1933 (4) TMI 13 - HC - VAT and Sales Tax

Summary

Issues:
1. Justification of invoking jurisdiction under section 25-A of the Act by the assessing authority.
2. Validity of circular instructions exempting turnover in goods manufactured from tax-paid iron scrap in light of the introduction of explanation II to the Fourth Schedule under Act 13 of 1982.

Analysis:

Issue 1:
The petitioner, a registered dealer under the Karnataka Sales Tax Act, purchased iron scrap for manufacturing iron and steel castings exempted by the Assistant Commissioner previously. However, the assessing authority issued a notice under section 25-A proposing rectification, which the petitioner challenged. The petitioner argued that the exemption was valid at the time of assessment and no error was apparent. The State contended that the circular exemptions lost efficacy due to the incorporation of explanation II to the Fourth Schedule by Act 13 of 1982. The Court examined the legal position and held that the assessing authority was not justified in invoking section 25-A as no error was apparent, and the circular exemptions were not null and void.

Issue 2:
The Court distinguished between the circular exemptions and the explanation II introduced in the Fourth Schedule under Act 13 of 1982. The circulars provided total exemption for goods under "iron and steel," while the explanation levied tax subject to reduction of tax on inputs. The Court emphasized that the circulars aimed to relieve manufacturers and dealers before the law declared by the Supreme Court. It concluded that the circular exemptions should be considered separately from the subsequent explanation. The Court ruled in favor of the petitioner, allowing the petitions and setting aside the rectification and appellate orders, restoring the original assessment orders.

In conclusion, the High Court of Karnataka held that the assessing authority was not justified in invoking jurisdiction under section 25-A and that the circular instructions exempting turnover in goods manufactured from tax-paid iron scrap were not rendered void by the introduction of explanation II to the Fourth Schedule under Act 13 of 1982. The Court allowed the petitions, setting aside the rectification and appellate orders, and restoring the original assessment orders.