1. ‘C’ Form

Whether the provision contained in Rule 6(b)(i) of the CST (Karnataka) Rules, 1957 providing for filing of ‘C’ forms marked as “original” to claim the benefit of concessional rate of tax was to be treated as directory or mandatory ? Held : as mandatory.

2. The Apex Court was seized of the same problem in the case of
India Agencies (Regd.) v. Addl. Commr. of Commercial Taxes, Bengaluru (2005) 139 STC 329 (SC), wherein it has been held on the construction of the aforesaid rule that in order to claim concessional rate of tax, the original ‘C’ form was required to be attached to the return. Therefore, the requirement was not a mere formality or technicality but it was intended to achieve the object of preventing the forms being misuse for the commission of fraud and collusion with a view to evade payment of taxes. The statutory provisions i.e. the rule in this regard have to be construed strictly without producing the original ‘C’ form as prescribed under the State Rule as referred to above r/w section 8(4) of the CST Act, the concessional rate of tax could not be availed of.

P.S. Readers may kindly note that this judgment is based on the State (CST) Rule 6(b)(i) which clearly mandates that ‘C’ form is required to be attached to the relevant return. Hence, SC interpreted the said rule r/w section 8(4) of the CST Act.

Fosroc Chemicals (India) Pvt. Ltd. v. State of Karnataka 2014-15 (19) KCTJ 233 (Kar.).

2. Ex parte Order

Ex parte assessment order which was confirmed by the ex parte appellate order on the alleged ground of non-appearance of the petitioner and non-production of documents, accounts and other substantive evidence. Plea of the petitioner that all the aforesaid documents were lying before the assessing authority which were not considered and appellate authority also without consulting the charge records passed by the ex parte order. Direction of the Board to the Departmental representatives to produce the charge record and non-production of the same by the Dept. In the circumstances, whether case could be remanded back to the appellate authority? Held: The petitioner claims on the points of disputes and his submission against the allegations made by the AO should be re-examined. However, before this Forum, no charge record was produced by the Dept., therefore, there was no way and means before the forum to verify the allegations made against both the authorities. Hence, the forum is of the opinion that instant revision petition ought to be remanded back to the appellate authority for fresh hearing subject to the verification of all the books of account, records and documentary evidence of the petitioner arising out of the impugned assessment order as well as verifying the authenticity of allegations made by the assessing authority as no fruitful verification has been made at the appellate stage before. Accordingly, the impugned ex parte order of the appellate authority was set aside and directed to make fresh hearing in accordance with law.

Rajesh Processing Corporation v. Sr. Jt. Commissioner, CT, Kolkata (2014) STA Vol. 64 P 23 (Board 79).

3. Input tax rebate

Motor vehicles are capital goods as defined in section 2(f) of Delhi VAT Act, and purchased thereof would form part of the business, but input tax credit was not available thereon. Section 6(3) of Delhi VAT Act provides that where a dealer sells capital goods which he had used exclusively for purchases other than making non-taxable sale of goods, and had not claimed a tax credit in respect of such capital goods, the sale of such capital goods shall be exempt from tax. The Delhi HC therefore held that the sale of used motor cars were exempt from tax u/s 6(3) of Delhi VAT Act and were not liable to tax, as no input credit is granted to a dealer on purchase of motor vehicles as they are not dealers in motor vehicles.

Anand Decors And Ors. v. Commr. of TT, New Delhi (2015) 26 STJ 22 (Del.).

4. Reassessment

Whether the prescribed authority could initiate a reassessment u/s 39(1) of the KVAT Act without first recording his satisfaction/belief that there was an underassessment of the tax liability and communicating the same to the dealer ? Held: As no.

2. Section 39 provides that, where the prescribed authority has grounds to believe that any return furnish which was deemed as assessed or any assessment was done u/s 38 understated the correct tax liability of the dealer, then, it may proceed to reassesse and also do reassessment in addition to such earlier reassessment. It is clear from the language of section 39, before that provision could invoked there should be grounds to believe that any return furnished earlier understated the correct tax liability. Unless such ground exist, the assessing authority has no jurisdiction to initiate reassessment proceedings. In fact, the question, what did the expression ‘reason to believe’ means was the subject matter of the judgment of the Bombay High Court in state of
Maharashtra v. Ketan Enterprises (2010) 30 VST 356 (Bom.). In the light of this judgment and following the same, in the instant case, the Govt. Advocate made available the records. It clearly sets out the reason for initiating the reassessment proceedings, and, therefore, it could not be said in the case that the assessing authority has not stated in writing the reasons for initiating proceedings u/s. 39(1) of the Act. Therefore, on the question of law, we hold that the prescribed authority cannot initiate re-assessment proceedings u/s. 39(1) of the KVAT Act, without first recording his satisfaction/ belief. In the instant case, as the said requirement was complied with, we hold that there is no substance in the contention of the petitioner.

