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TMI Blog2015 (11) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... e. - S. T. R. P. Nos. 130 to 170 - - - Dated:- 5-11-2014 - KUMAR N. AND MANOHAR B. JJ. T. Suryanarayana for the petitioner. Smt. S. Sujatha, Additional Government Advocate, for the respondent. ORDER These revision petitions are preferred by the assessee against the order passed by the Karnataka Appellate Tribunal dismissing his appeal and confirming the orders passed by the lower authorities. The assessee is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of manufacture and supply of construction chemicals. The assessee is registered under the provisions of the Central Sales Tax Act, 1956 (for short hereinafter referred to as 'the CST Act) and the Karnataka Value Added Tax Act, 2003 (for short hereinafter referred to as 'the KVAT Act'). 2. For the years 2006-2007, 2007-2008 and 2008-2009, the assessee filed its monthly returns as per the provisions of the KVAT Act. In the said return he declared both total and taxable turnovers under both the above enactments. Insofar as CST is concerned, the assessee claimed the benefit of the concessional rate of tax in respect of inter-State sales again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is not entitled for the benefit of concessional rate of tax on account of the fact that the invoices mentioned in the 'C' Forms pertain to a different quarter? 5. Whether interest under Section 9(2-B) of the CST Act read with Section 36 of the KVAT Act is chargeable from the end of the quarter till the date of assessment where a dealer is not able to furnish 'C' Forms in support of his claim for concessional rate of tax? 6. Whether the difference in tax on account of non-furnishing of statutory forms like 'C' Forms at the time of assessment could be treated as understatement of liability attracting penalty under Section 72(2) of the KVAT Act? 6. The learned Counsel for the assessee assailing the impugned order contended firstly that, the proceedings initiated under Section 39(1) of the KVAT Act is void ab initio because the Assessing Authority has not recorded the reasons for reopening the assessment. The reasons for such reopening has to be in writing. The said reasons are not furnished to the assessee and, therefore, he submits the impugned order requires to be set aside on that short ground. He further submits that, though the assessee was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y has grounds to believe that any return furnished which is deemed as assessed or any assessment issued under Section 38 understates the correct tax liability of the dealer, it:- (a) may, based on any information available, reassess, to the best of its judgment, the additional tax payable and also impose any penalty under sub-section (2) or sub-section (5) of Section 72 and demand payment of any interest; and (b) shall issue a notice of reassessment to the dealer demanding that the tax shall be paid within ten days of the date of service of the notice after giving the dealer the opportunity of showing cause against such reassessment in writing. (2) Where after making a reassessment under this Section, any further evidence comes to the notice of the Prescribed Authority, it may make any further reassessments in addition to such earlier reassessment . 9. Once a return is filed by a dealer/assessee under Section 35 of the KVAT Act, the assessee-dealer shall be deemed to have assessed to tax based on the return filed by him. No separate order of assessment is required. However, if the Commissioner notifies the dealer of any requirement of production of accounts before the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the exercise of the power to commence proceedings for reassessment are to be found under Section 35(1) of the BST Act. 25. The existence of the reasons is a must for holding belief that any turnover of sales or turnover of purchases of any goods has in respect of that year or part thereof escaped assessment, or has been under assessed or assessed at a lower rate, or that any deduction or other benefit referred to under Section 35(1) has been wrongly granted. The first condition thus immediately raises the question about the true import of the expression as reason to believe appearing in Section 35(1) of the BST Act. 26. The expression reason to believe postulates belief and the existence of reasons for that belief. The expression does not mean a purely subjective satisfaction of the Sales Tax Officer: the forum of decision as to the existence of reasons and the belief is not in the mind of the Sales Tax Officer. The words 'reason to believe' suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Sales Tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons for doing so or before issuing notice under Section 35(1) of the BST Act. The formation of belief and recording of reasons are imperative before the Assessing Officer can reopen a completed assessment. A mere change of opinion would not confer jurisdiction upon the Assessing Officer to initiate proceeding under Section 35(1) of the BST Act . 11. A Constitution Bench of the Apex Court also had an occasion to consider the expression 'reason to believe' in the case of Barium Chemicals Limited and Another v. Company Law Board and Others: AIR 1967 SC 295 wherein it was held that, the words reasonable grounds to believe were to be a restraint on administrative power just as compliance of the rules of natural justice in a quasi-judicial power which otherwise would render the power arbitrary. The words reason to believe or in the opinion of do not always lead to the construction that the process of entertaining reason to believe or the opinion is an altogether subjective process not lending itself even to a limited scrutiny by the Court that such a reason to believe or opinion was not formed on relevant facts or within the limits. It is an alternative safegua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t open to him to contend that the requirements under Section 39(1) is not complied with. In the instant case, such a contention is raised before the High Court for the first time and it is not permissible in law. For the aforesaid reasons, we do not see any substance in the first contention of the learned Counsel for the assessee. Therefore, on the first question of law, we hold that the Prescribed Authority cannot initiate reassessment proceedings under Section 39(1) of the KVAT Act without first recording his suggestion belief nor there is an understatement of tax liability. In the instant case, as the said requirement is complied with, we do not find substance in the contention of the assessee. Questions 2 and 3: 