- 1 - NC: 2025:KHC:4768-DB STA No. 23 of 2017 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 3RD DAY OF FEBRUARY, 2025 PRESENT THE HON'BLE MR JUSTICE KRISHNA S DIXIT AND THE HON'BLE MR JUSTICE G BASAVARAJA SALES TAX APPEAL NO. 23 OF 2017 BETWEEN: M/S MANGALORE CHEMICAL AND FERTILIZERS LIMITED UB TOWER, LEVEL 1, UB CITY VITTAL MALLAYA ROAD, BENGALURU - 560 001. (REPRESENTED BY ITS AUTHORIZED REPRESENTATIVE) …APPELLANT (BY SRI. RAVI RAGHAVAN.,ADVOCATE AND MISS. MEGHANA LAL., ADVOCATE) AND: 1. THE STATE OF KARNATAKA, REPRESENTED BY THE COMMISSIONER OF COMMERCIAL TAXES, GANDHINAGAR, BANGALORE. 2. AUTHORITY FOR CLARIFICATION AND ADVANCE RULINGS, VANIJYA THERIGE KARYALAYA,GANDHINAGAR, KALIDASA ROAD, BENGALURU - 560 009. …RESPONDENTS (BY SRI.ADITYA VIKRAM BHAT.,AGA FOR R1; V.C.O DATED 16/11/22 NO NOTICE IS REQUIRED TO AGAINST R2) THIS STA FILED UNDER SECTION 66(1) OF THE KARNATAKA VALUE ADDED TAX ACT 2003, PRAYING TO SET ASIDE THE IMPUGNED ORDER DATED 27.03.2017 BEARING NO. AR CLR CR 03/2012-13 DATED 27.03.2017 PASSED BY THE RESPONDENT NO.2 AUTHORITY FOR CLARIFICATION AND ADVANCE RULING. THIS STA, COMING ON FOR FINAL HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: Digitally signed by SHARADA VANI B Location: HIGH COURT OF KARNATAKA - 2 - NC: 2025:KHC:4768-DB STA No. 23 of 2017 CORAM: HON'BLE MR JUSTICE KRISHNA S DIXIT and HON'BLE MR JUSTICE G BASAVARAJA ORAL JUDGEMENT (PER: HON'BLE MR JUSTICE KRISHNA S DIXIT) This Appeal by the Assessee seeks to call in question the order dated 27.03.2017 made by the second Respondent who happens to be the Authority for Clarification and Advance Ruling clarifying that the Waste Heat Recovery Boilers purchased by the Appellant who caused their entry in the local area falls under Sl.No.7 of the table printed in the Notification No. FD 11 CET 2002 dated 30.03.2002 attracting entry tax at the rate of 2%. 2. A Coordinate Bench of this Court vide order dated 10.06.2024 has admitted the Appeal for consideration on the following questions of law: “a) Whether i8n the facts and circumstances of the case, Respondent Authority has acted within the four corners of the KTEG Act read with KVAT Act by passing the impugned order much beyond the time limit prescribed therein; b) Whether in the facts and circumstances of the case, Respondent Authority was right in ignoring S.No.6 of the Schedule Notification while framing the issue to be determined in the advance ruling - 3 - NC: 2025:KHC:4768-DB STA No. 23 of 2017 application, when the said entry reads ‘Diesel Captive Generating Sets’ and the goods which are to be classified are DG Sets; c)Whether in the facts and circumstances of the case, Respondent Authority was right in holding that the DG Sets imported by the Appellant and its auxiliaries procured indigenously are classifiable as ‘machinery of all kinds and parts and accessories thereof but excluding agricultural machinery’ under Entry 52 of the KTEG Act read with S.no.7 of the Schedule Notification; d) Whether on the facts and circumstances of the case, the Respondent Authority was right in holding that WHRB procured by the Appellant is classifiable ‘machinery of all kinds and parts and accessories thereof but excluding agricultural machinery’ under Entry 52 of the KTEG Act with S.no.7 of the Schedule Notification.” 3. Learned counsel for the Assessee drawing attention of the Court to the Notification No. FD 147 CET 2004, Bangalore, dated 29.12.2004 seeks to falter the impugned advance ruling contending that this Notification being a piece of delegated legislation, absolutely exempts commodities of the kind namely, diesel captive generation sets from entry tax. Learned AGA appearing for the Revenue resists the Appeal making submission in justification of the impugned advanced ruling and the reasons on which it is apparently constructed. - 4 - NC: 2025:KHC:4768-DB STA No. 23 of 2017 4. Having heard the learned counsel for the parties and having perused the Appeal papers, we are inclined to grant indulgence in the matter broadly agreeing with the submission made by the learned counsel appearing for the Assessee. He is right in telling that the impugned advance ruling is absolutely sustainable apart from being contrary to law inasmuch as, it seeks to levy tax when exemption avails. 5. The subject Notification dated 29.12.2004 that has been published in the Karnataka Gazette, extraordinary No.148 dated 29.12.2004 reads as under: “In exercise of the powers conferred by sub-section (1) of Section 11-A of the Karnataka Tax on Entry of Goods Act, 1979 (Karnataka Act 27 of 1979), the Government of Karnataka being of the opinion that it is necessary in Public interest so to do, hereby exempts, with effect from the First day of October, 2004, the tax payable by a dealer under the said Act, on the entry of diesel captive generation sets.” The reasoning of the Advance Ruling Authority runs counter to the intent & policy content of the Rule Maker as has been expressed in the above Notification. This is a case of misdirection in law attributable to the second - 5 - NC: 2025:KHC:4768-DB STA No. 23 of 2017 Respondent. Therefore, the question of law (b) & (c) are answered in favour of the Assessee and against the Revenue to the net effect that Diesel Captive Generating Sets are exempt from tax under Section 11-A of the Karnataka Tax on Entry of Goods Act, 1979 r/w the provisions of Karnataka Value Added Tax, 2003. The other questions of law pale into insignificance. In the above circumstances and with the above observations, this Appeal is disposed off setting aside the impugned order of the second Respondent. All logical consequences would follow. Costs made easy. Sd/- (KRISHNA S DIXIT) JUDGE Sd/- (G BASAVARAJA) JUDGE Bsv List No.: 1 Sl No.: 37