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Judgment
Puttaswamy, J.-On a reference made by one of us (Puttaswamy, J.,) these cases were posted before us for disposal.
As the questions that arise for determination in these cases are either common or inter-connected, we propose to dispose of them by a common order.
Entry No. 28 of the V Schedule of the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957) (hereinafter referred to as the Act) that came into force on 1-10-1957, as originally enacted read thus:
"28. Products of Village Industries when sold by a bona fide producer recognised by the commissioner, if necessary, after consultation with the Khadi and Village Industries Commission constituted under the Khadi and Village Industries Act, 1956".
S. 7. of the Karnataka Sales Tax (Fourth Amendment) Act, 1976 (Karnataka Act 78 of 1976) (hereinafter referred to as the 1976 Act) that came into force on 6-12-1976 amended and substituted the aforesaid entry to read as hereunder:
"28. Products of prescribed Village Industries which satisfy the prescribed conditions and limitations when sold by a bona fide producer recognised by the Commissioner".
This amendment thus conferred power on Government to recognise industries as Village Industries on such terms and conditions as are stipulated In the Rules to be made thereto without being guided by the recognition accorded by the Khadi and Village Industries Commission (hereinafter referred to as the Commission) constituted under the Khadi and Village Industries Act, 1956 (hereinafter referred to as the Khadi Act).
In exercise of the powers conferred by S. 38 of the Act, Government has framed Rules called the Karnataka Sales Tax Rules, 1957 (hereinafter referred to as the Rules) inter alia providing for issue of recognition certificates to Village Industries for claiming exemption from payment of taxes on sales of products of Village Industries and those Rules had been amended on more than one occasion and we are not concerned with all of them. In Notification No. FD 70 CSL 80 dt. 24-1-1981 published in Karnataka Gazette dt. 24-1-1981, Government has substituted the earlier R. 25A and the substituted Rule. 25A. (hereinafter referred to as the new Rule) that came into force on 1-2-1981 that is material reads thus:
"25-A: The Village Industries for the purpose of serial No. 28 of the fifth Schedule shall be as specified in column (2) of the table below and be such that (a) the Industry is Not situated within the local limits or within five Kilometers thereof of a City under the Karnataka Municipal Corporations Act, 1976 (Karnataka Act 140 of 1977) or a Municipality under the Karnataka Municipalities Act, 1964 (Karnataka Act 22 of 1964);
(b) its total investment in Plant and Machinery at any given time does not exceed Rupees Fifty Thousand; and (c) In respect of industries specified at items 13 to 26 of the said table, the annual sales turnover thereof does not exceed two and a half lakh rupees.
TABLE
Sl.No. Village Industries
Bamboo and Cane Industry
Bee Keeping Industry
Gas Plant Industry
Collection of Forest Plants and Fruits for Medicinal purposes
Groundnut with Jaggery Sweets Industry
Cottage Oil Industry
Cottage Manufacture of Matches
Handmade paper"products including hand made boards
Hand operated and Bullock driven Chakkies
Palmgur
Pottery
Hand Pounding of paddy including manufacture of beten rice (poha) and parched rice (Churmura and murmura)
Black Smithy
Carpentry
Cottage leather industry including tanning barck industry
Fibre Industry
Gur and Khandasari
Soap Making with non-edible oils
Lime Stone Industry
Smithy Industry
Fruits Processing and Fruits Preservation Industry
Manufacture of household utensils from Aluminium
Katha Manufacturing Industry
Manufacture of Shellac
Manufacture of Lacqured wooden Toys and Dolls
Manufacture of Gum and Resin.
Explanation:-Black Smithy and Smithy Industry specified at serial Numbers 13 and 20 shall, not include manufacture of iron and steel furniture".
In this notification, old R. 25B has not been amended. Rule 25B allows grant of exemption by Government on products manufactured and sold by recognised Industrial Training Industries in the State.
