P. Giri Raju vs The Commercial Tax Officer

Aravind Kumar, J.

Petitioner is a sole proprietary concern engaged in the works contract mainly for Government of Karnataka and its social wings and is registered as a dealer under the Karnataka Value Added Tax Act, 2003 (for short the ''Act''). For the Assessment Years 2008-09 and 2009-10, reassessment proceedings came to be initiated by respondent proposition notices came to be issued calling upon petitioner to produce books of accounts and on the ground of ill health petitioner did not appear before Authority and submitted representations dated 20.02.2015 and 10.03.2015, Annexures-B and A respectively requesting for extension of time to produce book of accounts and records sought for in the proposition notices dated 23.01.2015. On account of respondent allegedly refusing to receive the said representations, petitioner claims to have forwarded the same by registered post on 28.02.2015. However, assessing authority on the basis of available material framed reassessment orders on 28.02.2015, vide Annexures-D and E respectively and consequential demand notices, Annexures-G and H also came to be issued to petitioner raising tax demands. Alleging non payment of tax demanded under said demand notices, respondent initiated recovery proceedings and issued notices under Section 45 of the Act to the Garnishees and also attaching bank accounts of petitioner - Firm vide Annexures-K and J respectively. On coming to its knowledge of such attachment through its debtors, petitioner is said to have submitted representation to respondent on 10.04.2015, Annexure-L seeking withdrawal of demand notices as well as garnishees notices issued under Section 45 of the Act. Simultaneously petitioner also filed applications on 13.04.2015 vide Annexures-M and N seeking for rectification of alleged mistake in reassessment order and on receipt of said applications endorsement came to be issued to petitioner on 13.04.2015, Annexure-O indicating thereunder that petitioner can avail the remedy of filing appeal. Hence, petitioner has sought for withdrawal of recovery proceedings and quashing of demand notices dated 28.02.2015 and for direction to respondent to dispose of rectification applications, Annexures-M and N.

I have heard the arguments of Sri. K.G. Kamath, learned counsel appearing for petitioner and Sri. T.K. Vedamurthy, learned HCGP appearing for respondent who has submitted his arguments on instructions from respondent present before the Court and by making available the original records.

It is the contention of Sri. K.G. Kamath, learned counsel appearing for petitioner that despite making request for grant of time to produce books of accounts and postponement of reassessment proceedings, respondent has proceeded to pass reassessment orders which are in violation of principles of natural justice and demand notices have been served on petitioner on 10.04.2015 for the assessment year 2008-09 and on 09.04.2015 for the assessment year 2009-10 which would clearly indicate that within 30 days petitioner was required to pay the amount demanded under these notices and contends before lapse of said 30 days period petitioner cannot be treated as a defaulter and only after lapse of 30 days namely after 08.05.2015 and 09.05.2015 respectively and as such, initiation of recovery proceedings for recovery of tax by issuance of notices to debtors under Section 45 of the Act on 28.03.2015 vide Annexures-J and K is illegal. It is also contended such act of respondent violates Section 53 of the Act, inasmuch as, said provision enables the petitioner to seek for payment of tax in installments even if it is admitted to be due and payable and as such recovery proceedings is bad in law.

Per contra, Sri. T.K. Vedamurthy, learned HCGP appearing for respondent/State would contend that on account of reassessment orders passed on 28.02.2015 not being able to be served personally on petitioner due to petitioner refusing to receive the same as reported which was also on account of petitioner/assessee being unavailable at the address indicated in the assessment orders as was informed by the Official of respondent office namely Group ''D'' Official, who was deputed to serve the assessment order and on account of this factual position it resulted in effecting service through affixture on the same day and in support of his contention he has made available the mahazar drawn at the spot which is at page No. 16 of the original records. He would also contend that after such service of notice by affixture respondent/Authority has initiated recovery proceedings by issuing notices under Section 45 of the Act calling upon the debtors of petitioner to pay such amounts held by them on account of petitioners to be paid to respondent/Authority by issuing the garnishee/recovery notices, Annexures-J and K respectively. It is also contended that in order to ensure that assessment orders are served on petitioner, it was forwarded by speed post on 02.03.2015 itself which was also returned unserved and as such, respondent/Assessing Officer has forwarded the assessment orders by Registered Post Acknowledgement Due on 10.04.2015, which is duly received by the assessee and as such, it is contended that there is no infirmity, whatsoever, in the impugned notices or orders passed by respondent for this Court to exercise extraordinary jurisdiction. Hence, he prays for dismissal of writ petitions.

