TMI Blog2010 (2) TMI 1077X X X X Extracts X X X X X X X X Extracts X X X X ..... - 8 of 2007 - - - Dated:- 15-2-2010 - MANJUNATH K.L. AND ARAVIND KUMAR , JJ. The judgment of the court was delivered by ARAVIND KUMAR J. The assessee is questioning the correctness and the legality of the order passed by the Commissioner of Commercial Taxes dated March 14, 2007 whereunder the revisional powers under section 22A(2) of the Karnataka Sales Tax Act, 1957 (hereinafter referred to as, the Act , for short) came to be exercised which is at annexure A. The facts in nutshell are as follows: (i) The appellant is an individual P.W.D. contractor and is a proprietory concern trading in the name and style of M/s. Shiva Kumar, Holenarsipur, executing civil works which include and involve both transfer of property as well as civil work which is labour oriented. The appellant is also carrying on the business in HSD, petrol, diesel, lubricants, etc., as a subsequent seller. For the assessment year 1997-98 the appellant had opted for the benefit of composition in respect of contract work undertaken and the jurisdictional assessing officer, namely, Deputy Commissioner of Commercial Taxes (Assessment), Hassan levied four per cent tax on earthen work under section 17( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xercise of power under section 22A(2) of the Act issued a notice dated December 22, 2006 observing thereunder that the orders passed by the Joint Commissioner of Commercial Taxes (Appeals) (dated June 22, 2000) and the order passed by the Additional Commissioner of Commercial Taxes, Zone II, Bangalore (dated June 6, 2003) are prejudicial to the interest of the Revenue and accordingly called for reply from the appellant-assessee. In response to the said notice the appellant herein filed its objections to the proposed revisionary proceedings by reply dated February 6, 2007 (annexure H) which came to be considered by the Commissioner of Commercial Taxes and by his order dated March 14, 2007 rejected the claim of the assesseeappellant and restored the order passed by the Deputy Commissioner of Commercial Taxes and by his order dated March 14, 2007 rejected the claim of the assessee-appellant and restored the order passed by the Deputy Commissioner of Commercial Taxes, Assessment, Hassan dated April 29, 1999. It was held therein that once the assessee has opted for composition he cannot opt out and accordingly confirmed the order of assessing officer. (v) The appellant-assessee being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vy of sales tax on services when there is no transfer of property in goods is bad in law. (v) It was contended that the Commissioner of Commercial Taxes in exercise of his power under section 22A(2) of the Act, is not empowered to review both the orders, i.e., the order of the Joint Commissioner dated June 22, 2000 as well as the order of the Additional Commissioner of Commercial Taxes, Zone II, dated June 6, 2003 since the said provision permits him to disturb any one order at a time. Per contra Smt Geetha Menon, learned counsel for the Revenue, would contend that once the assessee has opted for composition under section 17(6) of the Act, they cannot be permitted to opt out particularly in the revisional jurisdiction. It is also contended that Mycon Construction case [1998] 111 STC 322 (Karn) was rendered in the background of considering the challenge to the vires of amendment brought, to rule 8B to the Karnataka Sales Tax (Amendment) Rules, 2001 whereunder the vires were challenged and in the said case it was a concession given by the State and as such the petitioners therein and similarly placed persons were allowed to opt out of composition and submits that the order pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 287 (Karn). (10) Iqbal Ahamed v. Deputy Commissioner of Commercial Taxes [2001] 51 Kar. LJ 390 (Karn). Per contra Smt Geetha Menon, learned Additional Government Advocate appearing for the respondent-Revenue would rely upon the following decisions: (i) Karnataka State Construction Corporation Limited, Bangalore v. State of Karnataka [2004] 138 STC 75 (Karn). (ii) W. A. No. 1740 of 2001 disposed of on December 10, 2004 in the matter of Deputy Commissioner of Commercial Taxes v. B. V. Subba Reddy [2007] 62 Kar. LJ 565. In order to appreciate the contentions raised by the respective advocates, it would be necessary to extract the relevant provisions of the KST Act as also rule 8 of the Karnataka Sales Tax Rules: Section. 22A of KST Act 22A. Revisional powers of Additional Commissioner and Commissioner. The Additional Commissioner may on his own motion call for and examine the record of (any order passed or proceeding recorded) under section 20 or section 21 of this Act and if he considers that any order passed therein by any officer who is not above the rank of a Joint Commissioner, is erroneous in so far as it is prejudicial to the interest of the Revenue, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sections 23, 24 and 25A, be final. Explanation I. If the order passed or proceedings recorded by the appropriate authority referred to in sub-section (1) or (2), involves an issue on which the High Court has given its decision adverse to the Revenue in some other proceedings and an appeal to the Supreme Court against such decision of the High Court is pending, the period spent between the date of the decision of the High Court and the date of the decision of the Supreme Court shall be excluded in computing the period referred to in clause (c) of sub-section (3). Explanation II. In computing the period of limitation for the purpose of sub-section (3), any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. Explanation III. For the purposes of this section, 'record' shall include all records relating to any proceedings under this Act available at the time of examination by the Additional Commissioner or the Commissioner. Rule 8B reads as hereunder: 8B. Composition of tax in the case of dealers executing works contracts. (1) The dealer who elects to compound the tax for any year under sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) and