2023 (6) TMI 752 - HC - VAT and Sales Tax

Withdrawal of Exemption from payment of tax payable under the provisions of the KVAT Act 2003 - Doctrine of Promissory Estoppel - exemption for sale of food articles and beverages by new tourism units - no notifications have been issued in exercise of the powers conferred under Section 5(2) of the KVAT Act 2003 granting exemption. Revenue s case is, in the absence of any notification issued under the provisions of the KVAT, assessee is not entitled for any exemption. HELD THAT - A perusal of Exemption Certificate dated March 25, 2003 makes it is clear that assessee is a registered Tourism Industry and is eligible for 100% tax exemption for a period of 7 years. By Government Order No. FD 303 CSL 99, dated January 07, 2000, the State Government discontinued sales tax based incentives. However the incentives already offered and committed were saved. By issuing subsequent Notification No. FD 363 CSL 2006, dated July 17, 2007 under the KST Act, it was clarified that the incentives offered earlier would remain unaffected. In the present case, assessee has availed the benefit for 100% sales tax exemption in the year 2003. The KAT has rightly recorded that the vide Notification dated July 17, 2007, the State Government have clearly stated that rescinding of the Notification dated November 12, 1999 shall not be applicable to the dealers who have made investment in establishment in a new tourism units and the incentives offered and committed by the Government shall not get affected. Revenue has placed reliance on Hotel Madhuvan Case 2008 (12) TMI 703 - KARNATAKA HIGH COURT , where this Court was examining whether a tourism unit is an industrial unit or not - In the instant case, the issue involved is whether petitioner is entitled for benefit of exemption. Admittedly, assessee has obtained exemption certificate dated March 25, 2003 for a period of seven years with effect from February 27, 2003. Though the State Government issued a Notification on January 07, 2000 discontinuing sales tax based incentives, the same has been clarified vide Notification dated July 17, 2007 to the effect that the notification dated January 07, 2000 shall not affect the dealers who have made investment in establishing new tourism units. This question was not under consideration in Hotel Madhuvan Case. Therefore, the said authority does not lend any support to the contention advanced on behalf of the Revenue. It is recorded further that even in the notification dated 07.01.2000 it is stated that the discontinuation shall not affect the incentives that have been already offered or committed by the Government until the eligibility of such incentives are completed. The eligibility certificate was valid for 7 years and could not have been rescinded before the period of eligibility expired as it is sovereign assurance. The contention urged by the Revenue that in absence of any specific notification under the KVAT Act, assessee is not entitled for exemption, is untenable - There are no error in the impugned order passed by the KAT - Revision Petition is dismissed.

Summary

Issues involved:
The issues involved in the judgment are whether the Tribunal was correct in setting aside the orders passed by the Assessing Authority and the First Appellate Authority, and whether the Appellate Tribunal was right in holding that the Respondent was eligible for exemption from tax under the KVAT Act 2003 without any specific notification granting such exemption.

Issue 1 - Tribunal's Decision Setting Aside Previous Orders:
The case involved a tourism hotel unit registered under the Karnataka Value Added Tax Act, 2003 (KVAT). The Assessing Officer denied tax exemption on the sale of food and beverages under the KVAT Act, leading to a series of appeals. The Karnataka Appellate Tribunal (KAT) ultimately allowed the assessee's appeal, stating that the exemption notification issued under the Karnataka Sales Tax Act, 1957 (KST Act) applied. The Revenue challenged this decision, arguing that without a specific notification under the KVAT Act, the assessee was not entitled to exemption.

Issue 2 - Eligibility for Exemption under KVAT Act:
The main contention was whether the assessee, as a tourism unit, was eligible for tax exemption under the KVAT Act. The Revenue argued that no specific notification was issued under the KVAT Act granting such exemption. However, the assessee had obtained an Exemption Certificate in 2003 under the KST Act, which was later clarified by subsequent notifications. The KAT analyzed these notifications and held that the assessee was entitled to the exemption as per the earlier certificates and notifications, even after the enactment of the KVAT Act.

Key Points:
- The Exemption Certificate obtained by the assessee in 2003 stated eligibility for 100% tax exemption for seven years, which was supported by relevant government notifications.
- Notifications issued in 2000 and 2007 clarified that incentives offered earlier to tourism units would not be affected, ensuring the continuation of tax exemptions.
- The KAT's decision was based on the understanding that the assessee had fulfilled the conditions for exemption as per the earlier certificates and notifications, despite the absence of a specific notification under the KVAT Act.
- The judgment distinguished a previous case regarding industrial units, emphasizing that the issue at hand was the entitlement to exemption benefits rather than the classification of the tourism unit.

Conclusion:
The High Court dismissed the Revision Petition, upholding the KAT's decision in favor of the Assessee. It was concluded that the assessee was entitled to the exemption benefits based on the previous certificates and notifications, despite the absence of a specific notification under the KVAT Act.