IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 28th DAY OF APRIL, 2017 BEFORE THE HON’BLE MR.JUSTICE RAGHVENDRA S. CHAUHAN WRIT PETITION NO.14485/2017 AND W.P. NOS.14732-738/2017 (T-RES) BETWEEN:
M.L. MANJUNATH PROP: M/S. MANJUSHREE BAR AND RESTAURANT, AGE: MAJOR, NO.30, SY.NO.125, 1ST MAIN ROAD, K.P. AGRAHARA, MAGADI ROAD, BENGALURU-560023.
(BY SRI.KIRESUR E.S., ADV.,) AND:
1. THE STATE OF KARNATAKA THROUGH ITS PRINCIPAL SECRETARY FINANCE DEPARTMENT, VIDHANA SOUDHA, AMBEDKAR VEEDHI, BENGALURU-560001.
2. THE ASSISTANT COMMISSIONER OF COMMERCIAL TAXES, LVO-070, D.V.O.-2, VIJAYANAGAR, BENGALURU-560040.
3. THE COMMISSIONER OF COMMERCIAL TAXES, VANIJYA THERIGE KARYALAYA, GANDHINAGAR, BENGALURU-56009.
(BY SRI.T.K.VEDAMURTHY, AGA.,) ... PETITIONER ... RESPONDENTS THESE WRIT PETITIONS ARE FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO DECLARE OR HOLD THAT THE AMOUNTS FOR WHICH LIQUOR SOLD BY THE KARNATAKA STATE BEVERAGES CORPORATION LIMITED BEING EXEMPT UNDER SECTION 5 OF THE VAT ACT QUALIFY FOR DEDUCTION UNDER RULE 3(2)(f) OF THE KVAT RULES, 2005 IN THE COMPUTATION OF THE TAXABLE TURNOVER OF THE PETITIONER.
THESE PETITIONS COMING ON FOR PRL. HEARING THIS DAY, THE COURT MADE THE FOLLOWING:
O R D E R The petitioner has challenged the assessment order dated 06.01.2017, and endorsement dated 25.1.2017, both passed by respondent No.2, the Assistant Commissioner of Commercial Taxes, (‘the ACCT’, for short).
2. Briefly stated the facts of the case are that the petitioner is a registered dealer under the Karnataka Value Added Tax Act, 2003 (‘KVAT Act’ for short), bearing registration No. TIN 29670478096. The petitioner claims that he is holding a licence in Form CL-9 issued under the Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968. The petitioner further claims to be a proprietary concern running a bar and restaurant under the name and style of M/s. Manjushree Bar and Restaurant. The petitioner is a dealer engaged in the sale of food, and re-sale of liquor including beer, fenny, liqueur and wine and soft drinks. According to the petitioner, w.e.f. 11.03.2005, the sale of liquor was exempted from tax under Section 5 of KVAT Act. Subsequently, the tax on liquor was made liable at the rate of 5.5% with effect from 01.03.2014, in accordance with the entry 59A inserted to the Third Schedule of the KVAT Act.
3. According to the petitioner, the Karnataka State Beverages Corporation Limited (‘KSBCL’ for short) is statutory body, and is owned by the State Government. The KSBCL, Bengaluru is the sole distributor of liquor in the State of Karnataka; it is holding CL-11 licence issued under the Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968.
Further, according to the petitioner, all the liquor dealers in the State purchase their liquor from KSBCL. Consequently, all the liquor dealers as well as KSBCL were made liable to pay the tax on sales of liquor at 5.5% percent under Section 4 of the KVAT Act.
4. By notification dated 28.02.2014, the Government had exempted the tax payable under the KVAT Act, on the sales of liquor by certain dealers. Subsequently, notification dated 21.02.2014 was amended by notification dated 21.04.2014.
