1990 (12) TMI 303 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of entry 2(a)(v) of the Fourth Schedule to the Karnataka Sales Tax Act, 1957 regarding the tax liability on the purchase of steel shutter lathes. Jurisdiction of the Commissioner of Commercial Taxes to revise an appellate order granting exemption.

Analysis:

The judgment of the High Court of Karnataka revolved around the interpretation of entry 2(a)(v) of the Fourth Schedule to the Karnataka Sales Tax Act, 1957, specifically concerning the tax liability on the purchase of steel shutter lathes. The appellant contended that the steel shutter lathes should be exempt from tax as they fell within the ambit of entry 2(a)(v) and were liable to tax at the first sale point. The assessing authority initially refused to accept this contention and brought the turnover relating to the purchases to tax. However, the appellant succeeded before the Deputy Commissioner of Commercial Taxes (Appeals) who granted exemption for the sales. The Commissioner of Commercial Taxes, in the exercise of his revisional jurisdiction, set aside the appellate order and restored the original assessment, leading to the present appeal.

The appellant argued, supported by a clarification issued by the Commissioner of Commercial Taxes, that the steel shutter lathes should be exempt from tax as they were used in the manufacture of rolling shutters without undergoing any other process. The High Court independently examined the items and concluded that they fell under one of the entries in entry 2(a) of the Fourth Schedule. Therefore, the Commissioner erred in setting aside the appellate order and subjecting the purchases to tax under section 5(1) of the Act.

The Court emphasized that if a transaction falls under a specific charging section, such as sub-sections (2), (3), or (4) of section 5, then the dealer is entitled to the exemption provided under the Act. In this case, the purchase of steel shutter lathes did not attract tax under section 5 of the Act, as previously accepted by the department in earlier years and subsequent assessments. The High Court allowed the appeal, set aside the Commissioner's order, and restored the Deputy Commissioner's order granting exemption for the sales.

Furthermore, the Court directed that any tax paid based on the Commissioner's order, now set aside, should be refunded to the appellant upon application, with the refund to be processed within one month from the date of receipt of the application. The petition was allowed accordingly.