Janarthanam, J.:— Tvl. Kannapiran Steel Re-rolling Mills, 17/18, Mill Road, Coimbatore-1 are dealers registered under the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act No. 1 of 1959—for short, “TNGSTA”) and under the Central Sales Tax Act, 1956 (Act 74 of 1956—for short “CSTA”). They effect business intra and inter-State.

2. They had been assessed on total and taxable turnover of Rs. 8,12,521 and Rs. 5,55,931 respectively for the assessment year 1986–87 under CSTA by the assessing officer—Additional Deputy Commercial Tax Officer, Oppanakkara Street Circle, Coimbatore. Their accounts were verified on December 4, 1987 by the officers of the Enforcement Wing, Coimbatore. Such verification revealed that they had claimed exemption on a turnover of Rs. 2,56,590, being the sales of M.S rods and rounds as second sales under CSTA. The explanation offered by them was that the goods were-manufactured out of raw materials purchased before March 17, 1986.

3. (i) The exemption so claimed was based upon the Notification No. 11(1)/CTRE/50/82, (G.O.P No. 311), dated 13th March, 1982 (published in the Tamil Nadu Government Gazette dated March 24, 1982, Part II, Section 1 at page 24). The said notification reads as under:

“In exercise of the powers conferred by sub-section (5) of section 8 of the Central Sales Tax Act, 1956 (Central Act 74 of 1956), the Governor of Tamil Nadu having been satisfied that it is necessary so to do in the public interest, hereby makes an exemption in respect of tax payable under the said Act in the course of inter-State trade or commerce in respect of the end-products coming under item 4 of the Second Schedule to the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act 1 of 1959) manufactured by the steel re-rolling mills in Tamil Nadu subject to the conditions that the raw materials specified in item 4 of the said Schedule to the said Act out of which the end-products are manufactured have suffered tax under the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act 1 of 1959) and that the dealers do not collect tax either directly or indirectly or make provision in the balance sheet to pay sales tax under outstanding expenses and get income-tax relief.

2. The notification hereby made shall come into force on and from 1st April, 1982.”

(ii) The Government of Tamil Nadu subsequently issued inter-State sales—Exemption—Cancellation—Notification in G.O.P No. 395, dated 25th April, 1986 [No. II(1)/CTRE/57(b)/86] and the notification so issued reads as under:

“In exercise of the powers conferred by sub-section (5) of section 8 of the Central Sales Tax Act, 1956 (Central Act 74 of 1956), the Governor of Tamil Nadu having been satisfied that it is necessary so to do in public interest hereby cancels the Notification No. II(1)/CTRE/50/82 dated the 13th March, 1982, published in Part II—Section 1 of Tamil Nadu Government Gazette, dated the 24th March, 1982, as subsequently amended.

2. The notification hereby made shall be deemed to have come into force on and from the 17th March, 1986.”

(This notification was published in the Tamil Nadu Government Gazette, Extraordinary No. 214, Part II, Section 1, dated April 25, 1986).

4. For the purpose of convenience, we may hereafter refer to the exemption notification as “earlier notification” and exemption cancellation notification as “subsequent notification”.

5. As per the earlier notification, raw materials were subjected to tax and the end-products made out of such raw materials were exempt from tax. The subsequent notification simply cancelled the earlier notification giving retrospective effect on and from March 17, 1986.

6. The assessment originally made was revised disallowing the claim of exemption to the tune of Rs. 2,56,590 and the total and taxable turnover had been determined as below:

Total turnover Taxable turnover Rs. Rs. Turnover determined by the assessing officer 8,12,521 5,55,931 Wrong exemption disallowed and assessed to tax … 2,56,590 Turnover now determined 8,12,521 8,12,521

7. A penalty of one and a half times the tax due on the alleged suppressed turnover was also levied and quantified in a sum of Rs. 30,800.

8. The aggrieved assessee-dealers filed an appeal in Ap. C.S.T No. 297 of 1988 before the Additional Appellate Assistant Commissioner (C.T), Coimbatore (for short, “AAAC”) and he, in turn, dismissed the appeal in toto, by his order dated 14th day of December, 1989.

