Deputy Commissioner of Commercial Taxes and Others vs B.V. Subba Reddy

P. Vishwanatha Shetty, J.—This appeal is directed against the order dated 20th October, 2000, made in Writ Petition No. 27459 of 2000 ( B.V. Subba Reddy Vs. Deputy Commissioner of Commercial Taxes and Others, ) by the learned single judge of this Court.

The facts in brief may be stated as hereunder:

The respondent (herein referred to as, "the assessee"), who is a contractor and who has registered himself as a dealer under the provisions of Karnataka Sales Tax Act, 1957 (hereinafter referred to as, "the Act"), made an application before the appellants (hereinafter referred to as, "the assessing authority") seeking permission for composition of tax as provided u/s 17(6) of the Act for the assessment year 1997-98. The assessing authority accepted the request made by the assessee for composition and proceeded with the matter u/s 17(6) of the Act. Thereafter, the assessee approached the assessing authority requesting to complete the assessment u/s 5B of the Act instead of Section 17(6) of the Act. The said request made by the assessee came to be rejected by the assessing authority by means of an endorsement dated July 17, 2000. The said endorsement came to be called in question by the assessee before this Court in B.V. Subba Reddy Vs. Deputy Commissioner of Commercial Taxes and Others, . The learned single judge in the impugned order, set aside the endorsement on the ground that it was permissible for the assessee to opt for assessment u/s 5B of the Act, though initially he had sought for assessment by way of composition u/s 17(6) of the Act. The learned single judge came to the said conclusion relying upon the observations made by this Court in the case of Mycon Construction Limited Vs. State of Karnataka and another, . Aggrieved by the order passed by the learned single judge, as noted by us earlier, this appeal is filed by the State.

Sri M. N. Ramanjaneyagowda, learned Additional Government Advocate, challenging the correctness of the impugned order passed by the learned single judge, made two submissions. Firstly, he submitted that the learned single judge has misunderstood and misread the judgment of this Court in the case of Mycon Construction Limited Vs. State of Karnataka and another, . According to him, in the said decision, this Court had permitted the assessee to opt for assessment u/s 5B of the Act in view of the concession given by the State in the statement of objections filed, when a challenge was made with regard to the constitutional validity of Section 17(6) of the Act. Therefore, he submitted that the observation made by this Court in the case of Mycon Construction Limited Vs. State of Karnataka and another, , permitting the assessees in those cases to opt for the assessment u/s 5B of the Act, though in that case they had initially sought for composition u/s 17(6) of the Act, cannot be considered as a law laid down by this Court. Secondly, he submitted that this Court, in two Division Bench decisions in the case of Karnataka State Construction Corporation Limited Vs. The State of Karnataka, to which one of us was a party (P. Vishwanatha Shetty, J.) and in the case of M.S. Rao v. Commissioner of Commercial Taxes, Karnataka, Bangalore (2003) 55 Kar LJ 262 to which also one of us was a party (S. B. Majage, J.) has taken a view that once an assessee opts for composition u/s 17(6) of the Act, it is no permissible for him to opt out of that and seek for assessment u/s 5B of the Act. He also submitted that since the question raised in this appeal has already been considered by this Court in the aforesaid two Division Bench decisions of this Court, the order passed by the learned single judge is liable to be set aside following those two decisions of this Court.

However, Sri Rabinathan, learned Counsel appearing for the respondent-assessee, though unable to dispute the ratio laid down by this Court in the cases of Karnataka State Construction Corporation Limited Vs. The State of Karnataka, and M.S. Rao (2003) 55 Kar LJ 262, strongly submitted that since the assessing authority has permitted the assessees in many cases under similar circumstances to opt out from the request made for composition u/s 17(6) of the Act and to seek for assessment u/s 5B of the Act, there is absolutely no justification to single out the assessee in this case and deny him the benefit of assessment u/s 5B of the Act. He also submitted that the learned single judge was justified in passing the impugned order relying upon the decision of this Court in the case of Mycon Construction Limited Vs. State of Karnataka and another, .

Having elaborately heard the learned Counsel appearing for the parties, the only question that emerges for consideration is:

Whether the order passed by the learned single judge calls for interference in this appeal ?

