Karnataka Cement Pipe Factory vs The Additional Commissioner of Commercial Taxes and Others

K.L. Manjunath, J.—These appeals were admitted on the following substantial question of law:

(i) Whether the Revisional Authority is having jurisdiction to decide, whether the authority to who supplies were made is a Government Department or an authority and it is not entitled to exemption under the notification?

Heard the learned Counsel for the parties.

The appellant is questioning the legality and correctness of the order dated 28-10-2009 passed by the Additional Commissioner of Commercial Taxes, Zone-1, Bangalore, u/s 22(1) of the Karnataka Sales Tax Act, 1957 (for short, ''Act'').

The appellant is a registered dealer engaged in the manufacturing of cement pipes. In the course of business, the appellant has supplied cement pipes manufactured by it to the Bagalkot Town Development Authority. Whenever goods manufactured by the appellant are sold, it is the duty of the appellant to collect the tax as required u/s 5 of the KST Act. Pursuant to the notification issued by the Government of Karnataka, the Tax to be collected under the KST Act in respect of the goods sold to the State of Karnataka and it is leviable under a concessional rate.

The appellant contended that Bagalkot Town Development Authority is a Government Department of Karnataka and it is created by the State of Karnataka under the provisions of the Karnataka Urban Development Authorities Act, 1987. It has collected the sales tax at concessional rate based on the notification issued by the State of Karnataka. Accordingly, assessment was completed.

The Additional Commissioner exercising his suo motu power vested in him, took up suo motu revision on the ground that the order passed by the Appellate Authority in allowing the appeal filed by the appellant/dealer is bad in law and there is loss of revenue. Further holding that the Bagalkot Town Development Authority is not a creation of State of Karnataka and that concessional rate given to the Bagalkot Town Authority is bad in law as such set aside the order of the Appellate Authority confirming the order passed by the Assessing Officer. This order is called in question in this appeal.

Therefore, the short question that arises for our consideration is whether the Bagalkot Town Development Authority has to be considered as Department of State of Karnataka or not? If the Authority concerned is a creation of State, any sale made to it by the appellant such authority has to be taxed at the concessional rate as per the Government notification. If Bagalkot Town Development Authority is not considered as a Department of State, then the order passed by the Revisional Authority has to be affirmed. It is not in dispute that the Bagalkot Town Development Authority is a creation of the State of Karnataka under the provision of the Urban Development Authorities Act, 1987, which authority has been created for the planned development of Towns and improve urban areas in the State and the areas adjacent thereof. Therefore, the authority is created under the statute and Urban Development Authority is governed by the provisions of the aforesaid Act. The Authority is managed by the Commissioner who has to be appointed by the State of Karnataka, but, shall not be an officer below the rank of Group ''A'' Officer of the State. The Constitution and incorporation of the authority namely, appointment of Chairman and other members of the committee is also vested with the Government. In other words, the entire planning authority has to work under the terms of the Government. Therefore, it is clear that it is a local authority of the State of Karnataka. We have considered the notification issued by the State. On perusal of the same, we are of the view that the benefit extended under the notification is squarely applicable to the sale made in favour of the statutory organisation like Bagalkot Town Development Authority. Therefore, we are of the view that the concessional rate applicable to the Government has to be extended to the Bagalkot Town Development Authority. In the circumstances, the substantial question of law formulated in these appeals has to be answered in favour of the appellant and against the respondent. In the result, the appeal is allowed. Order passed by the Additional Commissioner of Commercial Tax as per Annexure-A, dated 28-10-2009 is set aside and the order passed by the First Appellate Authority, Joint Commissioner of Commercial Tax is confirmed.