M/S STAPLES FUTURE OFFICE PRODUCTS PVT LTD vs. LOCAL VAT OFFICER-090

1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED ThIS THE 29TH DAY OF MAY, 2012 BEFORE THE HON’BLE MRJUSTICE B.S.PATIL W.P.Nos. 15976-987/2012 (T-RES) BETWEEN: M/s. Staples Future Office Products Pvt.Ltd., No.18/i, 3rd Floor, 10th Main, Ashoka Pillar Road, Jayanagar, 1st Block, Bangalore -560011. Represented by its Senior Manager-Commercial Sri. Chetan Chaturvedi Aged about 35 years. ... PETITIONER (By Sri. Indrakumar, Sr. Counsel for M/s. E.I.Sanmathi) AND: 1. Local Vat Officer-090 Malal Mahadeshwara Buildings, 1st Main Road, Chamarajpet, Bangalore —560 018. 2. The Deputy Commissioner of Commercial Taxes (Audit-35) DVO—3, 7th Floor, Commercial Taxes Buildings, Gandhinagar, Bangalore - 560 009. ... RESPONDENTS (By Sri. K.M.Shivayogiswamy, AGA) These writ petitions are filed under Articles 226 & 227 of the Constitution of India, praying to issue writ of certiorari or directions in the nature of certiorari quashing the order dated

2 4.5.12 passed by the 21d respondent-Deputy Commissioner of Commercial Taxes (Audit-3.5), Bangalore, in the petitioner’s case in TIN No.29810757379/LVO-90/PDF20547853 under the provisions of Sections 39(1), 36, 37 and 72(2) of the KVAT Act, 2003. These petitions coming on for preliminary hearing this day, the Court made the following: ORDER 1. Learned Additional Government Advocate is directed to take notice for respondents. 2. In these writ petitions, petitioner is calling in question the order dated 04.05.2012 passed by the 2nd respondent-Deputy Commissioner of Taxes (Audit-3.5), Bangalore. Petitioner has also challenged the consequential demand notice dated 04.05.20 12 issued by the said respondent. 3. Petitioner is a company registered under the Companies Act engaged in the business of trading in goods. The 2’ respondent-Deputy Commissioner issued a notice dated 24.01.2011 intimating his proposed visit to the business premises of the petitioner-Company. Thereafter, the 2’ respondent issued a proposition notice dated 29.03.2012 invoking the provisions of Sections 39(1), 72(2) as well as Sections 36 and 37 of the KVAT Act for the period from

3 01.04.2007 to 31.03.2008. By the said notice, petitioner was notified that the details of classification of goods taxable at 4% and 12.5% had not been furnished and therefore it was proposed to determine the tax payable at 4% on 75% of the purchases furnished and for the remaining 25%, at the rate of 12.5%. On receipt of the notice, petitioner submitted the reply on 05.04.2012 enclosing the commoditywise classified statement narrating the turnover in respect of goods taxable at 4% and the goods taxable at 12.5%. Petitioner further requested the authorities not to proceed with the proposed imposition of tax. Upon receipt of the reply submitted by the petitioner, the 2nd respondent has passed the impugned order which is produced at Annexure-E thereby holding that about 1804 items of goods taxable at 12.5% had been wrongly classified as goods taxable at 4%. Therefore, the assessment was concluded treating the said 1804 items of goods as taxable at the rate of 12.5%. 4. The contention of the petitioner is that without providing an opportunity to the petitioner to substantiate the plea taken by it as per the classification made and the details furnished, the 2nd respondent has proceeded to treat 1804 items of goods

4 as taxable at 12.5%. It is further contended that no reasons are assigned in the impugned order to come to such a conclusion. Learned counsel for the petitioner further points out that as per pre-assessment notice, there was a refund of Rs.32,959/- for the period 2007-08. Whereas the impugned assessment order which is now concluded by the 211d respondent has resulted in a total demand of Rs.9,07,067/- consisting of additional tax liability in a sum of Rs.4,83,339/- along with interest liability of Rs.3,48,884/- including penalty of Rs.74,844/- which is illegal and unsustainable. Learned counsel for the petitioner submits that after filing the reply enclosing the classification of the goods made for the purpose of collection of tax at different rates, if the 21d respondent intended to disagree with the details furnished, he ought to have provided an opportunity by issuing a notice. In this connection, he places reliance on the judgment of this Court in the case of MALLAPPA KALLAPPA UGARE vs. AGRICULTURAL INCOME TAX OFFICER - (1973) 91 ITR 529 (MYS). 5. The prayer made in the writ petition is resisted by the learned Additional Government Advocate. He contends that the petitioner has an alternative and efficacious remedy of

5 preferring an appeal and therefore this Court should not interfere in the matter in exercise of the writ jurisdiction. 6. Having heard the learned counsel for both parties and on perusal of the materials on record, it is apparent that the 2nd respondent has not assigned any reasons for the conclusion arrived at. As rightly contended by the learned counsel for the petitioner if the 2nd respondent disputed the classification made by the petitioner in the reply submitted, an opportunity ought to have been given to the petitioner to substantiate his claim. No opportunity of hearing is provided to the petitioner after the reply was submitted. On what basis the 21 respondent comes to the conclusion that 1804 items of goods had been wrongly classified under the category of 4% taxable goods is not forthcoming from the order passed. Therefore, the impugned order suffers from noncompliance with the principles of natural justice, inasmuch as the petitioner is not provided a fair and reasonable opportunity of being heard and also that the order passed is not a speaking order. Hence, on both these grounds, the petitioner is entitled to succeed. 7. I am of the view that in a matter like this, the litigants should not be driven to the alternative remedy as he is deprived

6 of a fair and reasonable opportunity of being heard and the order is not a speaking order. However, in order to avoid any delay in the assessment proceedings, it is necessary to direct the petitioner to appear before the assessing officer on a specified date so that the reassessment proceedings are expedited and the final order is passed at the earliest. Hence, I pass the following: ORDER (a) The impugned order is set aside. (b) The consequential demand notice is also set aside. (c) Petitioner is directed to appear before the 2nd respondent on 2.O6.2O12 at 3.00 PM, whereupon the petitioner shall be given a fair and reasonable opportunity of being heard in the matter and the 2d respondent shall pass a reasoned order after hearing the petitioner. Learned Additional Government Advocate is permitted to file memo of appearance within three weeks. Sd/ JUDGE VP