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TMI Blog2019 (12) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... Court' located in the same building i.e., Krishnapuram Prime, BC Road, Bantwal, which was registered under the provisions of the Act as the petitioner's additional place of business. It transpires that in April 2009, the petitioner filed a letter dated 25.4.2009 submitting details of a newly established vegetarian restaurant namely 'Krishnima Veg' in the same building and requested to accept the registration of Krishnima Veg under the composition scheme as per Section 15 of the Act. A certificate was issued in Form VAT-8 under Rule 137(2) of the Karnataka Value Added Tax Rules, 2005 ('Rules' for short) for the petitioner's principal place of business with additional places of business as Dakshin Court and Krishnima Veg on 19.06.2009. It is contended that the petitioner filed returns for Dakshin Court in VAT 100 and returns for Krishnima Veg in VAT 120 upto the tax period 2012-13. Since Krishnima Veg was a pure Veg restaurant where no liquor was being served, Dakshin Court was a Non-veg restaurant with licence for sale of liquor as well. Thereafter, in 2013, the petitioner filed a letter seeking benefit of composition scheme for both the restaurants and continued filing returns und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate tax treatments for separate restaurants operating from different premises in the same building. 5. Learned counsel submitted that as per 137 of the Rules, before issuing the composition scheme certificate, the respondent authorities had satisfied themselves of all conditions being fulfilled by the petitioner. The respondent No.3 cannot change its views subsequently and cancel the benefit on the ground of violation of conditions prescribed when there has been no change in the facts and circumstances of the case from the time of issuance of certificate till cancellation that too retrospectively. It was argued that no composition scheme benefit can be cancelled retrospectively. Reliance was placed on the following decisions:- 1) M/s. Oriental Cuisines Pvt. Ltd., vs. The Deputy Commissioner of Commercial Taxes, reported in 2018-TIOL- 635-HC-KAR-VAT 2) Amma Construction India Pvt. Limited vs. The Assistant Commissioner of Commercial Taxes, Bangalore reported in 2015 (83) Kar. L.J. 91 (HC); 3) Kalaburagi Cements Pvt. Ltd. Vs. ACCT reported in ILR 2018 Kar. 119. Thus, it was contended that the proceedings initiated by respondent No.4 to re-open the assessment proceedings unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Condition No.4 reads thus: "He shall not be a dealer selling liquor" Rule 136 contemplates reporting option and furnishing returns. The assesee is required to report his option, if not already registered, not later than the date on which his registration comes into effect under Section 25 and, if already registered, on the first day of any month after the date of registration in From VAT 1 to the Jurisdictional Local VAT officer or VAT Sub-officer. The Jurisdictional Local VAT officer or VAT Sub Officer shall within a period of 15 days from the date of receipt of Form VAT 1, if he is satisfied that the said form VAT 1 submitted under Rule 136 is correct and complete, he is empowered to issue a certificate in Form VAT 8 to the dealer in terms of Rule 137. Duties of dealer under the scheme are prescribed under Rule 138. Rules 142 to 145 deals with withdrawal from scheme and cancellation of certificate. Rule 142 contemplates requirements when threshold exceeded. Rule 143 contemplates voluntary withdrawal from scheme. As per rule 144(1), every dealer, who after opting to pay tax by way of composition purchases or obtains goods from outside the State or from outside the territory of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Made Foreign Liquor (IMFL) along with articles of food which is a condition prohibited for grant of composition under sub rule(4) of Rule 135 of the Rules. The order impugned does not traverse beyond this inspection report. Indisputably, the assessments of the petitioner were concluded for the earlier assessment years from 2009-10 to 2012-13 and the tax liability was fixed at the applicable rates of tax under the composition scheme. The assessee as well as the Assessing Authority have acted upon the certificate of composition scheme issued. The petitioner has not collected tax on his sales during the period of the operation of the composition scheme and has not claimed the input tax credit. Cancellation of the composition scheme retrospectively creates additional tax liability where the dealer has not collected the tax while opting for composition under Section 15 of the Act, otherwise the dealer was entitled to collect tax if the liability to pay tax was under Sections 3 and 4 of the Act. 15. It is well settled that the retrospective withdrawal or cancellation of the registration certificate will have no effect upon the assessee who has acted upon it when it was valid and operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The fact that registration has been granted, yet the person holding the certificate is a fictitious one seem to be contradictions in term. A certificate of registration can be granted only when the dealer, apart from being a businessman, satisfies the other requirements prescribed by law. A registration certificate cannot be granted to a non-existent person. The fact that there have been some persons who are labelled by the department as fictitious dealers goes to show that the officers under the Act either collude with dishonest people in the field or fail to exercise due diligence and allow fraud to be practised in the commercial field. Whether it is collusion or negligence, these officers bring disrepute to the State and introduce uncertainty and lack of confidence into a true filed of trust. It is high time that the State Government institutes appropriate enquiries, take such steps as the necessary to eliminate fictitious dealers from the filed and also take strong' ion against persons connected with such matters so that there be no recurrence of it in future." 18. In the case of Amma Construction India Private Limited, Bangalore Vs. The Asst. Commissioner of Commercial Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 2009-10 sans raising objections to the returns filed. Cancellation of the composition certificate with retrospective effect would damage the business activity of the dealer with cascading effect denying the input tax credits which would have been claimed by the petitioner collecting the taxes on his sales for which maintaining of regular books of accounts would be necessary. This could be examined in another angle also. Rules 142, 143 and 144 makes it clear that if the dealer exceeds the threshold, voluntarily withdrawn from the composition scheme, purchases or obtains goods from outside the State shall be inelgibile for such composition benefits and is liable to pay tax under Section 3 (VAT scheme) from the relevant periods prescribed therein i.e., prospectively. It may be true that the intelligence wing on the inspection conducted on 26.02.2015 might have discovered the sale of liquor in the business of premises of the assessee having wrongly opted for VAT as well as composition scheme for the two restaurants, filing two separate returns on 26.2.2015 but the multiple registrations obtained by the petitioner during 19.06.2009 to 31.03.2013 is not disputed. In such circumstances, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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