M/S Kathare Enterprises Vs the Additional Commissioner of Commercial Taxes

M/S KATHARE ENTERPRISES, REPRESENTED BY ITS PROPRITRIX, SMT. SAROJA BAI, W/O UMAKANTHSA KATHARE, R/O: WARD No.05, (NEW WARD No.13) BEHIND PATTANA PANCHAYATH OFFICE, ANJANEYA BADAVANE, BHAGYANAGAR, TQ:DIST: KOPPAL.

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…APPELLANT

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(BY SRI ASHOK G. V., ADVOCATE)

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Digitally signed by VALLI MARIMUTHU Location: HIGH COURT OF KARNATAKA

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AND:

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THE ADDITIONAL COMMISSIONER OF COMMERCIAL TAXES, (ZONE-3), 8^TH FLOOR, VTK-1, GANDHINAGAR, BENGALURU 560 009.

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THE JOINT COMMISSIONER OF COMMERCIAL TAXES (APPEALS), DAVANAGERE DIVISION, DAVANAGERE-577001.

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THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES (AUDIT BELLARY), BUDA COMPLEX, II FLOOR, MOTHI CIRCLE, BELLARY-583101.

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…RESPONDENTS

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(BY SRI ADITYA VIKRAM BHAT, AGA FOR R1 TO R3)

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THIS STA IS FILED UNDER SECTION R/W SEC.9(2) OF THE CENTRAL SALES TAX ACT, 1956 R/W 66(1) OF THE KARNATAKA VALUE ADDED TAX ACT,2003 AGAINST THE ORDER DATED 21.3.2017 PASSED IN No.ZAC-3/DVG/SMR-15/16-17 ON THE FILE OF THE ADDL. COMMISSIONER OF COMMERCIAL TAXES, (ZONE)3, 8^TH FLOOR, VTK-1, GANDHINAGAR, BANGALORE, SETTING ASIDE THE ORDER BEARING No.CST/AP/10/2016-17 CAS No.298925050 APP DATED 24.12.2016 PASSED BY JOINT COMMISSIONER OF COMMERCIAL TAXES, (APPEALS) DAVANAGERE, DAVANAGERE DIVISION, ALLOWING THE APPEAL FILED AGAINST THE REASSESSMENT ORDER DATED 29.04.2016 PASSED BY DEPUTY COMMISSIONER OF COMMERCIAL TAXES , AUDIT AND RECOVERY BELLARY, UNDER SECTION 9(2) OF THE CENTRAL SALES TAX ACT 1956, R/W SECTION 9(2-A),9(2-B) OF CST ACT,1956 AND SEC.39(1), 72(2) AND 36 OF KVAT ACT,2003.

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THIS STA HAVING BEEN HEARD AND RESERVED ON 09.09.2025 AND COMING ON FOR PRONOUNCEMENT OF ORDER THIS DAY (THROUGH VIDEO CONFERENCE), K. V. ARAVIND J., DELIVERED THE FOLLOWING:

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CORAM: THE HON'BLE MR. JUSTICE S.G.PANDIT and

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THE HON'BLE MR. JUSTICE K. V. ARAVIND

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C.A.V. JUDGMENT

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(PER: THE HON'BLE MR. JUSTICE K.V. ARAVIND)

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Heard Sri G.V. Ashok, learned counsel for the appellant– assessee, and Sri Aditya Vikram Bhat, learned Additional Government Advocate for respondent Nos.1 to 3.

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This appeal by the assessee is filed under Section 9(2) of the Central Sales Tax Act, 1956, read with Section 66(1) of the Karnataka Value Added Tax Act, 2003, assailing the suo motu revisional order dated 21.03.2017.

