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2011 (4) TMI 1269 - HC - VAT and Sales TaxDisallowance of benefit of exemption granted by the appellate authority to the assessees Held that - Once a dealer has paid Karnataka sales tax under the KST Act, he is entitled to the exemption under the notification. In that view of the matter, the authorities are in total error in taking note of section 18, rule 166 and amendment of rule 166 to deny the benefit of exemption under the enactment, which have in no way been dented by any of these subsequent events, by way of the amendments, omissions and deletion. In that view of the matter, we do not see any justification to deny the benefit to which the assessees are entitled to which is conferred on them under the notification under a parliamentary Legislation. Hence,appeals are allowed.
Issues:
Disallowed benefit of exemption on sales tax suffered on arecanut and black pepper during a transitional period. Detailed Analysis: The case involves two appeals by the Revenue challenging the disallowance of exemption benefits by the revisional authority to the assessees, who are registered dealers trading in arecanut and black pepper. The assessees conducted both local and consignment sales in inter-State trade and commerce and availed transitional relief on sales tax suffered on arecanut and black pepper held in stock from April 1, 2004, to April 1, 2005. The assessing authority disallowed the exemption for arecanut purchased during the transitional period and sold after April 1, 2005, stating that the benefit was already availed under the Karnataka Value Added Tax Act. The Joint Commissioner of Appeals granted relief to the assessees under section 18 of the KVAT Act, allowing exemption from Central sales tax for goods sold outside Karnataka if KST was paid during the transitional period. The Additional Commissioner initiated revision proceedings, contending that the benefit of the notification could not be availed after April 1, 2005, and that Rule 166(5A) inserted from April 1, 2006, clarified the applicability of transitional relief. The revisional authority set aside the appellate order, directing the collection of exemption granted for inter-State sales before April 1, 2005. The assessees appealed to the High Court, arguing that section 18 of the KVAT Act extended benefits to goods purchased after April 1, 2004, and used for resale at the commencement of the Act, contrary to the revisional authority's decision. The notification in question exempted dealers from Central sales tax if they had paid KST under the Karnataka Sales Tax Act for specified goods, including arecanut. The KVAT Act introduced transitional provisions under section 18, providing relief for tax paid under the KST Act on stock purchased after April 1, 2004, and used for resale at the Act's commencement. Rule 166 of the VAT Rules extended this benefit but was later amended and omitted. The revisional authority incorrectly assumed that the exemption notification was no longer valid under the VAT Act and denied benefits based on subsequent amendments and rules. The High Court held that the exemption under the notification was valid for dealers who paid KST, entitling them to exemption from Central sales tax for inter-State sales before April 1, 2005. The authorities erred in denying this benefit based on section 18, rule 166, and its amendments, as the notification's provisions were unaffected by these subsequent events. The Court allowed the appeals, setting aside the revisional authority's order and restoring the assessing authority's decision in favor of the assessees.
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