19 February 2019   

GST CASES

2019-TIOL-52-AAR-GST

TEWARI WAREHOUSING COMPANY PVT LTD: ADVANCE RULING (Dated: February 18, 2019)

GST - Applicant is constructing a warehouse on leasehold land using pre-fabricated technology; that the warehouse can be dismantled and reconstructed at a different location - applicant seeks a ruling as to whether the input tax credit is admissible on the inward supplies for construction of the said warehouse.

Held: Warehouse being constructed is an immovable property - Input Tax credit is, therefore, not admissible on the inward supplies for construction of the said warehouse as the credit of such tax is blocked u/s 17(5) of the GST Act, 2017: AAR

Application Dispose of

2019-TIOL-44-HC-KOL-GST

OPTIVAL HEALTH SOLUTIONS PVT LTD Vs UoI: CALCUTTA HIGH COURT (Dated: February 07, 2019)

GST - Petitioners have sought a direction upon the respondents to allow them to revise/rectify their Form GST TRAN-2 electronically or manually - Petitioners contend that the present scheme of things does not allow rectification or revision of the TRAN-2 form and such a lacuna violates Article 14 of the Constitution; that an assessee should be allowed to revise or rectify TRAN-2 form particularly when TRAN-1 forms are allowed to be revised or rectified; that authorities must have similar provisions as akin to rule 120A of the CGST Rules, 2017.

Held: Taxing statutes are to be strictly construed but such interpretation should not lead to a reckless or a mindless mechanical application of the statute - Form GST TRAN-2, at best, is an admission of the person filing the same with regard to the contents of the document - A person making an admission is entitled to prove that the admission was made by mistake or was untrue - If, a person making the admission is able to substantiate with cogent evidence that the admission was a mistake or was untrue, then such facts have to be taken into consideration for the purpose of deciding the evidentiary value of the admission and relevancy thereof - in other words, law permits a person making an admission, the liberty of explaining the same, if he so chooses - Form GST TRAN-2, at best, can be an admission allowing the authorities to inform the state of affairs of the petitioner in relation to the subject matter governed by such form - However, neither the Act nor the Rules of 2017 can be read to mean that the same excludes the right of a person making an admission to forfeit the opportunity to explain it - neither the Act nor the Rules of 2017 forfeits the right of a person making an admission to substantiate that such admission was made by mistake or was untrue - Therefore, when such a person is seeking to correct form GST TRAN-2 on his own, an opportunity should be afforded to such person to correct the same - the authorities may retain the original GST TRAN-2 form for their assessment purpose and can confront the person seeking to revise the GST TRAN-2 with the form as originally filed and require explanation as to why such revision was required and whether such revisions are justified or not - such an enquiry can be held in the assessment proceedings - Authorities are directed to allow the petitioner to file a revised Form GST TRAN-2 either electronically or manually, in accordance with law, within four weeks - Petition is disposed of: High Court

Petition disposed of

2019-TIOL-43-HC-KERALA-GST

STOVE KRAFT PVT LTD Vs ASTO: KERALA HIGH COURT (Dated: February 11, 2019)

GST - On the ground that separate e-way bills have to be generated for each of the invoices, the goods and vehicle of the petitioner, a dealer, have been detained - petitioner before High Court.

Held: It is not the case that the e-way bill does not mention all the invoices - there may be practical difficulty for the department in tracking the invoices when multiple number of invoices are mentioned in the e-way bill generated - nonethless, High Court is of the view that the goods and vehicle should be released to the petitioner upon execution of a simple bond - Government pleader submits that petitioner's case will be considered by respondent - Writ Petition is disposed of: High Court

Petition disposed of

CASE LAWS

2019-TIOL-384-HC-MAD-CT

STATE OF TAMIL NADU Vs SHARANA INDUSTRIES : MADRAS HIGH COURT (Dated: January 03, 2019)

TNGST - Writ - Sections 3(5) & 16(2)

Keywords - concessional rate of tax - levy of penalty - material handling equipments - traction batteries

The Commercial tax Department preferred the present revision challenging the action of CESTAT in allowing the sale of traction batteries u/s 3(5) of the TNGST Act, even though the commodity did not fall under VIII schedule to the Act. In other words, the The Department was aggreived by the order of CESTAT in holding that the commodity i.e. Traction batteries sold by the dealer against Form XVII for concessional rate of tax as contemplated under Section 3(5) of Tamil Nadu General Sales Tax Act, were used as part of the material handling equipments.

