The Asst. Commissioner Of ... vs M/S. Surfaces
2022 Latest Caselaw 5639 Kant

  IN THE HIGH COURT OF KARNATAKA AT BENGALURU

        DATED THIS THE 29TH DAY OF MARCH, 2022

                         PRESENT

         THE HON'BLE MRS.JUSTICE S.SUJATHA

                           AND

THE HON'BLE MR. JUSTICE SHIVASHANKAR AMARANNAVAR

                    S.T.R.P.No.8/2020

BETWEEN :
THE ASST. COMMISSIONER OF
COMMERCIAL TAXES
(AUDIT AND RECOVERY)-4.9,
DVO-4, BENGALURU-560047.                        ...PETITIONER

             (BY SRI JEEVAN J NEERALGI, AGA.)

AND :
M/S. SURFACES
NO.4, 14TH CROSS,
KOLANDAPA GARDEN,
ANEPALYA, AUDUGODI POST,
BENGALURU-560030.                           ...RESPONDENT

            (BY SRI CHIDANAND.K., ADV. - ABSENT]

      THIS STRP IS FILED UNDER SECTION 65(1) OF THE
KARNATAKA VALUE ADDED TAX ACT, 1957 AGAINST THE
JUDGMENT DATED 12.10.2018 PASSED IN STA.NO.17 TO
20/2016 AND STA.NO.21 TO 23/2016 ON THE FILE OF THE
DISTRICT JUDGE COMMERCIAL TAXES MEMBER ALLOWING
THE APPEAL AND SETTING ASIDE THE ORDER DATED
20.10.2015 PASSED IN VAT AP. 313-316/2013-14 ON THE FILE
OF THE JOINT COMMISSIONER OF COMMERCIAL TAXES
(APPEALS) -4 PARTLY ALLOWING THE APPEAL FILED UNDER
SECTION 62(1) OF THE KARNATAKA VALUE ADDED TAX ACT,
2003 AGAINST THE ORDER DATED 26.02.2014 PASSED UNDER
                            -2-




SECTION 39(1) OF THE KVAT ACT, 2003 BY THE ASSISTANCE
COMMISSIONER OF COMMERCIAL TAXES, (AUDIT AND
RECOVERY) 4.9, DV0-4 BANGALORE THE TAX PERIODS APRIL
2012, MAY 2012, JUNE 2012 AND SEPTEMBER 2012.

      THIS PETITION COMING ON FOR HEARING, THIS DAY,
S. SUJATHA, J., MADE THE FOLLOWING:

                       ORDER

This Revision Petition is filed under Section 65[1]

of the Karnataka Value Added Tax Act, 2003 ['Act' for

short] assailing the judgment dated 12.10.2018 passed

by the Karnataka Appellate Tribunal at Bengaluru

['Tribunal' for short] in STA No.17 to 20/2016 and allied

matters.

2. The revision petition has been admitted by

this Court to consider the following questions of law:

"1. Whether the assessee -

Respondent is entitled for input tax credit against the purchase effected from the bogus dealer M/s. Rajguru Impex and Karnataka Metal Stores?

2. Whether on the facts and in the circumstances of the case, the impugned

order passed by the Tribunal is sustainable in law?"

3. The respondent - assessee is a partnership

firm engaged in the trading of Aluminum profiles and

self-adhesive tapes etc., under the name and style of

"M/s. Surfaces" and is registered under the provisions of

the Act. The respondent has filed returns for the

assessment periods September 2011, December 2011,

February 2012, March 2012 to June 2012 and claimed

input tax credit as provided under Section 10[3] of the

Act. The respondent's case was taken up for re-

assessment by the prescribed authority after examining

the books of accounts, returns, balance sheet, sample

invoices and other related documents for the respective

tax periods and re-assessment orders were passed under

Section 39[1] of the Act rejecting the claim of the

respondent insofar as the input tax credit on the ground

that the respondent has produced the invoices relating to

the selling dealers viz., M/s. Rajguru Impex and

Karnataka Metal Stores who were said to be bogus

dealers involved in bill trading activity and also levied

interest and penalty for the alleged short payment of tax.

4. Being aggrieved by the said order, the

respondent preferred appeal before the First Appellate

Authority who confirmed the order of the Prescribed

Authority dismissing the appeal. Against which, the

respondent preferred appeal before the Tribunal which

came to be allowed. Hence, this Revision Petition by the

State.

