IN THE HIGH COURT OF KARNATAKA AT BENGALURU R DATED THIS THE 16^TH DAY OF JANUARY, 2025 PRESENT THE HON'BLE MR JUSTICE KRISHNA S DIXIT AND THE HON'BLE MR JUSTICE G BASAVARAJA SALES TAX REVISION PETITION NO. 25 OF 2018 BETWEEN:

THE STATE OF KARNATAKA REPRESENTED BY THE SECRETARY FINANCE DEPARTMENT, VIDHANA SOUDHA, BENGALURU-560 001.

…PETITIONER (BY SRI. ADITYA VIKRAM BHAT.,AGA)

AND:

M/S DINESH ASSOCIATES, NO.663, MALLAPPA NEW MARKET, CHIKKAPETE, BANGALORE-560 053.

REPRESENTED BY K J KAMATH, ADVOCATES …RESPONDENT Digitally signed (V.C.O DATED 25/05/2024 by SHARADA VANI B NOTICE TO RESPONDENT IS HELD SUFFICIENT)

Location: HIGH THIS STRP FILED UNDER SEC.65(1) OF THE COURT OF KARNATAKA VALUE ADDED TAX ACT., 2003 AGAINST THE KARNATAKA JUDGMENT DATED 31.07.2017 PASSED IN STA.NO.542 TO 573/2010 ON THE FILE OF THE KARNATAKA APPELLATE TRIBUNAL AT BENGALURU, ALLOWING THE APPEALS AND SETTING ASIDE THE ORDER DATED 25.09.2009 PASSED BY JCCT APPEALS BENGALURU PASSED IN VAT.AP.NOS. 473 TO 505/2009-10 PARTLY ALLOWING THE APPEALS AND UPHOLDING THE RE-ASSESSMENT ORDER DATED 06.06.2009 PASSED UNDER SEC.39(1), PENALTY ORDER UNDER SEC. 72(2) AND DELETING THE PENALTY LEVEID UNDER SEC.70(2) OF THE KVAT ACT, 2003, PASSED BY THE DCCT (DEBT MANAGEMENT) DVO-I BENGALURU, RESPECTIVELY FOR THE TAX PERIODS OF MAY 2005 TO SEPTEMBER 2008 .

THIS STRP COMING ON FOR HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

CORAM: HON'BLE MR JUSTICE KRISHNA S DIXIT and HON'BLE MR JUSTICE G BASAVARAJA

ORAL ORDER

(PER: HON'BLE MR JUSTICE KRISHNA S DIXIT)

This Revision Petition by the Revenue filed u/s. 65 of the Karnataka Value Added Tax Act, 2003 calls in question the order dated 31.07.2017 whereby the Karnataka Appellate Tribunal having allowed Assessee’s STA Nos. 542 to 573 of 2010 and negatived Revenue’s STA Cross Appeal Nos. 845 to 876 of 2016. The net effect of this common order is that the Assessee is entitled to claim the benefit of input tax, the levy of penalty & interest having been upset.

2. The Petition was admitted by a Co-ordinate Bench of this Court vide order dated 28.05.2024 on the following questions of law:

“(1) Whether the Tribunal was right in allowing the Respondent's Appeal and setting aside the disallowance of input tax credit claimed by the Respondent on purchases effected from dealers who had failed to discharge their tax liability on such sales?

(2) Whether the Tribunal was right in allowing the Respondent's Appeal and setting aside the disallowance of input tax credit claimed by the Respondent, despite the fact that the Respondent had utterly failed to discharge his burden of proving the correctness and genuineness of such claim?

(3) Whether the Tribunal was right in rejecting the State's Cross Appeal and affirming the order of the first appellate authority in so far as it set aside the levy of penalty under Section 70(2)(a)

of the KVAT Act?”

3. The above questions arose in the following fact matrix of the case:

3.1 The Respondent-Assessee is a dealer registered under the provisions of the 2003 Act. He runs the business in computer consumables & electrical goods like copper/GI strips, sheets, patties, plates, wires etc. The respondent claims to have purchased goods from a number of local and interstate traders. The respondent has filed its returns in Form VAT 100. The relevant tax periods occur between May 2005 and September 2008. The genesis of the lis is in the Re-assessment Order dated 06.06.2009 made by the Deputy Commissioner of Commercial Taxes under Section 39 (1) of the KVAT Act.

This order inter alia, has the following specific findings:

a) that the purchases made by the respondent were based on oral purchase orders;

b) that a review of books of computerised accounts, bank statements & bills do not satisfy the Assessing Officer;

c) that the documents lack a proper description of goods such as weight, size, thickness and measurements that are usual; the transactions are without weight slips, freight vouchers/bills.

d) in many cases the records were without