2021 (10) TMI 1027 - HC - VAT and Sales Tax

Interpretation of statute - Section 8 (5) of the CST Act - inter-state sale - C-Form - changes brought about by the amending Act of 2002 governs only Section 8 (5)(a) and not Section 8 (5)(b) of the CST Act is right and justifiable? - Whether the Division Bench of the Hon ble High Court of Karnataka was justified in not considering the Notification No.FD 199 CSL 2002(4) dated 31.5.2002 in the right prospect, though the same was upheld by the Division Bench of the Karnataka High Court in W.A. No.2417 of 2007 dated 02.04.2009 in the case of M/s Volvo India Pvt. Ltd.? - HELD THAT - Giving effect to the industrial policy 1996-2001, Government of Karnataka issued a notification bearing No.FD 32 CSL 96(II) dated 15.11.1996 under Section 19-C of the KST Act providing for tax exemptions or deferrals. Similarly, a corresponding notification dated 15.11.1996 was also issued under 19-C of Act read with Section 9 (2) of CST Act. The said notification issued under the CST Act exempted/deferred the tax payable under CST Act in respect of goods manufactured and sold in the course of inter-state trade and commerce by industrial units which are eligible and opted for the benefit prescribed under the notification dated 15.11.1996 issued under KST Act - The assessee had utilized FAVC tax exemption to a certain extent up to 01.04.2002. In the meantime, Section 8 (5) of the CST Act was amended with effect from 11.5.2002, thereby the benefit of tax exemption under Section 8 (5) of CST was made subject to the condition mentioned in Section 8 (4) of the CST Act pursuant to which the notification dated 31.5.2002 was issued by the Government of Karnataka specifying that exemption of tax shall be subject to the condition of furnishing declaration C / D forms by the assessee. It is now pointed by the learned counsel for the parties that said Special Leave Petitions are admitted and C.A. Nos. 473-480/2016 are pending, but no interim order of stay has been granted. In view of aforesaid, we have no hesitation to dispose of this petition answering question of law in favour of assessee and against Revenue subject to the result of C.A. Nos. 473-480/2016 pending before the Hon ble Apex Court. However, we make it clear that the dispute being confined herein to the exemption claimed in respect of inter-state sales turnover which is not supported by production of C or D forms, this decision would not come in the way for consequential adjustments. The question of law, with regard to interpretation of statute, is answered in favour of the assessee and against the Revenue - the question with regard to non-consideration of Notification No.FD 199 CSL 2002(4) dated 31.5.2002, does not arise for consideration in view of the first question, being answered in favour of the assessee - appeal dismissed.

Summary

Issues:
Challenge to order of Karnataka Appellate Tribunal regarding interpretation of Section 8(5) of CST Act and notification dated 31.5.2002. Assessment of medium-scale industry for the year 2002-03 under CST Act. Dispute over tax exemption and requirement of furnishing declaration forms 'C' or 'D'. Application of promissory estoppel doctrine. Interpretation of Section 8 of CST Act in light of relevant notifications and amendments.

Analysis:

1. The High Court addressed the Sales Tax Revision Petition filed by the Revenue challenging the Karnataka Appellate Tribunal's order. The main questions of law revolved around the interpretation of Section 8(5) of the CST Act and the applicability of the notification dated 31.5.2002. The case involved a medium-scale industry engaged in manufacturing plastic bottles, seeking tax exemption for inter-state sales not covered by 'C' Form.

2. The Tribunal allowed the appeal of the assessee, setting aside the orders of the assessing officer and the first appellate authority. The Revenue contended that the notification dated 31.5.2002 mandated the production of declaration forms 'C' or 'D' for claiming exemption under Section 8(5) of the CST Act. The Tribunal's application of promissory estoppel was challenged by the Revenue.

3. The assessee relied on a previous judgment to support their case, emphasizing that the amendment to Section 8(5) of the CST Act did not alter the fundamental operation of the provision. The High Court analyzed the relevant notifications and amendments to determine the impact on tax exemption claims and the necessity of producing declaration forms for sales to registered dealers.

4. The Court examined the historical context of tax exemptions under the CST Act and the industrial policy to assess the eligibility of the assessee for tax benefits. The judgment referenced previous Division Bench decisions to support the interpretation of Section 8 of the CST Act and the requirements for availing tax exemptions.

5. Ultimately, the High Court dismissed the appeal, answering the first question of law in favor of the assessee and against the Revenue. The second question was deemed unnecessary for consideration due to the resolution of the first issue. The decision was made subject to the outcome of pending Civil Appeal Nos. 473-480/2016 before the Supreme Court, allowing the Revenue to proceed in accordance with the law post the Supreme Court's decision.