Judgment:
(Prayer: These appeals filed under Section 24(1) of the Karnataka Sales Tax Act against the order dated: 21.1.2010 passed in No. SMR/KST/A & R-3/CR-75/09-10 on the file of the Addl. Commissioner Of Commercial Taxes, Zone-II, Bangalore, revising the appeal orders and restoring the orders of Re-Assessment passed by the assessing authority and etc.,)
RE: STA Nos.17/2010 & 122-123/2012:
1. These appeals under section 24[1] of the Karnataka Sales Tax Act, 1957 [for short KST Act] is by the assessee dealer and directed against the order passed by the Additional Commissioner of Commercial Taxes exercising his suo motu revisional powers under section 22-A of the KST Act.
2. The assessment period involved in these appeals are 2002-03, 2003-04 and 2004-05. Only one number having been assigned, we direct the assessee to pay deficit court fee and registry upon payment of deficit of court fee to assign the number.
3. The appeals are on the premise that the Additional Commissioner of Commercial Taxes while exercising suo motu revisional powers has committed an error and illegality in reversing the order passed by the Appellate Commissioner and in restoring the assessment order.
4. The question that arose was as to whether the appellant-dealer who without any dispute had the benefit of exemption in respect of its sales turnover including inter state sales turnover in terms of certain concessions given to new industrial establishments as per the Industrial Policy 1996 to 2001, could claim the benefit of the effectuating notification of this policy as per Government Order dated 15.11.1996 in respect of its inter states sales and in situations wherein exemption was claimed without the backup of production of C form and D form as the case may be.
5. The controversy arose in the background of the amendments to the provisions of sub-section [5] of section 8 of the Central Sales Tax Act, 1956 [for short CST Act] in terms of the amending Act No.20/2002 given effect to from 11.5.2002.
6. It is the case of the revenue that to effectuate the amendments and changes brought about, the State Government had issued a follow up notification dated 31.5.2002 and as a result of the amendment and this notification, a dealer who avails the benefit of exemption in terms of the Government notification dated 15.11.1996 can avail the same only by producing C form or D form as the case may be and not otherwise.
7. While there is no dispute that the Assessing Officer had not denied the benefit available to a dealer who effects inter state sales and produces forms C & D and on the other and had brought to tax inter state sales turnover at the rate as is provided under section 8[2] of CST Act in respect of inter state turnover of the assessee though claimed to have been sales in favour of registered dealers or the Government but had failed to file the declaration in Form C or Form D, the further question is only as to whether the assessee should have been denied the benefit of exemption also, in respect of inter state sales effected in favour of dealers other than registered dealers and the Government, though was so entitled to claim the exemption on the basis of the 15.11.1996 notification which had been issued by the State Government.
8. The Assessing Officer having taken the view that in the light of the amendment to sub-section [5] of section 8 of CST Act and the notification dated 31.05.2002, even though the dealer might have been subjected to tax on such inter state turnover at the higher rate as is indicate din section 8[2] of the CST Act, i.e., at 20% in the present case, nevertheless, such tax liability cannot be for reduction as against 80% of the fixed assets value which is the amount eligible for concession/exemption under the notification.
9. It is this aspect which became the bone of contention between the dealer and the revenue and in the appeal before the Joint Commissioner of Appeals, the assessee met with success with the Joint Commissioner opining that the dealer can avail of the benefit.
10. The Commissioner having set aside this order by exercising his revisional jurisdiction and having restored the order passed by the assessing authority, the assessee is before us in these appeals.
11. We have heard Sri. T N Keshavamurthy, learned counsel for the appellant and Smt. S. Sujatha, learned Additional Government Advocate appearing for the respondent State who have made submissions in some detail.
