Chisty Steels V. The Assistant Commissioner of Commercial Taxes (Audit-3), Navanagar, Hubli

WP/103796/2014

AI Insights

M/s Chisty Steels, a partnership engaged in trading iron and steel products, was reassessed under the Karnataka Value Added Tax Act, 2003, for the assessment year 2011-12. The reassessment was based on allegations that the input tax claimed by the petitioner was on purchases from bogus and fraudulent dealers. The Assistant Commissioner of Commercial Taxes issued a demand for tax, penalty, and interest, which the petitioner contested through writ petitions. The court found that the petitioner had not exhausted the available alternate remedies, specifically the appeal process under the KVAT Act, and thus declined to entertain the writ petitions.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 814701 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 13-03-2014
• Assessment Year: misc
• Other Referred Cases: Titaghur Paper Mills Co. Ltd. vs. State of Orissa, Raleigh Investment Company Limited v. Governor General in Council
• Laws Referred To: Karnataka Value Added Tax Act, 2003
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: K VIDYAVATI
• Assessee Lawyers: M N SHANKREGOWDA; H R KAMBIYAVAR
• Keywords: Bogus dealers; Demand notice; Input tax credit; Interest; Penalty; Reassessment order
• Section: 62; 39(1)

Judgement Text

": 1 : IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 13TH DAY OF MARCH, 2014 BEFORE THE HON’BLE MR. JUSTICE ARAVIND KUMAR WRIT PETITION NO.103796/2014 & WRIT PETITION NOS.103809-819/2014 (T-RES) BETWEEN: M/S CHISTY STEELS REPRESENTED BY ITS PARTNER K.M.MANIYAR, AGED ABOUT 58 YEARS, CITB, PLOT NO.18, RAVINAGAR, GOKUL ROAD, HUBLI …PETITIONER (BY SHRI M.N.SHANKARE GOWDA & SHRI H.R.KAMBIYAVAR, ADVS.) AND: THE ASSISTANT COMMISSIONER OF COMMERCIAL TAXES (AUDIT-3), NAVANAGAR, HUBLI …RESPONDENT (BY SMT. K.VIDYAVATI, AGA) THESE WRIT PETITIONS ARE FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE RE-ASSESSMENT ORDER AND DEMAND NOTICE BOTH DATED 15.02.2014, (ANNEXURE- N) PASSED BY RESPONDENT FOR THE ASSESSMENT PERIOD 2011-12 UNDER KVAT ACT IN THE PETITIONER'S CASE. THESE WRIT PETITIONS COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING: : 2 : ORDER Petitioner is seeking for quashing of reassessment order dated 15.02.2014, Annexure – N and the consequential demand notice issued on 15.02.2014 appended to the said reassessment order issued under Karnataka Value Added Tax Act, 2003. 2. I have heard the arguments of Shri M.N.Shankregowda learned counsel appearing for petitioner and Smt. K.Vidyavati, learned Additional Government Advocate appearing for respondent. 3. Petitioner is a registered dealer under the provisions of Karnataka Value Added Tax, Act 2003 (for short ‘KVAT Act’) which is a partnership carrying on its activities of trading in iron and steel products, namely H.R.Coils, Angles.M.S.Channels etc., having its registered office at Hubli. For the assessment year 2011-12 petitioner claims to have purchased iron and steel from various registered dealers located at Bangalore and sold the same locally in the course of : 3 : inter state trade and through consignment agent locally. Petitioner was issued with a notice under Section 39(1) of the KVAT Act on 18.12.2003 proposing to reassess the petitioner’s case and also for levying penalty and interest on the ground that input tax has been claimed erroneously, on the purchases made from bogus and fraudulent dealers engaged in bill trading. Hence, it was proposed by respondent – authority to reject the petitioner’s claim for input tax credit on the purchases made from dealers which according to respondent were alleged bogus dealers who had not filed the returns and paid the taxes accordingly. Respondent also proposed to treat the declared consignment sale of Rs.2,16,00,000/- as taxable turnover, proposing to levy tax at the rate of 5% along with interest and penalty, objections came to be filed by the petitioner to the said proposed notice on 22.01.2014. Petitioner also filed additional objections on 27.01.2014, vide Annexures – L and M respectively. Respondent having received the said objections proceeded to reject the same and pass : 4 : an order of reassessment confirmed the demand made in the proposition notice and accordingly, has raised a demand for payment of tax of Rs.23,28,176/- by levying penalty of Rs.2,32,818/- and interest of Rs.10,05,605/- for the period April 2011 to March 2012. 