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2014 (5) TMI 371 - HC - VAT and Sales TaxTax liability of interstate stock transfer - Movement of goods for works contract assessee claimed that could not use the electronically generated Forms VAT 505 stating that the goods being transported were not for sale and it is only a stock transfer. Levy of Tax Imposition of Penalty - Power of commissioner validity of circular - Held that - Judgment in Sri.Thirumalesh, reported in Time Tech India Private Limited V/S State of Karnataka 2014 (4) TMI 368 - KARNATAKA HIGH COURT followed - Invoking the revisional power u/s 64(1) on the ground that the order passed by the Appellate Authority is prejudicial to the interest of the revenue is totally incorrect - The appellant has transported the goods with valid document as required u/s 53(2)(b) of the Act - When such being the case, the question of imposing penalty u/s 57(12) of the Act does not arise - There is no breach of any statutory duty - Further, the Commissioner can only issue circular and he has no power to issue notification under the Act - All the notifications had to be issued by the State Government and it has to be gazette - In the instant case, the notification dated 21-3-2009 is not gazette - Hence it cannot be treated as mandatory - The revisional authority without considering the objections raised by the appellant, only under the impression that there is revenue loss to the State Government had set aside the order passed by the Appellate Authority which is contrary to law. The appellant has not violated any of the provisions of KVAT Act - The goods has been transported from one project area to another situated out side the State and the same is not for sale - Hence, the question of payment of tax does not arise - Imposition of the penalty under Section 53(12) of the KVAT Act is contrary to the provisions of the Act - Hence, the order passed by the revisional authority cannot be sustained - The appeal is allowed. The order dated 15-9-2009 by the Addl. Commissioner of Commercial Taxes u/s 64(1) of the KVAT Act is set aside - The order passed by the First Appellate Authority is restored Decided in favour of assessee.
Issues Involved:
1. Legality and correctness of the order dated 15-09-2010 by the Additional Commissioner of Commercial Taxes under Section 64(1) of the Karnataka Value Added Tax Act, 2003. 2. Applicability of the notification dated 21-03-2009 issued by the Commissioner of Commercial Taxes. 3. Validity of the penalty imposed for using non-electronically generated Form VAT 505. 4. Whether the goods transported were subject to tax. 5. Whether the Revisional Authority's invocation of Section 64(1) was justified. Detailed Analysis: 1. Legality and Correctness of the Order by the Additional Commissioner of Commercial Taxes: The appellant challenged the order dated 15-09-2010 by the Additional Commissioner of Commercial Taxes, which set aside the First Appeal Authority's decision. The Additional Commissioner found the First Appeal Authority's order erroneous and prejudicial to the revenue. The appellant contended that the Revisional Authority's decision was contrary to law and should be set aside. 2. Applicability of the Notification Dated 21-03-2009: The appellant argued that the notification dated 21-03-2009, requiring electronically generated Form VAT 505, did not apply to them since their principal office was under LVO 055, not LVO 020, LVO 065, or LVO 075. The Revisional Authority overlooked this aspect, which was crucial in determining the applicability of the notification to the appellant. 3. Validity of the Penalty Imposed for Using Non-Electronically Generated Form VAT 505: The Check-post authorities imposed a penalty of Rs. 2,50,000/- for using non-electronically generated Form VAT 505. The appellant explained that due to the remote location of Nandikur village and lack of internet access, they used the old forms. The First Appellate Authority accepted this explanation and set aside the penalty. However, the Revisional Authority reinstated the penalty, citing a violation of Section 53(2)(b) read with Rule 157(1) of the KVAT Rules. 4. Whether the Goods Transported Were Subject to Tax: The appellant argued that the transported steel centering materials were not for sale but for stock transfer to another project site in Andhra Pradesh. The First Appellate Authority agreed, stating that no tax was applicable as it was a stock transfer. The Revisional Authority, however, did not accept this explanation and imposed the penalty, which the High Court found to be incorrect. 5. Whether the Revisional Authority's Invocation of Section 64(1) Was Justified: The High Court examined whether the Revisional Authority was justified in invoking Section 64(1) to set aside the First Appellate Authority's order. The Court found that the appellant's actions did not result in any revenue loss to the State Government. The goods were transported with valid documents as required under Section 53(2)(b) of the Act, and there was no breach of statutory duty. The Court concluded that the Revisional Authority's invocation of Section 64(1) was not justified. Conclusion: The High Court allowed the appeal, setting aside the order dated 15-09-2010 by the Additional Commissioner of Commercial Taxes. The Court restored the order passed by the First Appellate Authority, which had set aside the penalty imposed by the Check-post authorities. The Court found that the appellant had not violated any provisions of the KVAT Act, and the transported goods were not subject to tax as they were for stock transfer, not for sale. The imposition of the penalty under Section 53(12) of the KVAT Act was deemed contrary to the provisions of the Act.
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