IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 14TH DAY OF MARCH, 2019 BEFORE:
THE HON’BLE MRS. JUSTICE S.SUJATHA WRIT PETITION No.10315 OF 2019 (T-RES) BETWEEN:
M/S SWATHI HOSPITALITY SERVICES PVT LTD A PRIVATE LIMITED COMPANY HAVING ITS CORPORTE OFFICE AT NO.5, AMAR MANSION, 2ND FLOOR, WEST OF CHORD ROAD, RAJAJINAGAR, BENGALURU - 560 086 AND (REPRESENTED BY ITS MANAGING DIRECTOR SRI GOPALAKRISHNA SHETTY) ... PETITIONER [BY SRI. RAJESH CHANDER KUMAR ADVOCATE] AND:
THE ASSISTANT COMMISSIONER OF COMMERCIAL TAXES (AUDIT)6.1,DVO-6 3RD FLOOR,2ND BLOCK KIADB BUILDING PEENYA 2ND STAGE BENGALURU - 560 058.
…RESPONDENT [BY SRI.T.K. VEDAMURTHY ADDITIONAL GOVERNMENT ADVOCATE] THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE RE-ASSESSMENT NOTICE IN NO.ACCT (AUDIT) - 6.1/T.NO.1430/18-19 PASSED UNDER SECTION 39(1) OF THE KVAT ACT READ WITH SECTION 36(1) AND 72(2) OF THE KVAT ACT DATED 12.02.2019 ALONG WITH THE CONSEQUENT ENDORSEMENT NO.ACCT (AUDIT)- 6.1/T.NO.1533/18-19 DATED 23.02.2019 (ANNEXURE-'A' & 'B') ISSUED BY THE RESPONDENT FOR THE PERIOD 2013-
14 AS BEING IN ABUSE OF JURISDICTION, WHOLLY ARBITRARY, ILLEGAL AND UNTENABLE IN LAW.
THIS PETITION COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:-
O R D E R The petitioner has challenged the Reassessment Notice No. ACCT(AUDIT)-6.1/T.NO.1430/18-19 issued under Section 39(1) of the Karnataka Value Added Tax Act, 2003 (For short, the ‘Act’) read with Section 36(1) and 72(2) of the Act dated 12.02.2019 along with consequent Endorsement No.ACCT (AUDIT)-6.1/T.NO.1533/18-19 dated 23.02.2019 issued by the respondent for the tax period 2013-14 as being in abuse of jurisdiction.
2. The petitioner is a private limited company registered under the provisions of the Act. It is the contention of the petitioner that the respondent has grossly erred in alleging that the petitioner has violated the provisions of Section 15 of the Act whilst the petitioner is indeed entitled to discharge tax at regular rate under section 4 of the Act for the places of business where it is selling liquor. This does not disentitle the petitioner from the benefit of composition and it is thus permissible to pay tax under both VAT and the composition scheme depending on the nature of its business activities, even though there is sale of liquor at one or more branches. The respondent further erred in holding that the petitioner had purchased goods from outside the State when such purchasers were in fact capital goods; such purchases have been held by this court not to violate Section 15 of the Act.
3. Sri Rajesh Chander Kumar, learned counsel for the petitioner would contend that the very subject matter relating to the tax period 2014-15 is pending consideration before this court in STA No.153/2016 whereby an ad interim order is passed to the effect that no coercive steps shall be taken by the authorities. In such circumstances, when the matter is sub-judice before this court, issuance of the Re- assessment Notice by the respondent for the tax periods 2013-14 is ex facie illegal.
4. The learned Additional Government Advocate appearing for the respondent would submit that by way of an interim order, this court has directed the authorities not to take coercive steps in the matter relating to the tax periods 2014-15. The tax period being 2013-14 in the present case, the period of limitation to initiate re-assessment proceedings would come to an end if no proceedings are initiated at this stage. In other words, any further reassessment proceedings if requires to be initiated pursuant to the order passed by this court in STA No.153/2016, the same would be barred by limitation in terms of the provisions of the Act, resulting in loss of revenue to the State exchequer.
5. Having heard the learned counsel for the parties and perusing the material on record, it is not in dispute that the subject matter involved in this petition insofar as the benefit of composition tax under section 15 of the Act on the total sales turnover/returns of the petitioner is seized of by this court in STA 153/2016, wherein the assessee has challenged the order passed by the Additional Commissioner of Commercial Taxes. In such circumstances, though the authorities are bound by the decision to be taken by this court, requisite procedure is required to be followed keeping in mind the period of limitation as contemplated under the Act to safeguard the interests of the revenue in the event the appeal filed by the assessee is dismissed. Hence, the issuance of notice under Section 39(1) of the Act to reassess the petitioner cannot be held to be illegal or irregular. However, considering the issue pending before the Division Bench of this court, it would be appropriate to direct the respondent to proceed with the reassessment proceedings and the same shall be subject to the result of STA No.153/2016 pending before this court. It is needless to mention that even if the reassessment order is passed for the tax periods in question, the same shall not be enforced until a decision to be taken by this court in STA 153/2016.
6. The petitioner is at liberty to produce books of accounts on 25.3.2019 without expecting any notice from the respondent. The respondent – authorities shall consider the books of accounts, objections/submissions of the petitioner – assessee and shall proceed in accordance with law.
With the aforesaid observations and directions, the writ petition stands disposed of.
Sd/- JUDGE nv