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TMI Blog2019 (12) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... llected tax on his sales during the period of the operation of the composition scheme and has not claimed the input tax credit. Cancellation of the composition scheme retrospectively creates additional tax liability where the dealer has not collected the tax while opting for composition under Section 15 of the Act, otherwise the dealer was entitled to collect tax if the liability to pay tax was under Sections 3 and 4 of the Act. It is well settled that the retrospective withdrawal or cancellation of the registration certificate will have no effect upon the assessee who has acted upon it when it was valid and operative - In the present case, it is not in dispute that the petitioner had acted on the composition registration certificate issued by the competent authority and it had carried on its business on the basis of the said certificate. Thus it will be harsh for the respondents to assess the petitioner under the VAT regular scheme and demand the payment of tax even for that period for which the petitioner had carried on his business under the composition scheme. Cancellation of the composition certificate with retrospective effect would damage the business activity of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing served, Dakshin Court was a Non-veg restaurant with licence for sale of liquor as well. Thereafter, in 2013, the petitioner filed a letter seeking benefit of composition scheme for both the restaurants and continued filing returns under the composition scheme in VAT 120 in respect of both the restaurants upto November 2014; from November 2014 to July 2016 only Krishnima Veg Restaurant was run by the petitioner and Dakshin Court was run by a separate legal entity. From July 2016 to June 2017 only Dakshin Court restaurant was run by the petitioner and Krishnima Veg was run by a separate legal entity under an independent registration certificate. Re-assessment proceedings for the period 2009-10 was concluded vide order dated 15.10.2014 recording the manner of filing of returns by the assessee for the two separate restaurants. 3. The petitioner s premises was inspected on 26.2.2015 subsequent to which notices dated 16.5.2015 were issued under Section 74 of the Act for the periods 2009-10 to 2013-14 proposing to levy penalty alleging that the registrations obtained by the petitioner and corresponding discharge of tax under two separate schemes are not in accordance with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istant Commissioner of Commercial Taxes, Bangalore reported in 2015 (83) Kar. L.J. 91 (HC); 3) Kalaburagi Cements Pvt. Ltd. Vs. ACCT reported in ILR 2018 Kar. 119. Thus, it was contended that the proceedings initiated by respondent No.4 to re-open the assessment proceedings under Section 39(1) of the Act for the tax periods 2012-13 is bad in law. 6. Learned counsel for the revenue submitted that the petitioner has violated the conditions stipulated in Rule 135 read with section 15 of the Act. The petitioner having opted for the composition scheme under Section 15 of the Act was engaged in selling liquor contrary to rule 135(4) of the KVAT Rules. The respondent No.3 being a registered authority has got power to cancel the composition scheme certificate for violation of the conditions of the scheme. Moreover, the respondent No.3 has cancelled composition certificate after affording reasonable opportunity. Hence, re-assessment proceedings initiated under Section 39[1] of the Act for the tax periods 2012-13 to levy tax under Section 3 of the Act is justifiable. 7. I have carefully considered the rival submissions of the learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed under Rule 138. Rules 142 to 145 deals with withdrawal from scheme and cancellation of certificate. Rule 142 contemplates requirements when threshold exceeded. Rule 143 contemplates voluntary withdrawal from scheme. As per rule 144(1), every dealer, who after opting to pay tax by way of composition purchases or obtains goods from outside the State or from outside the territory of India shall be ineligible for such benefit and liable to pay tax under Section 3 from first day of the month in which such purchase or procurement was made. As per sub-rule (2), every such dealer falling under sub-rule (1) shall report to the jurisdictional Local VAT officer or VAT sub-officer by furnishing a final return in Form VAT 120 for the previous tax period accompanied by proof of full payment of the tax in accordance with Rule 52 on the first day of the following month and surrender his certificate in From VAT 8 and any certified copies of such certificate issued for any additional place of business. 11. Rule 145 provides for cancellation of certificate. The jurisdictional Local VAT officer or VAT sub-officer shall, on receipt of a final return filed by the dealer under Rule 143 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additional tax liability where the dealer has not collected the tax while opting for composition under Section 15 of the Act, otherwise the dealer was entitled to collect tax if the liability to pay tax was under Sections 3 and 4 of the Act. 15. It is well settled that the retrospective withdrawal or cancellation of the registration certificate will have no effect upon the assessee who has acted upon it when it was valid and operative. Reference may be made in this regard to the decision of the Hon ble Apex Court in the case of State of Maharashtra Vs. Suresh Trading Company reported in (1997) 11 SCC 738 , wherein the Hon ble Apex Court has held thus: In our view, the High Court was right. A purchasing dealer is entitled by law to rely upon the certificate of registration of the selling dealer and to act upon it. Whatever may be effect of a retrospective cancellation upon the selling dealer, it can have no effect upon any person who has acted upon the strength of a registration certificate when the registration was current. The argument on behalf of the department that it was the duty of persons dealing with registered dealers to find out whether a state of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing disrepute to the State and introduce uncertainty and lack of confidence into a true filed of trust. It is high time that the State Government institutes appropriate enquiries, take such steps as the necessary to eliminate fictitious dealers from the filed and also take strong ion against persons connected with such matters so that there be no recurrence of it in future. 18. In the case of Amma Construction India Private Limited, Bangalore Vs. The Asst. Commissioner of Commercial Taxes reported in 2015(83)KLJ 91 , this Court has observed that the only condition for making further reassessment in addition to earlier assessment is when the authority takes notice of further evidence, there must be further evidence which is noticed by the Assessing Authority for further assessment or reassessment. Otherwise, the Assessing Authority has no jurisdiction to interfere with reassessment order granting refund of excess tax paid based on the evidence regarding deduction based on TDS certificate which was already before the Assessing Authority. 19. This court in the case of M/s Oriental Cuisines Pvt. Ltd., Vs. The Dy. Commissioner of Commercial Taxes (2018-TIOL) 63 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its and is liable to pay tax under Section 3 (VAT scheme) from the relevant periods prescribed therein i.e., prospectively. It may be true that the intelligence wing on the inspection conducted on 26.02.2015 might have discovered the sale of liquor in the business of premises of the assessee having wrongly opted for VAT as well as composition scheme for the two restaurants, filing two separate returns on 26.2.2015 but the multiple registrations obtained by the petitioner during 19.06.2009 to 31.03.2013 is not disputed. In such circumstances, if any conditions of the composition scheme is found to have been violated by the dealer, the competent authority can cancel the registration of the composition certificate from the relevant tax period but not with retrospective effect to undo the transactions acted upon the strength of the composition certificate when it was valid and operative. More particularly, when the re-assessment was concluded for certain tax periods with no objections raised in the manner of filing of the returns by the assessee. Initiation of re-assessment proceedings vide notice dated 09.02.2018 is consequential to the cancellation of composition registration certifi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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