Karnataka High Court

State Of Karnataka vs O G Variar And Sons Variar Bakery on 30 June, 2022

Bench: P.S.Dinesh Kumar, Anant Ramanath Hegde

                                       STRP No.4/2022


                          1

  IN THE HIGH COURT OF KARNATAKA AT BENGALURU

        DATED THIS THE 30TH DAY OF JUNE, 2022

                       PRESENT

    THE HON'BLE MR. JUSTICE P.S. DINESH KUMAR

                         AND
 THE HON'BLE MR. JUSTICE ANANT RAMANATH HEGDE

                S.T.R.P No.4 OF 2022


BETWEEN :

STATE OF KARNATAKA
THROUGH THE COMMISSIONER
OF COMMERCIAL TAXES
VANIJYA THERIGE KARYALAYA -1
1ST MAIN ROAD, GANDHINAGAR
BANGALORE-560 009                       ... PETITIONER

(BY SHRI. JEEVAN J. NERALAGI, AGA)

AND :

O.G.VARIAR AND SONS
VARIAR BAKERY
NO.68, 12TH MAIN, 2ND BLOCK
RAJAJINAGAR
BANGALORE-560 010
REP. BY ITS PARTNER
SRI. O.G. JAYASHANKAR VARIAR           ... RESPONDENT

(BY SHRI. M. THIRUMALESH, ADVOCATE)

     THIS STRP IS FILED UNDER SECTION 65(1) OF
KARNATAKA VALUE ADDED TAX ACT., 2003 AGAINST THE
ORDER DATED 12.03.2020 PASSED IN STA.NOS. 244/2015,
245/2015 376/2015 AND 377/2015 AND CROSS APPEAL
NOS.371/2016, 372/2016, 324/2016 AND 325/ 2016, ON
                                             STRP No.4/2022


                             2
THE FILE OF THE KARNATAKA APPELLATE TRIBUNAL AT
BENGALURU, ALLOWING THE APPEALS SETTING ASIDE THE
ORDER DATED 22.12.2014 PASSED IN VAT.AP.NO.564-
575/2013, 14 AND ORDER DATED 24.12.2014 PASSED IN
VAT.AP.NO.576-587/2013-14    AND     ORDER     DATED
10.04.2015 PASSED IN VAT.AP.NO.1034-1045/ 2014-15 BY
THE JOINT COMMISSIONER OF COMMERCIAL TAXES,
(APPEALS)-2    BENGALURU     FILED    AGAINST    THE
RE-ASSESSMENT     ORDER    DATED    24.02.2014   AND
27.02.2014 RESPECTIVELY, PASSED BY THE COMMISSIONER
TAX OFFICER DVO BENGALURU UNDER SEC. 39(1), 36 AND
72(2) OF THE ACT FOR THE TAX PERIODS FROM 2011-12
AND 2012-13.


     THIS STRP, HAVING BEEN HEARD AND RESERVED FOR
ORDERS ON 01.06.2022, COMING ON FOR PRONOUNCEMENT
OF  ORDERS    THIS   DAY,  P.S.DINESH   KUMAR    J,
PRONOUNCED THE FOLLOWING:-


                         ORDER

This Revision Petition by the Revenue is filed

for consideration of following questions:

"(1) Whether on the facts and in the circumstances of the Petitioner's case the Tribunal was right in law, in allowing the Respondent's Appeal and holding that the Respondent was eligible to pay taxes under the scheme of composition as provided for under Section 15(1)(c) of the Act, especially when the Respondent had effected purchase of machinery in the course of interstate trade for use in business activity of the Respondent?

STRP No.4/2022

(2) Whether on the facts and in the circumstances of the Petitioner's case the Appellate Tribunal was right in law on dismissing the Cross Appeals filed by the Petitioner herein?"

2. Heard Shri. Jeevan J.Neralagi, learned

AGA for petitioners and Shri. M. Thirumalesh

learned Advocate for the respondent.

3. Brief facts of the case are, respondent is

a partnership firm engaged in sale of bakery

products. It opted for composition scheme for

payment of tax as per Section 15(1) of the KVAT

Act, 20031 and it was assessed at the rate of 4% on

the sale of food items.

4. Based on the scrutiny of e-sugam Forms

and examination of books of accounts, the

Assessing Authority2 passed re-assessment orders

(dated 24.02.2014 for the Assessment Year

2011-12, order dated 27.02.2015 for the

Karnataka Value Added Tax Act

Commercial Tax Officer (Audit 2.2), Koramangala, Bengaluru STRP No.4/2022

Assessment Year 2012-13 and order dated

27.02.2015 for the Assessment year 2013-14, upto

July 2013), denying the benefit of payment of tax

under Composition Scheme on the ground that

respondent had made interstate purchases.

