Indian Kanoon - Search engine for Indian Law

6. Since this appeal, along with the other connected Writ Appeals and Writ Petitions, which were referred to the Division Bench were listed for hearing, we have heard the Learned Counsel appearing in all the Writ Appeals and Writ Petitions on behalf of the assessees and the Learned Advocate General and Smt. Sujatha, learned Additional Government Advocate, on behalf of the State.

7. Sri R.N. Narasimhamurthy, learned Senior Counsel appearing along with Sri N.N. Harish for the appellants in this appeal and Sriyuths K.P. Kumar, learned Senior Counsel, E.R. Indrakumar, R.V. Prasad, C.G Gopalaswamy, Narayan, Vikram, A. Satyanarayana, S. Nagaraj, K. Rama Shetty, T.N. Keshava Murthy, B.T. Mahesh, V.S. Jagannath M.N. Shankare Gowda, H.B.V. Patil, E.S. Kiresur, B.N. Jayadeva, T.H. Ramalingam, Smt. A. Rama, Sanath Kumar Shetty, B.N. Suresh, S.G. Bhat, Atul K. Alur, G.K.V. Murthy, Ajitkumar L. Raheja, S. V. Desai, C. Prakash, T. Krishna, P.H. Ramalingam, N.J. Ramesh, Venkatesh, Lakshmikumaran, Suresh S. Joshi, appearing for the appellants/petitioners in connected appeals/petitions strongly urged five contentions. Firstly, they submitted that the view taken by the learned Single Judge that the writ petitions were not maintainable as the appellants in this appeal have an alternative remedy provided under the Act, is erroneous in law since in Circular Annexure-D, the Commissioner had directed all the Assessing Authorities in the State to immediately take up assessment proceedings in all the pending cases of dealers of parts of Computer and Computer peripherals and to proceed to levy TOT/RST and additional tax on turnover and sale of parts of Computers and Computer peripherals at the rate specified under Section 6-B and 6-C of the Act and also has directed all the Assessing Authorities to immediately initiate re-assessment proceedings under Section 12-A of the Act in cases where assessments have already been completed allowing exemption from TOT/RST and additional tax on turnovers relating to sale of parts of Computer and Computer peripherals which was not available; and all the Revisional Authorities were also directed to initiate revision proceedings in cases of which the Assessing Authorities are unable to initiate assessment proceedings, the alternative remedy provided under the Act being only an empty formality, the learned Single Judge ought to have held that the assessees have no remedy provided under the Act. They also pointed out that as the discretion conferred on the assessing/revisional authorities have been completely curtailed or erased by virtue of Circular Annexure-D wherein it is also made clear that the instructions issued in Circular Annexure-D were required to be followed scrupulously by all the officers concerned and any deviance shall be viewed seriously, the learned Single Judge has seriously erred in law taking the view that the assessees have alternative remedies provided under the Act. It is also their submission that since the question involved being purely a question of law where this Court is required to decide on consideration of Sl. No. 20 of Part 'C of second schedule of the Act and also exemption notification in question whether the parts of Computer and Computer peripherals are exempted from levy of TOT/RST under Section 6-B of the Act, it is appropriate that this Court should decide the said question in exercise of its power under Article 226 of the Constitution of India as it would minimise the multiplicity of the proceedings and any error committed by the assessing authorities seriously affects the right to carry on their business or trade, guaranteed to them under Article 19(1)(g) of the Constitution of India. It is also pointed out by them that if the erroneous decision of the Assessing Authorities rendered pursuant to Circular Annexure-D has to be nullified in appeal, the assesses will have to deposit 50 per cent of the amount assessed in the order of re-assessment made. Therefore, it is their submission that when the order of re-assessment seriously affects the right of the assessees to carry on their trade or business guaranteed to them under Article 19(1)(g) of the Constitution of India, this Court has the power to interfere against any illegalities committed by the authorities. In support of these submissions, they relied upon the decision in the case of Himmatlal v. State of M.P. , Kailashnath v. State of U.P. , Bhopal Sugar Industrial Limited, M.P. v. D.P. Dube, Sales Tax Officer, Bhopal AIR 1967 SC 549, State of Bombay v. Bombay Education Society , State of Tamilnadu v. P.L. Malhotra , Onkarlal Nandlal v. State of Rajasthan , Filter Co. v. C.S.T. . Secondly, the Learned Counsel submitted that since it is for the assessing authority to make up its mind under Section 12-A of the Act as to whether the assessment has escaped, on objective consideration of the materials before it; and since undisputedly the proceedings have been initiated by virtue of the dictation given by the Commissioner by means of Circular Annexure-D dated 31St December 2004, all the proceedings initiated to reassessment already made including the order of re-assessment made in the purported exercise of the power conferred on the assessing authorities under Section 12-A