1990 (7) TMI 318 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of notification under section 8-A of Karnataka Sales Tax Act, 1957 regarding reduction of tax rate on specified goods.

Detailed Analysis:

Issue 1: Interpretation of Section 8-A of the Act
The relevant provision of section 8-A of the Karnataka Sales Tax Act, 1957 empowers the State Government to grant exemptions or reductions in tax rates on specified goods or class of goods. Sub-section (3-A) specifies that if the rate of tax on any goods is modified by an amendment, any notification issued under section 8-A(1)(a) is deemed to be cancelled. This provision is crucial in determining the validity of the notification in question.

Issue 2: Validity of Notification
The notification dated April 23, 1975, reduced the tax rate on twist drills, taps, dies, and other small machine tools from 8% to 4%. Subsequently, an amendment increased the tax rate to 10% from March 15, 1980. The petitioner argued that the notification did not fall under section 8-A(1)(a) and therefore should not be automatically cancelled. However, the Tribunal rejected this argument, leading to the revision petitions.

Issue 3: Interpretation of Section 8-A(1)(a)
The petitioner contended that the notification did not fall under section 8-A(1)(a) as it only applied to goods under section 5(1) and not those specified in the Schedules. However, the Court disagreed, stating that the power under section 8-A(1)(a) allows for exemptions on specified goods, irrespective of whether they are taxed at single or multiple points. The notification clearly specified the goods and thus fell under section 8-A(1)(a).

Conclusion:
The Court held that the notification reducing the tax rate on specified goods ceased to be effective from March 15, 1980, when the tax rate was increased. As per the interpretation of section 8-A of the Act, the notification fell under section 8-A(1)(a) and was subject to cancellation upon a change in the tax rate. Consequently, the revision petitions were dismissed, affirming the cancellation of the notification and the increase in tax rate on the specified goods.