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TMI Blog2003 (4) TMI 548X X X X Extracts X X X X X X X X Extracts X X X X ..... n. According to them, if this prayer is allowed, then S.R.O. No. 292 of 2000 providing for concessional rate of tax at four per cent has no relevance and will have no application, and therefore there is no challenge against the said notification, which of course is otherwise beneficial to the petitioners and other KV industries, if they are found to be not entitled to total exemption. 2.. I have heard the various counsel appearing for the petitioners Sri Raju Joseph, Special Government Pleader appearing for the State and Sri V.V. Joshi, appearing for the KV Industries Board. 3.. Before proceeding to decide the issue raised in the original petitions, it is useful to trace the nature of sales tax exemption enjoyed by the KV industries and the periodical changes effected by the Government leading to the impugned notifications. 4.. All KV industries were granted absolute and unqualified sales tax exemption on the sale of their products by periodical Government notifications, the last of which is S.R.O. No. 1727 of 1993 which provided for sales tax exemption on the sale of products of KV industries and exemption on the purchase of goods taxable at the last purchase point used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees two lakhs and above are liable to pay sales tax at the rate of four per cent on their products. 5.. What is clear from the various notifications above referred is that Government does not want to grant exemption indefinitely to all KV industries, but was only trying to identify such of the KV industries which should enjoy complete exemption and balance industries should be subjected to tax at least at a concessional rate. However, apparently the Government took inconsistent stand on various occasions and have obviously handled the matter in an indifferent and inconsistent manner. Eventhough KV industries with turnover of rupees twenty-five lakhs and above were identified as capable of paying tax and Notification S.R.O. No. 293 of 1998 was issued effective from April 1, 1998 the Government withdrew the introduction of tax by S.R.O. No. 644 of 1998 by stating that restriction in the form of tax for KV industries with annual turnover of rupees twenty-five lakhs and above would adversely affect such industrial units. It is not known as to how and on what basis within a short time the Government found that the KV industries with annual turnover of rupees twenty-five lakhs and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .O. No. 1090 of 1999 providing for levy of tax on KV industries with turnover of rupees ten lakhs and above survived for only three months, and in view of the stay granted by this Court, no collection of tax also would have been made by those industries. By the time the departmental officers could start enforcing the notification, the notification itself was withdrawn leaving the liability for only three months, and that too for a limited number of dealers. I do not think the respondents should be permitted to enforce S.R.O. No. 1090 of 1999 for a short period of three months that is for the last three months of assessment year 19992000 eventhough I find nothing illegal or arbitrary about both the notifications providing for tax based on annual turnover. Therefore I declare that no KV industries should be subjected to sales tax up to March 31, 2000. However, the assessing officers are entitled to forefeit the tax if any collected and remitted or retained by any KV industry during the period of three months from January 1, 2000 to March 31, 2000. Therefore I proceed to dispose of the original petitions confining the dispute only to S.R.O. No. 291 of 2000 for the assessment years com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 10 is extracted hereunder for easy reference: 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, either prospectively or retrospectively 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. (2) Any exemption from tax, or reduction in the rate of tax, notified under sub-section (1), (a) may extend to the whole State or to any specified area or areas therein; (b) may be subject to such restrictions and conditions as may be specified in the notification. (3) The Government may by notification in the Gazette, cancel or vary any notification issued under sub-section (1). It is clear from section 10(3) that any dealer claiming exemption based on the notification issued under section 10(1) should be taken to have notice of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es tax exemption only to industries originally declared as KV industries in the Act. The 21 industries which are granted exemption are the following: 1.. Manufacture of matches, fire works and agarbathies. 2.. Manufacture of soaps. 3.. Tanning of hides and skins and ancillary industries connected with the same. 4.. Manufacture of leather goods 5.. Manufacture of handmade paper 6.. Manufacture of canegur and khandsari 7.. Manufacture of manure and methane gas from cow dung and other waste products. 8.. Manufacture of lime products 9.. Manufacture of shellac. 10.. Manufacture of bamboo and cane goods 11.. Manufacture of vegetable and fruit products 12.. Manufacture of goods through black smithy other than manufacture of furniture. 13.. Manufacture of goods through carpentry other than manufacture of furniture. 14.. Manufacture of fibre products other than coir 15.. Manufacture of household utensils on aluminium. 16.. Manufacture of maize and ragi products. 17.. Manufacture of dipped rubber latex products such as rubber band gloves and balloons. 18.. Manufacture of palm products. 19.. Manufacture of pottery. 20.. Manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has any relevance for the purpose of levy of tax and such a classification cannot be said to be a reasonable classification to satisfy the test of article 14 of the Constitution of India. As I see no basis for the classification of 21 KV industries for the purpose of exemption while providing for tax for the rest of the KV industries I do not go into the decisions cited by both sides. Therefore I hold that S.R.O. No. 291 of 2000 is arbitrary and discriminatory and is therefore violative of article 14 of the Constitution of India. 9.. The next question is as to what is the consequential relief to be granted to the petitioners. According to the petitioners, they are entitled to a declaration that the benefit of the notification should be extended to all KV industries. They have also referred to the decision of this Court in Associated Cement Companies Ltd. v. Assistant Commissioner (Assessment) Sales Tax [1996] 101 STC 28; 1996 KLJ (TC) 30, wherein this Court has extended a similar relief after finding the notification granting exemption to some categories of dealers as discriminatory. However, I do not think the petitioners are entitled to such a relief for various reasons. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on products, turnover or on whatever other basis, to grant such exemption retrospectively, if the Government so feels. The result of declaring S.R.O. No. 291 of 2000 as invalid would be to hold that those 21 categories of industries will also be liable to pay tax from April 1, 2000 onwards. I feel such a consequence to them should be avoided because those 21 industries are not before this Court and for no fault of theirs, they would be made to pay tax retrospectively. Eventhough Notification S.R.O. No. 291 of 2000 is illegal and arbitrary, it holds out a promise to those 21 industries that no tax will be payable by them and Government has forfeited their right to levy and recover tax from them as long as the notification remains valid. Therefore S.R.O. No. 291 of 2000 until it is declared as invalid by this Court acts as a promise to those industries and Government should not be permitted to collect tax from them until the notification is declared as invalid by this Court. At the same time, they should not be allowed to enjoy an undue advantage at least in future over others under notification declared illegal. However, they should be given reasonable time to arrange for collect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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