9911796707
TMI Blog1976 (12) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... 1974-75. 2.. In brief, the case of the petitioners as stated in the petition is as follows: Prior to 1st September, 1970, the import and export of cashew could be had under licences issued by the trade authorities under the "open general licence scheme". The petitioners were under an obligation to re-export the processed cashew-nuts and earn foreign exchange. Therefore, the purchases of nuts were in the course of import and export and, therefore, subject to article 286(1)(b) of the Constitution. Alternatively, or by way of an additional ground of challenge, they would contend that, for reasons and on the facts to be noticed hereinafter, the transactions in question were "outside sales" and, for that reason again, exempt from taxation under article 286(1)(a) of the Constitution. From and after 1st September, 1970, the import and export of nuts were canalised through the Cashew Corporation of India (hereinafter referred to as the "corporation"). Under the scheme of canalisation, the corporation is a functionary or agent of the Government of India whose function was to import raw nuts from African countries and distribute the same to actual users like the petitioners. The petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ptember, 1973. But the petitioners were aggrieved when exhibit A notification was cancelled by exhibit B notification dated 9th November, 1973, withdrawing the exemption (copy exhibit B). This is the gist of the pleadings on the basis of which they have sought the reliefs prayed for. 3.. In paragraph 13 of the petition the petitioners have stated that the corporation explained the nature of the transaction between itself and individual allottees and evolved the procedure for allotment, which was communicated to the first petitioner by letter dated 4th November, 1970, (reproduced in paragraph 13 of the petition). The said letter recalled that the consignment of nuts was being shipped against one bill of lading and that the sale had already been effected to the 1st petitioner for the quantities allotted, when the goods were on the high seas before the arrival of the vessel. The petitioners have produced exhibit E letter dated 31st July, 1971, by which the corporation treated the goods as having been sold to the first petitioner on the high seas. Exhibit J dated 11th February, 1972, is an endorsement of the insurance policy by the corporation in favour of the allottee. It also conta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The petitioners would contend that for the years 1970-71, 1971-72 and 1972-73 the letters of authority were issued in this form. But thereafter a new form of letter of authority was introduced a copy of which is exhibit L. Condition No. 3 of the letter reads as follows: "The goods for the import of which this letter of authority has been granted shall be the property of the holder of the letter of authority at the time of import and thereafter up to the time of clearance through customs." The said condition is sanctioned by the Red Book for the year 1971 (see para 268 at page 180). 5.. Despite what the petitioners would claim to be the clear effect, implications and inferences to be gathered from the nature of the transactions and the course of dealings as evidenced by the aforesaid documents, the petitioners' complaint is that the sales tax authorities have been taking a wrong view of the law and demanding sales tax from the petitioners in respect of purchases of raw nuts imported through the corporation and allotted by the said corporation to the petitioners. This has occasioned the filing of this writ petition. 6.. The contentions urged by the petitioners are that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the authorities constituted under the Act to deal with the question of the scope of the exemption and its cancellation under section 10 of the Act. We, therefore, consider it necessary to deal with this part of the objection. Section 10 of the General Sales Tax Act, 1963, in so far as it is relevant, reads as follows: "10. Power of Government to grant exemption and reduction in rate of tax.-(1) The Government may, if they consider it necessary in the public interest, by notification in the Gazette, make an exemption or reduction in rate, in respect of any tax payable under this Act- (i) on the sale or purchase of any specified goods or class of goods, at all points or at a specified point or points in the series of sales or purchases by successive dealers, or (ii) by any specified class of persons, in regard to the whole or any part of their turnover ...... (3) The Government may, by notification in the Gazette, cancel or vary any notification issued under sub-section (1)." Exhibit A dated 12th October, 1973, issued under section 10(1) of the Act reads: "Kerala Gazette No. 42 dated 23rd October, 1973, Part I, Section iv. GOVERNMENT OF KERALA Taxes 'B' Department Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranted under sub-section (1). On the facts and circumstances disclosed, we think that the cancellation of the exemption was really not retrospective; and that with it, the petitioners lost the privilege of getting the sales in question exempt from tax on the basis of exhibit A, if the sales were otherwise taxable in law, for the period for which exhibit A notification was issued. 