Ugar Sugar Works Limited vs The Additional Commissioner of Commercial Taxes, Zone-1 and Others

N. Kumar, J.—The assessee has preferred this appeal against the order passed by the Additional Commissioner of Commercial Taxes, Zone-1, Bangalore, by virtue of the power conferred u/s 22-A(1) of the Karnataka Sales Tax Act, 1957, setting aside the order passed by the Appellate Authority and restoring the order of the Assessing Authority. The subject-matter of this proceedings pertains to 2002-2003 and 2003-2004. Both the orders are passed on 29-3-2007. By the said orders, the Assessing Authority held that, the assessee-company is liable to pay purchase tax since it has failed to achieve minimum average quantity. Therefore, it is not eligible to claim deferment of purchase tax. In other words, they recalled the subsidy given.

Aggrieved by the said order, the assessee preferred an appeal before the Appellate Authority. The Appellate Authority held that, the authorities were not justified in holding that the assessee is not eligible for grant-in-aid for the amounts paid to sugarcane growers towards subsidy attributable to the cane crushed for production of sugar exported out of the territory of India and consequently to have recalled the reimbursements received by the appellant by grant-in-aid and to have added the said amounts to the amounts of purchase tax levied. Therefore, it disallowed the said levy.

The Additional Commissioner of Commercial Taxes, Zone-1, Bangalore, initiated suo motu revisional proceedings on the ground that the said order passed by the Appellate Authority is prejudicial to the interest of the revenue. The assessee entered appearance and supported the order of the Appellate Authority. However, overruling the said objections, he set aside the order of the Appellate Authority and restored the original assessment order passed. It is against the said order, the present appeal is filed.

In fact, similar issues arose in the case of the assessee for the earlier period 2001-2002. In those proceedings the assessee did not get any relief before the lower Appellate Authority. He challenged it before the Karnataka Appellate Tribunal. The Karnataka Appellate Tribunal went into the question in detail in STA No. 87 of 2006 and by a separate order referring to the various Government Orders held that, payment of incentive price to cane growers and further waiver of purchase tax on sugarcane which is crushed for manufacture of sugar meant for export are two separate distinct issues. They are not inter-dependent. They cannot be linked. Linkage would lead to absurd situations and therefore, it set aside the orders passed by the authorities and granted relief to the assessee.

The revenue challenged the said order by filing STRP No. 203 of 2011. The said revision came to be withdrawn and accordingly was dismissed as withdrawn on 22-9-2011. The reason for withdrawing is, they were satisfied on a combined reading of both the notifications issued by the Government that there is no provision in either of the said Government Orders to recall the subsidy already given to the cane growers and the circumstances in which such sugarcane is produced by sugar factories for the purpose of manufacture of sugar which has exported outside the country during the year 2001-2002. The payment of subsidy to cane growers at Rs. 15/- per ton through the factory and the waiver of purchase tax on sugarcane payable by sugar factories on purchase of sugarcane used or for manufacture of sugar exported outside the country are on different footings and are not inter-linked. They are entirely on different footings on which the department has no issue. Therefore, they accepted the finding of the Karnataka Appellate Tribunal and withdrew the revision filed before this Court. For the same reasons stated above, the order impugned in this case is liable to be set aside and the order passed by the Appellate Authority is to be restored. Hence, we pass the following order.-

(i) Appeal is allowed.

(ii) The impugned order is hereby set aside.

(iii) The order passed by the Appellate Authority is restored.

By virtue of the interim order passed by this Court on 25-2-2010, the assessee has deposited 50% of the amount demanded. In view of the fact that the appeal is allowed, the said amount shall be refunded.