Full Judgment Text
1
IN THE HIGH COURT OF KARNATAKA, BENGALURU
TH
DATED THIS THE 4 DAY OF FEBRUARY, 2020
BEFORE
THE HON'BLE MR. JUSTICE KRISHNA S.DIXIT
W.P. NOS. 52272/2016 & 58523-58533/2016
C/W
W. P. NOS. 25450/2016 & 26503-26513/2016,
38863/2016 & 48608-48618/2016,
51482-51483/2016 & 51543-51552/2016,
16458/2017 (T-RES)
IN W.P. NOS. 52272/2016
& 58523-58533/2016:
BETWEEN:
M/S. WIPRO ENTERPRISES (P) LTD
(FORMERLY PART OF M/S WIPRO LTD.,
CONSUMER CARE AND LIGHTING DIVISION),
NO.105, HOOTAGALLI INDUSTRIAL AREA,
MYSORE-570018.
REPRESENTED BY
(VISHAL MITTAL. GROUP MANAGER LEGAL
AND INDIRECT TAXES
… PETITIONER
(BY SRI. G SHIVADASS, SENIOR COUNSEL A/W
MS. SONAL SINGH &
SRI. RAVI RAGHAVAN, ADVOCATES)
AND:
1. STATE OF KARNATAKA
THROUGH ITS PRINCIPAL SECRETARY,
FINANCE DEPARTMENT,
VIDHANA SOUDHA,
BANGALORE-560 001.
2. THE COMMISSIONER OF COMMERCIAL
TAXES IN KARNATAKA
VANIJYA THERIGE KARYALAYA,
GANDHINAGAR,
BANGALORE-560 009.
R
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3. THE DEPUTY COMMISSIONER OF
COMMERCIAL TAXES
(AUDIT)-1, SESHADRI BHAVAN,
DEWANS ROAD, MYSORE – 570 018.
… RESPONDENTS
(BY SRI. T K VEDAMURTHY, AGA)
THESE WRIT PETITIONS ARE FILED UNDER ARTICLE
226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH
THE RE-ASSESSMENT ORDER DATED 18.08.2016 R/W
DEMAND NOTICE DATED 25.08.2016 PASSED UNDER
SEC.39(1) OF KVAT ACT BY R-3 VIDE ANNEX-A TO W.P. FOR
ASSESSMENT YEAR 2012-13 AND ETC.,
IN W.P. NOS. 25450/2016
& 26503-26513/2016:
BETWEEN:
M/S WIPRO ENTERPRISES (P) LTD
(FORMERLY PART OF M/S WIPRO LTD)
CONSUMER CARE AND LIGHTING DIVISION,
NO 105, HOOTAGALLI INDUSTRIAL AREA,
MYSORE - 570018
REPRESENTED BY ITS GPA HOLDER
(ALWYN PEREIRA SR EXEC ACCOUNTS)
...PETITIONER
(BY SRI. SHIVADASS G, SENIOR COUNSEL A/W
MISS. SONAL SINGH AND
SRI. RAVI RAGHAVAN,ADVOCATE)
AND:
1. STATE OF KARNATAKA
THROUGH ITS PRINCIPAL SECRETARY,
FINANCE DEPARTMENT,
VIDHANA SOUDHA,
BANGALORE-560 001.
2. THE COMMISSIONER OF COMMERCIAL
TAXES IN KARNATAKA
VANIJYA THERIGE KARYALAYA,
GANDHINAGAR,
BANGALORE-560 009.
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3. THE DEPUTY COMMISSIONER OF
COMMERCIAL TAXES
(AUDIT)-1, SESHADRI BHAVAN,
DEWANS ROAD,
MYSORE – 570 018.
