Karnataka High Court
Indian Tool Manufacturers Ltd. vs State Of Karnataka on 24 July, 1990
Equivalent citations: [1990]79STC396(KAR)
ORDER M. Rams Jois, J.
1. In these two revision petitions presented under section 23(1) of the Karnataka Sales Tax Act, 1957, the following question of law arises for consideration :
"Whether the notification dated April 23, 1975, issued by the State Government under section 8-A of the Karnataka Sales Tax Act, 1957, reducing the rate of tax payable on twist drills, taps dies, reamers cutters, endmills and similar small machine tools from 8 per cent to 4 per cent ceased to be effective from March 15, 1980, on which dated by an amendment to the Act the rate of tax on those items was increased from 8 per cent to 10 per cent, on the ground that the notification falls under section 8-A(1)(a) of the Act ?"
2. In order to appreciate the above question of law, it is necessary to set out the relevant portion of section 8-A of the Act. It reads :
"8-A. Power of State Government to notify exemptions and reductions of tax.- (1) The State Government may, by notification, make an exemption or reduction in rate, in respect 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).
(3-A) If the rate of tax payable under this Act in respect of any goods or class of goods gets modified by an amendment to this Act, notification, if any, issued in respect of such goods or class of goods under clause (a) of sub-section (1) shall, with effect from the date from which such amendment comes into force be deemed to be cancelled to the extent it relates to such goods or class of goods."
As can be see from the above section it confers power on the State Government to exempt or reduce the rate of tax payable on the specified class of goods at all points in the series of sales by successive dealers under clause (a) of section 8-A(1). It also empowers the Government to exempt or reduce the tax payable by any specified class of dealers in regard to whole or any part of their turnover. According to sub-section (3-A) as far as any notification is issued under section 8-A(1)(a) is concerned, it ceases to be effective from the date on which the rate of tax on the goods in respect of which the notification had been issued, is changed by an amendment to the Act.
3. As far as the notification giving exemption or reduction in the rate of tax in respect of any class of dealers under section 8-A(1)(b) is concerned it continues to be in force until the same is cancelled or modified by any notification as provide under sub-section (3). As far as these petitions are concerned the relevant notification is dated April 23, 1975. It reads :
"GOVERNMENT OF KARNATAKA Karnataka Government Secretariat, Vidhana Soudha, Bangalore, dated 23rd April, 1975.
Notification Whereas by Notification No. S.O. 294 (FD 408 CSL 68) dated 22nd January, 1969, the rate of tax payable under the Karnataka Sales Tax Act, 1957, on the first point of sale in respect of the sales of twist drills taps, dies reamers cutters, endmills and other similar small machine tools was reduced to 3 per cent;
Whereas the rate of tax payable on such machinery and spare parts, etc., has been raised to 8 per cent with effect from 1st April, 1974;
And whereas the Government consider it necessary to reduce the rate of tax payable on the sales of twist drills, taps, dies, reamers, cutters, endmills and the similar small machine tools at 4 per cent;
Now, therefore, in exercise of the powers conferred by section 8-A of the Karnataka Sales Tax Act, 1957 (Karnataka Act No. 25 of 1957), the Government of Karnataka hereby reduces with effect from 15th May, 1975, the rate of tax payable under the said Act on the sales of twist drills, taps, dies reamers cutters endmills and other similar small machine tools from eight per cent to four per cent.
By order and in the name of the Governor of Karnataka (T. M. Vasudevan) Under Secretary to Government, Finance Department."
Under the above notification in respect of the goods specified in the notification the rate of tax payable at 8 per cent was reduced to 4 per cent. There is no dispute that there was an amendment to the Act which came into force with effect from March 15, 1980, which the rate of tax was enhanced from 8 per cent to 10 per cent. In view of the said amendment, by the force of sub-section (3-A), the notification dated April 23, 1975, automatically got cancelled, as that notification falls under section 8-A(1)(a) of the Act.
4. The contention of the petitioner, however, before the authorities and the Tribunal has been that the notification did not fall under section 8-A(1)(a) of the Act and, therefore, it cannot be said that the notification stood automatically cancelled with effect from March 15, 1980, by virtue of sub-section (3-A) of section 8-A of the Act. This contention has been rejected by the Tribunal. Aggrieved by the said order, the petitioner has presented these two revision petitions.
5. Sri S. P. Bhat, the learned counsel for the petitioner, contended that the notification dated April 23, 1975, does not fall under section 8-A(1)(a) of the Act and the notification itself does not say so, and if it is a notification which does not fall under section 8-A(1)(a) of the Act, it follows that the exemption or reduction of tax granted by the said notification would not cease to be effective with effect from March 15, 1980, on which date the rate of tax was changed by an amendment to the Act. In support of his contention that the notification does not fall under section 8-A(1)(a) of the Act, the learned counsel contended that the power conferred under the said provision was for granting exemption only in respect of general goods falling under section 5(1) of the Act and not in respect of goods specifically included in any of the Schedules to the Act. He relied on the last part of section 8-A(1)(a) of the Act which reads "at all points in the series of sales by successive dealers" and submitted that this portion of the clause indicated that the power granted under section 8-A(1)(a) is to exempt or grant reduction in respect of sales tax on goods falling under section 5(1) of the Act and in doing so it was open for the Government to say whether the exemption is at single point or at any specified number of points, but clause (a) does not authorities the exemption is respect of specific goods included in any of the Schedules. We find no merit in this submission. Under clause (a) of sub-section (1) of section 8-A of the Act the State Government is given power to grant exemption or reduction in the rate of tax on the sale or purchase of any specified goods. This means, goods specified in the notification to be issued by the State Government. It is immaterial whether the turnover of the goods specified are liable to be taxed at single point or multi-point. It is also open for the State Government to say as to whether the exemption granted is in respect of a series of transaction by all the successive dealers in respect of goods liable for tax at multi-point or in respect of single point. The entire power under clause (1)(a) of section 8-A relates to grant of exemption in respect of goods as distinct from granting of exemption in respect of specified class of dealers in respect of which the power is conferred under clause (b) of sub-section (1) of section 8-A of the Act.
6. Once we understand the meaning of section 8-A of the Act there is absolutely no difficulty in finding out as to whether the notification dated April 23, 1975, falls under section 8-A(1)(a) of the Act or section 8-A(1)(b) of the Act. The exemption granted in the notification with which we are concerned in this case is specific that it is in respect of sale of goods specified in the notification and not in respect of specific class of dealers. Therefore the notification squarely falls under section 8-A(1)(a) of the Act. As this is the correct position, it follows that the reduction in the rate of tax granted in the notification ceased to be effective with effect from March 15, 1980, on which date there was change of rate of tax from 8 per cent to 10 per cent. For the aforesaid reasons we answer the question first set out as fallows :
The notification dated April 23, 1975, issued by the State Government under section 8-A of the Karnataka Sales Tax Act, 1957, reducing the rate of tax payable on twist drills taps, dies reamers, cutters, endmills and the similar small machine tools from 8 per cent to 4 per cent ceases to be effective from March 15, 1980, on which date by an amendment to the Act the rate of tax on those items was increased from 8 per cent to 10 per cent, as the notification falls under section 8-A(1)(a) of the Act.
7. In the result, we make the following order :
The revision petitions are dismissed.
8. Petitions dismissed.