1989 (3) TMI 362 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the assessing authority has the power to make a reassessment under section 12A of the Karnataka Sales Tax Act, 1957, if it finds that the assessment of tax on the turnover of any item of goods had been made at a rate lower than the rate at which it is assessable to tax under the Act.

Detailed Analysis:

1. Power of Reassessment under Section 12A:
The primary issue was whether the assessing authority could reassess a turnover if it was initially taxed at a lower rate than prescribed. The court analyzed section 12A of the Karnataka Sales Tax Act, 1957, which allows reassessment under four circumstances:
- Escaped assessment of turnover.
- Under-assessed turnover.
- Assessment at a lower rate than prescribed.
- Wrongly allowed deductions or exemptions.

The court emphasized that the language of section 12A is clear and unambiguous, conferring power to reassess even when the entire turnover was before the assessing authority but taxed at a lower rate. The court concluded that the question must be answered in the affirmative, granting the assessing authority the power to reassess under these conditions.

2. Jurisdiction and Validity of Reassessment Notices:
The petitioners challenged the jurisdiction of the assessing authority to issue reassessment notices. They argued that section 12A only applied to escaped turnover, not to cases where the turnover was already assessed but at a lower rate. The court, however, clarified that section 12A explicitly covers scenarios where turnover is assessed at a lower rate, thus validating the reassessment notices.

3. Analysis of Precedents:
The petitioners relied on several precedents to support their contention:
- Chikanarasimhiah v. Assistant Commissioner of Commercial Taxes [1971] 28 STC 98 (Mys): The court had ruled that section 12A could not be invoked for turnover already before the assessing authority.
- Karnataka Trading Co. v. Commercial Tax Officer [1971] 28 STC 144 (Mys): Similar ruling as above.
- Balaji Trading Company v. State of Mysore [1971] 28 STC 147 (Mys): Followed the Chikanarasimhiah decision.
- Bidar Sahakar Sakkare Karkhane Ltd. v. State of Karnataka [1985] 58 STC 65 (Kar): Discussed reassessment under section 12A versus revisional power under section 21.
- Deputy Commissioner of Agricultural Income-tax and Sales Tax, Quilon v. Dhanalakshmi Vilas Cashew Co. [1969] 24 STC 491 (SC): Interpreted similar provisions under the Kerala General Sales Tax Act.

The court distinguished these cases, noting that they did not consider the specific provision in section 12A allowing reassessment for lower rate assessments. The court also cited the Andhra Pradesh High Court decision in State of Andhra Pradesh v. Polireddi Satyanarayana [1972] 29 STC 512, which supported the power of reassessment for lower rate assessments.

4. Classification of Rayon Yarn:
The petitioners argued that the reassessment involved changing the classification of rayon yarn from entry 24 to entry 147 of the Second Schedule. The court found this contention untenable, stating that the reassessment was based on the correct classification of rayon as synthetic fibre under entry 147, which was undisputedly subject to a higher tax rate.

Conclusion:
The court concluded that section 12A of the Karnataka Sales Tax Act, 1957, indeed empowers the assessing authority to reassess turnover if it finds that the tax was initially assessed at a lower rate than prescribed. The petitions were dismissed with costs, affirming the validity of the reassessment notices and orders.