2014 (1) TMI 364 - HC - VAT and Sales Tax

Rate of tax - Purchase of goods during the course of inter-state trade - Tax at the rate of 14.5% in respect of sale from October 2012 or at the rate of 4% as prescribed under the Composition scheme - Held that - petitioner has not been granted an opportunity of putting forth its case before the department. It was therefore stated that the petitioner may be granted an opportunity to put forth its case before the 2nd respondent before any precipitative action is taken in the matter - petitioner is at liberty to file its objections to the impugned notice dated 6.12.2013 within 15 days from today. If objections are filed to the impugned notice, the 2nd respondent or the competent authority is directed to consider the same, in the light of the relevant provisions of the Act and Rules and having regard to the nature of business carried on by the petitioner and thereafter to pass a speaking order. Till then, the respondents are directed not to take any precipitative action pursuant to the impugned notice - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of tax payment under the Scheme of Composition provided under Section 15 of the Karnataka Value Added Tax Act, 2003.
2. Validity of the notice of cancellation of registration issued by the department based on Circular dated 5.10.2013.
3. Opportunity for the petitioner to present its case before any precipitative action is taken by the department.

Analysis:

1. The petitioner, a dealer engaged in the hotel business under the Karnataka Value Added Tax Act, opted for tax payment under the Composition Scheme provided in Section 15 of the Act. The petitioner purchased goods during interstate trade, leading to a dispute with the department regarding the applicable tax rate. The department contended that the petitioner should pay tax at 14.5% instead of the prescribed 4% under the Composition scheme. The petitioner made representations challenging this stance.

2. The department, based on a Circular dated 5.10.2013, issued a notice of cancellation of registration under Rule 145 of the Act, instructing the petitioner to return the composition of tax certificate within seven days. The petitioner challenged this notice in a writ petition, seeking an opportunity to present its case before any adverse action is taken. During the hearing, the department confirmed that no precipitative action had been taken yet.

3. The court directed the petitioner to file objections to the notice within 15 days, allowing the petitioner an opportunity to present its case before the department. The 2nd respondent or competent authority was instructed to consider the objections, evaluate the nature of the petitioner's business, and issue a speaking order in accordance with the relevant provisions of the Act and Rules. Until a decision is made, the department was restrained from taking any precipitative action based on the impugned notice.

In conclusion, the writ petition was disposed of with the mentioned observations and directions, ensuring that the petitioner's objections are duly considered before any further action is taken by the department.