1982 (5) TMI 176 - HC - VAT and Sales Tax

Court rules in favor of assessee in inter-State sales tax dispute, orders refund for illegal assessment

Sundaram Industries Limited Versus Assistant Commissioner of Commercial Taxes (Assessment) I, Bangalore D

The court held that the Karnataka Sales Tax authorities lacked jurisdiction to assess the turnover of the assessee-company for inter-State sales of bus ... - Issues Involved:1. Jurisdiction of the Karnataka Sales Tax authorities.2. Nature of the sales (whether inter-State or intra-State).3. Mistake of law and its implications on tax assessments.4. Maintainability of the writ petitions.5. Refund of tax paid under a mistake of law.Detailed Analysis:1. Jurisdiction of the Karnataka Sales Tax Authorities:The primary issue was whether the Karnataka Sales Tax authorities had the jurisdiction to assess the turnover of the assessee-company for the sales of bus bodies to the corporation. The court held that the sales in question were inter-State sales and thus, the Karnataka Sales Tax authorities did not have jurisdiction under the Karnataka Sales Tax Act to assess the turnover. The court concluded that the impugned assessment orders were without jurisdiction and thus illegal.2. Nature of the Sales (Inter-State or Intra-State):The court examined whether the sales of bus bodies were inter-State sales or intra-State sales. It relied heavily on the Supreme Court's ruling in Union of India v. K.G. Khosla & Co. Ltd. [1979] 43 STC 457 (SC), which clarified that a sale could be considered an inter-State sale even if the contract did not specifically provide for the movement of goods from one State to another, as long as the movement was an incident of the contract. The court found that both the parties knew that the bus bodies were built at Madurai and delivered to Bangalore, thus making it an inter-State sale.3. Mistake of Law and Its Implications on Tax Assessments:The assessee-company argued that it paid Karnataka sales tax under a mistake of law, believing the sales were intra-State. The court accepted this argument, noting that the assessee-company only realized the mistake after the Supreme Court's decision in Khosla's case. The court emphasized that the mistake of law was genuine and not due to negligence.4. Maintainability of the Writ Petitions:The respondents argued that the writ petitions were not maintainable because the assessee-company had not availed of the alternative remedy under the Act and that the petitions were belated. The court rejected these arguments, stating that the petitions were maintainable because the branch at Bangalore was not a distinct entity from the assessee-company and that the petitions were filed promptly after the mistake was realized. The court also dismissed the preliminary objection regarding the misdescription of the assessee-company in the cause title.5. Refund of Tax Paid Under a Mistake of Law:The court directed that the tax paid by the assessee-company under the mistaken belief that it was liable to Karnataka sales tax should be refunded. Initially, the court ordered the Karnataka sales tax authorities to remit the amount to the Tamil Nadu authorities. However, upon learning that the assessee-company had already paid the Tamil Nadu authorities, the court modified its order to direct the Karnataka authorities to refund the tax directly to the assessee-company.Conclusion:The court allowed the writ petitions, quashed the impugned assessment orders, and directed the refund of tax paid under the mistaken belief that the sales were intra-State. The court's decision was based on the principles laid down in the Supreme Court's ruling in Khosla's case, emphasizing that the sales in question were inter-State and thus outside the jurisdiction of the Karnataka Sales Tax authorities. The court also addressed and rejected the preliminary objections regarding the maintainability of the petitions and the alleged delay in filing them.