5. Learned Additional Government Advocate

appearing for the Revenue would submit that the

Tribunal has not appreciated the material facts on record

in a right perspective and has allowed the appeal sans

assigning proper reasoning. The respondent has claimed

input tax credit based on the invoices issued by the

dealers who were engaged in the bill trading. The

Enforcement report regarding the bill trading activity of

the selling dealers namely, M/s. Rajguru Impex and

Karnataka Metal Stores having been placed before the

Prescribed Authority, the same was considered by the

Prescribed Authority while rejecting the input tax claimed

by the assessee. This aspect was rightly appreciated by

the First Appellate Authority but the Tribunal has allowed

the appeal without considering the primary aspect of tax

liability not being discharged by the selling dealers.

6. Learned counsel has placed reliance on the

judgment of the Co-ordinate Bench decision of this

Court in the case of Microqual Techno Private

Limited, Bangalore V/s. The Additional

Commissioner of Commercial Taxes, Zone-I,

Bangalore [2011 (71) Kar.L.J. 10 (HC) (DB)] and M/s.

Packwell Industries V/s. State of Karnataka [2012

SCC OnLine Kar 9136] in support of his submissions

and thus contended that the Tribunal erred in not

properly appreciating Section 70 of the Act inasmuch as

burden of proof in allowing the appeal.

7. There is no representation on behalf of the

respondent.

8. We have carefully considered the

submissions of the learned Additional Government

Advocate and perused the material on record.

9. The main ground for rejecting the input tax

credit claimed by the assessee is the report said to have

been furnished by the Enforcement Officer. The report

of the Enforcement Officer said to have been uploaded

in the departmental website alleging the bill trading

activity by the selling dealers namely M/s. Rajguru

Impex and Karnataka Metal Stores is the foundation for

the case on hand. The authorities have not co-related

the purchases made by the assessee with the alleged

invoices of the selling dealers qua movement of goods.

No attempt has been made by the Authorities to verify

whether the said transactions based on which the input

tax credit claimed was genuine or not. Merely placing

reliance on the report of the Enforcement Authority, the

input tax credit has been denied as no tax was paid by

the selling dealer. Independent application of mind by

the Prescribed Authority is sine qua non for taking

decision. Further, it is well settled legal principle that

the assessee claiming input tax credit is required to

satisfy the authorities that he has purchased the goods

from the registered selling dealers who have issued the

invoices and collected the tax. The payment of tax by

the registered dealer for the transactions effected in

terms of the invoices issued by the registered selling

dealers would entitle such registered dealer to claim the

input tax credit. The Department cannot deny the input

tax credit merely for the reason that the selling dealer

has not deposited the tax. Action has to be initiated

against the selling dealer. The attempt made by the

Department in denying the input tax credit as no tax

was paid by the selling dealers may not be appreciated

for the reason that the entitlement of the claim of input

tax credit by the registered dealer cannot be stretched to

the extent of compliance made by the selling dealers in

depositing the tax amount in full or part thereof as held

by the Co-ordinate Bench of this Court in the case of

State of Karnataka V/s. Rajesh Jain, Partner M/s.

Salem Steel Trading Company, Kurubarapet Main

Road Cross, Bangalore [ 2017 (89) Kar.L.J. 305 (HC)

(DB)] which has been rightly followed by the Tribunal in

allowing the appeal.

10. The arguments advanced by the learned

Additional Government Advocate referring to the

Microqual Techno Private Limited, Bangalore supra

and M/s. Packwell Industries supra deserves to be

negated in the facts and circumstances of the case

where the appellant has discharged the burden of proof

under Section 70 by placing necessary documents for

proving the genuineness of the transaction. Moreover,

the respondent has filed objections in the present

appeal along with the list of E-sugams raised by the

selling dealers submitting that the payments were made

only through RTGS/Banking challans, transactions

were recorded in the books of accounts which has not

been disputed by the Revenue.

11. In the given circumstances, we find no

perversity or irregularity in the order of the Tribunal

impugned. Accordingly, we answer the substantial

questions of law in favour of the assessee and against

the Revenue.

Resultantly, STRP stands dismissed.

At this juncture, learned Additional Government

Advocate submits that C.A.Nos.000316-000320/2020

filed by the Revenue is pending before the Hon'ble Apex

Court for consideration against the order passed by the

Co-ordinate Bench of this Court in the case of Rajesh

- 10 -

Jain supra. In the circumstances, it is needless to

observe that the Assessing Officer is at liberty to pass

appropriate consequential orders depending on the final

verdict of the Hon'ble Apex Court in the pending

C.A.Nos.000316-000320/2020.

Sd/-

JUDGE

Sd/-

JUDGE

NC.