14. The Apex Court in the case of India Agencies (Registered), Bangalore v. Additional Commissioner of Commercial Taxes, Bangalore: 2005(58) Kar. L.J. 101 (SC): AIR 2005 SC 1594: (2005)2 SCC 129: 2004 AIR SCW 7135: (2005)139 STC 329 (SC) has held that, in order to claim concessional rate of tax, the original 'C' Form has to be attached to the return. This requirement is not a mere formality or technicality but it is intended to achieve the object of preven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;C' Form or 'F' Form declaration is to ensure that goods are dispatched to other State as a result of sale or otherwise and the same are accounted for by the dealer of other State. As long as this primary objective is met the said declaration forms can be accepted as valid. Therefore, such declarations can be accepted as valid declarations relating to goods delivered in a quarter or month based on the date of dispatch of such goods or date of receipt of such goods in other States or date of invoice or combination of all the three. (b) In the time gap between the dates mentioned in the documents and the declarations filed by the seller is too large and if the accepting authority is having any doubt regarding the genuineness of such declarations, it is instructed to get the declarations cross-verified through the Additional Commissioner (I and C) . 16. In view of the above circular, the authorities were not justified in not granting relief to the assessee and, therefore, that portion of the impugned order is hereby set aside. The said question of law is answered in favour of the assessee and against the revenue. Question 5: 17. This Court had an occasion to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be found fault with. The said question of law is answered in favour of the revenue and against the assessee. Question 6-Regarding Penalty: 19. Section 72 of the KVAT Act deals with penalties relating to assessment. Sub-section (2) of Section 72 reads as under:- 72. Penalties relating to returns and assessment.-.... (2) A dealer who for any prescribed tax period furnishes particulars for preparation of a return or furnishes a return which understates his liability to tax or overstates his entitlement to a tax credit by more than five per cent of his actual liability to tax, or his actual tax credit, as the case may be shall after being given the opportunity of showing cause in writing against the imposition of a penalty, be liable to a penalty equal to ten per cent of the amount of such tax under or overstated . 20. A reading of the aforesaid provision makes it clear that, when a dealer has filed his return in the prescribed form and he understates his liability to pay tax or overstates his entitlement to a tax credit by more than 5% of his actual liability to tax, he is liable to pay penalty equal to 10% of the amount of such tax under or overstated. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strict civil liability on the assessee and the evasion of tax. When a statement of import/export is not filed before the A.O. it results in evasion of tax, however, when the goods in movement are carried without the declaration Form ST 18-A/18-C then strict liability comes in, in the form of Section 78(5) of the said Act. Breach of Section 78(2) imposes strict liability under Section 78(5) because as stated above goods in movement cannot be carried without Form ST 18-A/18-C. We are not concerned with non-filing of statements before the A.O. We are concerned with the goods in movement being carried without supporting declaration forms. The object behind enactment of Section 78(5) which gives no discretion to the Competent Authority in the matter of quantum of penalty fixed at 30 per cent of the estimated value is to provide to the State a remedy for the loss of revenue. The object behind enactment of Section 78(5) is to emphasise loss of revenue and to provide a remedy for such loss. It is not the object of the said section to punish the offender for having committed an economic offence and to deter him from committing such offences. The penalty imposed under the said Section 78(5) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -C. Therefore, they made the goods travelled with the forms. However, the said forms are left blank in all material respects. Therefore, A.O. was right in drawing inference of mens rea against the assessees. It has been repeatedly argued before us that apart from the declaration forms the assessees possessed documentary evidence like invoice, books of accounts etc., to support the movement of goods and, therefore, it was open to the assessees to show to the Competent Authority that there was no intention to evade the tax. We find no merit in this argument. Firstly, we are concerned with contravention of Section 78(2) which requires the goods in movement to travel with the declaration in Form ST 18-A/18-C duly filled in. It is Section 78(2)(a) which has been contravened in the present case by the assessees by carrying the goods with blank forms though signed by the consignee. In fact, the assessees resorted to the above modus operandi to hoodwink the Competent Officer at the check-post. As stated above, if the form is left incomplete and if the description of the goods is not given then it is impossible for the Assessing Officer to assess the taxable goods. Moreover, in the absence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d understate the liability. It is only on that condition being fulfilled, an opportunity should be given to the dealer to show cause in writing against the imposition of penalty. If the cause shown is not satisfactory, then the penalty equal to 10% of the amount of such tax under or overstated could be levied. From the aforesaid language in the section it is clear that imposition of penalty under Section 72(2) is not automatic. Even though no mens rea is required to attract the said provision, unless it is established that the assessee-dealer has understated his liability to tax, the question of imposing any penalty under the said provision would not arise. Understating the liability is a sine qua non for attracting Section 72(2) of the Act. 25. In the instant case, the assessee has filed the declaration claiming concessional rate of tax in respect of inter-State sales to which he is entitled to in law. On the day he filed such declaration he has not made any understatement. Whatever statement he has made in such declaration is strictly in accordance with the provisions of the CST Act. The provisions of the CST Act also provides for 3 months time to the purchaser to furnish the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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