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TMI Blog2024 (5) TMI 1327X X X X Extracts X X X X X X X X Extracts X X X X ..... ax 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007-08, 2008-09 and 2009-10. 4. The grievance of the petitioner/company is that respondent No. 5, on instructions and assignment by Joint Commissioner of Commercial Tax, inspected the petitioner s premises and while reversing the original assessment order has come to the conclusion that the entry tax paid by the petitioner company on the stock transfer value was not in compliance with the provisions of The Karnataka Tax on Entry of Goods Act, 1979 (for short KTEG Act ). Respondent No. 5 taking cognizance of Section 2A (8-a) of KTEG Act, held that the tax should have been paid on the basis of the prevailing market price of such goods in the local area and not on the value of the goods in terms of charging Section 3 (1) of KTEG Act and accordingly, has issued the impugned assessment orders and consequent, demand notices calling upon petitioner/company to pay differential tax between the stock transfer value and the sale price. 5. Learned Senior Counsel Sri. G. Shivadas, while questioning the constitutional validity of the words prevailing market price of such goods in the local area in the definition of Value of the goods in Section 2A (8-a) of KTEG Act, would vehemently argue and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the present case, respondent No. 4 accepted the declarations made in the returns filed by the company for the assessment years 2002-03, 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09 and proceeded to finalize the assessments. Therefore, he would contend that the excise undertaken by respondent No. 5 in reassessing, is clearly based on change in opinion and therefore, it is bad in law and contrary to Section 6 (2) of the Act. He would vehemently argue and contend that in all these petitions, reassessment notices and assessment Orders are issued based on subsequent change in opinion. He would further contend that the assessments were undertaken by respondent No. 4 by taking note of the value declared in the return i.e. stock transfer price and the same was taken as the value for the purpose of levy of entry tax. After 16 to 18 years of the 1992 amendment wherein the expression value of the goods was substituted w.e.f. 1.5.1992 in Section 2A and the same was substituted by the wordings the prevailing market price of such goods in the local area , respondent No. 5 placing reliance on this amended provision has proposed to demand differential tax by adopting the sale price an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30th March 2002. Therefore, the ingredients required for levy of Entry tax are: 1) Entry of notified scheduled goods from one local area to another local area is a Taxable event . 2) The person causing entry of such notified scheduled goods is a Taxable person . 3) The Rate of tax as notified in the notification is applicable for the levy of Entry tax. 4) Value of goods as defined under the Act, is the Measure of tax . Referring to the written submissions, he would contend that there is no dispute with regard to taxable event, taxable person and rate of tax. Learned Advocate General argues that the dispute is with regard to measure of tax which is the value of the goods as defined under Section 2A (8-a) of the KTEG Act. Referring to the above said definition, he would point out that there is absolutely no conflict or inconsistencies between the charging provision and the definition clause. Taking this Court through the definition, he would point out that the value of the goods as defined under clause (8-a) of sub-section (A) of Section 2 of the KTEG Act shall be understood as purchase value of such goods. Therefore, he would contend that it is the purchase price at which a dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Commercial Taxes. While seriously contesting the petitioner s claim that reassessment is purely based on change of opinion, reliance is placed on 12 (2) of the Act to justify the action of the Assessing Officer on the ground that State Government or the Commissioner may, by notification, authorize officer to exercise powers. Therefore, he would contend that the re-assessment orders and consequent demand notices in regard to differential tax is in accordance with law and does not warrant any indulgence at the hands of this Court. The learned Advocate General has also brought to the notice of this Court that in these batch of petitions, the petitioner/company in W.P. No. 67670/2010 and W.P. No. 104278/2014, has challenged the show-cause notices for assessment and therefore, no interference is warranted at this juncture. It is also contended that these impugned orders are appealable under Section 13 of KTEG Act, 1979 and therefore, it is contended that the writ petition is premature and misconceived. 14. Heard the learned counsel on record. I have given my anxious consideration to the judgments cited by the learned counsel for the parties. 15. The following points would arise for c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds as under: There shall be levied and collected a tax on [entry of any goods specified in the FIRST SCHEDULE] into a local area for consumption, use or sale therein, at such rates not exceeding five percent of the value of the goods as may be specified [retrospectively or prospectively by the State Government by Notification, and different dates] and different rates may be specified in respect of different goods or different classes of goods or different local areas. 