Having heard the learned Advocates appearing for parties and on perusal of records it would indicate that after issuance of notices to petitioner reassessment proceedings was initiated under Section 39(2) of the Act by respondent, which culminated in reassessment orders being passed on 28.02.2015 as per Annexures-D and E respectively. Hence, consequential demand notices came to be issued as per Annexures-G and H. Respondent claims to have served the said reassessment orders on petitioner by affixture on 28.02.2015. Undisputedly, reassessment orders came to be passed on 28.02.2015 and it does not indicate as to time at which the said order came to be passed. Alleged mahazar drawn for effecting service by affixture also does not indicate as to what time the Group ''D'' official had been entrusted the task of visiting the petitioner''s registered address to serve reassessment orders on petitioner. However, mahazar said to have been drawn at spot would indicate that Group ''D'' Official had visited the petitioner''s Officer namely registered office on 28.02.2015 at about 3.00 p.m. Said Official is said to have affixed the orders of reassessment on the building of registered office of petitioner.

Service of notice to a dealer under the Karnataka Value Added Tax can be effected by authorities under the mode prescribed under Rule 176 and said Rule reads as under:

"176. Service of Notices, etc.--The service on a dealer of any notice, summons or order under the Act or these rules may be effected in any of the following ways, namely.--

(1) by giving or tendering it to such dealer or his manager or agent; or

(2) if such dealer or his manager or agent is not found, by leaving it at his last known place of business or residence or by giving or tendering it to some adult member of his family; or

(3) if the address of such dealer is known to the prescribed authority by sending it to him by registered post; or

(4) if none of the modes aforesaid is practicable, by affixing it in some conspicuous place at his last known place of business or residence."

A bare perusal of said Rule would indicate that Authorities would be empowered to effect service of notice, summons or order passed under the Act or the Rules on any dealer in any of the modes and one of the modes prescribed is to affix it in a conspicuous place at the last known, place of business or residence of such dealer.

In the instant case, petitioner has been pursuing his grievance before the Authorities not only by filing returns but also by submitting the representations as evidenced from Annexures-A and B requesting for adjournment of reassessment proceedings and address mentioned in both these representations is No. 12, ''Anantha'', 4th Floor, 15th Cross, 2nd Temple Road, Malleshwaram, Bengaluru -560 003. In fact, perusal of reassessment order dated 28.02.2015 at Annexure-D would indicate that address reflected therein is No. 36, 16th Cross, 8th Main, Malleshwaram, Bengaluru - 55 and as on the date of reassessment order came to be passed, petitioner undisputedly and concededly had shifted his registered office to No. 12, "Anantha", 4th Floor, Second Temple Road, Malleshwaram, Bengaluru - 03 and it is this address which is also reflected in the mahazar drawn by respondent. The report namely mahazar drawn by the respondent''s Official, cannot be disputed or held to be contrary to facts as sought to be contended by learned counsel appearing for petitioner.

Be that as it may. It requires to be noticed that respondent at the first instance ought to have adopted the courses left open under Sub-rule (1) to (3) of Rule 176 to effect service of reassessment orders in the manner prescribed thereunder. In other words, said reassessment orders could have been despatched by Registered Post Acknowledgement Due or by Speed Post or efforts could have been made to serve personally on petitioner. Undisputedly reassessment orders as well as demand notices have been forwarded to petitioner by Speed Post on 02.03.2015 i.e., within two (2) days from the date of alleged affixture carried out. They have been returned unserved for the reason "door locked I/dropped" and as such service was not complete. Address reflected on the postal covers is No. 12, "Anantha", 4th Floor, Second Temple Road, Malleshwaram, Bengaluru. Hence, it cannot be gain said by the petitioner that respondent had not taken effective steps to effectively serve reassessment orders on petitioner.

Prescribed Authority in order to recover tax, penalty or any other amount duet to State may resort to recovery of such tax or penalty as provided under Section 45 of the Act by calling upon such persons from whom money is due or may become due and payable to the dealer or any person who holds or may subsequently hold such money for or on account of dealer, to pay to the prescribed Authority such money held by it/them. On order of re-assessment being passed and consequential demand being raised pursuant to such order prescribed Authority would be entitled to recover such tax, interest and penalty and other amounts due to State by resorting to section 42 of the Act. In the instant case respondent has invoked Section 42(9) of the Act by issuing notice dated 28.02.2015, Annexures-G and H and has called upon petitioner to pay the said amount within 30 days from the date of service of notice. A bare perusal of said notices would indicate that petitioner is required to pay tax, interest and penalty demanded thereunder is paid within 30 days of service of this notice''. Thus, the words ''service of notice'' would acquire significance inasmuch as non service of notice would amount to violation of principles of natural justice.

