Heard the learned counsel for the petitioner and the learned Government Advocate.

2. The petitioner has challenged the notification No.FD 197 CSL 2005(6), Bangalore, dated 30.04.2005, as amended by notification No.FD 316 CSL 2005(II), Bangalore, dated 05.08.2005, which is issued by respondent No.1, as discriminatory and violative of Article 14 of the Constitution and Clarification No.KSA.CR.25/12-13 dated 31.05.2012 issued by the 2respondent, as it contravenes the provisions of Entry No.67 of the third Schedule to the Karnataka Value Added Tax Act, 2003 (hereinafter referred to as the ‘KVAT Act’) and also consequential reassessment orders dated 12.01.2015 passed by respondent No.4 under Section 39(2) read with Sections 36(1) and 72(2) of the KVAT Act along with the demand notices dated 12.01.2015 for the period 2010-11 and 2011-12.

3. The petitioner is engaged in the manufacture and sale of Lead Sub Oxide (also known as Lead Oxide Grey). The Lead Sub Oxide manufactured by the petitioner is claimed to be not a final product sold to the ultimate consumer, but is an ‘industrial input’ used in the manufacture of battery plates. According to the petitioner, Lead Sub Oxide is formed in the

process of converting solid lead into lead powder in a ball mill furnace. The conversion happens due to surface friction. When surfaces in contact move relative to each other, the friction between the two surfaces converts solid lead into powdered lead. The powdered lead is used in the battery manufacturing industry to manufacture electrodes such as anode and cathode for new Batteries to store and generate energy. Any metal, when it is exposed to atmosphere, will react to oxygen and forms oxides. Similarly, the lead powder when exposed to atmosphere will react to oxygen and form oxides. There is no oxygen specially supplied to the ball mill furnace to convert solid lead into lead powder to form Lead Sub Oxides. Therefore, the petitioner by undertaking the above process has converted the solid lead into lead powder and when the same exposed to atmosphere, has reacted to oxygen and form oxides. There is no oxygen specifically supplied to the ball mill furnace to convert solid lead into lead powder to form Lead Sub Oxides.

4. According to the petitioner, before the commencement of the KVAT Act, 2003, the levy of tax on sale and purchase of goods within the State of Karnataka was governed by the Karnataka Sales Tax Act, 1957, (hereinafter referred to as the ‘KST Act’, for brevity) and under Section 5-A of the KST Act, the tax payable by a registered dealer in respect of sale of any industrial input to another dealer for use by the latter as component part or raw material or packing material of any other goods, which he intends to manufacture inside the State was at the rate of 4% or the rate specified in Section 5 of the KST Act, whichever is lower. With the introduction of the KVAT Act, sub-section (1) of Section 3 levied the tax on every sale of goods in the State by a registered dealer or a dealer liable to be registered, in accordance with the provisions of the KVAT Act. Further, Section 4 of the KVAT Act prescribes the rate of tax applicable to the goods classified under different schedules. As per the said Section, the goods classified under the Third Schedule to the KVAT Act was liable to tax at the rate of 5% up to 31.07.2012 and at the rate of 5.5% thereafter. Further, the unscheduled goods were liable to tax at the rate of 14% up to 31.07.2012 and at the rate of 14.5% thereafter.

5. The Lead Sub Oxide manufactured and sold by the petitioner was classifiable under the said Third Schedule to the KVAT Act at Entry No.67 and accordingly, the petitioner charged, collected and paid tax at the rate of 5% / 5.5% (as applicable during the relevant period). Entry No.67 in the Third Schedule to the KVAT Act reads as follows:

“Non-ferrous metals and alloys; Ingots, slabs, blocks, billets, sheets, circles, hoops, strips, bars, rods, rounds, square