IMPORTANT POINTS
When any condition of the exemption notification id not fulfilled the unit will not be entitled to benefits of the exemption.
Exemption notification should be construed strictly; but once the assessee gets covered by the exemption notification upon strict interpretation, notification giving benefit should be construed liberally.

Headnote:(a) Taxation law – Section 8-A, Kerala Sales Tax Act – Exemption – Granted on condition that appellant would invest Rs. 111 crores – Investment not made – Appellant not entitled to the benefit of exemption. (Para 4)
       (b) Karnataka Tax on Entry of Goods Act, 1979 – Section 11A r/w Section 19-C – Exemption – New Industrial unit – Notification dated 31.03.1993 – Should be certified to be eligible for exemption under the notification dated 21.06.1991 – Further, such unit should also be covered under notification dated 19.06.1991 – Appellant obtaining certification under notification dated 15.11.1996 and not 19.06.1991 – Conditions of notification dated 31.03.1993 not fulfilled – Appellant not entitled to benefits of exemption. (Para 8)
       (c) Interpretation of statute – Exemption notification – Should be construed strictly – Once the assessee gets covered by the exemption notification upon strict interpretation, notification giving benefit should be construed liberally. (Para 9, 11)
       (1995) 4 SCC 473; 1994 Supp. (3) SCC 606 – Relied upon
       Facts of the case:
       The appellant is a company having its manufacturing Unit at Somanahalli, Maddur Taluk, which falls under Zone-II of the notification dated 23.06.1997 issued by the State Government. The State Government had granted exemption from payment of entry tax on raw materials and component parts for a period of six years from the date of commencement of commercial production on making an investment of a sum of Rs.111 crores. Thereafter the appellant-company established its manufacturing, but for various reasons, the appellant-company could not make investment of a sum of Rs. 111 crores.
       For the Assessment Year 1997-1998, initially, the Assessing Authority had granted exemption from payment of entry tax on raw materials, components and machinery parts brought into the local area (Somanahalli) for use in the manufacture of DMD batteries. Subsequently, on reassessment the Assessing authority passed the order wherein he levied entry tax on the causing of entry of raw materials and components into the local area, on the ground that the appellant-company could not have availed tax exemption, since it did not fulfill the primary condition. The Assessing Authority had also levied penalty under Section 6(2) of the KST Act.
       The assessee had preferred the first appeal before the Deputy Commissioner of Commercial Taxes (Appeals) who partly allowed the appeal filed by the assessee.
       For the Assessment Years 1998-1999 and 1999-2000, the Assessing Authority had also passed reassessment orders and also had levied penalty. The assessee had filed first appeals before the First Appellate Authority which were rejected.
       The assessee filed appeals before the Karnataka Appellate Tribunal viz. STA Nos. 571/2001, 709, 329 and 330/2003. The Tribunal allowed STA No. 571/2001 and partly allowed STA No. 709/2003 and rejected STA Nos. 329 and 330/2003 for the Assessment Years 1997-1998, 1998-1999 and 2000-2001.
       The appellant filed revision petitions before the High Court which has dismissed all the three petitions.
       Finding of the Court:
       There is no error in the impugned judgment.
       Result: Appeal dismissed:

JUDGMENT :

A.K. Sikri, J.

The appellant herein (earlier known as BPL Soft Energy Systems Limited) has challenged the legality and validity of the order dated 12.01.2005 rendered by the High Court of Karnataka whereby three petitions of the appellant, after clubbing together, were heard and decided against it, by the said common order. Those petitions were preferred under Section 15A of the Karnataka Tax on Entry of Goods Act, 1979 (hereinafter referred to as the 'KST Act') against the order which was passed by the Karnataka Appellate Tribunal, Bangalore. The necessity of filing three petitions arose because of the reason that three Assessment Years i.e. 1997-1998, 1998-1999 and 1999-2000 are involved, though the question raised in all these petitions was identical which pertains to the levy of entry tax under the KST Act. All the authorities below including the Karnataka Appellate Tribunal took the view that the appellant is liable to pay the tax under the provisions of KST Act and is not entitled to exemption from payment of entry tax on raw material under Notification/Government Order No.CI.92.SPI.1997 dated 25.06.1997. The High Court has, vide the impugned judgment, affirmed the said view of the authorities below.

2. Some of the seminal facts which require a mention to determine the lis, are recapitulated below:

2.1 The appellant is a company incorporated under the provisions of the Companies Act, 1956. It is also a dealer registered under the provisions of the KST Act. The appellant is engaged in the manufacture of Dry Manganese Dioxide Batteries (DMD batteries). It has its manufacturing Unit at Somanahalli, Maddur Taluk, which falls under Zone-II of the notification dated 23.06.1997 issued by the State Government. Before establishing its manufacturing Unit at Somanahalli, Maddur Taluk, the appellant-company had approached the State Government for grant of incentive and exemption under the provisions of the KST Act and also under the provisions of the Karnataka Sales Tax Act, 1957. Pursuant to the request so made, the State Government had issued a Notification/Government Order in No. CI.92.SPI.1997 dated 25.06.1997 inter alia granting exemption from payment of entry tax on raw materials and component parts for a period of six years from the date of commencement of commercial production. In the Notification/Government Order, it was made clear that the appellant-company should make an investment of a sum of Rs.111 crores, to claim benefit under the notification dated 25.06.1997. After obtaining the said exemption from the State Government, the appellant-company established its manufacturing Unit at Somanahalli, Maddur Taluk. But for various reasons, the appellant-company could not make investment of a sum of Rs. 111 crores, as envisaged under the notification dated 25.06.1997. Therefore, the appellant-company was ineligible to claim the “Tax Holiday” under the aforesaid notification.

2.2 For the Assessment Year 1997-1998, initially, the Assessing Authority had passed an order under the provisions of the Entry Tax Act, granting exemption from payment of entry tax on raw materials, components and machinery parts brought into the local area (Somanahalli) for use in the manufacture of DMD batteries. Subsequently, the Assessing Authority had initiated reassessment proceedings and had passed the order and in that, has levied entry tax on the causing of entry of raw materials and components into the local area, on the ground that the appellant-company could not have availed tax exemption, since it did not fulfill the primary condition stipulated in the notification dated 25.06.1997 and it was also held by the Assessing Authority that since Government Order/Notification dated 25.06.1997 had been specifically issued granting entry tax exemption to the appellant-company subject to fulfilling certain conditions, the appellant-company is ineligible to seek exemption under general notification No. FD.11.CET.93(3) dated 31.03.1993. The Assessi

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Judicial Analysis

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2016 Supreme(SC) 291

SUPREME COURT OF INDIAA.K. SIKRI, ROHINTON FALI NARIMAN, JJ.Eveready Industries India Ltd. – AppellantVersusState of Karnataka – RespondentCivil Appeal No. 4231 of 2006Decided on : 13-04-2016

Cases Referred (2)

Judicial Analysis

SUPREME COURT OF INDIA
A.K. SIKRI, ROHINTON FALI NARIMAN, JJ.
Eveready Industries India Ltd. – Appellant
Versus
State of Karnataka – Respondent
Civil Appeal No. 4231 of 2006
Decided on : 13-04-2016