| S.No | Name | Date of Order | Subject | Actions |
|---|---|---|---|---|
| 11 | Tejas Arecanut Traders vs. Joint Commissioner of Commercial Taxes & Another | 20-12-2023 | Whether the mandatory pre-deposit of 10% under Section 107(6)(b) of the CGST Act is to be computed on the entire demand (tax + interest + fine + fee + penalty) or exclusively on the disputed tax amount. | View Download |
BACKGROUNDThe petitioner, a trader, was subjected to a confiscation order by the Enforcement Officer who determined the total demand at Rs.1,41,11,633/-, which included tax, fine, penalty and other components, with the tax component alone determined at Rs.6,71,983/-. When the petitioner filed an appeal before the Appellate Authority under Section 107(1) of the CGST Act, the Appellate Authority declined to admit the appeal on the ground that the petitioner had failed to comply with the pre-deposit requirement under Section 107(6) of the CGST Act — having calculated 10% pre-deposit on the entire demand of Rs.1,41,11,633/- (i.e., Rs.14,11,163/-). The petitioner, however, had already deposited 10% of the tax component alone amounting to Rs.67,200/-. FACTSThe petitioner challenged the entire demand confirmed in the confiscation order. The Appellate Authority, while examining the maintainability of the appeal, called upon the petitioner to deposit 10% of the total composite demand of Rs.1,41,11,633/- (inclusive of fine, penalty, fee and interest). The petitioner contended that the expression "tax in dispute" in Section 107(6)(b) of the CGST Act refers only to the tax component and does not include interest, penalty, fine and fee, and that he had already deposited 10% of the tax as determined by the Enforcement Officer. The Appellate Authority, rejecting this contention, refused to admit the appeal, leading to the present writ petition before the High Court. COURT OBSERVATIONS (Verbatim)"In the context of disputing the entire tax amount, the 10% pre-deposit requirement pertains exclusively to the remaining disputed tax amount as articulated in the statutory language. Consequently, there exists a statutory basis for asserting that 10% pre-deposit obligation is confined to the contested tax quantum excluding penalty, fee and interest. This interpretation aligns with the legal principle that penalties are consequential to the determination of the underlining tax liability.""The intentional exclusion of disputed interest, fine, fee, and penalty from sub-clause (b) of Section 107(6) of the CGST Act signifies a crucial legislative distinction. Analyzing this deliberate separation provides insights into the lawmaker's clear intent regarding the nature and scope of the pre-deposit obligation in appeals.""By isolating 'a sum equal to ten per cent of the remaining amount of tax in dispute' in sub-clause (b), the legislator conveys a focused pre-deposit requirement specifically related to the disputed tax amount. This implies that the legislative design prioritizes the financial commitment associated directly with the primary tax liability being contested.""The appellate authority therefore, was not justified in calling upon the petitioner to deposit 10% of not only tax liability, but, also fine which is imposed by the Enforcement Officer equivalent to the value of the goods. If the order passed by the appellate authority under challenge is accepted, then the condition under clause (b) giving an option to the aggrieved person who disputes the entire tax liability to deposit 10% of the remaining amount of tax in dispute would be defeated.""Therefore, the order under challenge is not sustainable. There is no need for the petitioner to deposit any percentage of disputed interest, fine, fee and penalty arising from the impugned order. In essence, the legislative intent as construed from Section 107(6)(b) of the CGST Act is that aggrieved party has to pre-deposit 10% of the tax liability and it does not extend to penalties, fees or interest when the petitioner has contested the entirety of the tax liability." FINAL VERDICTThe Writ Petition was allowed. The impugned order of the Appellate Authority calling for 10% pre-deposit on the total demand of Rs.1,41,11,633/- was set aside. Since the petitioner had already deposited 10% of the tax liability (Rs.67,200/-), the Appellate Authority was directed to admit the appeal and decide it on merits in accordance with law.👍 IN FAVOUR OF ASSESSEE CASES REFERRED BY THE COURT#Case NameCitation1Carbon Resources (P) Ltd. vs. State of Bihar & OthersCivil Writ Jurisdiction Case No. 24120 of 2023 (Patna High Court)2Durga Raj Vijay Kumar vs. State of U.P.(2022) (Allahabad High Court)3Commissioner of Income Tax vs. Hindustan Bulk Carriers2003 (Supreme Court)4J.K. Synthetics Ltd. vs. CTO(2004) (Supreme Court)5Prakash Nath Khanna vs. CIT(2004) (Supreme Court)6B. Premanand vs. Mohan Koikal[2011] (Supreme Court) | ||||
