2010 (7) TMI 950 - HC - VAT and Sales Tax

Whether the revisional authority was justified in interfering with the order of the appellate authority which had directed adjustment of tax paid under section 4(1) of the Karnataka Special Tax on Entry of Certain Goods Act, 2004, when the assessee was not claiming any benefit in pursuance of the judgment of this court which has struck down the charging section 3 of the said Act? Held that - The appellate authority on the admitted facts of this case, held that there is no prohibition under the Act for such adjustment when section 41 specifically provides for adjustment. The appellate authority directed the assessing officer to give the benefit to which the assessee is entitled to under section 4(1) of the Act. In the assessment order, the figures are quantified. It discloses what is the amount paid under the Act, what is the amount payable under the KST Act and what is the amount excess paid. The excess paid is either to be adjusted towards any tax liability or to be refunded to the assessee. Hence, the order passed by the appellate authority was legal and valid.

Summary

Issues:
1. Interpretation of section 4(1) of the Karnataka Special Tax on Entry of Certain Goods Act, 2004.
2. Jurisdiction of revisional authority to interfere with appellate authority's order.
3. Adjustment of special entry tax paid towards Karnataka Sales Tax Act liability.

Analysis:
1. The appellant, a company dealing in paints and thinners, sought adjustment of special entry tax paid under the Karnataka Special Tax on Entry of Certain Goods Act, 2004, against the Karnataka Sales Tax (KST) liability. The appellate authority recognized the appellant's entitlement under section 4(1) of the Special Entry Tax Act for reduction in tax liability if higher tax was paid. The authority found no legal bar to adjusting the excess amount standing in the appellant's credit towards KST arrears, setting aside the rejection of adjustment by the respondent.

2. The Additional Commissioner of Commercial Taxes, invoking suo motu revisional power under section 22A(1) of the KST Act, interfered with the appellate authority's decision. The revisional authority contended that an appeal against the striking down of the charging section of the Act was pending, with an interim stay on refund and specific assessment directions. Relying on this, the revisional authority set aside the order allowing adjustment, deeming it prejudicial to government revenue. The appellant challenged this decision through the present appeal.

3. The High Court emphasized that the appellant's claim was not based on the judgment striking down the charging section but on section 4(1) for tax adjustment. The assessing officer erred in denying the benefit under section 4(1) without valid reasons. The appellate authority correctly directed the assessing officer to grant the adjustment as per the Act, quantifying the excess amount for adjustment or refund. The court found the appellate authority's order legally sound, overturning the revisional authority's decision as erroneous, and reinstated the appellate authority's order allowing the adjustment.

In conclusion, the High Court allowed the appeal, setting aside the revisional authority's decision and restoring the appellate authority's order. Each party was directed to bear their own costs.