2016 (5) TMI 666 - SC - VAT and Sales Tax

Supreme Court: Distinction Between Oil Cake & De-Oiled Cake Upheld, Assessment Cannot be Reopened

The Supreme Court allowed the appeal in part, upholding the High Court's finding that oil cake and de-oiled cake are distinct commodities. However, it ... Reopening of the CST assessment - Sale of SF DOC in the course of inter-state trade - 'C' Forms obtained from the dealers in inter-state sales - whether the inter-state sale of SF DOC is liable to tax at 2% as per assessee or 4% as per succeeding assessing officer - Escapemant of tax - Held that:- by agreeing with the conclusion of the Hon'ble High Court in the case of M/s. Binani Industries Limited v. Assistant Commissioner of Commercial Taxes, VI Circle, Bangalore [2011 (8) TMI 992 - KARNATAKA HIGH COURT], yet the fact remains that the assessing authority had expressed the opinion with regard to the rate of tax on the de-oiled cake while scrutinizing ‘C’ Forms which is an expression of opinion on the available materials brought on record and, therefore, the first appellate authority as well as the tribunal was justified in concurring with the said order. The High Court has not expressed any opinion on this score. Considering the cumulative effect of the facts and law we have stated, we have not an iota of doubt in our mind that there should not have been reopening of assessment. However, the finding recorded by the High Court overturning the view of the tribunal that oil-cake and de-oiled cake are the same product and, therefore, both are liable to reduced rate of tax despite the notification only mentions oil-cake, is not defensible. The finding of the High Court as regards oil-cake and de-oiled cake being different products as per the notification dated 31st May, 2002 is correct. However, the assessee shall reap the benefit of initial assessment as the same could not have been reopened. - Decided partly in favour of appellant Issues Involved:1. Delay condonation and leave grant.2. Reassessment of tax liability on Sunflower De-oiled Cake (SF DOC).3. Distinction between oil cake and de-oiled cake for tax purposes.4. Validity of reopening assessment based on change of opinion.5. Application of commercial parlance test.Detailed Analysis:1. Delay Condonation and Leave Grant:The Supreme Court condoned the delay and granted leave to appeal.2. Reassessment of Tax Liability on SF DOC:The assessee filed a revised return for the assessment year ending 31-3-2003, declaring gross taxable turnovers. Initially, the Deputy Commissioner of Commercial Taxes assessed the tax at 2% on SF DOC based on 'C' Forms. However, the succeeding assessing officer later reassessed the tax at 4%, claiming the initial assessment was erroneous.3. Distinction Between Oil Cake and De-oiled Cake for Tax Purposes:The Joint Commissioner of Commercial Taxes (Appeals) and the Karnataka Appellate Tribunal held that oil cake and de-oiled cake should be taxed at the same rate of 2%. They relied on commercial parlance and previous case law, concluding that the reassessment at 4% was unsustainable. However, the High Court later distinguished between oil cake and de-oiled cake, treating them as different commodities and upholding the 4% tax rate for de-oiled cake.4. Validity of Reopening Assessment Based on Change of Opinion:The first appellate authority and the tribunal found that reopening the assessment based on a change of opinion was not permissible under Section 12-A of the Karnataka Sales Tax Act. The High Court did not specifically address this issue but focused on the distinction between oil cake and de-oiled cake.5. Application of Commercial Parlance Test:The assessee argued that oil cake and de-oiled cake are the same in commercial parlance and should be taxed similarly. The High Court rejected this argument, stating that the legislative distinction between the two commodities must be followed. The Supreme Court acknowledged the High Court's distinction but noted that the initial assessment should not have been reopened, as it was based on available materials and not challenged by the revenue.Conclusion:The Supreme Court allowed the appeal in part. It upheld the High Court's finding that oil cake and de-oiled cake are distinct commodities as per the notification dated 31st May 2002. However, it ruled that the initial assessment could not be reopened, allowing the assessee to benefit from the original 2% tax rate. The Court emphasized that the reopening of assessment based on a change of opinion was not justified.