12. The main contention of Sri T N Keshavamurthy, learned counsel for the appellant is that the kind of benefit given to an entrepreneur who has set up a new industrial unit in terms of the notification of the year 1996 is in the nature of rebate or concession given; that is not actually in the nature of exemption, the tax liability is determined and in fact in the present case due to non production of C & D forms, the dealer ha already been assessed to tax at the regular rtes without giving the concessional rates as is available under section 8[1] of CST Act, but nevertheless even the rebate/concession is being denied which definitely is not the intention or object of the amendment or the notification; that the assessee dealer is entitled to claim set off as against the eligible amount and it matters little as to whether the rate of tax is as indicated in section 9[1] or section 8[2] of CST Act and also as to whether the assessee had produced C & D forms or not for claiming such concession.
13. In support of such submission, Mr. T N Keshavamurthy, learned counsel for the appellant has placed reliance on the Judgment of the division Bench of Allahabad High Court in the case of YAMAHA MOTORS ESCORTS LIMITED v. STATE OF U.P. & OTHERS reported in [2011] 38 VST 116 [All], by referring to paragraphs 11 to 16 of this Judgment, submission is that the Allahabad High Court had occasion to examine an analogous notification issued by the U.P. Government in the context of the very provisions of section 8[5] of CST Act as amended; that it has been held that the dealer is entitled for concession or benefit of the nature as had been, extended earlier notwithstanding the notification and the amendment to section 8[5] of CST Act, and submits that this view of Allahabad High Court has to be accepted and the appeals allowed on such premise.
14. It is also brought to our notice that the Allahabad High Court was seized of the matter in the background of the matter having gone before the Supreme Court earlier and on this limited aspect, the matter having been remitted to the High Court, It is submitted that the restricting provisions in terms of amendment brought about in section 8[5] of CST Act are not attracted to the present transactions which are in the nature of sales effected in favour of unregistered dealer or dealers who have not issued C forms and sales in favour of the Government, but not covered by issue of D forms etc.
15. On the other hand, countering such submission, Smt. S. Sujatha, learned Additional Government Advocate has very vehemently submitted that thee is virtually no scope for contending so on behalf of the assessee; that the matter is virtually concluded by the division Bench Judgment of this court rendered in the case of M/s. VOLVO INDIA PVT. LTD., v. STATE OF KARNATAKA & OTHERS rendered on 2.4.2009 in W.A. No.2417/2007 affirming the view taken by the single Bench of this court and upholding the validity of the notification dated 31.5.2002.
16. Strong reliance is placed on this Judgment to submit that when once validity of this notification has been upheld by this court and what all the Commissioner has done is only to effectuate the notification in the manner a understood; that there is no scope for interference in these appeals and in the wake of this pronouncement, this court should necessarily dismiss the appeals.
17. It is also submitted that the view taken by the division Bench of Madhya Pradesh High Court in the case of M/S. VENKATESH SURGICAL COTTON v. THE STATE OF MADHYA PRADESH rendered on 7.2.2012 in WP No.11427/2008 and connected matters, supports the submissions and the notification dated 31.5.2002 virtually ensures that an assessee cannot claim any exemption without the production of C form or D form.
18. It is also submitted that the argument of rebate or concession is not available; that it is nothing but an exemption given referable to section 8[5] of CST Act; that while there can be a dichotomy of nature of exemption granted under section 8-A of KST Act as the very notification grants exemption in respect of both sales tax turnover as well as central sales tax turnover, in the sales tax enactment there is general exemption granted under section 8-A and specific exemption granted under section 19-C of KST Act, but such dichotomy or discretion is not available in the CST Act and section 8[5] of CST Act being the only statutory provision available for granting exemption and with section 8[5] of CST Act now being amended and the requirement of section 8[4] of CST Act being made mandatory and in the instant case there being no dispute that the assessee had not produced forms C & D in respect of turnover for which concession or exemption had been denied, there is no way of the assessee claiming exemption and therefore submits appeals have to be dismissed.
19. We have been through the legislative history of the amendment and it is submitted that amendment was necessitated and Parliament stepped in to bring about such amendment to the enabling exemption provision in v of the rampant malpractice that prevailed earlier by unscrupulous dealers claiming transactions which were not necessarily in favour of Government and registered dealers, also as inter state sales turnover covered by section 8[1] of CST Act and therefore the Parliament having consciously brought about the legislative change by amending the requirement of production of forms C & D for claiming exemption, the dealer cannot avail such exemption without production of C & D forms.