of the Act, are liable to be quashed by this Court. Thirdly, it is seriously urged by the learned Counsel appearing for the assessees that the parts of Computer and Computer peripherals, by means of legal fiction, have been treated as Computers and Computer peripherals, in Sl. No. 20 of Part 'C of the second schedule of the Act and according to the Learned Counsel this is clear from the language employed in Sl. No. 20 of Part 'C' of second schedule of the Act wherein the word 'namely' before the words 'Computers of all kinds' and the words 'that is to say' before the word 'peripherals' is used. Therefore, it is their submission that in view of the Notification Annexures-E, F and G issued by the Government in exercise of the power conferred on it under Section 8-A of the Act exempting from levy of TOT/RST in respect of Computer and Computer peripherals falling under Sl. No. 20 of Part 'C of second schedule of the Act, levy of tax on the parts of Computer and Computer peripherals are also exempted. They also pointed out that in view of the specific reference in the exemption notifications to Sl. No. 20 of Part 'C' of second schedule of the Act and also the phrase in the said Notifications is that "falling under Sl. No. 20 of Part 'C' of second schedule of the Act", it is clear that all the items referred to in Sl. No. 20 of Part 'C' of second schedule of the Act including the parts of Computer and Computer peripherals, are exempted from levy of tax. They further submitted that the legislature extended the meaning of Computer and Computer peripherals by including parts of Computer and Computer peripherals by using two expressions, 'namely' and 'that is to say'. In this connection, they drew our attention to the language employed in Sl. No. 20(i) of Part 'C' of the second schedule wherein the word 'namely' has been employed immediately after the words 'computers of all kinds' wherein various types of computers viz., mainframe, mini, personal, micro computers are set out and immediately thereafter, the words 'and the like and their parts' are provided. According to the learned Counsel, the words 'and their parts' provided in Sl. No. 20(i) of Part 'C' of second schedule immediately after the description of various types of computers, is indicative of the fact that the parts, by legal fiction, are made as parts of Computers. In other words, it is their submission that the word 'namely' which describes various types of computers and the words 'and their parts' are required to be understood as the legislature intending to include their parts for the purpose of levy of tax as computers. So far as the parts of peripherals are concerned, it is their submission that under Clause (a) of Sl. No. 20(ii) of Part 'C of the second schedule, immediately after the word 'peripherals' the words 'all kinds of printers and their parts' is employed. They have been described by using the words 'and various types of printers' and they have been described after employing the word 'namely'. The Learned Counsel also pointed out that under Clause (b) of Sl. No. 20(ii) of Part 'C' of the second schedule, various types of peripherals like terminals, scanners, multimedia kits, plotters, modem and their parts, have been set out. Therefore, from the words 'that is to say' employed immediately after the word 'peripherals' describing various types of peripherals along with their parts and the words and their parts' having been included, they submit, it must be understood that the words and their parts' is indicative of the legislative intention that the parts of the peripherals for the purpose of levy of tax is treated as computers. Therefore, it is the submission of the Learned Counsel for the assesses that since the parts of Computer and Computer peripherals, by legal fiction, are treated as Computers and Computer peripherals, the exemption Notifications Annexure-E, F and G, undisputedly exempts levy of TOT/RST under Section 6-B of the Act on Computer and Computer peripherals, the parts of Computer and Computer peripherals are also exempted from levy of tax. They also pointed out that the word 'namely' takes within its fold parts of computers also, is evident from the words 'and the like'. There is no punctuation mark such as 'semi-colon' or 'comma' between the words 'Computers of all kinds namely mainframe, mini, personal, micro computers and the like' and 'and their parts' so as to read the words 'and their parts' distinctively. According to the Learned Counsel if the words 'and their parts' is read distinctively, the same cannot stand by themselves as a separate taxable goods if earlier the parts of the said goods are totally deleted or left out. Therefore, they submit that the word 'and their parts' employed in Sl. No. 20 of Part 'C' of second schedule of the Act, in the context, has to be read conjunctively only. Therefore, they submit that once expression 'computer' is used as title, and their parts are connected in the contents of title wherever the expression computers is used, it would take within its fold the parts also by a method of artificial definition. They also pointed out that the legislature has defined computers for the limited purpose of classification to include their parts, is also evident from the definition of peripherals in