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Judgment
D.V. Shylendra Kumar, J.—This writ petition is by a partnership firm which was a registered dealer under the provisions of the Karnataka Sales Tax Act, 1957 (for short, "the Act") and which has questioned the revenue recovery proceedings resorted to by the revenue officials at the instance of the officials of the commercial Taxes Department for realizing the sales tax dues payable by the petitioner which was to the tune of Rs. 8,05,284, which is the amount as confirmed in the appellate order passed by the Joint Commissioner of commercial Taxes (Appeals) dated December 15, 2004 (copy at annexure A).
The challenge in this writ petition is not only to the legality of the tax liability on the premise that the petitioner is a dealer who had enjoyed the benefit of exemption from levy of tax in respect of its turnover in terms of a Government exemption notification issued u/s 8A of the Karnataka Sales Tax Act, 1957 (for short, "the KST Act") dated June 21, 1991 and being covered by entry at Sl. No. 11 which reads as under:
Notification No. FD 239 CSL 90(I), Bangalore, dated June 19, 1991 S.O. 1371, Karnataka Gazette, dated June 21, 1991
In exercise of the powers conferred by Sub-section (1) of Section 8A of the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957), the Government of Karnataka hereby exempts with immediate effect the tax payable under the said Act, in respect of goods manufactured and sold by new industrial units mentioned in column (2) of the table below located in the zones specified in column (3) to the extent indicated in column (4) and during the period mentioned in column (5) thereof, namely:
Table ---------------------------------------------------------------------------------------------- Sl. Location of the Extent of Period of No. Type of industry industry sales tax exemption exemption ---------------------------------------------------------------------------------------------- 1 Tiny/small-scale/ Situated in zone-II specified 100 per cent Three years medium and large- in annexure-I to tax exemption from the date scale industrial units Government Order No. without of commence- CI/138/SPC/90 dated any monetary ment of com- September 27, 1990 limit mercial production
2 do. do Zone-III do. Four years do.
3 do. do Zone-IV do. Five years do. 4 Tiny/small-scale/ Situated in zone-I do. Three years do. medium and large- industrial areas devel- scale industrial units open by Government in the thrust sector promoter agencies as defined in annexure-II- except in Bangalore to G.O. No. CI urban agglomeration 138/SPC/90 dated and Mysore City Corpo- September 27, 1990. ration [Please see para V(a) in G.O. No. CI/138/ SPC/90 dated September 27, 1990]
5 do. Situated in zone-II areas do. Four years do. of Bangalore urban and Bangalore rural districts [Please see para V(b) in G.O. No. CI/138/SPC/90 dated September 27, 1990]
6 Tiny/small-scale/ Situated in zone-II do. Five years do. medium and large- (other than Bangalore scale industrial units urban and Bangalore in the thrust sector rural districts) and zone- as defined in annexure-II III [Please see para V(c) to G.O. No. CI in G.O. No. CI/138/SPC/ 138/SPC/90 dated 90 dated September 27, September 27, 1990. 1990]
7 do. Situated in the notified do. Six years do area zone-IV as per annexure-I of G.O. No. CI/138/SPC/90 dated September 27, 1990. 8 Tiny/small-scale industrial Situated in Bangalore 100 per cent Three years units engaged in urban agglomeration tax exemp- from the date agro-food processing, areas and tion without of commence- agro-based industrial Mysore city corpora- any monetary- ment of com- high-tech packaging tion areas as per limit. mercial pro- units, cold-storages, Note-2 to para V in duction green-houses, tissue G.O. No. CI 138/ culture laboratory, bio- SPC/90 dated Sep- fertiliser, bio-technology, tember 27, 1990. compost, growth regulators, seed production and informatics/software units/industries as per Note-2 to para V in G.O. No. CI/138/SPC/90 dated September 27, 1990. 9 100 per cent export-oriented- Situated in zone-I do. Three years do. units in the (including Bangalore thrust sector as defined urban agglomeration in annexure-II to G.O. area and Mysore city No. CI 138/SPC/90 corporation area) as dated September 27, per annexure-I to 1990. G.O. No. CI 138/ SPC/90 dated September 27, 1990.
