1997 (11) TMI 493 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Liability for payment of turnover tax under Section 6-B of the Karnataka Sales Tax Act for the period from April 1, 1991 to August 27, 1991.
2. Validity of reassessment orders and proposition notices under Section 12-A of the Act.
3. Retrospective application of the exemption notification dated August 28, 1991.
4. Binding nature of the circular issued by the Commissioner under Section 3-A of the Act.

Issue-wise Detailed Analysis:

1. Liability for payment of turnover tax under Section 6-B of the Karnataka Sales Tax Act for the period from April 1, 1991 to August 27, 1991:

The petitioners, all dealers in raw silk and silk yarn, were initially exempted from turnover tax based on a circular dated October 1, 1991, issued by the Commissioner of Commercial Taxes. However, the assessing authorities later issued reassessment orders and proposition notices under Section 12-A of the Act, claiming that the tax liability for the period from April 1, 1991, to August 27, 1991, had been escaped. The petitioners challenged these reassessment orders and proposition notices.

2. Validity of reassessment orders and proposition notices under Section 12-A of the Act:

The reassessment orders and proposition notices were issued on the grounds that the petitioners' tax liability for the specified period had been escaped. The petitioners argued that the reassessments were not permissible as the original assessments were made in compliance with the Commissioner's circular, which was binding on the assessing authorities. The court agreed with the petitioners, stating that the reassessment orders and proposition notices were invalid as the original assessments were properly done following the circular instructions.

3. Retrospective application of the exemption notification dated August 28, 1991:

The petitioners contended that the exemption notification dated August 28, 1991, should be applied retrospectively from April 1, 1991, based on the background and circumstances, including the Chief Minister's budget speech and subsequent circulars by the Commissioner. The court, however, did not find it necessary to decide on the retrospective application of the notification, as it accepted the petitioners' second submission regarding the binding nature of the Commissioner's circular.

4. Binding nature of the circular issued by the Commissioner under Section 3-A of the Act:

The court emphasized that the circular issued by the Commissioner under Section 3-A of the Act was binding on all subordinate officers. The circular directed that turnover tax should not be collected from dealers in raw silk and silk yarn from April 1, 1991. The court held that the assessing authorities were bound by this circular and could not reopen the assessments under Section 12-A of the Act. The court cited several precedents, including decisions from the Supreme Court and other High Courts, to support the binding nature of such circulars.

Conclusion:

The court concluded that the reassessment orders and proposition notices issued under Section 12-A of the Act were invalid and quashed them. The original assessments made in compliance with the Commissioner's circular were upheld. The petitions were allowed, and the rule issued was made absolute, with no order as to costs.