2016 (6) TMI 904 - HC - VAT and Sales Tax

Levy of penalty - claim of input tax credit applying the wrong formula - whether the act of the petitioner would fall in the category of unintentional act or not - Section 72 of the KVAT Act - purchases of petroleum products including furnace oil - Held that - first appellate authority in the present matter, has found that the action was not unintentional and therefore, the benefit of circular would not be available to the assessee. The question of non- applicability of correct formula could be said as unintentional if there is ambiguity in the applicability of such formula. When the formula was so clear as found by the Tribunal, and if it was not applied, the view taken by the Tribunal that the action was not unintentional cannot be said to be an impossible view, which may call for interference by us. - Levy of penalty confirmed. - Decided against the assessee.

Issues:
1. Interpretation of Circular No.13/2006-07 dated 26-6-2006 by Karnataka Appellate Tribunal.
2. Levy of penalty and interest under sections 72(2) and 36 of KVAT Act for multiple tax periods.
3. Tribunal's refusal to follow a previous bench's order on the same issue.

Analysis:

Issue 1 - Interpretation of Circular:
The petitioner raised concerns regarding the applicability of Circular No.13/2006-07 and the Tribunal's decision on it. The Tribunal observed that the petitioner failed to demonstrate confusion in applying the prescribed formula for input tax credit. The Prescribed Authority found discrepancies in the petitioner's tax credit claims and noted non-compliance with relevant sections of the Act. The Tribunal upheld the decision that the petitioner did not qualify for the benefits outlined in the Circular due to lack of confusion in applying the formula. The First Appellate Authority and the Tribunal concurred on this finding, emphasizing that the Circular's benefits were not applicable to the petitioner.

Issue 2 - Penalty and Interest under KVAT Act:
The Tribunal upheld the levy of penalty and interest under sections 72(2) and 36 of the KVAT Act for 23 tax periods. The petitioner argued that the Tribunal did not consider the erroneous application of the formula by the assessing authority. However, the Tribunal found no ambiguity in the application of the formula and concluded that the petitioner's actions were not unintentional. The Tribunal's decision was based on the clarity of the formula application and the absence of confusion, leading to the dismissal of the petitioner's claims.

Issue 3 - Refusal to Follow Previous Order:
The petitioner contended that the Tribunal disregarded a previous bench's decision that favored the petitioner. However, the Tribunal differentiated the facts of the present case from the previous decision, emphasizing the lack of malafide intention in the petitioner's actions. The Tribunal maintained that the benefit of the circular was not applicable in the current scenario, as the action was deemed not unintentional. The Tribunal's decision was based on the specific circumstances of the case and the absence of malafide intention, leading to the dismissal of the petitioner's arguments.

In conclusion, the High Court dismissed the petitions, emphasizing that the scope of judicial scrutiny was limited to questions of law, not fact. The Court highlighted that the Tribunal's findings were final on factual matters unless there was an error of law. The Court found no grounds to interfere with the Tribunal's decisions, as they were based on factual assessments and interpretations of the law, leading to the dismissal of the petitioner's claims.

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