On Writ, the HC held that,

Whether traction batteries are designed to suit electrically operated material handling equipments and they can be purchased by issuance of Form XVII declaration, thereby making them entitled for concession u/s 3(5) of TNGST Act - YES: HC

Whether once it is established that there is no escapement of turnover, then no penalty can be levied on premises of concessional rate of tax availed by the dealer to which he was entitled - YES: HC

++ the short issue, which falls for consideration, is whether traction batteries specifically designed to suit electrically operated material handling equipments and vehicles like fork-lifts, power trolleys, electric vehicles can be considered as part of the electrically operated vehicles equipments. The counsel for assessee contended that since the traction batteries are specifically designed to suit the equipments, they were part of the machinery and can be purchased by issue of Form XVII declaration u/s 3(5) of TNGST Act. This Court however, does not agree for the simple reason that the product in question are traction batteries which are specifically designed to suit electrically operated material handling equipments and therefore, the Tribunal was right in holding that they can be purchased by issue of Form XVII declaration, thereby entitled for concession u/s 3(5) of the TNGST Act;

++ the next issue raised is with regard to levy of penalty u/s 16(2) of the TNGST Act. The Tribunal after taking into consideration that the revision of assessment was made u/s 16(1)(b) and noting that there was a dispute as to whether the claim of exemption by the assessee dealer was correct or not and what is the correct rate of tax, held that there was no escapement of turnover and therefore, vacated the levy of penalty. This Court is in agreement with the view taken by the Tribunal.

Revenue's petition dismissed

2019-TIOL-377-HC-MUM-IT

CIT Vs ASIAN PAINTS LTD: BOMBAY HIGH COURT (Dated: Febraury 6, 2019)

Income tax - Section 14A & Rule 8D

Keywords - exempt income - investment expenditure - suo moto disallowance

THE assessee company filed its return for the relevant A.Y and made a suomoto disallowance of Rs.15.21 lakhs therein, being the expenditure incurred to earn exempt income u/s 14A. During the course of assessment, the AO disregarded the same and proceeded to disallow an amount of Rs.1.10 crores u/s 14A r/w Rule 8D as expenditure incurred to earn exempt income.

On appeal, the Tribunal held that before invoking the provisions of Rule 8D, the AO had to record his non-satisfaction with the suo moto disallowance of expenditure made towards earning exempt income by assessee. This exercise not having been carried out by the AO before applying Rule 8D, the disallowance of expenditure to earn exempt income could not be sustained.

On appeal, the HC held that,

Whether Rule 8D can be invoked where suo moto disallowance made by taxpayer is not found to be satisfactory by AO having regard to the accounts of taxpayer - NO: HC

++ this issue is no longer res integra as the Apex Court in Godrej & Boyce Mfg. Co. Ltd. Vs. Dy. CIT - 2017-TIOL-212-SC-IT decided the issue in favour of assessee. In the said case, the Supreme Court has while considering the issue of disallowing of expenditure incurred to earn exempt income observed that: "....Whether such determination is to be made on application of the formula prescribed under Rule 8D or in the best judgment of the AO, what the law postulates is the requirement of a satisfaction in the AO that having regard to the accounts of the assessee, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of assessee. It is only thereafter that the provisions of section 14A(2) & (3) r/w Rule or a best judgment determination, as earlier prevailing, would become applicable....";

++ thus, Rule 8D cannot be invoked where the suo moto disallowance made by the assessee is not found to be satisfactory by the AO having regard to the accounts of the assessee. In the absence of recording the said fact of non-satisfaction in terms of Section 14A(2), invocation of Rule 8D is not permissible. Therefore, in view of the decision of the Apex Court, this question also does not give rise to any substantial question of law.