9. The assessee-dealers made a further appeal in C.T.A No. 219 of 1990 before the Tamil Nadu Sales Tax Appellate Tribunal, Coimbatore-18 (for short, “Tribunal”) and the Tribunal, in turn, allowed the appeal in toto, in the sense of setting aside both the assessments as well as penalty levied, as had been done by the assessing officer and laterly confirmed by AAAC, giving rise to the present action—Tax Case (Revision) No. 164 of 1994, by the Revenue.

10. From the pith and submissions of Mr. K. Ravi Raja Pandian, learned Special Government Pleader (Taxes) representing the Revenue and Mr. C. Natarajan, learned Senior Counsel representing the assessee-dealers, the point that crops up for consideration in this action is as to—

Whether the order of the Tribunal, on the facts and circumstances of the case, is sustainable in law ?

11. The earlier exemption notification had admittedly been issued, in exercise of the powers conferred by sub-section (5) of section 8 of CSTA. There is no need for us to reproduce the said notification here, in view of the virtual reproduction of the same in the process of summation of the facts of the case. The said notification had been issued by the Governor of Tamil Nadu in public interest, granting exemption in respect of tax payable under CSTA, in the course of inter-State trade or commerce in respect of the end-products, coming under item 4 of the Second Schedule to TNGSTA. For such end-products to attract exemption, the same must have to be manufactured by steel re-rolling mills in Tamil Nadu. That apart, raw materials specified in item 4 of the Second Schedule to TNGSTA out of which the end-products were manufactured had suffered tax under TNGSTA. What is further required was that the dealers did not collect tax either directly or indirectly or make provision in the balance sheet to pay sales tax under “outstanding expenses” and get “income-tax relief’. Though the said notification is dated March 13, 1982, it had come into force on and from 1st April, 1982.

12. The subsequent inter-State sale exemption cancellation notification, as already indicated, though dated 25th April, 1986, was given retrospective effect on and from 17th March, 1986.

13. Mr. K. Ravi Raja Pandian, learned Special Government Pleader (Taxes) representing the Revenue would submit that the rationale or reasoning given by the Tribunal for setting aside the assessment as well as penalty, as had been done by the assessing officer and laterly confirmed by the AAAC are altogether untenable and therefore it is, the order of the Tribunal is liable to be set aside, by ordering restoration of the order of the assessing officer and laterly confirmed by the AAAC.

14. Mr. C. Natarajan, learned Senior Counsel representing Mr. N. Inbarajan, learned counsel appearing for the assessee would submit that the order of the Tribunal, in setting aside the assessment as well as penalty, as had been imposed by the assessing officer and laterly confirmed by the AAAC is sustainable in law, not on account of the rationale or reasoning, as had been adverted to by the Tribunal, but for different reasons. What he would say is that the Government— a delegate—have no power to issue a notification of subsequent inter-State sales cancellation of exemption notification with retrospectivity on and from a particular date, that is to say, 17th March, 1986, when especially the Legislature has not conferred such a power on the delegate—Government, while enacting subsection (5) of section 8 of CSTA and therefore, the cancellation notification, if at all, would be prospective on and from 25th April, 1986, the date on which the same had been published. He would alternatively state that under the earlier exemption notification, a right of exemption had accrued to the assessee-dealers in respect of end-products they had manufactured, inasmuch as all vestitive facts, as contemplated by the said notification had been completed, culminating in the right of exemption.

15. We shall now enter into the arena of discussion on the tenability or otherwise of the rival submissions of either counsel.

16. sub-section (5) of section 8 of the CSTA, on which the earlier notification had been issued, runs as under:

“8. Rates of tax on sales in the course of inter-State trade or commerce.—

………………………

(5) Notwithstanding anything contained in this section, the State Government may, if it is satisfied that it is necessary so to do in the public interest, by notification in the official Gazette, and subject to such conditions as may be specified therein, direct,—

(a) that no tax under this Act shall be payable by any dealer having his place of business in the State in respect of the sales by him, in the course of inter-State trade or commerce, from any such place of business of any such goods or classes of goods as may be specified in the notification, or that the tax on such sales shall be calculated at such lower rates than those specified in subsection (1) or sub-section (2) as may be mentioned in the notification;

(b) that in respect of all sales of goods or sales of such classes of goods as may be specified in the notification, which are made, in the course of interstate trade or commerce, by any dealer having his place of business in the State or by any class of such dealers as may be specified in the notification to any person or to such class of persons as may be specified in the notification, no tax under this Act shall be payable or the tax on such sales shall be calculated at such lower rates than those specified in sub-section (1) or sub-section (2) as may be mentioned in the notification.”