| Tejas Arecanut Traders vs. Joint Commissioner of Commercial Taxes & Another 20-12-2023 Whether the mandatory pre-deposit of 10% under Section 107(6)(b) of the CGST Act is to be computed on the entire demand (tax + interest + fine + fee + penalty) or exclusively on the disputed tax amount.BACKGROUNDThe petitioner, a trader, was subjected to a confiscation order by the Enforcement Officer who determined the total demand at Rs.1,41,11,633/-, which included tax, fine, penalty and other components, with the tax component alone determined at Rs.6,71,983/-. When the petitioner filed an appeal before the Appellate Authority under Section 107(1) of the CGST Act, the Appellate Authority declined to admit the appeal on the ground that the petitioner had failed to comply with the pre-deposit requirement under Section 107(6) of the CGST Act — having calculated 10% pre-deposit on the entire demand of Rs.1,41,11,633/- (i.e., Rs.14,11,163/-). The petitioner, however, had already deposited 10% of the tax component alone amounting to Rs.67,200/-. FACTSThe petitioner challenged the entire demand confirmed in the confiscation order. The Appellate Authority, while examining the maintainability of the appeal, called upon the petitioner to deposit 10% of the total composite demand of Rs.1,41,11,633/- (inclusive of fine, penalty, fee and interest). The petitioner contended that the expression "tax in dispute" in Section 107(6)(b) of the CGST Act refers only to the tax component and does not include interest, penalty, fine and fee, and that he had already deposited 10% of the tax as determined by the Enforcement Officer. The Appellate Authority, rejecting this contention, refused to admit the appeal, leading to the present writ petition before the High Court. COURT OBSERVATIONS (Verbatim)"In the context of disputing the entire tax amount, the 10% pre-deposit requirement pertains exclusively to the remaining disputed tax amount as articulated in the statutory language. Consequently, there exists a statutory basis for asserting that 10% pre-deposit obligation is confined to the contested tax quantum excluding penalty, fee and interest. This interpretation aligns with the legal principle that penalties are consequential to the determination of the underlining tax liability.""The intentional exclusion of disputed interest, fine, fee, and penalty from sub-clause (b) of Section 107(6) of the CGST Act signifies a crucial legislative distinction. Analyzing this deliberate separation provides insights into the lawmaker's clear intent regarding the nature and scope of the pre-deposit obligation in appeals.""By isolating 'a sum equal to ten per cent of the remaining amount of tax in dispute' in sub-clause (b), the legislator conveys a focused pre-deposit requirement specifically related to the disputed tax amount. This implies that the legislative design prioritizes the financial commitment associated directly with the primary tax liability being contested.""The appellate authority therefore, was not justified in calling upon the petitioner to deposit 10% of not only tax liability, but, also fine which is imposed by the Enforcement Officer equivalent to the value of the goods. If the order passed by the appellate authority under challenge is accepted, then the condition under clause (b) giving an option to the aggrieved person who disputes the entire tax liability to deposit 10% of the remaining amount of tax in dispute would be defeated.""Therefore, the order under challenge is not sustainable. There is no need for the petitioner to deposit any percentage of disputed interest, fine, fee and penalty arising from the impugned order. In essence, the legislative intent as construed from Section 107(6)(b) of the CGST Act is that aggrieved party has to pre-deposit 10% of the tax liability and it does not extend to penalties, fees or interest when the petitioner has contested the entirety of the tax liability." FINAL VERDICTThe Writ Petition was allowed. The impugned order of the Appellate Authority calling for 10% pre-deposit on the total demand of Rs.1,41,11,633/- was set aside. Since the petitioner had already deposited 10% of the tax liability (Rs.67,200/-), the Appellate Authority was directed to admit the appeal and decide it on merits in accordance with law.