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TMI Blog2024 (5) TMI 1327X X X X Extracts X X X X X X X X Extracts X X X X ..... lenging the Constitutional validity of Section 2A (8-a) of the Karnataka Tax on Entry of Goods Act, 1979 and assailing the assessment notices dated 13.10.2010 and 19.03.2014 issued by respondent no. 5 proposing to pass reassessment orders and orders levying penalty for the years spanning from 2002 to 2009. Additionally, the petitioner/company is also aggrieved by the assessment orders dated 31.03.2017 issued by respondent No. 5 for the year 2009-2010, pursuant to notice dated 28.01.2017. 2. Petitioner is a company registered under the Companies Act, 1956 and is engaged in the business of manufacture and sale of pan masala containing tobacco known as guthka. Petitioner/Company earlier used to manufacture goods from its manufacturing unit located in Kolhapur District, later it was relocated at Belgaum district. The goods manufactured are then subsequently transferred to sale depot located within the same district on stock transfer basis. 3. Petitioner/company claims that the declarations made in the returns submitted by the petitioner for the payment of entry tax was examined by the Deputy Commissioner of Commercial Tax/respondent No. 4 and has accordingly, proceeded to finalize th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Commissioner of Central Excise, Pandicherry vs. M/s. Acer India Private Limited 2004 137 STC 596. While buttressing his arguments on this point, he would vehemently argue and contend that definition clause cannot run contrary to the charging provisions. Reliance is placed on the judgments in the case of Commissioner of Central Excise, Indore vs. Grasim Industries Limited 2018 (360) E.L.T. 769 (S.C.), Commissioner of Central Excise, Pandicherry vs. M/s. Acer India Private Limited (supra), BPL Limited vs. State of Karnataka and others MANU/KA/0625/2004, Voltas Limited vs. State of Karnataka MANU/KA/0488/2004, M/s. Castrol India Limited vs. Commercial Taxes Department, the Commissioner of Commercial Taxes, Madhya Pradesh 2019-VIL-601-MP and M/s.Mangalam Cement Limited vs. Commissioner of Commercial Tax 2019-VIL-483-ALH. Referring to these judgments, he would contend that sale price cannot be the basis for levy of entry tax. He would further point out that in case of stock transfer, the authorities have to act under Section 3 (1) of the Act and therefore, there can be no levy of entry tax on the sales price. 8. The second limb of argument canvassed by the learned Senior Coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 5 is wholly without jurisdiction and therefore, petitioner cannot be relegated at this juncture to avail the remedy of an appeal. Reliance is placed on the judgment rendered by the Apex Court in the case of Bal Krishna Agarwal vs. State of UP and others [1995] 1 SCR 148 to substantiate that some of the petitions are pending for almost 14 years and therefore, the same cannot be dismissed on the ground of alternate remedy. Even if the petitioner is relegated to the original authority for reconsideration, the Officer is bound by the language of the provisions of the Act and therefore, no purpose will be served in remanding the matter to the original authority. 11. Per contra, learned Advocate General reiterating the grounds urged in the statement of objections would place reliance on the notification dated 30.3.2002. He has further placed reliance on para 3 of the written submissions: "3. Charging Section: Section 3 of the Karnataka Tax on Entry of Goods Act, 1979 provides for levy of Entry Tax on any notified goods listed in the First Schedule of the said Act, on Entry into a local area for consumption, use or sale therein at the notified rates on the value of goods as may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (supra), learned Advocate General has placed reliance on the Division Bench judgment rendered in Voltas' case. Therefore, the learned Advocate General would point out that the petitioner's reliance on charging Section 3 (1) of the KTEG Act as it existed before amendment dated 1.5.1992 does not have any bearing on the provision of Section 2-A (8-a). The Apex Court has rendered the judgment in Hansa Corporation's case in 1981 and therefore, the principles laid down by Apex Court in the case of Hansa Corporation are not applicable to the present case on hand. He would contend that charging Section 3 (1) and Section 2A (8-a) defining the value of the goods are not competing each other. While the former prescribes the event attracting levy and incidence of tax, latter prescribes the value of the goods liable for tax. He would further point out that both Sections are inclusive of each other and therefore, the question of charging section prevailing over definition clause may not arise for consideration. 13. On reassessment notices, learned Advocate General would point out that these notices are not violative of clarifications issued by the Commissioner of Commercial Tax. Learned Advoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (8-a) of KTEG Act are valid? (3) Whether differential tax amount determined by respondent No. 5 based on mere change of opinion are in contravention of Section 6 (2) of the KTEG Act? (4) Whether petitioner/company needs to be relegated to avail remedy of appeal on the ground of alternate remedy?" 16. FINDING REGARDING POINT No. 1 : In the context of tax statutes such as the Karnataka Tax on Entry of Goods Act, it is essential to understand the interplay between the charging provision and definition clause. The complexities surrounding the interpretation of entry tax laws particularly in the context of stock transfers, necessities a meticulous examination of relevant legal principles and the judgments rendered by Apex Court and this Court on this issue. 17. Before I advert further, I deem it fit to refer to the definition clause under Section 2A (8-a) of KTEG Act, which reads as under: "'Value of the goods' shall mean the purchase value of such goods, that is to say, the purchase price at which a dealer has purchased the goods inclusive of charges borne by him as cost of transportation, packing, forwarding and handling charges, commission, insurance, taxes, duties and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be determined at the time when they enter the local area. This principle underscores the importance of assessing the value of the goods accurately when they cross the local jurisdictional boundaries. 22. Another significant judgment rendered by this Court in the case of Voltas Limited .vs. State of Karnataka (2008) 11 VST 267 (Karn.), this Court highlighted that assessing officers cannot levy entry tax based on the prevailing market price of goods. This judgment emphasizes the need for clarity in determining the taxable value of goods to avoid arbitrary assessments. 