Heard the learned Counsel for the petitioner and the learned Government Advocate.

2. The facts briefly stated are as follows:

The petitioner is a company registered under the Companies Act, 1956 and a dealer registered under the Karnataka Sales Tax Act, 1957 (hereinafter referred to as ‘the KST Act; for brevity) under the Central Sales Tax Act, 1956 (hereinafter referred to as ‘the CST Act’ for brevity) and the Karnataka Value Added Tax Act, 2003 (hereinafter referred to as ‘the KVAT Act’ for brevity).

The Government of Karnataka had extended a package of incentives and concessions to the petitioner vide Order dated 17.8.1994 and incentives in the form of deferment of the payment of tax under the KST Act and the CST Act was extended to the petitioner from the years 1994 to 2006. The petitioner was entitled to avail of sales tax deferment for its project of expansion, modernization and diversification of the petitioner’s plant – which were programmed under what was termed as Phase-I and Phase-II, spread over the period 1994-2006. The base tax liability fixed was in a sum of Rs.4.44 crore per annum.

The petitioner however, envisaged a further expansion and modernization of their existing unit and therefore, had approached the State Government for the grant of fresh incentives and concessions. The Government, by its order, dated 26.4.2000 granted the request. The said further expansion was identified by the petitioner as Phase-III.

The Government of Karnataka had, pursuant to the order dated 26.4.2000, issued a notification dated 5.6.2000, extending the deferment of the taxes payable under the KST Act, in respect of the goods manufactured and sold by the petitioner in respect of Phase III of the petitioner’s plant for a period of twelve years from 2002 to 2014 subject to certain restrictions and conditions enumerated therein. And on similar terms, by another notification also dated 5.6.2000 extended the deferment of tax payable under the CST Act in respect of the goods manufactured and sold by the petitioner in respect of Phase-III for a similar period of twelve years as above.

The Government however, changed its investment policies, and discontinued the incentives and concessions with effect from 1.1.2000. However, Sales Tax incentives were continued in respect of what were termed as “pipe-line projects” of which the petitioner was one, subject to the condition that such projects were completed and commercial production commenced before 1.1.2002. This was extended on the representation of the industrial units concerned, by an order dated 24.3.2004, the Government extended the period upto 30.6.2004, insofar as the petitioner is concerned.

By a Certificate dated 20.5.2004, the Department of Industries and Commerce, endorsed that the petitioner had invested Rs.223.73 Crore on fixed assets in respect of Phase-III of the project and that the petitioner was eligible for deferment on payment of sales tax, both under the KST Act and the CST Act, on the sale of goods manufactured by it for a period of twelve years from the date of commencement of commercial production, from 26.6.2002 to the extent of 80% of the value of fixed assets.

With the ushering in of reforms to bring about a uniform system of taxation known as Goods and Services Tax by the year 2010, the rate of tax payable under the CST Act was sought to be reduced in order to bring about uniformity and it was this object that the Taxation Laws (Amendment) Act, 2007, to amend certain provisions of the CST Act was introduced. By virtue of that, with effect from 1.4.2007, in respect of the sale of goods referred to in Sub-section (3) of Section 8 of the CST Act, by a dealer to a registered dealer in the course of inter-state trade, the rate of tax was fixed at 3%/ It also substituted Section 8, whereby sub-section (1) thereof would not apply to any sale in the course of inter-state trade unless the dealer selling the goods furnishes a declaration by the registered