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2018 (7) TMI 149 - HC - VAT and Sales TaxTaxability - materials like sand, jelly, bricks, etc purchased from unregistered dealers were held to be taxable - Commissioner of Commercial Taxes, Zone-I exercising powers under Section 64(1) of the Act revised the said order of the First Appellate Authority, and the order of First Appellate Authority was set aside restoring the order of the Assessing Officer relating to the tax periods April 2005 to March 2009 - Jurisdiction. Whether the Revisional Authority is justified in law in holding that the appellant is liable to purchase tax U/s 3(2) of the Act? - Held that - To attract Section 3(2), the relevant factors to be satisfied are i) Registered dealer or a dealer liable to be registered under the Act purchasing the taxable goods from the unregistered dealer; ii) Such purchase from the unregistered dealer is for use in the course of business of the registered dealer. If these two conditions are satisfied, registered dealer is liable to pay tax u/s 3(2) of the Act - once the taxable goods purchased from the unregistered dealers are used for development of their own property in the course of the business of the registered dealer, liability to pay tax u/s 3(2) of the Act arises. The decision of the Revisional Authority that the activity of formation of layout is a business is in conformity with the provisions of the Act, merely for the reason that no input tax credit can be claimed by the dealer, on this transaction, no liability u/s 3(2) arises, is only a misconceived notion of the Assessee and cannot be acceptable - the subsequent transactions of the URD purchased goods is immaterial for the purpose of levy of tax under Section 3(2) of the Act - demand of tax upheld. Jurisdiction - validity of proceedings by the Addl. Commissioner U/s 64(1) of the Act - Held that - The order of the Appellate Authority is not only erroneous but prejudicial to the interest of the revenue as discussed above. The twin test i.e., i the appellate order being erroneous and ii prejudicial to the interest of the revenue, being satisfied, the proceedings initiated by the Addl. Commissioner of Commercial Taxes is well within the scope and ambit of Section 64(1) of the Act. The action of the Revisional Authority cannot be held to be without jurisdiction. Appeal dismissed - decided against appellant.
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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