The Joint Commissioner Of Commercial Taxes (Appeals)-6 vs. M/S. Alankar Stones Private Limited
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Cause title — parties, addresses and appearances
ORAL ORDER
(PER: HON'BLE MR. JUSTICE S.G.PANDIT) This Sales Tax Revision Petition under Section 65 of the Karnataka Value Added Tax Act, 2003 (hereinafter referred to as ’the Act’) is filed by the Revenue challenging the judgment dated 06.08.2024 in STA No.144/2019 passed by the Karnataka Appellate Tribunal (hereinafter referred to as ‘Tribunal’), wherein, the appeal HC-KAR
CNR: KAHC010709062025 NC: 2026:KHC:50810-DB filed by the assessee/respondent herein under Section 63 of the Act was allowed.
The brief facts of the case are as under: A notice under Form VAT-275 was issued to the assessee/respondent on 18.03.2015 calling upon the assessee to produce the documents in support of the return filed in Form VAT-100 for the Tax period April-2011 to March-2012. Subsequently, a proposition notice was issued to the assessee on 17.07.2015, proposing to disallow the claims of exemption and input tax credit sought by the assessee. The issue pertained to reversal of input tax credit of Rs.82,877/- in respect of suppliers of the assessee who did not declare any turnover and filed nil returns. The reassessment order under Section 39(1) of the Act was passed by the petitioner No.2 on 11.10.2017, directing reversal of input tax credit of Rs.82,777/- and the consequent penalty and interest on the wrongly claimed input tax credit. Aggrieved by the same, the HC-KAR
CNR: KAHC010709062025 NC: 2026:KHC:50810-DB assessee filed an appeal under Section 62(6) of the Act before the petitioner No.1, however, by Order dated 18.12.2018, the appeal filed by the assessee was dismissed.
Challenging the Order dated 18.12.2018 passed by the petitioner No.1, the assessee was before the Tribunal under section 63 of the Act in STA No.144/2019. The Tribunal, vide impugned judgment dated 06.08.2024, allowed the appeal filed by the assessee and remanded the matter back to the assessing Authority to pass fresh orders by accepting the net input tax declared by the assessee to an extent of Rs.82,777/- for the assessment year 2011-12. Hence, the present Revision Petition under section 65 of the Act is filed by the Revenue.
Heard Sri. Aditya Vikram Bhat, learned Additional Government Advocate for the Revenue and Sri. M Thirumalesh for Sri. Narendra B Gandhi, learned counsel HC-KAR
CNR: KAHC010709062025 NC: 2026:KHC:50810-DB for the respondent/assessee on ‘admission’. Perused the entire petition papers.
Learned AGA Sri. Aditya Vikram Bhat for the Revenue would submit that the Tribunal erred in allowing
the appeal filed by the assessee and setting aside concurrent findings of petitioner No.1 and 2. It is submitted that the Tribunal erred in holding that the assessee has discharged the burden sufficiently under section 70 of the Act without taking into account the principles laid down by the Hon’ble Apex Court in STATE OF KARNATAKA VS M/S ECOM GILL COFFEE TRADING PVT. LTD. reported in (2023) 18 SCC 809. It is further submitted by the learned AGA that it is only before the Tribunal that the assessee placed on record the e-sugam which would prove the genuineness of the movement of the goods. Thus, it is prayed before this Court that the substantial questions of law as urged in the petition memo be admitted. HC-KAR
CNR: KAHC010709062025 NC: 2026:KHC:50810-DB
Per contra, Sri. M Thirumalesh for Sri. Narendra B Gandhi, learned counsel for the assessee would submit that the Tribunal is justified in allowing the appeal filed by the assessee and holding that the assessee has sufficiently discharged the burden under section 70 of the Act. The learned counsel for the assessee would take us through the Order passed by the petitioner No.2 as well as the petitioner No.1 to establish that the assessee had produced sufficient material to establish the movement of goods before the assessing authority as well as the 1st Appellate Authority as well. Thus, it is prayed that the Revision Petition filed by the Revenue be dismissed.
