Decided on June 30,2016

Deputy Commissioner Of Commercial Taxes (Vigilance) Appellant
M/S Hindustan Lever Limited Respondents


- (1.) In the present appeal, by special leave, the appellant has called in question the legal acceptability of the order dated 25.01.2007 passed by the Division Bench of the High Court of Karnataka at Bangalore in STRP No. 62 of 2004 whereby the Division Bench has dismissed the Special Revision Petition preferred by the appellant-department and affirmed the order dated 27.12.2003 passed by the Special Bench constituting five members of the Karnataka Appellate Tribunal, Bangalore (for short, "the tribunal") constituted under the Karnataka Sales Tax Act, 1957 (for short, "KST Act").
(2.) Requisite facts to be exposited for adjudication of this appeal are that Brooke Bond India Limited established its factory at Dharwad in the State of Karnataka and the said factory was engaged in manufacture of blended packet tea. With the passage of time, Brooke Bond India Limited was amalgamated with the respondent-company with effect from 21.03.1997. There is no dispute over the fact that the respondent-company registered under the Companies Act is a dealer under the KST Act. The dealer was granted sales tax exemption benefit for five years from the date of commencement of production in accordance with exemption eligibility certificate issued by the Government of Karnataka as per the package of incentive granted vide Government Order dated 27.09.1990 and sales tax exemption notification dated 19.06.1991 to which we shall advert to at a later stage.
(3.) When the matter stood thus, the Assistant Commissioner of Commercial Taxes (Intelligence), Kolar visited the premises of the respondent-assessee on 20th December, 1996. During the course of physical inspection the authority noticed that there was contravention of the conditions laid down under Explanation III(e) to the notification dated 19.06.1991. It was noticed by the said authority that sale of tea packets by the respondent-company from the Dharwad unit which had the benefit of exemption and the units manufacturing tea outside Dharwad unit which did not have the benefit of exemption were similarly priced. Two invoices - one from Dharwad unit and one from non-Dharwad unit - were taken note of and found that the ultimate sale price in both cases is Rs. 118 (the non-Dharwad tea had a sales tax component of Rs. 12.27, whereas the Dharwad tea had no sales tax component). Based on the said material as well as material evincible from the price circulars of the respondent-company found in the office, the intelligence officer arrived at the conclusion that the dealer had added the tax component to the sale price of Dharwad tea though not under the nomenclature of tax or cess. Hence, it was concluded that the respondent company was not entitled to the benefit of exemption, for Explanation III(e) to the notification dated 19.06.1991 had been violated.;

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