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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • For the Appellant: A.R. Srinivasa Rao, S. Rajendra Babu, Advocates.
Judges
  • Venkataramiah
  • Srinivasa Iyengar, JJ.
Acts
  • Sec. 8A of the Mysore Sales Tax Act, 1957 (Mysore Act 25 of 1957),
  • Sec. 8A of the Mysore Sales Tax, Act, 1957 (Mysore Act 25/57),
  • Sales Tax Act, 1957 (hereinafter referred to as the Act),
  • Sec. 8A of the MST Act, 1957 (Mysore Act 25 of 1957),
  • Sec. 4 of the U.P Sales Tax Act, 1948
  • Sec. 2(c) of the U.P Sales Tax Act,
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • For the Appellant: A.R. Srinivasa Rao, S. Rajendra Babu, Advocates.
Judges
  • Venkataramiah
  • Srinivasa Iyengar, JJ.
Acts
  • Sec. 8A of the Mysore Sales Tax Act, 1957 (Mysore Act 25 of 1957),
  • Sec. 8A of the Mysore Sales Tax, Act, 1957 (Mysore Act 25/57),
  • Sales Tax Act, 1957 (hereinafter referred to as the Act),
  • Sec. 8A of the MST Act, 1957 (Mysore Act 25 of 1957),
  • Sec. 4 of the U.P Sales Tax Act, 1948
  • Sec. 2(c) of the U.P Sales Tax Act,
See more information ...
Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

This consolidated judgment disposes of two revision petitions raising a common question of law. The petitioners in both matters were manufacturers of hand-made washing soap using edible oils during the period 1-7-1971 to 31-12-1971 (assessment year 1971–1972).

Under the Karnataka (Mysore) Sales Tax Act, 1957 (the Act) the standard rate for such soaps was six per cent (Second Schedule, Sl. No. 94). By a Notification dated 31-5-1971 (with effect from 1-7-1971) issued under Section 8A of the Act, the State Government reduced the rate to three per cent for hand-made washing soaps manufactured out of edible oils by dealers employing not more than twelve persons.

That first Notification was later superseded by a second Notification (giving effect from 1-1-1972) which stated the concessional rate applied only to hand-made washing soaps manufactured out of a combination of edible and non-edible oils. A third Notification dated 29-9-1972 purported to supersede earlier notifications and declared that the concessional three per cent rate applied (retrospectively) from 1-7-1971 only to soaps manufactured out of a combination of edible and non-edible oils.

The Commercial Tax Officer, the Deputy Commissioner of Commercial Taxes and the Karnataka Sales Tax Appellate Tribunal held that, by virtue of the third Notification, the earlier concession (as to soaps made solely from edible oils during 1-7-1971 to 31-12-1971) had been taken away with retrospective effect and assessed the petitioners at the six per cent rate. The petitioners challenged those orders by the present revision petitions.

Legal Issues Presented

  1. Whether a State Government, having issued a notification under Section 8A(1) of the Sales Tax Act granting a tax concession, can withdraw or vary that concession retrospectively in the absence of an express statutory power to make such retrospective changes;
  2. Whether a notification issued under the statutory power (Section 8A) has the statutory force of an exemption grafted into the parent Act (i.e., whether the notification, once validly issued, has the force of law and confers vested rights that cannot be retrospectively withdrawn by subordinate action unless expressly authorized).

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Kailash Nath v. State of U.P. Established that a notification issued under a statutory power (there, Sec. 4 of the U.P. Sales Tax Act) which exempts transactions has statutory force and the exemption is to be treated as if contained in the parent Act itself. The court relied on this authority to support the proposition that a notification issued under Sec. 8A, when validly made, has statutory force and creates an exemption effectively grafted into the statute.
India Sugars and Refineries Ltd. v. State of Mysore Considered whether subordinate legislative power to issue notifications having force of law could be exercised retrospectively in the absence of an express power to make them retrospective; held it could not be exercised retrospectively without express legislative authority. The court followed this decision to hold that, absent express statutory authority to act retrospectively, the State Government could not issue a notification that adversely affected vested rights by retrospective withdrawal of a concession.
Strawboard Mfg Co. v. Gutta Mill Workers Union Supreme Court authority relied upon in India Sugars establishing limits on subordinate/administrative bodies issuing retrospective notifications absent express power. Used as supporting precedent (via India Sugars) to reinforce the principle that delegated power to issue notifications cannot be used to take away vested rights retrospectively in the absence of express statutory authorization.
Indramani v. W.R. Nathu Supreme Court notice of the principle reflected in India Sugars regarding limits on retrospective subordinate action. Noted by the court as part of the line of authority confirming that subordinate legislative bodies may not validly act retrospectively unless the statute expressly permits it.
Income-Tax Officer, Alleppey v. M.C. Ponnoose Kerala High Court decision following India Sugars and Indramani, holding that subordinate government cannot act retrospectively without express power from the legislature. The court relied on this decision as additional authority supporting the proposition that notifications by subordinate bodies cannot be given retrospective effect so as to take away vested benefits unless expressly authorized by the statute.

