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2014 (7) TMI 533 - KARNATAKA HIGH COURTLevy of tax and interest - incentives to mega projects - assessee instead of depositing tax adjusted the same with refund entitlement - conditions of the notification mandatory or not - 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 - Held that:- petitioner-industrial unit is entitled to tax exemption limited to unavailed portion of the period and extent of tax exempted, but 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 said Act to the jurisdictional authority, while, the State Government is obliged to refund the said amount within the time specified under section 35 of the KVAT Act or within 15 days from the date of filing of the return and failure to do so, would entail the State Government to pay interest for the period of delay. Even if payment of the tax collected by the petitioner is made to the State in terms of condition No. 4, 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 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 the KVAT Act, apparently would not affect the essence or substance of the notification, annexure A, granting exemption from payment of tax. Petitioner though did not make payment of the tax collected under the KVAT Act along with some of the monthly returns submitted and for some months having made delayed payments, the Revenue could not have imposed interest by exercising a jurisdiction under section 36 of the KVAT Act - Decided in favour of assessee.
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