IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 04TH DAY OF APRIL 2019 BEFORE:
THE HON’BLE MRS. JUSTICE S.SUJATHA WRIT PETITION Nos.20646-20657/2017 (T RES) BETWEEN:
M/S. ORANGE BUSINESS SERVICES INDIA TECHNOLOGY PVT. LTD., (FORMERLY KNOWN AS EQUANT TECHNOLOGY SERVICES (P) LTD)., REPRESENTED BY ITS MANAGER- CUSTOMER SUPPORT, SRI. THIMMEGOWDA, AGED ABOUT 42 YEARS, UNIT NO.805-806, 8TH FLOOR, PRESTIGE MERIDIAN II, NO.30, M.G. ROAD, BENGALURU-560 001. ... PETITIONER [BY SRI. R.V. PRASAD, SENIOR ADVOCATE] AND:
1. THE ASSISTANT COMMISSIONER OF COMMERCIAL TAXES (AUDIT) – 1.7, D.V.O – 1, 3RD FLOOR, BMTC BUILDING, YESHAWANTHPURA, BENGALURU-560 022.
2. THE COMMISSIONER OF COMMERCIAL TAXES IN KARNATAKA, VANIJYA THERIGE KARYALAYA, 1ST MAIN, GANDHINAGAR, BENGALURU-560 009. … RESPONDENTS [BY SRI. T.K. VEDAMURTHY, AGA) THESE WRIT PETITIONS ARE FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE ORDER OF RE-ASSESSMENT DTD:11.4.2017 BEARING CAS NO.225040933 PASSED BY THE R-1 UNDER SECTION 39(1) OF THE ACT, PERTAINING TO THE ASSESSMENT PERIODS COMMENCING FROM APRIL TO MARCH 2011 AND THE CONSEQUENTIAL NOTICE OF DEMAND, ALSO DTD:11.4.2017 (ANNEXURE-D), ETC.
THESE PETITIONS COMING ON FOR ‘PRELIMINARY HEARING – B GROUP’ THIS DAY, THE COURT MADE THE FOLLOWING:-
O R D E R Heard the learned counsel for the parties.
2. The petitioner has assailed the order of re- assessment dated 11.04.2017 passed by respondent No.1 under Section 39(1) of the Karnataka Value Added Tax Act, 2003 (‘Act’ for short) pertaining to the tax periods, April 2010 to March 2011 and consequential notice of demand dated 11.04.2017.
3. The petitioner is a Private Limited Company incorporated under the provisions of the Companies Act, 1956 and was registered under the provisions of the Act, as a dealer during the relevant tax periods. The petitioner is engaged in the business of providing Network and IT Infrastructure Solutions which include the re-sale of equipment and installation thereof apart from providing Annual Maintenance Contract (AMC). The petitioner is also a service tax provider registered under the provisions of the Finance Act, 1994. For the tax periods, April 2010 to March 2011 the prescribed authority issued proposition notice dated 02.02.2017 pursuant to which, the petitioner filed a reply dated 27.02.2017 objecting to the proposals made by the prescribed authority. The respondent No.1-prescribed authority issued an endorsement dated 17.03.2017 calling upon the petitioner to furnish additional information. In response to that, the petitioner addressed a second reply dated 24.03.2017 furnishing the information sought for by the prescribed authority and further made a request to respondent No.1 to provide a period of one week to collect and furnish the document in respect of the details furnished in the reply. The prescribed authority passed the reassessment order impugned on 11.04.2017 under Section 39(1), 36(1) and 72(2) of the Act, levying tax, penalty and interest for the periods in question confirming the proposals made. Being aggrieved by the same, the petitioner is before this court.
4. The learned senior counsel assisted by the counsel on record for the petitioner submitted that the order impugned is hit by the principles of natural justice as no adequate opportunity was provided to the petitioner to furnish the documents to substantiate the stand taken as regards the rendition of service and non- vatable turnover which relates to the other states not to be captured under the provisions of KVAT Act while concluding assessment for the relevant tax periods in question. The learned counsel inviting the attention of the court to the assessment order dated 11.04.2017 submitted that the reasons assigned by the prescribed authority for rejecting one week’s time to produce the documents, as it is time barred case is ex-facie unjustifiable since the prescribed authority had seven years time to conclude the assessment relating to the tax periods in question i.e. tax period of 2010-11 in terms of the second proviso to Section 40 of the Act. The business of the petitioner being spread over across ten states, it was obligatory on the part of the prescribed authority to provide an adequate opportunity to the petitioner to meet the requirements made in terms of the endorsement dated 17.03.2017.
5. The total tax liability determined by the prescribed authority ignoring the rendition of services and the turnover of other states is contrary to the principles of natural justice and without jurisdiction. In such circumstances, it is necessary for this court to interfere with the order impugned despite the alternative remedy available under the Act.
