1/9 IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 10th DAY OF OCTOBER 2017 BEFORE THE HON'BLE Dr.JUSTICE VINEET KOTHARI WRIT PETITION No.9573/2017(T-Res) BETWEEN:
M/s AISHWARYA FORT NEAR RTO OFFICE, TURVANUR ROAD CHITRADURGA – 577501, REPRESENTED BY ITS PARTNER SRI ARUN KUMAR, S/O SRI NARASIMHA SHETTY. ..PETITIONER (BY SRI.G SARANGAN, SENIOR ADV. along with SRI MALLAHAR RAO K) AND:
1. STATE OF KARNATAKA BY ITS SECRETARY FINANCE DEPARTMENT VIDHANA SOUDHA BANGALORE – 560 001.
2. THE COMMISSIONER OF COMMERCIAL TAXES VANIJYA THERIGE KARYALAYA GANDHINAGAR BANGALORE – 560 009.
3. THE COMMERCIAL TAX OFFICER (AUDIT AND RECOVERY) CHALLAKJERE (KARNATAKA) …RESPONDENTS (BY SRI.T K VEDAMURTHY, AGA) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DTD 29.04.2016 PASSED BY THE R-3 UNDER SECTION 39(1) OF THE KVAT ACT 2003 READ WITH RULE 46 OF THE KVAT RULES 2005 FOR THE PERIOD 01.04.2008 TO 31.03.2009 IN FILE CASE NO.298502421 VIDE ANNEXURE E.
THIS WRIT PETITION COMING ON FOR PRELIMINARY HEARING THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER Mr.G.Sarangan, Sr. Adv., for Sri Mallahar Rao K, Adv. for Petitioner Mr.T K Vedamurthy,AGA This petition is directed against the assessment order passed by the respondent-Commercial Tax Officer (Audit and Recovery), Challakere on 29.04.2016 vide Annexure ‘E’ for the period 01.04.2008 to 31.03.2009.
2. The petitioner-Aishwarya Fort, Chitradurga has claimed in the petition that the petitioner was exempted from payment of Sales Tax and upon coming into force of the Karnataka Value Added Tax Act, 2003 with effect from 01.04.2005 also under the new law of KVAT Act. Learned counsel for the petitioner has sought to rely upon certain notifications in this regard and the learned counsel has also submitted that the learned Assessing Authority has wrongly relied upon the decision of this Court in the case of M/s Madhuvana International Pvt. Ltd. Bijapur v/s State of Karnataka W.A.No.212/2007 & Connected matters disposed of on 17-02-2008 referred to in paragraph 9(4) on page 30 of the paper book part of the impugned order.
3. Before this Court, neither any specific notification issued under The Karnataka Sales Tax Act or Karnataka Value Added Tax Act, has been produced exempting the hotel industry from the payment of Sales Tax/VAT. The petitioner is purportedly relying upon some notification issued by the Tourism Department of the State Government vide Annexure ‘A’ dated 12.11.2009 and Annexure ‘B’ dated 07.01.2000.
4. On the other hand, learned counsel for the revenue has submitted that this Court in the case of M/s Madhuvana International Pvt. Ltd. Bijapur has held that hotel industry is not an industry entitled for such exemption and no such specific Exemption Certificate under the Notification issued by the Tourism Department was ever granted to the petitioner-assessee and he also submitted that the reliance placed on the Certificate issued by the Department of Tourism, Government of Karnataka vide Annexure ‘C’ dated 25.03.2003 holding that the petitioner is entitled for exemption from sales tax and luxury tax cannot entitle the petitioner from claiming exemption from Sales Tax/VAT under two enactments in question as Tourism Department is not at all the competent authority to grant such exemption from tax.
