2021 (9) TMI 262 - HC - VAT and Sales Tax

Exemption on 'sales in the course of imports' - demand on account of Value Added Tax / Central Sales Tax on local / inter-state sales - effect of change in law or facts - time limitation - exigibility to tax under KST Act. Whether advance ruling dated 31.03.2006 by the Authority for Clarification and Advance Ruling is without jurisdiction and non-est? - HELD THAT - It is evident that the ACAR vide order dated 31.03.2006, has opined on the issue of applicability of the tax or otherwise on a transaction under KST Act and has not dealt with the issue under Section 5(2) of the Act. It is pertinent to note that though the aforesaid order could either have been revised by the Commissioner of Commercial Taxes under Section 22-A(2) of the KST Act or could have been challenged by the respondent in a writ petition before this Court. However, the respondent has not chosen to challenge the same. In other words, the order dated 31.03.2006 passed by the ACAR is in existence and has attained finality and binds the parties. The aforesaid order is neither without jurisdiction nor non est and the respondent cannot be permitted to raise a contention about its validity - the question of law is answered in the negative. Whether there is any change in law or facts so as to render the ruling by the Authority for Clarification and Advance Ruling inapplicable? - HELD THAT - The finding recorded by the Assessing Authority that it has examined voluminous transactions to arrive at a different conclusion on the facts of the case, is factually incorrect as Assessing Officer has only examined 0.11% of the entire transactions of sales in the course of import namely 60 transactions out of total 51,435 transactions - The Assessing Authority infact has undertaken a fresh analysis and arrived at different conclusions in respect of the very transactions which were considered by ACAR. Therefore, in the fact situation of the case, the advance ruling by ACAR is binding - the question of law is answered by stating that there is no change in the facts and in law so as to render the advance ruling by ACAR inapplicable to case of the petitioner. Whether the re-assessment proceedings initiated against the petitioner are barred by limitation? - HELD THAT - The order of re-assessment was passed on 04.01.2012 and therefore, the proceeding for re-assessment for tax period between April 2006 to December 2006 and from April 2007 to December 2007 is barred by limitation. It is pertinent to note that under the unamended provision, a vested right had accrued in favour of the petitioner. The amendment made to Section 40 of the Act, cannot be construed so as to open up a liability which had become barred. Even by retrospective operation of law, the aforesaid vested right accrued to the petitioner cannot be taken away - the re-assessment proceedings for the period between April 2006 to December 2006 and April 2007 to December 2007 is held to be barred by limitation. Whether the transactions in question are exigible to tax under KST Act? - HELD THAT - Since the adjudication of the nature of transaction involves factual adjudication, therefore, we deem it appropriate to remit the matter to the Adjudicating Authority in respect of the transactions beyond March 2007 and March 2008 as the transactions for a period between April 2006 to March 2007 and April 2007 to March 2008 have become final and the re-assessment proceedings cannot be initiated in respect of the transactions between the period from April 2006 to March 2007 and April 2007 to March 2008. Petition disposed off.

Summary

Issues Involved:
1. Jurisdiction and validity of the advance ruling by the Authority for Clarification and Advance Rulings (ACAR).
2. Applicability of the advance ruling by ACAR based on changes in law or facts.
3. Limitation period for re-assessment proceedings.
4. Taxability of transactions under the Karnataka Sales Tax (KST) Act.

Issue-Wise Analysis:

1. Jurisdiction and Validity of the Advance Ruling by ACAR:
The court examined whether the advance ruling dated 31.03.2006 by ACAR was without jurisdiction and non-est. It was noted that under Section 4 of the Karnataka Sales Tax Act, 1957, the Commissioner may constitute an Authority to clarify the rate of tax applicable or the exigibility of any transaction under the Act. The court highlighted that the order passed by ACAR is binding on all officers except the Commissioner, who has suo motu revisional powers under Section 22-A(2) of the KST Act. The court concluded that the ACAR's order dated 31.03.2006 was valid and had attained finality as it was not challenged by the respondent. Therefore, the first question of law was answered in the negative, affirming the jurisdiction and validity of the ACAR's ruling.

2. Applicability of the Advance Ruling by ACAR:
The court addressed whether there was any change in law or facts rendering the ACAR ruling inapplicable. It was found that the Assessing Authority's claim of examining voluminous transactions was factually incorrect, as only 0.11% of transactions were reviewed. Additionally, the Commissioner of Commercial Taxes had affirmed the ACAR's ruling even after considering the intercompany purchase agreement. Thus, the court held that there was no change in facts or law to render the ACAR ruling inapplicable, and the ruling remained binding.

3. Limitation Period for Re-assessment Proceedings:
The court analyzed the limitation period for re-assessment under Section 40 of the Act. It was noted that the re-assessment order dated 04.01.2012 was passed beyond the prescribed period for the tax periods April 2006 to December 2006 and April 2007 to December 2007. The court emphasized that a vested right had accrued to the petitioner under the unamended provision, which could not be taken away by retrospective amendments. Thus, the re-assessment proceedings for these periods were held to be barred by limitation, affirming the petitioner's vested rights.

4. Taxability of Transactions under the KST Act:
The court observed that the Assessing Authority had not examined individual transactions but based its decision on a small sample of 60 transactions out of 51,435. This approach was deemed impermissible. The Tribunal, being the final fact-finding authority, failed to independently analyze the transactions. Consequently, the court remitted the matter to the Adjudicating Authority to re-examine transactions beyond March 2007 and March 2008 in light of the ACAR ruling, while transactions for the period April 2006 to March 2007 and April 2007 to March 2008 were held final and barred from re-assessment.

Conclusion:
The court quashed the orders passed by the Assessing Authority, Appellate Authority, and the Tribunal. The Assessing Authority was directed to re-examine transactions beyond the barred periods in accordance with the ACAR ruling and relevant statutory provisions. The petition was disposed of accordingly.