20. It is also submitted that the notification is only to effectuate the amendment to section 8[5] of the CST Act and validity of this notification also having been upheld, the assessee and dealers are bound to fall in line with this requirement failing which they lose the benefit of exemption.
21. We have perused the orders under appeal, looked into the record and bestowed attention to the submissions made at the Bar.
22. There is no doubt that the question arises in the context of claim for exemption or if it is to be described in pedestrian manner, the mode of availing the concession!
23. An exemption can be claimed only in a manner provided for by the statute and not in any other manner and definitely not by way of an analogy or logical deduction. There is no doubt or dispute that the appellant-assessee is otherwise is entitled for the benefit of the notification of the year 1996 being a new industry. The only question is whether in terms of the amendments to section 8[5] of CST Act, a dealer like the appellant can claim any exemption under the earlier notification of the year 1996 in the wake of amendment to section 8[5] of CST Act and in the wake of follow up notification dated 31.5.2012.
24. For such purposes, we are of the view that a comprehensive reading of section 8 of CST Act is very necessary. Section 8 of CST Act reads as under:
8. Rates of tax on sales in the course of inter-State trade or commerce:-
(1) Every dealer, who in the course of inter-State trade or commerce, sells to a registered dealer goods of the description referred to in sub-section (3); shall be liable to pay tax under this Act, which shall be two per cent of his turnover or at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sales tax law of that State, whichever is lower:
Provided that the Central Government may, by notification in the Official Gazette, reduce the rate of tax under this sub-section.
(2) The tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of goods in the course of inter-State trade or commerce not falling within sub-section (1), shall be at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sale tax law of that State.
Explanation For the purposes of this sub-section, a dealer shall be deemed to be a dealer liable to pay tax under the sales tax law of the appropriate State, notwithstanding that he, in fact, may not be so liable under that law.
(3) The goods referred to in sub-section (1)
(a) xxx
(b) are goods of the class or classes specified of the certificate of registration of the registered dealer purchasing the goods as being intended for re-sale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or in the telecommunications network or in mining or in the generation or distribution of electricity or any other form of power;
(c) are containers or other materials specified in the certificate of registration of the registered dealer purchasing the goods, being containers or materials intended for being used for the packing of goods for sale;
(d) are containers or other materials used for the packing of any goods or classes of goods specified in the certificate of registration referred to in clause (b) or for the packing of any containers or other materials specified in the certificate of registration referred to in clause(c).
(4) The provisions of sub-section (1) shall not apply to any sale in the course of inter-State trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority.
Provided that the declaration is furnished within the prescribed time or within such further time as that authority may, for sufficient cause, permit.
(5) Notwithstanding anything contained in this section, the State Government may on the fulfillment of the requirements laid down in sub-section (4) by the dealer of it is satisfied that it is necessary so to do in the public interest, by notification in the Official Gazette, and subject to such conditions as may be specified therein, direct.-
(a) that no tax under this Act shall be payable by any dealer having his place of business in the State in respect of the sales by him, in the course of inter-State trade or commerce, to a registered dealer from any such place of business of any such goods or classes of goods as may be specified in the notification, or that the tax on such sales shall be calculated at such lower rates than those specified in sub-section (1) as may be mentioned in the notification;
(b) that in respect of all sales of goods or sales of such classes of goods as may be specified in the notification, which are made, in the course of inter-State trade or commerce, to a registered dealer by any dealer having his place of business in the State or by any class of such dealers or by any class of such dealers as may be specified in the notification to any person or to such class of persons as may be specified in the notification, no tax under this Act shall be payable or the tax on such sales shall be calculated at such lower rates than those specified in sub-section (1) as may be mentioned in the notification.
