1994 (6) TMI 194 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the Supreme Court's decision in Rajasthan Roller Flour Mills Association v. State of Rajasthan and State of Karnataka v. New Swastik Flour Mills [1993] 91 STC 408 is prospective or retrospective.
2. Whether the turnover of wheat products should be exempt from turnover tax under section 6B of the Karnataka Sales Tax Act, 1957.
3. Whether the revisional authorities were justified in imposing turnover tax on wheat products based on the Supreme Court's decision.
4. Whether the circular issued by the Commissioner of Commercial Taxes remains valid after the Supreme Court's decision.
5. Jurisdictional issues regarding the revisional powers exercised by the Joint Commissioner against the orders passed by the Assistant Commissioner.
6. Hardship caused to the petitioners due to lump sum payment requirements.

Detailed Analysis:

1. Prospective vs. Retrospective Application of Supreme Court's Decision:
The petitioners argued that the decision of the Supreme Court in Rajasthan Roller Flour Mills Association [1993] 91 STC 408 should apply only prospectively and not affect transactions prior to September 1, 1993. They cited various Supreme Court decisions where past transactions were not affected by new rulings. However, the court held that the principle of law declared by the Supreme Court is generally retrospective unless explicitly stated otherwise. The court emphasized that the Supreme Court did not restrict its decision to prospective application, thus making it applicable to past transactions as well.

2. Exemption from Turnover Tax under Section 6B:
The court examined whether wheat products like soji, maida, and atta should be considered the same as wheat for tax exemption purposes. Initially, the Karnataka High Court in New Swastik Flour Mill v. State of Karnataka [1992] 84 STC 49 held that wheat products were not different from wheat and thus exempt from turnover tax. However, the Supreme Court later reversed this decision, stating that wheat products are distinct commodities from wheat and thus subject to turnover tax.

3. Justification of Revisional Authorities' Actions:
Following the Supreme Court's decision, the revisional authorities under the Karnataka Sales Tax Act revised the earlier orders that exempted wheat products from turnover tax. The court upheld these revisions, stating that the revisional authorities acted within their powers and in accordance with the law as declared by the Supreme Court. The court clarified that the revised orders did not suffer from any infirmity as they were based on the Supreme Court's ruling.

4. Validity of the Commissioner's Circular:
The petitioners contended that the circular issued by the Commissioner of Commercial Taxes, which followed the High Court's earlier decision, should still be valid. The court dismissed this argument, stating that the circular ceased to have any effect once the Supreme Court reversed the High Court's decision. It was unnecessary for the Commissioner to issue a new circular following the Supreme Court's ruling.

5. Jurisdictional Issues:
The petitioners argued that the Joint Commissioner lacked jurisdiction to revise orders passed by the Assistant Commissioner, citing changes in the designations under Karnataka Act 5 of 1992. The court rejected this contention, affirming that the Joint Commissioner had the authority to revise the orders of the Assistant Commissioner as per section 21(2) of the Act.

6. Hardship Due to Lump Sum Payment:
The court acknowledged the hardship that petitioners would face if required to pay the amounts in question in a lump sum. It suggested that the authorities should consider granting suitable instalments for payment if proper applications were made by the petitioners. The court also clarified that petitioners could pursue other legal remedies for grievances unrelated to the turnover tax on wheat products.

Conclusion:
The petitions were rejected, and the court upheld the imposition of turnover tax on wheat products based on the Supreme Court's decision. The court granted a stay of recovery for four weeks to allow petitioners to make necessary applications for instalments or to appeal against the order.

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