MRS.JUSTICE S.SUJATHA

¶5

AND

¶6

THE HON’BLE MR. JUSTICE RAVI V. HOSMANI

¶7

S.T.R.P.No.153/2018 c/w S.T.R.P.No.151/2018, S.T.R.P.No.152/2018 & S.T.R.P.No.154/2018

¶8

BETWEEN :

¶9

M/s MAMATHA ENTERPRISES WHOLE SALE LIQUOR DEALER, MCC ‘B’ BLOCK, DAVANAGERE, REP BY ITS PARTNER SRI AJITH N. ...PETITIONER (COMMON)

¶10

(BY SRI ATUL K. ALUR, ADV.)

¶11

AND :

¶12

STATE OF KARNATAKA REP BY THE COMMISSIONER OF COMMERCIAL TAXES, KARNATAKA, VANIJYA THERIGE KARYALAYA, KALIDAS ROAD, GANDHINAGAR, BENGALURU-560 009. …RESPONDENT (COMMON)

¶13

(BY SRI K.HEMA KUMAR, AGA.)

¶14

THIS STRP No.153/2018 IS FILED UNDER SECTION 23(1) OF THE KARNATAKA SALES TAX ACT, 1957 AGAINST THE JUDGMENT DATED 25.10.2017 PASSED IN STA.NO.191/2012 ON THE FILE OF THE KARNATAKA APPELLATE TRIBUNAL AT BENGALURU, DISMISSING THE APPEAL FILED AGAINST THE ORDER DATED 29.11.2011 PASSED IN KST AP.NO.07/2010-11

¶15

¶16

ON THE FILE OF THE JOINT COMMISSIONER OF COMMERCIAL TAXES, (APPEALS) DAVANAGERE DISMISSING THE APPEAL AND UPHOLDING THE ASSESSMENT ORDER DATED 27.05.2010 PASSED BY DEPUTY COMMISSIONER OF COMMERCIAL TAXES (REC) DAVANAGERE UPHOLDING ASSESSMENT PASSED UNDER SECTIONS 12[3] AND 12[4] OF KST ACT, 1957, FOR THE ASSESSMENT YEAR 1995-1996.

¶17

THIS STRP No.151/2018 IS FILED UNDER SECTION 23(1) OF THE KARNATAKA SALES TAX ACT, 1957 AGAINST THE JUDGMENT DATED 25.10.2017 PASSED IN STA.NO.188/2012 ON THE FILE OF THE KARNATAKA APPELLATE TRIBUNAL AT BENGALURU, DISMISSING THE APPEAL FILED AGAINST THE ORDER DATED 29.11.2011 PASSED IN KST AP.NO.04/2010-11 ON THE FILE OF THE JOINT COMMISSIONER OF COMMERCIAL TAXES, (APPEALS) DAVANAGERE DISMISSING THE APPEAL AND UPHOLDING THE ASSESSMENT ORDER DATED 27.05.2010 PASSED BY DEPUTY COMMISSIONER OF COMMERCIAL TAXES (REC) DAVANAGERE UPHOLDING ASSESSMENT PASSED UNDER SECTIONS 12[3] AND 12[4] OF KST ACT, 1957, FOR THE ASSESSMENT YEAR 1992-1993.

¶18

THIS STRP No.152/2018 IS FILED UNDER SECTION 23(1) OF THE KARNATAKA SALES TAX ACT, 1957 AGAINST THE JUDGMENT DATED 25.10.2017 PASSED IN STA.NO.190/2012 ON THE FILE OF THE KARNATAKA APPELLATE TRIBUNAL AT BENGALURU, PARTLY ALLOWING THE APPEALS AND FILED AGAINST THE JUDGMENT AND DECREE DATED 29.11.2011 PASSED IN KST.AP.NO.06/2010-11 DAVANAGERE ON THE FILE OF THE JOINT COMMISSIONER OF COMMERCIAL TAXES, (APPEALS)-1, BENGALURU, DISMISSING THE APPEAL FILED AGAINST ORDER DATED 27.05.2010 PASSED BY DEPUTY COMMISSIONER OF COMMERCIAL TAXES (REC) DAVANAGERE, FOR THE ASSESSMENT YEAR 1994-1995.

¶19

THIS STRP No.154/2018 IS FILED UNDER SECTION 23(1) OF THE KARNATAKA SALES TAX ACT, 1957 AGAINST THE JUDGMENT DATED 25.10.2017 PASSED IN STA.NO.189/2012 ON THE FILE OF THE KARNATAKA APPELLATE TRIBUNAL AT BENGALURU, PARTLY ALLOWING THE APPEAL FILED AGAINST ORDER DATED 29.11.2011 PASSED IN KST.AP.NO.05/2010-11

¶20

¶21

ON THE FILE OF THE JOINT COMMISSIONER OF COMMERCIAL TAXES, (APPEALS), DAVANAGERE DIVISIOIN, DAVANAGERE, DISMISSING THE APPEAL AND UPHOLDING THE ORDER DATED 27.05.2010 PASSED BY DEPUTY COMMISSIONER OF COMMERCIAL TAXES (REC) DAVANAGERE, UNDER SECTIONS 12[3] AND 12[4] OF KST ACT, 1957, FOR THE ASSESSMENT YEAR 1993-1994.