17. A cursory perusal of what has been extracted above reveals that the State Government is clothed with the power to issue a notification in the official Gazette, if it is satisfied that it is necessary so to do in public interest, of course, subject to such conditions as may be specified therein. The power is there for the State Government to reduce the tax or completely grant exemption from tax, in the course of inter-State sales effected by any dealer or in respect of certain classes of goods. Nothing is traceable in the said sub-section as to whether the Government issuing any notification thereunder has any power to issue a further notification either to add or amend or vary or rescind the earlier notification issued. It is not as if the Government, which issued the exemption notification under the said sub-section is not having any power to add or amend or vary or rescind the earlier exemption notification on the ground of there being no power traceable in this sub-section itself.

18. Section 21 of the General Clauses Act, 1897 (Act No. 10 of 1897— for short, “GCA”) provides the answer. The said section reads as under:

“21. Power to make to include power to add, to amend, vary or rescind orders, rules or by-laws.—Where by any Central Act or Regulation, a power to issue notifications, orders, rules or by-laws is conferred, then that power includes a power exercisable in the like manner and subject to the like sanction and conditions (if any), to add, to amend, vary or rescind any notifications, orders, rules or bye-laws so issued.”

19. It is thus crystal clear that though the power to rescind the earlier exemption notification is not traceable to sub-section (5) of section 8 of the CSTA, yet the power inheres in favour of the State Government, pursuant to the salient provisions adumbrated under section 21 of GCA.

20. The moot question that arises for consideration is as to whether the State Government is having the necessary and requisite power to rescind the earlier exemption notification with retrospectivity. Axiomatic a proposition of law it is that a competent Legislature may make a law, even on matters relating to taxation, with retrospective effect. The question, however, is whether the Government—a delegate—is having the requisite and necessary power to give retrospectivity in a cancellation notification, as had been done in the instant case, in the absence of such a power having been engrafted in its favour under subsection (5) of section 8 of CSTA.

21. It is not as if such a question did never arise for consideration, before superior courts of jurisdiction and the plain fact is that such an issue came to be canvassed in Ananda Soap Factory v. State of Karnataka, [1978] 42 STC 356 (Kar) and what their Lordships—E.S Venkataramiah (as he then was) and M.K Srinivasa Iyengar, JJ., of the Karnataka High Court said in paragraph 4 (at page 360) is relevant and the same reads as under:

“4………………………

There is no provision in the Act which confers power on the State Government to issue a notification under section 8-A 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 as delegated by a Legislature 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, AIR 1960 Mys. 326, the question which arose for consideration was whether the power conferred by a Legislature on a subordinate legislative body like Government 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 Manufacturing Co. Ltd. v. Gutta Mill Workers' Union, AIR 1953 SC 95, held that in the absence of a legislative provision conferring power to issue a notification retrospectively, it was not open to the State Government to issue such a notification. In Dr. Indramani Pyarelal Gupta v. W.R Natu, AIR 1963 SC 274, the decision in the case of India Sugars and Refineries Ltd., AIR 1960 Mys. 326 was noticed by the Supreme Court. In Income-tax Officer, Alleppey v. M.C Ponnoose, [1967] 64 ITR 117 (Ker) : AIR 1966 Ker 5, following the decision of this Court in India Sugars and Refineries Ltd., AIR 1960 Mys 326 and the decision of the Supreme Court in Indramani's case, AIR 1963 SC 274, the Kerala High Court held that unless the power to act retrospectively had been expressly conferred by the Legislature on the Government exercising subordinate and delegated legislative powers, the Government could not act retrospectively. No decision which takes a contrary view has been cited before us. We are of the 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 Government to issue a notification either taking away vested rights or imposing obligations with retrospective effect.”

