2006 (6) TMI 475 - HC - VAT and Sales Tax

Summary

Issues: Validity of notice under section 53(2) of the Karnataka Value Added Tax Act, 2005; Interpretation of section 53(2)(b) of the KVAT Act; Effect of the amendment to section 53(2)(b) of the KVAT Act; Payment of penalty without protest and entitlement to relief.

In the present case, the petitioner sought permission to withdraw a prayer challenging the validity of rule 157(1)(a) of the Karnataka Value Added Tax Rules, 2005. The petitioner was transporting granite blocks accompanied by specified documents, but a notice was issued under section 53(12) of the KVAT Act due to an alleged discrepancy in the delivery note. The petitioner challenged the notice, arguing compliance with section 53(2)(b) of the KVAT Act, which required carrying a tax invoice, bill of sale, or delivery note. The inspection date being before an amendment to section 53(2)(b), the petitioner's compliance with the old law was deemed sufficient, rendering the notice invalid.

Regarding the interpretation of section 53(2)(b) of the KVAT Act, the court analyzed the requirement to carry specific documents and the implications of the subsequent amendment effective from April 1, 2006. The court held that the petitioner's actions on February 25, 2006, were protected under the law existing before the amendment, thereby rejecting the argument that the amended provision should apply retroactively to impose penalties.

Furthermore, the court addressed the issue of the petitioner paying the penalty without protest. It was argued that such payment without contesting the notice would bar the petitioner from seeking relief. However, the court held that the immediate payment was made to secure the release of goods and did not waive the right to challenge the notice's validity. Consequently, the court quashed the show cause notice and ordered the refund of the penalty paid by the petitioner.

In conclusion, the court allowed the writ petition, emphasizing the petitioner's compliance with the law prevailing at the time of the inspection, the inapplicability of the amended provision retroactively, and the petitioner's right to challenge the notice despite paying the penalty promptly.