The plaintiff must provide evidence of having paid the VAT amount to the Department when the defendant did not pay the tax in order to establish a cause of action for recovery.

JUDGMENT

H.P.Sandesh, J. - This appeal is filed challenging the judgment and decree of dismissal dated 10.08.2018 passed in O.S.No.992/2015 on the file of the Senior Civil Judge and J.M.F.C at Anekal which has been filed for recovery of Rs.10,12,696/- with interest at 18% per annum.

2. The parties are referred to as per their original rankings before the Trial Court to avoid confusion and for the convenience of the Court.

3. The factual matrix of the case is that the plaintiff is a private limited company incorporated under the Companies Act. The plaintiff is a manufacturer of Air Filters of different grades and supply the same all over India and outside India also. The plaintiff had purchased their input materials from the defendant from time to time and has paid the total consideration including the VAT. It is contended that on the strength of the payments, the plaintiff has taken credit of VAT in their books of accounts as per the VAT procedure and Act and have filed their returns with the Department of Commercial Taxes. On filing their returns quoting the purchase and tax having been paid with the defendant, the plaintiff was surprised to receive proposition notice under Section 39(1) of the Karnataka Value Added Tax Act, 2003 ('the Act' for short), wherein the department of Commercial Taxes have stated that the tax paid by the plaintiff and collected by the defendant has not been remitted to the Commercial Tax Department. Accordingly, the VAT Department have denied the credit of Rs.4,65,593/- for the period April, 2008 to March, 2009 and further a sum of Rs.5,42,103/- for the period April, 2009 to March, 2010 on the ground that the defendant has failed in paying the tax collected from the plaintiff and so also, the defendant has not filed VAT- 100 Returns.

4. The defendant having failed to fulfill the statutory obligations casted upon them as per the statutory provisions of Karnataka Sales Tax Act and VAT Rules in not depositing the money, whereby denying the credit of the said amount to the plaintiff amounts to fraud. In this regard, the plaintiff got issued the letter dated 25.12.2014 and also notice dated 11.03.2015 and demanded the defendant to make good the said amount. Inspite of the defendant having received the letter and notice, the defendant has failed to either provide the details of making good the amount to the Department nor they have paid the amount to the plaintiff. The defendant, in all is due to a sum of Rs.10,07,696/- and the Sales Tax Department has got every right to recover the same from the person i.e., the plaintiff, who have taken credit of the same. In view of the fact that the VAT credit having been denied and a proposition order having been passed, the plaintiff demanded the recovery of the aforesaid amount from the defendant. When the defendant failed to make good the loss caused to the plaintiff, without any other alternative has filed the suit for recovery of money. On filing the suit, the Trial Court was pleased to issue notice to the defendant and the defendant, after receipt of the suit summons did not choose to appear before the Court and was placed ex-parte.

5. The Trial Court has recorded the evidence of the Senior Executive Officer of the plaintiff as P.W.1 and got marked the documents Ex.P1 to P9.

6. The plaintiff contended that the Trial Court after considering the material available on record has committed an error in dismissing the suit on the ground that there is no cause of action for the plaintiff to file the suit.

7. It is further contended that the Trial Court has committed an error in not considering the pleadings and the evidence and failed to note that Exs.P1 and P3 are the final orders of assessment of the tax paid by the plaintiff to the VAT Department. The Trial Court has totally misconstrued the demand and has erroneously come to the conclusion that there is no cause of action for the suit. It is also contended that the trial Judge has failed to take note of the fact th