While we find considerable force in the submission of the learned Additional Government Advocate, that the question raised in this appeal is covered by the two Division Bench decisions of this Court in the cases of Karnataka State Construction Corporation Limited Vs. The State of Karnataka, and M.S. Rao (2003) 55 Kar LJ 262, we are unable to accede with the submission of the learned Counsel appearing for the respondent that the learned single judge was justified in passing the impugned order relying upon the decision of this Court in the case of Mycon Construction Limited Vs. State of Karnataka and another, . In the case of Karnataka State Construction Corporation Limited Vs. The State of Karnataka, , when the very question came up for consideration, this Court has taken the view that once an assessee seeks for assessment by way of composition u/s 17(6) of the Act, it is not permissible for him to opt out of it and seek for assessment u/s 5B of the Act.

In this connection, it is useful to have reference to the observations made by this Court in the case of Karnataka State Construction Corporation Limited Vs. The State of Karnataka, , which read as hereunder (at page 81 of STC):

...In our view, once the dealer opts for composition, he cannot be permitted to go back on that. The scheme of Sub-section (6) of Section 17 of the Act is to provide an alternative, simplified, convenient and hassle-free method of assessment of tax payable by making it optional for the assessee. If a dealer with his eyes wide open has opted for composition in terms of Sub-section (6) of Section 17 of the Act, at the fag end of the year, he cannot be allowed to go back on that. In our view, a dealer who seeks for composition under Sub-section (6) of Section 17 of the Act when it is accepted by the assessing officer is estopped by his conduct from wriggling out of the request made by him for composition. This also clear from the fact that the time-limit is prescribed for making an application at the commencement of the year or the commencement of the business. Therefore, in our view, it would not be permissible for a dealer to go back on the composition granted to him. In our view, the observation made by the honourable Supreme Court in the case of Commissioner of Central Excise and Customs Vs. M/s. Venus Castings (P) Ltd., relied upon by the learned Government Advocate supports the view we have taken above....

Same is the view taken by this Court in the case of M.S. Rao (2003) 55 Kar LJ 262.

Therefore, in our view, the order passed by the learned single judge is liable to be set aside on the short ground that the conclusion reached by him runs counter to the two Division Bench decisions of this Court, referred to above. Further, as rightly pointed out by the learned Additional Government Advocate, in the case of Mycon Construction Limited Vs. State of Karnataka and another, , this Court has not laid down the law taking the view that if once an assessee seeks for assessment by way of composition u/s 17(6) of the Act, it would still be open for him to opt out of it and seek for assessment u/s 5B of the Act. In that case, the assessees were permitted to seek for assessment u/s 5B of the Act though they had initially sought for assessment u/s 17(6) of the Act in the light of the statement made by the State Government enabling the assessees in those cases to seek for assessment u/s 5B of the Act. The said observations were made when constitutional validity of Section 17(6) of the Act came up for consideration before this Court. While refusing the submission made that Section 17(6) of the Act was unconstitutional in law, this Court, in the light of the concession shown by the State that the assessee could be permitted to seek for assessment u/s 5B of the Act, permitted the assessees in those cases to seek for assessment u/s 5B of the Act. It is clear from the observations made by this Court at paragraph 13 of the judgment, which reads as hereunder:

However, in view of the categorical statement made by the State in the statement of objections stating that this Court can permit the petitioners to opt for regular assessment u/s 5B; and I have taken that factor as one of the factors to come to the conclusion that the impugned provision in no way results in arbitrariness or violation of the right guaranteed to the petitioners either under Article 14 or under Article 19(1)(g) of the Constitution; it is necessary to reserve liberty to the petitioners to opt for regular assessment u/s 5B of the Act notwithstanding the fact that they had opted for composition u/s 17(6) of the Act....

Therefore, in the light of the discussions made above, the order passed by the learned single judge is liable to be set aside.

Accordingly, the order dated October 20, 2000 B.V. Subba Reddy Vs. Deputy Commissioner of Commercial Taxes and Others, passed by the learned single judge in Writ Petition No. 27459 of 2000, is set aside.

However, no order is made as to cost.