Court's Reasoning and Analysis

The court's analysis proceeded in several discrete steps, applying statutory text and precedent strictly as stated in the opinion:

  1. Statutory framework: The court set out Section 8A of the Mysore (Karnataka) Sales Tax Act. It noted that Section 8A(1) empowers the State Government to notify exemptions or reductions of tax and that Section 8A(3) permits the State Government to "cancel or vary any notification." Section 8A(2) allows conditions and restrictions to be attached, and Section 8A(4) prescribes consequences if conditions are contravened.
  2. Character of a valid notification: Relying on Kailash Nath v. State of U.P., the court observed that a notification issued in accordance with a statute (here, Sec. 8A(1)) has statutory force and that the exemption conferred thereby is to be construed as part of the parent Act—i.e., the notification creates an entitlement that has the character of a statutory exemption.
  3. Scope of retrospective power: The court acknowledged that Section 8A(3) gives power to cancel or vary notifications and that executive action can in principle be prospective. However, it emphasized there is no provision in the Act expressly authorising the State Government to issue notifications under Section 8A with retrospective effect.
  4. Precedential constraint on retrospective subordinate action: The court reviewed and relied upon a line of authority (India Sugars and Refineries Ltd.; Strawboard Mfg Co.; Indramani; Income-Tax Officer, Alleppey v. M.C. Ponnoose) holding that, in the absence of an express legislative provision granting retrospective power, a subordinate legislative or executive body cannot validly issue notifications that operate retrospectively to take away vested rights or impose obligations with retrospective effect.
  5. Application to the facts: Applying the above principle to the facts, the court concluded that the third Notification dated 29-9-1972, to the extent it purported to operate adversely against the petitioners by taking away the concession that had applied to soaps manufactured out of edible oils during 1-7-1971 to 31-12-1971, was ultra vires because the Act contained no express provision authorising such retrospective withdrawal by the State Government.
  6. Practical consequences ordered: The court set aside the findings/orders of the Commercial Tax Officer, the Deputy Commissioner of Commercial Taxes and the Karnataka Sales Tax Appellate Tribunal insofar as they relied on the retrospective operation of the third Notification; it directed the Commercial Tax Officer to revise the assessments in accordance with the first Notification dated 31-5-1971 (i.e., the concession that reduced the rate to three per cent).

Holding and Implications

Holding: The petitions are allowed; the third Notification dated 29-9-1972 is declared ultra vires insofar as it operates retrospectively to withdraw the concession given by the Notification dated 31-5-1971 for the period 1-7-1971 to 31-12-1971.

Immediate consequences for the parties:

  • The orders of the Commercial Tax Officer, the Deputy Commissioner of Commercial Taxes and the Karnataka Sales Tax Appellate Tribunal that treated the concession as withdrawn retrospectively are set aside.
  • The Commercial Tax Officer is directed to revise the assessments of the petitioners in accordance with the Notification dated 31-5-1971 (i.e., the reduced rate of three per cent applicable as provided by that Notification for the relevant period).
  • The petitions are allowed and no costs were awarded by the court.

Broader legal implication:

The court followed established precedent limiting the power of subordinate legislative or executive bodies to issue notifications with retrospective effect where the parent statute does not expressly confer such retrospective power. The opinion does not purport to set a new precedent; it applies and reaffirms existing authorities on the limits of retrospective subordinate action.

End of summary. This summary was prepared exclusively from the contents of the provided opinion and does not add or infer facts or holdings beyond that text.

Show full summary ...

    Ananda Soap Factory v. State Of Karnataka

    1. Because a common question of law arises for consideration in these two cases, they are disposed of by this common judgment.

    2. The petitioners in these two cases were manufacturers of hand made washing soap using edible oils during the period between 1-7-1971 and 31-12-1971 which formed part of the assessment year 1971-1972.

