1995 (7) TMI 420 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Legislative competence of the State Government to exempt wheat products from tax.
2. Validity and effect of the Government Order dated October 19, 1991.
3. Interpretation and effect of subsequent amendments and notifications.
4. Authority of sales tax officials to challenge the Government's notifications.

Detailed Analysis:

1. Legislative Competence of the State Government to Exempt Wheat Products from Tax:

The primary issue was whether the State Government had the legislative competence to exempt wheat products, including wheat bran, from tax under the Karnataka Sales Tax Act, 1957. The petitioners argued that the State Government had indeed exempted wheat bran from tax, but the sales tax authorities continued to levy tax on it, challenging the legislative competence of the State Government.

2. Validity and Effect of the Government Order Dated October 19, 1991:

The Government Order dated October 19, 1991, declared the abolition of sales tax on wheat and wheat products. This order was published in the Karnataka Gazette, which, according to the court, constituted a valid notification under Section 8-A(1) of the Act. The court held that the Government Order effectively exempted wheat bran from tax, even though it did not explicitly mention wheat bran. The court cited the case of Tara Steel Industries v. Assistant Commissioner of Commercial Taxes, where it was held that a formal resolution of the Government published in the official Gazette qualifies as a notification under the Sales Tax Act.

3. Interpretation and Effect of Subsequent Amendments and Notifications:

The court examined the insertion of entry No. 64 in the Fifth Schedule and entry 8(iii) in Part C of the Second Schedule by the Karnataka Act 4 of 1992. The Government Order had stated the intention to abolish sales tax on wheat and wheat products "pending issue of suitable amendment to the Karnataka Sales Tax Act, 1957." However, wheat bran was mistakenly included in entry 8(iii) of Part C of the Second Schedule, making it taxable. The Government issued a corrigendum on November 3, 1992, to correct this error, intending to exempt wheat bran by placing it in the Fifth Schedule. The court held that despite the corrigendum's lack of explicit statutory reference, the Government's intention to exempt wheat bran was clear and should be respected.

4. Authority of Sales Tax Officials to Challenge the Government's Notifications:

The court addressed the issue of whether sales tax authorities, as functionaries of the State Government, could challenge the Government's notifications. The court cited the case of K.S. Venkataraman & Co. (P) Ltd. v. State of Madras, where it was held that an authority created by a statute cannot question the vires of that statute or any of its provisions. The court also referred to the case of Assistant Commissioner of Commercial Taxes (Asst.) v. Dharmendra Trading Company, where the Supreme Court disapproved of state functionaries challenging the State Government's concessions. The court concluded that sales tax authorities, including the Commissioner, could not challenge the Government's notifications.

Conclusion:

The court held that the Government Order dated October 19, 1991, effectively exempted wheat bran from tax under the Karnataka Sales Tax Act, 1957, and this exemption remained valid as no subsequent notification canceling or varying it was issued. The impugned orders and notices levying tax on wheat bran were declared illegal and unenforceable. The writ petitions were allowed, and the court quashed the impugned assessment orders and notices to the extent they sought to levy tax on wheat bran.