2008 (7) TMI 862 - HC - VAT and Sales Tax

Proviso to rule 3(2)(c) of the KVAT Rules - whether is a provision which is discriminatory and also ultra vires of section 30(1) of the KVAT Act? Held that - Submission proceeds on a very fallacious ground that the rule particularly proviso to rule 3(2)(c) of the KVAT Rules is either discriminatory or ultra vires of section 30. In fact the rule mandates the applicability of the procedure to all assessees. There is no question of discrimination under this rule. As to how the rule may affect different assessees or different dealers is not the criteria for holding that the rule is a discriminatory provision and discriminates from dealer to dealer. the benefit envisaged under section 30 of the Act is only to make a correction within six months from the date of the sale transaction on finding the tax charged/collected is more or less by issuing a credit note or debit note and in case goods are returned within the prescribed period to issue a credit note forthwith and claim the value to be excluded from the taxable turnover. The value of the sale transaction is as fixed at the time of sale and even in terms of the charging section. There is no scope for fixing the price later. If under the rule the benefit is made available subject to the condition that the discounted price should have been so indicated in the invoice value of the goods the condition is neither ultra vires section 30 of the Act nor is discriminatory. Appeal dismissed.

Summary

Issues:
Assessment under Karnataka Value Added Tax Act, 2003 for the year 2006-07; Legality of the order in violation of principles of natural justice; Challenge to the proviso to rule 3(2)(c) of the KVAT Rules, 2005 as discriminatory and ultra vires of section 30(1) of the KVAT Act.

Analysis:
The assessment for the year 2006-07 under the Karnataka Value Added Tax Act, 2003 raised concerns regarding the deemed assessment and the claimed discounts by the assessee. A comprehensive notice for reassessment was issued, and the assessee was given an opportunity to respond within seven days. The assessing authority proceeded to pass orders under the KVAT and Karnataka Tax on Entry of Goods Act, leading to the filing of the present writ petition by the aggrieved assessee.

The petitioner challenged the legality of the order primarily on the grounds of violating natural justice principles and the discriminatory nature of the proviso to rule 3(2)(c) of the KVAT Rules, 2005. The rule required dealers to disclose discounts offered at the time of the transaction, which the petitioner argued was contrary to the benefit provided under section 30 of the KVAT Act for issuing credit and debit notes within six months of the sale. The petitioner contended that the rule was discriminatory and affected the benefit availed by dealers under section 30.

The court examined the provisions of the KVAT Act, particularly sections 3 and 30, along with the contentious rule 3(2)(c) of the KVAT Rules, 2005. It concluded that the rule did not create any new liability or hinder the benefit under section 30, which allowed corrections within six months through credit and debit notes. The court found no grounds for the rule being discriminatory or ultra vires of section 30, emphasizing that the rule applied uniformly to all assesses without discrimination.

In the judgment, the court dismissed the writ petition, stating that there was no substantial violation of natural justice principles in the order. While acknowledging that the authority could have allowed more time for the petitioner, the court held that statutory remedies under the Act were available to address any grievances. The court maintained that interference in writ jurisdiction was not warranted, and the petitioner could utilize the statutory remedies provided by the Act.

In conclusion, the court upheld the validity of the rule and the assessment order, emphasizing the importance of following statutory procedures and utilizing available remedies under the law.