22. We are in complete agreement with the view expressed by Their Lordships of the Karnataka High Court.

23. In this context, we may also usefully refer to the decision of the Supreme Court in the case of Cannanore Spinning and Weaving Mills Ltd. v. Collector of Customs and Central Excise, (1969) 3 SCC 112 : AIR 1970 SC 1950. What Their Lordships of the Supreme Court, namely, J.C Shah and K.S Hegde, JJ., said in that decision in paragraph 6 (at page 1953) is relevant and it reads as under:

“………The rule-making authority had not been vested with the power under the Central Excises and Salt Act to make rules with retrospective effect. Therefore the retrospective effect purported to be given under exhibit P12 was beyond the power of the rule-making authority.”

24. In view of the ratio or dictum laid down by the superior courts of jurisdiction, as referred to above, it goes without saying that the subsequent interstate sales—exemption—cancellation notification issued by the Government giving retrospectivity from 17th March, 1986 is not sustainable in law and if at all the said notification can be stated to operate prospectively on and from 25th April, 1986, the date on which it has been published in the Tamil Nadu Government Gazette. That being the legal position, the sales of end-products of the assessee-dealers till up to 25th April, 1986 have to be exempted from tax.

25. The next question that arises for consideration is as to what is to happen to the end-products manufactured out of raw materials, on which tax had already been paid, remaining unsold in stock, even subsequent to the targeted date, 25th April, 1986.

26. We have to recapitulate here, in the process of answering this question, the argument advanced by learned Senior Counsel Mr. C. Natarajan. According to him, the right of exemption had accrued to the assessee-dealers, before ever the exemption notification was cancelled by a subsequent notification by the Government, in the sense of all vestitive facts having been completed culminating in the accrual of the right of exemption and therefore it is, that the end-products would have the benefit of exemption, even if such products came to be sold long subsequent to 25th April, 1986.

27. The argument so projected, of course, wears a credible look of tenability. But, if a deep probe is made into such an argument, what would emerge to the surface is that, to such an argument, we cannot affix our seal or approval, on the facts and in the circumstances of the case. It is not as if that all vestitive facts had been completed culminating in the accrual of the right of exemption in favour of the assessee-dealers, as per the earlier exemption notification issued. No doubt true it is that all the vestitive facts prescribed in the earlier exemption notification had been fulfilled, de hors one fact as contemplated by the said notification. The right of exemption would accrue to the assessee-dealers only when the taxable event of sale of the end-products happen and not until then. The sale of end-products remained as an end-product without culminating in a sale during the currency of the notification. Therefore, the one vital vestitive fact of sale not happening did not culminate in the right of accrual of exemption in favour of the assessee-dealers. Such being the case, we are of the view that the assessee-dealers were not entitled to exemption in respect of the end-products remaining in their possession as stock beyond the targeted date, 25th April, 1986.

28. We may now advert to the order of the Tribunal relatable to the deletion of the penalty levied by the assessing officer and laterly confirmed by AAAC. It is not as if the turnover had been suppressed by the assessee-dealers. The turnover had actually been reflected in the accounts. The assessee-dealers bona fide believed that the said turnover was exempt from tax. In such state of affairs, it cannot at all be stated that the assessee-dealers had refracted or violated section 10(2) of TNGSTA read with section 9(2-A) of CSTA. We are therefore of the view that the order of the Tribunal in deleting the penalty cannot at all be stated to be not sustainable in law.

29. The resultant product of the discussion as above, leads to the following conclusions:

(i) The retrospectivity given by the subsequent inter-State sales—exemption— cancellation notification is not sustainable in law;

(ii) The end-products of the assessee-dealers sold up to 25th April, 1986 shall not at all be subjected to tax;

(iii) The end-products remaining in stock, subsequent to the targeted date, 25th April, 1986 shall be subjected to tax at the appropriate rate; and

(iv) The deletion of penalty, as ordered by the Tribunal cannot at all be stated to be not sustainable in law.

30. In view of the conclusions as above, the assessing officer has to work out the end-products sold up to 25th April, 1986 and give the relief of exemption therefor. Likewise, if there is any unsold stock of end-products beyond the targeted date of 25th April, 1986, such stock of end-products shall be subjected to appropriate tax. The tax case (revision) is thus disposed of. There shall, however, be no order as to costs, on the facts and in the circumstances of the case.

31. Petition disposed of accordingly.