Lamps India vs Deputy Commissioner of Commercial Taxes and Others

R. Gururajan, J.—Petitioner in these petitions is seeking for various prayers. Petitioner is challenging clause (iv) of the Explanation II of the notification dated June 7, 1989 as repugnant to Indus- trial Policy G.O. No. CI 146 SPC 88 dated December 5, 1988.

Petitioner, a partnership company, is a SSI unit and an ancillary to M/s. Mysore Lamps Works Ltd., Malleshwaram, Bangalore and is engaged in the manufacture and sale of HPMV burners and lamps, etc. Petitioner set up a manufacturing unit at Mulbagal during 1990 on the basis of the impugned Industrial Policy. A copy of the Government Order is filed at annexure A. Sales tax concession was implemented in terms of section 8-A of the Act. Notifications dated June 7, 1989 are filed at annexures B and C. Petitioner was issued with eligibility certificate by the Department of Industries in terms of annexure D. Assessment order was passed by the Assistant Commissioner of Commercial Taxes for the year 1994-95. Petitioner understood the Government Order as a liability to the extent of 50 per cent on the petitioner and 50 per cent as tax exemption. Petitioner''s understanding was accepted by the Additional Deputy Commissioner. Thereafter, the matter was reopened and subsequent assessment orders were passed in terms of annexures F and G. Petitioner is challenging annexures F and G and also clause (iv) of Explanation II of notification dated June 7, 1989 on various grounds.

Respondents have entered appearance and they have filed their statement of objections.

Heard the learned counsel for the parties. Petitioner invites my attention to the understanding of the Deputy Commissioner to say that the petitioner is fully justified in availing of 50 per cent in terms of the Act. According to the petitioner, the understanding is in consonance with the Policy. He says that the subsequent assess- ment orders are liable to be set aside in the light of the misunderstanding of the circular. Per contra, Government supports the order. After hearing, I have carefully perused the material on record.

Annexure A is an order issued by the Government of Karnataka. It provides for package of incentives and concessions for new industries in Karnataka. The order is dated December 5, 1998. Clause (I) provides for zones. Clause (II) provides for investment subsidies. Clause (III) provides for sales tax concession. It provides for eligibility for sales tax concession over a period of five years for industries in Zone II and seven years for industries in Zone III subject to limits prescribed in annexure II. Annexure II deals with small-scale industries. It provides for sales tax exemption of 50 per cent of the value of fixed assets over a period of five years from the date of commercial production subject to a total ceiling of rupees twenty lakhs. In case of small-scale units in Zone III the ceiling is thirty lakhs. Notification dated June 7, 1989 provides for a table. Insofar as SSI units are concerned, it provides for exemption for a period of 7 years from the date of commercial production or from the date of notification whichever is later. Explanation II provides for no eligibility under certain circumstances. It states that the provisions of the notification shall not be applicable to the turnover on which tax is collected by the eligible units under the provisions of the Karnataka Sales Tax Act.

In the case on hand, it is seen from the material on record that the petitioner is issued with a certificate dated November 9, 1993 in the matter of exemption of sales tax. It is further seen from the material on record that the petitioner had collected sales tax and the petitioner was assessed at 50 per cent of the liability. This order was passed by the Additional Deputy Commissioner. Thereafter noticing the error, respondents issued a notice. After hearing, they have chosen to say that in the light of the petitioner having collected the tax he is not eligible for any exemption. Petitioner in these circumstances has chosen to challenge clause (iv) of Explanation as violative of the Policy.

Policy provides for sales tax exemption up to 50 per cent of the value of tax assessed over a period of 7 years. The Policy does not provide for any liability of 50 per cent in the matter. However, the same has been clarified in terms of explanation that in the event of tax collection, the notification shall not be applicable. This cannot be said to run counter to the Policy. On the other hand, it is in aid of the Policy. Policy provides for sales tax exemption, which would mean no collection. If any dealer collects the tax and seeks exemption later it would be contrary to the Policy of exemption. Therefore clause (iv) of Explanation II cannot be set aside at the instance of the petitioner in the light of collection of tax by the petitioner. The argument of the petitioner with regard to understanding by the petitioner/Deputy Commissioner cannot be accepted. Exemptions are given as a special case and exemptions are to be understood in terms of the notification. Understanding/misunderstanding of the petitioner/ Deputy Commissioner is not a ground to set aside the clause.

Insofar as merits of assessment proceedings are concerned, admittedly they are appealable in character. Therefore I deem it proper to direct the petitioner to avail of the appeal remedy within four weeks from the date of receipt of a copy of this order. If any such appeal is filed within four weeks, in terms of this order, the appellate authority would consider the case on merits, in accordance with law and complete the proceedings within six months from the date of receipt of a copy of this order.

Ordered accordingly. No costs.