1995 (2) TMI 373 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of section 8(2-A) of the Central Sales Tax Act, 1956.
2. Whether footwear costing less than Rs. 30 per pair is generally exempt from sales tax under the Karnataka Sales Tax Act, 1957.
3. Validity and impact of clarifications issued by the Commissioner of Commercial Taxes.
4. Application of the principle of promissory or equitable estoppel.

Issue-wise Detailed Analysis:

1. Interpretation of section 8(2-A) of the Central Sales Tax Act, 1956:
The core issue revolves around the interpretation of section 8(2-A) of the Central Sales Tax Act, 1956, which states that no tax shall be payable on the turnover relating to the sale of any goods exempt from tax generally under the sales tax law of the appropriate State. The Explanation to section 8(2-A) clarifies that a sale or purchase of goods is not deemed to be exempt from tax generally if the exemption is conditional or applicable only under specified circumstances. The court emphasized that for an exemption to be considered general, it must be unconditional. Conditional exemptions do not qualify for the benefits under section 8(2-A) of the Central Sales Tax Act.

2. Whether footwear costing less than Rs. 30 per pair is generally exempt from sales tax under the Karnataka Sales Tax Act, 1957:
The petitioners argued that footwear costing less than Rs. 30 per pair, exempt under entry 46 of the Fifth Schedule to the Karnataka Sales Tax Act, should also be exempt from Central sales tax. The court, however, concluded that the exemption was conditional, as it was subject to the footwear costing less than Rs. 30 per pair. This condition made the exemption specific rather than general. The court referred to previous judgments, including Indian Aluminium Cables Ltd. v. State of Haryana and Pine Chemicals Ltd. v. Assessing Authority, to support the view that exemptions conditional upon specified circumstances or conditions do not qualify as general exemptions under section 8(2-A).

3. Validity and impact of clarifications issued by the Commissioner of Commercial Taxes:
The petitioners relied on a previous clarification issued by the Commissioner of Commercial Taxes in 1987, which stated that footwear costing less than Rs. 30 was exempt from both Karnataka Sales Tax and Central Sales Tax. The court, however, held that such clarifications do not override statutory provisions. It cited the Supreme Court's judgment in Bengal Iron Corporation v. Commercial Tax Officer, which stated that clarifications represent the understanding of the statutory provisions by the authorities and are not binding on the courts. The court also referred to the Division Bench judgment in Lipton India Limited v. State of Karnataka, reinforcing that clarifications are not binding on quasi-judicial authorities.

4. Application of the principle of promissory or equitable estoppel:
The petitioners argued that they had acted upon the 1987 clarification and changed their position to their detriment, invoking the principle of promissory estoppel. The court rejected this argument, stating that the petitioners had not laid the factual foundation necessary to claim estoppel. They failed to demonstrate that they had acted upon the clarification and changed their position to their detriment. The court concluded that without clear evidence of reliance and detriment, the principle of promissory estoppel could not be invoked.

Conclusion:
The court dismissed the writ petitions, holding that the exemption for footwear costing less than Rs. 30 per pair under the Karnataka Sales Tax Act was conditional and did not qualify as a general exemption under section 8(2-A) of the Central Sales Tax Act. The clarifications issued by the Commissioner of Commercial Taxes were not binding on the courts or the authorities, and the principle of promissory estoppel was not applicable due to the lack of evidence of reliance and detriment by the petitioners. The interim orders of stay were extended for six weeks to allow the petitioners to appeal the decision.