Having heard the learned counsel for the parties and on perusal of the entire petition papers, we are not inclined to interfere with the judgment passed by the Tribunal for the reasons recorded hereunder: A perusal at the order passed by the petitioner No.2 dated 11.10.2017 as well as the order passed by the petitioner HC-KAR
CNR: KAHC010709062025 NC: 2026:KHC:50810-DB No.1 dated 18.12.2018 would indicate that the claim for input tax credit was rejected for the reason that the assessee has failed to discharge the burden satisfactorily under section 70 of the Act as well as for the reason that the selling dealer has failed to pay the tax to the department. However, a perusal at the reassessment order would indicate that the assessee had produced sufficient documents to establish the genuineness of the transaction as well as produce e-sugams which would establish the movement of goods as envisaged in the decision of the Hon’ble Apex Court in M/S ECOM GILL COFFEE TRADING PVT. LTD. (supra). Such being the circumstances, the Tribunal is justified in setting aside the concurrent findings of the petitioner No.1 and 2 by holding that the assessee has proved the genuineness of the transactions. The petitioner No.1 and 2 erred in refusing to allow the claim of the assessee for input tax credit solely for the reason that the selling dealer has failed to pay the tax. Thus, we are of the opinion that the Revenue has not HC-KAR
CNR: KAHC010709062025 NC: 2026:KHC:50810-DB made out any grounds to admit the present revision petition. Hence, the instant Revision Petition deserves to be dismissed.
Before parting with this order, we deem it fit to pass some further directions. It was brought to our notice by the learned counsel Sri. Thirumalesh M during the course of hearing that the tax effect in this petition is merely Rs.82,777/-. We find that the present petition is one among several tax matters filed by the State which come before this Court involving a very small amount of tax effect. A considerable amount of judicial time is spent in hearing tax matters where the revenue involved is very small. Moreover, the State is required to incur expenditure towards preparation and prosecution of such matters. In cases where the tax effect is very small, the expenditure incurred in prosecuting the litigation may sometimes end up being more than the amount which is the subject matter of the dispute. It is noticed that the High Court in HC-KAR
CNR: KAHC010709062025 NC: 2026:KHC:50810-DB most instances with regard to litigation under the Act, is the Court of 4th instance. For illustrative purposes, in a Sales Tax Revision Petition, the reassessment order passed under Section 39(1) is usually challenged under Section 62(6) of the Act before the 1st Appellate Authority. Thereafter, the Order passed by the 1st Appellate Authority is challenged under section 63 of the Act before the Appellate Tribunal. Thereafter, challenging the Order passed by the Appellate Tribunal, a Sales Tax Revision Petition is filed. By the time the petition reaches the High Court, the State would’ve spent a considerable amount in prosecuting the matter. Thus, it does not make any practical sense fiscally for the State to prosecute the appeal any further, beyond the Appellate Tribunal, if the tax effect is miniscule, unless the subject matter involved has a rippling effect on other cases.
In this regard, we may take note of Circular No.09/2024 dated 17.09.2024 issued by the Central Board HC-KAR
CNR: KAHC010709062025 NC: 2026:KHC:50810-DB of Direct Taxes (CBDT), whereby the monetary limits for filing appeals in Income Tax matters have been enhanced. The said Circular prescribes a monetary limit of Rs.60 lakhs for appeals before the Income Tax Appellate Tribunal, Rs.2 crores for appeals before the High Courts and Rs.5 crores for appeals before the Hon’ble Supreme Court. The Circular states that the enhancement of monetary limits is a step towards management of litigation and also makes it clear that an appeal should not be filed merely because the tax effect exceeds the prescribed monetary limit. The Circular further provides for exceptions to the monetary limits and recognises that the decision to file an appeal has to be taken on the merits of the case as well.
The above approach, in our opinion, can also be considered by the State Government in respect of tax matters arising under the State enactments. We are therefore of the view that the State Government may HC-KAR
CNR: KAHC010709062025 NC: 2026:KHC:50810-DB consider laying down appropriate monetary limits for filing appeals or revision petitions before this Court in tax matters, having regard to the tax effect involved in each case. We make it clear that we are not prescribing any monetary limit by this order. It is for the State Government to consider the matter and take an appropriate decision in accordance with law, keeping in view the revenue involved, the expenditure incurred in prosecuting such litigation and the need to utilise judicial time for matters which require consideration by this Court. We hope that the State Government would examine the issue and take an appropriate decision in this regard.
Hence, we proceed to pass the following: ORDER a) STRP No. 61/2025 is dismissed.
b) Registry is directed to circulate a copy of this Order to the Additional Chief Secretary of the Finance Department, HC-KAR
CNR: KAHC010709062025 NC: 2026:KHC:50810-DB State of Karnataka to consider the suggestions made above and frame appropriate policy in that regard, if deemed necessary. (S.G.PANDIT) JUDGE (DR.CHILLAKUR SUMALATHA) JUDGE
NC CT:bms List No.: 1 Sl No.: 11
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.