M/s. Abhay Solvents Private Limited Versus The Assistant Commissioner Of Commercial Taxes Lgsto-510 Koppal And Commissioner Of Commercial Taxes
VAT and Sales Tax
2018 (3) TMI 1369 – KARNATAKA HIGH COURT – 2019 (29) G. S. T. L. 405 (Kar.) , [2020] 74 G S.T.R. 438 (Karn)
KARNATAKA HIGH COURT – HC
Dated:- 8-3-2018
Writ Petition Nos. 3636 & 4607-4624/2018 & W.P.Nos.4625-4626/2018 (T-RES)
CST, VAT & Sales Tax
MRS. S. SUJATHA J.
Petitioner: [By Sri K.P. Kumar, Senior Counsel for Ms. Veena j. Kamath, Adv. For Kamath & Kamath, Advs.]
Respondents: [By Sri T.K. Vedamurthy, Aga.)
ORDER
These petitions are filed challenging the correctness and legality of the order of the respondent dated 28.12.2017 as per Annexures-A1 to A18, inter alia, seeking for a direction to the respondent to furnish to the petitioner all the details, documents and information as sought for by the petitioner vide its letter dated 27.12.2017 as per Annexure-H and grant an opportunity of being heard
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25/2015 seeking for a direction to the concerned Authority to refund the input tax credit in respect of the tax period, March 2014 to July 2015. This Court following the decision of the Division Bench in M.K. AGRO TECH's case supra,allowed the writ petitions and a direction was issued to Respondent No.1 to process the application filed by the petitioner for refund of input tax paid in excess, refund the same, if not otherwise found disentitled. It was observed that in case the tax is refunded as ordered, the respondents are at liberty to obtain indemnity bond from the petitioner to the extent of amount refunded. Further refund shall be subject to result of special leave petitions pending in SLP [Civil] Nos.576-596/2014. Pursuant to the order passed by this Court, the respondent refunded the excess input tax credit in respect of tax period April 2015 to January 2017 after the indemnity bond executed by the petitioner. The Hon'ble Apex Court in its order dated 22.09.2017, in 'THE STATE O
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btain the same from the CCT directly. It is based on the CCT's circular, which was issued pursuant to the Judgment of the Hon'ble Apex Court in the case of M.K. AGRO TECH supra, demand notices were issued and orders were passed under section 10[5] read with section 69[1] of the KVAT Act, directing the petitioner to make payment of refund amount with interest from the date of the refund till the date of passing of the order. Being aggrieved by the same, petitioner is before this Court.
4. In the writ petition proceedings, learned counsel appearing for the petitioner has filed IA-2/2018 for impleading the CCT as Respondent No.2 to the proceedings. IA-3/2018 is filed seeking amendment of the writ petition under Order VI Rule 17 of the Code of Civil Procedure, 1908 read with Article 226 of the Constitution of India, to amend the writ petition. The additional relief sought by the petitioner is to quash the Circular No.09 of the CCT dated 9.10.2017 as per Annexure-J, by issuing a writ of ce
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the Authorities to demand/recover the refund amount with interest as sought for. Attention was drawn to Section 69[1] of the KVAT Act to contend that rectification of mistake apparent from the record is amenable to Section 69[1] of the KVAT Act with a view to rectify the same by the prescribed Authority, Appellate Authority or revising Authority. Application of the principles of law enunciated by the Hon'ble Apex Court in a subsequent Judgment cannot be construed as any mistake apparent on the record. The Authorities have refunded the amount based on the law holding the field on the date of passing of the refund order, if any subsequent order is passed by the Hon'ble Apex Court modifying or annulling the said order of this Court, on the basis of which, refund order was issued, the same would not be a ground to withdraw the refund order and to demand/seek recovery of the refund of the amount paid.
[iii] Notices under Section 42 of the KVAT Act were issued for the tax period March 2010
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xplanation dated 27.12.2017 filed, the orders impugned herein were passed on the ground that the issue involved relates to implementation of the Judgment of the Hon'ble Apex Court involving State revenue and hence granting further time would be unreasonable.
[iv] The request made by the petitioner to furnish the circular of the CCT dated 9.10.2017 was rejected by issuing endorsement dated 19.12.2017, informing that the same relates to the internal matters of administration of the Department. Therefore, in case of necessity of the said circular, petitioner can contact the CCT, Bengaluru. It was mandatory on the part of the respondent to provide the circular of CCT, the basis on which the impugned orders were passed before passing of the orders. It is settled law that any information/ documents/circulars relied upon by the Authorities must be made known to the Assessees while demand is made based on such material. The impugned orders passed are in violation of the principles of natural
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e Hon'ble Apex Court in the case of 'DEPUTY COMMISSIONER OF INCOME TAX AND OTHERS v. SIMPLEX CONCRETE PILES [INDIA] LIMITED' reported in [(2013) 11 SCC 373.