Petitiorer-I In W.P. No. 3017 of 1953 which is inter alia engaged in the manufacture of handmade paper products including hand made boards having it manufacturing unit at Banavasi Road, Sirsi Town was issued Recognition Certificate No. REG. SR. 6/77-78 dt. 18-3-1978 (Annexure-C in W. P. 3017 of 1983) by the Commissioner of Commercial Taxes, Karnataka, Bangalore (hereinafter referred to as the Commissioner) under Rs. 25A and 25B of the Rules, then in force, to be valid from 15-4-1977 on the terms and conditions stipulated therein. On the promulgation of the new R. 25A, the Commissioner issued a show cause notice to the petitioner proposing to cancel the aforesaid Recognition Certificate on the ground that the industry was situated within 5 Kilometers of Sirsi Town Municipality, which was opposed by it. On a consideration of the cause shown, the Commissioner by his order No REG. SR. 6/77-78 dt. 12/15-1-1982 (Annexure.D in W.P. 3017 of 1983 has cancelled the said certificate with effect from 1-2-1981 on the very ground proposerd in his show cause notice. Hence, the petitioners in W.p. No. 3017 of 1983 have challenged the validity of Entry No. 28 of the V Schedule introduced by the 1973 Act, New Rule 25A and the order dated 12/15-1-1982 made by the Commissioner.
Petitioner in W.P. Nos. 14382 and 14383 of 1983 was engaged in the manufacture of soap within the territorial limits of Tumkur Town Municipality. As in the case of the petitioner in W.P. No. 3017 of 1983, the certificate of registration of this petitioner has also been cancelled by the Commissioner on 4-11-1981 for the very reasons found in the previous case with effect from 1-2-1981 and, therefore, this petitioner has challenged the validity of R. 25A and the order made against it.
Petitioner in W.P. No. 4904 of 1980 who is engaged in the manufacture of bricks has challenged the validity of Rs. 25A and 25B of the Rules and the rejection of his application for grant of recognition certificate on the ground that ''brick'' was not one of the recognised Village Industries.
Petitioners in W.P. Nos. 11810 and 11845 of 1981 have approached this Court Challenging the validity of the new Rule and the show cause notices issued to them by the Commissioner proposing to cancel the certificate of registration issued to them and have obtained orders of stay.
Petitioner in W.P. No. 11050 of 1983 has challenged the validity of new R. 25A and the notice dated 26-3-1983 (Annexure-B) issued by the Assistant Commercial Tax Officer, Gadag (hereinafter referred to as the ACTO) declaring that the earlier Recognition Certificate granted to him by the Commissioner stands cancelled or withdrawn from 1-2-1981 and, therefore, he should pay the taxes due thereon from that day.
Petitioner in W.P. No. 3017 of 1983 alone has urged that Entry No. 28 substituted by the 1976 Act does not lay down criteria or guideline to the rule making authority in prescribes grant of exemptions and the same had conferred unbriddled, arbitrary and uncanalised power on the rule making authority and is. therefore, violative of Art. 14 of the constitution.
We have earlier set out entry No. 28 substituted by the 1976 Act in its entirely and noticed the changes it has brought about. The substituted entry no doubt confers power on Government, the highest executive authority, to frame Rules specifying the Village Industries, the terms and conditions subject to which exemptions can be granted from payment of Sales Tax.
Sri K.R.D. Karanth, learned Counsel for the petitioner in W.P. No. 3017 of 1983 did not substantiate and elaborate the challenge of this petitioner to entry No. 28 to even remotely hold that the same suffers from the vice of excessive delegation and was violative of Art. 14 of the Constitution.
In fast changing conditions in the country and even otherwise also, the specification of Village Industries, the terms and conditions subject to which exemption should be granted, cannot properly be dalt by the legislature and must inevitably. be left to be regulated by a subordinate authority. When power to frame Rules is conferred on Government, it is expected that it will reasonably and properly exercise, that power for purposes of the Act. We do not find any substance in the contention of the petitioner that Entery No. 28 has conferred unguided, uncanalised, arbitrary power on Government and suffers from the vice of excessive delegation and the same, therefore, violates Art. 14 of the Constitution. We see no merit in this challenge of this petitioner and reject the same.
Sri K.R. Prasad, learned Counsel for the petitioners in W.P. Nos. 14382 and 14383 of 1983 addressed the leading arguments on the validity of Rules which were adopted and supplemented by the other learned Counsel appearing in the other cases.