5. Feeling aggrieved, respondent

challenged the re-assessment orders before the

First Appellate Authority3 and the said Authority,

vide order dated 22.12.2014 in VAT:AP No 564-

575/13-14, order dated in 24.12.2014 in VAT AP.

No.576 to 587/13-14 and order dated 10.04.2015

in VAT AP.1034 to 1045/14-15 upheld the orders of

the reassessment insofar as it related to denial of

benefit of payment of tax by way of composition,

but however held that the respondent shall be

granted the benefit of input tax credit. Feeling

aggrieved by orders passed by the First Appellate

Joint Commissioner of Commercial Taxes (Appeals)-2, Shanthinagar, Bengaluru STRP No.4/2022

authority, the respondent filed STA No.244/2015,

STA 245/2015, STA 376/2015 and STA 377/2015

before the KAT4, Bengaluru. Revenue also filed

Cross Appeals registered as Nos.371/2016,

372/2016, 324/2016 and 325/2016. By the

impugned common judgment order 12.03.2020, the

KAT has allowed the appeals filed by the assessee

and set aside the order of the First Appellate

Authority, the Assessing Authority and Revenue

dismissed the Cross Appeals filed by the Revenue.

Hence, this Revision Petition.

6. Shri. Jeevan J. Neeralagi, learned AGA

for the Revenue submitted that it is not in dispute

that the respondent has made inter State purchase

of bakery machinery. In terms of Rule 135(1) & (2)

of the KVAT Rules5, the option to pay tax by way of

composition shall not be available to a dealer, who

Karnataka Appellate Tribunal, Bengaluru

Karnataka Value Added Tax Rules, 2005 STRP No.4/2022

makes inter-State purchase. The Assessing

Authority and the First Appellate Authority, on

appreciation of facts on record have rightly denied

the benefit to pay taxes under composition to the

respondent. He further submitted that though the

First Appellate Authority upheld the order of

reassessment in so far as it related to denial of

benefits of payment of tax by way of composition, it

has erred in granting the benefit of input tax credit.

The KAT has allowed the appeals on an erroneous

assumption that the goods in question are not

'goods in stock'. In view of the admitted facts, the

benefit of composition is not available to the

respondent. Therefore, the impugned order passed

by the KAT is unsustainable in law.

7. Shri. M. Thirumalesh, learned Advocate

for the assessee submitted that assessee is not

engaged in manufacture and sale of bakery

products. It has purchased machinery and its parts STRP No.4/2022

for use in the Restaurant. As held by this Court in

the case of Shri. Anantha Padmanabha Bhat Vs.

Commissioner of Commercial Taxes and another6,

the inter-State purchases made by the respondent

cannot be considered as 'goods in stock'.

8. We have carefully considered rival

contentions and perused the records.

9. Undisputed facts of the case are,

respondent is in the business of sale of bakery

items. It has purchased bakery machinery, its parts

and aluminum trays from outside the State.

Respondent is not engaged in the business of sale

of machinery.

10. In the case of Shri. Anantha

Padmanabha Bhat, rightly relied upon by the KAT,

this Court has held that the vitrified tiles used in the

W.P. No. 54356, 54357/2015 (Tax-Res) and W.P. Nos. 57006- 57027/2015 decided on 03.06.2016 STRP No.4/2022

restaurant owned by the assessee therein, were not

sold by him in the regular course of business but

they were used for the flooring of the restaurant.

Hence, it had become part of the immovable

property. It is held thus in that case:

"7. Admittedly, the petitioner is running a restaurant only and is engaged in the business of serving vegetarian food and not engaged in the business of sale of Vitrified Tiles. In the restaurant, the Vitrified Tiles in question were not sold by him in the regular course of business, but were used only for the purpose of flooring of the restaurant premises. When so fixed in the floor, the Vitrified Tiles of-course became the part of the immovable property, and it is beyond the common sense and basic commercial prudence to even comprehend that the Vitrified Tiles fixed on the floor of the restaurant could be treated by an assessing authority as the 'goods in stock' dealt with by the assessee or sold in the course of regular course of business. The assessing authorities trained and well acquainted with the commercial terms, cannot be allowed to take such perverse views."

11. In the instant case, admittedly,

respondent is engaged in sale of bakery items. The

goods purchased by the respondent are for STRP No.4/2022

preparing the bakery items. Hence, they cannot be

considered as 'goods held in stock'. We are in

respectful agreement with the view taken by this

Court in Anantha Padmanabha Bhat's case.

12. In view of the above, the questions

framed by the Revenue are answered in favour of

the assessee.

13. Resultantly, this revision petition fails

and it is accordingly dismissed.