1988 (2) TMI 438 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of G.O. Ms. No. 1176, Revenue (CT-II) dated 17th December, 1987 withdrawing exemption on sales tax for cycle tyres and tubes.
2. Interpretation of the effect of G.O. Ms. No. 575, Revenue (S) Department dated 9th June, 1987.
3. Retrospective application of tax exemptions and Government's authority.

Analysis:
The writ petitions were filed under Article 226 of the Constitution of India challenging the constitutional validity of G.O. Ms. No. 1176, Revenue (CT-II) dated 17th December, 1987, which withdrew the exemption on sales tax for cycle tyres and tubes. The petitioners were dealers in tyres and tubes, and the disputed turnover comprised the sale proceeds of cycle tyres and tubes during a specific period. The Government had previously issued G.O. Ms. No. 575, Revenue (S) Department dated 9th June, 1987, exempting sales of parts and accessories of cycles, including tyres and tubes. However, G.O. Ms. No. 1176 amended the earlier notification, withdrawing the exemption on tyres and tubes from 15th June, 1987. The main argument raised was regarding the retrospective effect of the withdrawal of the exemption.

The counsel for the petitioners contended that the Government's power to notify exemptions under Section 9 of the Act was not retrospective unless specified under Section 39(2A) added by Ordinance 19 of 1983. Citing a previous Division Bench decision, it was established that notifications could not have retrospective effect unless explicitly authorized. The Court agreed with this interpretation, holding that the withdrawal of the exemption on cycle tyres and tubes with retrospective effect was unauthorized. Consequently, the assessing authority was directed to revise the assessments in line with this decision, and the writ petitions were allowed without costs.

Justice Anjaneyulu concurred with the decision, emphasizing the importance of the Government's responsibility in withdrawing exemptions retrospectively. He noted that the impugned G.O. No. 1176, issued to exclude tyres and tubes from the earlier exemption, implied the intention to exempt them initially. Criticizing the Government's actions, he highlighted the significant tax implications for dealers due to the retrospective withdrawal of exemptions. The Judge expressed disappointment in the Government's disregard for the legal position established by the Division Bench in a prior case. The Court stressed the need for the Government to consider the implications of its decisions carefully, especially when imposing substantial tax liabilities retrospectively. Ultimately, the writ petitions were allowed, indicating a critical view of the Government's approach in this matter.