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2024 (5) TMI 1327 - HC - VAT and Sales TaxConstitutional validity of Section 2A (8-a) of the Karnataka Tax on Entry of Goods Act, 1979 - inclusion of the term prevailing market price of such goods in the local area within the definition of value of the goods under clause 2A (8-a) - significant lapse of time from the original assessments are valid under Section 6 (2) of KTEG Act or not - differential tax amount determined by respondent No. 5 based on mere change of opinion in contravention of Section 6 (2) of the KTEG Act - Maintainability of petition - availability of alternate remedy. Whether the inclusion of the term prevailing market price of such goods in the local area within the definition of value of the goods under clause 2A (8-a), in instances where goods are not purchased, conflicts with the charging provision outlined in section 3 (1) of the Act? - HELD THAT - The charging provision under Section 3 (1) of the KTEG Act serves as the foundational framework for levying entry tax. This provision mandates that the tax should be based on the value of goods entering the local area. However, the definition clause under Section 2A (8-a) introduces additional criteria, such as the 'prevailing market price,' which can potentially lead to conflicting interpretations, especially in cases involving stock transfers. In situations where there is a conflict between the charging provision and the definition clause, the Court's duty is to interpret these provisions in a manner that upholds the legislative intent behind the charging provision. The charging provision, being the substantive section imposing the tax, holds primacy over other provisions of the statute. The definition clause under Section 2A (8-a) of the KTEG Act must be construed harmoniously with the charging provision under Section 3 (1) of the KTEG Act. The charging provision, being the substantive section imposing the tax, should hold primacy in determining the taxable value of goods, especially in cases of stock transfers. In elucidating these provisions, it becomes apparent that the crux of Section 3 (1) lies in anchoring tax assessment to the value of goods at the time of their entry. Therefore, any reference to prevailing market price in Section 2A (8-a) should be construed as pertaining to the market value of goods contemporaneous with their entry into the local area. The term 'value of such goods' as mentioned in Section 2A (8-a) of the KTEG Act shall be interpreted to mean the value of goods at the time of their entry into the local area, consistent with the charging provision under Section 3 (1) of the KTEG Act. This interpretation ensures harmonization between the charging provision and the definition clause, eliminating any potential conflicts or inconsistencies. Whether re-assessment notices issued by respondent No. 5 after a significant lapse of time from the original assessments are valid under Section 6 (2) of KTEG Act and assessment orders for the assessment year 2009-10 passed by respondent No. 5 in terms of the wordings prevailing market price of such goods in local areas under clause 2A (8-a) of KTEG Act are valid? - Whether differential tax amount determined by respondent No. 5 based on mere change of opinion are in contravention of Section 6 (2) of the KTEG Act? - HELD THAT - The respondent No. 5 being a new Officer has conducted reassessment as opposed to the original assessing Officer who had accepted the returns submitted by the petitioner s company indicating that there is entry tax compliance by the petitioner company strictly in terms of the charging Section 3 (1) of the KTEG Act. The power to reassess is vested with the original assessing officer. Therefore, reassessment done by respondent No. 5 merely on the ground of change of opinion does not adhere to the compliance of mandate contemplated under Section 6 (2) of the KTEG Act. The assessment orders and reassessment notices issued by respondent No. 5 are based on change of opinion and therefore, the impugned assessment orders and reassessment notices are not sustainable and would warrant interference at the hands of this Court. Initiating reassessment purely on the grounds of change of opinion without substantive new material is impermissible under the law and therefore, liable to be quashed. Whether petitioner/company needs to be relegated to avail remedy of appeal on the ground of alternate remedy? - HELD THAT - In this case, the petitioner's challenge to the statutory provision goes beyond mere statutory interpretation and involves significant legal and constitutional implications, warranting this Court's intervention. Therefore, in light of the unique circumstances and the centrality of the disputed statutory provision to the petitioner's case, the writ petition represents not only the most efficacious but also the most equitable remedy available. By allowing the petitioner to directly address the substantive legal issues before this Court, justice can be served promptly and fairly, aligning with the overarching objectives of the legal system. This Court is inclined to hold that the petitioner at this stage cannot be relegated to avail the alternative remedy of an appeal, in light of law laid down by the Apex Court in DR BAL KRISHNA AGARWAL VERSUS STATE OF U.P. 1995 (1) TMI 393 - SUPREME COURT , where the Apex Court was of the view that the Court was not right in dismissing the writ petition on the ground of alternate remedy having found that the writ petition is found pending since 1998, i.e. more than five years. In the present cases on hand, the petitions are pending for almost 14 years. The impugned assessment orders and reassessment notices issued by respondent No. 5 are one without jurisdiction. Therefore, this Court under writ jurisdiction has ample powers to examine the validity of assessment orders and also reassessment notices. The writ petitions are allowed in part.
Issues Involved:
1. Constitutional validity of Section 2A (8-a) of the Karnataka Tax on Entry of Goods Act, 1979. 2. Validity of reassessment notices and assessment orders issued by respondent No. 5. 3. Whether differential tax amount determined by respondent No. 5 is based on mere change of opinion. 4. Whether the petitioner/company needs to be relegated to avail remedy of appeal on the ground of alternate remedy. Summary: Issue 1: Constitutional Validity of Section 2A (8-a) of KTEG Act The petitioner challenged the inclusion of the term "prevailing market price of such goods in the local area" within the definition of "value of the goods" u/s 2A (8-a) of the KTEG Act, arguing it conflicts with the charging provision u/s 3 (1) of the Act. The Court held that the charging provision, which mandates the levy and collection of tax on the value of goods, holds primacy over the definition clause. The term "prevailing market price" should be interpreted to mean the value of goods at the time of their entry into the local area, ensuring consistency with the charging provision. Issue 2: Validity of Reassessment Notices and Assessment Orders The petitioner argued that reassessment notices and assessment orders issued by respondent No. 5 were based on a change of opinion, which is contrary to Section 6 (2) of the KTEG Act. The Court found that the reassessment initiated by respondent No. 5 was indeed based on a change of opinion without any fresh material or evidence, thus not meeting the criteria under Section 6 (2). Therefore, the reassessment notices and assessment orders were deemed not sustainable. Issue 3: Differential Tax Amount Based on Change of Opinion The Court reiterated that reassessment based solely on a change of opinion is impermissible under the law. The assessment orders and reassessment notices issued by respondent No. 5 were based on a change of opinion and lacked substantive new material, making them unsustainable and warranting interference by the Court. Issue 4: Relegation to Avail Remedy of Appeal The petitioner argued that the writ petitions are maintainable despite the availability of an alternate remedy. The Court agreed, citing the law laid down by the Apex Court, which allows for writ petitions in cases where the order is wholly without jurisdiction or the vires of an Act is challenged. Given that the petitions had been pending for almost 14 years and the impugned orders were without jurisdiction, the Court held that relegating the petitioner to an appeal would lead to a miscarriage of justice. Order: 1. The writ petitions are allowed in part. 2. The term "prevailing market price of such goods in the local area" u/s 2A (8-a) of KTEG Act is to be interpreted as the value of the goods at the time of their entry into the local area, consistent with the charging provision u/s 3 (1) of the KTEG Act. 3. The reassessment notices dated 13.10.2010 and 19.03.2014 are quashed. 4. The assessment orders dated 31.03.2017 are quashed. 5. Authorities are granted liberty to reassess the petitioner's returns for the specified assessment years strictly in terms of Section 3 (1) of the KTEG Act.
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