¶22

THESE PETITIONS COMING ON FOR HEARING, THIS DAY, S. SUJATHA, J ., MADE THE FOLLOWING:

¶23

O R D E R

¶24

These revision petitions are filed by the petitioner – assessee under Section 23(1) of the Karnataka Sales Tax Act, 1957 (‘KST Act’ for short) against the orders of the Karnataka Sales Tax Appellate Tribunal, Bengaluru (‘Tribunal’ for short) passed in STA Nos.188/2012, 189/2012, 190/2012 and 191/2012 dated 25.10.2017 relating to the assessment years 1992-93, 1993-94, 1994-95 and 1995-96 respectively.

¶25

These petitions have been admitted by this

¶26

Court to consider the following questions of law:-

¶27

¶28

IN STRP Nos.151/2018, 152/2018 & 154/2018

¶29

“Whether, on the facts and circumstances of the case, the Tribunal was right in coming to the conclusion that, there is a proper service of notice/order as per 53 of the KST Rules?”

¶30

IN STRP No.153/2018

¶31

“1. WHETHER, on the facts and circumstances of the case, the Tribunal was right in coming to the conclusion that, there is a proper service of notice/order as per 53 of the KST Rules?

¶32

2. WHETHER, on the facts and circumstances of the case, the Tribunal was right in coming to the conclusion that, the petitioner is not eligible for the deduction of tax collected for the period 1995-96?

¶33

3. WHETHER, on the facts and circumstances of the case, the Daughter after the marriage is falls under the definition of his family as per 53 of the KST Rules?

¶34

4. WHETHER, on the facts and circumstances of the case, the Tribunal was right in remanding the case?

¶35

¶36

5. WHETHER, on the facts and circumstances of the case, after death of one of the partners the partnership still continuous as per provision of the Partnership Act?

¶37

6. WHETHER, on the facts and circumstances of the case the Tribunal was right in coming to the conclusion that the Daughter is falls under the definition of his family after the marriage?

¶38

7. WHETHER, on the facts and circumstances of the case the Tribunal was right in coming to the conclusion that the legal heirs need not be brought on record as per Section 16 of the KST Act?

¶39

8. WHETHER, on the facts and circumstances of the case after the death of one of the partners the legal heirs have to be brought on record or not?”

¶40

The assessee is a partnership firm

¶41

reconstituted with effect from 01.04.1992 and is

¶42

engaged in wholesale business of liquor such as IML and Beer. The assessee has obtained the CL-2 Excise

¶43

¶44

Licence under the provisions of the Karnataka Excise Act, 1965. The assessee is registered dealer under the provisions of the Karnataka Sales Tax Act, 1957 (‘KST Act’ for short) and also Central Sales Tax Act, 1956 (‘CST Act’ for short). The petitioner used to purchase the IML and Beer from the distilleries/MSIL. For the assessment years in question, the assessments were concluded determining the total and taxable turnover. Aggrieved by the said orders, the assessee preferred statutory appeals before the First Appellate Authority, who dismissed the appeals on the ground of limitation. Aggrieved by the common order of the Appellate Authority, the assessee has preferred STA Nos.1606/2002, 1607/2002, 1609/2002 and

¶45

1610/2002. The Tribunal allowed the appeals and remanded the case to the Assessing Authority to pass the orders in accordance with law. After remand, the Assessing Authority issued proposition notice on 15.12.2009 and was served on Sri. N. Ajith, partner of

¶46

¶47

the firm, M/s Mamatha Enterprises and on his brother Sri. N Amith. By that time, one of the partner Sri. D. Nemirajaiah, father of N. Ajith and N. Amith had expired on 18.08.2008. After the demise of the said Sri. D. Namerajaiah, the notice was served on Sri. N. Ajith, partner of the firm and he sought for an adjournment to produce the books of accounts. No books of accounts and other related documents were produced despite providing reasonable opportunity to the assessee. The audit authority concluded the assessment by passing the orders dated 27.05.2010 under Section 12(3) of the KST Act and created the additional demand.

