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Ananda Soap Factory Vs. State of Karnataka - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKarnataka High Court
Decided On
Case NumberS.T.R.P. Nos. 99 and 100 of 1975
Judge
Reported inILR1978KAR1682; 1979(1)KarLJ60; [1978]42STC356(Kar)
ActsKarnataka Sales Tax Act, 1957 - Sections 8A, 8A(1) and 8A(3); Uttar Pradesh Trade Tax Act, 1948 - Sections 2, 3 and 4
AppellantAnanda Soap Factory
RespondentState of Karnataka
Appellant AdvocateA.R. Srinivasa Rao, Adv.
Respondent AdvocateS. Rajendra Babu, High Court Government Pleader
Excerpt:
.....conferred expressly by the statute itself. we are of the opinion that in the absence of express power granted by the legislature to act retrospective it is not open to a subordinate legislative body like the state government to issue a notification either taking away vested rights or imposing obligations with retrospective effect......no. 94 of the second schedule of the act). but by notification dated 31st may, 1971, issued by the state government under section 8-a of the act, the state government reduced the sales tax payable on the sales turnover of hand-made washing soaps by a dealer employing less that twelve persons to three per cent. the said notification read as follows : 'notification :- in exercise of the powers conferred by section 8-a of the mysore sales tax act, 1957 (mysore act 25 of 1957), the government of mysore hereby reduces with effect from the first day of july, 1971, the rate of tax payable under the said act on the sale of hand-made washing soaps to three per cent, subject to the condition that such washing soaps are manufactured out of edible oils by a dealer within the state and not more than.....
Judgment:
ORDER

Venkataramiah, J.

1. Because a common question of law arises for consideration in these two cases, they are disposed of by this common judgment.

2. The petitioners in these two cases were manufacturers of handmade washing soaps, using the edible oils during the period between 1st July, 1971, and 31st December, 1971, which formed part of the assessment year 1971-72. Under the Karnataka Sales Tax Act, 1957 (hereinafter referred to as 'the Act'), the petitioners were liable to pay sales tax at six per cent on their sales turnover of washing soap (vide S1. No. 94 of the Second Schedule of the Act). But by notification dated 31st May, 1971, issued by the State Government under section 8-A of the Act, the State Government reduced the sales tax payable on the sales turnover of hand-made washing soaps by a dealer employing less that twelve persons to three per cent. The said notification read as follows :

'Notification :- In exercise of the powers conferred by section 8-A of the Mysore Sales Tax Act, 1957 (Mysore Act 25 of 1957), the Government of Mysore hereby reduces with effect from the first day of July, 1971, the rate of tax payable under the said Act on the sale of hand-made washing soaps to three per cent, subject to the condition that such washing soaps are manufactured out of edible oils by a dealer within the State and not more than twelve persons are employed in the manufacture of such soaps.'

The above notification was superseded by a second notification issued under section 8-A of the Act declaring that the concessional rate of taxation was applicable only in respect of sale turnover of hand-made washing soaps manufactured out of a 'combination' of edible and non-edible oils with effect from 1st January, 1972. The said notification read as follows :

Notification :- In exercise of powers conferred by section 8-A of the Mysore Sales Tax Act, 1957 (Mysore Act 25 of 1957), the Government of Mysore in supersession of Notification No. FD 133 CSL 71 dated 31st May, 1971, hereby reduces with effect from the first day of January, 1972, the rate of tax payable under the said Act on the sale of hand-made washing soaps of three per cent, subject to the condition that such washing soaps are manufactured out of a combination of edible and non-edible oils by a dealer within the State and not more than twelve persons are employed in the manufacture of such soaps.'

The above notification was superseded by a third notification issued under section 8-A of the Act on 29th September, 1972. It read as follows :

'Notification :- In exercise of the powers conferred by section 8-A of the Mysore Sales Tax Act, 1957 (Mysore Act 25 of 1957), the Government of Mysore in supersession of Notification No. FD 133 CSL 71 dated 22nd December, 1971, hereby reduces with effect from the first day of July, 1971, the rate of tax payable under the said Act on the sale of hand-made washing soaps to three per cent, subject to the condition that such washing soaps are manufactured out of a combination of edible and non-edible oils by a dealer within the State and not more than twelve persons are employed in the manufacture of such soaps.'

By the third notification, the State Government intended to confine the concession which had been given under the first notification only to the sales turnover of hand-made washing soaps which had been manufactured out of a combination of edible and non-edible oils with effect from 1st July, 1971. The Commercial Tax Officer, the Deputy Commissioner of Commercial Taxes and the Karnataka Sales Tax Appellate Tribunal have all taken the view that by virtue of the third notification the concession which had been extended to the petitioners who had manufactured hand-made washing soaps with the edible oils only during the period between 1st July, 1971 and 31st December, 1971, had been taken away on account of the retrospective effect given thereunder and that the petitioners should pay sales tax at six per cent on the sales turnover as provided in the Second Schedule of the Act. These revision petitions are preferred against the orders passed by the Tribunal.

3. Under section 8-A, the State Government may by notification make exemption and reduction in respect of any tax payable under the Act on the sale or purchase of any specified goods or class of goods at all points in the series of sales by successive dealer or by any specified class of persons in regard to the whole or any part of their turnover. Section 8-A of the Act, which is relevant for purposes of this case, reads as follows :

'8-A. Power of State Government to notify exemption and reduction of tax. - (1) The State Government may be notification, make an exemption, or reduction in rate, inrespect of any tax payable under this Act, -

(a) on the sale or purchase of any specified goods or class of goods, at all points in the series of sales by successive dealers; or

(b) by any specified class of persons, in regard to the whole or any part of their turnover.

