Sales Tax Appeal Nos. 1069 to 1115 of 2010 [C.H.-3]. Case: HMT Watch Factory IV Vs State of Karnataka. Karnataka Appellate Tribunal
| Case Number | Sales Tax Appeal Nos. 1069 to 1115 of 2010 [C.H.-3] |
| Counsel | For Appellant: Sri S. Ramasubramanian, Chartered Accountant and M/s.MSSV and Company and For Respondents: Sri R.C. Yadavannavar, State Representative |
| Judges | Niazahmed S. Dafedar, DJM and P. Puttaraju, CTM |
| Issue | Central Sales Tax Act, 1956 - Sections 10, 10A, 19, 2(24), 3(a), 6A, 6A(2), 6A(3), 9(2), 9(2-B); Income Tax Act, 1961 - Section 158BC; Karnataka Value Added Tax Act, 2003 - Sections 35, 36, 36(1), 37, 38, 39, 39(1), 39(1)(a), 63, 72(2) |
| Citation | 2013 (77) KarLJ 57 |
| Judgement Date | June 19, 2013 |
| Court | Karnataka Appellate Tribunal |
Judgment:
P. Puttaraju, CTM
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These forty-seven (47) appeals are filed under Section 9(2) of the Central Sales Tax Act, 1956 read with Section 63 of the Karnataka Value Added Tax Act, 2003 (for short, 'the CST Act and KVAT Act') challenging the common appeal order passed by the Joint Commissioner of Commercial Taxes (Appeals-3), Bangalore (for short, 'FAA') in Case Nos. CST/AP 253 to 299/2009-2010, dated 31st March, 2010 for the tax periods from April 2005 to February 2009, by which the FAA has upheld the reassessment orders dated 10th February, 2010 of the Deputy Commissioner of Commercial Taxes (Recovery), Tumkur (for brevity, 'AA'). The AA has levied penalty and interest also which are also upheld by the FAA. Aggrieved by the same, these 47 (forty-seven) appeals have been preferred. In view of the fact that the appellant-company has not furnished 50% proof of payment of tax due, the appeals were not admitted. In pursuant to the same, the appellant approached the Hon'ble High Court by filing writ petition seeking relief with respect to the payment of 50% of the tax, penalty and interest due vide W.P. Nos. 19648 to 19695 of 2010 (T-RES). The Hon'ble High Court has directed the Tribunal to allow the petitioner to deposit only Rs. 25.00 lakhs instead of 50% of the demand as a precondition and permitted the Tribunal to prosecute the appeals. The appellant having deposited Rs. 25.00 lakhs as pre-deposit by Demand Draft No. 395467, dated 14th July, 2010 before ACCT, LVO, Tumkur, the appeals have been admitted for adjudication.
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The appellant-company has submitted common statement of facts and the grounds of appeals which are stated thus in brief:
(i) The appellant is a public sector undertaking having its showrooms all over India from where retail sales are made to individual customers. In Karnataka, the showrooms are located in Tumkur and Bangalore whereas outside the State the showrooms are located in different places.
(ii) Apart from retail sales to the customers, the appellant-company has also effected institutional sales to various institutions and companies.
(iii) The appellant-company submits that based on the information from the showrooms regarding their requirements of watches, the marketing division of the company raises an indent on the factory mentioning the name of the institution. In case of retail sales, the indent raised by the appellant will mention only the type and quantity.
(iv) As far as showrooms located within the State when the sales are made to retail customers or to the institutional customers applicable VAT is charged by the showrooms and paid also. As far as showrooms outside the State of Karnataka are concerned, such showrooms have paid applicable local VAT in that State in case of retail sales and institutional sales. The commodity namely watches are dispatched outside the State to different showrooms located throughout India on the basis of stock transfers.
(v) The appellant-company classifies the stock transfer types into four categories.--
(a) Stock transfer to showrooms or retail sales in Karnataka on which KVAT has been paid when the sale has taken place.
(b) In case of institutional sales within Karnataka, KVAT has been admitted and paid.
(c) Stock transfers effected outside the State showrooms meant for only retail sales, the company claims the same as legal stock transfers.
(d) Stock transfers to showrooms to outside the State of Karnataka meant for institutions. In this regard, the appellant-company has not offered any remarks or the nature of transactions.
(vi) The appellant submits that initially the concerned LVO has called to submit statutory forms namely 'F' Forms for the tax periods of 2005-2006 to 2008-2009 for the 48 tax periods and the same have been furnished.
(vii) The DCCT (Recovery), Tumkur after due audit of the books of accounts has initiated reassessment proceedings under Section 39(1) of the KYAT Act and also under Section 9(2) of the CST Act. The AA has treated the entire stock transfer value falling under the purview of the CST Act as a sale and has levied CST accordingly.
(viii) Aggrieved by the same, the appellant filed first appeal before the FAA who has allowed the appeals partly and has given directions to the AA to re-compute the turnovers for each tax periods by taking into consideration exempted stock transfers and the stock transfers treated and held as inter-State sales as computed by him and to levy CST accordingly and also to calculate the penalty and interest under Sections 72(2) and 36(1) of the KVAT Act for the transactions which are treated as inter-State sales instead of stock transfers and to issue revised demand notice. This has been compiled by the AA which is not disputed by the appellant.
(ix) It has been urged by the appellant that the learned authorities below erred in law and on facts in holding that the turnover for each tax periods being stock transfers against the orders received from specific parties are liable for tax under Section 3(a) of the CST Act. The appellant in the grounds has enumerated such turnovers for each month/tax period in the grounds of appeal filed for each month/tax period covering 47 tax periods commencing from April 2005 to February 2009.
(x) The appellant assails the appellate order on the ground that enough time is not furnished to furnish 'F' Forms and also erred in law and on facts in rejecting the Form 'F' and treating the stock transfers as inter-State sales.
(xi) In case of defective 'F' Forms, the appellant urges that first proviso to Rule 12(5) is only directory.
(xii) The appellant questions the levy of interest on tax attributable to denial of exemption on account of non-submission of Form 'F' and alleged defective Form 'F'. In addition to this, the appellant also questions the levy of interest on transactions which have been denied the benefit of stock transfers exemptions and being taxed as inter-State sales. Thus, the appellant assails the levy of interest and urges that the same is attracted from the date of service of demand notice, demanding the tax payable under CST Act.
(xiii) Finally, the learned Counsel for the appellant also urged that the lower authorities have erred in law and on facts in levying penalty attributable to non-submission of Form 'F' and alleged defective Form 'F'. Further, the learned Counsel questions the penalty levied on the stock transfer transactions which are held as inter-State sales.
(xiv) The appellant has submitted written submissions by invoking Regulation 36 of the Karnataka Appellate Tribunal Regulations, 1979, wherein 10 grounds have been raised (first ground is as per grounds of appeals submitted along with appeal memorandum which has been narrated above). The second ground is with respect to validity of assessment under Section 39 and urges strongly that neither the reassessing authority nor the Commissioner who has issued jurisdiction order for reassessment under Section 39 of KVAT Act as recorded the reasons and grounds to make reassessment. It was been submitted that the prescribed authority gets jurisdiction only when he has grounds to believe that any return to furnished which is deemed as assessed or any assessment issued under Section 38 of the Act understates the correct tax liability. In this regard, the reliance is placed on the Hon'ble Apex Court decisions in Manish Maheshwari v. Assistant Commissioner of Income Tax and Another AIR 2007 SC 1696: (2009) 289 ITR 341 (SC): (2007) 3 SCC 794 rendered under Income-tax Act, 1961 in GKN Driveshafts...
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