TaxTMI 
TaxTMI 
2015 (3) TMI 131
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....aintenance Agreements (hereinafter referred to as 'FSMA' for short) and the Spares and Service Maintenance Agreements (hereinafter referred to as 'SSMA' for short) were essentially service contracts and that the materials supplied to its customers during the execution of these contracts were only incidental and ancillary to the principal objective of the contracts of service, the petitioner had been declaring the turnover in respect of the said maintenance agreements in its monthly returns by deducting the same while calculating its taxable turnover under the provisions of the Karnataka Sales Tax Act (hereinafter referred to as 'the Act') 3. For the assessment years 1992 - 93 to 1999 - 2000, the petitioner had been calculating the taxable turnover in accordance with the aforementioned method and duly discharging the liability to tax under the Act. However, the assessing authorities passed assessment orders demanding taxes on the turnover representing FSMA and SSMA from the year 1992 - 93 onwards. The petitioner contested the matter right up to the Hon'ble Supreme Court. The Supreme Court finally by its order dated 24.08.2005, in the case of Xerox Modi C....
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....n respect of tangible goods. Just like petrol is consumed after sale or ink is consumed after sale in this case also the toners and developers get consumed after sale. The property passes the moment they are put in the machine. At that stage they are not consumed but are tangible goods in which property can pass. 4. In fact the Apex Court had passed an interim order earlier which has held as under:- "There will be ad-interim stay of encashment of bank guarantess on condition that these bank guarantess are kept alive pending further orders. In the meanwhile, the existing interim arrangement for furnishing the bank guarantees in respect of demands raised will continue." Accordingly, assessee had furnished bank guarantees, whenever the assessment orders has been passed. 5. The present proceedings relate to the assessment year 2000 - 01. Because of the pendency of the matter before the Apex Court the authorities did not proceed to issue any assessment order for the said year. It is only after the Apex Court declaring law on dated 24.08.2005, on the point, the assessment order came to be passed on 21.03.2006, holding that the sales tax is payable. Accepting the sa....
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....p to the Supreme Court. It is only on 24.08.2005, the Apex Court pronounced its judgment and held, tax is payable. As the said matter was pending before the Supreme Court, even the department did not pass the assessment order in respect of the returns filed by the assessee for the subsequent period 2000 - 01. Subsequent to the Apex Court judgment i.e. on 24.08.2005, they processed the returns of the assessee and passed the order on 21.03.2006, demanding the tax and interest payable thereon. In view of the judgment of the Apex Court, the assessee promptly paid the tax and the interest. It shows the intention on the part of the assessee that he had doubt whether to pay the tax or not to pay tax in accordance with law. On the earlier occasions also, the assessment order were passed in pursuance of the interim order passed by the Apex Court, the assessee has furnished bank guarantees also. The Apex Court in the case of Hindustan Steel Limited vs. The State of Orissa reported in 1970 STC V 25 page 211 dealing with the cases in which penalty to be levied has held as under:- "An order imposing penalty for failure to carry out a statutory obligation is the result of a q....
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....f the case with which he is dealing. One cannot simply brush aside all explanations offered in regard to the alleged breach of law inviting the penalty, merely because the authority has the power to impose such penalty. There must be implicit evidence in the process of imposition of penalty that all materials relevant to the exercise of discretion which was before the authority was indeed considered by it before penalty came to be imposed." In the instant case, the penalty provision reads as under:- Section 12 B(4) of the Act: If at the end of the year it is found that the amount of tax paid in advance by any dealer for any month or quarter or for the whole year in the aggregate was less than the tax payable for that month or quarter or the tax for the whole year as finally assessed, as the case may be, by more than fifteen per cent, the assessing authority may direct such dealer to pay, in addition to the tax, a penalty which shall not be less than one half of the tax so paid in short, but not exceeding one and half times the amount by which the tax so paid falls short of the tax payable for the month or quarter or for the whole year, as the case may be: &nbs....