State of Karnataka Vs Aishwarya Fort (Karnataka High Court)
Karnataka High Court held that exemption certificate from the Commissioner of Tourism, Government of Kerala exempting payment of sales tax is valid for 7 years and could not have been rescinded before the period of eligibility expired as it is sovereign assurance.
Facts- The assessee, a tourism hotel unit is a registered dealer under the Karnataka Value Added Tax Act, 2003. The Government of Karnataka issued a notification dated November 12, 1999 under Section 8-A(1) of the Karnataka Sales Act, 1957 exempting sale of food articles and beverages by new tourism units. Assessee has obtained Exemption Certificate dated March 25th, 2003 from the Commissioner of Tourism, Govt. of Karnataka, Bengaluru.
Assessee was earlier registered with the Commercial Tax Department under the provisions of the KST Act and availed tax benefit for F.Ys 2003-04 and 2004-05. Subsequently assessee got registered under the KVAT Act and availed the benefit of exemption of tax for a period of five years during the KVAT regime.
The DCCT cum AO issued a proposition notice on the ground that after the enactment of the KVAT Act, the exemption granted under the KST Act would apply only to new industrial units and not tourism units. The AO passed a re-assessment order dated April 30, 2011 denying the exemption on the payment of tax on the sale of food and beverages on the ground that there was no exemption notification issued under the KVAT Act.
JCCT(A) partly allowed assessee’s appeal and confirmed the denial of exemption from payment under the KVAT Act. KAT allowed assessee’s appeal holding that assessee is eligible for exemption from payment of tax in view of the exemption notification issued under the provisions of KST Act. Aggrieved by the said order, Revenue has preferred this petition.
Conclusion- Held that even in the notification dated 07.01.2000 it is stated that the discontinuation shall not affect the incentives that have been already offered or committed by the Government until the eligibility of such incentives are completed. The eligibility certificate was valid for 7 years and could not have been rescinded before the period of eligibility expired as it is sovereign assurance.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
This Revision Petition by the Revenue, directed against the order dated December 14, 2020 in STA No. 25-36/2012 passed by the KAT1, Bengaluru, has been admitted to consider following questions of law:
i. Whether on the facts and in the circumstances of the Petitioner’s case, the Tribunal was right in law in allowing the respondent’s appeals and setting-aside the orders passed by the Assessing Authority as well as the First Appellate Authority?
ii. Whether on the facts and in the circumstances of the Petitioner’s case, the Appellate Tribunal was right in law in holding that the Respondent was eligible for exemption from payment of tax payable under the provisions of the KVAT Act 2003 especially in the background where no notifications have been issued in exercise of the powers conferred under Section 5(2) of the KVAT Act 2003 granting exemption?
2. Heard Shri. Jeevan J. Neeralgi, learned AGA for the Revenue and Shri. K. Mallaha Rao, learned Advocate for the Assessee.
3. Briefly stated the facts of the case are, assessee, a tourism hotel unit is a registered dealer under the Karnataka Value Added Tax Act, 20032. It commenced its business in the year 2001. It is engaged in providing boarding and lodging services to its customers. The Government of Karnataka issued a notification3 dated November 12, 1999 under Section 8-A(1) of the Karnataka Sales Act, 19574 exempting sale of food articles and beverages by new tourism units. Assessee has obtained Exemption Certificate dated March 25th, 2003 from the Commissioner of Tourism, Govt. of Karnataka, Bengaluru.
4. Assessee was earlier registered with the Commercial Tax Department under the provisions of the KST Act and availed tax benefit for F.Ys5. 2003-04 and 2004-05. Subsequently assessee got registered under the KVAT Act and availed the benefit of exemption of tax for a period of five years during the KVAT regime.
5. The DCCT6 cum AO7, Challakere issued a proposition notice8 on the ground that after the enactment of the KVAT Act, the exemption granted under the KST Act would apply only to new industrial units and not tourism units. The AO passed a re-assessment order dated April 30, 2011 denying the exemption on the payment of tax on the sale of food and beverages on the ground that there was no exemption notification issued under the KVAT Act.
6. On appeal, the JCCT(A)9 partly allowed assessee’s appeal and confirmed the denial of exemption from payment under the KVAT Act. On further appeal, the KAT allowed assessee’s appeal holding that assessee is eligible for exemption from payment of tax in view of the exemption notification issued under the provisions of KST Act. Aggrieved by the said order, Revenue has preferred this petition.
7. Shri. Jeevan J. Neeralgi, for the Revenue, submitted that:
