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TMI Blog2003 (12) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... s a registered dealer. The State Government with a view to accelerate the industrial growth of State of Karnataka and particularly the backward areas issued a Government order dated March 15, 1996 setting out the industrial policy for the State of Karnataka for the period 1996-2001. The policy provided various incentives and concessions in this regard. Policy provided for option of either sales tax exemption in respect of tiny/SSI/medium and large scale sectors for the period indicated in the Government order subject to a ceiling of the amount equivalent to 100 per cent of the value of fixed assets. According to petition averments the Government order provided for a decision to the State Level Committee with regard to interpretation of the Government Order. 2.1 The second notification was issued on November 15, 1996 in exercise of the powers conferred under section 19-C of the Act. The Government exempted the tax in respect of the goods manufactured and sold by the unit mentioned in column (2) of the table annexed thereto for a period of 5 years from the date of commencement of commercial production. The first notification which was the basic notification did not contain any such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited to the sales tax account. Neither in the invoice nor in their books of account there is any mention that an amount is recovered by way of tax. Extracts of the accounts and the certificate from the auditor are produced at annexure G. Petitioner was obliged to keep track of the period as well as the extent of the exemption availed by him and the reminder quantum of the exemption availed by him and the remainder quantum of the exemption that remained to be availed. The notification fixed the limit for medium and large scale industries as five years from the date of commencement of commercial production subject to a ceiling of the amount equivalent to 100 per cent of value of fixed assets invested by him in the new plant and then ensure that the exemption is claimed only up to that extent. Petitioner has to notionally assume what sales tax would have been levied but for this exemption and keep record of this figure. Petitioner has filed the sales tax maintenance account in this regard. 2.3 The assessing authority completed the assessment proceedings for the assessment year and granted exemption on the turnover relating to new unit showing the eligibility of exemption and quant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nting incentive has to be read as a whole. They refer to the scheme to contend that the condition of the incentive scheme requires that the option either for exemption or for deferred payment can be exercised only before production commences. The petitioner chose the option of exemption of tax. When its lapses were discovered and these steps were taken by the Government to recover the tax in respect of which default has been made, petitioner cannot seek refuge under the plea of deferred payment. This plea, if accepted, would make the incentive scheme prevail over the mandatory requirement to observe the provisions and obligations under the Sales Tax Act. They further say that the petitioner cannot approbate and reprobate. Petitioner cannot say that no tax has been collected and yet plead at the same time that the deferral clause comes into effect, totally ignoring the important circumstance that the question of deferred payment of tax can only arise only if tax has been collected and not paid. They further say that the method of accounting of the petitioner is only to violate the Act. They further say that the present situation comes under section 28(6)(i) and (iii). The satisfac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty in the given circumstances. He invited my attention to a policy dated March 15, 1996 providing for concession/incentives. According to him sales tax deferment and sales tax exemptions are provided in the said policy. He refers to the second notification to contend that the first notification is the mother and the second notification cannot override the first notification. In the first notification there is no such clause providing for automatic cancellation and such condition according to him is arbitrary and unsustainable. 4.1 In so far as the main argument of collection by the petitioner is concerned, he explains the history of the case to contend that the Government itself granted the tax concession to the petitioner. Petitioner has two units, one taxable unit and the other one non-taxable unit. Just because the price is same it does not mean that collection is made by the petitioner as a tax. He refers to me the various invoices to contend that no tax is collected by him. In fact he refers to me section 18 and other provisions to say that he could not have collected the tax. He also says that the respondents issued a notice on an earlier occasion with regard to violation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Advocate-General would say that the price is inclusive of sales tax which indicates collection of tax. Alternative plea of deferral itself would show that collection is made by the petitioner. Learned Advocate-General says that invoices are misleading and they cannot be accepted. He further says that consumer interest is to be paramount and that no benefit is flowing to the consumer. In conclusion he says that matter requires remand. 6.. In reply, learned counsel for the petitioner invites my attention to the facts again and explains that the second notification has no legs to stand in the light of the first notification and in the light of the judgment of this Court. He relies on the various case laws in support of his case. 7.. After hearing the parties, I have carefully perused the material on record. The following points arise for my consideration: (a) Maintainability (b) Challenge to clause (iii) (c) Jurisdiction under section 28(6) (d) Relief. Reg. Maintainability 8.. Admittedly petitioner is challenging the orders passed by the third respondent. The orders are passed under section 28(6) for various years. The assessment proceedings were concluded earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iction in terms of section 28(6) of the Act. Let me see the facts of the case to determine this issue. Reg: Challenge to clause (iii) of the second notification: 9.. The first challenge of the petitioner is to clause (iii) of the second notification dated November 15, 1996. Petitioner's contention is that the first notification prevails over the second notification and the condition imposed in the second notification is ultra vires the second notification. Elaborate arguments have been advanced in this regard. Let me see the notification itself to find out as to whether a case is made out by the petitioner. The Government order dated March 15, 1996 was issued in order to achieve the objective of industrial development of the State. The said order provided for concessions and incentives for the growth of economy of the State. Notification dated March 15, 1996 provided for active participation of industries in development of infrastructure. It further provided for development of potential growth centres, human resources and entrepreneurship development, simplification of rules and regulations and transparent administration. Package of incentives and concessions in terms of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is no doubt true that the first notification may be an exemption notification but if the exemption notification is held to be supplemental in nature there is no need to quash the condition No. 3. 