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The assessee–appellant is engaged in the business of selling human hair to exporters. During the year 2009-10, the appellant sold human hair valued at Rs.98,68,098/- to the exporter M/s. Srinivasa Hair Industries, Eluru (AP), and raised the corresponding sales invoices. A proposition notice was issued, proposing to treat the sales made to M/s. Srinivasa Hair Industries as inter-state sales and to levy tax at 12.5% on the turnover. The explanation offered by the assessee was rejected on the ground that the ‘H’ Form combined the invoices of the

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first and third quarters of 2009-10, which was held to be in contravention of Rules 12(1) and 12(10)(b) of the Central Sales

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Tax (Registration & Turnover) Rules, 1957¹ . The contention of the assessee that additional tax could not be levied without rejecting the books of accounts was also rejected holding that the turnover of deemed exports declared in the returns or in the books of accounts was not in dispute.

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3.1. The assessee, being aggrieved, preferred an appeal before the Joint Commissioner of Commercial Taxes (Appeals)² . The JCCT (A), by order dated 24.12.2016, relying on the judgment of the Andhra Pradesh High Court in Mahabaleswarappa & Sons vs. Assistant Commissioner (LTU), Anantapur and others³ , held that a dealer supplying goods for the purpose of export need not submit ‘H’ Forms for quarterly periods to claim the benefit under Rule 12(10)(a) of the Central Sales Tax (R & T) Rules. It was further held that while it is mandatory that the ‘H’ Form should cover inter-state transactions of the quarter, combining transactions exceeding one quarter is permissible.

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3.2 The Additional Commissioner of Commercial Taxes (Zone-3), invoking suo motu revisional jurisdiction under

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1 CST(R & T) Rules

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2 JCCT(A)

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3 [2013] 62 VST 241 (AP)

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Section 9(2) of the CST Act read with Section 64(1) of the KVAT Act, issued a show cause notice on the ground that the order dated 24.12.2016 was erroneous and prejudicial to the interest of the Revenue. The suo motu revisional authority, after considering the contentions raised by the assessee, held that the ‘H’ Form in question could be considered only for the transactions covered in a single quarter and remitted the matter to the prescribed authority for fresh disposal. Hence, this appeal by the assessee.

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Sri G.V. Ashok, learned counsel for the appellant– assessee, submits that the purchase of human hair for the purpose of sale to an exporter is not in dispute. Learned counsel further submits that the Assessing Officer has not disputed the turnover of deemed exports as declared in the returns or in the books of accounts. The exemption of turnover has been denied solely on the ground that the ‘H’ Form submitted covers the first and third quarters of the year 200910, which is held to be in contravention of Rule 12(10)(b) of the CST (R & T) Rules. Learned counsel submits that Rule 12(10)(b) of the CST (R & T) Rules adopts the manner of custody, maintenance, and certification as applicable to the ‘C’ Form. He further submits that the Circular dated 11.04.2014

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permits the acceptance of a ‘C’ Form even when it contains entries for more than one quarter. Hence, learned counsel contends that the said circular relating to the ‘C’ Form would, mutatis mutandis , apply to the ‘H’ Form as well.

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4.1 The Appellate Commissioner, considering the above aspects, rightly held that the ‘H’ Form is in conformity with Rule 12(10)(b) of the CST (R & T) Rules. Learned counsel submits that the suo motu revisional authority, under the impugned order, has committed an error in restricting the Form to cover only a single quarter, without appreciating that Rule 12(10) of the CST (R & T) Rules does not mandate recording of transactions for more than one quarter.

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4.2 Learned counsel for the appellant relies on the judgment in Mahabaleswarappa & Sons vs. Assistant Commissioner (LTU), Anantapur and others⁴ .

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Per contra, Sri Aditya Vikram Bhat, learned Additional Government Advocate for respondent Nos.1 to 3, submits that Rule 12(1) of the CST (R & T) Rules provides for a single declaration of all sales transactions taking place in a quarter of

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4 [2011 SCC OnLine AP 1073]

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a financial year between the same two dealers. He further submits that the Circular dated 11.04.2014 relates only to the ‘C’ Form and does not cover the ‘H’ Form. Therefore, the benefit of the said circular cannot be extended under Rule 12(10)(b) of the CST (R & T) Rules. Learned Additional Government Advocate contends that all notifications issued in connection with the ‘C’ Form cannot be applied mutatis mutandis to the ‘H’ Form by reading sub-clause (b) of sub-rule (10) of Rule 12 when such application was not intended. He further submits that when an exemption is subject to compliance with prescribed conditions, such compliance must be strictly observed, and the benefit of a circular issued for a specific purpose cannot be inferred or implied for a different purpose.