Fosroc Chemicals (India) Pvt. Ltd. v. State of Karnataka 2014-15 (19) KCTJ 233 (Kar.)

5. Remand – Powers of Tribunal to exercise

The power of remand by the Appellate Authority could only be exercise in the ends of justice and not for oblique purpose and for any excuse only with a view to provide a fresh innings to the revenue. In the present case, we noticed that explanations had not been corroborated by the record and
prima facie the figures stated by the Appellate Authority appeared to be incorrect regarding purchase, an examination and appreciation of each parchase should have been done and a clear cut finding of fact should have been recorded, but that was not done either by the AO or by the First Appellate Authority.

2. In such view of the matter, the court did not find any illegality in the impugned order, and therefore revision failed and was accordingly, dismissed.

M/s Usha Steel, Rajpur Chungi Agra v. Commissioner Commercial Tax Lko (2014) 49 PHT 584 (All).

6. Sale of ‘Used Cars’

The KVAT Act, 2003: Whether the benefit of tax rates reduction granted through Notification No. FD-300 CSL 2005 dated 24-10-2005 was applicable for ‘used cars’ was also applicable for demo cars sold by the petitioners after certain point of time ? The HC held sale of ‘demo cars’ was liable for tax at the applicable rates as these cars were purchased by the petitioners on payment of tax and this fact was not noticed. Similarly, when the said cars were sold, whether the said input tax paid by the petitioner was deducted out of the output tax payable was also not place of record and not considered. It is in the review petition, the above facts were brought to the notice of the Court. Hence, the petitions were dismissed.

M/s Mandovi Motors Pvt. Ltd., Manglore v. State of Karnataka 2014-15 (19) KCTJ 261 (Kar.)

7. Sale price

Receipts of rebates, discount, incentive and brokerages by the petitioner from the principal (manufacturer) for better performance. Petitioner showed the receipts in the credit side of the P & L A/c. as miscellaneous income. Addition of the aforesaid receipts to the gross turnover and taxable turnover and treated the same as part of sale price by the Appellate Authority without issue of show cause notice. Whether such action of the Appellate Authority was justified. Held, in the negative by following the decision of the West Bengal Taxation Tribunal in the case of
S. Bhattacharjee & Co. v. ACCT (2010) 55 STA 75 (WBTT).

A.M. Mobile Telecom Pvt. Ltd. v. Jt. Commr. Kolkata (2014) STA Vol. 64 P 31 (Board 87).

8. Schedule Entry

A. Schedule Entry B-17 under the HVAT Act, 2005 was under the consideration of the Haryana HC with reference to ‘Yakult’ (fermented milk drink). As per the statement for clarification submitted before Govt. for clarification the facts stated by the applicant were that they were manufacturer of fermented milk drink and sold the product under the brand name of ‘Yakult’. It was claimed that the said product was similar to ‘Lassi’ and marketed all across the world as fermented milk drink and it contained ingredients viz. (i) skimmed milk powder, (ii) water, (iii) sugar, (iv) glucose and (v) more than 6.5 billion live Lactobacillus Caseistrain Shirota.

2. The matter was examined. The various technical analysis reports submitted by the applicant indicated that ‘Yakult’ was a ‘sweetened flavoured fermented milk’ like ‘Lassi’ but the applicant did not say that it was ‘Lassi’. In this connection, on a clarification sought by M/s Nestle India Ltd., Gurgaon, it was already clarified that “Fruit ‘n’ Milk” and “Fruit ‘n’ Dahi” marketed by Nestle in these brand names were commodities commercially different from “milk” and “curd” and, hence, liable to VAT as unclassified goods.

3. In the light of the above, as the product ‘Yakult’ which was a product different from ‘Lassi’ in common and commercial trade parlance and did not find mentioned in any of the schedules appended to the Act, and, hence, liable to VAT as unclassified goods. Accordingly, issue stands clarified as above.

M/s Yakult Danone India Pvt. Ltd., Sonepat v. Addl. Chief Secretary to Govt. of Haryana, Excise and Taxation Dept. (2014) PHT Vol. 49 Part-8 P 578.

B. CELL PHONE BATTERY CHARGER

Cell phone battery charger sold along with cell phone in the solo pack, liability to tax. The AO, the Appellate Authority and the Tribunal held that the battery charger is not a part of the mobile / cell phone while the Division Bench of HC (Punjab & Haryana) held that cell phone battery charger is sold as a composite package along with cell phone, and, hence, said charger could not be excluded from the Schedule Entry for concessional rate of tax which applied to cell phones and parts thereof.

2. The Apex Court in appeal by placing reliance on the judgment in the case of
M/s Annapurna Carbon Industries Co. v. State of A.P. (1976) 2 SCC 273 held that the battery charger cannot be held to be a composite part of the cell phone but was an independent product which can be sold separately, without selling the cell phone.

State of Punjab and Ors. v. Nokia India Pvt. Ltd. 2014 NTN (Vol. 56) 407 (SC).

D. H. Joshi, Advocate