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TMI Blog2016 (6) TMI 903X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tax Act, 1957 ("the KST Act", for short) and the other under the CST Act. Under the policy of the State Government, a tax holiday of ten years was to be granted to information technology units from the date of commencement of commercial production. The petitioner- company has admittedly been granted the eligibility certificate under the said Policy and thus, was governed by the said notifications dated August 21, 1997. The procedure for grant of exemption had been provided for in the notifications issued under the KST Act, wherein it had been provided that "if an information technology industrial unit exercising the option for tax exemption, collects any amount by way of tax, it shall forthwith becomeineligible for tax exemption". By virtue of section 9(2) of the CST Act, the procedure under the KST Act was to be adopted for the CST Act also and thus, by the notification of the same date, i.e., August 21, 1997 issued under the CST Act, the petitioner-company was entitled to exemption under the CST Act by following the procedure provided in the KST notification. There is no dispute that the petitioner-company was subjected to Karnataka sales tax for sales within the State of Karn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the notification issued under the CST Act. For the tax period from April 1, 2005 till March 31, 2007, the assessee collected tax, both in the case of the Karnataka value added tax, as well as the Central sales tax, and deposited the same with the Government and thereafter claimed refund of the net tax, which was duly allowed to the assessee in both the cases, i.e., under the KVAT Act, as well as the CST Act. With effect from the tax period April 1, 2007, the benefit of payment of tax and thereafter claiming refund was continued to be allowed to the assessee under the KVAT Act, but was denied to it under the CST Act, primarily on the ground of the condition in the earlier notification dated August 21, 1997 issued under the KST Act, which provided that if the unit collects any amount by way of tax, it shall become ineligible for exemption. For the tax period after April 1, 2007, though the petitioner-assessee continued to deposit the tax so collected under the CST Act, but the refund of net tax was not given to it. The cases for the tax period from April 1, 2005 to March 31, 2007 were also reopened under the revisional power exercised by the Joint Commissioner under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ineligible for grant of exemption as provided in the notification dated August 21, 1997 under the KST Act, was applicable for both, i.e., the Karnataka sales tax as well as the Central sales tax, up to 2005 and thereafter, with effect from April 1, 2005, when the notification dated April 18, 2005 issued under the KVAT Act itself provided for collection of tax and then claiming refund of the net tax, the said condition that the unit would be ineligible if it collects tax, no longer remained for Karnataka value added tax as well as Central sales tax. It has further been contended that the output, input and net tax was clearly defined and described under section 10 of the KVAT Act, which was for sales within the State of Karnataka. However, though no Karnataka value added tax was chargeable for inter-State sales or for export, yet under section 20 of the KVAT Act, provision was made with regard to deduction of input tax on export and inter-State sales. The submission, thus, is that since by virtue of sub-section (2) of section 9 of the CST Act, the procedure prescribed for assessment, re-assessment, collection, etc., of Central sales tax was to be as per the KVAT Act (earlier KST A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) This notification shall not apply to:- (a) to (c) . . . (2) If an information technology industrial unit exercising option for tax exemption collects any amount by way of tax, it shall forthwith become ineligible for tax exemption. Notification dated August 21, 1997 under CST Act: In exercise of the powers conferred by section 19C of the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957) read with sub section (2) of the Central Sales Tax Act, 1956 (Central Act 74 of 1956), the Government of Karnataka, hereby- (i) exempts the tax payable under the said Central Sales Tax Act, 1956 in respect of goods manufactured and sold in the course of inter-State trade or commerce by new information technology industrial units which are eligible and opted for tax exemption under Notification No. FD 57 CSL 97(1), dated August 21, 1997 subject tothe condition that the aggregate of tax exemption availed of, if any, by the units under the said Notification together with quantum of tax exemption availed under this Notification shall not exceed the ceiling specified in Notification No. FD 57 CSL 97(1), dated August 21, 1997; or (ii) . . . Notification dated April 18, 2005 under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 56) shall not exceed the ceiling mentioned in the notifications issued under the Karnataka Sales Tax Act, 1957. Whereas, the Karnataka Sales Tax Act, 1957 has been replaced by the Karnataka Value Added Tax Act, 2003 (Karnataka Act 32 of 2004) on many of the goods. Now, therefore, in exercise of the power conferred by sub-section (5) of section 8 of the Central Sales Tax Act, 1956 (Central Act 74 of 1956) read with section 21 of the General Clauses Act, 1897 (Central Act 10 of 1897) and in partial modification of all the notifications issued on the subject, the Government of Karnataka hereby directs that with effect from April 1, 2005 the quantum tax exemption granted in all such notifications shall be subject to the condition that the aggregate of any tax exemption availed by the units under such notifications together with the quantum of tax exemption availed under any notification issued under the Karnataka Value Added Tax Act, 2003 shall not exceed the ceiling mentioned in the notifications issued under the Karnataka Sales Tax Act, 1957." The relevant section 10, sub-clauses (1) to (3) and section 20(1) of the KVAT Act, 2003, are reproduced below: "10. Output tax, input tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the tax or interest or penalty payable by such a dealer under this Act is a tax or interest or penalty payable under the general sales tax law of the State; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns, provisional assessment advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions, references, refunds, rebates, penalties, charging or payment of interest, compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly: Provided that if in any State or part thereof there is no general sales tax law in force, the Central Government may, by rules made in this behalf make necessary provision for all or any of the matters specified in this sub-section." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding given by the Tribunal with regard to ineligibility of the assessee/petitioner for being granted exemption only because it had collected tax, cannot bejustified in law. Even otherwise, the petitioner/assessee has, in good faith, paid the input tax and collected the output tax, both under the KVAT Act, as well as the CST Act and thereafter claimed refund of the net tax paid under both the Acts, on the basis that it was eligible for grant of exemption. Such position was accepted by the authorities under both the Acts and refund was actually granted to the assessee, which means that the Department itself had understood the notifications in the same manner as had been understood by the assessee. The subsequent revision by the Joint Commissioner, by invoking the provisions of section 63A of the KVAT Act, only for the purpose of the CST Act on the ground that assessee had collected tax, cannot be justified, inasmuch as the same benefit had been granted, and is being continued to be granted, to the assessee after April 1, 2005 in the case of the KVAT Act. As we have already noted above, the procedure under the KVAT Act was to be followed for Central sales tax also and thus, the re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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