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TMI Blog2014 (7) TMI 533X X X X Extracts X X X X X X X X Extracts X X X X ..... sive of tax exemptions, such as deferment of tax payable on the goods manufactured by the mega projects and sold within the State and in the course of inter-State trade or commerce. The promise held out in the "industrial policy of 1996-2001" was the basis for the peti tioner to cause investment of Rs. 351 crores to set up an industrial unit in Sy. No. 6-11, Krishna Sagar Village, Attibele, Bangalore-562 107, for manufacture of consumer electronic durables such as TV sets, refrigerators, washing machine, air-conditioners, etc., and commenced production with effect from April 2001. Following the industrial policy, it is said, the Finance Department of the Government of Karnataka issued special Notification No. FD 296 CSL 99(1) dated July 20, 2000, invoking section 19C of the KST Act, 1957, in the name of the petitioner extending exemption from tax on sales of goods manufactured by the petitioner for a period of 10 years from the date of commencement of commercial production. By yet another Notification No. FD 196 CSL 99(2) dated July 20, 2000 invoking section 8(5) of the CST Act, 1956, exemption was granted from payment of tax on inter-State sales of own manufactured goods for a per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated April 18, 2005, annexure A, the Joint Commissioner of Commercial Taxes (Admn.) issued an entitlement Certificate No. JCCT/EN-32/2005-06 dated May 7, 2005, annexure B, certifying that the petitioner is entitled to avail of exemption from tax on local and inter-State sales for a total amount of Rs. 295.75 crore being the unutilized portion as on April 1, 2005 during the remaining eligibility period from April 1, 2005 to March 31, 2011. 5. According to the petitioner, annexure C details the monthly returns filed, net tax paid and refunded for the period from April 2005 to March 2011;. the material particulars in annexure D are in respect of 22 tax periods intervening May 2005 to May 2009 for which only monthly returns in forms VAT 100 were filed, and net tax not paid due to serious financial difficulties. 6. It is the contention of the petitioner that under clause (4) of the notification dated April 18, 2005-annexure A, the petitioner could either file the monthly returns and pay the net tax within the specified time-limit of 20 days from the close of the previous month or after the expiry of the specified time, while the Revenue is required to refund the net tax within 15 day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia) Ltd. v. State of Karnataka) for extending the period of payment which was allowed and time extended by four weeks by order dated March 20, 2012, annexure G. It is thereafter that the petitioner paid Rs. 9,50,41,466 on April 16, 2012 and in terms of the notification, annexure A, the Revenue was obliged to refund the said amount to the petitioner on or before May 31, 2012. The failure on the part of the respondent-Revenue to refund the amounts deposited, led to several letters requesting refund of amount paid towards net tax for 6 tax periods from May 2005 to October 2005 and August 2006 to May 2007, which was rejected on the premise that the petitioner was required to pay the full amount of net tax of Rs. 32,02,92,610 relating to all the 22 tax periods by letter dated April 3, 2012, annexure J. 9. The petitioner filed its replies annexures K and L to the notice dated December 23, 2011 for payment of interest of Rs. 22,33,10,886, inter alia, pointing to clause (4) of the notification-annexure A and stating that, while, it is the obligation of the Revenue to refund the amount within 15 days of payment by the petitioner, failing which the amount would carry interest, the notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner Rs. 6,75,15,688 paid on March 17, 2012 and Rs. 9,50,41,466 paid on April 16, 2012 towards net tax for the months of May 2005 to October 2005;. August 2006 to May 2007, respectively. 13. Petition is opposed by filing statement of objections of the Revenue, inter alia, not denying the issue of notification, quantum of exemption of tax and the period of exemption, as also the issue of the exemption certificate by the Joint Commissioner. The respondent-Revenue, points to conditions (2), (3), (4) and (5) in the notification-annexure A to contend that the petitioner is required to collect the tax applicable under the KVAT Act on the sale of goods manufactured by it and pay the net tax along with the return prescribed under the Act with the jurisdictional authority, whereafter the Department is obliged to refund the said net tax paid within 35 days at the end of the month to which the return relates. If such a return is filed within the time specified under section 35 of the KVAT Act or within 15 days from the date of filing of the return, interest shall be paid for any delay in the refund. According to the Revenue, though the petitioner is exempt from payment of tax, is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justifiably levied interest under section 36(1) and penalty under section 72 of the KVAT Act. It is the further submission of the respondent-Revenue that the rectification order dated February 23, 2013-annexure R1 was passed invoking section 69(1) of the KVAT Act read with section 10(5) of the said Act, adjusting an amount of Rs. 15,77,35,446 out of Rs. 16,25,57,154 and that the petitioner is due and payable a balance of Rs. 48,21,708. In addition it is stated that a further rectification order dated May 20, 2013-annexure R2 was made invoking sections 69(1) and 10(5) of the KVAT Act adjusting the refund of Rs. 16,25,57,154 towards Central Sales Tax Act for the period April 2011 to June 2012 and therefore balance refundable is Rs. 8,24,71,104 and that the same when forwarded to the Joint Commissioner of Commercial Taxes for necessary approval, counter-signature was obtained on May 24, 2013, a voucher dated May 24, 2013 prepared for refund of Rs. 8.25 crores, hence what remains for consideration is with regard to levy of interest and penalty for the belated payment of tax amount in terms of the notification dated April 18, 2005. 