2012 (7) TMI 871 - HC - VAT and Sales Tax

Suo-motu exercise of revisional powers by CCT u/s 22A of the Karnataka Sales Tax Act, 1957 - Mode of availing the concession - Held that - The requirement of sub-section (4) of section 8 of the CST Act in itself is for the purpose of claiming the benefit of the lower rate of tax as indicated in subsection (1) of section 8 of the CST Act - on a proper and harmonious reading of section 8(5) of the CST Act after the amendment and even after inserting of the reference to the requirement of section 8(4) of the CST Act by a dealer requirement in sub-section (4) of the CST Act is one which is confined and restricted to a situation covered by the provisions of sub-section (1) of section 8 of the CST Act and it cannot in any way affect or control the exemptions granted vis-a-vis tax liability and the rate of tax as indicated in section 8(2) of the CST Act, i.e., the amendment cannot have any bearing or effect in respect of exemptions granted to inter State sales turnover either the class of dealers with reference to the goods or otherwise who are not registered dealers and not Government - restriction brought about by the amendment cannot regulate or effect an exemption if has been granted or is to be given in respect of inter State sales turnover effected in favour of non-registered dealers and other Governments - this is the only proper way of understanding of the amendment as we find that sub-section (5) of section 8 of the CST Act is an enabling provision to grant exemptions in situations where it is a case of levy of tax under the CST Act. On a reading of the plenary legislation and the notification issued being only to effectuate that, there was no conflict in the view expressed by the division Bench earlier upholding the notification - this is the only possible way of giving full effect to the exemption provision u/s 8(5) of the CST Act and at the same time effectuating the restrictions imposed therein insofar as inter State sales turnover effected in favour of registered dealers and the Governments, are concerned, while the benefit of exemption is claimed thus, the order of the revisional authority is set aside Decided in favour of petitioner.

Issues Involved:
1. Validity of the Additional Commissioner of Commercial Taxes' suo motu revisional powers.
2. Applicability of exemptions under the Industrial Policy, 1996-2001.
3. Impact of amendments to Section 8(5) of the Central Sales Tax Act, 1956.
4. Requirement of C and D forms for claiming exemptions.
5. Interpretation of Section 8 of the CST Act post-amendment.

Detailed Analysis:

1. Validity of the Additional Commissioner of Commercial Taxes' Suo Motu Revisional Powers:
The appeals were filed under Section 24(1) of the Karnataka Sales Tax Act, 1957, by the assessee-dealer against the order passed by the Additional Commissioner of Commercial Taxes, who exercised his suo motu revisional powers under Section 22A of the KST Act. The assessee contended that the Additional Commissioner committed an error and illegality by reversing the order passed by the Appellate Commissioner and restoring the assessment order.

2. Applicability of Exemptions under the Industrial Policy, 1996-2001:
The appellant-dealer claimed exemptions on its sales turnover, including inter-State sales, based on concessions given to new industrial establishments as per the Industrial Policy, 1996-2001. The controversy arose regarding the appellant's entitlement to these exemptions without producing C and D forms, as required by the follow-up notification dated May 31, 2002, issued by the State Government.

3. Impact of Amendments to Section 8(5) of the Central Sales Tax Act, 1956:
The amendments to Section 8(5) of the CST Act, effective from May 11, 2002, required the production of C and D forms for claiming exemptions. The Revenue argued that the dealer could avail of the exemptions only by producing these forms, while the appellant contended that the amendments should not affect the concessions granted under the 1996 notification.

4. Requirement of C and D Forms for Claiming Exemptions:
The assessing officer had taxed the inter-State sales turnover at the rate provided under Section 8(2) of the CST Act due to the non-production of C and D forms. The appellant argued that the benefit of the exemption should not be denied even without these forms, as the intention of the amendment and notification was not to restrict such concessions.

5. Interpretation of Section 8 of the CST Act Post-Amendment:
The court examined the legislative history and the scheme of Section 8 of the CST Act. It concluded that the requirement of sub-section (4) of Section 8, which mandates the production of C and D forms, is confined to situations covered by sub-section (1) of Section 8. The amendment to Section 8(5) does not affect exemptions granted for inter-State sales to non-registered dealers and other governments. The court emphasized that an exemption can only be claimed in the manner provided by the statute.

Conclusion:
The appeals were allowed, and the order of the revisional authority was set aside, restoring the order of the appellate authority. The court clarified that the decision does not affect the requirement of producing C and D forms for sales to registered dealers and governments. The revision petitions filed by the State were dismissed, affirming that the dealer is entitled to claim the benefit of the 1996 notification for inter-State sales not supported by C or D forms, as long as taxes were paid at the rate indicated in Section 8(2) of the CST Act.

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