M/S SRI SRINIVAS ENTERPRISES V. THE COMMISSIONER OF COMMERCIAL TAXES

WP/102531/2021

AI Insights

The case involves M/s Sri Srinivas Enterprises, which filed a writ petition against the assessment orders and subsequent appellate orders issued by the Commercial Taxes authorities in Karnataka. The petitioner argued that as a transporter engaged in logistics, they were not liable for taxation under the Karnataka Value Added Tax (KVAT) Act, 2003, as they did not engage in the purchase and sale of goods. The High Court of Karnataka, referencing a similar case (M/s. Sri. Venkateshwara Logistics), found merit in the petitioner's arguments and set aside the impugned orders, remitting the matter back to the assessing authority for a fresh evaluation.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 741526 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 09-08-2021
• Assessment Year: misc
• Other Referred Cases: M/s. Sri. Venkateshwara Logistics Vs. The Commissioner of Commercial Taxes and Others (W.P.No.100688/2021 dated 09.03.2021)
• Laws Referred To: KVAT Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: V S KALASURMATH
• Assessee Lawyers: K RAO; H R KAMBIYAVAR; PATRI K
• Keywords: Assessment Order; KVAT Act; Logistics; Tax liability; Transporter; Writ of Certiorari
• Section: 36(1); 39(1); 72(2); 62(6)(a)

