Karnataka High Court
N. Janardhana Acharya vs The State Of Karnataka on 16 June, 1980
Equivalent citations: 1980(2)KARLJ145, [1980]46STC375(KAR)
JUDGMENT Rama Jois, J.
1. These two sales tax revision petitions are presented under section 23(1) of the Karnataka Sales Tax Act, 1957 (hereinafter referred to as the "Act"), by a registered dealer against the orders of the Karnataka Appellate Tribunal confirming the orders of the appellate and assessing authorities. The only question of law that arises for consideration in these two revision petitions is as follows :
"Whether the notification issued under section 8A of the Act exempting the purchase turnover of old gold and silver articles from the levy of sales tax under section 6 of the Act became invalid with effect from 1st July, 1972, with effect from which date sub-section (1) of section 5 was amended enhancing the rate of tax payable on general goods from 3 to 3 1/2 per cent ?"
2. The petitioner is engaged in purchasing of old gold and silver articles and manufacturing gold and silver jewellery out of it and selling them. For the assessment years 1973-74 and 1974-75 the petitioner furnished his returns. During the relevant years he had purchased old gold and silver articles from individuals who were not liable to pay sales tax under the act. Thereafter the assessee prepared gold and silver jewellery out of the gold articles so purchased and had sold the said jewel. According to the assessee he was exempt from payment of sales tax under section 6 of the Act by virtue of a notification issued under section 8A of the Act. The Commercial Tax Officer assessed the assessee both under sections 5(1) and 6 of the Act at 3 1/2 per cent which was the rate prevailing during the relevant period. Aggrieved by the said orders the assessee preferred appeals to the Assistant Commissioner of Commercial Taxes (Appeals), Mangalore. His appeals were dismissed. Aggrieved by the said order the assessee preferred second appeals before the Karnataka Appellate Tribunal. By common order dated 7th August, 1978, the Tribunal confirmed the assessment made by the assessing authority both under sections 5(1) and 6 of the Act. However, the Tribunal reduced the purchase tax from 3 1/2 per cent to 1 per cent on the ground that the old gold and silver articles purchased by the assessee constituted bullion.
3. Sri K. Srinivasan, the learned counsel for the assessee, contended that in view of the notification issued by the State Government under section 8A of the Act on 10th September, 1970, the assessee was not liable to pay tax under section 6 of the Act on the purchase turnover of articles of gold and silver. The said notification reads :
"In exercise of the powers conferred by section 8A of the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957), the Government of Karnataka hereby exempts with effect from the 1st day of October, 1970, the tax payable under section 6 of the said Act on the purchases of articles of gold and/or silver (whether set with precious stones or not) by a manufactures of such articles subject to the condition that the said manufacturer proves to the satisfaction of the assessing authority that he has paid the tax payable either under sub-section (1) or clause (a) of sub-section (3) section 5 of the said Act on articles of gold and silver (whether set with precious stones or not) manufactured of the said articles so purchased by him."
4. Section 8A of the Act confers power on the State Government to reduce or exempt the tax payable under the Act by issue of a notification. The learned counsel for the assessee therefore contended that in view of the above notification the orders of the assessing authority as well as the appellate authority holding that the assessee was liable to tax under section 6 of the Act was unsustainable.
5. As can be seen from the order of the Tribunal, in coming to the conclusion that the aforesaid notification issued under section 8A of the Act was not available to the assessee, the Tribunal relied on the judgment of this Court in Shrishailappa v. Commercial Tax Officer ([1975 36 S.T.C. 223]. The view taken by the Tribunal is in conformity with the ratio of the said decision.
