2016 (9) TMI 825 - HC - VAT and Sales Tax

Imposition of penalty under Section 67(1) of the KVAT Act - claim of exemption from payment of tax on the turnover based on Form No.43 - commodity under Section 6(7)(b) of the KVAT Act 2003 - whether the petitioner was entitled for any exemption in terms of the Statute under Section 6(7)(b)? - Held that - the consumable used by the developer or industrial unit or establishments situated in the Special Economic Zone should be for setting up of the unit or use in the manufacture of other goods for being exempt. The cleaning material used for the purpose of cleaning the building and other facilities, furniture etc cannot be treated as a consumable used in relation to setting up of the unit or in the manufacture of other goods - it is apparent from the Statute itself that the petitioner is not liable for any exemption. Even in Form No.43 submitted by the dealer it is clearly mentioned as house keeping materials and house keeping consumables - ineligible for exemption. Whether in the light of Form No.43 issued by the purchaser whether the petitioner can be imposed with penalty? - Held that - a bare reading of Section 6(7)(b) would clearly indicate that the product supplied by the petitioner is liable to be taxed and no exemption can be claimed at all. That apart, as rightly contended by the learned Government Pleader, the petitioner did not raise any invoice showing the taxable component. If the petitioner had clearly indicated that it is taxable and the purchaser had issued Form No.43 it would have been a different situation. Therefore, this is an instance where the petitioner had acted deliberately in avoiding payment of tax knowing fully well that there is an obligation to pay tax on the said consumables - penalty rightly imposed. Section 25(1) of the Act - Held that - The Assessing Officer had occasioned to consider the penalty orders and issued fresh notice. There is no legal bar for the same. Therefore, it cannot be contended that there is any lack of jurisdiction on the part of the authorities in proceeding further. No interference with the order required - If aggrieved, the remedy of the petitioner is to challenge the penalty orders by approaching the revisional authority and it shall always be open for the petitioner to file appropriate objection to the notice under Section 25(1) of the Act - rest part of petition dismissed - decided against petitioner.

Summary

Issues:
1. Challenge to penalty orders for assessment years 2012-13, 2013-14 & 2014-15 based on exemption claim.
2. Challenge to notices issued under Section 25(1) for the same assessment years.
3. Interpretation of Section 6(7)(b) of the KVAT Act regarding exemption for specific goods.
4. Imposition of penalty based on Form No.43 issued by purchasers.
5. Validity of fresh notice under Section 25(1) after penalty orders.

Analysis:
1. The petitioner contested penalty orders issued for assessment years 2012-13, 2013-14 & 2014-15, claiming exemption based on Form No.43. The petitioner argued that penalty proceedings lacked jurisdiction as the commodity described did not fall under the KVAT Act. Despite objections, penalty orders were issued, demanding double the tax amount. The petitioner approached the court contending lack of jurisdiction in penalty proceedings without seeking statutory revision.

2. Another petition challenged notices under Section 25(1) for the same assessment years, arguing that proposed assessment relied on penalty orders subject to challenge in the first petition. The petitioner claimed that finalizing assessment without objection and issuing fresh notices under Section 25(1) post penalty orders were without jurisdiction.

3. The court analyzed Section 6(7)(b) of the KVAT Act to determine if the petitioner was entitled to exemption. The statute exempted specific items from taxation, and the petitioner claimed exemption for cleaning materials supplied to a Special Economic Zone. However, the court found that the cleaning materials did not qualify for exemption as they were not used for setting up units or manufacturing goods, as required by the statute.

4. Regarding penalty imposition based on Form No.43, the court noted that the petitioner did not raise invoices showing taxable components, leading to doubts about tax liability. The court emphasized that the petitioner deliberately avoided tax payment, indicating no error in the Intelligence Officer's penalty imposition.

5. The court upheld the validity of the fresh notice under Section 25(1) post penalty orders, stating no legal barrier to further proceedings. The court concluded that the petitioner failed to establish grounds for interference, advising challenging penalty orders through revisional authority and objecting to Section 25(1) notice. The writ petitions were dismissed, preserving the petitioner's right to challenge through appropriate channels.