Challenge against 12% Forest Development Tax On Forest Products: Karnataka HC Directs to follow Ruling of Apex Court [Read Order]

The Karnataka High Court in a challenge against the 12 % Forest Development Tax on forest products , dircted the parties to follow the ruling of apex court which is pending now. The bench stated that the matter will be according to the final decision of supreme court.

The Kalika Krupa,the petitioner is seeking to quash the Sale Intimation letters dated 25.02.2025 issued by respondents No.3 and 4 insofar as 12% Forest Development Tax . The petitioner has participated in the public  e-Tender-cum-Auction of timber at Dandeli as per the schedule dated 24.02.2025, which has already been sold through a public e-Tender-cum-Auction notification issued by the 2nd respondent/authority. The petitioner is the successful bidder of forest products from the respondents in auction bids by selecting the lots as per e-bills. Surprisingly, the petitioner received Sale Intimation letters dated 24.02.2025 issued respondents No.3 and 4 who levied FDT to an extent of 12% on the wood purchased by the petitioner.

The levy of tax of Forest Development Tax at 12% is what is questioned by the petitioner on the ground that it is contrary to law and also contrary to the judgment rendered by the Court in Writ Petition No.43937-43938 of 2016 and connected matters in the case of B.Rudragouda vs. State of Karnataka and others.

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Counsel for the petitioner relied on the judgment in B.Rudragouda (supra), whereby this Court has held that Section 98A of the Karnataka Forest Act to be ultra vires to the Constitution of India. HCGP         representing    the respondent/State sustains the order passed by the authorities and contended  that the judgment in the case of B.Rudragouda (supra) has been challenged before the Apex Court in SLP (Civil) Nos.4329-4386/2018 and an interim order against refund order of FDT was granted. Therefore it is contended that the outcome of the  matters before the Hon’ble Supreme Court would decide the matters herein.

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A single bench of Justice Suraj Govindaraj observed that though it is challenged before the Apex Court, the decision is not stayed and the interim order is granted only against refund. The Writ Petition is disposed of holding demand, collection and refund of FDT would be subject to final outcome of W.A.No.743/2021 and connected matters pending before this Court and C.A.Nos.3974-4068/2016 and C.A.Nos.3214-3271/2018, pending before the Supreme Court. 

The court held that the respondents would be at liberty to take further action only after disposal of the said matters by issuing fresh demand of tax or take action so far as the petitioner is concerned, wherever the FDT is already collected by the respondents.

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THE KALIKA KRUPA vs THE STATE OF KARNATAKA BY ITS SECRETARY , 2025 TAXSCAN (HC) 485 , WRIT PETITION NO.101529 OF 2025 (GM-FOR) , 27 February 2025 , SRI K. H. BAGI , SRI SHARAD V. MAGADUM