2018 (10) TMI 146 - HC - VAT and Sales Tax

Court quashes tax demand, criticizes authority for disregarding notification. Assessing Authority faces penalty for non-compliance.

M/s. KALYANI MOTORS PVT. LTD. Versus DEPUTY COMMISSIONER OF COMMERCIAL TAXES (AUDIT) -BENGALURU

The Court allowed the writ petition filed by M/s. Kalyani Motors Pvt. Ltd., challenging a reassessment order demanding a significant purchase tax amount ... Validity of reassessment order - purchase tax u/s 3(2) of the KVAT Act, 2003 - N/N. FD 82 CSL 10(VI), Bangalore, dated 31.03.2010. Held that:- This Court is surprised and is pained by the manner in which the authority has passed the impugned reassessment order in the second round of assessement for the period 01.04.0211 to March 2012 just ignoring the applicable Notification and throwing it to winds. The said order is therefore nothing less than suffering from malice-infacts as well as malice-in-law. Therefore, the said responsible officer deserves to pay the exemplary costs for passing such whimsical order and the writ petition deserves to be allowed. The writ petition is allowed and the impugned order Annexure-A dated 28.10.2016 passed by the 1st Respondent is hereby quashed and set aside. Issues:1. Reassessment order demanding purchase tax from the assessee under the KVAT Act, 2003.2. Interpretation of Notification No. FD 82 CSL 10(VI) dated 31.03.2010 reducing tax for dealers of used motor vehicles.3. Dispute over denial of input tax credit and failure to consider the Notification's applicability.4. Allegation of malice in passing the reassessment order and claim for exemplary costs.Analysis:1. The petitioner, M/s. Kalyani Motors Pvt. Ltd., challenged the reassessment order dated 28.10.2016 by the Deputy Commissioner of Commercial Taxes, demanding a substantial amount as purchase tax under the KVAT Act, 2003. The order raised a demand of Rs. 8,04,88,670 against the assessee for the period from 01.04.2011 to 31.08.2015, citing a difference in purchase tax u/s.3(2) of the Act.2. The core issue revolved around the interpretation of Notification No. FD 82 CSL 10(VI) dated 31.03.2010, which reduced the tax payable by dealers engaged in the sale and purchase of used motor vehicles to 5% of the difference between taxable turnover and the purchase amount of such vehicles. The petitioner, engaged in the sale and purchase of used cars, contended that the authority ignored this Notification, leading to the unjust demand for purchase tax.3. The petitioner's counsel highlighted the specific conditions stipulated in the said Notification, emphasizing that the assessee was entitled to pay only 5% tax as per the provisions outlined. The authority's failure to discuss why the Notification did not apply to the petitioner's case raised concerns. The denial of input tax credit without proper justification further added to the dispute, with the Revenue failing to establish any grounds for non-applicability of the Notification.4. The judgment criticized the authority's handling of the reassessment order, noting a disregard for the applicable Notification and a lack of justification for the demand made. The Court expressed surprise and dismay at the manner in which the order was passed, labeling it as suffering from malice-in-facts and malice-in-law. Consequently, the Court allowed the writ petition, quashed the impugned order, and directed the Assessing Authority to deposit costs amounting to Rs. 50,000 within a specified timeline. Failure to comply would result in deduction from the officer's salary for payment to the Prime Minister's Relief Fund, emphasizing accountability and adherence to legal provisions.This detailed analysis encapsulates the issues addressed in the judgment, focusing on the interpretation of legal provisions, notification applicability, and the authority's conduct in passing the reassessment order.