¶48

Being aggrieved by the said orders, the assessee preferred statutory appeals before the First Appellate Authority unsuccessfully. On further appeal to the Tribunal, the Tribunal dismissed the appeal in STA No.188/2012 relating to the assessment year 199293 and partly allowed STA Nos.189/2012, 190/2012

¶49

¶50

and 191/2012 relating to assessment years 1993-94, 1994-95 and 1995-96 holding that the assessment orders passed in the name of the Sri. N. Ajith as partner are valid. The matters were remanded to the Assessing Authority relating to the assessment years, 1993-94, 1994-95 and 1995-96 for the limited purpose of recomputing the tax levying 45% of the tax on the sale of Beer as per notification and to issue revised demand notice. Being aggrieved, the assessee has preferred these revision petitions raising the questions of law as aforesaid.

¶51

The arguments of the learned counsel appearing for the assessee are of three fold.

¶52

Firstly, service of assessment orders was made on Smt. Mamatha, D/o. Sri. D. Nemirajaiah, who is not the adult member of his (assessee’s) family. Secondly, the dispute raised regarding the partners i.e., the retirement of the partners Sri. K.M. Nagaraj and N. Manjunath, though noticed by the Assessing Authority, placing

¶53

¶54

reliance on the partnership deed dated 01.04.1992, accepting the same as the document of partnership for proceeding with the assessment, subsequent to the death of Sri. D. Nemirajaiah on 18.08.2008, proceeded against Mr. N. Ajith, legal representative of Sri. D. Nemirajaiah, albeit the partnership deed dated 01.04.1992 referred to by the Revenue does not contain the signatures of Sri. K.M. Nagaraj and N. Manjunath, the retired partners. As such, the assessment against the firm represented by Sri. N. Ajith is wholly unjustifiable. Thirdly, the Tribunal has failed to allow the deductions claimed with reference to the tax collected and paid.

¶55

Re. Point No.1:

¶56

In terms of Rule 53 of the Karnataka Sales

¶57

Tax Rules, 1957 (‘KST Rules’ for short) which deals with the service of notices etc., the service on a dealer or licensee of any notice, summons or order by giving or tendering it to such dealer or licensee or his manager or

¶58

10 -

¶59

agent under Karnataka Sales Tax Act or the Rules thereof may be effected in the modes prescribed therein. In terms of Clause (b) of Rule 53 of the KST Rules, if such dealer or licensee or his manager or agent is not found, by leaving it at his last known place of business or residence or by giving or tendering it to some adult member of his family; or in terms of Clause (c) of the Rule 53 of the KST Rules, if the address of such dealer or licensee is known to the Assessing or Licensing Authority by sending it to him by registered post would be the modes specified therein. The main ground of challenge in this regard is that Smt. Mamatha D/o. D. Nemirajaiah was married with Sri. Y.S. Nabhiraj on 15.09.1994 and the same was registered as per Hindu Marriage Act, 1955 on 15.03.2013. As such she ceased to be the adult member of the family of D. Nemirajaiah, service of notice of the assessment orders dated 27.05.2010 on Smt. N. Mamatha is not in conformity with the Rules.

¶60

11 -

¶61

This argument is wholly misconceived firstly,

¶62

‘family’ is not defined under the KST Act and KST Rules.

¶63

Ordinarily the married daughter does not cease to be the adult member of the family of her father because of her status as married. In the wake of the amendment brought to the Hindu Succession Act, 1956 with effect from 09.09.2005 irrespective of the date of marriage, married daughter continues to be family member. What is relevant is the service of the assessment order dated 27.05.2010. Even as per clause (c) of Rule 53 of the KST Rules, if the assessment orders are sent to the assessee by registered post on the address of such dealer/assessee/licensing authority known to the assessing officer or licensing authority, that would be suffice for the due service of notice/order on the assessee. Moreover, the alleged defective service of assessment orders would not prejudice the rights of the assessee for the reason that First Appeals were preferred on 08.11.2010 against the said assessment

¶64

12 -

¶65

orders dated 27.05.2010 well within the period of limitation. The First Appellate Authority has considered the matter on merits and dismissed the appeals on 29.11.2011, against which appeals were preferred before the Tribunal and the same came to be dismissed on merits on 25.10.2017. Being aggrieved by the said order of the Tribunal, these revision petitions are filed.

¶66

The assessee now raising the ground of defective service of the assessment order on the assessee has no relevancy for adjudicating the revision petitions filed against the orders of the Tribunal impugned. The question of law framed to the extent of defective notice is wholly untenable and deserves to be rejected.

¶67

Re. Point No.2.

