M/S. SRI VENKATESHWARA LOGISTICS vs. THE COMMISSIONER OF COMMERCIAL TAXES

IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 9TH DAY OF MARCH 2021 BEFORE THE HON’BLE MR. JUSTICE SACHIN SHANKAR MAGADUM W.P.NO.100688/2021 (T-RES) BETWEEN

M/S SRI VENKATESHWARA LOGISTICS, NO.498 A, S.V.T. COMPLEX, BELLARY ROAD, HOSPET-583 201. REP.BY ITS PROPRIETOR SRI.H.BASAVARAJ. ... PETITIONER (BY SRI.Y.V.RAVIRAJ & SRI.MALHARA RAO K., ADVS.)

AND

VANIJYA BHAVAN, BANDHINAGARA,

BENGALURU-560009.

AUDIT AND RECOVERY-2, HOSPET-583201.

DAVANGERE. ... RESPONDENTS

(BY SRI.V.S.KALASURMATH, HCGP FOR R1 TO R3)

THIS PETITION IS FILED UNDER ARTICLE 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF CERTIORARI OR ANY OTHER APPROPRAITE WRIT OR ORDER QUASHING THE ASSESSMENT ORDER FO THE SECOND RESPONDENT UNDER SECTION 39(1) READ WITH SECTION 72(2) READ WITH SECTION 36(1) OF THE KVAT ACT DATED 27.04.2015 VIDE ANNEXURE-A AND ETC.

THIS PETITION COMING ON FOR PRELIMINARY HEARING ‘B’ GROUP THIS DAY, THE COURT MADE THE FOLLOWING:

ORDER

The captioned writ petition is filed by the petitioner questioning the order passed by the assessing authority vide Annexure-A, impugned order passed by the appellate authority as per Annexure-C and also endorsement as per Annexure-E. 2. The case of the petitioner is that he is only a transport operator and is engaged in transporting logistics assigned by his clients. It is the specific case of the petitioner that he is not involved in purchase and sale of goods and thereby petitioner would not liable to pay purchase and sales tax under the Karnataka Value Added Tax, 2003 (hereinafter referred to as ‘the KVAT Act’ for short). 3. The grievance of the petitioner is that, respondent No.2 being the assessing authority without considering these material aspects has levied tax, interest

3 and penalty and the same is confirmed by the Joint Commissioner of Commercial Taxes and the same is without sanction under the provisions of the KVAT Act. 4. The petitioner further stated that he has declared transportation receipts under the Income Tax Act to the concerned authorities and also produced tax deduction at source certificate issued by his clients. It is his specific case that entire transaction of the petitioner is only in regard to transportation and does not amount to sale of goods. It is also stated that income tax returns filed by the petitioner has been accepted by the income tax authorities and thereby it is clearly established that petitioner is engaged in transport business and not sale of goods. 5. The grievance of the petitioner is that, without examining all these material aspects, respondent No.2- assessing authority by invoking the provisions of Section 39(1) r/w Section 72(2) and Section 36(1) of the KVAT Act has come to the conclusion that the petitioner has failed to

4 explain the transactions and has not submitted any details. On these premise, the authority has proceeded to assume that payments are received from sale of iron ore and consequentially respondent No.2-assessing authority has held that assessee has not declared true and correct turnover to the department and the tax payable to the government exchequer. On these set of reasoning respondent No.2-assessing authority has passed re- assessment for the tax period from April 2008 to March 2009 thereby levied tax to the tune of Rs.63,20,350/-. 6. The petitioner being aggrieved by the order passed by respondent No.2, preferred an appeal before respondent No.1 under Section 62(6)(a) of the KVAT Act. The appellate authority has proceeded to hold that present petitioner herein is reluctant to produce books of accounts throughout. The appellate authority was also of the view that though sufficient time was granted to enable the petitioner to produce the original books of accounts and

5 vouchers, however, there are laches and the petitioner is not diligent in placing on record the books of accounts. Thereby the appellate authority was of the view that originals of transaction remain obscure and the petitioner has failed to satisfactorily explain even at the appellate stage. On these set of grounds, the appellate authority has proceeded to dismiss the appeal thereby confirming the order passed by respondent No.2-assessing authority. 7. Learned counsel for the petitioner would submit before this court that petitioner is only involved in transporting goods and is not involved in sale and purchase of goods and thereby his business would not fall within the ambit of sale of goods and the same would not attract the provisions of the Act so as to levy tax on the transportation. 8. To buttress his arguments, the learned counsel placed reliance on the judgment rendered by this court in S.T.A.No.47/2011 and connected matters in case of M/s

6 Radhakrishna Agencies and W.P.No.14456-515/2011 in case of M/s Prakash Retail Pvt. Ltd. Relying on these two judgments, he would submit to this court that since the petitioner is in the business of transportation, the freight and insurance charges would not form part of sale price of goods supplied. In the judgment relied on by the petitioner, it is held that, where a party is involved in transport business and collects transportation charges from the customers, then State Government cannot enrich by bringing the transportation charges as part of sale of goods. 9. Per contra, learned HCGP would submit to this court that petitioner has failed to substantiate his claim either before the assessing authority or before the appellate authority. In spite of sufficient opportunity, the petitioner has not placed on record books of accounts and thereby the appellate authority was justified in drawing adverse inference and consequently was justified in

7 dismissing the appeal. In that view of the matter, he would submit to this court that, no materials are placed by the petitioner so as to warrant interference by this court. 10. I have meticulously perused the judgments cited by the petitioner. The judgment rendered by this court would clearly indicate that, where petitioners are engaged in trading by transporting articles, in such course of business, the transporter is entitled only transportation charges. However, the same cannot be termed as an income towards sale price of the goods. In the present case on hand, assessing authority and appellate authority have proceeded on an assumption that petitioner has deliberately failed to place on record books of accounts and in such circumstances, the impugned orders as per Annexure-A, C and E are passed. The grievance of the petitioner is that he was not afforded an opportunity to place on record books of accounts. On perusal of the records, I would find that there are laches on the part of

8 the petitioner in not defending the case by placing on record books of accounts. However, since valuable rights are involved and question as to whether the transportation of goods would fall within the ambit of definition of sale as contemplated under Section 2(29) of the KVAT needs to be examined. 11. Having regard to the peculiar facts and circumstances of the case and to do substantial justice, I deem it fit to afford one more opportunity to the petitioner to offer explanation before respondent No.2-assessting authority. For the reasons stated supra, I pass the following: ORDER The writ petition is allowed. The impugned orders as per Annexures-A, C and E are set aside. Matter is remitted back to respondent No.2- assessing authority. Since the matter pertains to the year

9 2014, the petitioner is directed to appear before respondent No.2-assessing authority on 06.04.2021. Thereafter, respondent No.2-assessing authority shall proceed with the case by notifying the petitioner and pass appropriate order after affording reasonable opportunity to the petitioner. Respondent No.2-assessing authority shall expeditiously dispose off the case and the petitioner is bound to cooperate with the hearing without seeking adjournments. Sd/- JUDGE MBS/-