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In support of his submissions, learned Additional Government Advocate relied on the judgments of the Hon’ble Supreme Court in Dr. Sharmad vs. State of Kerala⁵ ; State of Bihar (Now State of Jharkhand) Through the SubDivisional Officer vs. Tata Iron and Steel Company

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5 [2025 SCC OnLine 71]

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Limited⁶ ; Commissioner of Customs (Import), Mumbai vs. Dilip Kumar and Company and others⁷ ; and the judgment of the Calcutta High Court in Cipla Limited vs. Deputy Commissioner, Commercial Tax, Corporate

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Division and others⁸ .

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Having considered the submissions of learned counsel for the parties, the short issue for determination is the validity of the ‘H’ Form when issued containing the turnovers of two quarters. The ‘H’ Form is governed by Rule 12(1) and Rule 12(10)(b) of the CST (R & T) Rules, which read as follows:

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"12(1) The declaration and the certificate referred to in sub-section (4) of Section 8 shall be in Forms C and D respectively;

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[Provided that Form C in force before the commencement of the Central Sales Tax (Registration and Turnover) (Amendment) Rules, 1974, or before the commencement of the Central Sales Tax (Registration and Turnover) (Amendment) Rules, 1976, may also be used up to the 31st December, 1980, with suitable modifications:]

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[***]

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6 [(2019) 7 SCC 99]

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7 [(2018) 9 SCC 1]

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8 [SCC OnLine Calcutta 39]

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[Provided further that a single declaration may cover all transactions of sale which take place in a quarter of a Financial Year between the same two dealers:

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Provided also that where, in the case of any transaction of sale, the delivery of goods is spread over to different quarters in a financial year or of different financial years, it shall be necessary to furnish a separate declaration or certificate in respect of goods delivered in each quarter of a financial year.] "

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"12(10)(b) The provisions of the rules framed by the respective State Governments under sub-section (3), (4) and (5) of section 13 relating to authority from whom and the conditions subject to which any form of certificate in Form “H” may be obtained, the manner in which such form shall be kept in custody and records relating thereto maintained and the manner in which any such forms may be used and any such certificate may be furnished in so far as they apply to declaration in Form C prescribed under these rules shall mutatis mutandis apply to certificate in Form H. "

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Rule 12(10) mandates the declaration of transactions referred to in Section 5(4) of the Act in the ‘H’ Form and their submission to the prescribed authority. Clause (b) of sub-rule (10) of Rule 12 adopts the procedure regarding the manner of the form, custody, maintenance of records, and certification, as applicable to declarations in the ‘C’ Form prescribed under

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these Rules. Rules 12(1) and 12(10)(b) regulate the issuance of ‘C’ and ‘D’ Forms.

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The second proviso to Rule 12(1) states that a single declaration may cover all transactions of sale which took place in a quarter of a financial year between the same two dealers. A plain reading of this proviso, prima facie, indicates that a declaration in the ‘C’ Form can cover all transactions of sale in a quarter of a financial year between the same two dealers. There is no such express mandate under Rule 12(10) governing the ‘H’ Form. Clause (b) of sub-rule (10) of Rule 12 adopts the provisions applicable to the ‘C’ Form mutatis mutandis to the ‘H’ Form. Accordingly, the prescriptions relating to the ‘C’ Form apply, by way of adoption, to the ‘H’ Form. In that regard, if the second proviso to Rule 12(1) is read in conjunction, a declaration in the ‘H’ Form may cover all transactions of sale taking place in a quarter of a financial year between the same two dealers.