¶68

As regards the second point, inasmuch as the Revenue placing reliance on the partnership deed dated 01.04.1992, it is ex-facie apparent that the said copy of the partnership deed was furnished by the

¶69

13 -

¶70

assessee before the Assessing Authority. The said partnership deed would be safely construed as reconstitution of the partnership, wherein, the said partnership deed has been executed between Sri. D. Nemirajaiah as the first party and Sri. N. Ajith S/o. Sri. D. Nemirajaiah as the second party. It is mentioned that the first party namely, Sri. D. Nemirajaiah was carrying on the partnership business under the name and style of ‘M/s. Mamatha Enterprises’, along with other two partners namely, Sri. K.M. Nagaraj and Sri. N. Manjunath. It is further mentioned that Sri. K.M. Nagaraj and Sri. N. Manjunath have expressed their willingness to retire from the firm due to their personal problems and Sri. N. Ajith has agreed to brought as a partner of the partnership business of the firm M/s. Mamatha Enterprises.

¶71

Adjudication upon the validity and correctness of this partnership deed could not come

¶72

14 -

¶73

within the jurisdiction of the authorities. The challenge made by the assessee that the authorities have failed to consider the validity of this partnership deed is wholly misconceived. At the cost of repetition, we may observe that the Authorities who are discharging the functions under the provisions of the special enactment i.e., Karnataka Sales Tax Act, 1957 are not competent to decide the legality and correctness of the partnership deed.

¶74

The assessee having furnished the said partnership deed now cannot turn around and say that the said partnership deed is not in accordance with law and as such no reliance ought to have been placed by the authorities on this document. Be that as it may, it is not in dispute that Sri. N. Ajith is continued as the partner of the partnership business of M/s. Mamatha Enterprises. The retiring partners Sri. K.M. Nagaraj and Sri. N. Manjunath are required to be considered as necessary parties for proceeding with the assessment

¶75

15 -

¶76

founds foul of the well settled principles of law since the assessment could be proceeded with, anyone of the partner of the firm, the same being not the execution proceedings i.e., recovery proceedings.

¶77

It is also significant to notice from the original records placed by the learned Additional Government Advocate appearing for the revenue that Mr. N. Ajith has addressed a letter dated 29.07.2009 to the DCCT Recovery, requesting the said authority (Assessing Authority) to send all the correspondences in future to his brother’s place Sri. N. Amith as he was not capable of handling the matter and thereby he has authorized his brother Sri. N. Amith to show the accounts and receive the notice/correspondences from the assessing authority. This letter was received on the same day by the assessing authority i.e., on 29.07.2009. This would clarify that no objections were raised by Sri. N. Ajith before the Assessing Authority

¶78

16 -

¶79

regarding the defective service of notice or disputing the partnership deed dated 01.04.1992, as now canvassed by the learned counsel for the assessee.

¶80

Re. Point No.3

¶81

The third point is, the authorities have failed to allow the deductions claimed with respect to the tax collected and paid. As regards the third point, the Tribunal has categorically observed as under:

¶82

“33. Point No.3: As per the records the appellant had filed the annual return of turnover in form-4 only for the year 1992-93 and the claim of tax collected for other years 1994-95 and 1995-96 as deduction are shown only in the monthly statements in form-3. The books of accounts and relevant documents were not produced before the authorities. The burden of proof to justify any claim of deduction lies on the dealer u/s 6-A of the Act. No such proof was filed. The proposition notice was served before concluding the ex-parte order where additions were proposed and the appellant had not utilized the opportunity to dispel the same and hence has the determination has become final

¶83

17 -

¶84

against him. Hence, point No.3 is answered in the Affirmative in favour of revenue.”

¶85

In the absence of the relevant books of

¶86

accounts and documents placed before the authorities, it is unrealistic for this Court to expect any other finding from the Authorities/Tribunal. It is well settled legal principle that the burden of proof to justify any claim certainly lies on the dealer under Section 6-A of the KST Act. The same has been reiterated by the Tribunal. In the absence of discharge of such burden and not filing returns in Form-4 for some assessment years, claiming the deduction with respect to the tax amount said to have been collected and paid cannot be accepted. Accordingly, the arguments advanced by the learned counsel for the assessee in this regard also stands negated.

¶87

Hence, we find no reasons to accede to the submissions made by the learned counsel appearing for

¶88

18 -

¶89

the assessee and accordingly answer the substantial questions of law raised in favour of the Revenue and against the assessee.

¶90

In the result, revision petitions stand dismissed.

¶91

Sd/JUDGE

¶92

Sd/JUDGE

¶93

PMR/BVK

M/S Mamatha Enterprises v. State of Karnataka

Case brief

What is this about?

What did the court decide?

M/S Mamatha Enterprises v. State of Karnataka

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

M/S Robo Silicon Pvt. Ltd. Vs the State of Karnataka

M/S Laxmi Electronic Moulds & Precision Vs Union of India

The Commissioner of Commercial Taxes Vs M/S K M S Coach Builders Pvt. Ltd.

M/S S M Kannappa Vs State of Karnataka

The State of Karnataka Vs M/S Rane (Madras) Ltd.

The State of Karnataka by Vs M/S Rane (Madras) Ltd.