STATE OF KARNATAKA Vs. TOSHIBA EMBEDDED SOFTWARE (INDIA) PVT. LTD.

JUDGEMENT

(1.) The Revenue has preferred this revision petition challenging the order dated 05-11-2012 passed by the Karnataka Appellate Tribunal, Bangalore (hereinafter referred to as 'the Tribunal' for short) made in STA No. 2590/2010, whereby the Tribunal held the liability of tax for contravention or non-observance or non-compliance to the notifications on the appellant does not arise and accordingly granted relief to the assessee by setting aside the impugned orders.

(2.) The assessee is in the business of programming and development of software. The assessee had issued a Certificate on 30-09-2003 for Rs. 94,82,190/- towards purchases of various kinds of the furniture for use to M/s. Open Plan Office Systems, Lingarajpuram, Bangalore (hereinafter referred to as "the seller" for short). This seller of furniture produced the said certificate and obtained tax exemption. It was noticed by the Joint Commissioner of Commercial Taxes (Appeals) DVO, Bangalore (hereinafter referred to as 'First Appellate Authority' for short) that exemption is admissible as per Notification is in respect of sales of raw materials, component parts and packing materials by registered dealer to 100% export oriented units located in our State subject to certain conditions, restrictions and procedure prescribed therein. The goods purchased were various kinds of furniture for use in the business premises of the assessee. They do not fall under the above classifications and the notifications entitling the assessee for tax exemption. Therefore, the assessing authority held that there was contravention of notifications by which, as per Condition No. V of the notification dated 14-09-2001 and therefore tax was levied on the assessee and penalty was also imposed. The said order was challenged before the First Appellate Authority who affirmed the said order but deleted imposition of penalty on the ground that there was no malafide intention in issuing the Certificate. Aggrieved by the said order, the assessee preferred an appeal before the Tribunal, wherein the Tribunal held that the Certificate was not issued to the Seller in terms of notification intending for availing tax exemption in assessment in favour of the seller. The certificate was produced for reduction in rate of tax to 4% in case of sale of uninterrupted power supply system to information technology units. It does not also provide for issuance of a declaration or a certificate to the seller. Still, certificate was issued which was misused by the seller to avail tax exemption. The certificate was issued for the purpose of availing tax exemption by the Seller. Therefore, it was held that the liability of tax for contravention or non-observance or non-compliance to the notifications on the assessee does not arise. In fact, the liability of tax arises on the seller according to law due to taxable sales of furniture to the assessee out of gross sales effected at Rs. 1,08,46,785/-. Therefore the orders passed by the lower authorities were set aside and certain directions were issued to the lower authorities to take action even against the assessee for such misrepresentation. Aggrieved by the said order, the present revision petition is filed.

(3.) Learned Government Pleader appearing for the Revenue assailing the impugned order contends that the assessee though was not entitled to the benefit of any exemption produced the certificate and made the seller to believe that he is entitled to exemption and accordingly prevented the seller from collecting tax from him. It is a clear case of misrepresentation, misuse of exemption notification and therefore, under Section 8A(5)(a) of the Karnataka Sales Tax Act, 1957 (hereinafter referred to as 'the Act' for short) and hence the assessee is liable to pay tax.