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2020 Supreme(Kar) 169
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
KRISHNA S.DIXIT, J.
M/s. Wipro Enterprises (P) Ltd Represented By (Vishal Mittal. Group Manager Legal And Indirect Taxes – Appellant
Versus
State Of Karnataka – Respondent
W.P. Nos. 52272, 58523-58533 of 2016 C/W W.P. Nos. 25450 of 2016 & 26503-26513, 38863, 48608-48618, 51482-51483, 51543-51552 of 2016, 16458 of 2017 (TRES)
Decided on : 04-02-2020
For the Appellant :SRI. G. SHIVADASS, A/W MS. SONAL SINGH & SRI. RAVI RAGHAVAN, ADVOCATES
For the Respondent: SRI. T K VEDAMURTHY, AGA
The main legal point established in the judgment is that the branches of the same corporate body do not acquire independent 'legal personality' on being separately registered as dealers and supply of goods from one unit/branch to another of the same company does not amount to sale for the purpose of levy of tax under the Act.
Headnote:
Companies Act - Challenge to Orders of Assessment/Reassessment under Karnataka Value Added Tax Act, 2003 - Sec.39 - Sec.3, Sec.2(12), Sec.2(29), Sec.38(6) of the Act - The court held that branches of the same corporate body do not acquire independent 'legal personality' on being separately registered as dealers and supply of goods from one unit/branch to another of the same company does not amount to sale for the purpose of levy of tax under the Act.
Fact of the Case:
Petitioners, companies incorporated under the provisions of erstwhile Companies Act, 1956, challenged the Orders of Assessment/Reassessment made or sought to be made under the provisions of Sec.39 of the Karnataka Value Added Tax Act, 2003, contending 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.
Finding of the Court:
The court found that the branches of the same corporate body do not acquire independent 'legal personality' on being separately registered as dealers and supply of goods from one unit/branch to another of the same company does not amount to sale for the purpose of levy of tax under the Act.
Issues: The court framed the following questions of law for consideration: (i) whether the branches of the 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?
Ratio Decidendi: The court relied on the definitions and provisions of Sec.3, Sec.2(12), Sec.2(29), and Sec.38(6) of the Act to conclude that the branches of the same corporate body do not acquire independent 'legal personality' on being separately registered as dealers and supply of goods from one unit/branch to another of the same company does not amount to sale for the purpose of levy of tax under the Act.
Final Decision: The writ petitions succeeded, and a Writ of Certiorari was issued quashing the impugned orders. All the monies deposited by the petitioners pursuant to interim orders were to be immediately refunded to them, and the securities/bank guarantees furnished by the petitioners pursuant to interim orders were to stand rescinded/dissolved. The jurisdictional respondents were directed to issue orders/clarifications as required for giving effect to the judgment.
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/Reassessment 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 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 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 nonhuman beings as Gods, angels, devils and so forth… Since rights and 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 C