5. Petitioner further claims that it is carrying on the business of sale of liquor in Bengaluru urban area, and is liable to pay the tax of 5.5% on the sale of liquor. The petitioner further claims that according to the notification dated 28.02.2014, the liquor dealers- licence holders, other than CL-9 in urban area, CL-4, CL-6A, CL-7 were exempted from the tax payable under the KVAT Act on the sale of liquor. Consequently, the dealers in liquor, in urban area, holding CL-9 licence were made liable to pay tax. Challenging the constitutional validity of the levy of tax itself on liquor under the VAT Act, and the notification dated 28.02.2014, as violative of Article 14 of the Constitution on the ground of discrimination amongst the rural and urban, the liquor dealers had filed W.P. Nos.13078- 13082/2014 (T-Res) before this Court.
6. Since the issue with regard to the validity of the notification dated 28.02.2014 was sub-judice, the petitioner did not pay the tax under the KVAT Act, as the petitioner claimed exemption on the sale turnover of liquor made during the year 2014-15 and onwards. Therefore, VAT returns were filed by the petitioner and the tax payable as ‘Nil’.
7. Further, by judgment dated 30.09.2015, this Court upheld the constitutional validity of the notification dated 28.02.2014 in the case of Sri.M.Madhava Gowda V.Under Secretary to Government of Karnataka and others [2016 (84) Kar.L.J.193 (HC)]. Subsequently, the judgment of the learned single Judge was confirmed by the learned Division Bench of this Court in the case of Heaven Inn (Bar Attached) vs. State of Karnataka and another [2016 (86) Kar.L.J.1(HC)(DB)].
8. Rejecting the petitioner’s claim for exemption, on 30.12.2016, the respondent No.2, the ACCT issued a notice to the petitioner under Rule 17 and 40 of the Karnataka Value Added Tax Rules, 2005. Moreover, on 30.12.2016, the respondent also issued a demand notice for the payment of tax. By his letter dated 06.01.2017, the petitioner claimed deductions on the exempted purchase, and objected to the proposed levied of tax made without assessment. However, by assessment order dated 06.01.2017, and by the revised notice demand, respondent No.2 has determined the tax to a tune of Rs.7,78,770/-, and has imposed a penalty of Rs.77,174/-, and has sought interest of Rs.42,880/-. Thus, a total liability of Rs.8,98,824/- has been imposed on the petitioner.
9. Subsequently, the petitioner computed the taxable turnover under Rule 3(2)(f) of the KVAT Rules, 2005. According to the petitioner, the petitioner paid Rs.60,319/- for the assessment period April 2016 to November 2016. Thereafter, the petitioner revised its returns on 21.01.2017, and deposited Rs.60,319/- with the respondent No.2. Further, the petitioner filed an application for rectification of the assessment year. However, by endorsement dated 25.01.2017, the respondent No.2 has rejected the rectification application. Hence, this petition before this Court.
10. This Court has raised a pointed query to the learned counsel for the petitioner Mr.Keresur, E.S., as to why the alternative efficacious remedy available under Section 62 of the KVAT Act has not been pursued by the petitioner? To this pointed query, the learned counsel for the petitioner submits that the petitioner has choosen not to avail alternate remedy for two reasons: firstly, the assessing authority has not interpreted the notification dated 28.02.2014 properly. Secondly, in other appeals, filed before the appellate authority, the appellate authority has taken a stand contrary to the pleas being raised by the petitioner. Therefore, the petitioner is not required to avail the alternate remedy provided under Section 62 of the Act.
11. The stand being taken by the learned counsel for the petitioner is clearly untenable. If the assessing officer has misinterpreted the notification dated 28.02.2014, the same can be pointed out to the appellate authority by challenging the assessment order. Moreover, merely because the appellate authority may have decided against the petitioner on the previous occasion, it would not permit the petitioner to avoid taking recourse to alternate remedy and to approach this Court directly for invoking the writ jurisdiction of this Court.
12. Therefore, this Court is of the firm opinion that since an efficacious alternate remedy is available to the petitioner under Section 62 of KVAT Act, the writ jurisdiction of this Court should not be invoked by this Court. Therefore, these petitions are hereby dismissed.
Sd/- JUDGE BS