2003 (8) TMI 493 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to clause (iv) of Explanation II of notification dated June 7, 1989 as repugnant to Industrial Policy G.O. No. CI 146 SPC 88 dated December 5, 1988. Interpretation of sales tax concession eligibility under the Industrial Policy. Assessment orders passed by the Assistant Commissioner of Commercial Taxes. Validity of subsequent assessment orders and challenge to clause (iv) of Explanation II of notification dated June 7, 1989.

Analysis:

1. The petitioner, a partnership company, challenged clause (iv) of Explanation II of a notification dated June 7, 1989, as conflicting with the Industrial Policy G.O. No. CI 146 SPC 88 dated December 5, 1988. The petitioner, an SSI unit, set up a manufacturing unit based on the Industrial Policy's incentives. The issue arose when subsequent assessment orders were passed deviating from the petitioner's understanding of the tax liability and exemption under the Policy.

2. The Government Order issued by the Government of Karnataka on December 5, 1998, outlined incentives and concessions for new industries in Karnataka. It specified sales tax concessions for industries in different zones over a period of years, subject to certain limits. The notification dated June 7, 1989, provided exemptions for SSI units but excluded eligibility under specific circumstances, such as when tax is collected by eligible units under the Karnataka Sales Tax Act.

3. The Court observed that the petitioner had collected sales tax and was assessed at 50% of the liability, which was initially accepted but later disputed by the authorities. The respondents contended that due to tax collection, the petitioner was not eligible for any exemption as per the Policy. The Court held that the clause (iv) of Explanation II did not contradict the Policy but clarified that exemptions are not applicable if tax is collected, aligning with the Policy's intent of providing tax exemption.

4. The Court emphasized that exemptions under the Policy are to be strictly construed, and any misunderstanding by the petitioner or Deputy Commissioner does not warrant setting aside the clause. The Court directed the petitioner to avail the appeal remedy within a specified period for the assessment proceedings, indicating that the appellate authority would review the case on its merits and complete the proceedings within a stipulated timeframe.

5. In conclusion, the Court dismissed the petition, highlighting that the understanding of exemptions and tax liabilities under the Industrial Policy should align with the notification's provisions. The judgment emphasized the importance of adhering to the Policy's guidelines and the proper legal recourse available to address assessment disputes.