1997 (2) TMI 460 - SC - VAT and Sales Tax

Whether respondents who sold wheat bran are liable to pay sales tax thereon during the period December 26 1977 until June 1985? Whether by reason of the Notification No. 3320 dated March 9 1978 amending the entry relating to the rate of tax in the earlier notification in that behalf by including bran therein has the effect of bringing to an end the exemption from the levy of sales tax that bran enjoyed under Notification No. 14547 dated December 26 1977? Held that - The respondent would be liable to pay sales tax on its sales of bran at the rate of 3 per cent from March 9 1978 until June 1985 when the situation was radically altered.

Summary

Issues:
Determining liability for sales tax on wheat bran sold during a specific period based on conflicting notifications issued by the State Government.

Analysis:
The Supreme Court heard an appeal by the State of Bihar against a High Court order allowing a writ petition filed by the respondents concerning the liability to pay sales tax on wheat bran sold between December 26, 1977, and June 1985. The dispute arose due to conflicting notifications issued by the State Government regarding the taxation of bran.

The State Government initially issued a notification in 1977 fixing the sales tax rate on certain commodities, including "atta, maida, and sujji," at 3%. Another notification exempted "cattle feed and poultry feed" from sales tax. Subsequently, a 1978 notification amended the earlier one to include bran in the taxable commodities. The key issue was whether this amendment ended the exemption granted to bran under the previous notification.

The Court referred to previous judgments that established the principle that when a notification prescribes a tax rate on previously exempted goods, it implies the withdrawal of the exemption without the need for a separate revocation notification. Based on these precedents, the Court concluded that the 1978 notification imposing a 3% tax on bran effectively ended the exemption status of bran.

However, the Court expressed reservations about the retrospective effect given to the 1978 notification, considering it as delegated legislation. Despite this concern, the Court held the respondents liable to pay sales tax on bran sales at a 3% rate from March 9, 1978, until June 1985 when the circumstances changed significantly.

In conclusion, the Court allowed the appeal by the State of Bihar, setting aside the High Court's order and ruling in favor of imposing sales tax on bran sales as per the amended notification. No costs were awarded in the matter.