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State Of Bihar And Others v. Krishna Kumar Kabra And Another
Factual and Procedural Background
This appeal by the State of Bihar challenges an order of a Division Bench of the Patna High Court that allowed, at the admission stage, a writ petition filed by the respondents based on earlier judgments of that Court.
The respondents sold wheat bran. The question presented was whether their sales of bran were liable to sales tax during the period 26-12-1977 until June 1985.
On 26-12-1977, the State Government issued two notifications under the Bihar Sales Tax Fifth Ordinance, 1977: (i) Notification No. 14545 under Section 11(2), fixing a 3% rate of sales tax on various commodities, including at Serial No. 11 “Atta, Maida and Sujji”; and (ii) Notification No. 14547 under Section 6(3)(a), exempting “Cattle feed and Poultry feed” from sales tax. On 9-3-1978, Notification No. 3320 was issued under Section 11(1), amending Serial No. 11 in Notification No. 14545 to read “Atta, Maida, Sujji & bran … 3 per cent.” It is not in dispute that bran is covered by the broad description “Atta, Maida and Sujji.”
Legal Issues Presented
- Whether the inclusion of “bran” in the rate notification (Notification No. 3320 dated 9-3-1978) impliedly withdrew the exemption that bran had enjoyed under the exemption notification (Notification No. 14547 dated 26-12-1977).
- Whether Notification No. 3320 could validly operate with retrospective effect from 26-12-1977, given that it is a piece of delegated legislation.
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 |
|---|---|---|
| CST v. Agra Belting Works, (1987) 3 SCC 140; (1987) 66 STC 1 | Sections 3-A and 4 of the U.P. Sales Tax Act form part of a single taxing scheme; a later notification prescribing rate on goods previously exempted indicates an intention to withdraw the exemption. No separate revocation notification is necessary. | Applied by analogy: the later rate notification including “bran” reflected an intention, by necessary implication, to end the earlier exemption applicable to bran. |
| STO v. Dealing Dairy Products, 1994 Supp (2) SCC 639; (1994) 94 STC 93 | On similar facts, followed Agra Belting Works to uphold implied withdrawal of exemption upon issuance of a later rate notification. | Relied upon as reinforcing authority that the inclusion of “bran” in the rate schedule impliedly withdrew its prior exemption. |
Court's Reasoning and Analysis
- The Court noted that it was undisputed that “bran” falls within the broad description of “Atta, Maida and Sujji.”
- Drawing on CST v. Agra Belting Works and STO v. Dealing Dairy Products, the Court treated the taxing provisions and exemption provisions as components of a unified taxing scheme. Under this approach, when a later notification prescribes a rate of tax for goods that had earlier been exempted, the necessary implication is that the exemption is withdrawn; no express revocation is required.
- Applying these principles, the Court held that Notification No. 3320 (dated 9-3-1978), which expressly included “bran” in the 3% rate entry, intended by necessary implication to terminate the exemption that bran had enjoyed under Notification No. 14547.
- However, the Court found the retrospective operation given to Notification No. 3320 (from 26-12-1977) “difficult to uphold,” emphasizing that the notification is delegated legislation. On that basis, retrospective effect was not sustained.
- Accordingly, the Court fixed liability to tax at 3% on sales of bran from the date of the amending rate notification (9-3-1978) up to June 1985, when the “situation was radically altered.”
Holding and Implications
HOLDING: The appeal is allowed to the extent that the respondents are liable to pay sales tax at 3% on sales of bran from 9-3-1978 until June 1985, and the High Court’s order is set aside to that extent. The retrospective operation of Notification No. 3320 from 26-12-1977 is not upheld. There is no order as to costs.
Implications: The direct effect is that the respondents must pay sales tax at 3% on sales of bran for the period 9-3-1978 to June 1985. The decision applies established Supreme Court precedent recognizing implied withdrawal of exemptions when a later notification prescribes a tax rate for previously exempt goods; it does not announce a new rule. The Court also signals limits on giving retrospective effect to delegated legislation.
S.P Bharucha, J.— This is an appeal by the State of Bihar against the order of a Division Bench of the High Court at Patna allowing, at the admission stage, a writ petition filed by the respondents, basing itself upon earlier judgments of that Court.
2. The respondents sold wheat bran and the question is whether they are liable to pay sales tax thereon during the period 26-12-1977 until June 1985.
3. On 26-12-1977 the State Government issued a notification (No. 14545) in exercise of the powers conferred by Section 11(2) of the Bihar Sales Tax Fifth Ordinance, 1977, fixing the rate of sales tax on a variety of commodities which included, at Serial No. 11 “Atta, Maida and Sujji” at the rate of 3%. On the same day the State Government issued another Notification (No. 14547) in exercise of powers under Section 6(3)(a) of the said Ordinance exempting from the levy of sales tax various commodities including, at Serial No. 35, “Cattle feed and Poultry feed”. On 9-3-1978 the State Government issued a Notification (No. 3320) in exercise of the power conferred by Section 11(1) of the said Ordinance amending the aforesaid Ordinance No. 14545 so that Serial No. 11 thereof now read “Atta, Maida, Sujji & bran … 3 per cent”.
4. It is not in dispute that bran is covered by the broad description “Atta, Maida and Sujji”. The question is whether, by reason of the Notification No. 3320 dated 9-3-1978, amending the entry relating to the rate of tax in the earlier notification in that behalf by including “bran” therein, has the effect of bringing to an end the exemption from the levy of sales tax that bran enjoyed under Notification No. 14547 dated 26-12-1977.
5. Our attention has been drawn to two judgments of this Court that squarely cover the issue in favour of the appellant State. They are the judgments in CST v. Agra Belting Works (1987) 3 SCC 140, (1987) 66 STC 1 and in STO v. Dealing Dairy Products 1994 Supp (2) SCC 639, (1994) 94 STC 93. In the earlier case it was held that Sections 3-A and 4 of the U.P Sales Tax Act were parts of the taxing scheme incorporated in that Act and, therefore, where a notification was issued under Section 3-A prescribing the rate of tax on goods which had been exempted from tax by an earlier notification under Section 4, it had to be held that the intention was to withdraw the exemption and make the sale leviable to tax at the rate prescribed in the later notification. It was not necessary that a specific or separate notification withdrawing or revoking the notification should be issued. The latter judgment of this Court, on similar facts, followed the earlier judgment.
6. The facts being similar, we must hold that the Notification No. 3320 imposing tax at the rate of 3% specifically on bran intended, by necessary implication, to bring to an end the exemption that bran had theretofore enjoyed.
7. Notification No. 3320 has, however, been given retrospective effect from 26-12-1977. We find that difficult to uphold, having regard to the fact that this is delegated legislation.
8. We, therefore, hold that the respondent would be liable to pay sales tax on its sales of bran at the rate of 3% from 9-3-1978 until June 1985 when the situation was radically altered.
9. The appeal is allowed to the extent aforestated and the order under appeal, to the same extent, set aside.
10. There shall be no order as to costs.
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