9.. The doctrine of equitable estoppel was pressed into service to support the plea that the assurances given to the petitioners and to the cashew industry had been acted upon to the prejudice of persons like the petitioners, that exhibit A notification was only the culmination and the embodiment of these assurances, and that the Government should not be allowed to go back on the assurances and on the exemption by the cancellation notification, exhibit B. Attention was called to the judgment of Chandrasekhar Aiyar, J., in Shankari Prasad v. Union of IndiaA.I.R. 1951 S.C. 458., to the decision in Municipal Corporation of Bombay v. Secretary of State(1904) I.L.R. 29 Bom. 580., and to the decisions of the Supreme Court in Union of India v. Anglo Afghan AgenciesA.I.R. 1968 S.C. 718 at 726 and 728. Cas. 285 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the decision in Narinder Chand's case[1972] 29 S.T.C. 169 (S.C.); A.I.R. 1971 S.C. 2399. in support of his submission. He also relied on S. I. Syndicate Ltd. v. Union of IndiaA.I.R. 1975 S.C. 460., where it was held that price fixation under the provisions of the Sugar Control Order was more in the nature of a legislative measure and could not therefore give rise to a complaint that rules of natural justice had not been followed in fixing the price (vide paragraph 13). We agree that the power under section 10(3) is a legislative power. In Ramanatha Pillai's caseA.I.R. 1973 S.C. 2641 at 2649., the following passage from American Jurisprudence 2nd, at page 783, paragraph 123, was approved: "'Generally, a State is not subject to an estoppel to the same extent as in an individual or a private corporation. Otherwise, it might be rendered helpless to assert its powers in Government. Therefore as a general rule the doctrine of estoppel will not be applied against the State in its governmental, public or sovereign capacity. An exception however arises in the application of estoppel to the State where it is necessary to prevent fraud or manifest injustice.' The estoppel alleged by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the cancellation. The requirement of public interest which is embodied in sub-section (1) is not to be expressly found in sub-section (3). Whether it can be implied in sub-section (3), under section 20 of the Kerala General Clauses Act or otherwise, is not free from doubt. The petitioners' counsel would contend that no allegation of public interest had been disclosed in the counteraffidavit filed on behalf of the Government. We do not wish to express a final opinion whether the cancellation under section 10(3) can only be in public interest. Assuming that the element of public interest should be satisfied before cancellation, the learned Advocate-General submitted that the power to tax has to be presumed to be in public interest, and as the cancellation of the exemption would result in subjecting the exempted categories to taxation, the test of public interest would stand satisfied. He relied on the decision in State of Madras v. Nataraja Mudaliar[1968] 22 S.T.C. 376 (S.C.); A.I.R. 1969 S.C. 147 at 155., and Atiabari Tea Co. Ltd.'s caseA.I.R. 1961 S.C. 232 at 254. in support of his submission. The observations in these decisions lend support to the contentions of the learned Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e power to grant exemption cannot be said to be independent of the provisions under clause 5 of the Order. The object of the 1966 Control Order is to promote sugar industry and to eliminate unnecessary impediments in the production of sugar. It also ensures a fair deal to the growers of sugarcane. The provisions of the Control Order are intended to maintain harmony between the growers of sugarcane and the producers of sugar and to enable both of them to share profits reasonably. Therefore, the power conferred on the Government is required to be exercised having regard to the view points of the growers of sugarcane as well as the producers of sugar. It is necessary to give opportunity to the growers of sugarcane as well as the producers of sugar to be heard when the Government exercises powers under the 1966 Control Order for determining the additional price and granting exemption from payment of additional price. 18.. The grant of exemption from payment of price affects rights and interests of the growers of sugarcane. The Control Order contains elaborate machinery for fixation of additional price having regard to all relevant factors. The additional price fixation authority affo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own notification, we would decline interference under article 226 on the ground that the petitioners having taken the benefit of the exemption notification exhibit A in respect of a period prior to its promulgation, cannot be heard in these proceedings to contend that the cancellation of the exemption in similar fashion is illegal. In the result, we would uphold the validity of exhibit B notification. 14.. The two other principal points stressed by counsel for the petitioners were that the transactions in question were "outside sales " and/or sales in the course of import or export and, therefore, exempt under article 286(1)(a) and (b) of the Constitution. We do not think that it is either fair or proper or even within our jurisdiction, in the first instance to pronounce on these aspects of the case. It has been repeatedly laid down by the Supreme Court that the investigation of facts, in regard, for instance, to the nature of the transaction, has to be left to be found, in the first instance, by the taxing authorities, and that it is not for the High Court to appropriate to itself this task under article 226: see Sales Tax Officer v. Shiv Ratan[1965] 16 S.T.C. 599 (S.C.); A.I.R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decide the question of receiving these documents, and will deal with the appeals and dispose of the same within four months after the production of records by both sides within the stipulated time. We have little doubt that the decision of the Tribunal in regard to the nature of the transactions and the other matters relating to the assessment would be respected and followed by the assessing authorities before whom the proceedings are pending, where these involve identical or similar facts. The petitioners have furnished bank guarantee in respect of the tax due from them at the stage of the assessment. Their counsel intimated that they are prepared to make available one-third of the bank guarantee so far furnished by them to cover their approximate tax liability, and that the rest of the bank guarantee be released to them. We think this is a reasonable request. The bank guarantee furnished will be discharged; but the petitioners will within ten days after such discharge of the bank guarantee, furnish fresh bank guarantee for one-third of the amount covered by the guarantee discharged under this order. We are not directing that there should be no coercive steps against the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X
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