M/S. Park Square Infra Tech vs. State Of Karnataka
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Heard together (2 matters)
Read from the judgment's own cause title. This page is filed under one of them.
Cause title — parties, addresses and appearances
ORDER
The petitioner is actually aggrieved by the third respondent’s Assessment Orders dated 12.04.2019 for the tax-period under Section 39(1) of Karnataka Value Added Tax Act, 2003 (for short, 'KVAT Act'] and the endorsements issued by the second respondent rejecting the petitioner’s application under Section 69 of the KVAT Act. The petitioner has filed appeals against the Assessment Orders dated 12.04.2019 under Section 62(6] of the KVAT Act, and has presently filed appeals under Section 63 of the KVAT Act before the Karnataka Appellate Tribunal, Bangalore [KAT] against the said orders-in-appeal.
The petitioner has impugned the provision of Section 63(4) of the KVAT Act and has sought for directions to decide the petitioner’s appeals without pre-deposit. The details of the appeals before the KAT are as follows:
- 5 - The Appeal before the KAT and the corresponding Assessment Year The Corresponding Writ Petition STA No.63/2021, for the Assessment Year 2013-14 W.P.NO.15787/2022 STA No.62/2021, for the Assessment Year 2014-15 W.P.NO.15833/2022
The petitioner has also sought for directions to the third respondent not to proceed with coercive steps by way of any recovery proceedings against the petitioner for the aforesaid Assessment years pursuant to the corresponding assessment orders.
The petitioner has called in question the Assessment order dated 12.04.2019 in appeals in Nos. VAT.AP.55/2019-20 & VAT.AP.56/2019-20 under Section 62(6) of the KVAT Act. After the second respondent has disposed of these appeals, the petitioner has filed applications for rectification with the third respondent under Section 69 of the KVAT Act. With the second respondent rejecting these applications for rectification with issuance of
- 6 - Endorsements dated 20.03.2021 [which are produced as Annexure – D1 in each of these petitions] recording that there is no mistake apparent on the face of the record for rectification under Section 69 of the KVAT Act, the petitioner has called in question the orders- in-appeals in STA Nos.63/2021 & 62/2021 before the Karnataka Appellate Tribunal [KAT] under Section 63 of the KVAT Act contending that the orders rejecting the application merge with the orders-in-appeal.
The second respondent [the appellate authority] has disposed of the petitioner’s appeals in Nos.VAT.AP.55/2019-20 & VAT.AP.56/2019-20 as against the assessment orders dated 12.04.2019
1 The application for rectification is not considered for the reasons which read as under:
"
As there is no mistake apparent on records in the aforesaid appeal order, the rectification of the order u/s 69 of the KVAT Act 2003 does not arise.
That there is no provision for the appellate authority to review its own order u/s Section 62 of the KVAT Act 2003".
- 7 - concluding that the petitioner is a builder engaged in the construction of residential flats and it has not placed on record any material to demonstrate that it has received contractual amounts from the prospective buyers, and in the absence of such material, the construction activity by the petitioner would be for its own, and hence, the petitioner cannot claim any Input Tax Credit (ITC). The third respondent has also rejected the petitioner's applications for rectification on the ground that the agreements with the buyers are not placed on record and the petitioner would be ineligible for ITC claimed.
Sri Malhar Rao K, the learned counsel for the petitioner, submits that the petitioner, given its financial constraints, is unable to deposit 30% as required under the provisions of Section 63(4) of the KVAT Act and as such the present petitions are filed, but the petitioner would confine these petitions to the challenge to the rejection of the applications for
- 8 - rectification [Annexure-D in each of these writ petitions] seeking necessary orders for rectification and leave to withdraw the corresponding appeals before the KAT in STA No.62/2021 and STA
Sri Malhar Rao K submits that in the appeals in VAT.AP.55/2019-20 & VAT.AP.56/2019- 20, and also in the applications for rectification, the petitioner is specific that it was claiming ITC for the purchases prior to the date of agreements and not for the period thereafter. The appeals and the applications for rectification are rejected without considering this material aspect which are borne out from the records itself.
