M/S Satya Sai Constructions vs Additional Commissioner Of ...
2021 Latest Caselaw 1585 Kant

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     IN THE HIGH COURT OF KARNATAKA AT BENGALURU

       DATED THIS THE 18TH DAY OF FEBRUARY 2021

                        PRESENT

         THE HON'BLE MR. JUSTICE ALOK ARADHE

                           AND

     THE HON'BLE MR. JUSTICE NATARAJ RANGASWAMY

                  S.T.A. NO.125 OF 2016
BETWEEN:

M/S. SATYA SAI CONSTRUCTIONS
A PARTNERSHIP FIRM
THE RETREAT, NO.48
TARABANAHALLI VILLAGE
JALA HOBLI, BANGALORE-562157
REP. BY ITS MANAGING PARTNER
SRI. PRAKASH CHALLA
AGED ABOUT 63 YEARS
S/O SRI. CHALLA KONDAIAH.
                                              ... APPELLANT
(BY SMT. RADHIKA SHRIRANJINI M.D. ADV.,)

AND:

1.     ADDITIONAL COMMISSIONER OF
       COMMERCIAL TAXES, ZONE-I
       VANIJYA THERIGE KARYALAYA
       GANDHINAGAR, BANGALORE-560009.

2.     JOINT COMMISSIONER OF COMMERCIAL
       TAXES (APPEALS)-I, ABHAYA COMPLEX
       SESHADRIPURAM, BANGALORE.

3.     COMMERCIAL TAX OFFICER (ENFORCEMENT)
       SOUTH ZONE, V.T.K. - II
       80 FEET ROAD, NEAR NATIONAL GAMES
       HOUSING COMPLEX, VIVEKNAGAR POST
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     KORAMANGALA
     BANGALORE-560047.
                                           ... RESPONDENTS
(BY SRI. JEEVAN J. NEERALGI, AGA)
                             ---
      THIS S.T.A. IS FILED UNDER SEC.66(1) OF THE KARNATAKA
VALUE ADDED TAX ACT, 2003 AGAINST THE ORDER DATED
8.6.2015 PASSED IN NO.ZAC-1/MYS/KVAT/SMR-09/2014-15 ON
THE FILE OF THE ADDL. COMMISSIONER OF COMMERCIAL TAXES,
ZONE-1 BENGALURU, RESTORING THE ORDER DATED 30.6.2010
PASSED BY THE COMMERCIAL TAX OFFICER (ENF)-14, SOUTH
ZONE BENGALURU BEING THE PRESCRIBED AUTHORITY, AND
SETTING ASIDE THE ORDER DATED 14.3.2011 FOLLOWED BY
RECTIFICATION ORDER DATED 22.8.2011 OF FAA.

     THIS S.T.A. COMING ON FOR HEARING,         THIS   DAY,
ALOK ARADHE J., DELIVERED THE FOLLOWING:

                       JUDGMENT

This Sales Tax Appeal filed under Section 66(1) of

the Karnataka Value Added Tax Act, 2003 (hereinafter

referred to as 'the Act' for short) has been filed by the

appellant against order dated 08.06.2015 passed by the

Additional Commissioner of Commercial Taxes, by which

the Additional Commissioner of Commercial Taxes has

set aside the order passed by the Joint Commissioner of

Commercial Taxes dated 14.03.2011 and has restored

the orders of re-assessment passed by the adjudicating

authority dated 30.06.2010. The tax periods in question

pertain to 01.4.2008 to 31.3.2009 and 01.04.2009 to

31.03.2010. The appeal was admitted by a bench of this

court vide order dated 29.06.2018 on the following

substantial questions of law:

(i) Whether the revisional authority was justified in reversing the order of the First Appellate Court on the basis of facts and circumstances of the case?

(ii) Whether the revisional authority was justified in reversing the order, particularly on the ground that the assessee did not file a revised return under Section 35(4) of the KVAT Act, 2003?

2. Facts leading to filing of this appeal briefly

stated are that appellant is a partnership firm engaged

in development of residential projects based on a joint

development agreement entered into with the land

owner. The appellant formed the residential layout by

laying roads, sewage lines, water lines etc and sold the

residential layout to various customers and sale deed

has been registered transferring the document of title.

After registration of the sale deed, the appellant entered

into construction agreement with buyer for constructing

villas/ residential units. The entire construction activity

was undertaken by engaging a sub contractor who

charged Value Added Tax on the appellant. The

appellant filed its return under the provisions of the Act

after adjusting turnover pertaining to sub contractor.

