Exemption notifications and provisional assessment limits: supplemental tax-collection condition upheld, but jurisdiction failed under section 28(6).

Clause (iii) of the second exemption notification was upheld because it was read with the industrial policy and the first notification as a supplemental condition: if an exempt unit collected or purported to collect tax, exemption ceased for that period and deferment applied for the balance eligible period. By contrast, provisional assessment under section 28(6) of the Karnataka Sales Tax Act could be used only where the statutory jurisdictional facts existed, such as non-disclosure of turnover or a claim of exemption on taxable turnover. On the admitted facts, those preconditions were absent, so the authority acted beyond jurisdiction and the impugned assessments and demands were quashed.

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Issues: (i) Whether clause (iii) of the second exemption notification was invalid as being inconsistent with the first incentive notification. (ii) Whether proceedings and provisional assessments under section 28(6) of the Karnataka Sales Tax Act, 1957 were without jurisdiction on the facts.

Issue (i): Whether clause (iii) of the second exemption notification was invalid as being inconsistent with the first incentive notification.

Analysis: The industrial policy and the two notifications were read together. The first notification granted the incentive framework and contemplated withdrawal of concession with deferment for the balance period in appropriate cases. The second notification, issued as a follow-up under the same statutory scheme, dealt with the consequence of an exempt unit collecting tax or purporting to collect tax. It did not supersede the earlier notification or destroy the exemption scheme. Instead, it clarified that where tax was collected, exemption would cease for that period and deferment would apply for the remaining eligible period. The condition was treated as supplemental and not inconsistent with the original policy.

Conclusion: The challenge to clause (iii) failed and the condition was upheld.

Issue (ii): Whether proceedings and provisional assessments under section 28(6) of the Karnataka Sales Tax Act, 1957 were without jurisdiction on the facts.

Analysis: Section 28(6) could be invoked only when one of the statutory conditions existed, including failure to declare turnover or claiming exemption on turnover liable to tax. On the admitted and pleaded facts, the dealer had disclosed the turnover and the dispute was really about alleged breach of the exemption condition and alleged collection of tax. That situation did not fit the jurisdictional triggers in section 28(6)(i) or (iii). The order itself proceeded on an incorrect footing by treating the case as one of concealment and wrong exemption under section 28(6), although the essential statutory preconditions were not made out. Since the authority acted beyond the limits of the power conferred by the provision, the availability of appeal did not bar writ interference.

Conclusion: The provisional assessments and consequential demands were without jurisdiction and liable to be set aside.

Final Conclusion: The writ petitions succeeded, the impugned orders and demands were quashed, and the State was left free to proceed in accordance with law if so advised.

Ratio Decidendi: A provisional assessment under section 28(6) can be sustained only when the statutory jurisdictional facts contemplated by that provision are present; where the authority proceeds on a misfit factual and legal basis, the action is without jurisdiction and is amenable to writ correction.

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