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1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 22nd DAY OF APRIL 2015
PRESENT
THE HON’BLE MR.JUSTICE VINEET SARAN
AND
THE HON’BLE MRS.JUSTICE S SUJATHA
WRIT APPEAL NO.4900/2011 & WRIT APPEAL NOS.17699-709/2011(T-RES)
BETWEEN:
THE ASSISTANT COMMISSIONER OF COMMERCIAL TAXES (AUDIT) – 52 SHESHADRIPURAM DIVISIONAL VAT OFFICE – 5 BANGALORE – 20.
THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES (DM-51) DIVISIONAL VAT OFFICE-5 ABHAYA COMPLEX, II FLOOR SHESHADRIPURAM BANGALORE – 20.
STATE OF KARNATAKA BY ITS SECRETARY DEPARTMENT OF FINANCE VIDHANA SOUDHA AMBEDKAR VEEDHI BANGALORE
..APPELLANTS
(BY SRI K M SHIVAYOGISWAMY, AGA)
2 AND:
M/S FEDERAL MOGUL GOETZE (INDIA) LTD., FORMERLY KNOWN AS M/S GOETZE (INDIA) LTD. DODDABALLAPUR ROAD YELAHANKA BANGALORE – 560720 REPRESENTED BY SRI S S SRINIVASA DGM (FINANCE) AGED ABOUT 40 YEARS S/O SHANKAR SUVARNA. .. RESPONDENT
(BY SMT VANI H, ADV.)
THESE APPEALS ARE FILED UNDER SECTION 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER PASSED IN THE WRIT PETITION NO.20781/2010(T-RES) AND W.P.NOS.21811- 21821/2010 DATED 02.09.2010.
THESE APPEALS COMING ON FOR HEARING THIS DAY, VINEET SARAN J., DELIVERED THE FOLLOWING:
JUDGMENT
We have heard Sri K.M.Shivayogiswamy, learned AGA for the appellants and Ms.Vani H., learned Counsel for the respondent-assessee and perused the record.
The present writ appeals relate to the filing of revised returns by the assessee on 19.08.2006, for the tax period from July 2005 to March 2006. Ignoring the said revised returns, fresh assessment order was passed by the Assessing Officer on the ground that the revised returns were not filed within the prescribed period of six months, as provided under Section 35(4) of the Karnataka Value Added Tax Act, 2003 (hereinafter referred to as ‘the Act’ for brevity). 3. While passing the assessment order, the Assessing Authority did not take into consideration the Circular dated 07.07.2008 issued by the Commissioner of Commercial Taxes. The said Circular clearly provided that if the revised return indicated any additional tax liability, then in such a case, the return filed beyond a period of six months should be accepted with the payment made and reassessment
4 proceedings should be got initiated through the jurisdictional JC-DVO. 4. The learned Single Judge has considered the various provisions of law and has held that the Circular of the Commissioner of Commercial Taxes, would be binding on the Department as the same was to soften the rigors of change-over from one regime to another regime i.e., from the Karnataka Sales Tax Act to KVAT Act, which came into effect from April 2005. 5. While allowing the writ petitions filed by the assessee, the learned Single Judge has made certain observations in paragraphs 25 to 31 which we are reproducing below: “25. Rule 39 of VAT Rules provides for taking action by the concerned officer on an apparently incomplete and incorrect return submitted. The rationale behind Section 35(4) of the VAT Act and Rule 39 of the VAT Rules is only to lessen the imperfections. The errors cannot be left uncorrected and the returns cannot be left in the incomplete
5 state. Viewed in this perspective, the Commissioner’s order is laudable; the order cannot be held to be illegal or inconsistent with the provisions of the VAT Act or the Rules framed thereunder. If it were illegal, it would have been withdrawn by the Department.
Yet another aspect of the matter which cannot be lost sight of is that by filing the revised returns, the petitioner has come forward to pay the additional tax. It is not that it has filed the returns to seek refund of the tax already paid. If the belated returns are therefore entertained and the additional tax is accepted, as directed by the Commissioner, it does not affect the interest of the revenue adversely in any way. Filing of the belated revised returns and their acceptance by the concerned officer would not put the exchequer to any prejudice.
Considering all these aspects of the matter, this Court has no hesitation in holding that the respondent No.1 has not considered the petitioner’s belated revised
6 returns, though submitted with additional tax in accordance with the circular in question.
For yet another reason too, the Commissioner’s circular is absolutely sustainable. The sudden introduction of VAT regime has created an unfamiliar situation. To soften the rigors of change- over from one regime to another regime, a well thought out circular is issued. The Commissioner may have issued the circular to solve the teething problems.
As held by the Apex Court in the case of Commissioner of Sales Tax, U.P (supra), the Commissioner’s orders are definitely binding on the officers of the Department. The Kerala High Court, in the case of Commissioner of Income-Tax (supra) has held that a circular of the Central Board of Direct Taxes has the force of law and can even supplant the law in cases where it is beneficial to the assessee and has mitigated or relaxed the rigour of the law.
The respondent No.1 ought not to have passed the impugned order in defiance of the Commissioner’s circular. There is not even a cursory reference to the circular. The order thus suffers from the non- consideration of the relevant material.
Not entertaining the revised returns for the month of February and March 2006, even they were filed within the prescribed period of limitation, is reflective of the non-application of mind on the part of the respondent No.1.”
After making the said observations, the learned Single Judge has quashed the assessment order and the consequential demand notice and remanded the matter to the Assessing Authority for considering the petitioner’s revised returns in keeping with the Commissioner’s Circular dated 07.07.2008 and made it clear that no opinion was being expressed on the petitioner’s tax liability.
8 7. Challenging the said order of the learned Single Judge, these appeals have been filed.
Learned Counsel for the appellants has not disputed the fact that the Circular issued by the Commissioner would be binding on the Department. It is also not been disputed that the KVAT Act came into effect from 1st April 2005, prior to which Karnataka Sales Tax Act, was applicable. Thus, it can safely be said that with the change in regime of tax, the Commissioner of Commercial Taxes had issued the Circular to iron out the teething problems faced by the assessees. 9. Learned Counsel for the appellants also could not dispute the fact that the order of assessment was passed totally ignoring the Circular of the Commissioner, inasmuch as, for the months of February and March 2006, which were within the period of limitation of six months, the Assessing Officer rejected the revised returns
9 filed by the assessee, which could not have been done so. 10. In view of the aforesaid, we see no reason to interfere with the well-reasoned order passed by the learned Single Judge while allowing the writ petitions filed by the assessee. 11. Appeals are accordingly dismissed. There shall be no order as to costs.
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