Mahadevi Stores vs The Additional Commissioner of Commercial Taxes, Zone-1, Bangalore and Others

N. Kumar, J.—These appeals are preferred against the order passed by the Additional Commissioner of Commercial Taxes u/s 64(1) of Karnataka Value Added Tax Act, 2003. The assessee is a proprietary concern, registered under the Karnataka Value Added Tax Act, 2003 and dealing in Cigarettes, Supari, Gutkha Confectionary etc., under the name and style of M/s. Mahadevi Stores. The assessee has filed the monthly returns in Form VAT-100, in the Office LVO-390, Belgaum, in which the assessee has declared turnover and tax liability. The assessee has also filed annual returns in Form VAT 115, declaring the turnovers and taxes. On verification of the books of accounts, the Assessing Authorities noticed that the assessee has made mainly local purchase of Cigarettes, Supari, Gutkha, Confectionary, Tobacco, etc., from the local RDs. The assessee has claimed input tax credit on the local purchases. The assessee has effected mainly local sales of Cigarettes, Supari, Gutkha, Confectionary, Tobacco, etc. The Assessing Authority on verification of the books of accounts with reference to the Form VAT 100 observed that the assessee has not collected the VAT separately in the tax invoice as required u/s 9(1) of the KVAT Act, 2003 and Rule 29(1) of the Karnataka Value Added Tax Rules, 2005 for the tax period from 1-4-2007 to 31-3-2008. But while declaring the turnovers and taxes in Form VAT 100, the assessee has bifurcated/deviled the total amount of the tax invoice into net turnover and tax. The assessee has effected local purchases of 4% goods. But in the purchase register as well as in the monthly returns in Form VAT 100, the assessee has claimed input tax at 12.5%. Therefore, the Assessing Authority incorporating the above omissions issued a reassessment notice u/s 39(1) of KVAT Act, 2003. In reply to the said notice, the assessee appeared and contended that they have separately collected the tax u/s 9(1) of KVAT Act, 2003 and Rule 29(1) of KVAT Rules, 2005. The tax invoice issued clearly mentions the selling price includes VAT at 12.5% and the same is bifurcated in the books of accounts maintained. Out of the gross amount in the tax invoice, the tax element is bifurcated and separately shown in each and every bill. Hence, the tax element, which is claimed as exemption is to be allowed, if not it amounts to collection of tax on tax element. Thus, they would be put to double taxation and double jeopardy. However, the Assessing Authority overruling the said objections held that the assessee has admitted that they have not collected the tax separately in tax invoices as required u/s 9(1) of the KVAT Act, 2003 and Rule 29(1) of KVAT Rules, 2005. Therefore, they ought to have paid the taxes on the entire sale value of the tax invoice issued as required under the KVAT Act. Section 4 of the KVAT Act, 2003 is very much clear that the assessee is liable to pay tax on their entire taxable turnover. The collection of tax in the tax invoice is mandatory to the registered dealers as required u/s 9(1) of KVAT Act, 2003 and Rule 29(1) of KVAT Rules, 2005. Therefore, the Assessing Authority held that the assessee is liable to pay tax on the entire sales turnover as per the Act and penalty was also imposed.

Aggrieved by the said order the assessee preferred an appeal before the Joint Commissioner of Commercial Taxes (Appeals), Belgaum Division, Belgaum. The Appellate Authority after looking into Section 9 of the KVAT Act, 2003 and Rule 29 of KVAT Rules, 2005 and referring to the judgments relied upon held that in the instant case, the issue relates to the granting of deduction on taxes collected. The issue did not relate to grating or input tax deduction. The language employed in Rule 6(4)(h) of the Karnataka Sales Tax Rules, 1957 and Rule 3(2)(h) of KVAT Rules, 2005 are identical. The provision relating to collection of tax u/s 18 of the Karnataka Sales Tax Act, 1957 and Section 9 of the KVAT Act, 2003 convey the same meaning. The penal provision or contravention of provision relating to tax collection under both the laws are similar, the legislative intention in both the cases are one and the same. Therefore, he was of the view that the judgment in Spencer and Co., Ltd. Vs. The State of Mysore, applies in all the Courts to VAT laws also and accordingly, set aside the order passed by the Assessing Authority and directed the Assessing Authority to allow deductions on the tax collected as shown in the books of accounts and re-compute the taxable income and tax payable. Thereafter, issued a revised demand notice.

The Additional Commissioner of Commercial Taxes, Zone-1, by virtue the power u/s 64(1) of the KVAT Act, 2003 has invoked its jurisdiction and issued notice to the respondent to show cause why the tax should not be collected on the total turnover on the ground that the order of the Appellate Authority is erroneous and is detrimental to the interest of the revenue. The assessee appeared before him, reiterated his contentions, which was urged earlier. However, the Revisional Authority held that unless the value added tax is separately charged for in the tax invoice after the sale value of the goods and accounted in the books of accounts in the aforesaid manner, the deduction towards the value added tax collected on the inclusive basis in the gross value of the goods sold is not admissible. Therefore, he set aside the order of the Appellate Authority and restored the order of assessment. Aggrieved by the said order the assessee is before us.