9.4 Learned Advocate-General, says that a careful reading of this clause would show that it is more beneficial to the petitioner and it is not in any way in violation of the first notification. 9.5 I have noticed both the notifications. The first notification did provide for withdrawal of concessions and provides a deferral for the remaining period. Second notification only provides such action in the event of the exemption unit collecting certain amount notwithstanding exemption. This Court in Brooke Bond Lipton India Limited v. State of Karnataka [1998] 109 STC 265 has ruled as under: "34. It is not the case of the State Government that the second notification was issued with an intention to in any way supersede or impliedly repeal the first notification to the extent of any inconsistency. On the other hand, the records produced before us clearly establishes that the second notification was issued merely as a follow-up action to effectuate the industrial policy pronounced by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner warranting action under section 28(6) of the Act. 10.1 Parties have argued elaborately on this issue. The learned counsel for the petitioner essentially invites my attention to section 28(6) conditions 1 to 4 to contend that no condition as such is available warranting any proceedings in a case like this. His further submission is, assuming that section 28(6) is available even then there is no collection by way of tax in terms of a notification requiring any additional tax or requiring withdrawal of concession or providing deferral in terms of the material on record. He refers to various judgments in this regard. Learned Advocate-General countering this argument would say that the conditions are available to the State. His further submission is that exemption cannot be misused or abused as it has to subserve the public interest. He invites my attention to the material facts to contend that the tax is part of the price and it would indicate that tax has been collected by the petitioner. After elaborate argument, let me see as to whether this order is with jurisdiction in terms of the power confirmed under section 28(4) of the Act. If the answer is, "yes", then the q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents submitted in form No. 3. The only bone of contention is that the declared turnover is in contravention of condition No. 3 and the second exemption notification. Therefore on facts it is clear that there is no failure on the part of the petitioner to declare the whole turnover either in the books or in the return submitted by the petitioner. Therefore the order suffers from want of jurisdiction in the absence of any finding with regard to failure to declare in terms of section 28(6)(i) of the Act. Section 28(6)(iii) again deals with claiming exemption on the turnover liable to tax declared in the return or the statements submitted in form No. 3. As I mentioned earlier, it is the case of the department that though the petitioner is eligible for exemption, he has violated condition No. 3 warranting action in the given set of circumstances. The exemption on the turnover liable to tax is different from exemption granted as a whole by way of concession. Both stand on a totally different footing. Therefore the petitioner-counsel is right in his submission that the entire order is without jurisdiction. In fact he has raised this contention even before the officer concerned, and have c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and background and whose glaring lapses occasionally come to our notice. The superior Court will ordinarily decline to interfere by issuing certiorari and all we say is that in a proper case of the kind mentioned above it has the power to do so and may and should exercise it. We say no more than that." 10.7 In Calcutta Discount Co. Ltd. v. Income-tax Officer AIR 1961 SC 372, a Constitution Bench of the Supreme Court has ruled as under: ".....It is well-settled however that though the writ of prohibition or certiorari will not issue against an executive authority, the High Courts have power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Courts, it is well-settled, will issue appropriate orders or directions to prevent such consequences. ....The existence of such alternative remedy is not however always a sufficient reason for refusing a party quick relief by a writ or order prohibiting an authority acting without jurisdiction from continuing such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary to express any opinion with regard to that aspect of the matter. The question as to whether the petitioner has collected the tax wrongly or in contravention of the notification, is left open. If the State still feels that action is needed in terms of the sales tax laws, liberty is available to the State to act in a manner known to law and if available to them in law. 13.. Before parting with this case, it is also necessary for this Court to make a few observations with regard to concessions and exemption if granted by the State in the larger interest of economic growth. In these days of commercial globalisation of business each country and for that matter each State has to compete with others for better investment and for better economy. At the same time while granting concession the interest of the consumer has to be given its foremost place. As a matter of fact, learned Advocate-General argued that the consumer interest is paramount in such cases. He also invites my attention to the judgment of the Supreme Court in the case of Amrit Banaspati Co. Ltd. v. State of Punjab [1992] 85 STC 493. The Supreme Court has ruled as under: "An exemption is a concession allowed to a cla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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