Abhiram Infra Projects Pvt. Ltd. Vs Additional Commissioner of Commercial Taxes (Karnataka High Court)
The Karnataka High Court heard an appeal under Section 66(1) of the Karnataka Value Added Tax Act, 2003 (KVAT Act), challenging an order dated 22.05.2023 passed under Section 64 of the KVAT Act and the consequential demand notice dated 21.07.2023. The dispute related to the assessment year 2014-15. The appellant, a registered dealer under the KVAT Act, had been subjected to a reassessment under Section 39(1), following which tax liability was paid. Subsequently, an order under Sections 36 and 37 regarding interest on delayed payment of tax was passed. Thereafter, proceedings under Section 64(1) were initiated by issuance of a notice dated 28.07.2021, followed by a revised notice dated 23.02.2023, culminating in the impugned revisional order.
The assessee contended that the original order sought to be revised had been passed on 31.07.2017 and that the revisional proceedings under Section 64 were barred by limitation as the final revisional order was passed beyond four years. It was argued that Section 64 required both initiation and completion of revisional proceedings within four years. The assessee also asserted that although the notice was dated 28.07.2021, it was actually received only in August 2022 and alleged that the notice was antedated. Reliance was placed on State of Andhra Pradesh v. M. Ramakishtaiah and Co. and A. Vykuntappa Setty & Co. v. Commissioner of Commercial Taxes, Bangalore.
The Revenue submitted that the revisional authority had called for the records on 13.07.2021, the records were received on 22.07.2021, and notice under Section 64(1) was issued on 28.07.2021, all within four years from the original order dated 31.07.2017. The Revenue relied upon the Full Bench decision in M/s. Khimijibhai Mills and Another v. The Additional Commissioner of Commercial Taxes, Belgaum Zone, contending that limitation under Section 64 applies to initiation of revisional proceedings and not to passing of the final order. It was further submitted that the notice was dispatched to the registered address by registered post and also served by email.
The High Court examined the original records and the provisions of Section 64. It observed that Section 64(3) prohibits exercise of revisional powers after four years from the order sought to be revised, which means that the revisional authority must call for the records, examine them and decide to initiate revision within four years. The Court held that initiation of proceedings by calling for the records and issuing notice within the prescribed period satisfies the statutory requirement. The date of service of notice on the assessee or the date of passing the revisional order is not relevant for computing limitation under Section 64.
Relying on the Full Bench decision in M/s. Khimijibhai Mills, the Court reiterated that the four-year limitation is for initiation of revisional proceedings and not for completion of the revision by passing the final order. It distinguished A. Vykuntappa Setty & Co. on the ground that, in that case, although the records had been received within the limitation period, no action had been initiated within four years.
Holding that the revisional proceedings had been initiated within the prescribed four-year period, the High Court found that the substantial question of law did not arise for consideration. The appeal was rejected.
Cases Discussed
- M/S.KHIMIJIBHAI MILLS AND ANOTHER v/s THE ADDITIONAL COMMISSIONER OF COMMERCIAL TAXES, BELGAUM ZONE (Full Bench, Karnataka High Court), ILR 2001 KAR 520
- A.VYKUNTAPPA SETTY & CO., AND OTHERS v/s COMMISSIONER OF COMMERCIAL TAXES, BANGALORE (Supreme Court), (1999) 112 STC 647 (1996 SCC OnLine SC 31)
- STATE OF ANDHRA PRADESH v/s M.RAMAKISHTAIAH AND CO. (Supreme Court), (1994) 93 STC 406 (1994 SCC OnLine SC 3)
- Subba Rao case, [1967] 19 STC 257 (Mys.)
- Busunur Industries case, [1986] 61 STC 123
- Satyanarayana Engineering Works case, [1999] 112 STC 578
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The assessee is in appeal under Section 66(1) of the Karnataka Value Added Tax Act, 2003 (for short “KVAT Act”), with a prayer to set aside the order dated22.05.2023 in Proceedings No.ZAC/03/BNG/SMR-06/21-22 (Annexure-A) passed in exercise of power under Section 64 of KVAT Act and consequently to set aside the demand notice dated 21.07.2023 bearing Demand No.190516121.02 (Annexure-B).
2. Though the appeal is listed for orders, the same is taken up for final disposal with the consent of learned counsel appearing for the parties.
