Full Judgment
Chandrakantaraj URS, J.
1. These two petitions are disposed of by the following common order at the stage of preliminary hearing after notice to the respondents and after hearing the counsel.
2. The petitioners are aggrieved by the notice issued by the respondent-Commercial Tax Officer, II Circle, Gadag. The notices dated 9th September, 1981, are produced at annexures A and B to the petitioners. The respondent-Commercial Tax Officer has informed the petitioners that in view of the amendment made to rule 25A of the Karnataka Sales Tax Rules, 1957, (hereinafter referred to as 'the Rules') and as published in the Gazette dated 24th January, 1981, in Notification No. FD 70 CSL 80 the petitioners are no longer exempted from payment of tax under the Act as they have ceased to be village industries as defined in the new rule 25A of the Rules.
3. Aggrieved by the same, the petitioners have approached this Court under article 226 of the Constitution, inter alia, contending that having been recognised by the Commissioner of Commercial Taxes in Karnataka as persons carrying on village industries and having regard to the language of section 8 of the Karnataka Sales Tax Act (hereinafter referred to as 'the Act') which has the effect of exempting goods mentioned in the Fifth Schedule to the Act, the Commercial Tax Officer had no power to issue the impugned notices (annexures A and B) and bring to tax the business turnover of the petitioners from oil-seed crushers (the petitioners in the writ petitions have not stated whether the crushers are operated by power or they use animal or manual power). Their place of business is situated within the town limits of Gadag-Betegeri in Dharwar District. They were earlier recognised as carrying on business of cottage industry and the produce came under the classification to be found at entry No. 28 in the Fifth Schedule.
4. The learned counsel, Sri B. V. Katageri, strenuously contended that once, pursuant to the power exercised under section 8, the Government granted the exemption to the goods produced mentioned in the Fifth Schedule, by changing the rule which is subordinate legislation, the Government cannot take away the exemption conferred by the section by amending rule 25A of the Rules, and therefore it is argued that the amendment of rule 25A of the Rules only has prospective effect and should not affect the producers of goods while they already enjoyed the exemption granted in accordance with entry No. 28 of the Fifth Schedule and rule 25A, as it originally existed.
5. It is difficult to accept the argument advanced by the learned counsel. Section 8 of the Act reads as follows :
'8. Exemption of tax :- (1) No tax shall be payable under this Act on the sale of goods specified in the Fifth Schedule subject to the conditions and exceptions, if any, set out therein.'
In other words, what is clear from the language of section 8 is goods specified in the Fifth Schedule shall not be taxable under the Act subject to the conditions and exceptions, if any, set out in the Fifth Schedule itself. The Fifth Schedule to the Act contained originally as many as 44 entries; some of which have been deleted and some of them have been substituted by the amendments subsequently. Entry 28, with which we are concerned, originally read as follows :
'Products of village industries when sold by a bone 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.';
But that entry came to be amended by Act 78 of 1976 and presently reads as follows :
'Products of prescribed village industries which satisfy the prescribed conditions and limitations when sold by a bona fide producer recognised by the Commissioner.'
The effect of the amendment 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 long as the recognition was continued. In sub-clause (r) of sub-section (1) of section 2 of the Act 'prescribed' means prescribed by the Rules made under the Act. Therefore the reference to prescription in entry No. 28 of the Fifth Schedule must be in accordance with the Rules framed under the Act. Rule 25A as amended by the notification to which reference has been made earlier in the course of this order provides as follows :
'25A. 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 kilometres thereof of a city under the Karnataka Municipal Corporation Act, 1976 (Karnataka Act 14 of 1977), or a municipality under the Karnataka Municipalities Act, 1964 (Karnataka Act, 22 of 1964);
(b) ........................
(c) ......................... TABLE -----------------------------------------------------------------Sl. No. Village Industries 12-----------------------------------------------------------------1. ..................2. ..................3. ..................4. ..................5. ..................6. Cottage oil industry.' ----------------------------------------------------------------'
From the above it is clear that while undisputedly the petitioners carry on the business of cottage oil industry, they do not satisfy the requirement of sub-clause (a) of rule 25A of the Rules inasmuch as they are situated undisputedly within the city limits of Gadag-Betegeri Municipality. In other words, by amendment of the Rules, the village industry of the petitioners has ceased to get the benefit of exemption though it may remain a cottage oil industry, by virtue of the conditions prescribed by sub-clause (a) of rule 25A of the Rules. If that is the legislative intent, it is not open to the petitioners to contend that either the impugned notices or the notification effecting the amendment is without the authority of law.
6. In fact, there is no challenge made to the validity of the amendment of rule 25A of the Rules, though the learned counsel for the petitioners advanced the argument that the notification amending the rule was bad inasmuch as it affected the freedom of the petitioners to carry on their trade. That argument, I should necessarily reject, because the amendment does not amount to any prohibition imposed on the petitioners to carry on the trade. It only brings to tax the turnover of the petitioners which was earlier exempt and no more.
7. In the result, I do not see any illegality in the impugned notices issued by the respondent-Commercial Tax Officer. Therefore, they do not call for interference.
8. For the aforesaid reasons, these petitions are rejected without a rule being issued.
9. Smt. Vanaja, the learned Government Pleader, is permitted to file her memo of appearance within two weeks from today.