2008 (3) TMI 499 - SC - VAT and Sales Tax

Whether the assessee-industry was eligible for exemption in respect of purchase tax leviable under section 6 of the Act on the value of arecanut purchased from member-growers and consignment of arecanut outside the State for sale, as also the levy of turnover tax under section 6B and cess under section 6D of the Act by virtue of the notification issued by the State Government pursuant to the Government Order No. CI.30 SPC.96(I) dated March 15, 1996 as amended by Government Order No. CI.30. SPC.96(I) dated May 14, 1999? Held that - Appeal dismissed. The new industrial policy of the State Government for the years 1993-98 and the exemption notification is looked into, the only conclusion that can be drawn is, what is exempted under the notification issued by the State Government is tax leviable under section 5 of the Act on the goods manufactured and sold by an industrial unit. Therefore, the notification is in no way in variance or contrary to the industrial policy for the years 1993-98.

Summary

Issues:
Challenge to order passed by Karnataka High Court dismissing writ petition and sales tax revision petition.

Analysis:
The appeal challenged the order passed by a Division Bench of the Karnataka High Court dismissing the writ petition and sales tax revision petition filed by the appellant. The Writ Petition was filed under articles 226/227 of the Constitution of India, seeking to quash assessment orders contrary to policy notification by the Karnataka Government. The sales tax revision petition was filed under section 23(1) of the Karnataka Sales Tax Act against the judgment passed by the Karnataka Appellate Tribunal. The main issue was whether the assessee-industry was eligible for exemption in respect of purchase tax leviable under section 6 of the Act on the value of arecanut purchased from member-growers and consignment of arecanut outside the State for sale, along with the levy of turnover tax and cess under different sections of the Act based on government notifications.

The assessee, engaged in processing arecanut, claimed to be governed by the New Industrial Policy and Package of Incentives and Concessions under the 1996-2001 Scheme. The dispute arose when the revisional authority revised assessment orders, levying purchase tax, turnover tax, and cess on the ground that the appellant was eligible for sales tax exemption only on the sales turnover of manufactured goods. The High Court accepted the Revenue's stand that the notifications issued by the State Government exempted only sales tax on goods manufactured and sold by industrial units, not purchase tax under section 6 of the Act.

The High Court's decision was based on the interpretation of the Government orders and notifications, emphasizing exemption or deferment for manufacturing units. The Government orders dated March 15, 1996, and May 14, 1999, focused on sales and not on the purchase of raw materials. The subsequent Government order aimed to extend benefits to certain non-manufacturing units, clarifying the entitlement of manufacturing and non-manufacturing units under the industrial policy.

The notification provided sales tax exemption or deferral for new industrial units, giving them the option to claim either exemption or deferment under the Act and the CST Act. The Government's policy was to grant sales tax holiday or exemption for a specified period to different scale industries. The notification exempted tax leviable under section 5 of the Act on goods manufactured and sold by industrial units, aligning with the industrial policy for the years 1993-98.

The High Court correctly analyzed the situation, finding no infirmity in its order. Consequently, the appeal was dismissed with no order as to costs.