the appellate authority by order dated June 22, 2000 held that works contract receipt concerning the execution of earthen work to the tune of Rs. 1,65,70,899 be reduced from the gross works contract receipts and only the rest of the turnover be subjected to tax under section 17(6) of the Act, thereby reducing the tax liability to Rs. 8,93,835 from Rs. 15,56.671. One curious aspect which requires to be noticed at this juncture is that the assessee being satisfied of the same did not challenge the same which is obvious since the same being beneficial to it. Be that as it may, the Additional Commissioner of Commercial Taxes, Zone II, Bangalore in exercise of his powers under section 22A(1) of the Act suo motu issued a notice dated September 2, 2002 calling upon the appellant-assessee to show cause as to why the relief given by the first appellate authority bifurcating a portion of the contract work should not be brought to tax as it is an error warranting revisional action by placing reliance on the case of S.S. Muddanna v. State of Karnataka reported in [1993] 89 STC 90 (Karn). It is in reply to this notice it was contended by the appellant, that though the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 17 was under consideration and it is in this background, the learned judge of this court in paragraph 13 of Mycon Construction's case [1998] 111 STC 322 held as follows (at page 338): However, in view of the categorical statement made by the State in the statement of objections stating that this court can permit the petitioners to opt for regular assessment under section 5B; and I have taken that factor as one of the factors to come to the conclusion that the impugned provision in no way results in arbitrariness or violation of the right guaranteed to the petitioners either under article 14 or under article 19(1)(g) of the Constitution; it is necessary to reserve liberty to the petitioners to opt for regular assessment under section 5B of the Act notwithstanding the fact that they had opted for composition under section 17(6) of the Act, if the petitioners, within 12 weeks from today, make an application to the concerned assessing authority that they may be assessed as provided under section 5B of the Act, and further direct the assessing authorities to proceed to assess the petitioners and all others, who are not before the court, as provided under section 5B of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the conclusion reached by him runs counter to the two Division Bench decisions of this court, referred to above. Further, as rightly pointed-out by learned Additional Government Advocate, in the case of Mycon [1998] 111 STC 322, this court has not laid down the law taking the view that if once an assessee seeks for assessment by way of composition under section 17(6) of the Act, it would still be open for him to opt out of it and seek for assessment under section 5B of the Act. In that case, the assessees were permitted to seek for assessment under section 5B of the Act though they had initially sought for assessment under section 17(6) of the Act in the light of the statement made by the State Government enabling the assessees in those cases to seek for assessment under section 5B of the Act. The said observations were made when constitutional validity of section 17(6) of the Act came up for consideration before this court. While refusing the submission made that section 17(6) of the Act was unconstitutional in law, this court, in the light of the concession shown by the State that the assessee could be permitted to seek for assessment under section 5B of the Act, the assessees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply to this sub-section; (iii) The amount paid under clause (ii), shall be subject to such adjustment as may be necessary on completion of final assessment. Explanation. No tax shall be payable under this sub-section on the turnovers to amounts paid to sub-contractors as consideration for execution of works contract whether wholly or partly subject to production of proof that such sub-contractor is a registered dealer liable to tax under the Act and that the turnover of such amounts is included in the monthly statements or return of turnover, as the case may be, filed by such sub-contractor. If a dealer liable to tax under section 5B was to elect for composition, in lieu of amount of tax payable by the assessee during the year, on the total consideration for the works contract executed by him in that year in the State, in respect of works contract specified in column No. 2 of the VI Schedule, the rate of tax would be four per cent. Conditions and circumstances prescribed under the said section are to be found in rule 8B of the Karnataka Sales Tax Rules, 1956. Rule 8B reads as follows: 8B. Composition of tax in the case of dealers executing works contracts. (1) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment being April 1, 1997 to March 31, 1998. The said words added to sub-rule (1) of rule 8B not being in existence during the assessment period in question, i.e., April 1, 1997 to March 31, 1998 cannot be applied to the facts and circumstances of the case and accordingly submits that the reasoning given by of the Commissioner of Commercial Tax in his revisional order dated March 14, 2007, passed in exercise of power under section 22A(2) of the KST Act is erroneous and liable to be set aside. The undisputed facts on this issue in the instant case are: the assessee had opted by way of election to get the composition done under section 17(6) of the Act and had obtained an assessment order on April 29, 1999 (annexure B) which resulted in filing an appeal before the Joint Commissioner of Commercial Tax (Appeals) which came to be allowed by order dated June 22, 2000 and the assessee having accepted the same in effect would result in an inevitable conclusion that the assessee did not have any grievance in, so far as, composition method adopted particularly having not perused the said order of the Joint Commissioner of Appeals. Thus, the dealer has accepted the order passed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce with sub-section (1) once in a quarter and pay in advance the full amount of tax payable for every quarter within twenty days after the close of that quarter to which such tax relates: Provided further that the full amount of tax payable by the dealer in advance for the year as reduced by the amount to tax already paid under this section shall be paid within thirty days after the close of the year to which such tax relates: Provided also that where the tax payable for any quarter by a small-scale industrial undertaking is not paid within thirty days after the close of the quarter to which such tax relates, such undertaking shall be liable to pay tax thereafter as provided under this sub-section excluding the first proviso. Act 5 of 2000 (from April 1, 2000) (2) If default is committed in the payment of tax for any month or quarter as the case may be, beyond ten days, whether or not a statement as required under sub-section (1) is filed; or if the amount of tax paid is less than the amount of tax payable for any month or quarter as the case may be, the dealer defaulting payment of tax or making short payment of tax shall, in addition to the tax, pay interest calcul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Under section 12B there is a mandatory duty cast on every dealer to declare the taxable turnover during the preceding month and the dealer is required to pay in advance the full amount of tax payable by him, under this Act within 21 days after the close of the preceding month to which such tax relates to. The said tax is paid on the basis of the turnover particulars shown in the statement filed by the assessee. The relevant rule applicable in so far as payment of tax in advance is concerned is rule 17. The said rule reads as follows: 17. Payment of tax, in advance, reimbursement of excess tax paid on industrial inputs, etc. (1) The statement under sub-section (1) of section 12B shall be in form 3 and in the case of an industrial unit in form 3 along with a statement in the form of annexure to form 3 and the return under sub-section (3) of section 25B shall be in form 3B and shall be sent in duplicate to the assessing authority or the registering authority, as the case may be, so as to reach it within twenty days after the close of the month to which such statement or return relates. Such statement or return shall be accompanied by a receipt from a Government Treasury, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 STC 322 (Karn) wherein it is clearly held as '. . . And further direct the assessing authorities to proceed to assess the petitioners and all others who are not before the court as provided under section 5B of the Act. This direction is binding on the State and its assessing, revising or appellate authorities wherever an application is made seeking assessment under section 5B of the Act and they are directed to pass appropriate orders suitable modifying the assessment. . .' We therefore, request your good authority to cancel the composition benefit sought by us and to assess under section 5B of the Act and thus render justice to us. We have filed herewith purchase statements, expenditure incurred details, RA bills to prove the works contract undertaken in which no transfer or property is involved, etc., for enabling you to finalise the assessment. Thus, the assessee in question was fully aware as to the nature of transaction and being conscious of the same had elected to be governed by alternate method of taxation, namely, composition. There was no compulsion on the assessee to opt for method of taxation as provided under subsection (6) of section 17. It was voluntar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /added words with effect from June 8, 2001. The rule-making power is a delegated legislation. It cannot override the statutory provision, namely, section 17(6) of the Act. Sub-clause (ii) of sub-section (6) of section 17 postulates that assessee after electing to opt for composition method would be permitted by the assessing authority to pay the amount under clause (i) and it is only on being granted the permission the assessee or dealer would pay the tax in advance as provided under section 12B of the Act. In effect it would mean that once permitted under the Act of election by the assessee, the assessee cannot, retrace the steps and admit to do undo what has been done. The same is impermissible under the Act itself, which is the only conclusion, which can be drawn by reading the words in sub-clause (ii) of sub-section (6) of section 17 of the Act and no other view can be arrived at. Thus, when section itself is clear the rule would only act as a procedural factor. The rule-making authority having noticed that it may lead to an ambiguous interpretation have thought fit to clarify the same by way of adding the words and such application once filed by the dealer electing to compoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Cement Co. Ltd. v. Commercial Tax Officer, Kota [1981] 48 STC 466; AIR 1981 SC 1887 has held as follows (at page 476 of STC): The argument pressed before us on behalf of the assessee is that since section 7 of the Act does not expressly say that a registered dealer who has not filed any return or a person who has claimed that his turnover or any part thereof is not taxable and has not paid tax due in respect of such disputed turnover should also pay interest on the tax which is legitimately due to the Government but withheld by him, no interest can be claimed under section 11B of the Act in such cases. Section 7 of the Act which deals with the submission of returns is not a charging section but a machinery section. It is settled law that a distinction has to be made by court while interpreting the provisions of a taxing statute between charging provisions which impose the charge to tax and machinery provisions which provide the machinery for the quantification of the tax and the levying and collection of the tax so imposed. While charging provisions are construed strictly, machinery sections are not generally subject to a rigorous construction. The courts are expected to con ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
