2005 (9) TMI 598 - HC - VAT and Sales Tax

Issues Involved:
1. Maintainability of the writ petitions due to the availability of alternative remedies.
2. Validity of proposition notices and reassessment orders issued under the influence of the Commissioner's circular.
3. Exemption of parts of computer and computer peripherals from turnover tax/resale tax (TOT/RST).
4. Authority of the Commissioner to withdraw clarifications.
5. Binding nature of the Commissioner's clarifications on the department.

Detailed Analysis:

1. Maintainability of the Writ Petitions:
The court considered whether the writ petitions were maintainable despite the availability of alternative remedies under the Karnataka Sales Tax Act. The court noted that normally, it would not interfere with proposition notices or assessment orders if alternative remedies are available. However, it is well-settled that the High Court can intervene if the notices or orders are patently illegal or issued in violation of natural justice. In this case, the court found that the instructions in the Commissioner's circular (Annexure D) effectively dictated the actions of the assessing authorities, making any objections filed by the assessees an empty formality. Thus, the alternative remedy was deemed ineffective, and the writ petitions were maintainable.

2. Validity of Proposition Notices and Reassessment Orders:
The court examined whether the proposition notices and reassessment orders were issued under the undue influence of the Commissioner's circular. It was found that the instructions in the circular compelled the assessing authorities to proceed with reassessment without independent application of mind. The court held that the proposition notices and reassessment orders were issued due to the dictation of the Commissioner, violating the quasi-judicial nature of the assessing authorities' functions. Consequently, the proposition notices and reassessment orders were quashed.

3. Exemption of Parts of Computer and Computer Peripherals:
The court analyzed whether parts of computers and computer peripherals were exempt from TOT/RST under the relevant notifications (Annexures E, F, and G). It was concluded that the parts of computers and computer peripherals are, by legal fiction, treated as computers and peripherals under Sl. No. 20 of Part "C" of the Second Schedule to the Act. The court noted that the language in the exemption notifications, which referred to items "falling under Sl. No. 20 of Part 'C' of the Second Schedule," indicated a legislative intent to exempt all items listed, including parts. Thus, the parts of computers and computer peripherals were exempt from TOT/RST.

4. Authority of the Commissioner to Withdraw Clarifications:
The court addressed whether the Commissioner had the authority to withdraw the earlier clarification (Annexure H) by issuing a new circular (Annexure J). It was established that the power to issue a clarification includes the power to withdraw it. The court cited section 21 of the Karnataka General Clauses Act and relevant case law to support this position. Therefore, the withdrawal of the clarification by the Commissioner was valid.

5. Binding Nature of the Commissioner's Clarifications:
The court considered whether the department was bound by the Commissioner's clarification (Annexure H) until it was withdrawn. It was held that the clarification was binding on the department only during the period it was in operation, i.e., from December 15, 2004, to December 23, 2004. Since the clarification was withdrawn within eight days, it did not bind the department for assessments made prior to its issuance or after its withdrawal. The court emphasized that the binding effect of a clarification ceases once it is withdrawn.

Conclusion:
The court set aside the order of the learned single Judge, declared that parts of computers and computer peripherals are exempt from TOT/RST, quashed the proposition notices and reassessment orders, and invalidated the Commissioner's circular (Annexure D). The appeal was allowed, and the writ petitions were disposed of accordingly.

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