👍 IN FAVOUR OF ASSESSEE CASES REFERRED BY THE COURT#Case NameCitation1Carbon Resources (P) Ltd. vs. State of Bihar & OthersCivil Writ Jurisdiction Case No. 24120 of 2023 (Patna High Court)2Durga Raj Vijay Kumar vs. State of U.P.(2022) (Allahabad High Court)3Commissioner of Income Tax vs. Hindustan Bulk Carriers2003 (Supreme Court)4J.K. Synthetics Ltd. vs. CTO(2004) (Supreme Court)5Prakash Nath Khanna vs. CIT(2004) (Supreme Court)6B. Premanand vs. Mohan Koikal[2011] (Supreme Court) | ||||
| 12 | The State of Karnataka v. Tallam Apparels | 26-02-2021 | Whether a purchasing dealer can be denied Input Tax Credit (ITC) on the ground that the selling dealer has failed to remit the tax collected to the Government, despite the purchasing dealer having made genuine purchases supported by proper tax invoices an | View Download |
BackgroundThe assessee is a registered dealer under the Karnataka Value Added Tax Act, 2003, engaged in the business of sale of textiles and readymade garments. The assessee purchased goods from registered dealers within the State, paid tax through account payee cheques, and issued tax invoices to buyers as required under Section 29 of the KVAT Act. The Audit Authority, upon audit of the books of accounts, rejected the returns and by order dated December 26, 2014 under Section 39(1) of the Act, disallowed the Input Tax Credit claimed by the assessee for the tax period September 2012 to March 2013, on the ground that certain selling dealers — namely M/s. Taksons, M/s. Jasky Exporters Pvt. Ltd., and M/s. Venus Printers — were suspected to be bogus dealers and had not remitted the tax to the Department. FactsThe assessee challenged the order of the Audit Authority before the Joint Commissioner of Commercial Taxes (Appeals), who dismissed the appeal by order dated October 30, 2015, upholding the re-assessment and penalty order. The assessee thereafter appealed to the Karnataka Appellate Tribunal (KAT), which by judgment dated August 21, 2017 allowed the appeal, set aside the orders of the authorities below, and restored the ITC claim of the assessee. The State of Karnataka filed the present revision petition before the High Court challenging the order of the KAT. The State contended that the Tribunal failed to appreciate that under the KVAT Act, only tax actually collected and discharged by the selling dealer is eligible to be availed as ITC by the purchasing dealer, and that the assessee failed to prove the genuineness of the transactions and that the selling dealers were not bogus. The assessee, on the other hand, maintained that it had made purchases supported by proper documentation including account payee cheques reflected in the invoices themselves, thereby fully discharging its burden under Section 71 of the Act, and that it cannot be made responsible for the failure of the selling dealer to remit tax. Court Observations (Verbatim — Crucial Extracts)"From perusal of these documents, it can safely be concluded that the transaction is not a bogus transaction or make believe transaction. Since M/s. Tallam Apparels is not a bogus dealer, as is evident from the documents produced by the assessee, dis-allowing of input tax is incorrect. There cannot be any dispute, that burden is cast on the assessee to establish the transaction to lay a claim for deduction of input tax by production of necessary documents. This Court is of the considered opinion that the assessee has discharged this burden by placing necessary documents referred to supra. The details of the account payee cheques mentioned in the invoice itself demonstrates that the amount is transferred from the assessee to the dealer through the Bank which fact establishes that the transaction is not a bogus transaction." — Para 12"In the case on hand, if M/s. Tallam Apparels has not remitted the tax to the Department, for which assessee cannot be penalized." — Para 13"Under the scheme of the Act, there is no power vested in the authority to proceed against the assessee for non-remittance of tax by his purchaser. This aspect of the matter has been rightly considered by the Karnataka Appellate Tribunal in the right perspective." — Para 14 Final VerdictThe High Court of Karnataka dismissed the State's revision petition and upheld the order of the Karnataka Appellate Tribunal. It was held that once the assessee had established the genuineness of purchases through proper documentation including account payee cheques, ITC could not be denied merely on the ground that the selling dealer had not remitted tax to the Department, as the assessee cannot be penalized for the default of the selling dealer. | ||||
