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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 ..... , it is more of a formality of accounting that amount as against the total amount of exemption from payment of tax during the relevant period and nothing more. If that is so, there cannot be a failure of the object or purpose of the notification if the petitioner did not make payment of tax collected in order to account for the amounts to be adjusted as against the entitlement. Though the petitioner filed its monthly returns, nevertheless is inconsequential in the light of the clause 5 of the notification, annexure A, the compliance of which would sequentially enable the Revenue to adjust the amounts as against the entitlement. The law laid down in Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal [2010 (11) TMI 13 - SUPREME COURT OF INDIA] 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance 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 period of 10 years from the date of commencement of commercial production. It is further asserted that the Department of Industries and Commerce, Government of Karnataka, issued eligibility certificate dated October 12, 2001 certifying that the petitioner was eligible to avail of tax exemptions on local and inter-State sales of own manufactured goods for a total amount of ₹ 351.26 crore over a period of 10 years commencing from April 1, 2001 to March 31, 2011 and also allowed exemption from tax on local and inter-State sales of own manufactured goods with effect from April 1, 2001. 2. The State Government is said to have issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 days from the date of such payment. The petitioner, it is said, entertained a bona fide belief that in respect of the 22 tax periods for which only returns were filed, it was permissible for the petitioner to pay the net tax even after the expiry of the time-limit of 20 days specified in section 35 of the KVAT Act, entitled to refund of the net tax. While such payment of net tax and refund thereon within 15 days was more of a procedural requirement since the actual object of the notification was to extend exemption from the payment of tax and that it would be in order that proceedings are drawn up by the concerned aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to May 2007, which was rejected on the premise that the petitioner was required to pay the full amount of net tax of ₹ 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 ₹ 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 notification did not mandate payment of interest by the petitioner on either delayed payment or non-payment of the amount of tax collected, placing reliance upon the decision of this court in Commissioner Of Central Excise and Service Tax, Bangalore v. Bill Forge Private Limited, Bangalore [2012] 72 Kar.L.J. 315 (HC)(DB), holding that interest payable to Government would be only to the period for which the Government was deprived of tax revenue and not beyond, following the decision of the apex court in the case of Pratibha Processors v. Union of India [1996] 11 SCC 101, explaining the ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 required to collect tax on the sale of manufactured goods, since under the KVAT Act every sale is taxable, and pay net tax as per the Act and thereafter claim refund, to be adjusted towards unavailed portion of the tax concession extended under the KST Act. Notification-annexure A provides for payment of interest by the Revenue if there is any delay in effecting refund of the said sum. It is asserted that the petitioner having failed to pay net tax along with the return filed, is liable to pay interest under section 36 of the KVAT Act for bela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions 69(1) and 10(5) of the KVAT Act adjusting the refund of ₹ 16,25,57,154 towards Central Sales Tax Act for the period April 2011 to June 2012 and therefore balance refundable is ₹ 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 ₹ 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 submits that the notification, annexure A, does not require the petitioner to physically make payment of the tax collected in terms of the KVAT Act since such a tax is exempted and therefore non-payment along with submission of the monthly return is of no consequence. Elaborating the said submission, points to the conditions in the notification-annexure A granting exemption from payment of tax as a public policy for new industries and the formality of filing the returns or payment of the tax collected is only to account for the amount t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate 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 respondent-Revenue, perused the pleadings and examined the orders impugned, the core question for decision-making is, whether the petitioner is liable to pay interest on delayed payment or non-payment of tax collected under the KVAT Act in terms of the notification, annexure A? 17. There is no dispute that the petitioner, an industrial unit registered under the KST Act was extended an exemption from payment of tax up to ₹ 351.26 crores during the period of 10 years commencing from April 1, 2001 to March 31, 2011, had utilized on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ler 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. (9) The industrial unit claiming tax exemption under this notification shall file an application before the jurisdictional Joint Commissioner of Commercial Taxes within 30th April, 2005, giving details of the extent and period of tax exemption extended, availed and the balance, the relevant notification under which it was availing the tax exemption and the date from which it intends to claim tax exemption under this notification. (10) The jurisdictional Joint Commissioner of Commercial Taxes shall issue a certificate of entitlement regarding the tax exemption available to the industrial unit under this notification, within ten days from the date of fili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant 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. 21. Yet again section 38 of the KVAT Act provides for imposition of certain strict criteria in the matter of submission of monthly returns, specifically given a go-bye as indicated in clause 5 of the notification, annexure A. In other words, the industrial unit will not be deemed to have been assessed to tax though returns are submitted but subjecting the refund to assessment on production of books of account. All the conditions, when comprehensively read, do not indicate that they must be strictly construed, having regard to the object and purpose sought to be achieved by the exemption. Non-compliance with the condition of deposit of the tax collected by the petitioner does n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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