10 Tiny/small-scale/ Situated in the noti- do. Six years do medium and large scale fied Mysore and industrial units in Dharwar electronics electronics/telecommunications cities as per para VI and informatics in G.O. No. CI 138/ (software) as per SPC/90 dated Sep- para VI in G.O. No. CI tember 27, 1990. 138/SPC/90 dated September 27, 1990.
11 All khadi and village Situated in the State 100 per cent without any industries as defined of Karnataka time-limit." under the Khadi and Village Industries Act, 1956 and as amended from time to time. ----------------------------------------------------------------------------------------------
and because of this position, and also being aggrieved by a subsequent notification dated August 28, 1993 published in gazette dated September 23, 1993 which is again issued u/s 8A of the KST Act, which reads as under:
Notification No. FD 171 CSL 93(VI), Bangalore, dated August 28, 1993, Karnataka Gazette, dated September 23, 1993.
SO 1184.-In exercise of the powers conferred by Sub-section (3) of Section 8A of the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957), the Government of Karnataka hereby varies with immediate effect the Notification-I, No. FD 239 CSL 90, dated June 19, 1991, as follows namely:
In the said notification,:
(i) in the Table, the entries relating to serial number 11 shall be omitted;
(ii) In Explanation I, Clause (ii) shall be omitted ; (iii) Explanation IIA shall be omitted ; (iv) in Explanation III:
(a) in Clause (a), Sub-clause (ii) shall be omitted ;
(b) after Clause (f), the following clause shall be inserted, namely:
(g) to Tiny/small-scale industrial units whose investment in
fixed assets has taken place on or after July, 12, 1993 and to medium/ large-scale industrial units which are in the process of establishment and have not opted for availing concessions under this notification before September 30, 1993. (v) in procedure,:
(a) in Clause (1), Sub-clause (b) shall be omitted ;
(b) in Clause (2), Sub-clause (b) shall be omitted.
Note : For Notification No. FD 239 CSL 90(I), dated June 19, 1991 (See Sl. No. 27).
Whereby the earlier exemption notification dated June 21, 1991 (copy at annexure E) came to be varied by omitting the entry at Sl. No. 11 from the eligibility of exemption.
The liability is questioned on the premise that when under the earlier notification the exemption was mentioned for an indefinite period, the State Government could not have issued a subsequent notification withdrawing the exemption with effect from the date of issue of the subsequent notification; that it virtually amounts to going back on the promise culled out in the earlier notification ; that the State Government has no power to withdraw the exemption that had been granted in favour of khadi and village industrial units as defined in Khadi and Village Industries Act, 1955.
In so far as challenge to recovery proceedings, particularly, the forfeiture under annexure C dated June 23, 2006 and the so-called attachment order dated March 22, 2006 (copy at annexure H) which in fact is in the nature of a restraint order on the petitioner not to alienate any of its properties on the premise that the tahsildar has no power of forfeiture even while acting under the provisions of the Karnataka Land Revenue Act, 1964 (for short, "the KLR Act") while recovering any arrears of land revenue and further that the proclamation u/s 6 of the Revenue Recoveries Act, 1890 (for short, "the RR Act") issued by the Deputy Commissioner addressed to the petitioner cannot be valid for two reasons, one that the provisions of the Revenue Recoveries Act, 1890 is not applicable and secondly that the so-called proclamation is defective in not mentioning the properties of which proclamation has been issued.
Notice had been issued to the respondent-State and the officers of the commercial Taxes Department. The respondents have entered appearance through counsel Smt. Niloufer Akbar, learned Additional Government Advocate and have filed statement of objections defending the impugned actions.
Appearing on behalf of the petitioner, Sri Sanath Kumar Shetty, learned Counsel would urge that the withdrawal of the exemption notification in terms of subsequent notifications dated August 28, 1993 (copy at annexure F) is contrary to the earlier notification and also contrary to the provisions of Section 8A of the KST Act; that once exemption had been granted for an indefinite period as under the earlier notification, the Government could not subsequently withdraw the exemption by a later notification and even the withdrawal is not proper in terms of the language of the provisions of Section 8 of the KST Act as the exemption notification can only be cancelled, but in the instant case, what has been done is to omit in terms of Sub-section (6) of Section 8A of the KST Act; that it cannot be varied as is sought to be done under the later notification and assuming that it is done, it cannot have any legality as it is not in consonance with the provisions of Sub-section (6) of Section 8 (sic) of the KST Act.
