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2009 DIGILAW 1014 (KAR)

BHUVANA COMFORTS (P) LTD. v. STATE OF KARNATAKA.

2009-12-16

ARAVIND KUMAR, K.L.MANJUNATH

body2009
JUDGMENT ARAVIND KUMAR, J. - The assessee has filed this petition questioning the correctness and legality of the order passed by the Karnataka Appellate Tribunal in S.T.A. Nos. 2016-2017/2004 dated October 5, 2007. The facts of the case are as follows : The assessee is a private limited company carrying on the business in the running of resort and health club and is registered under the provisions of the Karnataka Sales Tax Act, 1957 and Central Sales Tax Act, 1956 and registration certificate came to be issued as per annexure B dated September 1, 1996 permitting the petitioner to use cement and steel. The assessee has used the steel and cement purchased to its projects involving construction activities in the resort and health club and the said cement and steel was purchased from outside the State. After the purchase, the respondent has issued the C declaration forms. The audit wing of the Revenue noticed that the commodity purchased, namely, the cement and steel, has not been sold subsequently, after manufacture or processing and found the assessee had utilised it for its own use. On noticing the same, a notice under section 10A of the CST Act, 1956, came to be issued on September 5, 2001 calling upon the assessee to file the objections within a period of 10 days. The said notice came to be served on the respondent - assessee on September 10, 2001 and the assessee had not chosen to file any objection to the said notice. The jurisdictional authority exercising power under section 10A of the CST Act passed an order on October 24, 2001 levying a penalty of Rs. 2,30,580 as provided under section 10A of the Act. The said order was carried in appeal before the Deputy Commissioner of Commercial Taxes (Appeals), Bangalore, which resulted in dismissal order dated January 14, 2004. The said order of the first appellate authority was further pursued by the assessee before the Karnataka Appellate Tribunal in S.T.A. Nos. 2016-2017/2004. The Tribunal on considering the submissions dismissed the appeal and confirmed the order of levy of penalty holding that the assessee had misled the authorities and the said act of the assessee amounted to an offence under section 10(d) of the CST Act, 1956, by order dated October 5, 2007. 2016-2017/2004. The Tribunal on considering the submissions dismissed the appeal and confirmed the order of levy of penalty holding that the assessee had misled the authorities and the said act of the assessee amounted to an offence under section 10(d) of the CST Act, 1956, by order dated October 5, 2007. Aggrieved by this order of the Appellate Tribunal the assessee is in revision before this court by raising the following substantial questions of law : "Whether the purchase of the cement by the petitioner - assessee for construction of resorts attracts the payment of Central sales tax ?" We have heard Sri Atul K. Alur, the learned counsel appearing for the petitioner and Smt. Geetha Menon, learned Additional Government Advocate for the respondent - Revenue. Sri Atul K. Alur submits that when the authorities themselves have issued the registration certificate and permitted him to make use of the cement and steel for construction of resort and health club, there was no justification for invoking the penal provisions, namely, 10A for imposing penalty on the assessee for not utilising the same as required under section 8(3)(d) of the CST Act and accordingly submits that the levy of the penalty requires to be set aside. He elaborates his submissions contending that neither the first appellate authority nor second appellate authority has considered these aspects and as such prays for allowing of the appeal and answering the question of law in favour of the assessee. Smt. Geetha Menon, the learned Additional Government Advocate appearing for the respondent while substantiating the order passed by the authorities contends that the fact of C form having been misused is established and even otherwise the assessee has not utilised the goods, namely, cement and steel procured from dealers outside the State for the purpose of manufacture or processing resulting in sale and as such the authorities were justified in levying the penalty and confirming the same. Having heard the learned counsel for the parties, we find from the order of the first appellate authority that the grounds urged by the appellant from (a) to (i) has been considered by the appellate authority and the contentions now raised by the assessee with regard to non-application of mind by the adjudicating authority. Having heard the learned counsel for the parties, we find from the order of the first appellate authority that the grounds urged by the appellant from (a) to (i) has been considered by the appellate authority and the contentions now raised by the assessee with regard to non-application of mind by the adjudicating authority. It is contended that the authority which levied the penalty did not specify as to what clauses of the Act have been violated and here this itself demonstrates that the authorities were not definite and it amounts to vagueness and as such the decision in the case of South Eastern Coal Fields Limited v. Sales Tax Officer reported in [2008] 14 VST 298 (Orissa) is pressed into service. It is seen that in the instant case show-cause notice has been issued on September 5, 2001 proposing to levy penalty and no reply to the show-cause notice has been filed by the assessee. While challenging the order of levy of penalty before the first appellate authority the assessee has specifically taken a contention that there is no violation of section 10(d) of the CST Act. Thus, we find that the assessee has understood the contents of the show-cause notice and was aware of the nature of the penalty being levied, and now it cannot be permitted to raise this issue at the third appellate stage. Particularly, having not taken any specific grounds on this issue, the assessee has admitted the order of the adjudicating authority who levied the penalty on the ground that the assessee has not filed any objections to the show-cause notice and cannot be permitted to raise such a ground at this stage. Even otherwise at the first appellate stage the assessee having understood the contents of the show-cause notice has specifically denied that penalty cannot be levied under section 10(d) of the Act which fact has also been considered by the first appellate authority and negatived. We find from the perusal of the order of the Tribunal dated October 5, 2007 that no such ground has been raised either in reply to the show-cause notice or at the stage of the first appeal and accordingly the Tribunal has confirmed the levy of penalty under section 10(d) of the CST Act, 1956. We find from the perusal of the order of the Tribunal dated October 5, 2007 that no such ground has been raised either in reply to the show-cause notice or at the stage of the first appeal and accordingly the Tribunal has confirmed the levy of penalty under section 10(d) of the CST Act, 1956. The assessee obviously has not raised the issue regarding specifying levy of penalty under which provision either in reply to the show-cause notice or in the grounds urged before the first appellate authority since it was fully aware of it. The adjudicating authority has on consideration of the facts available before it has levied the penalty under section 10A of the CST Act. The decision in the case of South Eastern Coal Fields Limited [2008] 14 VST 298 (Orissa) pressed into service by the assessee. We find that in the said case show-cause notice issued to the assessee. It was not specified as to under which provision the assessee would be liable to pay the penalty and on such consideration the honourable Orissa High Court has held that the show-cause notice suffers from legal infirmity. It is also noticed that in the said judgment a plea was taken by the assessee at the first available opportunity, unlike in the present case. In the instant case we not only find that the show-cause notice has been issued on September 5, 2001 for which admittedly the assessee has not replied nor objected to at the first appellate stage. On the other hand the assessee has taken up the contention that penalty cannot be levied under section 10(d) of the CST Act which in fact is to be understood that the assessee was well aware as to under which provision of the Act the penalty is being levied. Hence, the assessee now cannot contend contrary to the grounds urged before the first appellate authority for assailing the order of the learned Tribunal. In view of the above facts, the question of law raised in the petition memorandum has to be answered against the assessee and in favour of the Revenue. Accordingly the petition is dismissed. No order as to costs. Smt. Geetha Menon is permitted to file memo of appearance within a period of four weeks from today.