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Hosangadi Shoe and Stationery Dealer Vs. State of Karnataka - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKarnataka High Court
Decided On
Case NumberS.T.R.P. Nos. 48 and 87 of 1980
Judge
Reported in[1985]58STC158(Kar)
ActsKarnataka Sales Tax - Sections 3A, 8 and 21; Karnataka Sales Tax Rules - Rule 25-A and 25-B(3)
AppellantHosangadi Shoe and Stationery Dealer
RespondentState of Karnataka
Appellant AdvocateSuresh S. Joshi, Adv.
Respondent AdvocateS. Rajendra Babu, Government Adv.
Excerpt:
.....be said that, it is without jurisdiction. it is only in cases where the power is sought to be exercised by such an authority who is lawyer authority to disciplinary authority, but it cannot be said against the appellate authority, it cannot be said that it is a lack of jurisdiction to exercise such power. - it further observed that the assessing authority had committed a clear error in giving exemption without examining and properly appreciating the material before him and therefore the deputy commissioner was perfectly justified in proceeding to revise the orders. the commissioner may, if he is satisfied that the dealer is a bona fide producer, entitled to exemption from tax, may grant the certificate prayed for. the tribunal also has failed to consider the legal effect of the..........the exemption originally granted should be recalled. in pursuance to the said audit objection the deputy commissioner of commercial taxes initiated action under section 21 and proposed to revise the assessment orders and to withdraw the exemption granted earlier. he accordingly revised the orders of assessment by his order dated may 10, 1978 and subjected the turnovers for two years to tax under the k.s.t. act. being aggrieved by that order the assessee preferred appeals before the appellate tribunal who also upheld the action of the deputy commissioner and dismissed the appeals. against the said order of the tribunal, the assessee has come up in revision before this court. 2. before we examine the contentions urged for the assessee it will be useful to refer to the reasons given by the.....
Judgment:

Rajasekhara Murthy, J.

1. The two revision petitions arise out of the order of the Tribunal, Bangalore, dated July 20, 1979 made in STA. Nos. 28 and 29/78. For the two assessment years 1974-75 and 1975-76 the assessee who is a dealer in footwear, was exempted by the assessing authority in respect of his turnover for the two years on the basis of a certificate of recognition issued by the Commissioner under rule 25-B(3) of the Karnataka Sales Tax Rules. The Commissioner issued the certificate to the assessee that his establishment is a cottage industry falling under item 15 of the table attached to rule 25-A.

It appears, the Commercial Tax Officer (Audit) pointed out that the assessee was not entitled to the grant of exemption since he was manufacturing chappals also out of rubber and that therefore the exemption originally granted should be recalled. In pursuance to the said audit objection the Deputy Commissioner of Commercial Taxes initiated action under section 21 and proposed to revise the assessment orders and to withdraw the exemption granted earlier. He accordingly revised the orders of assessment by his order dated May 10, 1978 and subjected the turnovers for two years to tax under the K.S.T. Act.

Being aggrieved by that order the assessee preferred appeals before the Appellate Tribunal who also upheld the action of the Deputy Commissioner and dismissed the appeals.

Against the said order of the Tribunal, the assessee has come up in revision before this Court.

2. Before we examine the contentions urged for the assessee it will be useful to refer to the reasons given by the Tribunal while dismissing the appeals. The Tribunal has stated that the assessee was undoubtedly preparing chappals using mostly rubber and so cannot be said to have produced anything from a cottage leather industry. It further observed that the assessing authority had committed a clear error in giving exemption without examining and properly appreciating the material before him and therefore the Deputy Commissioner was perfectly justified in proceeding to revise the orders. The Tribunal also noticed the letter of the Commissioner dated 29th October, 1978 addressed to the Commercial Tax Officer, Ranebennur, in which he had stated :

'Even if the usage of rubber is more than that of leather, it cannot be said that the chappals are exclusively made out of rubber. As the assessee is using both leather and rubber in the manufacture of chappals, it is considered that the industry would come under 'Cottage Leather Industry' and the assessee would be entitled for exemption of sales tax provided that the annual sales turnover thereof does not exceed rupees one lakh and the R.C. already issued continues to be valid. The audit party my be informed accordingly.'

But the Tribunal observed that the letter of the Commissioner cannot be considered to be an order or instruction issued under section 3A of the K.S.T. Act and on that ground it ignored that letter.

3. Under section 8 of the Act, sale of goods specified in the Fifth Schedule, subject to the conditions and exceptions if any set out therein, is exempt from tax under the Act. The Fifth Schedule enumerates the goods that are exempted from tax under section 8. Item 28 in the Fifth Schedule refers to products of village industries which are entitled to exemption on being recognised by the Commissioner. Rule 25-A contains a table of village industries which are entitled to exemption under Fifth Schedule. Under rule 25-B dealer who is a bona fide producer of products of any village industry referred to in item 28 of the Fifth Schedule, may make an application to the Commissioner for grant of a certificate of recognition. The Commissioner may, if he is satisfied that the dealer is a bona fide producer, entitled to exemption from tax, may grant the certificate prayed for. Such certificate of recognition so issued shall be valid from the date of receipt of the application up to the date of its cancellation.

4. The assessee in these cases, is a manufacturer of chappals. The assessee claimed exemption in respect of part of his turnover relating to sale of chappals manufactured by him. His claim was based on the certificate issued by the Commissioner recognising the articles of footwear manufacture by him, as 'products of village industries' falling under item 28 of the Fifth Schedule entitling him to exemption. That certificate of recognition was granted on August 30, 1969 and it is not disputed that the said certificate is still in force and is not cancelled.

5. The Commissioner has also, by his letter dated December 29, 1978 addressed to the C.T.O., Ranebennur, stated that the certificate is still in force and the audit party may be informed accordingly. In the face of the certificate issued by the Commissioner exempting turnover of the assessee, it was not open to the Deputy Commissioner to take action under section 21 to revise the orders of assessment and levy tax on the exempted turnover. The Tribunal also has failed to consider the legal effect of the certificate granted by the Commissioner. When the Commissioner is the authority under the Act to issue certificate of recognition for the purpose of granting exemption under the Act, is must be binding on every authority including the audit wing of the Department. Their task, in our opinion, is to unearth the suppression of turnover resulting in evasion of tax due to the State and not to differ from the view taken by the Commissioner in a matter like this.

6. The sole ground on which the Deputy Commissioner revised the assessments and brought the disputed turnover to tax was that the chappals manufactured by the assessee were not exclusively of leather but were made of rubber mainly. This conclusion by the Deputy Commissioner even if it is borne out from the records, was neither called for nor was he competent to take a view contrary to the recognition granted by the Commissioner in exercise of his powers conferred by the statute. His order seeking to annual the assessment was wholly without jurisdiction.

7. In the result, therefore, the revision petitions are allowed. The orders of the Tribunal as well as that of the Deputy Commissioner are set aside and the original orders of the assessment granting exemption are restored.


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