4. Aggrieved by the same, petitioner is before this Court invoking extraordinary jurisdiction of this Court contending inter alia that objections filed by petitioner has not been considered in proper prospective and there is total non-application of mind by respondent with respect to the vehicle numbers and it is glaring on the face of it since it is contrary to records and as such, it was improper on the part of the department to take a stand that a single vehicle has been used for three trips from Bangalore to Hubli on the same day when e-sugam forms generated by the suppliers which has been approved by the department wherein it has categorically proved that the stand of the department is incorrect and as such, it cannot be construed that petitioner had colluded with the : 5 : suppliers. On these amongst other grounds urged in the writ petitions, Shri M.N. Shankregowda learned counsel appearing for the petitioner would seek for quashing of the assessment order. 5. The impugned order has been passed by respondent in exercise of the power under Section 39(1) of the KVAT Act, 2003. Against said order, an appeal is provided under the Act namely under Section 62 of the KVAT Act. Petitioner without exhausting the available, alternate and efficacious remedy has approached this Court, invoking extraordinary jurisdiction. Time and again it has been held by the Hon’ble Apex Court that writ petition would not be maintainable when alternate remedy is available. It has been held in the case of Titaghur Paper Mills Co. Ltd., and another vs. State of Orissa and another reported in AIR 1983 SC 603 as follows: “6. We are constrained to dismiss these petitions on the short ground that the petitioners have an equally efficacious : 6 : alternative remedy by way of an appeal to the prescribed authority under sub- s.(1) of s.23 of the Act, then a second appeal to the Tribunal under sub-s.(3) (a) thereof, and thereafter in the event the petitioners get no relief, to have the case stated to the High Court under s.24 of the Act. In Raleigh Investment Company Limited v. Governor General in Council, (1947) 74 Ind. App. 50: (AIR 1947 PC 78) Lord Uthwatt, J. in delivering the judgment of the Board observed that in the provenance of tax where the Act provided for a complete machinery which enabled an assessee to effectively to raise in the courts the question of the validity of an assessment denied an alternative jurisdiction to the High Court to interfere. It is true that the decision of the Privy Council in Raleigh Investment Company's case, (supra) was in relation to a suit brought for a declaration that an assessment made by the Income Tax Officer was a nullity, and it was held by the Privy Council that an assessment made under the machinery provided by : 7 : the Act, even if based on a provision subsequently held to be ultra vires, was not a nullity like an order of a court lacking jurisdiction and that s.67 of the Income Tax Act, 1922 operated as a bar to the maintainability of such a suit. In dealing with the question whether s.67 operated as a bar to a suit to set aside or modify an assessment made under a provision of the Act which is ultra vires, the Privy Council observed: \"In construing the section it is pertinent, in their Lordships opinion to ascertain whether the Act contains machinery which enables an assessee effectively to raise in the courts the question whether a particular provision of the Income Tax Act bearing on the assessment made is or is not ultra vires. The presence of such machinery, though by no means conclusive, marches with a construction of the section which denies an alternative jurisdiction to inquire into the same subject-matter.\" : 8 : 6. In view of the fact that petitioner has an alternate remedy available under law namely an appeal can be filed under Section 62 of KVAT Act, this Court refuse to entertain the present writ petitions and as such, without expressing any opinion on the merits of the case and the contentions raised by Shri M.N. Shankregowda, these writ petitions are rejected. Petitioner would be at liberty to file an appeal before the Appellate Authority within 15 days from today and in the event of such an appeal along with an application for being filed, it is needless to state that Appellate Authority would consider the same on merits and dispose it in accordance with law. 7. In the event the appeal is filed within 15 days from today, Appellate Authority without examining the issue of delay shall adjudicate the appeal on merits. Ordered accordingly. SD/- JUDGE Rsh "