(6) Notwithstanding anything contained in this section, no tax under this Act shall be payable by any dealer in respect of sale of any goods made by such dealer, in the course of inter-State trade or commerce to a registered dealer for the purpose of setting up, operation, maintenance, manufacture, trading, production, processing, assembling, repairing reconditioning, re-engineering, packaging or for use as packing material or packing accessories in a unit located in any special economic zone or for development, operation and maintenance of special economic zone by the developer of the special economic zone, if such registered dealer has been authorized to establish such unit or to develop, operate and maintain such special economic zone by the authority specified by the Central Government in this behalf.
(7) The goods referred to in sub-section (6) shall be the goods of such class or classes of goods as specified in the certificate of registration of the registered dealer referred to in that sub-section.
(8) The provisions of sub-sections (6) and (7) shall not apply to any sale of goods made in the course of inter-State trade or commerce unless the dealer selling such goods furnishes to the prescribed authority referred to in sub-section (4) a declaration in the prescribed manner on the prescribed form obtained from the authority specified by the Central Government under sub-section (6) in sub-section (5) duly filled in and signed by the registered dealer to whom such goods are sold.
Explanation For the purposes of sub-section (6), the expression special economic zone has the meaning assigned to it in clause (iii) to Explanation 2 to the proviso to section 3 of the Central Excise Act, 1944 (1 of 1944).
25. We notice from the scheme of this section that section not only is charging section, but also provides the rate of tax vis-à-vis in respect of which sales has been effected by a dealer to purchaser outside the State.
26. Sub-section [1] of section 8 of CST Act takes care of inter state sales effected by registered dealer in favour of registered dealers or Governments. The rate of tax one can notice is on a lower side and not more than 4% during the relevant time and now it is 2%.
27. Sub-section [2] of section 8 of CST Act covers other situations of inter state sale of goods i.e., sales not in favour of registered dealers and Governments. Here again, the case being declared goods or otherwise have a bearing on the rate of tax.
28. Sub-section [4] of section 8 of CST Act controls the operation of sub-section [1] of section 8 of CST Act by indicating that the fact of inter state sales being in favour of either registered dealer or Government, should be evidenced by the purchaser providing a statutory form known as C form in the case of registered dealer and D form if the sale is in favour of the Government.
29. Sub-section [5] of section 8 of CST Act is the provision enabling the State Government to issue notifications granting exemptions vis-à-vis either on class of dealers as is provided in clause [a] or vis-à-vis classes of goods as enabled under clause [b] of this section.
30. The words on the fulfillment of the requirements laid down in sub-section [4] by the dealer, have been inserted by the amending Act of the year 2002. It is because of such amendment, the question has arisen as to what is the meaning of this provision and what is the effect of sale in the wake of amendment and in what manner it affects the claim for exemption though either the class of goods or class of dealers have been notified for grant of exemption.
31. Submission of Smt. S. Sujatha, learned Additional Government Advocate is that the amendment having been to the main part of section 8[5] of CST Act and being in common to both clauses [a] and [b], amendment has to necessarily be read as one governing situations occurring under both clause [a] and [b] and therefore there is no escape from the requirement of production of C & d forms for claiming exemption.
32. We have examined this submission in some detail. We find that the requirement of sub-section [4] of section 8 of CST Act in itself is for the purpose of claiming the benefit of the lower rate of tax as indicated in sub-section [10 of section 8 of CST Act. It is therefore that on a proper and harmonious reading of section 8[5] of CST Act after the amendment and even after inserting of the reference to the requirement of section 8[4] of CST Act by a dealer requirement in sub-section [4] of CST Act is one which is confined and restricted to a situation covered by the provisions of sub-section[1] of section 8 of CST Act and it cannot in any way affect or control the exemptions granted vis-à-vis tax liability and the rate of tax as indicated in section 8[2] of CST Act i.e., the amendment cannot have any bearing or effect in respect of exemptions granted to inter state sales turnover either the class of dealers with reference to the goods or otherwise who are not registered dealers and not Government. In other words, restriction brought about by the amendment cannot regulate or effect an exemption if has been granted or is to be given in respect of inter state sales turnover effected in favour of non registered dealers and other Governments.
