Time-bound tax exemption survives statutory transition where later notifications preserve the unavailed balance of the earlier concession.

A time-bound tax exemption granted under the earlier Karnataka Sales Tax regime survived the transition to the Karnataka Value Added Tax regime for its unexpired portion. The later notifications expressly preserved the unavailed balance of the earlier concession, and the State could not withdraw the accrued benefit by executive action in the absence of withdrawal in law or any overriding public interest. The text states that the petitioners, having set up tourism units in reliance on the exemption, were entitled to continue receiving the remaining exemption period, and the withholding endorsement, reassessment orders, and demand notices were unsustainable.

---

---

Issues: Whether the petitioners were entitled to continue availing the unexpired portion of tax exemption granted under the earlier notification issued under the Karnataka Sales Tax Act, 1957, and whether the department could withhold that exemption and levy tax under the Karnataka Value Added Tax Act, 2003.

Analysis: The earlier exemption notification under section 8-A(1) of the Karnataka Sales Tax Act, 1957 had not been withdrawn or rescinded. The petitioners had set up new tourism units in reliance on that promise and had already enjoyed the exemption only for part of the stipulated period. The later notifications issued under section 5(2) of the Karnataka Value Added Tax Act, 2003 expressly preserved the unavailed portion of exemption already granted under the earlier regime. In the absence of any demonstrated overriding public interest or any basis to require restoration of status quo ante, the State and its officers could not prematurely take away the accrued benefit.

Conclusion: The petitioners were entitled to the remaining period of exemption, and the endorsement withholding exemption, the reassessment orders, and the demand notices were unsustainable and liable to be quashed.

Final Conclusion: The writ petitions succeeded because the exemption already promised to the petitioners survived the change in tax law for the unexpired period and could not be withdrawn by the department in the manner attempted.

Ratio Decidendi: Where the Government has granted a time-bound tax exemption and has not withdrawn it in law, the exemption cannot be prematurely taken away by executive action merely because a new taxing statute has come into force, especially when the later statutory notifications preserve the unavailed portion of the earlier concession and no overriding public interest is shown.

---