2001 (8) TMI 1335 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether iron ore lumps are liable to purchase tax under entry 1 of the Third Schedule to the Act.
2. Whether section 5-A of the Karnataka Sales Tax Act permits the purchase of industrial inputs at a concessional rate irrespective of tax liability at purchase or sale point.

Issue 1: The respondent challenged assessment orders under the Karnataka and Central Sales Tax Acts, arguing that iron ore lumps are not liable to purchase tax under entry 1 of the Third Schedule. The contention was that lumps do not fall under the category of ore before the relevant amendment. The assessing authority held that lumps are iron ore and thus taxable under section 5(3)(b). The Court noted that the distinction between lumps and ore need not be decided as per the single Judge's finding. The Commissioner's clarification allowed the purchase of lumps against form 37 for manufacturing other goods, which was considered binding on the assessing authority.

Issue 2: The controversy also involved whether section 5-A permits the purchase of industrial inputs like iron ore lumps at a concessional rate, regardless of tax liability. The assessing authority disputed the applicability of section 5-A and penalized the misuse of form 37. The Commissioner's clarification supported the purchase of lumps as raw materials for manufacturing other goods against form 37. The Court emphasized that the Commissioner's clarification was binding on the assessing authority, citing Supreme Court precedents that tax authorities cannot take a stand contrary to such instructions. The Court upheld the single Judge's decision to modify the assessment based on the Commissioner's clarification.

In conclusion, the High Court dismissed the writ appeals, affirming the single Judge's decision in favor of the respondent regarding the liability of iron ore lumps to purchase tax and the applicability of section 5-A for purchasing industrial inputs at a concessional rate. The judgment highlighted the binding nature of the Commissioner's clarification on the assessing authority, in line with established legal principles and Supreme Court rulings.