2014 (9) TMI 32 - HC - VAT and Sales Tax

Benefit of exemption from payment of tax under Section 6-B of the Karnataka Sales Tax Act - levy of resale tax - Held that - The word used in clause-(x) and the aforesaid clause(xiv) are identical. After amendment, it is called as resale tax. Earlier it was called as turnover tax. Both are leviable unless the goods falls under the proviso. If the goods falls under the proviso, the benefit of exemption was granted. Therefore, the Tribunal was not justified in denying the exemption when the earlier proviso also provided for such exemption. In that view of the matter, to that extent, the judgment of the Tribunal requires to be set aside and accordingly, it is set aside. It is held that assessee is entitled to the benefit of exemption from payment of turnover tax for the assessment years 2000-01 and 2001-02 in terms of the law which was prevailing then and is entitled to exemption from payment of resale tax for the assessment year 2002-03 as held to be entitled by the Tribunal. Assessing Authority shall grant exemption to the assessee for the assessment years 2000-01 and 2001-02 from payment of turnover tax in terms of Clause-(xiv) to the proviso to Section 6-B. For the assessment year 2002-03, the assessee is entitled to the benefit of exemption from payment of resale tax in terms of Clause-(x) of proviso to Section 6-B. After giving the aforesaid exemption, if the assessee is still liable to pay any tax, the Assessing Authority is at liberty to frame an appropriate assessment order - Decided partly in favour of assessee.

Summary

Issues:
1. Whether the assessee was entitled to exemption from payment of turnover tax for the assessment years 2000-01 and 2001-02?
2. Whether the Tribunal was justified in passing the order of remand in respect of STA 853/2008?

Analysis:

Issue 1:
The revision petitions challenge the Tribunal's order denying exemption from tax under Section 6-B of the Karnataka Sales Tax Act for the assessment years 2000-01 and 2001-02, despite granting the benefit for 2002-03. The Tribunal based its decision on the introduction of resale tax from 1.4.2002 to transition to the Value Added Tax system. The appellant argued that even before the 2002 amendment, the law provided for exemption under Clause-(xiv) of the proviso to Section 6-B. The High Court agreed, stating that the provisos before and after the amendment were similar, granting exemption if goods fell within the proviso. The Tribunal's denial of exemption for the earlier years was unjustified. The Court set aside the Tribunal's judgment, ruling in favor of the assessee for the assessment years 2000-01 and 2001-02, as well as for 2002-03.

Issue 2:
Regarding the order of remand in respect of STA 853/2008, the Tribunal's decision to remit the matter to the Assessing Authority for re-computation of tax was challenged. The revenue contended that the law pre and post 1.4.2002 differed significantly, and the Tribunal's denial of exemption for 2000-01 and 2001-02 was justified. However, the High Court held that the Tribunal's decision to remand the matter for re-computation was reasonable. The Court directed the Assessing Authority to grant the assessee exemption from turnover tax for 2000-01 and 2001-02 and from resale tax for 2002-03, as per the provisos to Section 6-B. Any remaining tax liability after granting exemptions was left to the Assessing Authority's discretion for appropriate assessment.

In conclusion, the High Court ruled in favor of the assessee, granting exemption from turnover tax for the specified assessment years and directing the Assessing Authority to recompute any tax liability accordingly.