NEELAKANTESHWAR OIL Vs. STATE OF KARNATAKA …

JUDGEMENT

(1.) THE petitioner is a registered dealer under the Karnataka Sales Tax Act, 1957 (in short "the Act"). THE petitioner established a new small-scale industrial unit for manufacture of edible oil and edible oil cake by crushing groundnuts, which went into commercial production on April 29, 1994.

(2.) BY Notification No. FD 239 CSL 90 (I), dated June 19, 1991, the Government of Karnataka, in exercise of its powers conferred under sub-section (1) of section 8-A of the Act, exempted with immediate effect the tax payable under the said Act in respect of the goods manufactured and sold by new industrial units described in column (2) of the table given in the said notification, located in the zones specified in column (3) of the table, to the extent indicated in column (4) and during the period specified in column (5) of the said table. Item (1) of the said table exempts tiny/small-scale/medium/large-scale industrial units situated in zone II (specified in annexure I to Government Order No. CI/138/SPC/90 dated September 27, 1990), the extent of exemption being 100 per cent tax exemption without any monetary limit and the period of exemption being three years from the date of commencement of commercial production.

(3.) THE petitioner contends that the 100 per cent exemption that is granted under the notification dated June 19, 1991, extends not only to sales tax payable on the "goods manufactured and sold" by the petitioner, but to all taxes payable under the Karnataka Sales Tax Act by the petitioner and that would include the purchase tax payable on raw materials purchased by it, for manufacturing goods. THE petitioner contends that the effect of the notification granting 100 per cent exemption is to exempt the petitioner from payment of any tax, that is sales tax, purchase tax or turnover tax under the KST Act in respect of its taxable turnover; and consequently the petitioner is not liable to pay purchase tax in regard to the raw materials (groundnuts) purchased by it for manufacturing oil and oil-cakes; the petitioner relied on the decision of this Court in Anitha Cashew Industries v. Commercial Tax Officer, II Circle, Udupi reported in [1993] 90 STC 163 and contended that the exemption provision should be construed liberally so that the exemption granted, does not become illusory.