Judgement Text

"IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 9TH DAY OF AUGUST, 2021 BEFORE THE HON’BLE MR.JUSTICE S.R. KRISHNA KUMAR WRIT PETITION NO.102531/2021 (T-RES) BETWEEN M/S SRI SRINIVAS ENTERPRISES D.NO.14/15, OPP. UNION BANK OF INDIA, BALLARY ROAD, HOSPET-583201 REPRESENTED BY ITS PARTNER SRI.H.MANJUNATH …PETITIONER (BY SRI. K. MALLAHA RAO, SRI H.R.KAMBIYAVAR & PATRI SHASHIKALA K, ADVOCATES) AND 1 . THE COMMISSIONER OF COMMERCIAL TAXES VANIJYA BHAVAN GANDHINAGARA, BENGALURU-560009 2 . THE JOINT COMMISSIONER OF COMMERCIAL TAXES (APPEALS) “VANIJYA THERIGE BHAVANA” DEVRAJ URS LAYOUT, ”A” BLOCK DAVANAGERE-577006 3 . THE ASSISTANT COMMISSIONER OF COMMERCIAL TAXES,(AUDIT AND RECOVERY) BALLARI-583115 ... RESPONDENTS (BY SRI.V.S.KALASURMATH, HCGP) 2 THIS WRIT PETITION IS FILED UNDER ARTICLE 226 AND 227 OF CONSTITUTION OF INDIA PRAYING TO ISSUE OF A WRIT OF CERTIORARI OR ANY OTHER APPROPRIATE WRIT OR ORDER QUASHING THE ASSESSMENT ORDER OF THE RESPONDENT NO.3 UNDER SECTION 39(1) READ WITH SECTION 72(2) OF THE KVAT ACT DATED 21.04.2014 AND 01.04.2015 VIDE ANNEXURE-A AND B AND ETC. THIS PETITION COMING ON FOR ORDERS, THIS DAY, THE COURT, MADE THE FOLLOWING: ORDER In this writ petition, the petitioner has sought for the following reliefs: i. Issue a Writ of Certiorari or any other appropriate writ or order quashing the assessment order of the Respondent No.3 under Section 39 (1) read with Section 72(2) of the KVAT Act dated 21.04.2014 and 01.04.2015 vide Annexure-“A” and “B”. ii. Issue of a writ of certiorari or any other appropriate writ or order quashing the orders passed by the Joint Commissioner of Commercial Taxes, (Appeals) Respondent No.2, in respect of financial year 2007-08 dated 30.06.2018 vide appeal preferred under Section 62(6)(a) of the KVAT Act bearing No.KVAT/AP-234 to 240/2014-15 produced as Annexure- 3 “C” and in respect of financial year 2008- 09 dated 17.07.2018 vide appeal No.KVAT/AP/06/15-16 produced as Annexure-“D” and also endorsements issued by the Respondent No.2 in respect of financial year 2007-08 dated 22.12.2020 vide JCCT/AP/DVG/R.A./ T.No.886/2020-21 produced as Annexure- “G” and the endorsement issued by the Respondent No.2 in respect of financial year 2008-09 dated 22.12.2020 vide JCCT/ AP/ DVG/ R.A./ T.No.885/ 2020-21 produced as Annexure-“H”. iii. Issue a Writ of Mandamus or any other appropriate writ or direction directing the Respondent No.2 to accept the returns filed by the Petitioner for the tax period 2007-08 and 2008-09 treating the petitioner as transporter/engaged in logistics activities and not liable to taxation under KVAT Act. iv. Issue a writ of Prohibition or any other appropriate writ or order prohibiting the Respondent No.3 from initiating any recovery proceedings in respect of the re-assessment order with respect to financial year 2007-08 and 2008-09 till the disposal of this writ petition before this Hon’ble Court; 4 v. Grant such other orders of directions deemed fit in the circumstances of the case and in the interests of justice. 2. Heard learned counsel for the petitioner and learned HCGP for the respondents. Perused the material on record. 3. In addition to reiterating the various contentions urged in the Memorandum of Petition and referring to various documents produced by the petitioner, learned counsel for the petitioner invites my attention to the decision of a Co-ordinate Bench of this Court in the case of M/s. Sri. Venkateshwara Logistics Vs. The Commissioner of Commercial Taxes and Others (W.P.No.100688/2021 dated 09.03.2021) produced at Annexure-K and prays to allow this petition in terms of the aforesaid decision of a Co- ordinate Bench of this Court. 5 4. In M/s. Sri. Venkateshwara Logistics’s case (supra), a Co-ordinate Bench of this Court has held as under: “The captioned writ petition is filed by the petitioner questioning the order passed by the assessing authority vide Annexure-A, impugned order passed by the appellate authority as per Annexure-C and also endorsement as per Annexure-E. 2. The case of the petitioner is that he is only a transport operator and is engaged in transporting logistics assigned by his clients. It is the specific case of the petitioner that he is not involved in purchase and sale of goods and thereby petitioner would not liable to pay purchase and sales tax under the Karnataka Value Added Tax, 2003 (hereinafter referred to as ‘the KVAT Act’ for short). 3. The grievance of the petitioner is that, respondent No.2 being the assessing authority without considering these material aspects has levied tax, interest and penalty and the same is confirmed by the Joint 6 Commissioner of Commercial Taxes and the same is without sanction under the provisions of the KVAT Act. 4. The petitioner further stated that he has declared transportation receipts under the Income Tax Act to the concerned authorities and also produced tax deduction at source certificate issued by his clients. It is his specific case that entire transaction of the petitioner is only in regard to transportation and does not amount to sale of goods. It is also stated that income tax returns filed by the petitioner has been accepted by the income tax authorities and thereby it is clearly established that petitioner is engaged in transport business and not sale of goods. 5. The grievance of the petitioner is that, without examining all these material aspects, respondent No.2-assessing authority by invoking the provisions of Section 39(1) r/w Section 72(2) and Section 36(1) of the KVAT Act has come to the conclusion that the petitioner has failed to explain the transactions and has not 7 submitted any details. On these premise, the authority has proceeded to assume that payments are received from sale of iron ore and consequentially respondent No.2- assessing authority has held that assessee has not declared true and correct turnover to the department and the tax payable to the government exchequer. On these set of reasoning respondent No.2-assessing authority has passed re-assessment for the tax period from April 2008 to March 2009 thereby levied tax to the tune of Rs.63,20,350/-. 