Revenue's appeal dismissed

2019-TIOL-376-HC-MUM-IT

PR CIT Vs LEMUIR AIR EXPRESS: BOMBAY HIGH COURT (Dated: February 6, 2019)

Income tax - Section 28(va)

Keywords - capital receipt - non compete agreement - transfer of going concern

THE assessee is a partnership firm, engaged in the business as custom house agent, as also an air cargo agent. During the relevant year, the assessee transferred its business of international cargo to one DHL Danzar Lemuir Pvt Ltd as a going concern for consideration of Rs. 54.73 crore. The assessee offered such receipt to tax as capital gain. The AO did not accept this stand of assessee and noticed that in the deed of transfer of business, there was a clause that the assessee would not involve into carrying on of same business. According to the AO therefore, in view of such non-compete clause in the agreement, the receipt could be the assessee's income in terms of Section 28(va) and consequentially taxable under the head 'Profits and Gains of Business and Profession'.

On appeal, the CIT(A) was of the opinion that the entire sum of Rs. 54.73 crore was not paid for non-compete agreement. He apportioned the total consideration into two parts namely a sum of Rs. 4.5 crore was attributed to the non-compete clause, the rest i.e 50.23 crore was treated as the assessee's capital receipt taxable as capital gains. On further appeal, the Tibunal upheld the view of CIT(A), inter alia observing that the assessee had under the agreement in question transfered the entire business and the non-compete clause was merely consequent to the transfer of business.

On appeal, the HC held that,

Whether entire sale consideration received from transfer of whole business as a going concern, can be attributed as non compete fees, by simply relying on residual element of receipt relatable to the non-compete agreement - NO: HC

++ the Revenue does not dispute the factual findings of the CIT(A) that the assessee had transferred the entire business as a going concern. In that view of the matter, the entire sale consideration of Rs. 54.73 crore could never have been attributed to the non-compete clause contained in such agreement. The CIT(A) applied logical formula to arrive at the apportionment between the value for the sale of business and of non-compete clause in the agreement. No perversity is pointed out in this approach of the CIT(A). What however, the Revenue argued is that the entire amount was attributable to the non-compete agreement which is clearly an incorrect proposition. The assessee which was engaged in highly specialized business, transferred the entire business for valuable consideration. Non-compete clause in such agreement was merely a part of the understanding between the parties. What purchaser received under such agreement was entire business of the assessee along with non-compete assurance;

++ it is noticed that Clause (va) of Section 28 pertains to any sum whether received or receivable, in cash or kind, under an agreement, inter alia for not carrying out any activity in relation to any business or profession. A non-compete agreement would therefore fall in this clause. Proviso to said clause (va), however, provides that the said clause would not apply, to any sum whether received or receivable, in cash or kind, on account of transfer of right to manufacture, produce or process any article or thing or right to carry on any business or profession which is chargeable under the head "Capital Gains". The assessee's receipt attributable to the transfer of business was correctly taxed by the CIT(A) as confirmed by the Tribunal as giving rise to capital gain. It was only residual element of receipt relatable to the non-compete agreement which was brought within fold of Clause (va) of Section 28. No question of law, therefore, arises.

Revenue's appeal dismissed

2019-TIOL-375-HC-KOL-IT

CIT Vs PEERLESS GENERAL FINANCE AND INVESTMENT COMPANY LTD: CALCUTTA HIGH COURT (Dated: February 6, 2019)

Income tax - pending assessment - territorial jurisdiction

THE Revenue Department preferred the present appeal challenging the action of ITAT in holding that the AO, Kolkata had only the power to make the assessment within his territorial jurisdiction, which included eleven branches of the assessee and not over the other 134 branches which outside his territory. On that basis, the Tribunal proceeded to further hold that although the AO for Kolkata had not made any proper assessment of the amounts paid as interest, the Tribunal was reluctant to re-open the issue after the passage of so many years.

