2006 (3) TMI 719 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to notification denying exemptions and incentives under the New Industrial Policy, 2001.
Interpretation of the apex court's judgment regarding notifications contrary to industrial incentive policies.
Exemption from entry tax and sales tax on petroleum products for export-oriented units.
Validity of notification withholding exemption on petroleum products.
Quashing of endorsement issued by Commercial Tax Officer.

Analysis:

The petitioner, an export-oriented unit, challenged a notification dated November 30, 2001, which omitted certain exemptions and incentives under the New Industrial Policy, 2001. The petitioner argued that the notification was contrary to the industrial policy, citing the apex court's judgment in State of Bihar v. Suprabhat Steel Ltd. The court noted that under the New Industrial Policy, 2001, the petitioner was promised exemption from entry tax and sales tax on petroleum products used as consumables. However, the notification withheld this exemption on petroleum products like petrol, diesel, furnace oil, naptha, and LSHS. The court held that the notification was repugnant to the industrial policy and quashed it to the extent of withholding the exemption on petroleum products.

The court emphasized that notifications must align with industrial policies approved by the government, as per the apex court's ruling. The notification, issued under the Karnataka Tax on Entry of Goods Act, aimed to provide incentives to industrial units but cannot deny benefits available under the industrial policy itself. The court highlighted the specific clause in the New Industrial Policy, 2001, granting exemptions to export-oriented units, including the petitioner. The court found the notification withholding exemption on petroleum products to be inconsistent with the policy and thus declared it invalid.

Consequently, the court ordered the quashing of the notification to the extent of excluding petroleum products from the exemption. Additionally, the endorsement issued by the Commercial Tax Officer, which aligned with the invalid notification, was also quashed. The petitioner was entitled to a refund of the amount paid as a result of the invalidated notification. The judgment reaffirmed the principle that notifications conflicting with industrial policies are liable to be struck down, ensuring alignment between government notifications and approved policies.