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TMI Blog2018 (3) TMI 1369X X X X Extracts X X X X X X X X Extracts X X X X ..... that: - there is a delay caused in making the payment of legitimate taxes to the department. However, levy of interest under Section 36 shall be subject to hearing in the peculiar circumstances of the case on hand. It is true that interest would have been attracted if there is any omission on the part of the dealer if no output tax paid or short paid or higher input tax claimed. The prescribed authority ought to have examined this aspect of the matter in providing an opportunity of hearing to the petitioner. Once indemnity bond is furnished, the payment of tax refunded is mandatory and the same cannot be assailed by the petitioner. Hence, confirming the demand of tax refunded, the matters are remanded to the prescribed authority to examine the levy of interest applicable to the tax demanded. Petition allowed in part. - Writ Petition Nos. 3636 & 4607-4624/2018 & W.P.Nos.4625-4626/2018 (T-RES) - - - Dated:- 8-3-2018 - MRS. S. SUJATHA J. Petitioner: [By Sri K.P. Kumar, Senior Counsel for Ms. Veena j. Kamath, Adv. For Kamath Kamath, Advs.] Respondents: [By Sri T.K. Vedamurthy, Aga.) ORDER These petitions are filed challenging the correctness and legality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of this Court in STRP Nos.774-794/2013 and held that the assessee was not entitled to claim full input tax credit and provisions of Section 17 of the KVAT Act, partial rebate was applicable. Subsequently, the respondent issued notice and sought to recover the refunded amount with interest placing reliance on the decision of the Hon ble Apex Court in the case of M.K. AGRO TECH supra, on the premise that the refund was subject to the result of the Hon ble Supreme Court Judgment and sought for recovery on the basis of a circular issued by the Commissioner of Commercial Taxes [ CCT , for short] dated 9.10.2017. 3. It is the contention of the petitioner that the petitioner submitted a letter dated 9.12.2017 to the respondent, requesting to furnish a copy of the circular of the CCT on the basis of which recovery was sought to be made from the petitioner, which was refused by the respondent and directed the petitioner to obtain the same from the CCT directly. It is based on the CCT s circular, which was issued pursuant to the Judgment of the Hon ble Apex Court in the case of M.K. AGRO TECH supra , demand notices were issued and orders were passed under section 10[5] read w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order is passed by the Hon ble Apex Court modifying or annulling the said order of this Court, on the basis of which, refund order was issued, the same would not be a ground to withdraw the refund order and to demand/seek recovery of the refund of the amount paid. [iii] Notices under Section 42 of the KVAT Act were issued for the tax period March 2010 to January 2017 based on the circular of the Commissioner dated 9.10.2017 calculating the refund amount with the applicable interest. Again issuing notices under Section 69[1] of the KVAT Act is arbitrary exercise of the respondent. The reply to the said notice was submitted by the petitioner on 27.12.2017. On the very same day, a letter was addressed bringing to the notice of the respondent that reply notice has been sent through RPAD and the same may be delivered in the next few days. Therefore, it was requested not to take any adverse action against the petitioner until reply notice was received. However, the respondent proceeded to pass the order impugned herein without providing an opportunity to the petitioner to put forth its explanation to the notices issued under section 69[1] of the KVAT Act. Further, the reques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue placed the submissions as under: [i] Section 174[3][i] of the KGST Act contemplates that in consequence of, or to give effect to, any finding, direction or order made under any provision of the relevant repealed Acts or any Judgment, or order made by the Supreme Court, High Court or any other court whether before or after the commencement of KGST Act, any order, assessment or reassessment or any action may be made notwithstanding the repeal of the KVAT Act. The proceedings relates to the tax period April 2015 to January 2017, much prior to the KGST Act coming into force. Proceedings were pending under the KVAT Act relating to these tax periods. Hence, claim of refund with interest by the respondent is saved under Section 173 of the KGST Act. Even otherwise, the said repeal of KVAT Act shall not invalidate the demand/ recovery of refund made to the petitioner by virtue of the order of this Court in Writ Petition Nos.110509-525/2015, whereby the refund was ordered subject to the petitioner filing indemnity bond and subject to the result of the Judgment of the Hon ble Apex Court in the case of M.K. AGRO TECH supra. The order impugned is based on the Judgment of the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the KGST Act contemplates that KVAT Act has been repealed. Section 174, saving provision reads thus: 174. Saving . (1) The repeal of the Acts specified in section 173 shall not- (a) revive anything not in force or existing at the time of such repeal; or (b) affect the previous operation of the repealed Acts and orders or anything duly done or suffered thereunder; or (c) affect any right, privilege, obligation, or liability acquired, accrued or incurred under the repealed Acts or orders under such repealed Acts: Provided that any tax exemption granted as an incentive against investment through a notification shall not continue as privilege if the said notification is rescinded on or after the appointed day; or (d) affect any tax, surcharge, penalty, fine, interest as are due or may become due or any forfeiture or punishment incurred or inflicted in respect of any offence or violation committed against the provisions of the repealed Acts; or (e) affect any investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejudice or affect the general application of section 6 of the Karnataka General Clauses Act, 1899 (Karnataka Act III of 1899) with regard to the effect of repeal. 