6. The petitioner being aggrieved by the order passed by respondent No.2, preferred an appeal before respondent No.1 under Section 62(6)(a) of the KVAT Act. The appellate authority has proceeded to hold that present petitioner herein is reluctant to produce books of accounts throughout. The appellate authority was also of the view that though sufficient time was granted to enable the petitioner to produce the original books of accounts and vouchers, however, there are laches and the petitioner is not diligent in placing on record the books of accounts. 8 Thereby the appellate authority was of the view that originals of transaction remain obscure and the petitioner has failed to satisfactorily explain even at the appellate stage. On these set of grounds, the appellate authority has proceeded to dismiss the appeal thereby confirming the order passed by respondent No.2-assessing authority. 7. Learned counsel for the petitioner would submit before this court that petitioner is only involved in transporting goods and is not involved in sale and purchase of goods and thereby his business would not fall within the ambit of sale of goods and the same would not attract the provisions of the Act so as to levy tax on the transportation. 8. To buttress his arguments, the learned counsel placed reliance on the judgment rendered by this court in S.T.A.No.47/2011 and connected matters in case of M/s Radhakrishna Agencies and W.P.No.14456-515/2011 in case of M/s Prakash Retail Pvt. Ltd. Relying on these 9 two judgments, he would submit to this court that since the petitioner is in the business of transportation, the freight and insurance charges would not form part of sale price of goods supplied. In the judgment relied on by the petitioner, it is held that, where a party is involved in transport business and collects transportation charges from the customers, then State Government cannot enrich by bringing the transportation charges as part of sale of goods. 9. Per contra, learned HCGP would submit to this court that petitioner has failed to substantiate his claim either before the assessing authority or before the appellate authority. In spite of sufficient opportunity, the petitioner has not placed on record books of accounts and thereby the appellate authority was justified in drawing adverse inference and consequently was justified in dismissing the appeal. In that view of the matter, he would submit to this court that, no materials are placed by the petitioner so as to warrant interference by this court. 10 10. I have meticulously perused the judgments cited by the petitioner. The judgment rendered by this court would clearly indicate that, where petitioners are engaged in trading by transporting articles, in such course of business, the transporter is entitled only transportation charges. However, the same cannot be termed as an income towards sale price of the goods. In the present case on hand, assessing authority and appellate authority have proceeded on an assumption that petitioner has deliberately failed to place on record books of accounts and in such circumstances, the impugned orders as per Annexure-A, C and E are passed. The grievance of the petitioner is that he was not afforded an opportunity to place on record books of accounts. On perusal of the records, I would find that there are laches on the part of the petitioner in not defending the case by placing on record books of accounts. However, since valuable rights are involved and question as to whether the transportation of goods would fall within the ambit of definition of sale as 11 contemplated under Section 2(29) of the KVAT needs to be examined. 11. Having regard to the peculiar facts and circumstances of the case and to do substantial justice, I deem it fit to afford one more opportunity to the petitioner to offer explanation before respondent No.2- assessting authority. 12. For the reasons stated supra, I pass the following: ORDER The writ petition is allowed. The impugned orders as per Annexures-A, C and E are set aside. Matter is remitted back to respondent No.2- assessing authority. Since the matter pertains to the year 2014, the petitioner is directed to appear before respondent No.2- assessing authority on 06.04.2021. Thereafter, respondent No.2-assessing authority shall proceed with the case by notifying the petitioner and pass appropriate order after affording reasonable opportunity to the petitioner. Respondent No.2- 12 assessing authority shall expeditiously dispose off the case and the petitioner is bound to cooperate with the hearing without seeking adjournments.” 5. As rightly contended by learned counsel for the petitioner the instant petition is squarely covered by the aforesaid decision of a Co-ordinate Bench of this Court. 6. Accordingly, I pass the following: ORDER i) The writ petition is allowed in terms of the decision of a Co-ordinate Bench of this Court in the case of M/s. Sri. Venkateshwara Logistics Vs. The Commissioner of Commercial Taxes and Others (W.P.No.100688/2021 dated 09.03.2021). ii) The impugned order as per Annexures-A, C and E are set aside. Matter is remitted back to remitted back to respondent No.3-Assessing Authority. 13 iii) The petitioner is directed to appear before respondent No.3- Assessing Authority on 06.09.2021. iv) Thereafter, respondent No.3 – Assessing Authority shall proceed with the case by notifying the petitioner and pass appropriate order after affording reasonable opportunity to the petitioner. v) Respondent No.3 – Assessing Authority shall expeditiously dispose off the case and the petitioner is bound to co-operate with the hearing without seeking adjournments. SD/- JUDGE BMC "