IN THE HIGH COURT OF KARNATAKA R DHARWAD BENCH DATED THIS THE10H DAY OF NOVEMBER, 2017 PRESENT THE HON’BLE MRS. JUSTICE S.SUJATHA AND THE HON’BLE Dr. JUSTICE H. B. PRABHAKARA SASTRY S.T.R.P.Nos.100019/2015 & 100005/2016 BETWEEN: THE STATE OF KARNATAKA, BY THE COMMISSIONER OF COMMERCIAL TAXES, VANIJYA THERIGE KARYALAYA, GANDHINAGAR, BENGALURU-560 001. … PETITIONER (BY SRI M.KUMAR, AGA) A N D : M/S SHREE RENUKA SUGARS LIMITED, B.C.105, HAVLOCK ROAD, BELAGAVI-590 001. (BY SRI.SANGRAM S.KULKARNI, ADV.) …RESPONDENT THESE PETITIONS ARE FILED UNDER SECTION23OF STA ACT1957 AGAINST THE ORDER
DATED3001.2015 PASSED IN STA NOS.3500 & 3501/2013 ON THE FILE OF THE KARNATAKA APPELLATE TRIBUNAL AT BANGALORE, ALLOWING THE APPEAL FILED UNDER SECTION22(1) OF THE KARNATAKA SALES TAX ACT, 1957. THESE PETITIONS COMING ON FOR ADMISSION, THE SAME HAVING BEEN HEARD AND RESERVED ON3010.2017, THIS DAY, S.SUJATHA J., MADE THE FOLLOWING:
2. ORDER
Since common issues are involved in these matters, both the matters are clubbed, heard and disposed of by this common order.
2. The Revenue has preferred these revision petitions under Section 23 of the Karnataka Sales Tax Act, 1957, (for short ‘the Act’) challenging the common judgment of the Karnataka Appellate Tribunal at Bengaluru in STA No.3500 and 3501/2013 for the assessment years 2006-2007 and 2007-2008.
3. Facts in brief are: The respondent herein is a company registered under the Companies Act, 1956, and is carrying on the business of the manufacture and sale of sugar. The respondent- company was assessed to tax for the assessment years 2006-2007 and 2007-2008 by order dated 25.04.2009. A rectification order was passed by the Assessing authority under Section 25-A of the Act on 23.01.2010 on the ground 3 that the sugarcane purchased in respect of crushing units situated at Haveri, Havalaga, Guralatti and Alanda were not eligible for the benefit of treating the tax on purchase of sugarcane as loan for a period of ten years. In pursuant to the rectification order, the assessee was liable to pay additional tax and the same was paid on additional demand made.
4. The respondent-Company was issued with notice for making payments towards interest on the delayed payment of taxes imposed by way of rectification order which were the subject matter of writ petitions before this Court and the same came to be disposed of on 09.02.2011 with a direction to the assessee to go before the Assessing Authority with their grievances and also directed the Assessing Authority to consider the grievance of the assessee with regard to the proposal of imposing penalty and interest thereon, subsequent to which, the respondent- company submitted written objections to the notice dated 11.02.2010. The said objections were considered under 4 Section 12–B (2) of the Act and the order was passed on 06.06.2011 directing the respondent-Company to pay interest for the assessment years 2006-2007 and 2007- 2008. Aggrieved by the said order, the respondent- company filed first appeals before the competent authority who dismissed the appeals. Being aggrieved by the said order of the first appellate authority, the respondent- company filed STA No.3500-3501/2013 before the Karnataka Appellate Tribunal at Bengaluru. The Tribunal allowed the appeals setting aside the orders of the assessing authority and the 1st appellate authority.
5. Being aggrieved by the same, the revenue has preferred these revision petitions.
6. Sri M.Kumar, learned Additional Government Advocate appearing for the Revenue argued that the Tribunal erred in coming to the conclusion that the assessee was not liable to pay interest under the relevant provisions of the Act. In arriving at the said decision, the 5 Tribunal relied on the judgment of the Hon’ble Apex Court and this Court which are not directly applicable to the facts of the present case. The question in the present case is, deliberate efforts made by the assessee to evade tax in the guise of claiming certain benefits which were not at all applicable. At the first instance, the explanation offered by the assessee that they had claimed benefit under a mistaken notion is at best only self serving. The Tribunal failed to appreciate these vital aspects in a right perspective in allowing the appeals. It is the contention of the learned counsel that interest is liable to be paid under Section 12–B (2) of the Act in view of the rectification orders passed under Section 25–A of the Act.