… RESPONDENTS
(BY SRI. T K VEDAMURTHY, AGA)
THESE WRIT PETITIONS ARE FILED UNDER ARTICLE
226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH
THE RE-ASSESSMENT ORDER DATED 28.03.2016 R/W
DEMAND NOTICE DATED 29.03.2016 PASSED UNDER
SECTION 39(1) OF KVAT ACT BY R-3 VIDE ANNEX-A TO THE
W.P. FOR ASSESSMENT YEAR 2009-10 AND ETC.,
IN W.P. NOS. 38863/2016
& 48608-48618/2016:
BETWEEN:
M/S WIPRO ENTERPRISES (P) LTD
(FORMERLY PART OF M/S WIPRO LTD)
CONSUMER CARE AND LIGHTING DIVISION,
NO 105, HOOTAGALLI INDUSTRIAL AREA,
MYSORE - 570018
REPRESENTED BY ITS (GROUP MANAGER-
LEGAL & INDIRECT TAXES)
...PETITIONER
(BY SRI. SHIVADASS G, SENIOR COUNSEL A/W
MISS. SONAL SINGH AND
SRI. RAVI RAGHAVAN,ADVOCATE)
AND:
1. STATE OF KARNATAKA
THROUGH ITS PRINCIPAL SECRETARY,
FINANCE DEPARTMENT,
VIDHANA SOUDHA,
BANGALORE-560 001.
2. THE COMMISSIONER OF COMMERCIAL
TAXES IN KARNATAKA
VANIJYA THERIGE KARYALAYA,
GANDHINAGAR,
BANGALORE-560 009.
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3. THE DEPUTY COMMISSIONER OF
COMMERCIAL TAXES
(AUDIT)-1, SESHADRI BHAVAN,
DEWANS ROAD,
MYSORE – 570 018.
… RESPONDENTS
(BY SRI. T K VEDAMURTHY, AGA)
THESE WRIT PETITIONS ARE FILED UNDER ARTICLE
226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH
THE RE-ASSESSMENT ORDER DATED 07.06.2016 READ
WITH DEMAND NOTICE DATED 07.06.2016 PASSED UNDER
SECTION 39(1) OF KVAT ACT BY R-3 VIDE ANNEX-A TO THE
W.P. FOR ASSESSMENT YEAR 2011-12 AND ETC.,
IN W.P. NOS. 51482-51483/2016
& 51543-51552/2016:
BETWEEN:
CHAMUNDESHWARI BUILD TECH PVT. LTD.,
TH
30 KM, BANGALORE –MYSORE HIGHWAY,
BIDADI INDUSTRIAL AREA,
RAMNAGARAM TALUK – 562 109.
REPRESENTED HEREIN BY ITS
MANAGING DIRECTOR
MR. KIRAN KUMAR MEDA,
AGED ABOUT 42 YEARS.
...PETITIONER
(BY SRI. K P KUMAR, SENIOR COUNSEL A/W
SRI. VISHWASAI RAJENDRA, ADVOCATE)
AND:
THE ASSISTANT COMMISSIONER OF
COMMERCIAL TAXES,
(AUDIT – 21), DVO-2,
TH
‘A’ B;LOCK, 5 FLOOR,
VTK-2, KORMANGALA,
BENGALURU – 47.
… RESPONDENT
(BY SRI. T K VEDAMURTHY, AGA)
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THESE WRIT PETITIONS ARE FILED UNDER ARTICLE
226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH
THE IMPUGNED REASSESSMENT ORDER DATED 27.08.2016
(ANNEXURE-Q) PASSED BY THE RESPONDENT AS RECTIFIED
VIDE THE ORDER 29.08.2016 (ANNEXURE-R) UNDER THE
PROVISIONS OF THE KARNATAKA VALUE ADDED TAX ACT,
2003 FOR THE TAX PERIODS APRIL 2012 TO MARCH 2013
AND ETC.,
IN W.P. NO. 16458/2017:
BETWEEN:
M/S WIPRO ENTERPRISES (P) LTD
(FORMERLY PART OF M/S WIPRO LTD)
CONSUMER CARE AND LIGHTING DIVISION,
NO 105, HOOTAGALLI INDUSTRIAL AREA,
MYSORE – 570018. REPRESENTED BY
(NIKHIL CHANDRA GUPTA)
MANAGER INDIRECT-TAXATION.
...PETITIONER
(BY SRI. SHIVADASS G, SENIOR COUNSEL A/W
MISS. SONAL SINGH AND
SRI. RAVI RAGHAVAN,ADVOCATE)
AND:
1. STATE OF KARNATAKA
THROUGH ITS PRINCIPAL SECRETARY,
FINANCE DEPARTMENT,
VIDHANA SOUDHA,
BANGALORE-560 001.
