2011 (6) TMI 715 - HC - VAT and Sales Tax

Whether the activity of the petitioner in printing of packaging materials to the specification of customers amounts to works contract taxable under section 5B of the Act or constitute sales taxable under section 5(1) of the Act? Whether in the facts and circumstances of the case the Appellate Tribunal is legally justified in summarily dismissing the appeal filed by the petitioner without independent examination and application of mind of the contentions of the petitioner that its activity is one of works contract of printing falling under section 5B read with entry 31 of the Sixth Schedule to the Act and not a sale taxable under section 5(1) of the Act? Whether the Appellate Tribunal is legally justified in confirming the levy of penalty of 36, 000 under section 12(4) of the Act without appreciating the fact that there was no suppression of turnover detected outside the books of account and that the determination of taxable turnover by the assessing authority was merely based on his best judgment and the opinion expressed by the inspecting authority? Whether the penalty levied under section 12A(1A) of the Act is legally justified in the facts and circumstances of the case? Held that - the Tribunal has erred in passing the order impugned without going through the relevant material on record. It is significant to note that after careful perusal of the order impugned passed by the Tribunal that the first part of the order consists of the facts of the case and the second part does not contain any reasoning or finding as such for passing the said order. Except referring since the FAA has already considered the amount raised which are perfectly within the framework of law we do not find sufficient reasons to interfere with the orders of the FAA nothing worthwhile is forthcoming. The said reasoning given by Tribunal cannot be sustained. The instant revision petition is allowed in part and the impugned common order passed by the Karnataka Appellate Tribunal Bangalore on April 29 2008 in S.T.A.No. 590 of 2007 for the assessment year 2001-02 is hereby set aside and the matter is remitted back to the Karnataka Appellate Tribunal Bangalore to reconsider the same

Summary

Issues Involved:
1. Determination of whether printing of packaging materials to customer specifications constitutes a works contract taxable under section 5B or a sale taxable under section 5(1) of the Act.
2. Legality of the Appellate Tribunal's summary dismissal of the petitioner's appeal without independent examination.
3. Justification of the levy of penalties under sections 12(4) and 12A(1A) of the Act.

Analysis:

1. The primary issue in this case revolves around the nature of the petitioner's activity in printing packaging materials. The petitioner argued that their work falls under the category of works contract of printing, while the assessing authority contended it was a sale taxable under section 5(1) of the Act. The Tribunal's order lacked proper reasoning and failed to consider crucial evidence, leading to the High Court setting it aside. The Court emphasized the need for a thorough examination of the facts and relevant provisions before reaching a decision.

2. The second issue concerns the legality of the Appellate Tribunal's dismissal of the petitioner's appeal without a detailed review. The High Court found fault with the Tribunal's order, noting the absence of proper reasoning and failure to consider the Joint Commissioner of Commercial Taxes' decision. The Court stressed the importance of a comprehensive analysis in line with the Act and Rules, directing the Tribunal to reconsider the matter with due diligence and provide a reasoned decision after affording both parties a fair hearing.

3. Lastly, the Court examined the penalties imposed under sections 12(4) and 12A(1A) of the Act. The petitioner contested the levy, arguing that there was no suppression of turnover outside the books of account and that the determination was based on the assessing authority's judgment and the inspecting authority's opinion. The Court highlighted the necessity for a proper assessment based on all relevant factors and directed the Tribunal to reevaluate the penalties in accordance with the law, ensuring a fair opportunity for both parties to present their arguments.

In conclusion, the High Court allowed the revision petition in part, setting aside the Tribunal's order and remitting the matter for reconsideration. The Court emphasized the importance of a thorough and reasoned decision-making process in line with the legal provisions, ensuring a fair hearing for all parties involved.