On appeal, the HC held that,

Whether when actual question of law remains unanswered over years as the Department did not take any action on ground of territorial jurisdiction, then no unnecessary harassment should be caused to assessee while reopening the issue - YES: HC

++ it is seen that for more than ten years, this appeal u/s 260A is pending before this Court. Therefore, the fact remains that as far as the Calcutta assessments are concerned, a most unreliable and erroneous one for all practical purposes remains in the file. The Tribunal has not touched it on the ground of passage of time. No determination has been made on the real issue as to whether the required tax was not deducted by the assessee in its other 134 branches;

++ it is a most unfortunate state of affairs but from the point of Revenue, a determination, even a proper guess work or best judgement assessment should be made in respect of the Calcutta branches. The Tribunal should do it itself without remanding the matter to the AO. Since nothing has been done by the authority for so long, unnecessary harassment is not caused to the assessee and that the Tribunal will proceed on the basis of the available records before it and pass an order which is just and reasonable. It would be open to the Revenue to take appropriate action with regard to the other 134 branches outside the Kolkata jurisdiction.

Case disposed of

2019-TIOL-374-HC-KERALA-IT

SREE CHAMUNDI DEVI TEMPLE TRUST Vs ITO: KERALA HIGH COURT (Dated: January 31, 2019)

Income tax - Writ - bonafide conduct - completion of assessment - opportunity of hearing

THE assessee, a public religious trust, filed its return for the relevant A.Y. Later, in response to a notice issued by the authorities u/s 142(1), the assessee claimed to have submitted a detailed reply. Nevertheless, u/s 143(2), the assessee received another notice requiring it to produce its vouchers and bills in support of the return and also to show cause as to why for certain additions, disallowances should not be made. Though the hearing was scheduled for Dec 27, 2018, the assessee asserted that it received the notice only in the afternoon of that day. Therefore, the very next day the assessee submitted its objections, besides seeking ten more days time to produce the documents. However, the ITO went ahead and completed the assessment, perhaps-as the assessee pleaded -to avoid the problem of limitation.

On Writ, the HC held that,

Whether the taxpayer having bonafide conduct, should be given an additional opportunity of hearing before the completion of assessment - YES: HC

++ it remains un-contradicted, that the assessee received the notice only in the afternoon of Dec 27, 2018, though the hearing was supposed to be at 11 Am. As an element of bona fide conduct on the assessee's part, it is noticed that the very next day the assessee filed its objections and sought ten more days time. Perhaps to avoid the technical tangles, the ITO completed the assessment proceedings by Dec 31, 2018. Under these circumstances, it will only serves the interest of justice if the assessee is given one more opportunity. Therefore, the matter is remanded to the ITO for fresh adjudication.

Case remanded

2019-TIOL-373-HC-MAD-CUS

PASHA INTERNATIONAL Vs CC: MADRAS HIGH COURT (Dated: January 10, 2019)

Cus - Petitioner, while filing shipping bills, inadvertently had put "No" instead of "Yes" in the form for claiming benefit under Merchandise Exports from India Scheme - Petitioner claims that when the system was done manually, the corrections could be made in view of the enabling provision of section 149 of the Customs Act, but now that the EDI system is being followed, corrections cannot be made; that petitioner cannot suffer for an inadvertent mistake made by them.

Held: In view of the decision of the Kerala High Court in the case of Saint Gobain India Pvt. Ltd., the second respondent can be directed to issue N.O.C. to enable the petitioner to avail the benefit from the third respondent - the third respondent to consider the claim of the petitioner and pass appropriate orders thereon expeditiously - writ petition stands disposed of, accordingly: HIGH COURT [para 4, 5]

Writ Petition disposed of

2019-TIOL-372-HC-MAD-CUS

SRI VARAHI CHEMICALS Vs CC: MADRAS HIGH COURT (Dated: January 24, 2019)

Cus - Anti-Dumping Duty [ADD] - Writ Petition seeks to restrain the respondents from collecting any duty in the name of ADD in terms of notification no.50/2017-Customs (ADD) dated 18.10.2017 in respect of the imports of Soda Ash made by the petitioner firm from the countries specified in notification no.34/2012-Customs (ADD) dated 3.7.2012.

