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2015 (5) TMI 105 - KARNATAKA HIGH COURT

2015 (5) TMI 105 - KARNATAKA HIGH COURT - [2015] 82 VST 230 (Kar) - Exemption from tax - Whether the commodity in question, i.e., White Oats would be exempted under Entry 16 of the First Schedule of the Karnataka Value Added Tax Act, 2003 or would be subjected to tax under the Act - Held that:- First clarification dated 03.06.2006 was issued by the Commissioner itself on a query made by another dealer with regard to the sale of White Oats, which was a product similar, if not identical to the pro .....

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uld not arise. In fact, not only the assessee but the department itself was under a genuine belief or impression that the product in question was exempted from tax, as the department did not raise any question with regard to the monthly returns filed by the assessee right from April 2006 onwards and it accepted the same, which would amount to ‘deemed assessment’.

Where the Commissioner itself had issued a clarification dated 03.06.2006 with regard to the commodity in question, the as .....

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ax, until the second clarification dated 20.01.2010 was issued. After the issuance of the said clarification, the assessee (instead of getting into litigation by raising a dispute regarding the White Oat flakes being subjected to tax or not) started paying taxes on sale of the said commodity.

Clarification dated 03.06.2006 was issued under Section 59(4) of the Act. Such clarification is not applicable merely in the case of the applicant seeking clarification, but, to all registered de .....

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yment of tax with regard to the commodity in question (i.e., White Oats) till 20.01.2010 i.e., the date when the second clarification was issued by the Commissioner - Decided partly in favour of assessee. - STRP Nos. 331-378/2014 - Dated:- 15-4-2015 - Vineet Saran And S. Sujatha,JJ. For the Appellants : Sri E R Indra Kumar, Sr Counsel, Smt E I Sanmathi, Adv, Sri S V Giri kumar For the Respondent : None ORDER This is a bunch of 48 revision petitions relating to the tax period April 2006 - March 2 .....

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, for the tax period in question, the assessee had neither collected tax from the customers nor did it deposit any tax with regard to the commodity in question. Then on 16.02.2010, a notice was issued to the assessee under Section 39(1) of the Act requiring the assessee to answer as to why the White Oats should not be subjected to tax and why the assessee be not liable to pay tax along with interest and penalty? This notice was for the assessment years 2006-07 to 2008-09. For the assessment year .....

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der dated 31.01.2011 the appellant was subjected to tax for the aforesaid 12 months. The assessee challenged the said orders in appeals, which were decided by two separate orders dated 20.12.2012 passed by the Joint Commissioner of Commercial Taxes whereby the appeals of the assessee were dismissed. Challenging the said appellate orders, the assessee filed appeals before the Karnataka Appellate Tribunal, which have also been dismissed by a common order dated 01.02.2014. Challenging the said orde .....

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el for the parties, these revision petitions have been heard and are being disposed of at the admission stage. 4. The brief facts relevant for these cases are that the Act of 2003 came into force with effect from 01.04.2005. The petitioner/assessee started dealing in White Oats for the first time in the assessment year 2006-07. With regard to the liability of payment of tax on the said commodity i.e., White Oats, vide communication dated 10.04.2006, a clarification was sought by another dealer i .....

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clarified that Oats and their flour exempt as per Entry 16 of the First Schedule to the Karnataka Value Added Tax Act, 2003 . The First Schedule to the Act relates to goods Exempted from Tax under Section 5(1) and Entry 16 reads as under: 16. Coarse grains and their flour excluding paddy, rice and wheat and their flour . It is in reference to the above that a clarification was sought by a dealer dealing in similar products (White Oats) and the aforesaid clarification dated 03.06.2006 was issued .....

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n is made with regard to fixing of tax on Pre Cooked & Processed White Oats at 12% under Section 4(1)(b) of Karnataka Tax Assessment Rule, 2003 . 6. There is no dispute about the fact that White Oats which are dealt with by the assessee are processed White Oats. As such, after the second clarification was issued on 20.1.2010, there was no ambiguity or doubt with regard to the said product being subjected to tax under the Act. It is for the period up to 20.1.2010 which is in dispute i.e., whe .....

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er. In this regard, it is submitted that the assessee did neither collect tax from the customers nor did it pay any tax. It is also submitted that for the tax period in question, the assessee had filed its regular monthly returns and at no point of time there was any question raised by the department with regard to the applicability of tax on the sale of such goods by the appellant and as such, the returns had been accepted, which would amount to deemed assessment . It is further submitted that .....

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processing did not change the essential characteristic of Oat as nothing was added while processing Oats as Flakes and if the flakes were crushed then it becomes flour (powder) and as such, on merits also, the White Oats being sold by the petitioner/assessee would be exempted from tax in terms of the clarification dated 03.06.2006 as the Oats as well as its Flour were held to be exempted from tax. 8. In view of the fact that the assessee has, after the issuance of the second clarification dated .....

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of the second clarification dated 20.01.2010, whereby the processed Oats which was the commodity sold by the assessee, were clarified to be subject to tax. 9. Sri Giri Kumar, learned Addl. Government Advocate for the respondent has vehemently argued that the notice dated 16.02.2010 and 18.08.2010 (both under Section 39(1) of the Act) were issued independent of the second clarification dated 20.01.2010. According to the respondents, the processed Oats were always subjected to tax. Under Section 3 .....

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nces of this case, we are of the view that till the issuance of the second clarification dated 20.01.2010, the assessee was not liable for payment of tax. The primary reason for coming to this conclusion is that the first clarification dated 03.06.2006 was issued by the Commissioner itself on a query made by another dealer with regard to the sale of White Oats, which was a product similar, if not identical to the product being dealt with by the assessee herein. When along with the query, the sam .....

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r a genuine belief or impression that the product in question was exempted from tax, as the department did not raise any question with regard to the monthly returns filed by the assessee right from April 2006 onwards and it accepted the same, which would amount to deemed assessment . No-doubt, under Section 39(1) of the Act the limitation for issuing a notice for reassessment is 5 years and the tax period in question is within such period of limitation, but, the reassessment under Section 39(1) .....

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wrong information is stated or given by the assessee in its returns. In the facts of the present case where the Commissioner itself had issued a clarification dated 03.06.2006 with regard to the commodity in question, the assessee/dealer would be presumed to have a genuine belief that it was exempted from tax and thus, it cannot be said to be a case where the assessee had furnished any wrong information or concealed any material information. It is not the case where the sale of White Oats had n .....

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he said commodity. 11. The Tribunal dealt with the merits of the matter as to whether the Oats in question which were processed as Oat Flakes were Coarse Grain or Coarse Oat or not, and after finding that the Processed Oat Flakes would not be classified as Coarse Oat, held that the said commodity would not be covered under the exemption clause. The Tribunal, however, did not consider the question that on a query with regard to an identical product i.e., White Oat Flakes, the Commissioner had its .....

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mmodity in question was exempted from tax. The assessee thus did not collect any tax from the customers and consequently did not pay to the department. The department did not raise any question after the returns had been filed, whereby the assessee did not pay tax, treating itself to be exempted from tax for such commodity. As we have already held above, the department itself was under the genuine belief or impression that after the clarification dated 03.06.2006, the commodity in question was e .....

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