Sri Prasad relying on the ruling of the Supreme Court in Commissioner of Income Tax, Andhra Pradesh v. (Sick) Income Tax Officer, ''D'' Ward, Companies, District I,Calcutta, & Others [(1977) 107 I.T.R. 909] has urged that Rule 25A framed by Government was not for purpose of the Act and was, therefore, ultra vires of the Act.
Sri S. Rajendra Babu, learned Government Advocate appearing for the respondents has urged that R. 25A had been framed to carry out the purposes of the Act was intra vires.
The purposes of the Act is to levy tax on purchase or sale of goods in the State of Karnataka (vide preamble of the Act).
S. 2(r) of the Act defines the term ''prescribed'' as prescribed by Rules made under the Act.
S. 38(1) of the Act empowers Government to make Rules to carry out the purposes of the Act. The power conferred by S. 38(1) is general and is not restricted by S. 38(2) of the Act. S. 38(2) only particularises certain matters enumerated in the several sub-clauses as matters falling within the preview of S. 38(1) of the Act.
S. 38(2)(a) of the Act empowers Government by Rules on all matters expressly required or allowed by the Act to be prescribed.
Entry No. 28 of the V Schedule substituted by the 1976 Act empowers Government by Rules made to specify the products of Village Industries that are allowable for exemption under S. 8 of the Act. The same entry also empowers Government to specify the conditions and limitations subject to which the products of specified Village Industries should be allowed exemption under S. 8 of the Act. On the very terms of Entry No. 28 and S. 38(2)(a) of the Act, it is manifest that Rr. 25A and 25B have been framed only for purposes of the Act.
Even if we exclude reference to Entry No. 28 and S. 38(2)(a) of the Act, we are still of the opinion that Rs. 25A and 25B framed by Government are for purposes of the Act only and not ultra vires of the Act.
In the cases relied on by Sri Prasad, the Supreme Court and the Calcutta High Court were examining the validity of certain Rules framed by Government of India under the Income Tax Act, 1961. While holding that the Rules can be framed for purposes of that Act, the Supreme Court and the Calcutta High Court have held that the Rules impugned in those cases were not for purposes of that Act. But, that is not the position in the present cases. Whether an impugned Rule has been framed for purposes of that Act or not has to be ascertained and decided without reference to a decision rendered on an entirely different Rule framed under an entirely different enactment. We are therefore, of the opinion that the ratio in Taj Mahal Hotel''s and Century Enka Ltd.''s cases does not really hear on the point and assist Sri Prasad.
On the above discussion, we hold that Rr. 25A and 25B framed by Government are for purposes of the Act and are intra vires of the Act.
Sri Prasad has urged that R. 25A of the Rules restricting Village Industries to places outside five Kms. of a city or town referred to in that Rule was arbitrary, discriminatory, irrational and was violative of Art. 14 of the Constitution.
Sri Babu, urged that R. 25A was not violative of Art. 14 of the Constitution.
The true scope and ambit of Art. 14 of the Constitution has been explained by the Supreme Court in a large number of rulings and to notice all of them would be an idle parade of scholarship. But, according to all of them Art. 14 forbids class legislation but does not forbid classification. Permissible classification must satisfy two conditions viz., (i) it must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and (ii) the differentia must have a rational relation to the object sought to be achieved by the statute in question. So far as classification in taxation measures the legislature possesses the greatest freedom. In The Twyford Tea Co. Ltd, and Anr. v. The State of Kerala and Anr. (AIR 1970 S. C. 1133) Hidayatullah, CJ. speaking for the majority, upholding the validity of the Kerala Plantation (Additional Tax) (Amendment) Act of 1960, as amended in 1967, reviewing all the earlier cases, has set out all the leading principles settled by the Supreme Court to be borne in examining the validity of a taxation enactment, when challenged as violative of Art. 14 of the Constitution. These principles stated in Twyford Tea Cols case have been reiterated by the Supreme Court in all the later cases notably in M/s Murthy Match Works etc. etc. v. The Assistant Collector of Central Excise etc. (AIR 1974 SC 497), M/s. S. Kodar v. State of Kerala (AIR 1974 SC 2272), and State of Karnataka and Otrs, v. M/s. Hansa Corporation (AIR 1981 SC 463). Without unnecessarily reproducing the relevant paragraphs of all these rulings and thus burdening our order, but bearing the principles enunciated in all of them, we propose to examine the challange of the petitioners to new R. 25A of the Rules.