    3. Under the Karnataka Sales Tax Act, 1957 (hereinafter referred to as ‘the Act’), the petitioners were liable to pay sales tax at six per cent on their sales turnover of washing soaps (vide Sl. No. 94 of the Second Schedule of the Act). But by a Notification d/- 31-5-71, issued by the State Govt. under Sec. 8A of the Act, the State Govt. reduced the sales tax payable on the sales turn-over of hand made washing soap by a dealer employing less than twelve persons to three per cent. The said notification read as follows:

    “Notification:

    In exercise of the powers conferred by Sec. 8A of the Mysore Sales Tax, Act, 1957 (Mysore Act 25/57), the Govt. of Mysore, hereby reduces with effect from the first day of July, 1971, the rate of tax payable under the said Act on the sale of hand made washing soaps to three per cent subject to the condition that such washing soaps are manufactured out of edible oils by a dealer within the State and not more than twelve persons are employed in the manufacture of such soaps.”

    4. The above Notfin was superseded by a 2nd Notfin under S. 8A of the Act declaring that the concessional rate of taxation was applicable only in respect of sales turn-over of hand made washing soaps manufactured out of a ‘combination’ of edible oils with effect from 1-1-72. The said notification read as follows:

    “Notification:

    In exercise of the powers conferred by Sec. 8A of the Mysore Sales Tax Act, 1957 (Mysore Act 25 of 1957), the Govt. of Mysore in supersession of Notification No. FD 133 CSL 71 d/- 31-5-71, hereby reduces with effect from the first day of January 1972, the rate of the tax payable under the said Act on the sale of hand made washing soaps to three per cent subject to the condition that such washing Soaps are manufactured out of a combination of edible and non-edible oils by a dealer within the State and not more than twelve persons are employed in the manufacture of such soaps.”

    5. The above Notification was superseded by a Third Notification issued under Sec. 8A of the Act on 29-9-72. It read as follows:

    “Notification:

    In exercise of the powers conferred by Sec. 8A of the MST Act, 1957 (Mysore Act 25 of 1957), the Govt. of Mysore in supersession of Notification No. FD 133 GSL 71, d/- 22nd Decr. 1971, hereby reduces with effect from the first day of July, 1971 the rate of tax payable under the said Act on the sale of hand made washing soaps to three per cent subject to the condition that such washing soaps are manufactured out of a combination of edible and non-edible oils by a dealer within the State and not more than twelve persons are employed in the manufacture of such soaps.” (underlining (italics) by us).

    6. By the third Notification, the State Govt. intended to confine the concession which had been given under the first Notification only to the sales turn-over of the hand made washing soaps which had been manufactured out of the combination of edible and non-edible oils with effect from 1-7-71. The Commercial Tax Officer, the Deputy Commissioner of Commercial. Taxes and the Karnataka Sales Tax Appellate Tribunal have all taken the view that by virtue of the third Notification the concession which had been extended to the petitioners who had manufactured band made washing soaps with the edible oils only during the period between 1-7-71 and 31-12-71, had been taken away on account of the retrospective effect given thereunder and that the petitioners should pay sales-tax at six per cent on the sales turn-over as provided in the second schedule of the Act. These revision petitions are preferred against the orders passed by the Tribunal.

    7. Under Sec. 8A the State Govt. may by notification, make exemption and reduction in respect of any tax payable under the Act on the sale or purchase of any specified goods or class of goods at all points in the Series of sales by successive dealers or by any specified class of persons in regard to the whole or any part of their turnover. Sec. 8A of the Act which is relevant for purposes of this case reads as follows:

    “8A. Power of State Govt. to notify exemption and reduction of tax:—(1) The State Govt. may by notification, make an exemption, or reduction in rate, in respect of any tax payable under this Act—

    (a) on the sale or purchase of any specified goods or class of goods, at all points in the series of goods, by successive dealers; or

    (b) by any specified class of persons, in regard to the whole ??? any part of their turnover.

    (2) Any exemption from tax or reduction in the rate of tax, notified under sub-sec. (1) may be subject to such restrictions and conditions as may be specified in the notification.

    (3) The State Govt. may, by notification, cancel or vary any notification.

    (4) If any restriction or condition specified under sub-sec. (2) is contravened or is not observed by a dealer, the sales or purchases of such dealer may with effect from the commencement of the year in which such contravention or non-observance took place, be assessed to tax or taxes under the appropriate provisions of this Act as if the provisions of the notification under sub-sec. (1) did not apply to such sales or purchases.”

