2009 (4) TMI 950 - HC - VAT and Sales Tax

Court upholds dismissal of challenge against tax exemption notification amendment. Promissory estoppel not applicable. Compliance required for benefits.

The High Court upheld the dismissal of a challenge against a modified exemption notification under the Central Sales Tax Act and Karnataka Sales Tax Act. ... Sales tax exemption - inter-State sale of goods - power under sub -section (5) of Section 8 of the CST Act - Held that:- The impugned notification is issued by the State Government on the basis of the amendment made to Section 8(5) of the CST Act - No doubt sales tax exemption is granted in favour of the appellant's company from the year 1998 for a period of 12 years i.e., from the date of commencement of the production of its goods. In the meanwhile, the parliament, in exercise of its legislative powers, has made amendment to sub -section (5) of Section 8 of CST Act. On fulfillment of the requirements laid down in sub -section (4) by the dealer, sales tax exemption can be availed by the company. Incorporation of the said amended portion of sub -section (5) of Section 8 was notified to the company by issuing the notification impugned in the writ petition. The appellant dealer cannot contend that the amended provisions of sub -section (5) of Section 8 of CST Act is not applicable to it and therefore the impugned notification adding additional conditions are bad in law - The grant of sales tax exemption in favour of the appellant -company is a benefit. Therefore, the same cannot be claimed as a matter of right. The assessment order was passed for the period from 1 -4 -2004 to 31 -3 -2005 onwards as the appellant has not complied with the requirements of sub -section (4) of Section 8 of CST Act. Appeal dismissed. Issues:Challenge against an exemption notification under the Central Sales Tax Act, 1956 and Karnataka Sales Tax Act, 1957; Incorporation of new conditions to an existing exemption notification; Violation of promissory estoppel by modifying exemption terms; Interpretation of statutory provisions post-amendment.Analysis:1. The appellant challenged an exemption notification granted under the CST Act and KST Act, which exempted the company from sales tax on finished goods for 12 years. The State Government later modified the notification to add conditions related to Form 'C' and Form 'D' declarations. The appellant argued that this modification violated promissory estoppel as it changed the terms of the original exemption.2. The State Government justified the modified notification, stating it was in accordance with the CST and KST Acts. The appellant relied on the Supreme Court judgment in MRF Limited case to support their argument against the modification. The Single Judge dismissed the writ petition, leading to the appeal.3. The High Court examined the amendment to Section 8(5) of the CST Act, which required dealers to fulfill certain conditions for tax exemption. The appellant's sales tax exemption was granted before the amendment. The Court noted that the appellant must comply with the new conditions post-amendment to avail the exemption benefit.4. The Court emphasized that the grant of sales tax exemption was a benefit, not a right, and the amended provisions of Section 8(5) applied prospectively from 11-5-2002. The appellant's failure to meet the new conditions led to an assessment order for the period post-amendment, which the appellant did not comply with.5. The Court concluded that the appellant could not solely rely on the earlier conditions and ignore the additional requirements post-amendment. The Assessing Authority's proposition notices were valid, and the Single Judge's decision to dismiss the writ petition was upheld. The appeal was deemed meritless and dismissed without costs.