S. 8 of the Act provides for exemption of tax on the sale of goods specified in the V schedule subject to the conditions and exceptions, if any, set out therein.
Entry No. 28 substituted by the 1976 Act that came into force on 6-12-1976 provides for exemption of products of prescribed Village Industries that satisfy the prescribed conditions and limitations when sold by a bona fide purchaser recognised by the Commissioner. The power to specify the Village Industries and the terms and conditions subject to which such exemption can be granted to the specified Village Industries, is conferred on Government. But, the very entry or the legislature itself has provided exemption to products of Village Industries sold by a bona fide producer recognised by the Commissioner. The exemption granted by the legislature is to products of specified Village Industries and not to products of all and every type of industry wherever and however, they are situated. The exemption is not to the products of industries of villages but to products of Village Industries.
The term ''Village Industry'' which is not defined in the Act and the Rules is not a term of art with a fixed meaning and, therefore, Its meaning has to be ascertained in the context in which it occurs in the Act and the Rules.
With all the progress achieved in the country, in general, and in Karnataka, in particular, India is still a land of villages. The majority of our people live in the neglected villages, many of which are still cut off from the benefits of modern civilisation. progress in science and technology and living conditions. Any one engaged in Village Industry is essentially a self employed man and generally such a person and his entire family work together without engaging any labour force. In many a case, the village artisan who may own lands in the village, also attends to his agricultural operations and his industry along the members of his family. The village artisan or the village industrialist makes a small investment of capital and works with simple tools and gadgets and his personal skill in that industry. The term ''Village Industry'' as the name itself suggests, must have its base and operation in the village and not in the city and town When an industry that must have its base and operation in the village is shifted to a city or town, in it ceases to be a Village Industry. Art. 43 of the Constitution that enjoins on the State to encourage cottage industry on an individual or co-operative basis in rural areas also supports this conclusion.
A village with all its disadvantages and cities and towns with many advantages cannot be treated as forming one class or group. The conditions in the village are not the same as the conditions that obtain in the cities and towns. A Village Industry with its base and operation In the Village cannot be compared to an industry with its base and operation in the city or town. Both are dissimilarly situated and one cannot be compared with the other. On this analysis, it is not possible to hold that the exemption granted to products of Village Industries suffers from the vice of discrimination and the same offends Art. 14 of the Constitution.
Earlier, we have generally noticed the distinction and difference between the industries based in the Villages and the industries based in cities and towns. The industries based in the Villages or outside the cities and towns undoubtedly form a separate group or class. The exemption or incentive given to the Village Industries also fulfilling the mandate of Art. 43 of the Constitution has nexus to S. 8 of the Act or the Act. From this it follows that the classification of Village Industries in the new R. 25A agreeably with Entry No. 28 of the V schedule satisfies the twin tests of permissible classification and is not violative of Art. 14 of the Constitution.
Sri Karanth has urged that the prescription of monetary limits on the investment of plant and machinery and the total turn over of certain Industries in the new R. 25A was not a case of a valid classification, arbitrary, irrational and was violative of Art. 14 of the Constitution.
The very object of Entry No. 28 of the V schedule was to encourage or give certain incentives to Village Industries. We have earlier briefly explained what a Village Industry means. When we keep before us the requirements of a Village Industry, we cannot hold that the amount of investment on plant and machinery, at any time, should not exceed Rs. 50,000 or that the total turn over of item Nos. 13 and 26 should not exceed Rs. 1,50,000 is irrational arbitrary and violaties Art. 14 of the Constitution. We see no merit in this contention of Sri Karanth and reject the same.
