2005 (10) TMI 521 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to the legality of a government notification granting tax exemption under the Karnataka Sales Tax Act, 1957 and Central Sales Tax Act, 1956.

Analysis:
The petitioners, registered dealers under the Karnataka Sales Tax Act and Central Sales Tax Act, challenged a government notification granting tax exemption for a specific period starting from April 1, 1998, under the KST Act. The petitioners argued that the notification, although beneficial, created an arbitrary classification by discriminating between intra-State and inter-State business, as it exempted tax under the KST Act but not the CST Act, which they believed was incorrect. They contended that the exemption under the KST Act should automatically apply to the CST Act as well, as per section 8(2-A) of the CST Act, which links the tax rate to the KST Act. However, authorities refused to grant this exemption under the CST Act, leading to the filing of the writ petition seeking clarification on the notification's interpretation to include exemption under the CST Act. The respondents, represented by the Additional Government Advocate, defended the notification, stating it was beneficial and legally sound. They argued that the exemption under the KST Act does not extend to the CST Act and that seeking exemption is not a right but limited to specific items and periods under the KST Act. The court held that the notification under the KST Act cannot be stretched to cover the CST Act liability and that any consequences under the CST Act due to the exemption must be addressed separately in appropriate proceedings. The petitions were dismissed as lacking merit, affirming the denial of exemption under the CST Act based on the notification issued under the KST Act.