The department after inspection proceeded against the

appellant on the ground that Value Added Tax paid on

the purchase of material for formation of the road,

laying sewerage lines, pipelines etc is not eligible for

input tax credit. The respondents also disallowed the

deduction of payment made by the appellant to the sub

contractor from the total turnover on the ground that

the appellant has not produced any documentary

evidence. It was also stated that appellant has not

deducted Tax at Source on purchase of sand, stone,

timber, ply wood etc. The appellant filed objections to

the proposal made in the notice and stated that the

amount collected for civic amenities is not exigible to

Value Added Tax as predominant object is to sell

residential layouts.

3. The Commercial Tax Officer revised the

orders of assessment for the period from the period

from 01.04.2008 to 31.03.2009 and 01.04.2009 to

31.03.2010 by order dated 30.06.2010 and levied the

tax on estimated contract receipts at the rate of 4%

under the composition scheme and levied interest and

penalty on the turnovers. The assessee thereupon filed

an appeal before the Joint Commissioner of Commercial

Taxes who by an order dated 14.03.2011 partly allowed

the appeals and set aside the order of assessment

levying tax, interest and penalty. In pursuance of the

aforesaid order, a revised demand notice dated

22.08.2011 was issued. The Additional Commissioner of

Commercial Taxes initiated proceedings under Section

64(1) of the Act to review the order of the Joint

Commissioner of Commercial Taxes and set aside the

order dated 14.03.2011 passed by the Joint

Commissioner of Commercial Taxes and restored the re-

assessment orders holding that the appellant is not a

works contractor and tax has to be paid under the

composition scheme at the rate of 4%. In the aforesaid

factual background, this appeal has been filed.

4. Learned counsel for the appellant submitted

that the order passed by the Additional Commissioner is

not sustainable in law and the second Revisional

Authority erred in law in revising the order passed by

the first Appellate Authority. It is further submitted that

the order passed by the first Appellate Authority is

neither erroneous nor prejudicial to the interest of the

revenue. It is further submitted that the power under

Section 64(1) of the Act has wrongly been invoked only

the ground of non filing of revised returns and the

second appellate authority failed to appreciate that once

tax is levied by the authority prescribed, there is no

discovery of any omission or error by the appellant and

therefore, the question of filing the revised return does

not arise. It is further submitted that the second

Appellate Authority ought to have appreciated that the

first Appellate Authority rightly recomputed the tax

liability by extending the benefit of input tax credit and

deduction of payments made to sub contractors in

accordance with law and same therefore, cannot be

treated either as erroneous or prejudicial to the interest

of the revenue. In support of aforesaid submissions,

reliance has been placed on decisions in

COMMISSIONER OF INCOME TAX AND ANOTHR VS.

D.G.GOPALA GOWDA, ITA NO.1422/2006 DATED

05.03.2013, M/S INFINITE BUILDERS AND

DEVELOPERS VS. THE ADDITIONAL

COMMISSIONER OF COMMERCIAL TAXES ZONE II,

STA No.59/2009 dated 30.05.2013.

5. On the other hand, learned Additional

Government Advocate submitted that the order passed

by the Additional Commissioner is just and legal and the

provisions of Section 64(1) of the Act have been rightly

invoked as the appellant failed to file the revised return

as provided under Section35(4) of the Act. It is further

submitted that the matter requires some factual

adjudication therefore, the same may be remitted to the

second Appellate Authority viz., Additional

Commissioner of Commercial Taxes.

6. We have considered the submissions made

by learned counsel for the parties and have perused the

record. Powers under Section 64 of the Act can be

invoked only if the order is erroneous insofar as it is

prejudicial to the interest of the revenue. Thus, twin

conditions are required to be satisfied for invoking the

powers under Section 64 of the Act viz., that the order

sought to be revised is erroneous insofar as it is

prejudicial to the interest of the revenue. However, from

perusal of the impugned order dated 08.06.2015, it is

evident that the Additional Commissioner of Commercial

Taxes has not recorded a finding that the order passed

by the Joint Commissioner of Commercial Taxes is

erroneous insofar as it is prejudicial to the interest of

the revenue. The Joint Commissioner of Commercial

Taxes has acted like an Appellate Authority while

passing the impugned order dated 08.06.2015. The

condition precedent for invocation of power under

Section 64 (1) of the Act having not been satisfied, the

impugned order cannot be sustained in the eye of law.

For the aforementioned reasons, the substantial

questions of law are answered in favour of the appellant

and against the respondents. In the result, the order

dated 08.06.2015 passed by the Additional

Commissioner of Commercial Taxes is hereby quashed.

In the result, appeal is allowed.

Sd/-

JUDGE

Sd/-

JUDGE ss