In recent years our Supreme Court notably in E.P. Royappa v. State of Tamil Nadu & Anr. A.I.R. (1974 S.C. 555), Smt. Maneka Gandhi v. Union of India & Anr. (A.I.R. 1978 S. C. 597), Ramana Dayram Shetty v. The International Air Port Authority of India & Otrs. (AIR. 1979 S.C. 1628), and Ajay Hasia Etc. v. Khalid Mulib Sehravardi & otrs. Etc. (A.I. R. 1981 S.C. 487) has added a new dimension to Art. 14 of the Constitution, according to which arbitrary State action is the very anti-thesis of the rule of law enshrined in Art. 14 of the Constitution, on which score, such State action can be invalidated by Court. Whatever be the views of the eminent author Sri H.M. Seervai in his classic treatise on the Constitutional Law of India, Third Edition, at pages 272 to 279 on this aspect, we must, with respect to the learned Author, apply the law declared by the Supreme Court. In the cases noticed by us, the Supreme Court has not ruled that legislation can be struck down as being arbitrary. We art doubtful whether the principal of arbitrary action is at all applicable to legislation, that too taxation measures enacted by a competent legislature, that can be taken exception on two well known grounds viz, (i) went of legislative competence; and (ii) as being in violation of one or the other provisions of the Constitution. On this analysis itself we will not be justified in invalidating new R. 25A of the Rules. But. we will also assume that the new dimension of Art. 14 of the Constitution propounded by the Supreme Court is equally applicable to legislation also and examine the impugned Rule on that basis.
What we have said earlier in sustaining the validity of Entry No. 28 and R. 25A without an iota of doubt reveals that there is no arbitrationess in the impugned Rule at all. The Rule is prefectly intelligible rational and subsereves the constitutional mandate of Art. 43 of the Constitution and purposes of the Act. We have therefore, no hesitation in holding that the impugned Rule does not suffer from arbitrariness and is not violative of Art. 14 of the Constitution.
On the above discussion, we hold that R. 25A of the Rules is not violative of Art. 14 of the Constitution and is valid.
Petitioner in W.P. No 4904 of 1980 has also challenged the validity of R. 25B of the Rules as violative of Art. 14 of the Constitution.
At the hearing, learned Counsel for the petitioner did not elaborate his contention to sustain this challenge of the petitioner. The pleadings in the case and the arguments have not displaced the presumption of validity available to R. 25B of the Rules on which ground alone, the challenge to R. 25B of the Rules is liable to be rejected.
R. 25B of the Rules empowers Government to grant recognition certificates and thus except from the payment of taxes under S. 8 of the Act to Industrial training Institutes on the bring and Conditions stipulated in the Rule the industrial institutes which are established to impart education in trades and and crafts useful to industries, cannot be treated as trading organisations run with the object of making profits. The Industrial Training Institutes form a separate class or group which are dissimilarly situated with other trading organisations. On these grounds or any other principle, we cannot hold that Rule 25B of the Rules is violative of Art. 14 of the Constitution. We, therefore, reject the challenge of the petitioner to R. 25B of the Rules.
We have earlier noticed that the Commissioner has withdrawn the recognition certificates granted to the petitioners in W.P. Nos. 3017, 14382 and 14383 of 1983 from 15-1-1982 and 4-11-1981 respectively. Before making the impugned orders the Commissioner had issued necessary show cause notices considered their representations and objections and has found that the Industries were situated in the Municipal limits of Sirsi and Tumkur, which finding is not disputed by the petitioners. Even otherwise, we do not find any infirmity in the finding recorded by the Commissioner on this question.
The power to grant exemption comprehends in itself the power to withdraw the exemption. The Rule of construction embodied in S. 21 of the Karnataka General Clauses Act, 1899 supports this conclusion. In this view, it was open to the Commissioner to withdraw the exemption on being satisfied that the same no longer conforms with new R. 25A of the Rules. We see no merit in the challenge of the petitioners to the withdrawal of the earlier exemptions granted to them and we reject the same
While making his orders on the dates noticed by us earlier, the Commissioner has directed that the recognition certificates shall be deemed to have been cancelled with effect from 1-2-1981 on which day the new R. 25A came into force.
Learned Counsel for the petitioners have urged that it was not open to the Commissioner to withdraw the exemption from an anterior date and in any event from 1-2-1981 and his orders to that extent are illegal.