11. In terms of Section 174(1)(f), it is clear that the repeal of the Act specified in Section 173 shall not affect any proceedings including that relating to an appeal, revision, review or reference, instituted before, on or after the appointed date, under the said repeals Acts and such proceedings shall be continued under the said repealed Acts as if KGST Act had not come into force and KVAT Act had not been repealed. Further Subsection (3) of Section 174 envisages that notwithstanding anything contained in Section 173, despite any limitation contained in any of the repealed Acts or, assessment or re-assessment may be made on the assessee or any person in consequence of, or to give effect to, any finding or direction or order made under any provision of the relevant repealed Acts or any Judgment or order made by the Hon ble Apex Court or High court or any other court whether before or after commencement of KGST Act. 12. Section 38 of the KVAT Act deals with the assessment of tax. In terms of the returns filed un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y bond, whichever is later. It is made clear that refund shall be subject to result of Special Leave Petitions pending in S.L.P. (Civil) Nos.576-596 of 2014. (emphasis supplied) 13. Thus it is made clear that refund shall be subject to result of Special Leave Petition pending in SLP (CIVIL) Nos. 576-596/2014. The Judgment of M.K. AGROTECH s case supra was reversed by the Hon ble Apex Court in Civil Appeal Nos.15049-69/2017 by its Judgment dated 22.9.2017. It is based on the said Judgment, proceedings are initiated by the respondent- authorities to demand/recover the refunded amount pursuant to the directions issued by this Court in W.P.Nos.110509-525/2015. 14. The contention of the learned Senior counsel that KGST Act having come into force on 1.7.2017 and the KVAT Act being repealed on the same day, respondent-authorities have no power to recover the refunded amount cannot accepted for the reason that the refund order was directed to be passed by this Court in W.P.Nos.110509-525/2015 subject to the result of the Special Leave Petition pending before the Hon ble Apex Court. It was further ordered that respondents are at liberty to obtain indemnity bonds from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. However, now it is argued that the power under Section 10(5) r/w Section 69(1) of the Act cannot be exercised/invoked by the prescribed authority to withdraw the refund/ demand/initiate proceedings for recovery of refunded amount. Section 10(5) provides for refund or adjustment of the excess amount whereunder input tax deductable by the dealer exceeds the output tax. An order of recovery/demand of refunded amount has to be passed pursuant to the disposal of the appeal before the Hon ble Apex Court as ordered by this court while directing the respondent-authorities to refund the amount. Hence, respondent-authorities demanding the refund amount cannot be found fault with or it cannot be held that proceedings initiated by the prescribed authority under Section 10(5) r/w Section 69(1) is not valid. 17. In view of the submissions made by the learned counsel for the revenue it is clear that Annexure-C notice issued under section 42 of the KVAT Act is only for the purpose of information to the assessee and has no legal force and the same cannot be enforced. The same is held to be only for the purpose of information. Parallel proceedings initiated by the Deputy Commissioner i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y tax under the statute. Section 11B provides for levy of interest on failure of the dealer to pay tax due under the Act and within the time allowed. Should this provision be strictly construed or should it receive a broad and liberal construction, is a question which we will have to consider in determining the sweep of the said provision. It is well-known that when a statute levies a tax it does so by inserting a charging section by which a liability is created or fixed and then proceeds to provide the machinery to make the liability effective. It, therefore, provides the machinery for the assessment of the liability already fixed by the charging section, and then provides the mode for the recovery and collection of tax, including penal provisions meant to deal with defaulters. Provision is also made for charging interest on delayed payments, etc. Ordinarily the charging section which fixes the liability is strictly construed but that rule of strict construction is not extended to the machinery provisions which are construed like any other statute. The machinery provisions must, no doubt, be so construed as would effectuate the object and purpose of the statute and not defeat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the same may take about 3-4 days to reach the prescribed authority instead of directly submitting the detailed reply. The prescribing authority proceeded to conclude the proceedings as the assessee sought time to file reply, no such time is required to be granted in view of the judgment of the Hon ble Apex Court. Tax refunded being liable to be paid as discussed above, demand of tax is not hit by the principles of natural justice. 22. The commissioner s circular dated 9.10.2017 is attacked by the dealer mainly on the count that no penalty and interest can be levied without providing an opportunity of hearing. As aforesaid, proceedings initiated to demand/recover the tax refunded based on the Judgment of the Hon ble Apex Court as well as this court in W.P.Nos.110509-525/2015 coupled with the indemnity bond filed by the dealer may not be held to be unjustifiable as levying of interest is compensatory in nature but the same requires an opportunity to the petitioner to put-forth his reasons or explanation in as much as quantification is concerned in the facts and circumstances of the present case. Reasonable opportunity is quintessential as much as levying penalty. Hence Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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