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TMI Blog2024 (11) TMI 282X X X X Extracts X X X X X X X X Extracts X X X X ..... nothing placed on record to establish that either the petitioner or Gamesa were registered as dealer under the provisions of the Act, 1979 when the supply contract was entered between the petitioner and Gamesa - the petitioner was not entitled to the benefit of the notification dated 31.03.2000 and claim exemption. This Court by Order dated 03-07-2024 called upon the petitioner to place on record the certificate issued by the Department of Energy, Government of Karnataka, certifying that the petitioner is a renewable energy project, its date of commencement, its date of commercial generation and its eligibility for exemption from tax. Unfortunately, the petitioner has failed to produce any of the above documents. A perusal of the clauses of the supply contract establish beyond doubt that the petitioner and Gamesa were consensus-ad-idem over the liability of payment of entry tax, in as much as they agreed that the cost of WTGs included the entry tax, if any. The petitioner has also claimed the benefit of the notification dated 18.12.2010, when it filed its reply to the notice issued by the authorities under the KVAT Act, 2003. Therefore, the petitioner cannot now contend that it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sector and energy efficiency. 4. The petitioner contends that, in the year 2015, Siemens Gamesa Renewable Power Private Limited (hereinafter referred to as Gamesa ) sought to set up and administer a wind energy plant in the State of Karnataka and accordingly submitted a proposal to the State Government. This proposal was accepted and by way of a government order dated 16.12.2016, the petitioner was allotted 50 MW out of 200 MW allotted to a company named M/s GM Navarra Wind Energy Private Limited in Babaleswara and Mulavada village of Vijaypura district. 5. The petitioner contends that Gamesa offered to it, to execute the work of installation of a wind-energy based power generation plant having an operational capacity of 50 MW at Babaleswar for production and supply of electricity to the distribution companies. The petitioner accepted the offer and entered into an agreement/ supply contract dated 05.07.2016 with Gamesa relating to the supply of Wind Turbine Generators and for commissioning the project. The investment of the petitioner in the project at Vijayapura district was approximately 440 crores. 6. The petitioner contends that, Clause 2.1.3 of the supply contract, specified t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion from payment of entry tax as per the Government order dated 19.01.2010, at the time of filing his first monthly or quarterly statement under the KTEG Rules. In each of the subsequent years for which tax exemption was claimed, the entrepreneur was bound to produce the above certificate within 60 days of the commencement of the year certifying that the registration of his project is valid for the year. 10. The petitioner contends that notification dated 31.03.2000 applied specifically to wind mills and therefore, the petitioner was exempted from payment of entry tax covered under the definition of 'dealer'. It was thus under the bona fide belief that it was exempt from paying any entry tax on any components used in relation to a Wind Power Project. It is contended that, even otherwise, Gamesa has undertaken to discharge the liabilities under the KTEG Act, 1979, in respect of the Project, as Gamesa was also covered under the definition of Dealer under the KTEG Act, 1979. The petitioner therefore, did not take an action under the KTEG Act, 1979, as it believed in good faith that it was not required to do so. 11. It is contended that the notification dated 31.03.2000 applie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the petitioner and that the petitioner had not obtained the exemption certificate from the Department of Energy. The petitioner therefore, before this court challenging the aforesaid impugned order. 15. The learned Senior counsel for the petitioner urged the following contentions: (i) That the notification dated 31.03.2000 exempted the entry tax on all kinds of Wind mills parts and accessories thereof brought into any local areas for consumption, use or sale. He contends that the impugned assessment order is passed based on the notification dated 18.12.2010 which is a general notification providing for exemption on Entry of plant and machineries and Capital goods brought for the Purpose of establishing captive power generation plant into the local area by an entrepreneur for use in setting up a Renewable Energy Project . He contends that the notification dated 31.03.2000, being a specific notification applicable to wind mills and parts would prevail over a general notification dealing with goods involved in a Renewable Energy Project. While drawing a distinction in the various types of Renewable Energy Project, he contends that, the 2000 notification is not applicable to a solar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o have brought or caused to be brought the goods into the local area. Therefore, liability to pay the entry tax is on such dealer but not the contractor with whom the dealer entered into the contract. It contended that notification dated 18.12.2010 is the latest notification, which is comprehensive in nature which covers entry of all capital