5. Having heard the learned counsel for the parties, this Court is satisfied that the mixed question of facts and law raised in the present petition can very well be decided by the appellate authority created under the Act itself. In the absence of any clear entitlement of exemption of the petitioner and any specific Exemption Certificate issued in favour of petitioner-assessee, the claim of the petitioner-assessee is at best, only debatable one. It would depend upon the facts to be established by the petitioner before the concerned authorities of the Department and the application of the Notifications on such facts, in the present case.
6. The reasons assigned by the respondent/Appellate Authority denying such exemption from tax to the petitioner-assessee are quoted below from the impugned order for ready reference:
“The objection filed by the dealer firm was carefully perused and the objection filed is denied for the following reasons:-
1. The Karnataka sales tax act was substituted by Karnataka Value Added Tax Act-2003 with effect from 01-04-2005. Under the Karnataka Value Added tax Act- 2003, the industrial units is eligible for tax exemption on sale of goods manufactured by it, under the notification issued by the Karnataka Government under the provisions of the Karnataka Sales Tax Act, 1957. As per the Notification No.FD CSL 2005(1) dated 18-04-2005.
2. As per the above notification, the tax exemption issued to the industrial units by the Government under the provisions of the Karnataka Sales Tax Act, 1957 is eligible for tax exemption under KVAT Act-03, subject to the conditions mentioned in the above notification.
3. The said dealer is a hotelier and availed exemption from the payment of tax as a Tourism industry. Under the provisions of the KVAT Act-2003, the tourism industry is not covered under the Notification No.FD 56 CSL 2005(1) dated 18-04-2005.
4. The Honorable High Court of Karnataka in case of M/s. Madhuvana International Pvt. Ltd., Bijapur v/s. State of Karnataka W.A.No.212/2007 (T-KST) C/W 233, 432, 758, 826, 256, 265 and 389 of 2007 dated 17-02-2008 as stated that the hotel industry claiming exemption shall avail a certificate from the department of industry and commerce, the said department should certify that hotel claiming exemption is an industry comes under industry and commerce.
5. Since the assessee doesn’t possess any certificate issued by industrial and commerce and also as per the above discussion, the tax is levied on the sale of food and drinks under section 4(1)(b) of the KVAT Act-03 without giving the input tax credit on the local purchases. The reason for not giving the input tax credit is, as per the subsection 3 of section 10 of KVAT Act- 03, the net tax payable by a registered dealer in respect of each tax period shall be amount of out put tax payable by him in that period less the input tax deducted by him as may be prescribed in that period. The dealer firm has not claimed the input tax in the Form VAT-100 i.e., in that particular tax period. Hence the output tax payable is calculated without giving the input tax credit.
6. As per the judgment in case of M/s. Centum Industries Private Ltd., Bangalore, given by Honorable High Court of Karnataka vide STRP.No.294/2011 and 210-
/2013 dated 31-07-2014 clearly stated that “If the assessee is not putting forth claim for input tax deduction in respect of each tax period nor as he put forth such a claim in a revised claim which he would have filed within six month there from his right to claim of input deduction is lost.
In view of the above discussion, the Form VAT-100 filed by the dealer is rejected and the Reassessment under section 39(1) of the KVAT Act-03 for each tax period of 2008- 09 is concluded as under:”
7. All these questions, the petitioner-assessee can very well raise in the regular appeal which lies under Section 62 of the Karnataka Value Added Tax Act, 2003 before the Joint Commissioner (Appeals). The impugned assessment order, was however passed way back on 29.4.2015 and the limitation of filing such appeal might have expired.
8. Under these circumstances, the petition is disposed of by relegating the petitioner/assessee to the alternative remedy available to the petitioner against the impugned order, and if, such an appeal is filed before the Joint Commissioner (Appeals) under Section 62 of the Act within a period of 4 weeks from today, the same shall be entertained without raising objection as to the limitation. However the assessee, will have to comply with the other relevant conditions for maintaining such appeal before the First Appellate Authority.
8. With these observations and liberty to the petitioner, petition is disposed of. No costs.
Sd/- JUDGE Brn