7. Learned Additional Government Advocate appearing for the revenue placed the submissions as under:
[i] Section 174[3][i] of the KGST Act contemplates that in consequence of, or to give effect to, any finding, direction or order made under any provision of the relevant repealed Acts or any Judgment, or order made by the Supreme Court, High Court or any other court whether before or after the commencement of KGST Act, any order, assessment or reassessment or any action may be made notwithstanding the repeal of the KVAT Act. The proceedings relates to the tax period April 2015 to January 2017, much prior to the KGST Act coming into force. Proceedings were pending under the KVAT Act relating to these tax periods. Hence, claim of refund with interest by the respondent is saved under Section 173 of the KGST Act. Even otherwise, the s
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ers, issued the Circular dated 9.10.2017, bringing to the notice of the departmental authorities, the Judgment of the Hon'ble Apex Court in the case of M.K. AGRO TECH supra. It is no doubt true that the penalty and interest are directed to be levied, but no such penalty is levied in the case on hand. It is only interest has been levied which is in conformity with Section 36[1] of the KVAT Act. The argument of the learned Senior Counsel, in as much as, not providing adequate opportunity to the petitioner would not be relevant since the respondent has acted upon the Judgment of the Hon'ble Apex Court in the case of M.K. AGRO TECH supra, which is binding on the authority as well as the Assesse.
[iii] The Assessee placing reliance on the Judgment of M.K. AGRO TECH supra, sought for refund of input tax credit, strangely now canvassing arguments that the said Judgment is not applicable to the facts of the present case.
[iv] Issuance of notice under Section 42 of the KVAT Act was only for t
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force or existing at the time of such repeal; or
(b) affect the previous operation of the repealed Acts and orders or anything duly done or suffered thereunder; or
(c) affect any right, privilege, obligation, or liability acquired, accrued or incurred under the repealed Acts or orders under such repealed Acts:
Provided that any tax exemption granted as an incentive against investment through a notification shall not continue as privilege if the said notification is rescinded on or after the appointed day; or
(d) affect any tax, surcharge, penalty, fine, interest as are due or may become due or any forfeiture or punishment incurred or inflicted in respect of any offence or violation committed against the provisions of the repealed Acts; or
(e) affect any investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such tax, surcharge, penalty, fine, i
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necessary or expedient,-
(a) for making omissions from, additions to and adaptations and modifications of the rules, notifications and orders issued under the repealed Acts;
(b) for specifying the authority, officer or person who shall be competent to exercise such functions exercisable under any of the repealed Acts or any rules, notifications or orders issued thereunder as may be mentioned in the said notification.
(3) Notwithstanding anything contained in section 173, nothing contained in any of the repealed Acts limiting the time within which any action may be taken or any order, assessment or re-assessment may be made shall apply to an assessment or re- assessment made on the assessee or any person,-
(i) in consequence of, or to give effect to, any finding, direction or order made under any provision of the relevant repealed Acts or any judgement, or order made by the Supreme Court, High Court or any other court whether before or after the commencement of this Act;
(ii)
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ng contained in Section 173, despite any limitation contained in any of the repealed Acts or, assessment or re-assessment may be made on the assessee or any person in consequence of, or to give effect to, any finding or direction or order made under any provision of the relevant repealed Acts or any Judgment or order made by the Hon'ble Apex Court or High court or any other court whether before or after commencement of KGST Act.
12. Section 38 of the KVAT Act deals with the assessment of tax. In terms of the returns filed under Section 35 of the KVAT Act, there is a deemed assessment under Section 38(1) of the KVAT Act. Thus on the returns filed by the assessee under Section 35 of the Act, refund was claimed on the ground that the input tax deductable by the dealer exceeds the output tax payable by him mainly relying on the Division Bench Judgment of this Court in M.K. AGROTECH's case supra. Refund claimed or the adjustments sought by the dealer not being responded, petitioner approac
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s and subject to the result of pending Special Leave Petitions. The orders passed in the connected writ petitions are also placed on record for the perusal of this Court.
4. In the result, by following the decision of the Division Bench and the orders subsequently passed in the writ petition pursuant to the judgment rendered by the Division Bench, these writ petitions are allowed. A direction is issued to respondent No.1 to process the application filed by petitioner for refund of input tax paid in excess, as per Annexure 'B' and refund the same, if not otherwise found disentitled. In case the tax is refunded, as ordered, respondents are at liberty to obtain indemnity bond from the petitioner to the extent of amount refunded.
It is also ordered that refund shall be made within a period of two weeks from the date of receipt of a copy of this order and from the date the petitioner furnishes indemnity bond, whichever is later.
