1997 (6) TMI 352 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of the assessing authority.
2. Validity of the exemption certificate.
3. Eligibility for sales tax exemption.
4. Availability of alternative remedies.

Detailed Analysis:

1. Jurisdiction of the Assessing Authority:

The court emphasized that "every error of law" does not affect the jurisdiction of a statutory authority to pass an order. An error would only be jurisdictional if the authority assumes competence by an erroneous application of a principle of law or an erroneous assumption of essential jurisdictional facts. The distinction between lack of jurisdiction and an erroneous order is crucial. While lack of jurisdiction can be challenged in writ proceedings, an erroneous order must be questioned through the statutory machinery provided.

2. Validity of the Exemption Certificate:

The petitioner-company claimed sales tax exemption based on investments in fixed assets, as per a notification under section 8-A of the Karnataka Sales Tax Act, 1957. The assessing authority partially rejected this claim, questioning the validity of the exemption certificate. The petitioner argued that the exemption certificate, once granted, could not be questioned by the assessing authority. However, the court noted that the notification did not specifically make such certificates binding on the assessing authority. The court referenced a similar case where the certificate was found non-compliant with the exemption notification requirements and was rightly rejected by the assessing authority.

3. Eligibility for Sales Tax Exemption:

The assessing authority found that certain investments claimed by the petitioner did not qualify as "fixed assets" eligible for exemption. These included:
- Dies and patterns not installed in the petitioner's manufacturing unit.
- Computers taken on lease.
- Internally capitalized computers.

The court noted that the assessing authority did not dispute the investments but concluded that they did not amount to investments in fixed assets. The petitioner contended that this conclusion was a jurisdictional error. However, the court held that the authority's jurisdiction to pass an order remains intact even if the order contains errors. The authority's power to assess and determine tax liability under the statute was not in question.

4. Availability of Alternative Remedies:

The court reiterated that statutory remedies must be exhausted before resorting to writ jurisdiction, except in exceptional situations such as violations of natural justice or challenges to the constitutionality of the statute. The petitioner did not challenge the vires of the statute or claim a violation of natural justice. The court cited precedents emphasizing the need to follow the statutory appellate process for redressal of grievances related to assessment orders. The court concluded that the petitioner should have pursued the statutory appeals process to challenge the assessment order on its merits.

Conclusion:

The court dismissed the petition, holding that the assessing authority's order denying the exemption did not render it without jurisdiction. The petitioner was advised to challenge the order through the appropriate statutory appeals process. The petition was dismissed in limine.