18. The definition clause defines the term value of goods for the purpose of the Act. It states that the value of the goods shall mean the purchase value of the such goods, inclusive of various charges borne by the dealer. The conflicting clause in the definition is in relation to goods which are not purchased by the dealer. The entry tax has to be paid on the prevailing market price of such goods in the local area. The wordings prevailing market price of such goods in the local area indicated in the definition of clause 2A (8-a) needs to be examined in the context of charging provision of Section 3 (1) of the Act. The charging provision under Section 3 (1) of the Act establishes the fundamental basis for levying entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for tax imposition. 25. Drawing from the principles established in the aforementioned judgments, it becomes evident 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. 26. Applying the principle of 'reading down,' the definition clause's wording in Section 2A (8-a), such as 'prevailing market price,' should be interpreted in alignment with the charging section. This approach ensures consistency and coherence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. This interpretation harmonizes the definition clause with the charging provision by ensuring that tax liability is determined based on the inherent worth of goods upon entry, rather than their subsequent market fluctuations or sale prices. 30. In light of the foregoing analysis and in adherence to the principles of statutory interpretation, particularly the principle of 'reading down,' the definition clause under Section 2A (8-a) of the KTEG Act shall be construed as follows: 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 inconsist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3, 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 2008-09 and 2009-10 were accepted by respondent No. 4 through assessment orders dated 21.10.2004, 30.8.2006, 11.2.2008, 25.06.2008, 25.08.2009, 7.4.2010. 32. The fundamental principle guiding the reassessment process is to ensure that it is not initiated on the mere change of opinion by the Assessing Authority. The Apex Court in Commissioner of Income Tax, Delhi .vs. Kelvinator India Limited (2010) 2 SCC 723 has laid down this principle clearly. The Apex Court emphasized that reassessment should be made on tangible material that indicates an escape of income or any other legitimate reason to believe that income has been under assessed. In the current case, respondent No. 5 has initiated reassessment by taking cognizance of definition clause at Section 2A (8-a) of the KTEG Act. Respondent No. 5 while passing assessment orders and reassessment notices has relied on the term prevailing market price of such goods in the local area as incorporated in Section 2A (8-a) of the KTEG Act. Therefore, it is borne out from records that this is a clear case of change of opinion and therefore, does not meet the requisite criteria enumerated in Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. 35. 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. 36. The impugned assessment orders dated 31.3.2017 which is subject matter of W.P. 103670/2017 and W.P. 103671/2017 are not sustainable in the light of findings recorded supra. The Assessing Officer has to pass fresh assessment orders by not referring to prevailing market price in Section 2A (8-a) of the KTEG Act but in terms of the charging provisions under Section 3 (1) of the KTEG Act by ensuring that tax liability is determined based on the value of the goods upon entry rather than prevailing market price. Accordingly, point No. 2 is answered in the negative and point No.3 is answered in the affirmative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bar for granting relief in the exercise of power under Article 226 of the Constitution . On the grounds that the appellants' writ petition was dismissed by the Bombay High Court and that the Railway Claims Tribunal offered better remedies, an appeal was preferred before the Hon ble Supreme Court against this decision. However, the Hon ble Supreme Court ruled that the High Court cannot reject the writ petition or order the appellants to pursue an alternate remedy because the respondent had acknowledged liability. 39. In the present batch of petitions the These batch of petitions are filed challenging the vires of Section 2A (8-a) of KTEG Act. This Court while answering point No. 1 has held as under: In the light of the foregoing analysis and in adherence to the principles of statutory interpretations, particularly, the principle of reading down , the definition clause under Section 2A (8-a) of the KTEG Act, shall be construed as follows: The term prevailing market price of the goods in the local area as mentioned in Section 2A (8-a) of the KTEG Act shall be interpreted to mean the value of the goods at the time of their entry into local area, consistent with charging provision u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejudice the rights of the petitioner/company. Therefore, even on this count, this Court is not inclined to relegate the petitioner/company to avail the remedy of an appeal and if permitted would lead to miscarriage of justice. Accordingly, point No. 4 is answered in the negative. 43. For the aforesaid reasons, this Court proceeds to pass the following: ORDER (i) The writ petitions are allowed in part. (ii) The term prevailing market price of such goods in the local area as delineated in Section 2A (8-a) of KTEG Act should be interpreted to mean the value of the goods at the precise moment of their entry into the local area as envisaged by the charging provision under Section 3 (1) of the KTEG Act. (iii) The re-assessment notices dated 13.10.2010 and 19.3.2014 in W.P. Nos. 67670/2010 and W.P. Nos. 104278/2014 respectively are quashed. (iv) The assessment orders dated 31.03.2017 in W.P. No. 103670 and 103671/2017 being contrary to Section 3 (1) are not sustainable. Accordingly, stands quashed. (v) Liberty is reserved to the authorities to assess the petitioner s returns for the assessment years 2009-10 (01.04.2009-13.10.2009) and 2009-10 (14.09.2009-31.03.2010) strictly in terms of S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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