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The next issue relates to the Circular dated 11.04.2014. Undoubtedly, the circular deals with ‘C’ or ‘F’ Forms. It provides that, by way of relaxation of the second proviso to Rule 12(1) of the CST (R & T) Rules, a declaration in the ‘C’ Form covering

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transactions taking place beyond a single quarter would be allowed, and such declarations would be treated as valid. The circular further provides that, in case of any doubt regarding the genuineness of such declarations, the Additional Commissioner of Commercial Tax (I & C) is instructed to crossverify the same.

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The Andhra Pradesh High Court in Mahabaleshwarappa (supra) , while dealing with Rule 12(10)(a), held that the Rule does not, in any manner, support the view that the assessee is required to file declarations for quarterly periods only, and not for the entire year. It was held that a plain and literal reading of the Rule does not admit the interpretation that a dealer must submit declarations in the ‘H’ Form on a quarterly basis. Be that as it may, in view of the Circular dated 11.04.2014, the stand of the authorities is not sustainable. Rule 12(10) does not mandate that the ‘H’ Form record transactions of sale for a single quarter of a financial year only. By virtue of sub-clause (b) of sub-rule (10) of Rule 12, the provisions of Rule 12(1) are made applicable by adoption. The circular, in relaxation of the requirement of the second proviso to Rule 12(1), allows declarations covering transactions of sale that take place over more than one quarter of a financial year. Although the circular

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refers specifically to the ‘C’ Form, a conjoint reading of Rule 12(1) and Rule 12(10) indicates that the circular issued regarding the ‘C’ Form applies mutatis mutandis to the ‘H’ Form under Rule 12(10). Hence, the Circular dated 11.04.2014 equally governs the ‘H’ Form under Rule 12(10).

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The ‘H’ Form covering transactions of more than one quarter cannot be held to be invalid in view of the Circular dated 11.04.2014 and the judgment of the Andhra Pradesh High Court in Mahabaleswarappa (supra) .

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The view taken by the Appellate Authority is one of the possible views. Merely because another view is possible, the order under revision cannot be held to be erroneous or prejudicial to the interest of the Revenue. The exercise of revisional jurisdiction is not warranted merely on the ground that an alternative view is available. In the case on hand, for the reasons discussed hereinabove, this Court is of the opinion that the view taken by the Appellate Authority is justifiable.

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The judgments cited by the learned Additional Government Advocate are not applicable to the facts of the present case. It is well settled that, where ambiguity exists in the provisions, the same is to be interpreted in a manner that

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advances the object intended to be achieved. There is no dispute regarding this settled position of law. The prescribed authority, in its order dated 21.03.2017, has categorically held that the turnover of deemed exports declared in the returns or as recorded in the books of accounts corresponds with each other, and there is no dispute in that regard. Accordingly, the entire transactions and the eligibility for exemption are not in dispute before the prescribed authority, except for the technical objection regarding the entries in the ‘H’ Form.

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In view of the findings of this Court and the correctness of the ‘H’ Form as discussed hereinabove, it is held that the ‘H’ Form is in conformity with Rule 12(10)(b) of the CST (R & T) Rules.

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For the aforesaid reasons, the following :

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ORDER

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(i) The appeal is allowed .

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(ii) The questions of law are answered in favour of the Assessee and against the Revenue.

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(iii) The order of the revisional authority dated 21.03.2017 is hereby set aside and order in Appeal

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No.CST/AP/10/2016-17, dated 24.12.2016 passed by the Joint Commissioner of Commercial Taxes (Appeals), Davanagere Division, Davanagere, is hereby restored.

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(iv) No order as to costs.

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Sd/(S.G.PANDIT) JUDGE

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Sd/(K. V. ARAVIND) JUDGE

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MV

M/S Kathare Enterprises v. the Additional Commissioner of Commercial Taxes

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M/S Kathare Enterprises v. the Additional Commissioner of Commercial Taxes

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