In so far as the argument regarding the illegality of the forfeiture order by the Tahsildar is concerned, learned Counsel for the petitioner would draw attention to the provisions of the KST Act as well as KLR Act and points out that there is no power of forfeiture in favour of the Tahsildar and therefore the order is bad in law.
With regard to the proclamation as noticed earlier, the argument is that the proclamation is one which is issued under the RR Act the provisions of which Act are not attracted in the present situation as an arrear of land revenue contemplated under the provisions of the KST Act is different from the recovery proceedings under the RR Act.
In support of the submission that the subsequent notification purporting to vary the earlier notification is not valid, learned Counsel for the petitioner would rely upon the decision of the Supreme Court in the case of MRF Ltd., Kottayam Vs. Assistant Commissioner (Assessment) Sales Tax and Others, .
On the other hand, Smt. Niloufer Akbar, learned Additional Government Advocate appearing for the State, would defend the action and for the purpose of supporting the action of Tahsildar as under annexure C would draw the attention of the court to the provisions of Section 13(3)(a) of the KST Act which read as under:
Payment and recovery of tax.-(3) Any tax assessed, or any other amount due under this Act from a dealer or any other person may without prejudice to any other mode of collection be recovered:
(a) as if it were an arrear of land revenue.
and the provisions of Sections 160(2), 161(c) and 165 of the KLR Act.
These relevant statutory provisions read as under:
Arrear of land revenue and defaulter-(2) A statement of account, certified by the Deputy Commissioner or by the Assistant Commissioner shall, for the purpose of this chapter be conclusive evidence of the existence of the arrear of land revenue, of its amount and of the person who is the defaulter:
Process for recovery of arrears.-An arrear of land revenue may, after serving a written notice of demand on the defaulter u/s 162, be recovered by any one or more of the following processes, namely:
(a) and (b) ...
(c) by attachment and sale of the defaulter''s Immovable property under Sections 165 - 168 ;
Attachment and sale of immovable property.-When the (Tahsildar) is of opinion that the processes referred to in Clauses (a) and (b) of Section 161 are inexpedient or insufficient for the recovery of an arrear, he may, in addition to or instead of any of these processes, cause any Immovable property of the defaulter to be attached and sold.
Submission is that on a combined reading of the statutory provisions, it is obvious that the Tahsildar has the power. In so far as proclamation is concerned, it is submitted that the proclamation issued under the provisions of the RR Act is a proper one for the reason that the RR Act is pressed into service for the purpose of collection of any arrears of land revenue also and there is absolutely no impediment for resorting to recovery proceedings under the KST Act, KLR Act and RR Act simultaneously and in support of the submission reliance is placed on the judgment of this Court in the case of Ali Agro Extract Pvt. Ltd. Vs. Assistant Commissioner of Commercial Taxes and Others,
So far as the legality of the subsequent notification is concerned, submission of learned Additional Government Advocate is that the notification very clearly mentions that the exemption granted in respect of the particular type of industry is not continued any further by omitting the entry relating to grant of exemption ; that it amounts to a cancellation of the exemption and therefore the notification is not only well within the powers of the Government but also it is not bad on the premise that it is a case of a notification which is bad on the principle of violating the promise made earlier and the Government being estopped from modification or rescinding the notification on the principles of promissory estoppel.
In so far as the argument relating to the legality of the subsequent notification is concerned, it entirely depends upon the language used in the notification itself and by contending that the subsequent notification only seeks to vary the earlier notification and does not purport to cancel the exemption and is therefore bad.
The effect of the notification cannot be avoided whether it is couched in the language of varying, or as specifically mentioned in Section 8A of the KST Act as cancelling. The effect of the notification dated August 28, 1993 is only to cancel the exemption that had been granted in favour of the khadi and village industrial units as figured at Sl. No. 11 of the earlier notification. It is the impact of the notification that is important and not merely the manner of cancellation or the word used for cancellation. It cannot be disputed that the Government while exercising the delegated power for notifying the exemptions u/s 8A of the KST Act also has the power to withdraw, modify, vary, cancel such exemptions.
