2003 (12) TMI 598 - HC - VAT and Sales Tax

Issues Involved:
1. Maintainability of the writ petition.
2. Challenge to clause (iii) of the second notification dated November 15, 1996.
3. Jurisdiction under section 28(6) of the Karnataka Sales Tax Act, 1957.
4. Relief sought by the petitioner.

Detailed Analysis:

Reg. Maintainability:

The petitioner challenged orders passed by the third respondent under section 28(6) for various years, subsequent to an inspection and seizure of documents. The court noted that these orders are appealable under the statute. However, it has been established in several cases that once the assessment year concludes, the proper course is to refer the proceedings to the regular assessing authority for further action under section 28(7) of the Act. Therefore, no appeal need be filed. Section 28 is a special provision concerning the powers to order production of books of account and powers of inspection and seizure. The court determined that it must examine whether the conditions for invoking section 28(6) were met and whether the petitioner's challenge to the conditions was valid. The court concluded that despite the State Government's opposition, the petition was maintainable.

Reg. Challenge to Clause (iii) of the Second Notification:

The petitioner contended that the first notification dated March 15, 1996, which provided for industrial incentives and concessions, prevails over the second notification dated November 15, 1996. The second notification, issued under section 19-C of the KST Act, included a clause (iii) stating that if a unit collecting tax while claiming exemption, it would cease to be eligible for tax exemption and would only be eligible for tax deferment. The petitioner argued that this clause was ultra vires the first notification. The court examined both notifications and determined that the second notification was supplemental and clarificatory in nature, not inconsistent with the first notification. The court upheld clause (iii) as it did not entirely withdraw tax concessions but provided for tax deferment in case of violations. The challenge to clause (iii) was thus held to be unsustainable.

Reg. Scope of Section 28(6) of the Act:

The petitioner argued that the impugned order was without jurisdiction as the conditions under section 28(6) were not met. Section 28(6) allows provisional assessment if the officer has reason to believe that the dealer has failed to declare turnover, failed to account for turnover, claimed exemption on taxable turnover, or admitted to paying a lower rate of tax. The court found that the petitioner had declared the entire turnover and that the issue was the alleged violation of clause (iii) of the second notification. The court concluded that the order was without jurisdiction as the conditions under section 28(6) were not satisfied. The court emphasized that the authority had misunderstood the conditions and wrongly concluded that section 28(6)(i) was applicable.

Relief:

The court, following the Supreme Court's judgments, set aside the impugned order for want of jurisdiction. It deemed it unnecessary to express any opinion on whether the petitioner had collected tax wrongly or in contravention of the notification, leaving the matter open for the State to act in accordance with the law if needed. The court also highlighted the importance of considering consumer interest while granting concessions and exemptions for economic growth.

Conclusion:

The writ petitions were allowed, and the impugned orders and consequential demands were set aside for lack of jurisdiction. The court reserved liberty for the State to take action if warranted under the sales tax laws. No opinion was expressed regarding the issue of freight under rule 6(4) of the KST Rules, and the petitioner was given the liberty to pursue remedies in that regard.

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