It is made clear that refund shall be subject to result of
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Court. It was further ordered that respondents are at liberty to obtain indemnity bonds from the petitioner to the extent of amount refunded. The refund orders are passed after obtaining the indemnity bonds from the petitioner to the extent of the amount refunded. Though the subject matter of W.P.Nos.110509-525/2015 was relating to the tax period from March 2014 to July 2015, refund orders are issued for 22 months based on the said order of this court subject to the indemnity bonds executed by the petitioner. Hence repeal of the KVAT Act on 1.7.2017 would not affect the proceedings initiated by the Authorities in view of Section 174(1)(f) and (3) of KGST Act.
15. It is true that ordinarily no rectification is allowable based on the subsequent judgment passed by the High Court or the Apex Court, but in the peculiar facts and circumstances of the case when the petitioner has approached this court seeking refund of the amount referring to the Judgment of the Division Bench in M.K. AGROT
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owing cause, in writing, against such amendment. As could be observed from the records that no enhancement of an assessment or otherwise increasing of the liability of the dealer has been made by the Prescribed authority in rectifying the refund orders passed under Section 10(5) of the Act. Indisputably the impugned orders are passed under Section 10(5) r/w Section 69(1) of KVAT Act. Admittedly, assessee had no objections at the time of passing of the refund orders under Section 10(5) of the Act. However, now it is argued that the power under Section 10(5) r/w Section 69(1) of the Act cannot be exercised/invoked by the prescribed authority to withdraw the refund/ demand/initiate proceedings for recovery of refunded amount. Section 10(5) provides for refund or adjustment of the excess amount whereunder input tax deductable by the dealer exceeds the output tax. An order of recovery/demand of refunded amount has to be passed pursuant to the disposal of the appeal before the Hon'ble Apex C
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has observed, on the ratio of the Judgment of the Hon'ble Apex Court, penalty and interest shall be levied as per the levies as existed at that point of time for the relevant years of assessment or re-assessment. It can be held that circular issued by the Commissioner of Commercial Taxes is only incorporating the executive instructions intended in the department in order to maintain uniformity in collecting taxes, interest and penalty, finalising the assessments or initiating any proceedings in furtherance of achieving the benefit of the judgment of Hon'ble Apex Court.
19. It is trite law that penalty is not automatic, while imposing penalty, it is mandatory to provide an opportunity of hearing to the dealer but in the batch of present cases, no such penalty is levied by the prescribed authority.
20. As regards levy of interest, it is apt to refer to the judgment of the Constitution Bench of the Hon'ble Apex Court in the case of J.K.SYNTHETICS LTD. -VS- COMMERCIAL TAXES OFFICER repor
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ble smooth and effective collection of the tax from the dealers liable to pay tax under the statute. Section 11B provides for levy of interest on failure of the dealer to pay tax due under the Act and within the time allowed. Should this provision be strictly construed or should it receive a broad and liberal construction, is a question which we will have to consider in determining the sweep of the said provision.
It is well-known that when a statute levies a tax it does so by inserting a charging section by which a liability is created or fixed and then proceeds to provide the machinery to make the liability effective. It, therefore, provides the machinery for the assessment of the liability already fixed by the charging section, and then provides the mode for the recovery and collection of tax, including penal provisions meant to deal with defaulters. Provision is also made for charging interest on delayed payments, etc. Ordinarily the charging section which fixes the liability is s
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e to provide for charging interest, the Court must give that meaning to it as is conveyed by the language used and the purpose to be achieved. Therefore, any provision made in a statute for charging or levying interest on delayed payment of tax must be construed as a substantive law and not adjectival law.”
21. In the light of the said judgment, it can be held that interest is levied in order to compensate any loss occasioned to the revenue due to delay. The dealer was liable to pay the tax in terms of Section 10 of the KVAT Act. In view of the said judgments of this court in M/s M.K. AGROTECH's case supra applying the principles enunciated therein, net tax was computed and refund was claimed before this court, on the submissions made by the revenue that the matter is subjudiced before the Hon'ble Apex Court, refund order was directed to be made subject to the result of the decision of the Hon'ble Apex Court. Had no refund was made, the tax amount would have been utilized by the reven
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able to be paid as discussed above, demand of tax is not hit by the principles of natural justice.
22. The commissioner's circular dated 9.10.2017 is attacked by the dealer mainly on the count that no penalty and interest can be levied without providing an opportunity of hearing. As aforesaid, proceedings initiated to demand/recover the tax refunded based on the Judgment of the Hon'ble Apex Court as well as this court in W.P.Nos.110509-525/2015 coupled with the indemnity bond filed by the dealer may not be held to be unjustifiable as levying of interest is compensatory in nature but the same requires an opportunity to the petitioner to put-forth his reasons or explanation in as much as quantification is concerned in the facts and circumstances of the present case. Reasonable opportunity is quintessential as much as levying penalty. Hence Commissioner issuing circular instructions though for the smooth functioning or administration of the department, no instructions to levy penalty or
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