APPLICOMP (INDIA) LTD. Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) THE petitioner, a company incorporated under the Companies Act 1956, a dealer registered under the Karnataka Sales Tax Act, 1957, for short, "the KST Act" and Karnataka Value Added Tax Act, 2003, for short, "the KVAT Act", as well as the Central Sales Tax Act, 1956, for short, "the CST Act", asserts that the Government of Karnataka issued an order bearing No. Cl. 30 SPC 96 dated March 15, 1996 announcing the industrial policy for a period of five years commencing from April 1, 1996 to March 31, 2001 for short the industrial policy 1996 -2001, offering incentives to mega projects with investment in fixed assets in excess of Rs. 100 crore. The incentives, according to the petitioner, in terms of the notification, were inclusive of tax exemptions, such as deferment of tax payable on the goods manufactured by the mega projects and sold within the State and in the course of inter -State trade or commerce. The promise held out in the "industrial policy of 1996 -2001" was the basis for the petitioner to cause investment of Rs. 351 crores to set up an industrial unit in Sy. No. 6 -11, Krishna Sagar Village, Attibele, Bangalore -562107, for manufacture of consumer electronic durables such as TV sets, refrigerators, washing machine, air -conditioners, etc., and commenced production with effect from April 2001. Following the industrial policy, it is said, the Finance Department of the Government of Karnataka issued special Notification No. FD 296 CSL 99(1) dated July 20, 2000, invoking section 19C of the KST Act, 1957, in the name of the petitioner extending exemption from tax on sales of goods manufactured by the petitioner for a period of 10 years from the date of commencement of commercial production. By yet another Notification No. FD 196 CSL 99(2) dated July 20, 2000 invoking section 8(5) of the CST Act, 1956, exemption was granted from payment of tax on inter -State sales of own manufactured goods for a period of 10 years from the date of commencement of commercial production. It is further asserted that the Department of Industries and Commerce, Government of Karnataka, issued eligibility certificate dated October 12, 2001 certifying that the petitioner was eligible to avail of tax exemptions on local and inter -State sales of own manufactured goods for a total amount of Rs. 351.26 crore over a period of 10 years commencing from April 1, 2001 to March 31, 2011 and also allowed exemption from tax on local and inter -State sales of own manufactured goods with effect from April 1, 2001. The State Government is said to have issued Government Order No. FD 303 CSL 99 dated January 7, 2000 to discontinue tax based incentives and concessions to new industries and investments under various industrial policies, with an exception to continue the incentives already offered and committed by the Government, until completion of the period of eligibility of such incentives.

(2.) THE KST Act, 1957, was replaced by the KVAT Act, 2003, with effect from April 1, 2005. Sub -section (2) of section 5 of the KVAT Act invests a jurisdiction in the State to issue notifications for continuation of incentives to the extent of unavailed quantum and eligibility periods by way of refund of tax collected and paid. Keeping with the decision to continue the incentives offered to industrial units under the KST Act for the full period of eligibility, the Government of Karnataka issued notifications dated April 18, 2005 effective from April 1, 2005 continuing the tax exemption and tax deferral to industrial units which had the benefit of incentives under the KST Act for the remaining period of eligibility and limited to the unutilized quantum of exemption or deferral. In addition, for industrial units that were previously granted exemption from tax, a Notification No. dated April 18, 2005 was issued continuing the exemption by way of refund of net tax paid on a monthly basis, though the grant of exemption from tax is opposed to the scheme of the value added tax, and hence, the modified procedure for payment of net tax and refund thereon. It is asserted that clause (4) of the notification requires the Revenue to refund the net tax within 15 days from the date of filing of the monthly return and payment of net tax by the industrial units.

(3.) ACCORDING to the petitioner, annexure C details the monthly returns filed, net tax paid and refunded for the period from April 2005 to March 2011; the material particulars in annexure D are in respect of 22 tax periods intervening May 2005 to May 2009 for which only monthly returns in forms VAT 100 were filed, and net tax not paid due to serious financial difficulties.