3. Heard learned counsel Sri.Rohan Veeranna Tigadi for appellant-assessee and Smt.Jyothi Maradi, learned High Court Government Pleader for respondents-Revenue. Perused the entire appeal papers.
4. The brief facts of the case are that:
The appellant is a Company, incorporated under Companies Act, 1956 and is a registered Dealer under the KVAT Act. The dispute relates to the assessment year 2014-15. For the said assessment year, respondent No.2 passed re-assessment order under Section 39(1) of KVAT Act and the appellant is said to have paid tax liability imposed under re-assessment order dated 31.07.2019. Subsequently, respondent No.2 also passed order on 23.07.2019 under Sections 36 and 37 of the KVAT Act for payment of interest on delayed payment of tax liability under order dated 31.07.2017. Thereafter, notice dated 28.07.2021 was issued to the appellant under Section 64(1) of KVAT Act. The appellant is said to have submitted reply on 22.08.2022. Thereafter, revised notice under Section 64(1) of KVAT Act is said to have been issued on 23.02.2023 and the appellant is said to have submitted reply on 18.03.2023. The impugned order came to be passed on 22.05.2023 and fresh demand notice dated 21.07.2023 is issued. Challenging both the orders, the appellant is before this Court in this appeal.
5. Learned counsel for the appellant would contend that the original order under revision was passed on 31.07.2017 and notice issued under Section 64(1) of KVAT Act is beyond 4 years. Hence, the same is without jurisdiction. Learned counsel referring to Section 64 of the KVAT Act submits that the Authorities ought to have initiated and completed the proceedings by passing final order within 4 years from the date of original order. Learned counsel would further submit that the Additional Commissioner is bound to complete the revisional proceedings under Section 64(1) of KVAT Act within a period of 4 years and he cannot exercise any power after the expiry of 4 years. Further, learned counsel would submit that even if the proceedings is initiated within 4 years, it is not open for the Additional Commissioner to pass final order beyond 4 years under Section 64(1) of the KVAT Act. In that regard, learned counsel places reliance on the decisions of the Honb’le Apex Court in STATE OF ANDHRA PRADESH v/s M.RAMAKISHTAIAH AND CO., reported in (1994) 93 STC 406 (1994 SCC OnLine SC 3) and in A.VYKUNTAPPA SETTY & CO., AND OTHERS v/s COMMISSIONER OF COMMERCIAL TAXES, BANGALORE reported in (1999) 112 STC 647 (1996 SCC OnLine SC 31.) Further, learned counsel would submit that though the notice under Section 64(1) is dated 28.07.2021, the appellant received the notice only during August 2022 and reply is submitted immediately, in terms of Annexure-F dated 22.08.2022. It is contended by the learned counsel for the appellant that notice dated 28.07.2021 issued to the appellant is antedated. Hence, he prays for allowing the appeal and to set aside the orders under challenge.
6. Per contra, learned HCGP would submit that the proceedings under Section 64 of the KVAT Act is initiated within 4 years from the date of original order i.e., 31.07.2017. Learned HCGP would submit that Revisional Authority called for records by its letter dated 13.07.2021 and records were received by the first respondent on 22.07.2021. Upon receipt of the records, the first respondent took decision to initiate proceedings and issued notice on 28.07.2021. Learned HCGP placing reliance on the judgment of the Full Bench of this Court in the case of M/S.KHIMIJIBHAI MILLS AND ANOTHER v/s THE ADDITIONAL COMMISSIONER OF COMMERCIAL TAXES, BELGAUM ZONE reported in ILR 2001 KAR 520 submits that, Full Bench of this Court taking note of the decisions of the Honb’le Apex Court on which learned counsel for the appellant has placed reliance, held that it would be sufficient if the records are called and proceedings is initiated within 4 years. Further, learned HCGP would submit that notice sent by Registered Post Acknowledgement Due to the same address in which, the appellant has registered his Dealership, returned with postal shara “Addressee Not Found”. Moreover, she submits that e.mail sent was served on the same day. Thus, she prays for dismissal of the appeal.
7. During the course of hearing, we directed the learned HCGP to produce original records so as to find out whether the proceedings or notice issued to the appellant, in terms of Section 64(1) of KVAT Act is within 4 years. Accordingly, learned HCGP made available the original records, which we have perused.
8. Though the appellant in the memorandum of appeal has raised three substantial questions of law, learned counsel for the appellant has pressed only substantial question of law No.1, which reads as follows:
“Whether the Additional Commissioner can pass an order under Section 64 after the expiry of more than 4 years since the passing of the original order?”
