2016 (4) TMI 535 - SC - VAT and Sales Tax

Entitlement for benefit of exemption - Notification No. FD.11.CET.93(3) dated 31.03.1993 - Entry tax - Whether the appellant falls within the ambit of new industrial unit , essential requirement of exemption notification - Held that - a Unit has to be certified to be eligible for exemption under the notification dated 21.06.1991. That is an essential requirement for a Unit to fall within the definition of A New Industrial Unit under the notification dated 31.03.1993 as it is assigned the same meaning as contained in the notification dated 21.06.1991. Notification dated 31.03.1993 further makes it clear that this notification is not to apply to a Unit to which notification dated 19.06.1991 does not apply. So much so, the procedure prescribed in the notification dated 19.06.1991 for claiming exemption is also made applicable to the Industrial Units seeking exemption under the notification dated 31.03.1993. It was admitted by the appellant itself that the Department of Industries and Commerce issued eligibility certificate in terms of industrial policy G.O. No. CI 30 SPC 96 dated 15.03.1996 and notification dated 15.11.1996 issued under Section 19-C of the KST Act. Such eligibility certificate would not be of any consequence in as much as, in order to get the benefit of the notification dated 31.03.1993, the appellant was required to get certification under the notification dated 19.06.1991. Obviously, therefore, the appellant does not fulfill the requirement of the notification dated 31.03.1993 as well. It is trite that exemption notifications require strict interpretation. In order to get benefit of any exemption notification, assessee has to satisfy that it fulfills all the conditions contained in the notification. It is a different matter that once the conditions contained in the exemption notification are satisfied and the assessee gets covered by the exemption notification, for the purpose of giving benefit notification has to be construed liberally. However, in the present case, the appellant has not been able to cross the threshold and to find entry under notification dated 31.03.1993. Therefore, the appellant was not entitled to exemption from entry tax. - Decided against the appellant

Issues Involved:
1. Legality and validity of the order dated 12.01.2005 by the High Court of Karnataka.
2. Levy of entry tax under the Karnataka Tax on Entry of Goods Act, 1979 (KST Act).
3. Entitlement to exemption from payment of entry tax under Notification/Government Order No.CI.92.SPI.1997 dated 25.06.1997.
4. Applicability of general Notification No. FD.11.CET.93(3) dated 31.03.1993 for claiming entry tax exemption.
5. Interpretation of legislation by reference versus legislation by incorporation.
6. Conditions for qualifying as a "new industrial unit" under the relevant notifications.

Detailed Analysis:

1. Legality and Validity of the Order Dated 12.01.2005:
The appellant challenged the High Court of Karnataka's order dated 12.01.2005, which clubbed three petitions concerning assessment years 1997-1998, 1998-1999, and 1999-2000. The High Court affirmed the view of the authorities below, holding the appellant liable to pay entry tax under the KST Act and ineligible for exemption under the Notification dated 25.06.1997.

2. Levy of Entry Tax Under the KST Act:
The appellant, engaged in the manufacture of Dry Manganese Dioxide Batteries, was initially granted exemption from entry tax on raw materials for the assessment year 1997-1998. However, reassessment proceedings levied entry tax due to non-fulfillment of the investment condition stipulated in the Notification dated 25.06.1997. Similar reassessment and penalty impositions occurred for the years 1998-1999 and 1999-2000.

3. Entitlement to Exemption from Payment of Entry Tax:
The appellant was granted an exemption from entry tax under Notification dated 25.06.1997, contingent upon an investment of ?111 crores. The appellant failed to meet this investment requirement, rendering it ineligible for the "Tax Holiday" under the said notification. Consequently, the appellant could not claim the exemption for the assessment years in question.

4. Applicability of General Notification No. FD.11.CET.93(3) Dated 31.03.1993:
The appellant sought exemption under the general Notification dated 31.03.1993, which exempted entry tax on raw materials for new industrial units. The High Court rejected this claim, concluding that the appellant was excluded from the benefits of the general notification due to the amendment of the notification dated 19.06.1991 by the notification dated 31.03.1993.

5. Interpretation of Legislation by Reference vs. Legislation by Incorporation:
The High Court distinguished between legislation by reference and legislation by incorporation. It held that the case involved legislation by reference, meaning subsequent amendments to the referred legislation (notification dated 19.06.1991) would apply. The appellant argued for legislation by incorporation, where subsequent amendments would not apply. However, the Supreme Court found it unnecessary to delve into this distinction, given the appellant's failure to meet the conditions of the specific exemption notification.

6. Conditions for Qualifying as a "New Industrial Unit":
To qualify as a "new industrial unit" under the general Notification dated 31.03.1993, an entity must meet the definition provided in the notification dated 19.06.1991. The appellant did not obtain the necessary certification under the notification dated 19.06.1991, thus failing to qualify as a "new industrial unit" and becoming ineligible for the exemption.

Conclusion:
The Supreme Court upheld the High Court's decision, affirming that the appellant was not entitled to exemption from entry tax due to non-fulfillment of the investment condition and lack of proper certification. The appeal was dismissed, and the principles of strict interpretation of exemption notifications were reinforced.

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