The present case is of one where exemption is withdrawn not retrospectively but only prospectively, in the sense, the exemption in favour of the industries like that of the petitioner ceases with effect from the date of issue of the notification dated August 28, 1993.
Though Sri Sanath Kumar Shetty, learned Counsel for the petitioner, would contend that the decision relied upon is attracted to the present case for the reason that the exemption in the earlier notification was forever and the language of the notification indicates indefinite period under the column relating to the period of exemption, I am afraid neither principles of law in the decision is attracted to the case nor can the argument be accepted for the reason that it is not in the nature of an exemption forever but an exemption without a definite period, in the sense, it can be varied at any moment.
It is not possible to accept the argument of Mr. Shetty that words without any time-limit are one granting permanent exemption forever as that would militate against the very purpose and object of the Act of levying tax and the exception being granting exemptions.
An exemption can never be permanent in nature as that will be quite contrary to the purpose and object of the Act levying sales tax and therefore the only understanding of the word can be exemption for indefinite period and that it can be withdrawn at any time and the Government is not bound to retain the exemption for any particular period or for all times to come.
It is for this reason, the principles of promissory estoppel is also not attracted as there is no promise held out by the Government granting exemption for any specific period, within which period the exemption is withdrawn.
Except for this argument, no other argument is advanced nor can be entertained and though the present proceedings are not exactly the proceedings challenging the assessment order and the confirming appellate order, this contention of exemption is taken up as it was urged as a pure question of law and involving the interpretation of the exemption notification.
In so far as the validity of annexure C forfeiture order passed by the Tahsildar is concerned, examination of statutory provisions as quoted above does not reveal any enabling power in favour of the Tahsildar to order forfeiture. An order of forfeiture is a very serious order which is in the nature of penalty and until and unless it is an express provision, there is no question of reading the power of forfeiture in favour of any authority. In fact, under the KST Act what is enabled in favour of the officials of the commercial taxes department is for recovering the arrears of tax and for such recovery, amount as notified under the KLR Act as though it is arrears of land revenue can be resorted to. A recovery is different from forfeiting the properties. Even the KST Act does not envisage any forfeiture of any of the property belonging to an assessee in default. While that in itself is sufficient to invalidate the action under annexure C even under the KLR Act, there is no power of forfeiture and particularly on a reading of the statutory provisions referred to and relied upon by learned Additional Government Advocate.
In so far as the legality of the proclamation under annexure F is concerned, I do not find it is necessary to go into this aspect any further for the reason that it is only in the nature of a direction issued to the petitioner not to alienate his properties. An action which even on a general reading of the recovery procedure under the KST Act is justified as the recovery officer can always call upon the assessee in default to make payment and not to indulge in transactions for defeating the interest of the Government by pre-emptive sales, etc. In fact, it is not even an attachment notice in the sense of proclamation as there is no mention of any particular property in the notice. It is an innocuous order on the petitioner apprising him not to alienate his properties.
In this view of the matter, it is not necessary to further examine the question of legality of this notice on the premise of the argument addressed, but on the authority of the decision rendered in Ali Agro Extract Pvt. Ltd. Vs. Assistant Commissioner of Commercial Taxes and Others, the revenue is not prevented from having recourse to simultaneous recovery proceedings under several modes. If that is so, the recovery under the RR Act or under the KLR Act is not to be frowned upon. In fact, the RR Act is an enabling piece of legislation to recover the arrears of land revenue found due under the KLR Act. Therefore, there is no merit in the argument that the notice under annexure F has to be quashed.
In the result, this writ petition is allowed in part. Forfeiture order bearing No. ST. TAX. CR. 23/05-06 dated June 23, 2006 passed by the Tahsildar is quashed by issue of a writ of certiorari, but in respect of all other aspects, the challenge fails.
It is also made clear that it is open to the recovering authority to take recourse to recovery proceedings even against the property under annexure C in the manner permitted under the law and if there are still any arrears by the petitioner to recover in such manner.
Rule made absolute.