9. To appreciate the above, it would be convenient to extract Section 64(1), (2) and (3) of KVAT Act, which reads as follows:
“64.Revisional powers of Additional Commissioner and Commissioner:-
(1) The Additional Commissioner may on his own motion call for and examine the record of any order passed or proceeding recorded under this Act and if he considers that any other passed therein by any officer, who is not above the rank of Joint Commissioner, is erroneous in so far as it is prejudical to the interest of the revenue, he may, if necessary, stay the operation of such order for such period as he deems fit and after giving the person concerned an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or canceling the assessment or directing a fresh assessment.
2. The Commissioner may on his own motion call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by any officer subordinate to him or the Authority for Clarification and Advance Rulings constituted under Section 60 is erroneous in so far as it is prejudicial to the interest of the revenue, he may if necessary, stay the operation of such order for such period as he deems fit and after giving the person concerned an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or canceling the assessment or directing a fresh assessment.
3. The Additional Commissioner or the Commissioner shall not exercise any power under sub-section (1) or sub-section (2), as the case may be, if –
(a) the time for appeal against the order has not expired;
b. the matter has been subject to an appeal under Section 63 or a revision in the High Court; or
c. more than four years have expired after the passing of the order sought to be revised:
Provided that in the case of an order passed by the Appellate Authority under Section 62 allowing the appeal preferred in full, the condition specified in clause (a) shall not apply.”
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10. A plain reading of the above provision makes it abundantly clear that on calling and examining record of any order passed or proceedings recorded under the KVAT Act and if he considers that any order passed therein by any Officer, who is not above the rank of Joint Commissioner, is erroneous insofar as it is prejudicial to the interest of the revenue, he may, if necessary, stay the operation of such order for such period as he deems fit and after giving the person concerned an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order.
11. Sub-Section (3) would state that the Additional Commissioner or Commissioner shall not exercise any power under sub-Section (1) or sub-Section (2) beyond the time stated therein, i.e., more than 4 years after passing of the order sought to be revised. In other words, the Additional Commissioner shall call for records, examine and take a decision as to revise or otherwise the order passed by the subordinate officer or authority, within 4 years, which would mean, the proceedings shall have to be initiated within a period of 4 years from the date of passing of the order sought to be revised.
12. In the instant case, the order sought to be revised was passed on 31.07.2017. The records were called for under letter dated 13.07.2021 which was dispatched on 14.07.2021 and records were received by the Additional Commissioner on 22.07.2021 and notice under Section 64(1) of KVAT Act was issued to the appellant on 28.07.2021. If the proceedings is initiated within 4 years from the date of order sought to be revised, the date of serving notice on the assessee would have no consequence. Initiation of proceedings and issuance of notice under Section 64(1) of KVAT Act is relevant for computing limitation of 4 years and not service of notice or passing of order under Section 64(1) of KVAT Act.
13. The Full Bench of this Court in M/S.KHIMIJIBHAI MILLS (supra) taking note of the decision in STATE OF ANDHRA PRADESH v/s M.RAMAKISHTAIAH AND CO. (supra) at paragraphs 17, 23 and 24 has held as follows:
“17. We have given our anxious consideration to the arguments raised by Mr. Gandhi but are unable to persuade ourselves to agree with the same. Legislative amendments of section 22-A from 1964-1992 would indicate that the Legislature has been using two types of phraseology at different points of time. From 1.1.64 to 31.12.67 the words were “no order shall be made” ……….. after the expiry of 4 years from the date of the order sought to be revised. From 1.1.68 to 31.12.92 the words used were “…………… the power under sub-section (1) shall be exercisable only within a period of 4 years from the date of the order sought to be revised was passed”. From 1.1.92 the Legislature reverted back to the words which were in operation from 1.1.64 to 31.1.67 and provided that the Joint Commissioner or Commissioner “shall not pass any order under sub-section (1) or sub-section (2)…………………. if more than
4 years have expired after the passing of the order sought to be revised”. Finding that the words in the amended provisions were creating problem, the Legislature amended section 22-A by Act 5 of 1993 with retrospective effect from 1.1.92 and introduced the words in sub-section