| The State of Karnataka v. Tallam Apparels 26-02-2021 Whether a purchasing dealer can be denied Input Tax Credit (ITC) on the ground that the selling dealer has failed to remit the tax collected to the Government, despite the purchasing dealer having made genuine purchases supported by proper tax invoices anBackgroundThe assessee is a registered dealer under the Karnataka Value Added Tax Act, 2003, engaged in the business of sale of textiles and readymade garments. The assessee purchased goods from registered dealers within the State, paid tax through account payee cheques, and issued tax invoices to buyers as required under Section 29 of the KVAT Act. The Audit Authority, upon audit of the books of accounts, rejected the returns and by order dated December 26, 2014 under Section 39(1) of the Act, disallowed the Input Tax Credit claimed by the assessee for the tax period September 2012 to March 2013, on the ground that certain selling dealers — namely M/s. Taksons, M/s. Jasky Exporters Pvt. Ltd., and M/s. Venus Printers — were suspected to be bogus dealers and had not remitted the tax to the Department. FactsThe assessee challenged the order of the Audit Authority before the Joint Commissioner of Commercial Taxes (Appeals), who dismissed the appeal by order dated October 30, 2015, upholding the re-assessment and penalty order. The assessee thereafter appealed to the Karnataka Appellate Tribunal (KAT), which by judgment dated August 21, 2017 allowed the appeal, set aside the orders of the authorities below, and restored the ITC claim of the assessee. The State of Karnataka filed the present revision petition before the High Court challenging the order of the KAT. The State contended that the Tribunal failed to appreciate that under the KVAT Act, only tax actually collected and discharged by the selling dealer is eligible to be availed as ITC by the purchasing dealer, and that the assessee failed to prove the genuineness of the transactions and that the selling dealers were not bogus. The assessee, on the other hand, maintained that it had made purchases supported by proper documentation including account payee cheques reflected in the invoices themselves, thereby fully discharging its burden under Section 71 of the Act, and that it cannot be made responsible for the failure of the selling dealer to remit tax. Court Observations (Verbatim — Crucial Extracts)"From perusal of these documents, it can safely be concluded that the transaction is not a bogus transaction or make believe transaction. Since M/s. Tallam Apparels is not a bogus dealer, as is evident from the documents produced by the assessee, dis-allowing of input tax is incorrect. There cannot be any dispute, that burden is cast on the assessee to establish the transaction to lay a claim for deduction of input tax by production of necessary documents. This Court is of the considered opinion that the assessee has discharged this burden by placing necessary documents referred to supra. The details of the account payee cheques mentioned in the invoice itself demonstrates that the amount is transferred from the assessee to the dealer through the Bank which fact establishes that the transaction is not a bogus transaction." — Para 12"In the case on hand, if M/s. Tallam Apparels has not remitted the tax to the Department, for which assessee cannot be penalized." — Para 13"Under the scheme of the Act, there is no power vested in the authority to proceed against the assessee for non-remittance of tax by his purchaser. This aspect of the matter has been rightly considered by the Karnataka Appellate Tribunal in the right perspective." — Para 14 Final VerdictThe High Court of Karnataka dismissed the State's revision petition and upheld the order of the Karnataka Appellate Tribunal. It was held that once the assessee had established the genuineness of purchases through proper documentation including account payee cheques, ITC could not be denied merely on the ground that the selling dealer had not remitted tax to the Department, as the assessee cannot be penalized for the default of the selling dealer. | ||||