(2) Any exemption from tax or reduction in the rate of tax notified under sub-section (1) may be subject to such restrictions and conditions as may be specified in the notification.

(3) The State Government may, by notification, cancel or vary any notification issued under sub-section (1).

(4) If any restriction or condition specified under sub-section (2) if contravened or is not observed by a dealer, the sale or purchases of such dealer may, with effect from the commencement of the year in which such contravention or non-observance took place, be assessed to tax or taxes under the appropriate provisions of this Act as if the provisions of the notification under sub-section (1) did not apply to such sales or purchases.'

When once a notification is issued by the State Government in accordance with the provisions of section 8-A(1), the notification would have statutory force and the validity of the exemption granted thereunder has to be construed as exemption granted by the statute itself. This view is in accord with the view taken by the Supreme Court in Kailash Nath v. State of U. P. : AIR1957SC790 , where a notification issued under section 4 of the U.P. Sales Tax Act, 1948, which conferred similar power on the State Government of U. P. came up for the consideration. The Supreme Court, in the course of its decision, observed as follows :

'The 2nd petitioner is a dealer as defined in section 2(c) of the Uttar Pradesh Sales Tax Act, which by section 3 lays down that every dealer shall, subject to the provisions of the Act, in every assessment year, pay a tax on his turnover of each year which shall be determined in such manner, as may be prescribed. Under section 4 of that Act, the State Government has been empowered either to exempt certain kinds of transactions from the payment of sales tax completely, or to allow rebate of a portion of the tax payable.

Is pursuance to that, the Uttar Pradesh Government of 3rd December, 1949, issued a Notification No. ST-6499/X - 902(20)-48 that with effect from 1st December, 1949, the provisions of section 3 of the Act (relating to the levy of sales tax) shall not apply to the sales of cotton cloth or yarn manufactured in Uttar Pradesh, made on or after 1st December, 1949, with a view to export such cloth of yarn outside the territories of India on the condition that the cloth or yarn is actually exported and proof of such actual export is furnished. This notification having been made in accordance with the power conferred by the statute has statutory force and validity and, therefore, the exemption is as if it is contained in the parent Act itself.'

4. It is no doubt true that under section 8-A(3) of the Act, the State Government has the power to cancel or vary a notification issued under sub-section (1) thereof. There is also no doubt that this powder can be exercised prospectively. The question for consideration in these cases is whether the State Government could withdraw the concession extended to the petitioners under the first notification dated 31st May, 1971, by the third notification dated 29th September, 1972. In these cases, if we come to the conclusion that such power was not available, the petitioners would be liable to pay sales tax only in accordance with the first notification which reduced the rate of tax to three per cent of the turnover of hand-made washing soaps.

There is no provision in the Act which confers power on the State Government to issue a notification under section 8-A with retrospective effect. It is beyond dispute that a competent legislature may make a law even on matters relating to taxation with retrospective effect. The question, however, is whether the executive authority, to which the power to modify a law as delegated by legislature under a statute, can withdraw a benefit already given in the absence of an express provision in the statute itself, enabling it to exercise that power with retrospective effect. The question is no longer res integra. In India Sugars and Refineries Ltd. v. State of Mysore (A.I.R. 1960 Mys. 326.), the question which arose for consideration was whether the power conferred by a legislature on a subordinate legislative body like Government to issue notification having the force of law under a statute could be exercised retrospectively unless the power to issue such a notification with retrospective effect had been conferred expressly by the statute itself. This court, relying upon the decision of the Supreme Court in Strawboard Mfg. Co. v. Gutta Mills Workers' Union : (1953)ILLJ186SC , held that in the absence of a legislative provision conferring power to issue a notification retrospectively, it was not open to the State Government to issue such a notification. In Indramani v. W. R. Natu : [1963]1SCR721 , the decision in the case of Indian Sugars and Refineries Ltd. (A.I.R. 1960 Mys. 326.) was noticed by the Supreme Court. In Income-tax Officer, Alleppey v. M. C. Ponnoose : [1967]64ITR117(Ker) , following the decision of this Court in Indian Sugars and Refineries Ltd. (A.I.R. 1960 Mys. 326.) and the decision of the Supreme Court in Indramani's case : [1963]1SCR721 , the Kerala High Court held that unless the power to act retrospectively had been expressly conferred by the legislature on the Government exercising subordinate and delegated legislative powers, the Government could not act retrospectively. No decision which takes a contrary view has been cited before us. We are of the opinion that in the absence of express power granted by the legislature to act retrospective it is not open to a subordinate legislative body like the State Government to issue a notification either taking away vested rights or imposing obligations with retrospective effect. The third notification dated 29th September, 1972, the the extent it operated adversely against the petitioners in so far as the sales turnover of hand-made washing soaps relating to the period between 1st July, 1971, and 31st December, 1971, is concerned has therefore to be declared as ultra vires and we do so accordingly. The decisions of the Commercial Tax Officer, the Deputy Commissioner of Commercial Taxes and the Tribunal are therefore set aside. The Commercial Tax Officer if directed to revise the assessment in accordance with the notification dated 31st May, 1971.

5. The petitions are accordingly allowed. No costs.

6. Petitions allowed.


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