6. Learned Addl. Govt. Advocate appearing for the respondents justifying the impugned order submitted that sufficient opportunity was provided to the petitioner by issuing two endorsements pursuant to the proposition notice issued on 02.02.2017, despite the same, the petitioner has failed to substantiate his claim. On the other hand, there was suppression of material facts relating to E-Sugam which are unaccounted/undeclared. In such circumstances, this court cannot exercise the powers under article 226 and 227 of the Constitution of India to examine the disputed questions of facts circumventing the alternative remedy available under the Act. In support of his contention the learned counsel placed reliance on the order of the cognate Bench of this court in the case of M/s. TTP Technologies Pvt. Ltd., vs. State of Karnataka and Others in W.P. Nos.57922-933/2016.
7. I have carefully considered the rival submissions of the learned counsel appearing for the parties and perused the material on record.
8. The proposition notice dated 02.02.2017 issued by the prescribed authority was duly served on the assessee and the reply was filed. Again on 24.03.2017 further a week’s time was sought, to collect and submit all the documents in support of their claim on the query raised as per the endorsement dated 17.03.2017. The endorsement dated 17.03.2017 indicates that on verification of the objections filed by the assessee in response to the proposition notice along with revenue details, the assessee has failed to furnish the following details:-
“1) In other State: i.e. Details of registration, Vat returns filed to other states, etc.
2) Non Vatable Revenue: failed to provide service tax details, invoices related to commission and financial adjustment details.
3) e-Sugam: Category- To Shop- failed to provide L.R.Copies, bank statements and other connected documents.
4) Export sales: Failed to provide high sea details, export details and other related documents otherwise tax @5% will be levied.”
9. It is the specific case of the petitioner that assessee is engaged in rendition of services as well as sale of goods spread over across 10 states. In such circumstances, the prescribed authority proceeding to conclude the assessment on 11.04.2017 on the ground that the same would be a time barred case in the event of not concluding the assessment before the said date is unacceptable in view of the period of limitation provided under the second proviso to Section 40 of the Act whereby, seven years time is contemplated for concluding assessment relating to the tax periods in question.
10. The legal proposition envisaged by the cognate Bench of this court in the order relied upon by the revenue is well settled principle and there is no cavil with the said principle. However, as quoted by the cognate Bench in paragraph 15, the judgment of the Hon’ble Apex court in the case of In Board of Control for Cricket v. Cricket Assn. of Bihar [(2016) 8 SCC 535], on the compliance with the principles of natural justice, it is held as under:-
“Principles of natural justice, it is well settled, are not codified rules of procedure. Courts have repeatedly declined to lay down in a straitjacket, their scope and extent. The extent, the manner and the application of these principles depends so much on the nature of jurisdiction exercised by the court or the tribunal, the nature of the inquiry undertaken and the effect of any such inquiry on the rights and obligations of those before it. The extent of the application of the principles also depends upon the fact situation of a given case.”
Thus the extent of the application of principles depend upon the fact situation of a given case. It is observed in paragraph 22 by the cognate Bench as under:-
“22. Only a prima-facie look at the facts about the opportunity being given to the assessee or not and whether the question of vires as raised is really involved or not, can be looked into at the first blush. Even question validity of Rules cannot be allowed only as a tangent ground for maintaining the writ petition. That should be a serious challenge, which prima-facie requires interpretation and analysis by the constitutional courts and because those questions cannot be left to be determined by the authorities created under the Act itself. No deeper enquiry into the submissions of the nature made in the present case, can be legitimately undertaken in exercise of writ jurisdiction under Article 226 of the Constitution of India.”
11. It is not in dispute that the writ jurisdiction cannot be invoked in a routine manner. However, considering the request made by the petitioner for a week’s time to produce the documents being rejected on the ground of time barred case necessarily calls for interference by this court. Assessee cannot be made to suffer with a high pitched assessment unless the reasonable opportunity is provided to substantiate the claim made by the assessee. It is noticed that the petitioner has deposited a sum of Rs.1,00,00,000/-
(Rupees One Crore only) before the authority in terms of the order passed by this court on 09.05.2017 and in such circumstances, this court deems it appropriate to set aside the impugned assessment order as well as demand notice at Annexure-D and to restore the proceedings to the file of the respondent No.1- prescribed authority to redo the assessment after providing reasonable opportunity of hearing to the petitioner subject to the petitioner depositing a further sum of Rs.1,00,00,000/- (Rupees One Crore only) before the assessing authority within a period of three weeks from today.
12. The petitioner shall appear before the respondent No.1-prescribed authority on 25.04.2019 without expecting any notice. The respondent No.1- prescribed authority shall provide further two weeks time to furnish all the necessary requisite documents by the petitioner-assessee. The prescribed authority shall thereafter conclude the re-assessment proceedings in accordance with law in an expedite manner after hearing the petitioner.
13. Such total deposit of Rs.2,00,00,000/- (Rupees Two Crores only) shall be subject to the decision to be taken by the prescribed authority.
With the aforesaid observations and directions writ petitions stand disposed off.
Chs* Sd/- JUDGE