Held: It is an admitted case of the respondents that as on date, no notification is in force empowering the collection of ADD - it is a matter of fact that such power conferred on the authorities through issuance of relevant notification ceased to exist after 2.7.2018, which right was also not recommended to continue by the DGAD by proceedings dated 14.12.2018 - hence, there is no justification on the part of the respondents in seeking for any interim protection for releasing the goods without collecting the ADD on the reason that the order passed by DGAD dated 14.12.2018 is an appealable order - the respondents cannot insist upon the petitioner to protect the interest of the Revenue towards the ADD in the absence of any statutory right available as on today for levying & collecting such duty - writ petition is allowed : HIGH COURT [para 6, 7]

2019-TIOL-371-HC-MAD-CUS

UNIK TRADERS Vs ADDL CC: MADRAS HIGH COURT (Dated: January 22, 2019)

Cus - W.P.Nos.33269 and 33276 of 2018 are filed challenging the seizure memorandum dated 1.12.2018 and consequently, for a direction to release the subject matter consignment covered under the Bill of Entry referred to therein - W.P.No.540 of 2019 is filed challenging the conditional order dated 1.1.2019 for provisional release of the subject matter consignment:

Held: There is no dispute to the fact that if the goods were originated from Sri Lankan country, there will not be any difficulty for the revenue to release those goods without imposing the conditions as stipulated in the impugned order, however, by collecting the required duty - but the dispute is regarding the country of origin - it is evident that as on today, the said communication dated 6.12.2018 (which clearly states that all the containers of Arecanut are of Sri Lankan origin and have been exported from Sri Lanka with Certificates issued by the competent authority), seems to be the latest communication issued by the Sri Lanka Customs Authority, prima facie, supports the case of the petitioner - under such circumstances, imposing onerous and stringent conditions for release of the goods cannot be justified - the interest of the parties will be safeguarded if the conditions stipulated in the impugned order is modified to the following effect - accordingly, W.P.No.540/2019 is allowed in part and the conditions imposed in the impugned order are modified as follows: (a) the petitioner shall furnish a Bond equal to the value of the seized goods i.e., Rs.40.82 crores (b) the petitioner shall furnish a Bank guarantee/security deposit to cover 30% of the differential duty (c) the above bond and bank guarantee shall be furnished by the petitioner within a period of seven working days (d) on receipt of such bond and bank guarantee/security deposit, the respondent shall provisionally release the goods forthwith - in view of the order passed in W.P.No.540 of 2019, no further order is required in W.P.Nos.33269 & 33276 of 2018 - accordingly, both these writ petitions are closed : HIGH COURT [para 12, 14, 15, 16, 17]

Writ Petition No.540 of 2019 partly allowed/

2019-TIOL-370-HC-MAD-CUS

WITTHAL INTERNATIONAL PVT LTD Vs ACC: MADRAS HIGH COURT (Dated: January 25, 2019)

Cus - In a case of import of dry raw cashew nuts, the supplier (petitioner), on realizing that the third respondent (importer) is a bogus company, entered into a fresh contract with the fourth respondent - since in the Import General Manifest [IGM], the name of the third respondent continued to be shown, the goods could not be cleared and continued to remain in Tuticorin port and petitioner incurring huge demurrage charges, therefore, the Writ Petition.

Held: Since as per Circular No.14/17-Customs dated 11.4.2017, the responsibility of amendment in the IGM solely rests with the shipping line/agent as they file IGM with Customs under section 30 of Customs Act, 1962, the second respondent (shipping line) is directed to forthwith apply for amendment in the IGM and other documents - upon filing of the same, the first respondent or any other competent authority to forthwith allow the same - after completion of the formalities, the goods to be released by the first respondent - first respondent is directed to fast track the formalities - writ petition is allowed : HIGH COURT [para 4, 5]

2019-TIOL-369-HC-PATNA-ST

SHREE MAHAVIRA BUILDWELL PVT LTD Vs CCGST & CE: PATNA HIGH COURT (Dated: January 8, 2019)

ST - The Revenue raised duty demands for the relevant periods - The petitioner filed the present writ, alleging that the SCN was pre-meditated and was of the nature of post-decisional SCN - It was also alleged that the SCN was issued beyond the period of limitation as prescribed u/s 73(2) of the Finance Act - It was also alleged that the exemption notifications dated 24.05.2010 & 20.06.2012 were not considered.

