9911796707
TMI Blog2016 (2) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ter-alia challenging the re-assessment orders for the tax periods April 2005 to March 2009 and the consequent demand notices issued by the prescribed authority. 3. The appellants sought exemption from levy of value added tax as envisaged in the framework agreement, (hereinafter referred to as 'the FWA' for short), dated 3.4.1997 entered into by the respondent No.1 with appellant No.1. 4. The learned single Judge vide impugned order, disposed of the aforesaid writ petitions observing that the appellants prayer for exemption from levy of tax under the provisions of the KVAT Act relates to policy matters, which has to be considered by the Government of Karnataka and a decision to be taken thereof. The learned single Judge accordingly directed the appellants to appear before the Government and the Government shall take policy decision and pass appropriate orders in accordance with law. However, so far as payment of arrears of tax is concerned, appellants are directed to exhaust the remedy available under the law. 5. Being aggrieved by the said Judgment and order passed by the learned single Judge, the appellants have filed these appeals. 6. Sri. K. P. Kumar, learned senior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture project which is eligible for the benefit of tax concession in terms of Government Order dated 26.12.1997. 8. It is also pointed out by learned counsel that the Government of Karnataka issued another notification No.FD.35.CSL.98[II] Bangalore dated 1.8.1998 exempting the tax payable by a dealer i.e., a contractor or sub contractor under section 5B and 6B or 17[6] of the KST Act on turnover relating to transfer of property in goods involved in execution of works contract to a dealer undertaking infrastructure project in terms of the Government Order dated 26.12.1997. This exemption provided by the Government of Karnataka was extended from time to time till 13.1.2005. It is contended that subsequent to the KVAT Act coming into force from 1.4.2005, despite making several representations requesting the appellants to honour the exemption clause i.e., exemption promise in the state taxes as per FWA, the same was not given effect to by the respondents by issuing appropriate notifications exempting the appellants from the levy of tax under the KVAT Act, which it was required to do. 9. Learned counsel vehemently contended that in view of express assurances of the respondent No.1 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idor Project (BMIC). 10. Learned counsel further submitted that the appellants are primarily not challenging the reassessment orders in view of the FWA, exempting the appellants from payment of taxes. The learned single Judge, driving the appellants to approach the respondent No.1 for necessary benefits, is contrary to the terms and conditions stipulated in the FWA and accordingly seeks for setting aside the Judgment and order passed by the learned single Judge and to allow the writ petitions. 11. The assessee-company is seeking for tax exemption under the KVAT Act placing reliance on the assurance or promise granted by the Government of Karnataka by the FWA dated 3.4.1997. 12. It is contented that the appellants had made its establishment based on the promises made by the Government of Karnataka to extend certain benefits to the assessee including the tax benefits which was in fact implemented and acted upon by issuing two different notifications dated 1.8.1998 under the KST regime in respect of infrastructure project. Having implemented the said FWA, the Government of Karnataka was bound to extend the same, even in the VAT regime. 13. It is further contended that it is the ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC 98] 15. On the contrary, learned counsel Sri. K.M. Shivayogiswamy, appearing for the respondent-State would contend that Article 12 of the FWA deals with taxes. Article 12.1 specifies that Government of Karnataka shall extend or make available to the company and its affiliates in connection with the project, certain concessions, incentives and holidays in respect of the state and local taxes, duties. The Government of Karnataka had assured the appellantcompany and its affiliates only to extend the reduction and elimination of state and local taxes. The learned counsel would refer to the definition clause of 'Affiliate' as defined under Article 1.2 of FWA. 'Affiliate' means in relation to any Party, any person in which that Party holds, or any Person that holds in that Party, directly or indirectly, at least a ten percent [10%] beneficial equity interest and includes a subsidiary as defined under section 4 of the Companies Act of India.' 16. It is argued that the Government of Karnataka had entered into an agreement as per the FWA to grant tax concessions, incentives and holidays in respect of state and local taxes only to the appellant-company and its af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaking an infrastructure project in terms of the Government Order dated 26.12.1997. These two Notifications are general notifications, not specifically issued to the assessee-company. Such notifications issued under the KST regime exempting the tax with respect to infrastructure project was extended from time to time till 13.1.2005. However, subsequent to the KVAT Act coming into force, no such power is vested with the State Government to extend tax concession, incentive and holidays to the dealers except as provided under sections 5[1] and 5[2] of the KVAT Act. 18. Our attention was drawn to the provisions of sections 5[1] and 5[2] of the KVAT Act, to emphasize that, section 5[1] of the KVAT Act provides for exemption only in respect of the goods and not to any class of persons and section 5[2] of the KVAT Act provides for exempting the new industrial units. 19. According to the learned counsel, the assesseecompany is entitled to tax benefit as per section 5[2] of the KVAT Act i.e., the Government of Karnataka can only reimburse or refund the net tax paid by the assesseecompany. As such, Government of Karnataka issued the Government Order dated 7.12.2011 extending the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of refund of tax collected on purchases or sales made by such industrial unit). 