M/S Crown Hospitality vs. The Assistant Commissioner Of Commercial Taxes

Facts

The petitioner, M/s. Crown Hospitality, filed two writ petitions challenging assessment orders passed by the Assistant Commissioner of Commercial Taxes and the Deputy Commissioner of Commercial Taxes. WP No. 18698 of 2018 challenges an order dated April 19, 2018, and a consequent demand notice for the period 2012-13. WP No. 42655 of 2016 challenges a reassessment order dated December 22, 2015, and a consequential demand notice. The core issue in both cases revolves around the refusal of composition under Section 15 of the Karnataka Value Added Tax Act, 2003, on the grounds that capital goods were purchased from outside the State or outside India. The orders were passed under Section 39(1)(a) read with Sections 36(1) and 72(2) of the VAT Act.

Held

The Court allowed the writ petitions and quashed the impugned assessment orders dated April 19, 2018, and December 22, 2015. The Court relied on the Division Bench decision in Anantha Padmanabha Bhat vs. Commissioner of Commercial Taxes, which held that a dealer is entitled to the benefit under the Composition Scheme if goods are purchased for own use, even if from outside the State. This principle was further supported by the Supreme Court's disposal of the Special Leave Petition in the case of State of Karnataka and others vs. Ganapathi Stone Crushes. However, the Court granted liberty to the State to seek revival of these petitions if the pending proceedings before the Hon'ble Supreme Court, arising from the decision in Anantha Padmanabha Bhat vs. Commissioner of Commercial Taxes, are decided in favour of the State. The Court also directed that if the petitioner is entitled to any refund consequent to this order, the authorities shall permit such refund at the earliest upon application, subject to any order on revival.

Key Issues

1. Whether the petitioner is entitled to the benefit of the Composition Scheme under Section 15 of the Karnataka Value Added Tax Act, 2003, when capital goods are purchased for own use from outside the State or outside India? (Question of law) Petitioner's contention: The petitioner argued that if capital goods are purchased for own use, as opposed to goods in stock, the dealer is entitled to the benefit under the Composition Scheme. They relied on the High Court's decision in Anantha Padmanabha Bhat vs. Commissioner of Commercial Taxes and the Supreme Court's confirmation of a similar decision in State of Karnataka and others vs. Ganapathi Stone Crushes. Revenue's contention: The revenue argued that the decision in State of Karnataka and others vs. Ganapathi Stone Crushes was based on Anantha Padmanabha Bhat vs. Commissioner of Commercial Taxes, and the State's petition against the latter decision is pending before the Supreme Court. Therefore, the revenue sought liberty to revive the petitions if the Supreme Court decides in favour of the State.