M/S Ravi Prakash Refineries (P) Ltd vs State Of Karnataka

3. The assessee-appellant is engaged in the manufacturing of refined edible oil by solvent extraction process and refining along with trading in edible oil and oil-cake. For the assessment year ending 31-3-2003 the assessee had filed Revised Annual Return in Form 4, declaring the Gross Taxable Turnovers at Rs.19,76,37,615-00 and Rs.1,60,93,055-00 respectively.

4. As the factual narration would show the appellant sold Sunflower De- oiled Cake (SF DOC) and several other goods in the course of inter-State trade and commerce and in the course of the said transaction the appellant produced 'C' Forms obtained from the dealers in inter-State sales. The assessee had admitted the liability of tax at 2 per cent on the sale of SF DOC in the course of inter-State trade and commerce. The Deputy Commissioner of Commercial Taxes (Assessment) Chitradurga, the assessing authority, had passed an order of assessment under Section 9(2) of the Central Sales Tax Act, 1956 (for brevity, 'the CST Act') on 29th January, 2005, whereby it had expressed the view that a sum of Rs.4,75,68,764/- was subjected to tax at 2 per cent. The assessing officer had granted the benefit on production of 'C' Form in terms of the Notification No.FD 119 CSL 2002 (2) dated 31st May, 2002.

5. After the order of assessment was passed, the succeeding assessing officer formed an opinion that there was an escapement of tax due to the reason that the inter-State sales of SF DOC was actually liable to tax at 4 per cent and not at 2 per cent, which had been erroneously adopted by the earlier assessing authority. Following the principles of natural justice, he levied the tax at 4 per cent on the inter-State sales of SF DOC.

7. Though the assessee succeeded, yet it preferred an appeal, being STA No.425 of 2006 before the Karnataka Appellate Tribunal, Bangalore (for short, 'the tribunal'), as the first Appellate Authority had not expressed any opinion with regard to rate of tax on oil-cake and de-oiled cake. It was contended before the Tribunal that the oil cake and de-oiled cake as per the commercial parlance are one and the same and, therefore, the rate of tax has to be at 2 per cent and not 4 per cent. The tribunal after noting the submissions referred to the schedule in the notification and the decision in M/s Sterling Foods vs. State of Karnataka,[8] State of Karnataka vs. M/s Goa Granites[9], M/s Habeeb Protiens and Fats Extracts, Hiriyur, Chitradurga District vs. Commissioner of Commercial Taxes, Bangalore and Anr.[10] and came to hold as under :

13. On a perusal of the aforesaid provision, it is limpid that it permits re-opening of an assessment on the ground that if the assessee has been assessed at a rate lower than the rate at which it is assessable under Act. The rate of tax is four per cent. The assessee had filed the return and the 'C' Forms claiming the benefit of the Notification dated 31.05.2002 in respect of inter-State sale of oil-cakes. The assessing officer had accepted the 'C' Forms on verification and granted the benefit. The assessing officer on a proper security has accept the ‘C’ Forms on the basis of which reduced rate of tax was claimed. The assessment was reopened as there was no escapement of tax due in respect of inter-State sale in respect of SF DOC.

2006 shall stand modified accordingly.

20. Though we have agreed with the said conclusion of the 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. It is worthy to note that the revenue had not challenged the order passed by the Joint Commissioner. 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.

21. Consequently, the appeal filed by the assessee is allowed in part. 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. In the facts of the case, there shall be no order as to costs.