The learned Counsel for the appellant assailing the impugned order of the Revisional Authority contends that as it is clear from the bills, which is not in dispute, the assessee has mentioned in each bill that the selling price include VAT at 12.5%. Thereafter in the books of accounts maintained, the cost price of the goods sold and the tax component is separately mentioned. Even in the bills the same in mentioned and therefore, there is a compliance of Section 9 of the KVAT Act, 2003 and Rule 29 of the KVAT Rules, 2005. Therefore, the Revisional Authority was in error in setting aside the order of the Appellate Authority. In fact the question whether the total turnover includes the tax component or not is purely question of fact and it is open to the assessee in the assessment proceedings to produce such evidence to substantiate his claim and authorities are bound to look into evidence on record and pass appropriate orders. Therefore, the approach of the Revisional Authority is inconsistent with the law and therefore it requires to be set aside.

Per contra, the learned Government Advocate supported in the impugned order.

Though on 30-11-2011, when the appeals were admitted, three substantial questions of law were formulated after hearing to the parties. Now the Court felt necessity to reframe the substantial questions of law. Accordingly, we frame the only substantial question of law, that arise for our consideration is as under:

Whether the assessee is entitled to the benefit of deduction of tax from the total value of the bills, when in the bill the assessee has not shown the value of the cost price of the goods and the tax payable thereon separately?

Section 9 of the Act deals with collection of tax by registered dealers, Governments and statutory authorities, it reads as under:

Collection of tax by registered dealer, Governments and statutory authorities.--(1) Every registered dealer liable to pay tax under the Act shall collect such tax at the rate or rates at which he is liable to pay tax, and the tax collected shall be accounted for under the provisions of this Act and Rules made thereunder.

(2) The Central Government, a State Government, a statutory body or a local authority shall, in respect of any taxable sale of goods effected by them, collect by way of tax any amount which a registered dealer effecting such sale would have collected by way of tax under this Act, issue a tax invoice, pay the tax so collected into the Government Treasury or any designated back and furnish monthly returns, as specified u/s 35 to the prescribed authority.

Rule 29 of the Karnataka Value Added Tax Rules, 2005 prescribes the particulars of tax invoice, it reads as under:

Particulars of tax invoice.--(1) A tax invoice shall contain the following details, namely. --

(a) a consecutive serial number;

(b) the date of its issue;

(c) the name, address and registration number (TIN) of the selling dealer;

(d) the name, address and registration number (TIN) (if registered) of the buyer;

(e) a full description of the goods;

(f) the quantity of the goods;

(g) the value of the goods;

(h) the rate and amount of tax charged in respect of taxable goods;

(i) the total value; and

(j) signature of the selling dealer or his agent.

A reading of both provisions makes it very clear that in the tax invoice, the registered dealer shall mention (a) description of the goods; (b) the quantity of goods; (c) value of the goods; (d) rate and amount of the tax charged in respect of the taxable goods; and (e) the total value. In other words, before arriving at a total value, in the bill the description of the quantity and the value of the goods should be specifically mentioned. It is on the value of goods, the tax payable is to be mentioned. They should also mention the rate at which the tax is collected. Thereafter, he should arrive at a total figure by adding these two. If the tax invoice is issued in this form then, he will be eligible to claim the deduction from the total amount.

Admittedly, in the instant case, in the bills and invoices raised by the assessee, the value of the goods is not mentioned, the rate of tax on the said value of goods and the amount of tax is not mentioned. The total is not arrived at by adding the value of goods and tax. On the contrary in the bills and invoices a particular amount is claimed, in the bottom, a seal is put saying that the tax is collected at 12.5% and the amount of tax. That is not what is prescribed under the law, if the assessee could mention the rate of tax and the amount of tax payable, he should have mentioned the same after mentioning the value of the goods and then he should have added. Then only he would be entitled to the benefit of deduction of tax from the total value mentioned in the bill. His mentioning in the books of account in a separate column, the value of the goods and the value of the tax cannot be given due weightage because what should be mentioned in the books of accounts is what is mentioned in the bill. When in the bill, he has not mentioned the value of goods and value of tax separately, the entries in the books of accounts looses its weight.

It is in this context, the Assessing Authority was justified in holding that the appellant has not entitled to the benefit of tax deduction, out of the total amount of tax collected in each bill. The lower Appellate Court instead of looking into the facts carefully was more concerned about the judgments, which are relied upon, were no law is laid down and where they were deciding the case on facts. If misconstrued those judgments, while applying them to the facts of these cases, which has resulted in an error apparent on the face of records. The Revisional Authority was fully justified in initiating suo motu proceedings as the order passed by the Appellate Authority was erroneous and prejudicial to the interest of revenue and he was duty-bound to interfere with such an erroneous order, set aside the same and restore the order of assessment. In that view of the matter, we do not see any justification to interfere with the order passed by the Revision Authority. No merits, Dismissed.