2009 (11) TMI 871 - HC - VAT and Sales Tax

High Court Upholds Tribunal Decision on Tax Classification: Notification Prevails Over Judicial Ruling

The High Court upheld the Karnataka Appellate Tribunal's decision in favor of the assessee, emphasizing that the Government notification classifying fried ... - Issues:Interpretation of Government notification on tax levy for fried gram and Bengal gram under Karnataka Sales Tax Act, 1957.Analysis:The judgment revolves around the classification of fried gram and Bengal gram for tax purposes under the Karnataka Sales Tax Act, 1957. The Supreme Court in Gopuram Gram Mill Co. v. State of Andhra Pradesh clarified that fried gram is distinct from Bengal gram. However, the Government notification from March 31, 1984, continued to classify both as the same for tax purposes. Despite the Supreme Court's ruling in 1994, the notification remained unchanged.The case involves an assessment order for the year 1996-97, where tax was levied at 1.25% based on the Supreme Court judgment. Subsequently, a rectification application led to a reduction in the tax rate to 1%. However, the Joint Commissioner of Commercial Taxes reviewed the rectification order and reinstated the original tax rate. The assessee appealed to the Karnataka Appellate Tribunal, which ruled in favor of the assessee on July 18, 2006.The Revenue challenged the Tribunal's decision, arguing that the Tribunal erred by not following the Supreme Court's judgment, which treated fried gram and Bengal gram as different commodities for tax purposes. The Revenue contended that despite the lack of a fresh notification, tax should be levied based on the Supreme Court's decision.Conversely, the assessee's counsel maintained that as the Government notification remained unchanged, the parties should be governed by the existing notification rather than the Supreme Court's ruling. The counsel argued that the assessing officer cannot demand a higher tax rate based on the Supreme Court's decision when the Government notification was not updated.Ultimately, the High Court found no substantial question of law in the case. The Court highlighted that the Government notification classifying fried gram and Bengal gram as the same was in effect until 1997, despite the Supreme Court's contrary ruling. Therefore, the Court dismissed the Revenue's petition, emphasizing that the assessing officer cannot demand higher tax rates based on a judicial decision when the Government notification remained unaltered.