When the facts on hand are examined in the background of what is indicated herein above, it would indicate that order of re-assessment as well as demand notices came to be served on the petitioner namely when it was despatched by respondent under Registered Post Acknowledgement Due on 07.04.2015, and it came to be received by petitioner on 09.04.2015. Thus, 30 days period in the instant case would commence from 09.04.2015 and ends on 08.05.2015. However, even before 30 days period came to an end respondent has resorted to recover the tax determined under the impugned re-assessment orders by invoking Section 45 of the Act and calling upon the persons holding money on behalf of petitioner and which is payable to petitioner by directing them to remit the funds to the Department within three (3) days from the date of notices dated 28.03.2015, Annexures-J and K respectively. Thus, Annexures-J and K has to be necessarily held as premature.

It also requires to be noticed that immediately on coming to know about such notices having been issued by respondent, petitioner has filed applications for rectification of re-assessment orders dated 28.02.2015 (Annexures-D and E) by submitting applications on 13.04.2015 as per Annexures-M and N respectively seeking rectification of said orders. Respondent/Authority was required to examine the said application as provided under Section 69(1) and pass orders on merit. Instead of taking said recourse respondent has issued an endorsement dated 13.04.2015, Annexure-O suggesting thereunder that petitioner can prefer an appeal before Joint Commissioner of Commercial Taxes, Appeals-II, Bengaluru against orders of reassessment without examining the rectification applications on merits. It is needless to state that when such applications have been filed seeking rectification alleging there is error apparent on face of record, then such Authority is required to examine the said application and pass orders in accordance with law. However, it cannot be kept idle or direct the assessee to file an appeal without passing orders on such rectification application.

In the light of discussion made hereinabove, this Court is of the considered view that respondent had taken reasonable steps to effect service of re-assessment orders dated 28.02.2015, Annexures-D and E along with demand notices on petitioner. However, for reasons best known Rule 176 of the Karnataka Value Added Tax Rules, has not been adhered to as already discussed hereinabove. However, it is also made clear at this stage itself that it would not be incumbent upon the respondent authorities to resort to effect service of notice in seriatum as prescribed under Sub-rule (1) to (4) and as indicated therein, it can be effected in any one of the modes prescribed thereunder.

Now turning my attention back to facts in hand it would indicate that order of assessment as well as consequential demand notices have been served on the petitioner only on 09.04.2015, petitioner had a statutory right to file an appeal against said order as provided under section 62 of the Act or in the alternate had a right to deposit the tax within 30 days from date of service of notice as indicated in the demand notices or could have sought for payment in installments. The right of the petitioner to deposit such tax demanded would be available till the end of 30th day. Records would indicate demand notices were served on petitioner on 09.04.2015 by RPAD and petitioner had right to deposit the same on or before 08.05.2015. However, in the instant case respondent has initiated recovery proceedings under section 45 to recover the tax demanded even before completion of 30 days namely by issuing notices on 28.03.2015 to the debtors of petitioner. As such the impugned Garnishee notices Annexures-G and H cannot be sustained. Though Annexures-G and H cannot be sustained same is not quashed, in as much as pursuant to Demand notices respondent has issued notices dated 28.03.2015 and 30.03.2015, Annexures-J and K respectively under Section 45 of the Act to debtors of petitioner and same being held bad in law and as such they require to be quashed by reserving liberty to the respondent to issue fresh notices in the event of petitioner application for rectification Annexures-M and N being rejected. Hence, I proceed to pass the following:

ORDER

"(i) Writ petitions are hereby allowed in part.

(ii) Demand notices dated 28.03.2015 and 30.03.2015 Annexure-J and K are hereby quashed.

(iii) Respondent shall dispose of the applications dated 13.04.2015 Annexure-M and N filed by the petitioner expeditiously at any rate within 15 days from the date of hearing which is fixed at 12.05.2015 at 11.00 A.M. without waiting for any further notice.

(iv) Petitioner would be at liberty to place any additional material before the respondent and on production of such material respondent shall be at liberty to pass orders on rectification applications dated 13.04.2015 Annexure-M and N in accordance with law.

(v) No opinion is expressed on the merits of the case."

Sri. T.K. Vedamurthy, learned HCGP appearing on behalf of respondent is permitted to file memo of appearance within four weeks from today.