Held: It is seen that the petitioner has option of statutory appeal available to it - Hence the petitioner is permitted to raise such issues in the appeal to be filed by it - As the statutory period for filing such appeal expired during the pendency of the present petition, the petitioner is granted 4 weeks' time to file such appeal along with application for condonation of delay - Meanwhile, the Department is directed to refrain from taking any coercive measures: HC

Assessee's Writ petition disposed of

2019-TIOL-368-HC-PATNA-ST

SATYENDRA KUMAR CONSTRUCTION PVT LTD Vs CC, CE & ST: PATNA HIGH COURT ( Dated: January 17, 2019)

ST - The petitioner is a contractor which executed some contract for a government corporation - It filed the present writ, seeking that directions be issued to the Revenue to disburse refund of service tax paid by the petitioner, in view of exemption granted under Notfn No 25/2012.

Held: The Revenue claimed that the agreed rates included taxes & levies and it is only where such taxes got enhanced under any statute during the period of contract that such differential amount of levy, on account of enhancement, if paid by the contractor was refundable - Such argument appears to be reasonable - However, no counter affidavit is filed in support of such submission - Moreover the petitioner's representation, seeking refund as per mandate of certain clauses in the contract, is pending disposal - Hence the Managing Director of the corporation is directed to dispose off such representation through a speaking order: HC

Writ petition disposed of

2019-TIOL-367-HC-DEL-MISC

IKECHUKWU CHUKWUBUIKEM STANLEY Vs NARCOTIC CONTROL BUREAU: DELHI HIGH COURT (Dated: February 11, 2019)

Miscellaneous - interim bail - health illness - recovery of heroin - seizure of parcel

THE present petition had been preferred seeking interim bail for a period of four weeks in Sessions Case No. 225 of 2017 on the ground of illness of his wife. The case of the prosecution was that an information was received that one parcel booked with DHL Express Limited from Delhi to Spain was containing drugs. The said parcel was seized and examined and 575 grams of heroin was recovered. The parcel was booked by the co accused using his own identity. It was alleged that the co accused disclosed the identity of petitioner as the one who had booked the parcel and petitioner was alleged to have named another co accused as the one who had given the articles to him. The petitioner in his defence, contended that his wife was suffering from distal urethral stricture.

On Writ, the HC held that,

Whether an accused is eligible for interim bail on ground of health illness of his wife, if he furnishes a bail bond with one surety of the like amount to the satisfaction of the Trial Court - YES: HC

++ it is seen that fresh status report has been filed with regard to the family members of the wife of petitioner. Though the status report indicates that there are family members, however, Respondent's counsel submits that as per his instructions they are not residing with her. Keeping in view the totality of the facts & circumstances and the status report, this Court is of the view that petitioner is entitled to interim bail for a period of four weeks. Accordingly, on petitioner furnishing a bail bond in the sum of Rs. 25,000/- with one surety of the like amount to the satisfaction of the Trial Court, the petitioner shall be released on interim bail for a period of four weeks from the date of his release. Petitioner shall not do anything which may prejudice either the trial or the prosecution witnesses. Petitioner shall also intimate to the AO the date and the hospital of admission of the wife of the petitioner. The petitioner shall mark his presence in the office of the NCB, but the officers of NCB shall not detain the petitioner more than necessary.

Case disposed of

2019-TIOL-366-HC-ALL-VAT

CCT Vs LEATHER CRAFT: ALLAHABAD HIGH COURT (Dated: February 1, 2019)

U.P. VAT Act - Writ - Section 8

Keywords - input tax credit - povisional assessment - unregistered seller

THE assessee company was engaged in trading in leather and shoe material. During the months of April to August 2016, the assessee disclosed to have purchased goods from M/s. Rajiv Enterprises; M/s. Chandni Enterprises; M/s. Maa Ambe International; M/s. Rahman Overseas; and M/s. Gold Star Leather Finishers against the tax invoices. Based on such purchases, the assessee raised claim of ITC. This claim of ITC so made was rejected by the AO in part while making the provisional assessment order for the months of April to August 2016 on the reason that the seller M/s. Rajiv Enterprises had made purchase of the goods from one M/s. Mahalaxmi Traders whose registration had been cancelled from before. Similar rejections were made on similar reasoning, for the months of May to August 2016.

