2009 (3) TMI 920 - HC - VAT and Sales Tax

Whether this is a fit case for examination in writ jurisdiction? - Held that - The condition to be imposed on the writ petitioners cannot be uniform in all situations. Even the Supreme Court has observed that the condition should be in the interest of larger public revenue and to safeguard the interest of the petitioners also. if the petitioner deposits 50 per cent of the demand, if not already deposited, of the disputed amount and furnishes security to the satisfaction of the authority, for the balance, the enforcement of the demand may be stayed pending adjudication of the appeal, which they can now avail of by filing appeals before the appellate authority within four weeks from today. It is open to the petitioner to explain the delay in preferring the appeals by pointing out the pendency of these matters before this court. It is open to the other petitioners to take benefit of this order or to move the appellate authority for any conditional interim order.If the petitioners file the appeal within four weeks, the authorities may examine the appeal on merits and accept any explanation for condoning the delay, taking note of the pendency of these writ petitions till now before this court.

Summary

Issues:
Assessment under Karnataka Value Added Tax Act, 2003; Nature of transaction - service or sale; Legality of assessment orders; Writ jurisdiction bypassing statutory remedy; Activity of Government-owned company; Liability under State and Central Acts; Examination of questions in writ jurisdiction; Statutory remedies; Safeguards for petitioners; Deposit of disputed amount; Stay of demand enforcement pending appeal.

Analysis:
The judgment involves multiple writ petitions by assesses under the Karnataka Value Added Tax Act, 2003 challenging assessment orders passed by authorities. The primary contention is the nature of the transaction being questioned, whether it is more in the nature of a service transaction or involves a sale of goods. The petitioners argue that if an activity is identified as a service, it should not attract State sales tax provisions. They rely on the Supreme Court's decision that service and sales cannot co-exist, especially when the activity has already been subjected to service tax under the Finance Act, 1994. The petitioners also assert that approaching the High Court through writ jurisdiction is justified due to settled legal principles in such cases.

In one specific case involving a Government-owned company, the petitioner argues that its activities are more in the nature of services provided to consumers or the Union of India, and therefore not liable under the Karnataka Value Added Tax Act. Reference is made to a Supreme Court decision to support this claim. The petitioner contends that such questions necessitate High Court examination rather than being relegated to statutory authorities, emphasizing the need for a thorough legal analysis.

The Additional Advocate-General representing the State argues that the assessment orders are valid and require examination based on facts and relevant laws. It is contended that the authorities are competent to levy tax on activities constituting a sale of goods under the Constitution of India, and the Supreme Court's observations in a specific case may not be directly applicable. The State advocates for utilizing statutory appeal remedies rather than seeking relief through writ jurisdiction.

The judgment emphasizes the importance of allowing statutory authorities to examine complex legal questions, especially in evolving areas like science and technology applications in commercial activities. It underscores the need for a hierarchical review process before involving the High Court. The court expresses reluctance to entertain these matters under writ jurisdiction, directing petitioners to pursue statutory remedies and appeals.

Regarding the liability faced by the petitioners under both State and Central Acts, the court considers the financial burden and suggests safeguards to prevent double taxation. The judgment addresses the deposit of disputed amounts and stays enforcement of demands pending appeal, with specific conditions for different petitioners based on individual circumstances. The court stresses the need for safeguarding public revenue while protecting the interests of the petitioners in these tax assessment disputes.