23. The Apex Court in the case of Moriroku U.T. India(P) Limited vs. State of Uttar Pradesh and others (2008) 4 SCC 548 was examining the excise duty payable on manufacture of goods. Apex Court while examining the excise duty and liability on manufactured goods held that excise duty is levied based on the value of the manufactured goods, irrespective of their sale price. This principle reinforces the idea that the value at the time of manufacture or entry is crucial for tax assessment. 24. The Apex Court in the case of State of Rajasthan and others vs. Rajasthan Chemists Association AIR 2006 SC 2699 held that ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f goods within the same corporate entity or group without an actual sale. Therefore, determining the appropriate taxable value becomes crucial to prevent double taxation and ensure fairness in tax imposition. In line with the judgments like Voltas Ltd v. State of Karnataka (supra), where this Court emphasized that entry tax cannot be levied based on the prevailing market price, it becomes clear that the assessing officers must adhere to the principles laid down in the charging provision when assessing tax on stock transfers. 28. The primary objective behind the imposition of entry tax is to tax the entry of goods into the local area for consumption or use. The legislative intent, therefore, is to levy tax based on the value of goods at the time of their entry. Any interpretation deviating from this principle would defeat the legislative intent and undermine the objectives of the entry tax laws. 29. In light of the comprehensive legal analysis and principles discussed above, the definition clause under Section 2A (8-a) of the KTEG Act must be construed harmoniously with the charging provision under Section 3 (1) of the KTEG Act. The charging provision, being the substantive sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve that the whole or any part of the turnover of a dealer or the value of taxable goods brought or caused to be brought into a local area by a dealer whether on his own account or on account of his principal or any other person or who has taken delivery or is entitled to take delivery of such goods on its entry into local area in respect of any tax period has escaped re-assessment to tax; or (c) tax has been under re-assessed; or (d) has been re-assessed at a rate lower than the rate at which it is assessable under this Act; or (e) any deductions or exemptions have been wrongly allowed in respect thereof, The assessing authority may, notwithstanding the fact that whole or part of such escaped turnover or value of taxable goods as the case may be, was already before the said authority at the time of assessment or reassessment, proceed to make assessment or any further re-assessments in addition to such earlier assessment or re-assessment" Now, let me examine whether the impugned assessment orders in two petitions and reassessment notices in three petitions are beyond the permissible limit prescribed under Section 6 (2) of KTEG Act. The above said section lays down condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09. It is also relevant to note that these assessment orders were passed as late as 2004 to 2010, almost 12 years to 18 years after the amendment made in 1992. Therefore, respondent No. 5 taking cognizance of 1992 amendment could not have initiated reassessment process. 33. Given this statutory mandate under the charging Section 3 (1) of the KTEG Act, any subsequent attempt by the Assessing Officer to revise the assessment and base it on the prevailing market price of the goods would deviate from the established principles and legislative intent. 34. Upon thorough examination of relevant legal provisions, the assessment orders in W.P. Nos. 103670 and 103671/2017 and reassessment notices issued by respondent No. 5 in W.P. Nos. 67670/2010 and 104278/2014 are solely grounded on a change of opinion without providing any fresh material or evidence to suggest any under assessment. Furthermore, it is clearly evident from the records that respondent No. 5 being a new Officer has conducted reassessment as opposed to the original assessing Officer who had accepted the returns submitted by the petitioner's company indicating that there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, this rule is not an 'Absolute Rule of Law' and there are certain valid exceptions where the writ petitions are maintainable in the High Court and in such cases, the petitioner ought not to be relegated to alternative remedy. The Apex Court in the case of Whirlpool Corporation v Registrar of Trademarks AIR 1999 SC 22, Mumbai held that the under Article 226 of the Constitution, the High Court has discretion in regard to the matter of entertaining a writ petition and the existence of alternative remedy has been consistently held by this Court not to operate as a bar in at least three contingencies namely: (i) The writ petition has been filed for the enforcement of any of the Fundamental Rights protected by Part III of the Constitution. (ii) There has been a violation of the principle of natural justice. (iii) The order or proceedings are wholly without jurisdiction or the vires of an Act is challenged 38. A similar view was adopted by the Hon'ble Supreme Court in the case of Harbanslal Sahnia v Indian Oil Corpn. Ltd AIR 2003 SC 2120. Thereby the Apex Court upheld that the availability of alternative remedies is not an absolute bar to the granting of writs under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ond mere statutory interpretation and involves significant legal and constitutional implications, warranting this Court's intervention. Therefore, in light of the unique circumstances and the centrality of the disputed statutory provision to the petitioner's case, the writ petition represents not only the most efficacious but also the most equitable remedy available. By allowing the petitioner to directly address the substantive legal issues before this Court, justice can be served promptly and fairly, aligning with the overarching objectives of the legal system. 42. This Court is inclined to hold that the petitioner at this stage cannot be relegated to avail the alternative remedy of an appeal, in light of law laid down by the Apex Court in Bal Krishna Agarwal's case (supra), where the Apex Court was of the view that the Court was not right in dismissing the writ petition on the ground of alternate remedy having found that the writ petition is found pending since 1998, i.e. more than five years. In the present cases on hand, the petitions are pending for almost 14 years. The impugned assessment orders and reassessment notices issued by respondent No. 5 are one without jur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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