24. Section 8-A of KST Act reads thus: "8-A. Power of State Government to notify exemptions and reductions of tax. (1) The State Government may, by notification, make an exemption, or reduction in rate, in respect of any tax payable under this Act, (a) on the sale or purchase of any specified goods or class of goods, at all points in the series of sales by successive dealers; or (b) by any specified class of persons, in regard to the whole or any part of their turnover; or (c) on the sale or purchase of any specified class of goods by any specified class of dealers in regard to the whole or part of their turnover." 25. A conjoint reading of these two provisions under KST Act and KVAT Act postulates that a specific provision was available under the KST Act to extend the exemption of taxes to the class of dealers, whereas, under Section 5(1) of the KVAT Act, goods specified in the first schedule and any other goods as may be specified by the State can be exempted from payment of tax. Section 5(2) of the KVAT Act provides for granting exemption to an industrial unit providing the tax benefit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 8-A of the KST Act to a notification issued in respect of class of dealers, though it was specifically on the sale of goods i.e., machinery, equipments and construction material. On the repeated requests and representations made by the appellant No.1, Government Order dated 7.12.2011 is issued by the Government extending the benefit of reimbursement or refund of tax as envisaged in section 5[2] of the KVAT Act. It is an admitted fact that the appellant No.1 has set up its establishment subsequent to the FWA dated 3.4.1997 on the assurance of certain benefits which were to be extended to the appellant No.1 and its affiliates. 28. It is the specific case of the Revenue that State Government is not empowered to grant exemption or reduction in rate in respect of any tax payable under the KVAT Act on the sale or purchase of any specified goods by any specified class of dealers. A reading of Section 5(1) of the KVAT Act postulates that goods specified in the First Schedule and any other goods that may be specified by a notification by the State Government would be exempt from the tax payable under the Act, subject to such conditions and restrictions, as may be specified in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson producing the same variety of those fabrics. In that context it is held thus: "9. It was next contended that even if it were held that R.8 is valid and constitutional, the notifications are bad in so far as they exempt certain classes of persons and not classes of goods from the excise duty. It is argued that the tax is a duty of excise on 'any goods' and item 19 has reference to a particular variety of goods, namely, 'cotton fabrics'; the exemption if any could have been granted in respect of any particular specified variety of cotton fabrics and not with reference to the persons producing the same variety of those fabrics. There is apparently a fallacy in this argument. The tax is on the production of any goods, but it is payable by persons producing such goods. The exemption also is with reference to such goods as come within the description of excisable goods. The respondent No. 5 has been exempted from payment of excise duty in respect of goods produced by the weavers. It has not been exempted from the payment of a personal tax, like Income Tax. The exemption must, therefore, have reference to the same kind of tax which would otherwise have been leviable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssory estoppel." 32. It is settled law that the doctrine of promissory estoppel being an equitable doctrine, it must yield when the equity so requires. 33. In the case of Nestle India Limited (supra), the facts before the Apex Court was relating to the provisions of Punjab General Sales Tax Act, 1948 wherein, the Government's decision to abolish purchase tax on milk was considered in the light of the Chief Minister, Council of Ministers and the Finance Department's decision to abolish purchase tax on milk with effect from 01.04.1996, the sales tax authorities having taken the consequential action of issuing circulars, consequently, the milk producers did not pay the purchase tax along with their returns for the year 1996-97 as required under the Rules framed under the Act. In that context, it is held though, the statutory provisions required exemption to be granted by notification, nevertheless, the Court having found that the essential pre-requisites for the operation of promissory estoppel had been established, directed the issuance of exemption notification considering the various Judgments of the Apex Court rendered on the issue of Doctrine of Promissory Estoppel. Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le by a contractor or subcontractor on the turnover relating to transfer of property in goods involved in execution of work contract to a dealer undertaking an infrastructure project subject to certain conditions which is a general notification, not specifically issued to the appellant-company or its affiliates. Appellant No.4 would have availed the benefit of the said notification but the same cannot be compelled to be continued under KVAT Act unless it is an affiliate of the appellant-company, in terms of the FWA. Hence, the Appellant company No.4 in whatever manner has no right to claim exemption on the strength of the FWA entered into between the Government of Karnataka and Appellant No.1-company. The arguments advanced by the learned senior counsel on this issue requires to be negated. We cannot direct the State Government to issue any notification exempting the nonaffiliates of the appellant company from the tax payable under the provisions of the KVAT Act in terms of FWA. The fourth appellant, if aggrieved by any assessment/reassessment order, has to take recourse of statutory appeal available under the KVAT Act. 36. For the foregoing reasons we pass the following: ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
