2023 (3) TMI 1119 - HC - VAT and Sales Tax

Disallowance of exemption from payment of tax under 1996-2001 industrial policy - molasses, bagasse and filter mud - disallowance on the ground that it would amount to dual benefit because the petitioner is enjoying the benefit of deferral of purchase tax on sugarcane - sale of by-products namely, molasses, bagasse and filter mud - disallowance when the petitioner's application for granting of FAVC was pending consideration before the SLCC. HELD THAT - The AO (Assessing Officer) has disallowed the exemption on the premise that it would amount to dual benefit to the petitioner. The State Government have also denied the benefit which has been considered in the aforementioned writ petition. Thus, the subject matter is common in the said writ petition and this revision petition. In our considered opinion, the reasons recorded while allowing the writ petition also answer the contentions urged by the assessee and the Revenue in this revision petition and this revision petition merits consideration. The questions of law are answered in favour of the assessee and against the Revenue - Revision petition is allowed.

Summary

Issues:
1. Disallowance of exemption from payment of tax on molasses, bagasse, and filter mud under the 1996-2001 industrial policy.
2. Disallowance of exemption from payment of tax on the sale of by-products.
3. Disallowance of exemption from payment of sales tax on molasses, bagasse, etc., under the industrial policy while the application for FAVC was pending.

Issue 1: Disallowance of exemption from payment of tax on molasses, bagasse, and filter mud under the 1996-2001 industrial policy:
The Revision Petition challenged the order of the Karnataka Appellate Tribunal (KAT) dismissing the petitioner's claim for exemption from tax on molasses, bagasse, and filter mud. The Tribunal held that granting such exemption would result in dual benefit as the petitioner was already benefiting from the deferral of purchase tax on sugarcane. The High Court considered the arguments presented and concluded that the petitioner was entitled to the exemption. The Court noted that the denial of exemption by the Assessing Officer (AO) and the State Government was also addressed in a related writ petition where the petitioner's entitlement to exemption from sales tax on the by-products was upheld. The High Court allowed the Revision Petition, answered the questions of law in favor of the assessee, and set aside the KAT's order confirming the decisions of the AO and the First Appellate Authority (FAA).

Issue 2: Disallowance of exemption from payment of tax on the sale of by-products:
The High Court simultaneously heard a writ petition filed by the assessee challenging the State Government's decision to deny sales tax exemption on the by-products, namely molasses, bagasse, and filter mud. The Court allowed the writ petition, ruling in favor of the petitioner and holding that they were entitled to exemption from payment of sales tax on the mentioned by-products. The Court found that the reasons for allowing the writ petition also addressed the contentions raised in the Revision Petition, indicating a common subject matter. Consequently, the High Court granted the assessee the exemption from sales tax on the by-products, as sought in the writ petition.

Issue 3: Disallowance of exemption from payment of sales tax on molasses, bagasse, etc., under the industrial policy while the application for FAVC was pending:
The petitioner's claim for exemption from sales tax on molasses, bagasse, and other products under the 1996-2001 industrial policy was disallowed by the Hon'ble Tribunal. The Tribunal's decision was based on the pendency of the petitioner's application for granting of Fixed Asset Verification Certificate (FAVC) before the State Level Co-ordination Committee (SLCC). However, the High Court, after considering the arguments presented, allowed the Revision Petition, answered the questions of law in favor of the assessee, and set aside the KAT's order confirming the decisions of the AO and the FAA. The Court held that the petitioner was entitled to the exemption from payment of sales tax on the mentioned by-products, irrespective of the pending FAVC application.

This comprehensive analysis of the judgment highlights the issues involved and the High Court's decisions regarding the disallowance of exemptions from tax and sales tax on various by-products under the industrial policy, ultimately ruling in favor of the assessee in each instance.