2. THE COMMISSIONER OF COMMERCIAL
TAXES IN KARNATAKA
VANIJYA THERIGE KARYALAYA,
GANDHINAGAR,
BANGALORE-560 009.
3. THE DEPUTY COMMISSIONER OF
COMMERCIAL TAXES
(AUDIT)-1, SESHADRI BHAVAN,
DEWANS ROAD, MYSORE – 570 018.
… RESPONDENTS
(BY SRI. T K VEDAMURTHY, AGA)
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF
THE CONSTITUTION OF INDIA PRAYING TO QUASH THE RE-
ASSESSMENT ORDER DATED 14.03.2017 READ WITH
DEMAND NOTICE DATED 16.03.2017 PASSED UNDER
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SECTION 39(1) OF KVAT ACT BY R-3 VIDE ANNEX-A TO THE
W.P. FOR ASSESSMENT YEAR 2010-11 AND ETC.,
THESE PETITIONS COMING ON FOR FINAL HEARING
THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER
All these petitioners being the companies
incorporated under the provisions of erstwhile Companies
Act, 1956 are knocking at the doors of Writ Court for
laying a challenge to the Orders of Assessment/Re-
assessment made or sought to be made under the
provisions of Sec.39 of the Karnataka Value Added Tax
Act, 2003 (hereafter “2003 Act”) mainly on the ground that
their branches or units cannot be treated as separate
“legal persons” and therefore supply of goods from one
branch to another in the State does not amount to “sale”
so as to attract the statutory levy.
2. After service of notice, the respondents having
entered appearance through the learned Addl. Govt.
Advocate resist the writ petitions contending that the
branches/units of each of the petitioner-corporate bodies
on being registered as separate dealers become legal
entities independent of their parental corporate body and
therefore the supply of goods from one unit to another
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amounts to “sale” as extensively defined in the Act,
attracting the levy; it is also contended that the writ
petitions are misconceived when there is the statutory
remedy of appeal availing to the petitioners.
3. Since substantially similar questions of law &
facts arise from these cases, all they are taken up for final
hearing together so that the same are disposed off by this
common judgment, as suggested at the Bar. Having heard
the learned counsel for the parties and having perused the
petition papers, this Court frames the following questions
of law for consideration:
“(i) whether the branches of same corporate
body acquire independent “legal personality” on
being separately registered as dealers for the
purpose of the Act?
(ii) whether supply of goods from one
unit/branch to another of the very same company
amounts to sale for the purpose of levy of tax
under the Act?”
4. Both the above questions need to be answered in
the negative for the following reasons:
(a) Sec.3 of the Act provides for levy of VAT on the
‘sale’ by a ‘dealer’ registered or liable to be registered under
the Act; the word ‘dealer’ is defined in Sec.2(12) of the
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dictionary clause of the Act; it is a “means and includes”
definition, is true by virtue its expansive text; the principal
part of the definition reads:
“ ‘Dealer’ means any person who carries
on the business of buying, selling, supplying or
distributing goods, directly or otherwise,
whether for cash or for deferred payment, or
for commission, remuneration or other valuable
consideration and includes …”;
nine categories of dealers that are enumerated in the
inclusive part of the definition coupled with four
Explanations do not even remotely suggest that the units
or branches of a corporate body or of an unincorporated
association would acquire legal personality, merely
because they re permitted to file tax returns on the
application of the management, as rightly contended by
the learned Senior Advocates for the petitioners;
(b) in ‘Salmond on Jurisprudence’ Twelfth
Edition, SWEET & MAXWELL 1966, at page 298 it is
stated:
“… the prime case of a person is a human
being, and personality would seem to entail the
position of those characteristics belonging to
particularly to mankind, i.e., the power of
thought, speech and choice. To personify an
object is to imagine it as endowed with such
attributes; and it is on account of the
possession of such qualities that we ascribe
personality to such non-human beings as Gods,
angels, devils and so forth… Since rights and
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duties involve choice, therefore, they will
