By TIOL News Service

BANGALORE, OCT 01, 2018: THE Assessee deals with the sale and purchase of used cars.

A Writ petition was filed against the re-assessment order Deputy Commissioner of Commercial Taxes (Audit) raising a Demand of Rs.8,04,88,670/- against the assessee for the period 01.04.2011 to 31.08.2015 imposing difference of purchase tax u/s.3(2) of the KVAT Act, 2003.

The petitioner submitted that under the specific Notification No. FD 82 CSL 10(VI), Bangalore, dated 31.03.2010, the assessee was entitled to pay only 5% of the tax on the difference of value between the taxable turnover in respect of such sales of used motor vehicles and the amount paid towards the purchase of such used motor vehicles, subject to the conditions stipulated in such Notification.

However, ignoring the said Notification, the Respondent-authority demanded the purchase tax from the assessee and also denied the claim of input tax credit on the ground that no returns were filed in support of the claim of ITC.

The said Notification is extracted below -

…the Government of Karnataka  hereby reduces with effect the First day of April, 2010, the tax payable by a dealer engaged in the purchase and sale of used motor vehicles, on the sale of all kinds of used motor vehicles including used motor cycles  under sub-section (1) of Section 4 of the said Act to  five per cent of the difference between the taxable turnover in respect of such sale and the amount paid towards purchase  of such motor vehicles subject to the condition that :-

(1)  no deduction of input tax  is claimed by the dealer in respect of purchase of any goods used in the motor vehicles sold ; and

(2) such  motor vehicles have been registered  in the State prior to their sale under the provisions of the Motor Vehicles Act, 1988 (Central Act 59 of 1988)."

During the hearing, the counsel for the respondent Revenue was unable to make out any ground for non-applicability of the said Notification.

The High Court, therefore, observed -

"7…, this Court is surprised and is pained by the manner in which the authority has passed the impugned reassessment order in the second round of assessement for the period 01.04.2011 to March 2012 just ignoring the applicable Notification and throwing it to winds. The said order is therefore nothing less than suffering from malice-in-facts as well as malice-in-law. Therefore, the said responsible officer deserves to pay the exemplary costs for passing such whimsical order and the writ petition deserves to be allowed."

The Writ Petition was allowed by quashing and setting aside the impugned order.

The assessing authority (by name) was directed to deposit the costs quantified at Rs.50,000/- from her personal resources with the Registrar General within one month (failing which, the same was to be deducted from her salary by the Commissioner, Commercial Tax Department) and which amount, upon deposit, is to be remitted to the 'Prime Minister's Relief Fund', Delhi, for meeting the costs of relief to sufferers of natural disasters.

(See 2018-TIOL-2037-HC-KAR-CT)