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Judgment
Ashok Bhan, J.-Appellant is a company incorporated under the Companies Act, 1956 and is engaged in the manufacture and sale of cement. It is borne on the files of the Deputy Commissioner of Commercial Taxes (Assessments), Bangalore (hereinafter referred to as ''Sales Tax Officer'').
State Government issued a new Industrial Policy for the years 1993-98. The object of the issuance of the new Industrial Policy can be traced from the preamble to the new Industrial Policy which provides the giving of package of incentives and concessions to accelerate industrial development in Karnataka and to take the State to a prominent position in the industrial map of the Country. For attracting the setting up of industrial units or for inducing industrial units to expand their existing units to increase the capacity, certain concessions were proposed to be given including exemption from payment of sales tax or deferment of the same according to eligibility and entitlement of the applicant. The entitlement and eligibility was to be determined by the officers of the Industries Department for which a State Level Committee was constituted. An industrial unit subject to eligibility could file an application before the State Level Committee claiming either exemption or deferment of sales tax as per entitlement according to the new industrial policy.
Applicant made a fresh investment to the tune of Rs. 48 crores by putting up a unit for captive power generation plant. State Level Committee after examining the eligibility and entitlement of the applicant issued the certificate Annexure-B dated 16-6-1996.
Appellant filed its sales tax returns for the months of April, May, June and July 1996. The said monthly returns were not accepted by the Sales Tax Officer on the ground that the appellant was not entitled to exemption of sales tax and the certificate of exemption issued was not binding on the Assessing Authority. The returns filed were incomplete and incorrect. Sales Tax Officer issued a show cause notice to the appellant in pursuance to which the assessee filed its objections. The Sales Tax Officer after considering the objections so filed, proceeded to frame provisional assessments for the months of April, May, June and July 1996 vide its order dated 15th of October, 1996 by rejecting the sales tax exemption claimed by the assessee on certain portions of sales turnover of the cement on the strength of the Certificate Annexure-B.
Aggrieved against the order passed by the Sales Tax Officer, appellant filed Writ Petition Nos. 29825 to 29829 of 1996 inter alia praying that the orders passed by the Sales Tax Officer and the consequential demand notices be quashed.
Basically what was contended by the appellant before the Single Judge was that Sales Tax Officer was not competent to question the correctness of the contents of the eligibility certificate granted by the State Level Committee and was bound to accept the same. This contention was countered by the respondents saying that the Sales Tax Officer could reject the certificate produced before it if the same had not been issued in accordance with law.
Argument raised by the State Counsel prevailed with the learned Single Judge and it was observed that the Sales Tax Officer before whom the certificate is produced need not blindly accept the same thereby meaning that the same could be rejected by him. It was held that the Sales Tax Officer had rightly rejected the certificate issued by State Level Committee. Writ petition was dismissed. Aggrieved against the order passed by the Single Judge, present appeals have been filed.
Counsel for the appellant has repeated the argument which had been raised by him before the learned Single Judge. In support of his contention, he has relied upon a recent judgment of the Division Bench in W.A. No. 3791 of 1997, dated 13-3-1998 in the case of M/s. Wipro Infotech Limited, Mysore v Additional Deputy Commissioner of Commercial Taxes (Assessment-II), Mysore and Others, 1998(44) Kar. L.J. 627.
We have gone through the judgment rendered in M/s. Wipro Infotech Limited''s case, supra, with the help of the Counsel for the parties. The learned Judges after examining the matter raised before it in depth and after calling upon the Director of Industries-cum-Commissioner of Industrial Development representing the Department of Industries and Commissioner of Commercial Taxes representing the Department of Sales Tax to file their affidavits explaining the course to be adopted in case there is conflict between the two departments regarding interpretation of the certificate issued by the State Level Committee held at para 20 and para 22 as follows:
"20. Keeping in view the statutory provisions, the legislative intendment and the stand taken by the contesting parties, we hold that the Assessing Authority under the Act, for the purposes of determining the eligibility and the entitlement, is legally bound to accept the factual aspects which are to be covered by a certificate required to be issued and produced before him as per the procedure laid down under the notification including the amount of investment which is certified to be eligible for the said purpose".
"22. It is also necessary to be clarified that if the Assessing Officer discovers any factual error either apparent on the face of the record or even otherwise, then, he can request the concerned officers of the Industry Department to rectify the certificate after hearing the industrial unit concerned. We also find it advisable to observe that if the concerned officer does not take prompt or desired action in the matter, then the Commissioner of Commercial Taxes, at his level, can refer the matter to the State Level Committee whose decision has been given a finality under clause (k) of the Government order reproduced above".
From the perusal of the order of the Division Bench, it is evident that the observations made by the learned Single Judge in the impugned judgment run counter to the observations made by the Division Bench and to that extent, it cannot be held to be a good law. Observation of the learned Single Judge to the extent that the Sales Tax Officer was not bound by the certificate issued or that he could ignore the same, cannot be accepted in view of the observations made by the Division Bench in M/s. Wipro Infotech Limited''s case, supra.
Appeal is accepted and the order of the Single Judge is set aside. Writ petition is allowed. It is held that the Sales Tax Officer is bound by the certificate issued by the Industries Department under the new industrial policy. The assessment framed by the Assessing Authority to the extent that it includes sales tax on the exempted items is set aside. The demand notices issued for payment of exempted sales tax are also quashed. However we reserve liberty to the Sales Tax Officer in terms of paragraph 22 of the Division Bench judgment extracted above to approach the concerned officer of the Industries Department if he is of the opinion that any factual error either on the face of the record or otherwise has crept in while issuing the certificate. If the Sales Tax Officer files such representation with the concerned officers of the Industries Department, then the officers of the Industries Department on prima facie satisfaction of the objections raised by the Sales Tax Officer, may issue notice to the appellant to show cause as to why the certificate issued earlier be not recalled/amended. Appellant shall be given sufficient opportunity to counter the show cause notice. Thereafter it shall be open to the concerned officers of the Industries Department to either reaffirm its earlier certificate or to withdraw/modify the same in accordance with law. Till the order is withdrawn or modified, the Sales Tax Officer remains bound to accept the certificate.
The learned Counsel for the appellant pointed out that during the pendency of the appeal in pursuance to the demand notices issued by the Sales Tax Officer, the appellant has paid the sales tax demanded from him and prays that appropriate directions be issued regarding the amount deposited by the appellant. In the natural course of events, authorities are required to refund the tax collected by them in case the orders of assessments is set aside but keeping in view the peculiar facts of the case, instead of refund, we order that the appellants shall be entitled to adjust the amount paid under the demand notices which have been set aside, against any future demands, monthly or otherwise. It is clarified that in case the objections filed by the Sales Tax Officer are sustained by the officers of the Industries Department and because of that, the appellants becomes ineligible to the exemption of sales tax or a part thereof, then the appellants shall be bound to redeposit the amount of sales tax on a demand created by the sales tax authorities. The appeal is allowed in the above terms with no order as to costs.