On appeal, the Tribunal answered in favour of assessee, on the reasoning, though the purchases made by the sellers might be doubted on the basis of enquiry made, however, the sales made to the assessee could not be doubted for that reason. Accordingly, the Tribunal granted the benefit of ITC.

On revision, the HC held that,

Whether claim of ITC should not be denied to a dealer in an ex parte provisional assessment, without confronting him with all adverse material regarding such ITC claim - YES: HC

++ in the first place, to invoke the provision of Rule 21(3), normally, the enquiry required to be conducted is only viz-a-viz the seller who may have sold the goods to the assessee claiming ITC against a tax invoice. Once such transaction is found to be genuine and goods established to have been sold, no further enquiry may be required to be made. To that extent the submission of assessee's counsel is correct. However in the facts of the present case, it does appear that other than relying on the enquiry made with respect to the first selling dealer, the revenue authorities also referred to certain other enquiries made from the seller from whom the assessee made the purchases. Some of those sellers also appear to have disputed the transactions claimed by the assessee. At the same time, it is admitted by the counsel, the enquiries referred to in the orders were wholly ex-parte and with which the assessee had not been confronted during the course of the proceedings. Neither those submissions were recorded during the course of the assessment proceedings against the assesse nor any opportunity to cross-examine such witnesses was given to the assessee;

++ in such circumstances, though normally the Court may have remanded the matter to the AO to pass a fresh order in accordance with law after allowing the assessee an opportunity to rebut the evidence relied upon by the revenue, however, in view of the fact that the present proceedings have arisen from the provisional assessment proceedings and it has been stated at the bar that the final assessment proceedings have not yet been concluded, the present revisions are disposed of with a direction that it shall remain open to the assessing authority to confront the assessee with all adverse material that may have been collected by the revenue authorities with respect to ITC claimed by the assessee, in those proceedings and to accordingly pass an assessment order in accordance with law. In view of the fact that the rejection of ITC was made on the basis of an ex-parte enquiry in provisional assessment proceedings, in the meanwhile the order of the Tribunal shall continue to exist till a final assessment order is passed, without being influenced by any observation made in the impugned order, or this order, affecting the merits of the dispute.

Case disposed of

2019-TIOL-365-HC-KAR-VAT

SOUTHERN MACHINE TOOLS Vs DCCT: KARNATAKA HIGH COURT (Dated: January 17, 2019)

Karnataka VAT Act - Writ - reassessment - reasonable opportunity - statutory remedy

THE assessee is a Proprietorship concern, engaged in the manufacturing of Machinery tools. It had preferred the present writ petition contending that no reasonable opportunity was provided to the petitioner, before passing the re-assessment order.

On Writ, the HC held that,

Whether when the dealer itself did not respond to the proposition notice, he could not caim that no reasonable opportunity was provided to him before passing of re-assessment order - YES: HC

Whether when the dealer is entitled to move before appellate authority for the interim relief of stay, then invoking writ jurisdiction circumventing alternative statutory remedy provided under the Act cannot be countenanced - YES: HC

++ it was apparent that the assessee was duly served with the notice by Muddam. However, as there was no response, an endorsement was issued and the same was duly served on the assessee by Muddam. Despite the same, the assessee did not respond to the proposition notice. Hence, it could not be held that no reasonable opportunity was provided to the petitioner, before passing of the re-assessment order. A complete mechanism is provided under the Act to challenge the re-assessment order. Even regarding the stay of recovery proceedings, the assessee is entitled to move before the appellate authority for the interim relief of stay in accordance with law. In such circumstances, invoking writ jurisdiction circumventing alternative statutory remedy provided under the Act cannot be countenanced.

Assessee's petition dismissed