14. The learned senior counsel for the petitioner subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty which has a penal character, should be geared to the actual amount of tax withheld and the extent of delay in paying the tax on the due date. 15. Per contra, learned Government Advocate seek to sustain the order impugned as being well merited, fully justified and not calling for interference. Learned counsel, while reiterating the averments set out in the statement of objections, in addition places reliance upon paragraph 34 of the decision of the Bombay High Court in Mahalaxmi Cotton Ginning Pressing and Oil Industries v. State of Maharashtra [2012] 51 VST 1 (Bom), wherein the decision of the Constitution Bench of the apex court in Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal [2011] 6 GSTR 369 (SC);. [2011] 1 SCC 236, is extracted. According to the learned counsel, the petitioner ought to have strictly adhered to and complied with the conditions in the notification-annexure A in order to seek exemption, since the mandatory requirement of the conditions must be obeyed or fulfilled exactly and having not done so, is disentitled to the reliefs. 16. Having heard the learned senior counsel for the petitioner and learned Government advocate for the responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (5) The industrial unit claiming tax exemption under this notification shall not be deemed to have been assessed based on the return filed by him and any refund made shall be subject to assessment requiring production of accounts in support of the return filed;. (6) The tax exemption extended in this notification shall not be available to an industrial unit on its sale of goods to another industrial unit which is claiming exemption of tax on its purchase in terms of the notification No. FD 56 CSL 2005(3), dated April 18, 2005. (7) On any claim of deduction of input tax by a registered dealer on his purchase from the industrial unit claiming tax exemption under this notification, on account of any sale in the course of inter-State trade or export outside the country of the goods purchased, the amount refunded to such industrial unit shall be repayable to the extent of input tax claimed by the purchaser. (8) The unit claiming tax exemption under this notification shall be eligible for input-tax rebate as specified under the said Act, while calculating the net tax payable by the industrial unit. &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The exemption under the notification annexure A is by way of a public policy of the State to encourage new industrial units to set up business in the State of Karnataka, more so, when the investments are more than Rs. 100 crores. The State, in its wisdom, extended the benefit of tax exemption by invoking sub-section (2) of section 5 of the KVAT Act, while section opens with a non obstante clause that is, "notwithstanding anything contained in the KVAT Act", though the submission of returns under the KVAT Act was shifted from annually to monthly and the tax collected by the petitioner was required to be accounted only to be adjusted against the exemption extended during the relevant period. This purpose is also highlighted by the State in its statement of objections at paragraph No. 6 supra. If this is the scope, object and purpose behind the condition requiring the petitioner to submit its monthly returns and also payment of the tax collected, indicates that the said procedure contemplated is only for the purpose of adjustment of the amount as against the total quantum of exemption from tax and to ascertain the period within which such availment is permissible and nothing more. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue could not have imposed interest by exercising a jurisdiction under section 36 of the KVAT Act. 25. In fact, the decision in Pratibha Processors' case [1996] 11 SCC 101, in the circumstances, has no application and there is no necessity to go into the merit of the submission made in the alternative by the learned senior counsel for the petitioner. 26. The law laid down in Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal [2011] 6 GSTR 369 (SC);. [2011] 1 SCC 236 supports the case of the petitioner in the matter of whether the conditions imposed in annexure A notification are to be construed strictly or otherwise. The apex court, having observed that mandatory requirements of conditions while seeking exemption must be obeyed or fulfilled exactly, nevertheless stated that at times, some latitude can be shown if there is failure to comply with some requirements, which are directory in nature and non-compliance of which "would not affect the essence or substance of the notification granting exemption". A reading of the statement of objections filed by the Revenue does not indicate that the non-compliance of the payment of tax collected by the petitioner under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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