naturally under any system of law be held to
inhere primarily in those beings which enjoy
the ability to choose, viz., human beings… a
person is any being whom the law regards as
capable of rights or duties. Any being that is
so capable is a person, whether a human being
or not… Persons are the substances of which
rights and duties are the attributes. It is only
in this respect that persons possess juridical
significance…”
The Apex Court in the historic decision in Ayodhya
Case ie., M.SIDDIQ (D) THR LRs. –VS- MAHANT
SURESH DAS & ORS. 2020 (I) SCC page 1 - at paragraph
111 referring to Salmond observes as under:
“111. A legal person possesses a capability to
bear interests, rights and duties. Salmond makes
a crucial distinction between legal personality and
the physical corpus on which legal personality is
conferred. …
Legal persons, being the arbitrary creations of
the law, may be of as many kinds as the law
pleases. …
Legal personality is not human nature. Legal
personality constitutes recognition by the law of
an object or corpus as an embodiment of certain
rights and duties. Rights and duties which are
ordinarily conferred on natural persons are in
select situations, conferred on inanimate objects
or collectives, leading to the creation of an
artificial legal person. An artificial legal person is
a legal person to the extent the law recognizes the
rights and duties ascribed to them, whether by
statute or by judicial interpretation. Salmond
presciently notes that the rights and duties
conferred on artificial legal persons ultimately
represent the interests and benefits of natural
persons. ….”
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In the light of the above, it is bit difficult to accept the
contention of the Revenue that the branches/units of the
Corporate Dealer acquire juristic personality on merely
being separately registered as Dealers, the purpose of
such registration being confined to only the assessment;
this accords with what the Division Bench of the Bombay
High Court opined in COMMISSIONER OF SALES TAX –
vs- INDOKEM PVT. LTD., 1975 -35- STC 432 BOM , the
Court observed:
“ For obtaining his initial certificate of
registration a dealer has to show that the
combined turnover of his head office and its
branch or branches exceeds the specified limit.
Thereafter he has to make separate applications
for registration in respect of each branch officer
situate within the jurisdiction of different Sales
Tax Officers. The branch office would have a
registration certificate issued to it irrespective of
the fact whether the turnover of sale or
purchases effected by the branch office exceeds
the specified limit or not, for the certificate of
registration is issued to a branch office merely
on the strength of the fact that the dealer’s
combined turnover in respect of his head office
and its branch office has exceeded the specified
limit. A branch office, therefore, is not a
registered dealer. In such cases what merely
happens is that a dealer is issued several
registration certificates in respect of his places of
business. This does not bring into being as
many dealers as there are registration
certificates. The registered dealer remains only
one. The other provisions are merely for
administrative convenience…”
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(c) the contention of the Revenue that once the
units/branches of a corporate body on being registered as
dealers would become juristic persons, cannot be
sustained without straining the language of Sec.2(12)
which defines the term ‘Dealer’; sub-sec (6) of Sec.38
provides for registration of separate units of a dealer who
happens to be a body corporate, having plural
branches/units of business; the same reads as under:
“(6) Notwithstanding anything contained in
this Act, where a dealer is a body corporate and
has more than one place of business,
Commissioner may, subject to such conditions
as may be prescribed and with the consent of
the dealer, treat each of such places of business
as a separate unit for the purposes of levy,
assessment and collection of tax and thereupon
all the provisions of this Act regarding
registration, filing of returns, assessment and
collection of tax, shall apply as if each of such
places of business is a separate unit ”.
