CST refund under revised incentive scheme cannot be denied by importing an earlier tax-collection bar.

The 2005 sales tax incentive scheme required a distinction between the earlier exemption model, which barred tax collection, and the later Karnataka VAT/CST procedure, which expressly required the unit to collect tax, pay the net tax, and obtain refund. The commentary explains that the earlier disqualifying condition could not be mechanically carried forward into the post-2005 notification, particularly where the Department had already accepted returns and granted refund under the same later procedure for an earlier period. It also notes that exemption notifications for new industries are to be construed liberally once eligibility is established, so the refund mechanism under the operative notification should prevail.

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Issues: Whether the assessee was disentitled to collect Central sales tax and claim refund under Notification No. FD 56 CSL 2005(1) dated April 18, 2005 merely because the earlier notification contained a condition that collection of tax would render the unit ineligible for exemption.

Analysis: The exemption scheme changed with effect from April 1, 2005. Under the earlier regime, exemption under the CST notification followed the procedure under the KST notification, which barred collection of tax by the unit. Under the later regime, the KVAT notification expressly required the unit to charge and collect tax, pay the net tax, and then receive refund, and the CST notification was made subject to the same State-law procedure through section 9(2) of the CST Act. The earlier ineligibility condition could not be mechanically carried forward after the 2005 notifications, especially when the Department itself had accepted the assessee's returns and granted refund for an earlier period under the same post-2005 procedure. Exemption notifications granting incentive to new industries are to be construed liberally once eligibility is established.

Conclusion: The assessee was entitled to collect CST and to the refund mechanism under the 2005 notification; denial of refund on the ground of tax collection was unjustified.

Final Conclusion: The revisions were allowed and the orders below were set aside to the extent they denied the assessee the CST refund benefit.

Ratio Decidendi: Once eligibility for an exemption is established, the exemption notification and its prescribed refund procedure must be applied according to the operative later notification and construed liberally in favour of the beneficiary; an earlier disqualifying condition cannot be imported to defeat the later scheme without express continuation.

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