2009 (2) TMI 782 - HC - VAT and Sales Tax

Claim in respect of a concession given under section 18 of the Karnataka Sales Tax Act - Held that - By enacting section 18 the Legislature enabled the Government to frame Rules. This is to extend a concession effectuated through rule 166. The rule in categorical terms says that concession is confined to reducing the tax liability under the later Act only to the extent of the lesser of the liabilities under the two Acts and not beyond that. Therefore irrespective of the tax liability under the earlier Act, the concession cannot be extended to the whole of the tax liability under the earlier Act if the liability under the later enactment if is less; which is the situation in the case of the petitioner. If the petitioner should have incurred a lesser liability, there was no possibility of the petitioner getting the concession to the extent of liability under the later enactment. Therefore not only the order passed by the authority restricting the concession to the extent of liability under the latter is in consonance with the statutory provisions but also the provisions by themselves do not suffer from any vice or arbitrariness, illegality or ultra vires the provisions of section 18. Thus no exception can be taken to the earlier order dated March 2, 2007 passed in form No. 270 and if it is so irrespective of the nature of order passed under section 90 order for clarification by the Government, that order stands and in this view of the matter no interference is warranted.

Issues:
1. Interpretation of transitional provisions under the Karnataka Value Added Tax Act, 2003 regarding relief on sales tax on stock in hand.
2. Application of section 18 and rule 166 in determining tax liability for registered dealers.
3. Dispute over the extent of concession available to a dealer under the new Act compared to the earlier Act.
4. Challenge to the order passed by the competent authority regarding the claim for better benefit under section 90 of the Act.
5. Validity of the provisions of rule 166 restricting the concession to the lesser of the tax liabilities under the two Acts.
6. Argument on the correctness of the order passed in form VAT 270 and the authority's decision regarding the extent of concession.
7. Examination of whether the concession under section 18 is a matter of right and the scope of such concession as per statutory provisions.

Analysis:
1. The case involves a registered dealer under the Karnataka Sales Tax Act seeking relief under the transitional provisions of the Karnataka Value Added Tax Act, 2003. The dispute arises from the interpretation of section 18 of the Act, which provides for relief on sales tax on stock in hand at the commencement of the new Act. The concession is subject to the provisions prescribed under the Act, specifically rule 166, which determines the extent of relief based on the tax liability under the earlier Act or the new Act, whichever is lower.

2. The petitioner claimed the benefit of section 18 read with rule 166 for goods purchased under the earlier Act. However, the Department restricted the benefit to the tax liability under the new Act, leading to a disagreement. The petitioner challenged this decision through a writ petition, seeking clarification from the competent authority under section 90 of the Act. The authority upheld the earlier decision, prompting the petitioner to approach the court again for redress.

3. The core issue revolves around the limitation imposed by rule 166, which restricts the concession to the lesser of the tax liabilities under the two Acts. The petitioner argued for a broader interpretation to maximize the benefit under the earlier Act. However, the court emphasized that the concession is not an absolute right but is governed by the statutory provisions. The legislative intent behind section 18 was to provide relief within the confines of rule 166, ensuring that the concession does not exceed the liability under the new Act.

4. The court upheld the authority's decision, stating that the restriction to the tax liability under the new Act was in line with the statutory provisions. The order passed in form VAT 270 was deemed correct, and the court found no grounds for interference. Additionally, the court dismissed the petitioner's challenge to the validity of rule 166, affirming that the concession cannot extend beyond the limits set by the legislation.

5. In conclusion, the court ruled that the petitioner's claim for a broader concession beyond the liability under the new Act was not permissible under the statutory framework. The court emphasized that the concession under section 18 is subject to the rules framed by the Government, and in this case, rule 166 governs the extent of relief available to registered dealers. Therefore, the writ petition was dismissed for lacking merit based on the statutory provisions and the authority's decision.

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