Sri Babu has urged that on the terms of the new Rule, 25A, the commissioner was justified in withdrawing the exemption from 1-2-1981 though he actually made his orders from a later date In support of his contention Sri Babu has strongly relied on two rulings rendered by Chandrakantaraj Urs, J., the first one in M.S. Mudhol v. State of Karnataka & Otrs, (1982(2) Kar. L.J. 354) and the other in M/s. Mysore Furniture House v. The State of Karnataka & Otrs. (W.P. No. 39006 of 1982 decided on 8-11-1982) that only followed the former.
Earlier, we have seen the effect of substitution of the Entry No. 28 by the 1976 Act. The 1976 Act did not provide for automatic cancellation of earlier registration certificates granted by the Commissioner under the previous entry and the earlier Rules. The new R. 25A made by Government 24-1-1981 also did not provide for automatic cancellation of registration certificates earlier granted by the Commissioner under the law that was then in force. Sri Babu has not brought to our notice any specific provision in the Act or the Rules providing for automatic cancellation of earlier registration certificates granted by the Commissioner.
An order made by an administrative authority under an enactment or a rule in the absence of a specific enabling provision can only be given effect to from the date the order is made and communicated by the authority and not from an anterior date or from the date the new law came into force, is well settled and does not require a reference to decided cases. From this it follows that the orders made by the Commissioner prior to the date he made and communicated his orders to that extent are illegal.
But, in Mudhol''s case, Chandrakantaraj Urs, J. has expressed a different view and, therefore, it is necessary to examine the same in detail.
In Mudhol''s case the petitioner had been issued a recognition certificate for his oil seed crushers situated within the town limits of Gadag-Butegeri of Dharwad District. On the promulgation of new Rule 25A the Assessing ofiicer issued a notice to the petitioner inter alia stating that the exemption granted by the Commissioner stood withdrawn or cancelled from 1-2-1981, the validity of which was challenged before this Court under Article of the Constitution. In that case, it was urged that the exemption once granted cannot be withdrawn and the new rule had no application to an earlier exemption granted thereto. In repelling that contention Chandrakantaraj Urs, J., observed thus:
"The effect of the amedment is that the exemptions earlier granted on the recognition afforded by the Commissioner, by operation of law stood automatically cancelled and would be available only as the recognition was continued".
In M/s. Mysore Furniture House''s case, Mudhol''s case was followed by the same learned Judge. With great respect to the learned Judge, we find it difficult to subscribe to this conclusion which does not flow from the 1976 Act, new R. 25A or any other provision of the Act and the Rules. We have seen earlier that the Act and the Rules did not provide for automatic cancellation. From 1-2-1981 there was change in law, which we have also upheld. But, whether that change in law disentitled a person or not had to be examined by the Commissioner and an order made thereto by him on such examination. We, therefore, with respect to the learned Judge, dissent and overrule this enunciation in Mudhol''s and M/s. Mysore Furniture House''s cases.
On the above discussion, we hold that the orders impugned in W.P. Nos. 3017, 14382 & 14383 of 1983 to the extent they hold that the exemptions stand withdrawn from 1-2-1981 are illegal. But, from this, it does not follow the impugned orders have to be quashed in their entirety. On the other hand the offending portions of the orders only that are severable require to be interfered with by us.
We consider that this is the proper stage to examine the validity of the notice dt. 26-3-1983 issued by the ACTO that is challenged in W.P. No. 11050 of 1983 in which the ACTO has expressed the view that the recognition certificate stands withdrawn from 1-2-1981 and the petitioner should, therefore, pay taxes on sale products from that date.
We do not propose to restate what we have said earlier.
The exclusive power to grant recognition certificates under the earlier Rules or the new Rule is conferred on the Commissioner. When that is so, the power of withdrawal can be exercised only by the Commissioner and not by any of his subordinates. From this it follows that the notice issued by the ACTO is without the authority of law and illegal.
In Muthol''s case a similar notice issued against that petitioner was not interfered with by this Court. But, therein this precise question was neither raised nor decided by our learned brother. We are o the opinion that the decision in Mudhol''s case, if it should be understood as upholding the power of the ACTO to issue the impugned notice, is opposed to the Rules and the legal principles touching on the question. Whether on this score we should quash the impugned notice is next question-that calls for examination.