33. We are of the view that this is the only proper way of understanding of the amendment as we find that sub-section [5] of section 8 of CST Act is an enabling provision to grant exemptions in situations where it is a case of levy of tax under the CST Act.
34. We are not inclined to accept the contentions urged on behalf of the State to read the changes brought about by the amending Act of 2002 as one which governs both clauses [a] and [b] for the reason that insofar as clause [a] is concerned, we notice that the sales are all in favour of registered dealer and the Government in clause[b] pertains to inter state sales in favour of other persons other than registered dealers and Governments are also covered. It is therefore we have to attribute a meaning to the legislature having made a conscious distinction between the clauses [a] and [b] of section 8[5] of CST Act from which we can understand is that restriction imposed will have a bearing and proper meaning if it is only with reference to inter state sales effected in favour of registered dealers and the Governments.
35. We have perused the Judgment of Allahabad High Court and with respect while we are in agreement with the conclusion arrived at, we have preferred to give our own reasoning as indicated above and we would not like to express any opinion with regard to the line of reasoning indicated in the Judgment by the Allahabad High Court.
36. We also hold that while the validity of the notifications by this court and therefore the notification operating in the manner in which it is so provided does not in any way affect or make difference to the manner in which the very provisions of section 8[5] operates and is to be interpreted and understood after the amendment.
37. As we are expressing the view as above, on a reading of the plenary legislation and the notification issued being only to effectuate that, we do not find any conflict in the view expressed by the division bench earlier upholding the notification and the present view taken by us in this Judgment. We are of the view that, this is the only possible way of giving full effect to the exemption provision under section 8[5] of CST Act and at the same time effectuating the restrictions imposed therein insofar as inter state sales turnover effected in favour of registered dealers and the Governments, are concerned, while the benefit of exemption is claimed.
38. The appeals are allowed. The order of the revisional authority is set aside in the wake of the understanding of the provisions of section 8[5] of CST Act after amendment and order of the appellate authority is restored.
39. We make it clear that in the context of dispute raised in these appeals being confined to exemption claimed in respect of inter state sales turnover which has been effected in respect of turnover not supported by production of C or D forms, this decision does not in any way seek to avoid requirement of production of C or D forms in respect of sales effected in favour of registered Dealers and Governments and non production resulting in denial of the exemption n terms of the amended provisions.
40. We also make it clear that we have not examined the justification or otherwise of the rate at which the turnover has been subjected to tax as that is not the issue before this court in these appeals and the rate as determined by the Assessing Officer is retained.
RE: STA Nos.18/2010 & 124/2012:
41. These appeals under section 24[1] of the KST Act is by the assessee dealer and directed against the order passed by the Additional Commissioner of Commercial Taxes exercising his suo motu revisional powers under section 22-A of the KST Act.
42. The assessment period involved in these appeals are 2003-04 and 2004-05. Only one number having been assigned, we direct the assessee to pay deficit court fee and registry upon payment of deficit of court fee to assign the number.
43. These appeals are allowed in terms of the Judgment rendered above in STA No.17/2010.
RE: STRP Nos.134 & 137-138 of 2008:
44. These revision petitions by the State Government under section 20[3] of KST Act are directed against the order of the Karnataka Appellate Tribunal and raising the question as to the entitlement or otherwise of the benefit of exemption under the notification of the year 1996 as a dealer who has set up a new industry in the notified areas and who has effected inter state sales and has claimed benefit/exemption, but denied because of non declaration in C forms by registered dealer.
45. Identical questions having been examined in the above appeals and the questions having already been answered in the above appeals, we opine that the revision petitions are to be dismissed and the questions raised in these appeals are answered against the revenue and in favour of the assessee, as the dealer is otherwise entitled to claim the benefit of the notification so long as the inter state sales is not in favour of registered dealers and therefore the requirement of production of declaration form-C being not attracted and therefore the benefit being not denied to a dealer claiming the benefit of exemption notification of the year 1996 and so long as the dealer has paid taxes at the rate as indicated in section 8[2] of the CST Act.
46. Therefore, the revision petitions filed by the State are dismissed.