6. The learned counsel for the assessee however contended that the view taken by a single Judge of this Court in the said case is erroneous. In the said case, the question for consideration was whether the reduced rate at 4 per cent in respect of dyes fixed by virtue of a notification issue by the State Government under section 8A of the Act continued to be in force after the amendment of the Act raising the sales tax payable on dyes from 6 per cent to 8 per cent. From the facts set out in the judgment it is seen that prior to 10th September, 1970, the sales tax payable on the turnover pertaining to dyes was 6 per cent, vide entry 97 of the Second Schedule to the Act. The State Government issued a notification dated 10th September, 1970, under section 8A of the Act by which the sales tax payable on the turnover relating to dyes was reduced to 4 per cent. By the Karnataka Sales Tax (Amendment) Act, 1974, which came into force with effect from 1st April, 1974, the sales tax payable on the turnover relating to dyes was enhanced from 6 per cent to 8 per cent. Thereafter the State Government issued another notification dated 7th June, 1974, under section 8A of the Act purporting to reduce the tax payable on the turnover relating to dyes to 4 per cent with effect from 1st July, 1974. Rejecting the claim of the assessee therein that the reduced rate of 4 per cent was available even during the period from 1st April, 1974, to 1st July, 1974, it was held that as the legislature, which was the highest legislative body, amended the Act and declared that on and after 1st April, 1974, the turnover relating to dyes would be subjected to a tax at a higher rate at 8 per cent instead of the pre-existing rate at 6 per cent, the notification issued by the State Government under section 8A of Act became ineffective with effect from 1st April, 1974, on the ground that it was inconsistent with the amending Act. Applying the ratio of the said decision the Tribunal held that the notification dated 10th September, 1970, exempting the tax on the purchase turnover of old gold and silver articles, issued under section 8A of the Act also became ineffective with effect from 1st July, 1972.
7. In our opinion, the learned counsel for the assessee is right in his submission that the view taken in the Shrishailappa's case ([1975] 36 S.T.C. 223) is erroneous. Sub-section (1) Of section 8A of the Act confers power on the State Government either to reduce the rate of tax payable on any goods under the Act or to exempt the tax payable on any specified goods under the Act by the issue of a notification to that effect. Sub-section (3) of section 8A confers power on the State Government to cancel or vary a notification issued under sub-section (1) by the issue of a notification. Therefore a notification issued under section 8A(1) of the Act either reducing the rate of tax or exempting the tax payable on any specified goods continues to be a in force until it is modified or cancelled by the State Government by a notification issued under sub-section (3) of section 8A. We are unable to agree with the view taken by the single Judge in the Shrishailappa's case ([1975] 36 S.T.C. 223) that notification issued under section 8A(1) becomes invalid by the enhancement of rate of tax on the goods specified in the notification by any subsequent amending Act on the ground of inconsistency. In our view, such a notification does not in any way become inconsistent with the provisions of the Act by the mere enhancement of the rate of tax by an amendment made subsequent to the issue of a notification unless the amending Act clearly shows that it should be effective, notwithstanding a notification already issued under section 8A of the Act or that it took away the power of the State Government under section 8A of the Act, generally or in respect of such items. There is nothing in the amending Act 5 of 1972 which could be considered as having affected the validity of the notification issued under section 8A of the Act. We hold that the view taken by the single Judge in the Shrishailappa's case ([1975] 36 S.T.C. 223) is wrong and we overrule the said decision.
8. In conclusion we hold that the notification dated 10th September, 1970, issued by the State Government in exercise of its power under section 8A of the Act exempting the purchase turnover of old gold and silver articles from the levy of tax under section 6 of the Act was not in any way affected by the amending Act 5 of 1972 and continued to be in force.
9. As the assessee was clearly entitled to the benefit of exemption granted under the notification dated 10th September, 1970, his turnover could not be brought to tax under section 6 of the Act. Therefore the orders of assessment levying tax on the purchase turnover of the assessee under section 6 of the Act cannot be sustained. Consequently the orders of the first and second appellate authorities confirming the said orders also cannot be sustained.
10. For the reasons aforesaid we make the following :
The orders of the Appellate Tribunal, the Assistant Commissioner of Commercial Taxes (Appeals), Mangalore, and of the assessing authority, in so far as these orders subjected the assessee to tax under section 6 of the Act are set aside.
No costs.
11. Petitions allowed.