2014 (7) TMI 1149 - HC - VAT and Sales Tax

Court directs public sector entity to provide bank guarantee instead of 30% tax deposit

M/s. Bharat Earth Movers Limited Versus State of Karnataka And The Commissioner of Commercial Taxes

M/s. Bharat Earth Movers Limited Versus State of Karnataka And The Commissioner of Commercial Taxes - TMI Issues:1. Validity of the endorsement demanding outstanding tax dues from a public sector undertaking.2. Interpretation of Section 62 of the Karnataka Value Added Tax Act, 2003 regarding appeals and deposit requirements.3. Consideration of waiving the deposit of 30% of tax amount for a public sector undertaking.4. Comparison with a previous Supreme Court judgment involving a public sector company.Analysis:The judgment pertains to a public sector undertaking challenging an endorsement demanding outstanding tax dues issued by the 3rd respondent authority. The endorsement was based on a reassessment order passed under Section 39 of the Karnataka Value Added Tax Act, 2003. The petitioner had filed an appeal before the 4th respondent, but it had not been heard yet. The petitioner argued that the entire tax liability was disputed and, therefore, should not be required to deposit 30% of the tax amount as per Section 62 of the Act. The petitioner relied on a Supreme Court judgment involving another public sector company where a deposit was waived pending appeal.The court considered both sides' arguments. The respondents opposed waiving the deposit, fearing it could set a precedent and bypass the statutory provision. They argued that the petitioner, being a financially stable company, should make the deposit. The court noted that the petitioner's liability was under dispute, and the decision rested with the appellate authority. It referenced the Supreme Court's decision involving a public sector company and agreed that the petitioner should not be required to deposit 30% of the tax amount. Instead, the petitioner was directed to provide a bank guarantee to the appellate authority and pay the entire tax dues with interest within a month if unsuccessful before that authority. The court emphasized that the order was specific to the petitioner being a public sector undertaking and should not be treated as a precedent for other assesses.In conclusion, the court disposed of the writ petitions by directing the petitioner to provide a bank guarantee instead of making the 30% tax deposit, considering the petitioner's status as a public sector undertaking. The judgment highlighted the unique circumstances of the case and the need to balance the statutory provisions with the petitioner's financial condition.