goods, plant and machineries for setting up a Renewable Energy Project. It is contended that the wind turbine generators were also covered under this notification. It is contended that the petitioner has acknowledged the applicability of notification dated 18.12.2010, in its reply dated 15.12.2017. However, when the petitioner was called upon to produce the exemption certificate, it took a u-turn and fell back upon the earlier notification dated 31.03.2000 and the clarification of the commissioner of commercial taxes issued in the year 2006-07. It was contended that the notification dated 18.12.2010, being later in time, it is specifically applicable to entrepreneurs bringing in plant and machineries or capital goods into a local area for the purposes of generating Renewable Energy. He contended that, respondent is empowered to prescribe restri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dged the applicability of the notification dated 18.12.2010. However, when it realized that it did not follow the procedure contemplated under the notification dated 18.12.2010, it relied upon the earlier notification dated 31.03.2000 to claim exemption. It is also contended that petitioner was chosen to establish the Wind Power Project under the Energy Policy 2009-14 and hence it was governed by the notification dated 18.12.2010 which was issued under Section 11A of the KTEG Act, 1979. It is contended that since the petitioner was not registered under the provision of the KTEG Act, 1979 and did not obtain the exemption certificate, it was bound to pay the entry tax as levied. 17. The learned Advocate General representing the respondents contended that the petitioner had established the unit under the energy policy 2009-14 at which point in time, the exemption notification applicable was 18.12.2010, which fact was acknowledged by the petitioner when it issued the reply dated 15.12.2017 but claimed that the liability to pay the entry tax is upon the contractor. He further submitted that the petitioner cannot now backtrack and claim that the exemption notification dated 31.03.2000 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndaki villages of Vijayapura Taluk and district from M/s G.M Navarra wind energy Pvt Ltd to M/s PTC energy Limited. Accordingly M/s PTC Energy Limited has entered into an agreement with KREDL on 16-01-2017 (ii) Pursuant to (i) above the Company plans to develop, design, engineer, procure finance, construct, own, operate and maintain a wind energy based electric power generating station, herein after defined as the project, with a gross capacity of 24MW at Kakhandaki villages of Vijayapura Taluk and District and desires to sell electricity generated in the said project to HESCOM which is at present engaged in the purchase, supply and distribution of electricity has agreed to purchase electricity generated in the said project (here in after defined) from the company on the conditions set forth herein. 20. A perusal of the above establishes beyond doubt that the petitioner was granted permission to establish the wind mills at Bableshwar during the year 2016. 21. The State Government by its Energy Policy 2009-14, provided amongst other things, granted exemption from payment of entry tax in accordance with the Karnataka Industrial Policy, 2009-10. The industrial Policy, 2009-10, provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of three years and on inputs and raw materials excluding petroleum products was for a period of five years. 24. Under Section 3 of the Act, 1979, entry tax shall be levied and collected on goods specified in the first schedule and reads as follows: 3. Levy of tax.- (1) There shall be levied and collected a tax on entry of any goods specified in the FIRST SCHEDULE into a local area for consumption, use or sale therein, at such rates not exceeding five percent of the value of the goods as may be specified retrospectively or prospectively by the State Government by notification and different dates and different rates may be specified in respect of different goods or different classes of goods or different local areas. 25. Section 11A of the Act, 1979, enables the state government to exempt or reduce tax payable on goods or class of goods or persons or class of persons and reads as follows: 11A. Power of State Government to exempt or reduce tax.- (1) The State Government may, if in its opinion it is necessary in public interest so to do, by notification and subject to such restrictions and conditions and for such period as may be specified in the notification, exempt or reduce eithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he powers conferred by Section 11-A of the Karnataka Tax on Entry of Goods Act, 1979 (Karnataka Act 27 of 1979), the Government of Karnataka being of the opinion, that it is necessary in the public interest so to do, with effect from the nineteenth day of January, 2010 hereby exempts the tax payable under the said Act: - (i) On the entry of plant and machinery and capital goods including those brought for the purpose of establishing captive power generation plant, into a local area caused by an entrepreneur for use in setting up a renewable energy project including a cogeneration project in terms of Government Order No. EN 354 NCE 2008, dated 19th January 2010, for a period of three years from the date of commencement of the project implementation; and (ii) On the entry of any goods into a local area caused by