In his petition, the petitioner does not dispute that his industry was situated within-the Municipal limits of Gadag Bategeri town and, therefore, the earlier recognition certificate granted was liable to be cancelled by the Commissioner after issuing a show case notice thereto as was done in other cases, which was probably not done having regard to the ruling of this Court in Mudhol''s case or by some inadertance. But for this, the Commissioner would have cancelled the Recognition Certificate of this petitioner atleast from 1-1-1982, if not earlier. We are, therefore, of the opinion that it is enough to make a declaration to this effect, without needlessly quashing and reserving liberty to the Commissioner to make his order.
In W.P. Nos 11810 and 11845 of 1981 of the petitioners have challenged the show cause notices issued to them by the Commissioner on 15-5-1981 and 23-5-1981, in which he had stated that their industries were situated within the municipal limits of Gadag-Bategeri town. Both these petitioners do not deny this assertion of the Commissioner and even admit the same.
In the normal circumstances, it would have been proper to permit these petitioners to show cause to the notices received them and the Commissioner to decide the same in accordance with law. But, such a course, having regard to the admitted facts, long pendency of these cases and for the very reasons stated while dealing with the notice impugned in W.P. No. 11050 of 1983, is not called for and it is enough to make a similar declaration in these cases also.
What now remains to be considered is the validity of order No. REG. SR. 55/79-80 dt. 4-1-1980 (Annexure-E in WP No. 4904 of 1980) made by the Commissioner that is challenged by the petitioner in W.P. No. 4904 of 1980, which is a private limited company incorporated under the company incorporated under the Companies Act and is engaged in the manufacture of bricks. In his order the Commissioner has rejected the application made before him for recognition certificate and the same reads thus:
"Sub: Grant of Recognition Certificate in the case of M/s. Ganesh Trading and Industrial (Pvt.) Limited, Bangalore.
Ref: Application dated 31-5-1979 from the above party.
M/s. Ganesh Trading and Industries (Pvt.) Limited, Bangalore had applied for grant of Recognition Certificate under R. 25-B of Karnataka Sales Tax Rules, 1957 for manufactures of bricks.
The case is examined in detail with reference to relevant provisions of the K.S.T. Act, 1957, As the ''Brick Industry'' is not one of the Village Industry prescribed under R. 25A of K.S.T. Rules, 1957, the applicant is not eligible for getting recognition under R. 25B Therefore, the application for grant of Recognition Certificate cannot be considered and is hereby rejected.
Office Note is approved by the Commissioner,
(Sd) H.R. Venkata Rao,for Commissioner of Commercial Taxes".
On the basis of this order, the Commercial Tax Officer, Bangalore by his Endorsement No nil dt. 4-3-1980 has called upon the petitioner to pay the sales tax on its sales for 1978-79 and 1979-80 (Annexure-F in W.P 4904 of 1980) which is also challenged by the petitioner.
In challenging the order dt. 4-1-1980, the petitioner has urged two grounds and they are (i) that the bricks manufactured by it are ''pottery'' specified in item No. 11 of R. 25A and, therefore, it was entitled for a recognition certificate under that Rule and (ii) that the Khadi Board had issued it a certificate as a pottery industry under the Khadi Act and the same should have been accepted by the Commissioner as was done by him from 22-2-1977 to 14-2-1978.
Sri S.G. Shivaram, learned Counsel for the petitioner has strenuously contended that bricks manufactured by his client was pottery and, therefore, the Commissioner should have issued a Recognition Certificate as was done previously.
In the old and the new Rule exemption was for ''pottery'' and not to ''bricks'' or ''brick manufacture''. The terms ''pottery'' and bricks'' are not defined in the Act and the Rules. We have, therefore, to ascertain their meaning from the context in which they occur.
The word ''pottery is defined in Oxford and Webster''s dictionaries thus:
"Pottery: 1. A potter''s workshop or factory. 2. The potter''s art, ceramics; the manufacture of earthen vessels. 3. Pottery ware, earthenware. (Shorter oxford English Dictionary Third Edition revised with Addenda p. 1556).
