2016 (12) TMI 426 - HC - VAT and Sales Tax

Benefit of composition scheme - whether it is justified to hold that the benefit of Composition Scheme under Section 15 (1) of the Karnataka Value Added Tax Act, 2003, cannot be denied on the ground that certain capital goods were purchased by the petitioner-assessee, which were not goods-in-stock ? - the petitioner-assessee, running a Restaurant purchased certain Vetrified Tiles to be fixed on the floor of the Restaurant - Held that - Since in the present case, the first appeal of the petitioner-assessee has been disposed of against the assessee and the second appeal before the Tribunal under Section 63 of the Act has not yet been filed, the petitioner-assessee is relegated to the alternative remedy before the said Tribunal and if such appeal is filed before the Tribunal within fifteen days from today, the same shall be considered on merits without objection as to the limitation by the said Tribunal in accordance with the aforesaid order of this Court. If, however, the Department can produce before the Tribunal the proof of the aforesaid judgment being stayed by any superior Court, they will be entitled to proceed further in accordance with law - petition disposed off.

Summary

Issues:
1. Benefit of Composition Scheme under Section 15 (1) of the Karnataka Value Added Tax Act, 2003 denied on the ground of certain capital goods not being "goods-in-stock."

Analysis:
The judgment delivered by the Karnataka High Court in this case revolved around the denial of the benefit of the Composition Scheme under Section 15(1) of the Karnataka Value Added Tax Act, 2003, to a petitioner-assessee who had purchased Vitrified Tiles for their restaurant. The court referred to Rule 135(2) of the KVAT Rules, 2005, which specifically mentions "goods in the stock" as goods dealt with by the assessee in their regular business. The court clarified that these rules do not cover goods purchased for construction purposes, like the Vitrified Tiles in this case. The court emphasized that the Tiles, even though purchased from another state and fixed in the restaurant floor, cannot be considered "goods in stock" but can be categorized as "goods." The judgment highlighted that the restriction against selling such goods after opting for the Composition Scheme did not apply in this scenario, as the Tiles were not sold in the course of business. The court concluded that the assessing authority had misused its power for reassessment, and the order deserved to be quashed under Article 226 of the Constitution of India.

The court allowed the writ petitions, directing the respondent assessing authority to pay costs to the assessee. However, since the first appeal was disposed of against the assessee and the second appeal to the Tribunal was pending, the petitioner was advised to pursue the alternative remedy before the Tribunal. The court instructed that if the appeal was filed within fifteen days, it should be considered on merits without limitation objections. The Department was permitted to proceed further if they could provide proof of the judgment being stayed by a superior court. The judgment concluded by disposing of the writ petitions based on these observations.