an entrepreneur for use as inputs, component parts and consumables (excluding petroleum products) in the renewable energy project including a cogeneration project set up in terms of Government Order No. EN 354 NCE 2008, dated 19th January, 2010, for a period of five years from the date of commercial generation of electricity in such project. commencement of commercial generat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change the Scope of Contract in compliance with new Applicable Laws, shall be borne by the Employer. b) The Parties shall, mutually agree on the adjustment to any terms of this Contract so as to negate any effect of such Change in Law, on the obligations to be performed by the Parties under this Contract. Where it is not possible to negate the effect of such Change in Law, Parties shall agree on a mechanism. including but not limited to adjustment to the terms of this Contract, whereby the adverse effect of such Change in Law on the affected Party's obligations under this Contract is mitigated. 32. Clause 9.1 of supply contract dealt with the indemnity on the part of Gamesa which is extracted below; 9. INDEMNITY 9.1 Contractor agrees to indemnify and hold harmless the Employer from and against any and all Claims and Losses suffered or incurred by the Employer for: a) any failure on its part to pay Taxes including any and all liability, any Claim and/ or Loss is suffered arising out of Article-2 of the Contract Agreement; b) any non-compliance or violation of Applicable Law by it; c) breach of its representations and warrants contained in this Contract; d) physical damage by it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the notification. One of the documents, was that the entrepreneur was eligible for exemption from payment of entry tax as per the Government order dated 19.01.2010. In respect of each of the subsequent years for which the tax exemption is claimed under the notification, the entrepreneur is required to produce a certificate from the Department of Energy, Government of Karnataka within 60 days from the date of commencement of the year certifying that his registration of the project is valid for that year. 35. The Assistant Commissioner of Commercial Taxes (Enforcement), Nippani, issued a notice under Section 79 read with Section 82(1) under the Karnataka Value Added Tax Act, 2003 (hereinafter referred to as KVAT Act, 2003 ), pointing out certain observations made and called for objections for determination of tax liability. The respondents have placed on record a reply dated 15.12.2017, addressed to the Assistant Commissioner of Commercial Taxes (Enforcement), Nippani to the notice under Section 79 of KVAT Act, 2003, wherein the petitioner contended as follows: As per the notification bearing No.FD10CET210 of Government of Karnataka, our company is eligible for exemption under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no conflict between the notifications dated 31.03.2000 and 18.12.2010. Consequently, respondent No. 2 passed an order under 5B and 5C of the KTEG Act, 1979, demanding entry tax of Rs. 6,71,05,727/- and interest at 1.5% p.m amounting to Rs. 4,38,33,735/-. However, penalty under Section 20B (1) of the KTEG Act, 1979, was dropped due to non-filling of returns by the petitioner. Following this, a notice of demand was issued on 02.07.2020 demanding a sum of Rs. 11,09,39,462/-. 39. In view of the aforesaid facts, the following question arises for considerations: i) Whether the petitioner was entitled to claim the benefit of the exemption notification dated 31.03.2000 ? or Whether the notification dated 18.12.2010 was applicable to the petitioner? ii) Whether the notification dated 31.03.2000 was superseded by the notification dated 18.12.2010? 40. Under Section 11A of the KTEG Act, 1979, the State Government is entitled to exempt specified class of persons or Class of dealers or Goods or Class of goods or All or any goods or class of goods from the tax payable under the KTEG Act, 1979. A perusal of the notification dated 31.03.2000 shows that exemption was granted to dealers with effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble for registration under Section 10 of the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957) [or Section 22 of the Karnataka Value Added Tax Act, 2003 (Karnataka Act 32 of 2004)], or (b) who brings or causes to be brought such goods into a local area or takes delivery or is entitled to take delivery of such goods, the aggregate value of which is not less than [five lakh rupees] in a year, shall get himself registered under this Act in such manner on payment of such fee and within such period as may be prescribed. The registration shall be renewed from year to year on payment of the prescribed fee until it is cancelled: Provided that every manufacturer who buys or causes to be brought any goods into a local area or every dealer who brings or causes to be brought any goods into the State, shall get himself registered under this Act, if the aggregate value of such goods brought into a local area or into the State, as the case may be, is not less than one lakh rupees in a year: Provided further that the Commissioner may notify the website in which an application shall be made electronically. 47. Clause (iii) to Sub-section (2) of Section 4 mandates even an occasional dealer sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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