2011 (11) TMI 607 - HC - VAT and Sales Tax

Summary

Issues:
1. Challenge to order passed by Additional Commissioner of Commercial Taxes
2. Refund of penalty amount
3. Legal notices for refund not acted upon
4. Writ Petition filed for refund
5. Appeal against order imposing cost
6. Refusal to refund penalty leading to legal proceedings
7. Challenge to imposition of penalty
8. Authority's duty to encourage honest tax-payers
9. Abuse of power by authorities
10. Constitutional right to approach court

Analysis:

1. The appellant challenged the order passed by the Additional Commissioner of Commercial Taxes, setting aside the Appellate Commissioner's order and restoring the original order under section 64(1) of the Karnataka Value Added Tax Act, 2003. The appellant, a private limited company engaged in plywood manufacturing, transferred goods to its branches, leading to a penalty notice for contravention of section 53(2) of the Act.

2. Following the appeal process, the Department was required to refund the penalty amount of &8377; 2,18,150, which was not done despite legal notices. A Writ Petition was filed, leading to a court order directing the refund. The Department appealed against the cost imposition, which was upheld, and subsequent appeals were dismissed.

3. The check-post officer imposed a penalty based on document insufficiency, which was later found to be erroneous by the Commissioner. The appellant had the original documents but produced photocopies during the check, leading to a dispute. The Commissioner set aside the penalty order as the documents satisfied legal requirements.

4. The court highlighted the Department's failure to promptly refund the penalty, leading to legal action by the appellant. The court emphasized the importance of authorities encouraging legitimate transactions and honest taxpayers, criticizing the Department's actions as harassment.

5. The court noted the abuse of power by the authorities in delaying the refund and challenging court orders. It emphasized the appellant's constitutional right to seek legal recourse and criticized the Department's reluctance to accept court decisions, leading to unnecessary harassment of successful litigants.

6. In conclusion, the court allowed the appeal, set aside the impugned order, and directed the respondents to pay a cost of &8377; 10,000 to the petitioner. It stressed the need to curb the tendency of punishing individuals for exercising their legal rights and highlighted the importance of respecting court decisions to avoid unnecessary harassment of successful litigants.