2023 (7) TMI 39 - HC - VAT and Sales Tax

Forfeiture of the refund permitted to the petitioner - third respondent has erred in his jurisdiction in upholding the fourth respondent s rectification order dated 12.07.2019 under Section 69 of the KVAT Act or not - HELD THAT - In the present case, the petitioner, when not obliged to deduct any tax at Source from M/s. Ocean Interior Limited its Contractor as contemplated under Section 9-A of the KVAT Act, has deducted certain amount as tax and deposited the same along with interest because of its own reading of this provision. Subsequently, when the petitioner has made a request for VAT Form-156, its representatives are informed that it was not obliged under the provisions of Section 9-A of the KVAT Act to deduct the amount. The petitioner has repaid the amount to M/s. Ocean Interior Limited. Neither this fact, nor the further assertion that the contractor has filed full returns disclosing this transaction and offering tax is contested. This Court must opine that, given the scheme under Section 47 of the KVAT Act and the circumstances in which the petitioner has deduced TDS and deposited the same notwithstanding the provisions of Section 9(A) of the KVAT Act, there could not have been a forfeiture. The petitioner has repaid the amount deducted as TDS to its contractor on being informed that it could not have deducted any amount as TDS and the contractor has also offered such amount as tax - In the present case, without any detailing, the fourth respondent has only opined that refund is not in accordance with the proceedings dated 11.07.2019. The fourth respondent, unless could explicate in the impugned order dated 12.07.2019 how the proceedings dated 11.07.2019 related to deductions made notwithstanding the provisions of Section 9-A of the KVAT Act, could not have been relied upon the same to conclude that there was a mistake apparent from the record in permitting the refund. This Court is of the considered view that the respondents must refund a sum of Rs. 80,75,720/- in terms of Form- 185 dated 11.02.2019 (Annexure-M) within a reasonable time without interest, but if there is any delay, then must be liable to pay interest for the delayed period - Petition allowed.

Summary

Issues:
1. Challenge to orders under the Karnataka Value Added Tax Act, 2003.
2. Rectification proceedings under Section 69 of the KVAT Act.
3. Forfeiture under Section 47(3) of the KVAT Act.

Detailed Analysis:

Issue 1: Challenge to Orders under the Karnataka Value Added Tax Act, 2003
The petitioner contested orders dated 31.03.2021, 12.07.2019, and 15.09.2021 under the KVAT Act. The petitioner deducted Tax Deducted at Source (TDS) during the relevant assessment year and deposited the amount. However, upon seeking VAT Form-156, the petitioner was informed they were not obligated to deduct TDS. The Assessing Officer initiated proceedings under Section 69, leading to a series of orders culminating in forfeiture of a significant sum. The petitioner challenged these orders on various grounds, including the legality of rectification proceedings and the invocation of Section 47(3) for forfeiture.

Issue 2: Rectification Proceedings under Section 69 of the KVAT Act
The petitioner argued that the rectification order dated 12.07.2019 was unjustified as it was not based on a mistake apparent from the record, a prerequisite for invoking Section 69. The petitioner's counsel contended that the Assessing Officer lacked jurisdiction to rectify the earlier order permitting a refund. The petitioner maintained that the rectification was not warranted, and the appeal authority erred in upholding the rectification order.

Issue 3: Forfeiture under Section 47(3) of the KVAT Act
The petitioner disputed the application of Section 47(3) for forfeiture, emphasizing that no tax was collected but TDS was deducted erroneously. The respondent argued that the rectification order was justified based on preceding proceedings. Both parties presented conflicting interpretations of Section 47 of the KVAT Act. The court analyzed the provisions and concluded that in the petitioner's circumstances, where TDS was repaid upon realizing the error, forfeiture was not appropriate. The court held that the petitioner was entitled to a refund without interest, with liability for interest in case of delay.

In conclusion, the court allowed the petition, quashed the impugned orders, and directed the refund of the disputed amount within a specified period. The judgment extensively analyzed the legal provisions, the actions of the parties, and the principles governing rectification and forfeiture under the KVAT Act, ultimately ruling in favor of the petitioner based on the specific facts and legal interpretations presented during the proceedings.