Global E-Business Operations (P.) Ltd. vs State of Karnataka

These sales tax revision petitions are preferred against the order dated 13th August 2010 passed by the Karnataka Appellate Tribunal at Bangalore in STA Nos. 1990-2004/2009, whereby, all appeals filed by the appellants were dismissed and the orders passed by the Joint Commissioner of Commercial Tax (Appeals) dated 27-07-2009 and the order of the Assessing Authority dated 30-07-2008 have been confirmed. In these revision petitions, though the petitioners framed six questions of law, the revision petitions were admitted to consider the following two questions of law: "(i) Whether notification No.FD.300.CSL.05 dated 24.10.2005 as it stood during the period from 24.10.2005 to 31.7.2007 is applicable to the sale of used cars by all dealers or does it apply only to dealers engaged in purchase and sale of the used cars?

(ii) Whether the Hon''ble Karnataka Appellate Tribunal was right in law in dismissing the appeals on the ground that another bench of the Tribunal has held the issue in favour of revenue, even after specifically noting that in the said other case the Tribunal did not deal with the question of retrospective of the Notification, and that too even without giving any reference whatsoever to the other case decided by the other Bench such as the appeal number or the name of the parties involved?"

The petitioner-assessee is a private limited company engaged in a business of data processing and other I.T. enabled services for Hewlett-Packard Companies. On 25-07-2008, the Assistant Commissioner of Commercial Taxes (Audit-41), Bangalore, visited the business premises of the petitioner and verified the books of account from 1-4-2005 to 31-03-2007. They did not find any lapses relating to export of data processing and other IT Services, but noticed escaping tax liability in respect of sale of used cars. The Audit Officer, accordingly, concluded re-assessment for November 2005 to March 2007, except December 2006 and February 2007, and found that the company had sold several cars purchased by them during this period. The concerned authority, after giving an opportunity to the petitioner-assessee rejected their contentions and levied VAT tax u/s 39 followed by penalty u/s 72(2) in respect of turnovers of 15 months. The first appellate authority and the Tribunal confirmed the said order. 2. In the course of hearing before the Assessing Authority, the petitioner-assessee placed heavy reliance upon the notification dated 24-10-2005 issued by the Government of Karnataka in exercise of the powers conferred on it by sub-section (3) of Section 4 of the Karnataka Value Added Tax Act, 2003 (for short "the Act"), whereby, the Government reduced with immediate effect, the tax payable by a dealer under sub-section (1) of section 4 of the Act on the sale of used car to 4% of the difference between the taxable turnover in respect of such sale and the amount paid towards purchase of said car subject to the following conditions:

(i) no deduction of input tax is claimed by the dealer in respect of purchase of any goods used in the car sold; and

(ii) such car has been registered in the State prior to its sale under the provisions of the Motor Vehicles Act, 1988 (Central Act 59 of 1988).

The Assessing Authority after dealing with the notification held that it is applicable to a dealer engaged in sale and purchase of used motor cars. In short, it was held that the dealer who are engaged in sale and purchase of used motor cars are only covered by the said notification. This view was confirmed by the first appellate authority. The Tribunal though dismissed the appeal held that the notification covers not only the dealers engaged in sale and purchase of used cars but also the dealers engaged in other business. Despite this finding, the Tribunal decided the appeals against the petitioner-assessee holding that the assessee did not place any material on record to show that they purchased the cars which were sold during the VAT period. In other words, it was held that the assessee did not place any material on record to show that the cars were really purchased and tax was paid under the Act after it came into force including the transit period. In view thereof, the Tribunal refused to extend any benefit of the notification dated 24-10-2005.

We perused the order of the Tribunal carefully and found that though the Tribunal did not observe in so many words that the first condition in the notification dated 24-10-2005 was not fulfilled, in effect, it meant that the first condition in the notification was not satisfied by the assessee. The fact remains that the assessee did not have any occasion/reason nor did the authorities below granted an opportunity to the petitioner-assessee to place on record the materials to satisfy whether they fulfilled both the conditions in the notification. The claim of the assessee, as observed earlier, was rejected on different grounds.

In view thereof, learned counsel for the parties fairly stated that without recording further reasons the matter may be remanded to the Assessing Authority for a limited purpose to see whether the assessee satisfy both the conditions stipulated in the notification. Learned counsel for the petitioner-assessee while making such prayer fairly stated that the assessee shall not raise any other contention in these proceedings and that they may be given an opportunity to place on record the materials in support of their case that they satisfy both the conditions specified in the notification and that they are entitled for its benefit. Learned counsel for the respondent submits that the petitioner-assessee may be given such opportunity, clarifying that he shall not be allowed to raise any other contentions as raised in these proceedings. In this view of the matter, we are satisfied that the following order shall meet the ends of justice:

(i) The Revision Petitions are partly allowed and remanded to the Assessing Officer to once again examine the matter in the light of the observations made in this order and shall grant an opportunity to the petitioner-assessee to place materials in support of their case that they satisfy both the conditions as stipulated in the notification dated 24-10-2005.

(ii) It is made clear that the Assessing Authority shall not allow the petitioner-assessee to raise any other contentions.

(iii) The observations and the findings recorded by the authorities below insofar as other contentions are concerned are confirmed and the matter is remanded only for a limited purpose as indicated above.

(iv) The Assessing Authority shall consider the matter as expeditiously as possible and preferably within a period of six months from the date of receipt of this order.

Learned counsel for the petitioner-assessee states that he has instruction not to press the second question of law as framed by this Court while admitting the matter. His statement is accepted. With these observations, the revision petitions are disposed of. No costs.