7. On the other hand, learned counsel Sri Sangram S.Kulkarni, appearing for the assessee supporting the impugned orders submitted that Section 12-B (2) of the Act provides for payment of interest in cases of default committed in the payment of tax for any month or quarter beyond ten days, or if the amount of tax paid is less than 6 the amount of tax payable for any month or quarter in terms of the returns filed. In such cases, for the default in payment of tax or making short payment of tax, the liability accrues on the assessee to pay interest. Admittedly, no provisional assessment was made by the assessing authority under Section 12-B (3) of the Act to determine the tax amount rejecting the returns by the assessee as incorrect or incomplete and no demand was made under the said provision. This issue is squarely covered by the judgment of the Hon’ble Apex Court in the case of J.K.SYNTHETICS LTD., VS. COMMERCIAL TAXES OFFICER [1994 STC422(SC)]. and the judgment of this Court in the case of STATE OF KARNATAKA VS. MANDOVI MOTORS (PRIVATE) LIMITED, MANGALORE, reported in [2014 (79) KLJ581. Based on these judgments, the Tribunal allowed the appeals which do not warrant any interference by this Court. Thus, he submits that no question of law arises for consideration in this revision petition and accordingly deserves to be rejected. 7 8. We have given our bestowed consideration to the arguments advanced at the hands of the learned counsel for the parties and perused the material on record.
9. The question of payment of interest under Section 12- B(2) of the Act is the main dispute. The Revenue is claiming interest under Section 12-B (2) of the Act based on the rectification orders passed under Section 25-A of the Act, rectifying the assessment orders. Section 12-B(1) of the Act deals with the payment of tax in advance according to which every dealer is required to file monthly returns to the assessing authority including the taxable turnover during the preceding month and shall pay in advance the full tax amount payable by him within 20 days after the close of the preceding month to which tax relates. Sections 12-B(2) and 12-B(3) of the Act reads thus: “(2) If default is committed in the payment of tax for any month or quarter as the case may be, beyond ten days, whether or not a statement as required under sub- section (1) is filed; or if the amount of tax paid is less than the amount of tax payable for any month or quarter as the case may be, the dealer defaulting payment of tax 8 or making short payment of tax shall, in addition to the tax, pay interest calculated at the rate of two per cent per month from the date of such default or short payment to the date of payment of such tax or upto the date specified for payment of tax assessed under Section 12, as the case may be. (3) If no such statement is submitted by a dealer under sub-section (1) before the date prescribed or if the statement submitted by him appears to the assessing authority to be incorrect or incomplete, the assessing authority may assess the dealer provisionally for that month to the best of his judgment, recording the reasons for such assessment, and proceed to demand and collect the tax on the basis of such assessment; Provided that before taking action under this sub- section the dealer shall be given a reasonable opportunity of being heard.” 10. Section 12-B (2) of the Act empowers the authorities to collect interest in the following circumstances: i) if default is committed in the payment of advance tax for any month or quarter as the case may be, beyond ten days whether or not of filing of the monthly statements, or 9 ii) if the amount of tax paid is less than the amount of tax payable for any month or quarter as the case may be.
11. It is beneficial to refer to the Constitutional Bench judgment of the Hon’ble Apex Court in the case of J.K.SYNTHETIC’s case supra, wherein it is observed thus: “17. Let us look at the question from a slightly different angle. Section 7 (1) enjoins on every dealer that he shall furnish prescribed returns for the prescribed period within the prescribed time to the assessing authority. By the proviso the time can be extended by not more than 15 days. The requirement of Section 7 (1) is undoubtedly a statutory requirement. The prescribed return must be accompanied by a receipt evidencing the deposit of full amount of 'tax due' in the State Government on the basis of the return. That is the requirement of Section 7 (2). Section 7 (2-A), no doubt, permits payment of tax at shorter intervals but the ultimate requirement is deposit of the full amount of 'tax due' shown in the return. When Section 11-B (a) uses the expression "tax payable under sub-sections (2) and (2-A) of Section 7", that must be understood in the context of the aforesaid expressions employed in the two sub- sections. Therefore, the expression 'tax payable' under the said two sub-sections is the full amount of tax due and 'tax due' is that amount which becomes due ex hypothesi 10 on the turnover and taxable turnover "shown in or based on the return". The word 'payable' is a descriptive word, which ordinarily means "that which must be paid or is due or may be paid" but its correct meaning can only be determined if the context in which it is used is kept in view. The word has been frequently understood to mean that which may, can or should be paid and is held equivalent to 'due'. Therefore, the conjoint reading of Sections 7 (1), (2) and (2-A) and 11-B of the Act leaves no room for doubt that the expression 'tax payable' in Section 11-B can only mean the full amount of tax which becomes due under sub-sections (2) and (2-A) of the Act when assessed on the basis of the information regarding turnover and taxable turnover furnished or shown in the return. Therefore, so long as the assessee pays the tax which according to him is due on the basis of information supplied in the return filed by him, there would be no default on his part to meet his statutory obligation under Section 7 of the Act and, therefore, it would be difficult to hold that the 'tax payable' by him 'is not paid' to visit him with the liability to pay interest under clause (a) of Section 11 -B. It would be a different matter if the return is not approved by the authority but that is not the case here. It is difficult on the plain language of the section to hold that the law envisages the assessee to predicate the final assessment and expect him to pay the tax on that basis to avoid the liability to pay interest. That would be asking him to do the near impossible.” 11 12. The Division Bench of this Court in the case of MANDOVI MOTORS’s case supra, has observed thus : “10. Therefore, in addition to the monthly returns i.e., Form 3 which he has filed, a dealer is expected to file yearly returns i.e., Form 4 under Section 12 (1) of the Act in the prescribed manner. Sub-section (1-A) of Section 12 makes it obligatory on the part of the dealer to pay in advance the full amount of tax payable by him on the basis of such return filed under Section 12 (1) as reduced by any tax already paid under Section 12-B. Along with the return he shall furnish satisfactory proof of the payment of such tax. The said provision declares the tax so payable on such annual return shall for the purpose of Section 13 be deemed to be the tax due under this Act from such dealer. If default is committed in the payment of full amount of tax payable in advance for any year as reduced by any amount of tax already paid under Section 12-B, whether or not a return as required under sub-section (1) is filed; or if the amount of tax paid is less than the amount of tax so payable, the dealer defaulting payment of tax or making short payment of tax shall, in addition to the tax, pay interest calculated at the rate of 2% per month as prescribed under sub-section (1-B) of Section 12. In other words, when a dealer files a return, states what is the tax payable, but he fails to make payment of the said tax or makes short payment, then he is liable to pay interest on the tax due under the Act. After the filing of the return, if the Assessing Authority is satisfied that any return submitted under sub-section (1) 12 is correct and complete, he shall assess the dealer on the basis thereof by virtue of the power conferred on him under sub-section (2) of Section 12 of the Act. However, if no return is submitted by the dealer under sub-section (1) before the date prescribed or specified in that behalf, or if the return submitted by him appears to the Assessing Authority to be incorrect or incomplete, the Assessing Authority shall assess the dealer to the best of his judgment, recording the reasons for such assessment. On such assessment if it is found that the dealer is due in any amount of tax, then he shall issue notice to the dealer in Form 6 calling upon the dealer to pay the tax as finally assessed within 21 days from the date of service of notice, then under Section 13 he is liable to pay interest on such difference in the tax finally assessed. That is the scheme under the Act. Therefore, Section 12 (1-B) is attracted when there is a default in payment of tax due under the act from the dealer. It has no application to the interest payable in terms of final assessment. Interest is payable on final assessment under Section 13. Interest is due on tax due under the Act under Section 12 (1-B).” 13. In the light of these judgments, the facts of the case is analyzed. Indisputably, no provisional assessment is made under Section 12-B (3) of the Act determining the tax liability, rejecting the monthly returns as incomplete or incorrect. It is also clear that the tax amount paid by the 13 assessee is in conformity with the returns filed. In other words, there is no short payment of tax in terms of the monthly returns filed. If so, initiating proceedings under Section 12-B (2) of the Act to claim interest on the rectification orders passed subsequent to the assessment orders is unjustifiable. A harmonious reading of sub- Sections (1), (2), (3), (3A) and (4) of Section 12-B makes it clear that the phrase ‘paid’ and ‘payable’ employed in sub- Section (2) shall be the determination of advance tax made by the assessee not the assessment made by the assessing authority.
14. From the aforesaid, it is clear that when the assessee pays the tax which according to him is due on the basis of the information made in the return filed by him, it is highly unrealistic to expect him to pay the tax on the basis of final assessment done by the assessing authority. The assessee cannot predict the liability accruing on the basis of the rectification proceedings initiated subsequent to assessment proceedings. The assessee cannot foresee 14 these eventualities which according to him was unexpected/uncalled. If any demand is made on finally assessing the assessee or on the rectification order, penal provisions under Section 12 (3-A) and Section 12 (4) would have been invoked but no power under Section 12-B (2) dealing with the interest on the advance tax payment can be exercised save or except demand made on provisional assessment under Section 12-B(3).
15. No question of law arises for consideration in these revision petitions. Accordingly, sales tax revision petitions are dismissed. Jm/- Sd/- JUDGE Sd/- JUDGE