1990 (2) TMI 293 - HC - VAT and Sales Tax

High Court affirms jurisdiction to issue notice under Sales Tax Act, clarifies exemption requirements

The High Court upheld the Deputy Commissioner's jurisdiction to issue the show cause notice under section 21(4) of the Karnataka Sales Tax Act. It ... - Issues:1. Jurisdiction of Deputy Commissioner to issue show cause notice under section 21(4) of the Karnataka Sales Tax Act.2. Exemption from payment of tax on purchase turnover under a notification issued by the State Government.3. Interpretation of the proviso to section 6B of the Act regarding exemption for articles purchased falling in the Fifth Schedule.Detailed Analysis:1. The petitioner, an assessee under the Karnataka Sales Tax Act, challenged a show cause notice issued by the Deputy Commissioner of Commercial Taxes, questioning the exclusion of a sum paid for ornaments purchased from unregistered dealers from the total turnover. The notice was issued under section 21(4) to examine errors causing revenue loss. The petitioner contended that the purchase turnover was exempt based on a notification by the State Government. The High Court found no error in the notice as the assessing authority failed to discuss the exemption claim or assess the petitioner's entitlement, justifying the Deputy Commissioner's revisional jurisdiction.2. The notification provided exemption from tax on the purchase of gold or silver articles if used by the dealer-manufacturer in manufacturing goods sold, and turnover tax was paid on the manufactured items. The Court noted that the assessing authority did not analyze the purchase turnover for exemption eligibility, leading to revenue loss. The petitioner's failure to claim exemption specifically and the authority's acceptance of the taxable turnover without scrutiny justified the show cause notice under section 21(4).3. The petitioner argued for exemption under the proviso to section 6B of the Act, claiming reliance on the notification under section 8A. However, the Court observed that exemption under the proviso required the purchased articles to fall within the Fifth Schedule, which the petitioner failed to demonstrate for gold ornaments. Without a specific entry in the Fifth Schedule covering the purchases, the petitioner could not claim exemption under the first proviso to section 6B. Consequently, the Court dismissed the writ petition, emphasizing the lack of exemption eligibility and the failure to establish a legal basis for challenging the notice.In conclusion, the High Court upheld the jurisdiction of the Deputy Commissioner to issue the show cause notice, highlighted the conditions for exemption under the State Government notification, and clarified the requirements for claiming exemption under the proviso to section 6B of the Act. The dismissal of the writ petition underscored the petitioner's inability to establish exemption eligibility and legal grounds for challenging the assessment order.