Sl. No. 20(ii) of Part 'C of second schedule of the Act, wherein the legislature has chosen to use the words 'all kinds of printers and their parts', and thereafter enumerated the type of printers in Clause 20(ii)(a); and in Clause 20(ii) (b), the parts are mentioned after referring to terminals, scanners, multimedia kits, plotters, modem and their parts. They also pointed out that legislature, while defining the term Computer at Sl. No. 20(i) of Part 'C' given to second schedule, has chosen to put the words 'and their parts' at the end of the definition. Therefore, they pointed out mat from the placement of phrase 'and their parts' in different sub-heading it is clear that the legislature has not intended to exclude parts from the main items and it always intended to treat them synonymously for the purpose of taxation. It is also their submission that since item No. 9 of the exemption notification Annexure-F reads that computers, computer peripherals, computer consumables and computer cleaning kits "falling under Sl. No. 20 of Part 'C' of second schedule of the Act", it must be understood that all the items set out in Sl. No. 20 of Part 'C' of second schedule of the Act are exempted from levy of tax. According to the learned Counsel, item 9 of exemption notification in substance takes into its fold all the items mentioned in Sl. No. 20 of Part 'C' of second schedule of the Act. Elaborating this submission, the learned Counsel pointed out that otherwise there was no need to refer to in item 9 of the exemption Notification as "falling under Sl. No. 20 of Part 'C' of Second Schedule". They submitted that similar is the position in so far as Notification Annenxure-G, which granted exemption on resale tax under Section 6-B of the Act. According to them, in this Notification also the language employed is Computer and Computer peripherals, computer consumables and computer cleaning kits "falling under Sl. No. 20 of Part 'C' of the second schedule." Emphasizing the words "falling under Sl. No. 20 of Part 'C' of the second schedule", the Learned Counsel pointed out that from this it is clear that all the items referred to in Sl. No. 20 of Part 'C' of second schedule of the Act is exempted from levy of TOT/RST payable by a dealer under Section 6-B of the Act. It is their submission that once the words Computer and Computer peripherals are used in the Notifications Annexure-E, F and G which refers back at Sl. No. 20 of Part 'C' of second schedule of the Act, the definition contained in the said item should be treated as automatically incorporating as a whole in the Notifications Annexure-E, F and G. Once the definition in Sl. No. 20 of Part 'C' of second schedule of the Act includes Computer and Computer peripherals, the said Notifications would also apply to the parts of Computer and Computer peripherals. It is their submission that the expression defined in the Act should be understood in the same sense as it is used in the Rules and Notification issued under the Act. They also pointed out that from the contents of the exemption Notifications, it is clear that it is bodily lifted from Sl. No. 20 of Part 'C' of second schedule of the Act for grant of exemption. They further pointed out that since Section 20 of the Karnataka General Clauses Act, 1899, provides that where, by any enactment, a power to issue any notification, order, scheme, rule, form, or bye-law is conferred, then the expression used in the notification, order, scheme, rule form or bye-law, shall unless there is anything repugnant in the subject or context, have the same respective meanings as in the enactment conferring the power. Therefore, they submitted that since Notifications Annexure-E, F and G were issued by the Commissioner in exercise of the power conferred on him under Section 8-A of the Act, the contents of the said Notifications must be understood as one found in Sl. No. 20 of Part 'C of the second schedule of the Act. The Learned Counsel also pointed out that the principle of doctrine of incorporation by a reference, has to be applied in view of Section 20 of the General Clauses Act and the Sl. No. 20 of Part 'C' of second schedule of the Act must be read into with the exemption Notification. In support of submissions referred to above made, the Learned Counsel relied upon the judgment of the Supreme Court in the case of Tata Oil Mills Co. Ltd v. Collector of Central Excise , Collector of Central Excise v. Neoli Sugar Factory 1993 Supp. (3) SCC 69, Commissioner of Income Tax v. Straw Board Manufacturing Co. Ltd 1989 Supp. (2) SCC 523, Prestige Engineering (India) Ltd. v. Collector of Central Excise, Merrut , Steel Authority of India Ltd. v. Collector of Central Excise, Bolpur, West Bengal , Collector of Central Excise, Hyderabad v. Galada Continuous Castings Ltd. 2000 (119) ELT 272 (SC), Krishiutpadan Mandisamiti, Kanpur v. Gang A Dal Mill and Co. and Ors. 1985 (58) STC 23, Collector of Customs, Bangalore v. Maestro Motors Ltd , Navnit Lal C. Javeri v. K.K. Sen , Appellate Assistant Commissioner of Income Tax, Bombay 56 ITR 198 (SC), Commissioner of Customs v. Indian Oil Corporation and Anr. 2004 Vol. 267 1TR 272, M/s Srinivasa Electricals v. Additional Commissioner of Commercial Taxes . Fourthly, they submitted that the intention of the