2017 (12) TMI 1015 - HC - VAT and Sales Tax

Benefit of Composition Scheme - Section 15 of the KVAT Act, 2003 - denial on the ground that they purchased certain goods from outside the State or in the course of inter-State Trade or Commerce including the capital goods like Plant and Machinery and in view of the Circulars issued by the Head of the Department, namely Commissioner of Commercial Taxes, Circular No.14/2013-14 on 05/10/2013 and Circular No.20/2013-14 on 18/12/2013, such benefit is sought to be denied to them. Held that - this Court does not find anything offending or beyond the language of Section 15 of the KVAT Act, 2003 and Rule 135 of the KVAT Rules, 2005 in the said Circulars. The said Circulars merely explain the provisions of the said Section 15 of the KVAT Act, 2003 and Rule 135 of the KVAT Rules, 2005 in a contextual manner. The Assessing Authorities or even the Appellate Authorities while dealing with such issues are still free to take their independent view of the matter and one cannot say that they are bound by the terms of the Circulars issued by the Commissioner of Commercial Taxes which are nothing but administrative guidelines for their sub-ordinate Assessing Authorities and the learned Commissioner of Commercial Taxes has such powers under the KVAT Act, 2003. Validity of Section 15 of the KVAT Act, 2003 - Held that - this Court cannot reconsider the issue de novo merely because some arguments are sought to be raised which as contended by the learned counsel for the petitioners, was not raised earlier. They are free to raise any such questions relating to validity of the said provisions before the Division Bench of this Court where the appeal against the said judgment of the learned Single judge namely Writ Appeal No.1654/2009 is pending in the same case. This Court does not find any reason to allow the assessees petitioners to by-pass the regular appellate remedies available to them under the KVAT Act, 2003 before the Appellate Forums and if such petitions are directed only against the Show Cause Notices issued by the Assessing Authorities, the assessees may first show cause before the concerned Authorities themselves. The writ petitions are considered to be premature and do not deserve to be entertained by this Court at this stage - petition dismissed.

Summary

Issues Involved:
1. Denial of the benefit of the 'Composition Scheme' under Section 15 of the Karnataka Value Added Tax Act, 2003.
2. Validity of Section 15 of the KVAT Act, 2003.
3. Interpretation of Circulars issued by the Commissioner of Commercial Taxes.
4. Availability of alternative remedy under Section 62 of the KVAT Act, 2003.

Detailed Analysis:

1. Denial of the Benefit of the 'Composition Scheme':
The assessees, comprising hoteliers, works contractors, and crushing units, were denied the benefit of the 'Composition Scheme' under Section 15 of the KVAT Act, 2003. This denial was based on their purchase of goods, including capital goods, from outside the State or through inter-State trade. The denial was in accordance with Circulars No. 14/2013-14 and No. 20/2013-14 issued by the Commissioner of Commercial Taxes. The petitioners argued that the purchase of capital goods from outside the State should not disqualify them from availing the Composition Scheme, as these goods were essential for their business operations and not for trade.

2. Validity of Section 15 of the KVAT Act, 2003:
The petitioners questioned the validity of Section 15 of the KVAT Act, 2003. However, it was noted that the validity of this section had already been upheld by a learned Single Judge in the case of New Taj Mahal Café (P.) Ltd. v. State of Karnataka. The court reiterated that the validity issue was pending before the Division Bench and could not be re-agitated in the present writ petitions. The court emphasized that different arguments or shades of arguments do not justify reconsidering the issue de novo.

3. Interpretation of Circulars Issued by the Commissioner of Commercial Taxes:
The petitioners contended that the Circulars issued by the Commissioner of Commercial Taxes were misinterpreted. The court found that the Circulars merely explained the provisions of Section 15 of the KVAT Act, 2003, and Rule 135 of the KVAT Rules, 2005, in a contextual manner. The court held that these Circulars were administrative guidelines and did not inhibit the discretion of the Assessing Authorities or the Appellate Authorities to decide cases in accordance with the law.

4. Availability of Alternative Remedy:
The court highlighted the availability of an alternative remedy under Section 62 of the KVAT Act, 2003, which provides for an appeal against the impugned assessment orders. The court stated that the petitioners should first exhaust the appellate remedies available under the KVAT Act before approaching the court. The court found the writ petitions premature and directed the petitioners to raise their contentions before the Departmental Authorities. The court also clarified that the questions of interpretation, including whether 'capital goods' are 'goods,' should be determined through the appellate forums provided under the KVAT Act, 2003.

Conclusion:
The court disposed of the writ petitions, vacated the interim orders, and relegated the petitioners back to the Departmental Authorities. It allowed the petitioners to file regular appeals within 30 days, which should be entertained by the respective Appellate Authorities without raising objections about the limitation, provided other conditions for maintaining such appeals are met. The court reiterated that the validity of Section 15 of the KVAT Act, 2003, remains subject to consideration by the Division Bench.