Sri Hema Kumar K., the learned Additional Government Advocate for the respondents, submits that the petitioner has resorted to filing applications under Section 69 of the KVAT Act as a ruse to get over the fact that the petitioner has not
- 9 - called in question the second respondent's order within the time allowed under Section 63 of the KVAT Act and this ruse is borne out from the fact that the petitioner has not even placed on record a copy of the application for rectification or furnished the details of the purchases and the date of the agreements. He also emphasizes that this Court must consider the petitioner's conduct in not placing on record any document even before the appellate Court despite the repeated opportunities only to be met by the submissions of Sri K.Malhar Rao, in rejoinder, that the opportunity is extended only during the time when there was restriction and lock down because of onset of Covid-19 pandemic.
This Court, in the peculiar circumstances of the case, must now consider whether the petitioner must be permitted to continue the petitions as against its grievance with the third respondent’s Assessment Orders dated 12.04.2019 for the tax-
- 10 - period 2013-14 and 2014-15 and the rejection of the applications for rectification with liberty to withdraw its petition as against challenge to the provisions of Section 63-(4) of the KVAT Act and the second respondent’s orders in STA No.62/2021 and STA
The second respondent has rejected the petitioner’s application for rectification for the reason which reads as under:
"The application for rectification is not considered for reasons:
As there is no mistake apparent on records in the aforesaid appeal order, the rectification of the order u/s 69 of the KVAT Act 2003 does not arise.
That there is no provision for the appellate authority to review its own order u/s Section 62 of the KVAT Act 2003".
It is seen from the assessment orders dated 12.04.2019 that the petitioner is held ineligible
- 11 - for ITC claimed because of the proposition laid down by the Hon'ble Supreme Court in Civil Appeal No.8672/2013 in L & T v. State of Karnataka. However, the petitioner's specific case is that he is claiming ITC for only those purchases which are made prior to the agreements with the prospective buyers and no claim is made for the purchases from the date of the agreements with prospective buyers.
The second respondent has rejected the applications for rectification by a perfunctory order and has not examined whether any rectification would be justified if the petitioner can demonstrate that the claim for ITC is only for those purchases which are made prior to the agreements with the prospective buyers and no claim is made for the purchases from the date of the agreements with prospective buyers. Sri Malhar Rao K is categorical that the agreements can be produced and if those are scrutinized, it would be borne out that the petitioner
- 12 - is not asking for rectification of the assessment orders for any period post the date of the respective agreements. If the assessment orders are framed without considering these aspects there could be error apparent, and in that event, there must be rectification under the provisions of Section 69 of the KVAT Act.
Therefore, this Court is of the view that there is lack of consideration and there must be interference with the rejection of the rectification application on the ground of arbitrariness. However, there is merit in the submissions by Sri Hema Kumar K that this Court must consider the fact that the petitioner has chosen to file an application for rectification way beyond the limitation prescribed under the statute to call in question the order-in- appeal and the petitioner has not placed any material on record to establish financial constraints. These circumstances as also the fact that the petitioner has
- 13 - availed the appellate remedy under Section 63 of the KVAT Act and such appeals will not be admitted unless pre-deposits are made in terms of Section 63(4) of the KVAT Act must be considered.
In the peculiarities of this case, this Court is of the considered view that the petition must be entertained to the limited extent of interfering with the rejection of the applications for rectification and restoring such applications for reconsideration but on terms including the deposit that the petitioner will have to make. The petitioner must appear without further notice before the second respondent with liberty to file additional submissions/documents and simultaneously deposit 10% of the demand in terms of each of the notices for the relevant tax period. Hence, the following: ORDER
(i) The petitions are allowed-in-part. The petitioner's prayer as against the provisions of
- 14 - Section 63(4) of the KVAT Act is rejected and the petitioner is given liberty to withdraw the appeals under Section 63 of KVAT Act before the Tribunal in STA No.62/2021 and STA No.63/2021 placing on record a certified copy of this order.
(ii) The Endorsements issued by the second respondent [as per Annexure-D in each of the petitions] are quashed and the petitioner's rectification applications are restored for reconsideration by the third respondent. The petitioner shall appear before the second respondent and file additional plea/documents, if any, on 30.04.2023 and shall also deposit 10% of the demand in terms of the notices as aforesaid on or before 30.04.2023. (iii) The second respondent shall decide on the merits of the rectification applications on or before 31.05.2023. It is needless to observe that if the petitioner fails to appear on the date of the
- 15 - first appearance or deposit the amount as stipulated herein, the restored applications shall be dismissed for default. JUDGE
SA ct:sr
Reproduced from the public record of the Karnataka High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.