(3) as “………….. shall not exercise any power under sub-sections (1) and (2) ………………. if more than 4 years have expired after the passing of the orders sought to be revised”. A close reading of sub-sections (1) and (2) of section 22-A would indicate that the Additional Commissioner or Commissioner, as the case may be, on his own motion, can call for and examine the records of any proceedings under the Act, if he considers that any order passed by any officer subordinate to him is erroneous and prejudicial to the interest of the Revenue. Firstly, the power that can be exercised is to call for and examine the records; secondly, if necessary, to stay the operation of such order for such period as he deems fit; thirdly, after giving an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such orders thereon as the circumstances of the case justify. These three powers were described in Subba Rao’s case [1967] 19 STC 257 (Mys.) to be the three facets of the same power. The Commissioner exercises his power to revise the order of the subordinate authority as soon as he calls for the record of the proceedings of the subordinate authority. Limitation prescribed in the section is for initiation of the proceedings to revise and not to the passing of the final order revising the order of the subordinate authority. All that section 22-A(3) says is that power conferred under section 22-A(1) and (2) is exercisable within 4 years from the date of the order of assessment that is proposed to be revised. Exercise of the power commences as soon as the records are called for. If that act is done within 4 years, the jurisdiction vests in the revisional authority to revise the order of subordinate authority. Section 22-A does not put a limitation on the revisional authority to pass the final order within a specified period. Contention that power of the Additional Commissioner/Commissioner to call for the records, to examine them and to pass such order as he thinks fit are three independent powers and all those powers should be exercised within the time fixed under section 22-A(3) of the Act cannot be accepted. It becomes unworkable. For example, if the revisional authority calls for the records a month prior to the expiry of the period of 4 years, then the revisional authority cannot be expected to conclude the proceedings and pass a final order within one month after affording due opportunity to the assessee. This is not the intention of the Legislature. Whenever the Legislature had that intention, Legislature expressed it by saying that no order under section 22-A shall be made after the expiry of 4 years. Instead, the Legislature has now used the words exercise the powers under subsections (1) and (2) within a period of 4 years which means that initiation of proceedings has to be within a period of 4 years. Calling for records, examining them and passing such orders as deemed fit have rightly been held to be the facets of one single power, namely, the power to revise. Additional Commissioner/ Commissioner’s power to call for records, examine them, and to pass such orders as he thinks fit are facets of the one single power, namely, the power of revision as held in Subba Rao’s case [1967] 19 STC 257 (Mys.).
23. Lot of emphasis was laid before us that the use of the word “any” by the Legislature in sub-section (3) of section 22-A would indicate that “any” or “all” the powers vested with the revisional authority under section 22-A were required to be completed within a period of 4 years. We do not find any substance in this submission either. The words of the section are “………….. shall not exercise
any power” which, in the context of the situation would mean exercise of power to initiate the proceedings and not concluding the same as well. As observed in the foregoing paragraphs, the limitation for conclusion of the proceedings has now been provided by section 22-B, introduced by Act 7 of 1997. The earlier words used by the Legislature was “…………….. shall be exercisable only within a period of 4 years” and now the words used are “…………………. shall not exercise any power” which, though to be in negative form, is in substance the same. Emphasis in the earlier provision was in affirmative terms to exercise the power only within 4 years, whereas now the emphasis is in the negative terms by saying that the authority shall not exercise the power beyond the period of 4 years. There is no material difference either to the exercise of the power to revise or to the period of limitation prescribed.
24. For the reasons stated above, we reiterate the view expressed by this Court in Subba Rao case [1967] 19 STC 257 (Mys.), Busunur Industries case [1986] 61 STC 123 and Satyanarayana Engineering Works case [1999] 112 STC 578 and answer the question referred thus:
“That section 22-A envisages and provides for limitation of a period of four years for initiating the proceedings by sending for the records only and would not include the passing of the final order under section 22-A as well.””
14. It is clear from the above that four years limitation prescribed under Section -64 of KVAT Act is to call for records and to initiate proceedings and not to pass final order.
15. The case of VYKUNTAPPA SETTY AND CO. (supra) on which learned counsel for the appellant places reliance would have no application to the facts of the present case since in the said case, though the Commissioner had received records within 4 years, he did not initiate any action even after receipt of records for the reasons mentioned at paragraph 3 of the departmental note in that case.
16. For the reasons recorded above, we are of the view that the question of law raised would not arise for consideration and it is not a fit case for admission. Accordingly, appeal stands rejected.