Government has always been to exempt even the parts of Computer and Computer peripherals, whenever the exemption was granted to Computer and Computer peripherals. In support of this contention, they pointed out that the Government has been granting exemption in addition to the Computers and Computer peripherals, to computer consumables and computer cleaning kits falling under SI. No. 20 of Part 'C of second schedule of the Act. Therefore, they submit that there is absolutely no justification to take view that the Government, which has been granting exemption to computer, computer peripherals, computer consumables namely: stationery, floppy disks, CD Roms, DAT tapes, printer ribbons, printer cartridges and cartridge tapes, computer cleaning kits and computer software, has consciously chosen to deny the exemption only to parts of computers and computer peripherals. According to the learned Counsel, the turnover of parts of Computer is too small when compared to the turnover pertaining to computer peripherals, computer consumables, computer cleaning kits and computer software. They also pointed out the fact that all the Assessing Authorities in the State, except one assessing authority relied upon by the State in its statement of objections, have taken the view that the parts of Computer and Computer peripherals are also exempted from levy of TOT/RST and on that basis passed orders of assessment and the Commissioner also has issued the clarification Annexure-H clarifying that the parts of Computer and Computer peripherals are entitled for exemption, is a clear indication of recognition of the fact that the parts of Computer and Computer peripherals are treated, by legal fiction, as parts of Computer and Computer peripherals. In other words, it is their submission that the contemporaneous exposition given by the Assessing Authorities and the Commissioner who have been entrusted with the implementation of the provisions of the Act where parts of Computer and Computer peripherals were exempted from levy of tax in terms of the exemption Notifications, has to be given full weightage. They pointed out that except one assessing authority, though all the Assessing Authorities in the State have made orders of assessment giving exemption in respect of parts of Computer and Computer peripherals from levy of tax for the total turnover or resale of those goods under Section 6-B of the Act, none of the revisional authorities, who are conferred with the suo-moto power under Section and 22-A(1) and 22-A(2) of the Act, have exercised the power conferred on them under the Act till the issue of Circular Annexure-D notifying that the parts of Computer and Computer peripherals were not exempted from levy of tax. This, they pointed out, obviously, all the Assessing Authorities and the Revisional authorities have clearly understood that the parts of Computer and Computer peripherals were exempted from levy of TOT/RST. It is also submitted by some of the Counsel appearing for the assessees in the connected matters that the Commissioner having issued Clarification Annexure-H dated 15"1 December 2004 clarifying that the parts of computers and computer peripherals are exempted from levy of TOT/RST payable by a dealer under Section 6-B of the Act, he had no power to withdraw the said Clarification by means of circular Annexure-J. The learned Counsel, in support of their submissions referred to above, relied upon the decision of the Supreme Court in the case of K.P. Varghese v. Income Tax Officer, Ernakulam and Anr. 1981 (SC2 )GJX-0419-SC, Collector of Central Excise v. Parle Exports (P) Ltd , and also the division bench decision of this Court in the case of Sri Veerarajendra Corporation v. State of Karnataka (1985) 58 STC 0199, Bangalore Wood Industries v. Assistant Commissioner of Commercial Taxes (Assessment), Hassan (1994) 092 STC 0603 W, the decision of this Court in the case of Om Shanti Silks and Anr. v. Assistant Commissioner of Commercial Taxes, Challakere (1998) 110 STC 0449. Fifthly, they submitted that since the Commissioner, by means of Clarification Annexure-H, had clarified that parts of Computer and Computer peripherals are exempted from payment of tax by a dealer under Section 6-B of the Act, though the said Clarification was withdrawn by means of another circular Annexure-J, it has to be held that at least, till the date of withdrawal of clarification Annexure-H by the Commissioner by means of circular Annexure-J, the Department is bound by the clarification Annexure-H, and therefore, it is not permissible to reopen the assessments already made. They pointed out that even if the Circular issued by the Commissioner is held was contrary to law on the ground that the parts of Computer and Computer peripherals are not exempted from levy of tax as contended on behalf of the State, since the Circular issued by the Commissioner is binding on the department, it is not permissible for the State to go back on that. In support of this submission they relied upon the decisions of the Supreme Court in the case of Ranadey Micronutrients v. CCE , CCE v. Jayant Dalal Private Ltd , Paper Products Ltd v. CCE , in the case of CCE v. Dhiren Chemical Industries , in the case of CCE v. Maruti Foam(P) Ltd , in the case of Saciallied Products Ltd v. CCE .