The contention of the learned counsel for the Revenue that
the expression “separate unit” makes such units “separate
dealers” for the purpose of levy of tax, is not supported by
the above text of legal provision; if the Legislature intended
that these separate units on being so registered shall
become independent dealers, it would have employed the
expression ‘separate dealers’ instead of ‘separate units’ in
the sale provision;
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(d) Rule 47 of Karnataka Value Added Tax Rules,
2005 which is promulgated to give effect to sub-section (6)
of Sec.38 of the Act enables the officer authorised by the
Commissioner to permit each of the business branches of a
corporate dealer to file a separate return, is true; that
enablement per se does not make such branches separate
juristic persons; Mr.Shivadass, learned Sr. Advocate
appearing for the dealer is justified in pointing out
condition (i) prescribed in Rule 47 to the effect that
treating of the branches of the business of a corporate
dealer as separate units shall not reduce the tax liability
in any way; Sec.38 (6) of the Act and Rule 47 are only
intended to facilitate ease of business of the branches
which the corporate dealer has in the same State; their
text and context do not support the contention that they
are intended to confer legal personality on such branches,
on their registration; the State has such legislative power
to attribute legal personality to an entity, under Part-XI of
the Constitution of India, is beside the point as long as in
exercise of such power, no provision is enacted to that
effect in the Statute Book;
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(e) the next contention of the Revenue that the
supply of goods from one branch to another of the same
corporate dealer amounts to sale and therefore the tax is
leviable, does not have any legal substance; the term ‘sale’
is defined again in the dictionary clause of the Act;
sec.2(29) employs a ‘means & inclusive’ definition, is true;
the sale is expressed as a transaction with all its
grammatical variation and cognate expressions wherein
the transfer of the property in goods ‘ by one person to
another’ takes place; even the inclusive part of the
definition or the Explanation does not suggest that there
can be a sale transaction between “one and oneself”; in
other words, sale of goods being an accomplished contract
necessarily involves minimum two persons inasmuch as
one cannot contract with oneself; even the deeming
provision in sub-section (3) of sec.2(29) does not militate
against this view; similarly, the inclusive definition of
‘person’ given in the dictionary clause of the Karnataka
General Clauses Act, 1899 does not support the contra
contention of the Revenue;
(f) similar questions arising under the Tamil Nadu
Value Added Tax Act, 2006 had fallen for the consideration
of the Hon’ble Madras High Court in the case of
14
NATIONAL TEXTILE CORPORATION LTD., -vs-
ASSISTANT COMMISSIONER, COIMBATORE, 2016- VIL
-637-MAD ; the decision therein supports the view taken by
this Court; since the provisions of the Karnataka Act and
the Tamil Nadu Act are in pari materia with each other,
there is no reason or rhyme for this Court to tread a
different path; paragraphs 2, 15 & 16 of the Madras
decision are reproduced below:
“2. The short issue, which falls for
consideration is, whether the petitioners herein,
which are two units of National Textile
Corporation Ltd., could be treated as two
different entities and the transfer of yarn from
one of the entity to the other, for the purpose of
manufacture of cloth, which is an exempted
commodity, would amount to sale.
15. In a revision petition filed by the
petitioner therein, it was contended that transfer
of furniture to the other units of SIDECO would
not come under the definition of sale. While
considering the said issue, the Division Bench
referred to the decision of the Allahabad High
Court in U.P. STATE CEMENT CORPORATION
LTD., vs. COMMISSIONER OF SALES TAX,
(1979) 43 STC 476 (Allahabad), which was
also taken note of in K.C.P.Limited and held that,
the existence of two entities, different from each
other, capable of transferring property in goods
from one to the other was the desideratum of a
transaction of sale. The SIDECO, a corporate
entity, wholly owned by the State of Kerala had
different units carrying on activities in different
parts of the State, but they were parts of the
same legal entity. When goods were transferred
from one unit to another, there was no sale of
goods at all.
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16. The above referred judgments would
squarely apply to the facts and circumstances of
this case. As pointed out earlier, the registration
certificates of both the units state that they are
units of National Textile Corporation Ltd., Thus,
for all the above reasons, this Court has no
hesitation to hold that the impugned proceedings,
insofar as treating both the petitioners as distinct
legal entities and treating the inter units transfer
of cotton and cotton yarn to the transferee,
namely, the petitioner in W.P.No.12211 of 2014
cannot be treated as sale transaction and the
finding that merely, because there are two TIN
numbers to treat both the units as separate units
and the finding rendered by the respondent in
this regard is wholly untenable.”
In the above circumstances, these writ petitions
succeed; a Writ of Certiorari issues quashing the impugned
orders; all the monies deposited by the petitioners
pursuant to interim orders shall be immediately refunded
to them; the securities/bank guarantees furnished by the
petitioners pursuant to interim orders shall stand
rescinded/dissolved.
The jurisdictional respondents shall issue
orders/clarifications as are required for giving effect to this
judgment.
Costs made easy.
Sd/-
JUDGE
Snb/