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2018 (7) TMI 149 - HC - VAT and Sales Tax


Issues Involved:
1. Justifiability of action under Section 64(1) of the Karnataka Value Added Tax Act, 2003.
2. Liability of the appellant to purchase tax under Section 3(2) of the Act.

Issue-wise Detailed Analysis:

1. Justifiability of Action under Section 64(1):
The appellant challenged the Revisional Authority's action under Section 64(1) of the Karnataka Value Added Tax Act, 2003, arguing that the initiation of proceedings was without jurisdiction. The appellant contended that the Revisional Authority's action was based on a mere change of opinion and did not meet the essential criteria of the appellate order being erroneous and prejudicial to the interest of the revenue. The court, however, found that the order of the Appellate Authority was indeed erroneous and prejudicial to the revenue. Therefore, the Revisional Authority's action was within the scope and ambit of Section 64(1) of the Act, and the appeals on this ground failed.

2. Liability to Purchase Tax under Section 3(2):
The appellant argued that Section 3(2) of the Act did not apply as they were not engaged in the resale of goods but in the development of properties, where the materials purchased from unregistered dealers were used for construction and not sold as goods. The court examined the relevant factors under Section 3(2), which include the purchase of taxable goods from unregistered dealers by a registered dealer for use in the course of business. The court referred to the definition of 'business' under Section 2(6) of the Act, which includes any trade, commerce, or adventure in the nature of trade, commerce, or manufacture.

The court cited previous judgments, including Continental Builders and Developers vs. State of Karnataka and Shyamaraju & Company (India) Pvt. Ltd., which clarified that the use of goods purchased from unregistered dealers for development in the course of business attracts tax under Section 3(2). The court found that the appellant's activities of developing layouts and selling immovable properties constituted business activities, and therefore, the purchase tax under Section 3(2) was applicable.

Conclusion:
The court upheld the Revisional Authority's decision, confirming that the appellant was liable to pay purchase tax under Section 3(2) of the Karnataka Value Added Tax Act, 2003. The court also validated the jurisdiction of the Revisional Authority under Section 64(1) of the Act, dismissing the appeals on all grounds. The court emphasized that the essential requirement for tax liability under Section 3(2) is the use of goods in the course of business, which was satisfied in this case.

 

 

 

 

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