2010 (3) TMI 1044 - HC - VAT and Sales Tax

When the appellant is the first seller of iron ore to a registered dealer in Karnataka is required to produce form 32, in order to claim exemption under section 5(3)(b) of the KST Act? Held that - The production of form 32, would be applicable only to the person if a purchase tax has to be paid by such purchaser being a registered dealer under the KST Act, provided he is seeking exemption to pay the purchase tax and we are also of the opinion if the seller is required to pay the sales tax at the first sale in such circumstances seller is required to obtain form 32 from the purchaser, provided he is seeking any exemption. But in the instant case, the seller is not liable to pay the purchase tax. The purchase tax is always required to be paid by the purchaser and not by the seller. If the seller is not liable to pay the tax, the question of obtaining form 32 from the purchaser does not arise at all. This distinct has not been considered by the Additional Commissioner of Commercial Taxes. In favour of assessee.

Summary

Issues:
Interpretation of section 5(3)(b) of the KST Act regarding exemption claim for first seller of iron ore in Karnataka.

Analysis:
The case involved a dispute where the appellant, a mine owner, initially declared sales as inter-State but later corrected it to intra-State sales. The Joint Commissioner allowed the appeal, but the Additional Commissioner reopened the case under section 22A(1) of the Act, citing the requirement of form 32 under rule 26(9)(a) of the KST Rules for claiming exemption. The appellant contended that as a first seller to a registered dealer, he wasn't obligated to produce form 32, as it's the purchaser's responsibility for exemptions under section 5(3)(b) of the KST Act.

The court considered the arguments presented. The appellant's counsel argued that the Additional Commissioner erred in requiring form 32 from the first seller, as it's the purchaser's duty to provide such declarations for claiming exemptions. On the other hand, the Government Advocate relied on rule 26(9)(a) to support the need for the first seller to produce form 32. The court noted the necessity to determine if the first seller, in this case, was required to furnish form 32 when selling iron ore to a registered dealer in Karnataka.

Upon examining rule 26(9)(a) of the KST Rules, the court concluded that form 32 was only necessary if the purchaser intended to claim exemptions and pay purchase tax. Since the seller wasn't liable for the tax, the obligation to obtain form 32 from the purchaser didn't apply. The Additional Commissioner's oversight in this regard led the court to rule in favor of the appellant, setting aside the Additional Commissioner's order and reinstating the Joint Commissioner's decision.

In the final judgment, the court allowed the appeal, overturned the Additional Commissioner's order, and directed any amount paid to be refunded to the appellant. The court's decision clarified the distinction between the responsibilities of the seller and purchaser in claiming exemptions under the KST Act, emphasizing that the obligation to produce form 32 lies with the party liable for the tax, which in this case was the purchaser.