    8. When once a notification is issued by the State Govt. in accordance with the provisions of Sec. 8A(1), the notification would have statutory force and the validity of the exemption granted thereunder has to be construed as exemption grafted by the Statute itself. This view is in accord with the view taken by the Supreme Court in Kailash Nath v. State of U.P(1) where a notification issued under Sec. 4 of the U.P Sales Tax Act, 1948 which conferred similar power on the State Govt. of U.P came up for consideration. The Supreme Court, in the course of its decision, observed as follows:

    “The 2nd petitioner is a dealer as defined in Sec. 2(c) of the U.P Sales Tax Act, which by Sec. 3 lays down that every dealer shall, subject to the provisions of the Act, in every assessment year, pay a tax on his turn-over of each year which shall be determined in such manner, as may be prescribed. Under Sec. 4 of that Act, the State Govt. has been empowered either to exempt certain kind of transactions from the payment of sales tax completely, or to allow a rebate of a portion of the tax payable.

    In pursuance to that, the U.P Govt. on 3-12-49 issued a notification No. ST. 6499-X-902 (20) 48, that with effect from 1-12-49, the provisions of Sec. 3 of the Act (relating to the levy of sales tax) shall not apply to the sales of cotton cloth or yarn manufactured in U.P, made on or after 1-12-49, with a view to export such cloth or yarn outside the territories of India on the condition that the cloth or yarn is actually exported, and proof of such actual export is furnished. This notification having been made in accordance with the power conferred by the statute has statutory force and validity and, therefore, the exemption is as if it is contained in the parent Act itself.”

    9. It is no doubt true that under Sec. 8A(3) of the Act, the State Govt. has the power to cancel or vary a notification issued under sub-sec. (1) thereof. There is also no doubt that this power can be exercised prospectively. The question for consideration in these cases is whether the State Govt. could, withdraw the concession extended to the petitioners under the first Notification d/- 31-5-71 by the third Notification d/- 29-9-72. In these cases if we come to the conclusion that such power was not available, the petitioners would be liable? to pay sales tax only in accordance with the first Notification which reduced the rate of tax to three per cent of the turn-over of hand made washing soaps.

    10. There is no provision in the Act which confers power on the State Govt. to issue a notification under S. 8A with retrospective effect. It is beyond dispute that a competent Legislature may make a law even on matters relating to taxation with retrospective effect. The question, however is whether the Executive Authority, to which the power to modify a law is delegated by a Legisltaure under a statute can withdraw a benefit already given in the absence of an express provision in the statute itself enabling it to exercise that power with retrospective effect. The question, is no longer res integra. In India Sugars and Refineries Ltd. v. State of Mysore(2), the question which arose for consideration was whether the power conferred by a Legislature on a subordinate legislative body like Govt. to issue notification having the force of law under a statute could be exercised retrospectively unless the power to issue such a notification with retrospective effect had been conferred expressly by the statute itself. This Court relying upon the decision of the Supreme Court in Strawboard Mfg Co. v. Gutta Mill Workers Union(3) held that in the absence of a legislative provision conferring power to issue a notification restospectively, it was not open to the State Govt. to issue such a notification. In Indramani v. W.R Nathu(4), the decision in the case of India Sugar & Refinierie Ltd., was noticed by the Supreme Court. In Income-Tax Officer, Alleppey v. M.C Ponnoose(5), following the decision of this Court in India Sugars & Refinieries Ltd., and the decision of the Supreme Court in Indramani's case, the Kerala High Court held that unless the power to act retrospectively had been expressly conferred by the Legislature on the Govt. exercising subordinate and delegated legislative powers, the Govt. could not act retrospectively. No decision which takes a contrary view has been cited before us. We are of opinion that in the absence of express power granted by the Legislature to act retrospectively it is not open to a subordinate legislative body like the State Govt. to issue a notification either taking away vested rights or imposing obligations with retrospective effect. The third Notification d/- 29-9-72 to the extent it operated adversely against the petitioner in so far as the sales turnover of hand made washing soaps relating to the period between 1-7-71 and 31-12-71 is concerned has therefore to be declared as ultra vires and we do so accordingly. The ??? of the Commercial Tax Officer, the Deputy Commissioner of Commercial Taxes and Tribunal are therefore set aside. The Commercial Tax Officer is directed to revise the assessment in accordance with the Notification dated 31-5-1971.

    11. The petitions are accordingly allowed.

    12. No costs.

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    Comments

    Ananda Soap Factory v. State Of Karnataka
    (Jun 28, 1978)