2006 (8) TMI 537 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Misuse of Form 18 for concessional tax rate.
2. Definition and classification of "newspaper" under KGST Act.
3. Applicability of penalty under Section 45A of the KGST Act.
4. Maintainability of writ petition under Article 226 despite alternative remedy.

Detailed Analysis:

1. Misuse of Form 18 for Concessional Tax Rate:
The petitioner, a company engaged in printing and publishing newspapers, used Form 18 to purchase printing ink at a reduced tax rate under Section 5(3) of the KGST Act. The authorities issued notices alleging misuse of Form 18, arguing that newspaper printing does not involve a manufacturing process and newspapers do not qualify as "goods" under Section 2(xii) of the KGST Act. Consequently, the petitioner was accused of an offense under Section 45A of the KGST Act, leading to a proposed penalty of Rs. 46,40,592.

2. Definition and Classification of "Newspaper" under KGST Act:
The court examined whether "newspaper" falls within the definition of "goods" under Section 2(xii) of the KGST Act. Historically, newspapers were taxed under the Government of India Act, 1935, but post-Constitution, the power to tax newspapers was assigned to the Centre (Entry 92, List I). The KGST Act explicitly excludes newspapers from the definition of "goods," aligning with the constitutional mandate that states cannot levy sales tax on newspapers (Entry 54, List II). Consequently, newspapers are not considered "goods" under the KGST Act, making the use of Form 18 for purchasing printing ink unauthorized.

3. Applicability of Penalty under Section 45A of the KGST Act:
Given that newspapers are excluded from the definition of "goods," the concessional rate of tax under Section 5(3) does not apply to purchases for newspaper production. The issuance of Form 18 for such purchases constitutes a misuse, attracting penalties under Section 45A. The court found no infirmity in the penalty proceedings initiated against the petitioner. However, the court directed the assessing authority to reconsider the penalty amount, considering the petitioner's claim of a bona fide belief in the applicability of the concessional rate.

4. Maintainability of Writ Petition under Article 226 Despite Alternative Remedy:
The single judge dismissed the writ petition, citing the availability of an alternative remedy by way of revision under the KGST Act. However, the appellate court held that the existence of an alternative remedy does not bar the jurisdiction of the High Court under Article 226, especially when the impugned order is alleged to be without jurisdiction or authority of law. The court cited precedents where writ petitions were entertained despite alternative remedies, emphasizing that the rule of exclusion is discretionary. The court deemed the writ petition maintainable under Article 226, given the legal questions involved and the alleged misuse of repealed provisions.

Conclusion:
The court dismissed the writ appeal, upholding the penalty proceedings under Section 45A of the KGST Act. It directed the assessing authority to reconsider the penalty amount within two months, considering the petitioner's bona fide belief. The court affirmed the maintainability of the writ petition under Article 226, despite the availability of an alternative remedy.