"Pottery: 1: a place where clayware is made and fired, 2a: the art of craft of the potter, b: the manufacture of clayware. 3: Clayware: esp; earthenware as distinguished on the one hand from porcelain and stoneware and on the other from brick and tile." (Webster''s third New International Dictionary vol. II (H to R) page 1776)
The term ''brick'' or ''brick manufacturing'' is defined in those dictionaries thus:
"Brick: 1. A substance formed of clay, kneaded, moulded, and hardened by baking with fire, or sun dried: used in building. 2. A block of this substance, of a definite size and shape; usually rectangular. b. A similar block or slab of sand and lime, concrete, etc. 3. Any brick shaped block." (Shorter Oxford English Dictionary Third Edition revised with Addenda p. 220)
"Brick: 1. a building or paying material that is made by molding clay into blocks while moist and hardening it sometimes in the sun (as was done extensively in ancient times) but usu. today by baking or burning by fire either in a kiln or in slamps and that is ordinarily red in colour due to the presure of iron components converted by heat into red Oxide, a brown or yellow color being obtained by the addition of lime or magnesia to the lc. a: an individual molded usu. rectangular block of with everage dimension in trucleaca long 21/4 to 33/4 x 8 inches b: a block of other letexo Brick other material (as concrete, sand and lime, or glass) of similar size and shape c: BRICKBAT. 3: a rectangular usu. oblong often compressed mass." (Webster''s Third New international Dictionary, vol. I (AG) page 275).
Even the ordinery dictionary meanings of these terms do not support the claim of the petitioner that bricks should be treated as pottery.
Any one who has lived in a village in our country or has even seen a potter turning the wheel with skill and dexterity and ultimately produces pots with his hands and simple tools, will at once say that it is an art and that the manufacture of bricks either by traditional moulds or by wire-cut methods was totally different and is not at all pottery. The manufacture of bricks can never be considered as ''pottery'' and is even jarring to say so. While, pottery is an art and even a fine art that requires very dexterous hands to produce them, the manufacture of bricks does not require any artistic skill and training and can be done by a hardy labourer with little or notraning. Even the article on ''Pottery'' in the New Encyclopaedia Britannica (Macropaedia vol. 14) at pages 928 to 930, though the same does not regretrully deal with ''Indian Pottery'' supports this conclusion. We have, there fore, no hesitation in holding that the claim of this petitioner is ill conceived, far fetched and extravegant.
A Certificate granted by the Commission for purposes of the Khadi Act, at any rate, on and after 6-12-1976 is not binding on the Commissioner and cannot be the basis for grant of recognition under the Act, which is a self contained code. The certificate or the opinion of the Khadi Board is not binding on the Commissioner. We see no merit on the reliance placed by the petitioner on the certificate issued by the Commission.
We find that bricks and tites except country bricks and country tiles are separately taxed under Entry No. 12 of the II Schedule to the Act. If bricks are to be treated as pottery'' the legislature would not have separately taxed bricks in Entry No. 12 of the Second Schedule.
On the above discussion, we hold that the order dt. 4-1-1980 made by the commissioner, which was within his jurisdiction, does not suffer from any infirmity to call for our interference under Art. 226 of the Constitution.
In the light of our above discussion, we make the following orders and directions:
(1) We dismiss W.P. No. 4904 of 1980 and discharge the rule issued in the case.
(2) We dismiss W.P. Nos. 11810, 11845 of 1981, 3017, 11050, 14382 and 14383 of 1983 in so far as they relate to the validity of Entry No. 28 and Rules 25A and 25B of the Rules.
(3) We quash the orders made by the Commissioner that are challenged in W.P. Nos. 3017, 14382 and 14383 of 1983 in so far as they direct that the Recognition Certificates are withdrawn from 1-2-1981 and declare that those orders will be valid from the date they were made by him and not earlier.
(4) We reject the challenge of the petitioners in W.P. Nos. 11810 and 11845 of 1981 and 11050 of 1983 to the notices received by them. But, we declare that the recognition certificates of these petitioners stand revoked by the Commissioner from. 1-1-1982.
(5) We direct the respondents to regulate the assessments and recoveries from the petitioners for the relevent periods on the basis of the declaration made in this order.
Writ petitions except W.P. No. 4904 of 1980 are disposed of in the above terms. But. in the circumstances of the cases, we direct the parties to bear their own costs.
Let this order be communicated to the respondents within 3 days from this day. Let a copy of this order be furnished to the learned Government Advocate within the same time.