IN THE HIGH COURT OF KARNATAKA AT BENGALURU PRESENT THE HON BLE MR.JUSTICE VINEET SARAN AND THE HON BLE MRS.JUSTICE S SUJATHA

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1 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU R DATED THIS THE 18 TH DAY OF MARCH 2015 PRESENT THE HON BLE MR.JUSTICE VINEET SARAN AND THE HON BLE MRS.JUSTICE S SUJATHA WRIT APPEAL NOS /2015 (T-RES) BETWEEN M/S PAHARPUR COOLING TOWERS LTD. REPRESENTED BY ITS SENIOR EXECUTIVE-COMMERCIAL, SRI B N BALAKRISHNA, AGED ABOUT 48 YEARS, PAHARPUR HOUSE, NO.41, CUNNINGHAM CROSS ROAD, BANGALORE APPELLANT (BY SRI. R.V.PRASAD AND K.HEMA KUMAR, ADVOCATES) AND 1. THE ASSISTANT COMMISSIONER OF COMMERCIAL TAXES (AUDIT)-1.3, D.V.O-1, 5 TH FLOOR, TTMC BUILDING, BMTC BUS STAND, YESHWANTHPUR, BANGALORE THE COMISSIONER OF COMMERCIAL TAXES IN KARNATAKA, VANIJYA THERIGE KARYALAYA, I MAIN, GANDHINAGAR, BANGALORE RESPONDENTS (BY SRI. S.V.GIRIKUMAR, AGA)

2 2 THESE WRIT APPEALS ARE FILED U/S 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER PASSED IN THE WRIT PETITION /15 DATED 5/3/15. THESE APPEALS COMING ON FOR PRELIMINARY HEARING THIS DAY, VINEET SARAN J., DELIVERED THE FOLLOWING: JUDGMENT Notice on behalf of the respondents has been accepted by Sri Giri Kumar, learned Government Advocate. 2. Heard Sri R V Prasad, learned counsel for the appellant as well as Sri Giri Kumar, learned Government Advocate appearing for the respondents. With the consent of learned counsel for the parties, these appeals are being disposed of at the admission stage. 3. The brief facts of this case are that for the tax period April 2007-March 2008 and for the period April 2008-March 2009, notice under Section 52(1) of

3 3 the Karnataka Value Added Tax Act, 2003 (hereinafter referred to as the Act for brevity) was issued to the appellant, who is engaged in the business of construction, supply, erection and commissioning of cooling towers for power plants, steel plants etc. The notice dated was issued on the ground that the appellant had not claimed input tax rebate in Form VAT-100 and therefore, the input tax claim was proposed to be disallowed. Further, by the said notice it was proposed to allow the labour charges 30% on entire works contract receipt. In response to the same, the appellant filed a detailed reply on Thereafter, by order dated , which related to the period April 2007-March 2008 and another order dated , relating to the period April 2008-March 2009, after denying the claim of the appellant of 80% of labour charges, only 30% was allowed in terms of clause (m) of Rule 3(2) of the Karnataka Value Added Tax Rules, Challenging the said orders, the appellant filed Writ

4 4 Petition Nos /2015 which have been dismissed by judgment and order dated primarily on the ground of alternate remedy available to the appellant by filing an appeal under Section 62(1) of the Act. 4. Aggrieved by the said order, these appeals have been filed. 5. The contention of the learned counsel for the appellant is that since the appellant had submitted the audited balance sheet in Form VAT-240, the benefit of clause (l) of Rule 3(2) of the Rules of 2005 ought to have been given to the appellant as the audit report and also the accounts of the appellant/assessee had not been rejected by the assessing authority. It is further contended that Clause (m) of the aforesaid Rules, was not applicable in the case of the appellant and since in the order, the Assessing Officer had accepted that the audit report in Form VAT 240 had been submitted by the

5 5 appellant, the Assessing Officer has erred in law by applying the principles of Clause (m) of Rule 3(2) by stating that the appellant (assessee-company) had not filed the audited balance sheet to ascertain the actual labour charges deduction. The submission of the learned counsel for the appellant is that the order passed was in gross violation of the principles of natural justice because the same was done without examining the records and as such, the writ petition ought to have been entertained on merit. 6. Learned counsel for the respondent has however submitted that there is no error apparent on the face of the record, nor, there has been any violation of the principles of natural justice and as such, the alternate remedy available to the appellant by filing an appeal under Section 62(1) of the Act of 2003 ought to have been availed by the appellant and that the order dismissing the writ petition filed by the appellant is justified in law.

6 6 7. The facts as stated are not disputed by the parties. It is not disputed that the audit report was filed by the appellant in Form VAT-240. It is also not disputed that the audit report (books of accounts) as presented by the appellant had not been rejected by the Assessing Officer. In fact, after having admitted in the assessment order that the audit report had been filed, the observation that the assessee/company had not filed the audited balance sheet, on the basis of which Rule 3(2)(m) of the Rules, 2005 has been made applicable, cannot be justified and is an error apparent on the face of the record. 8. Calling for a reply to the show cause notice would thus mean that the reply submitted by the party concerned should be considered and appreciated by the authority. In the present case, though it is accepted that the audit report had been filed, but, by not appreciating or considering the audit report and by merely stating that the same was

7 7 not filed, the assessing officer has in fact ignored the reply of the assessee and the documents filed by the assessee and has thus committed a grave mistake, which, in our opinion would fall within the purview of violation of principles of natural justice. This we say so because merely granting opportunity to file a reply and document would not be sufficient unless the same is considered and appreciated by the authority. As such, in the aforesaid facts, relegating the appellant to avail the alternate remedy by filing the appeal cannot be justified. Thus, we are of the view that the order dated whereby the writ petition has been dismissed by the learned Single Judge merely on the ground of the petitioner having alternate remedy of filing an appeal, is liable to be set-aside. 9. Since we have already held that the Assessing Officer had not applied his mind judiciously and did not consider the audit report and account books which had admittedly been filed by the

8 8 assessee, we allow these appeals as well as the writ petitions and quash the orders passed by the Assessing Authority for the relevant assessment periods and remand the matter to the Assessing Authority for fresh decision, in accordance with law, after considering the reply of the appellant, the papers and other documents submitted by the appellant along with the reply, as well as the relevant documents filed with Form VAT 240 and Form VAT 100. The Assessing Authority is expected to decide the matter afresh in accordance with law as expeditiously as possible, without granting unnecessary adjournments to the parties concerned. Appeals stand allowed. Sd/- JUDGE Sd/- JUDGE Brn