S.K.V.i. Khadi Bhandar Vs. Additional Commissioner of Commercial Taxes, Mysore Zone - Court Judgment

Excerpt:
sales tax - exemption - whether various items sold by appellants which according to them come under approved category of products manufactured and sold by khadi and village industries commission would be exempt from sales tax - in order to boost to artisans and khadi and village industries sector, which would also serve objective of rural industrialasation, all products manufactured in said sector shall be exempt from sales tax. - [a.v. srinivasa reddy, j.] when order 8 rule 11 cpc is to be adhered to -- held -- it is only where there is furnishing of a copy of the plaint or petition is made mandatory that the provision of order 8 rule 11 cpc could be adhered to. as there is no such provision on the act or in the rules, making it mandatory on the part of the petitioner to serve a copy of the petition on the defendant along with notice, order 8 rule 11 cpc can have no application at all to a proceedings under the act. the order passed is without application of mind and in total disregard of the facts and circumstances of the case as also the provisions governing the procedure that ought to be mandatorily followed under the act. (b) karnataka rent act, 1999 (karnataka act no. 34/2001) - section 42 -- karnataka rent rules, 2001 -- rule 33 -- civil procedure code, 1908 ( central act no. 5 of 1908) --order 5 rule 2, order 8 rule 11 -- trial court took exception to the filing of the objection statement beyond the outer period prescribed in the civil procedure code and rejected it -- order of trial court set aside and applicability of section 42(1) of the act read with order 5 rule 2 and order 8 rule 11 cpc discussed. held: the impugned order prejudicially affects the right of the petitioners since he is estopped from meeting the case as pleaded by the respondent in her petition. in the absence of pleadings by the petitioner-tenant the court may well refuse to consider the oral evidence that maybe led by him in support of any defence that may be open to him. before passing such an order the court was duty-bound to call upon the petitioner in terms of section 42 (1) of the act to show cause why such an order should not be passed against him. it is quite regrettable that the court-below passed the order when the petitioner-tenant had not even taken a single adjournment for filing the objections. the order is passed overlooking sub-section(3) of section 42 which provides that a party is entitled to request and obtain three adjournments throughout the proceedings and the adjournments could be obtained at any stage of the proceedings. the order-sheet discloses that even this benefit had not been availed of by the petitioner-tenant for filing the statement as he had promptly filed it on the very next date of hearing. passing of the impugned order in the said facts and circumstances of the case was not only most unreasonable but highly regrettable. it smacks of an approach which is injudicious and totally lop-sided. the impugned order betrays a total lack of understanding of the laws of procedure and the manner in which they should be applied to specific instances. the impugned order is, therefore, liable to be set aside. (c) civil procedure code, 1908 ( central act no. 5 of 1908) - order 5, rule 2 , order 8, rule 11 -- karnataka rent act, 1999( (karnataka act no. 34/2001) -- section 42 --summons not accompanied by a copy of the petition --held -- copy of petition was furnished to him only on the date previous to the date of filing of the statement by the tenant. in fact, the provisions of order 8 rule 11 cpc could not have been applied at all to the case on hand as the summons was not accompanied by a copy of the petition as required under order 5 rule 2 cpc. the court-below before applying the principle enunciated in merchant and ors. v. shrinath chaturvedi, ought to have noticed that there is no legislative mandate in the present act mandating that the statement of objections is to be filed within 30, 60 or 90 days. on the contrary section 42(3) speaks of the entitlement of a party to seek for three adjournments in the entire course of the case which could be at any stage of the proceedings. the court-below failed to notice that it was by reason of the fact that such a mandate was there in the act, which was under its consideration, that the apex court while interpreting the said provision laid down the said principle. while interpreting the provisions of an act the court should try and give effect to the object of the act and in so doing it should be guided by the principles of purposive construction. the court-below misled itself in applying the provision contained in order 8, rule 11 c.p.c. disregarding the fact that the petitioner-tenant could have filed the statement of objections only after the copy of the eviction petition was served on him. in the present case the same was furnished to him only on the date previous to the date of filing of the statement by the tenant. in fact, the provisions of order 8, rule 11 c.p.c. could not have been applied at all to the case on hand as the summons was not accompanied by a copy of the petition as required under order 5, rule 2 cp.c. (d) civil procedure code, 1908 (central act no. 5 of 1908) - order 5 rule 2, order 8 rule 11 -- due service -- notice served on the defendant -- without tendering a copy of the plaintiff along with --cannot be construed as "due service". revision is allowed. - ' the government had specified that this exemption would be available effectively to khadi and village industries units established and existing as on october 1, 1990. we are not very much concerned about the time-factor because there is no controversy with regard to this aspect of the case. the learned government advocate submitted that the totality of the intention expressed by the state government in the circulars in question very clearly limits the exemption to the business activities of the khadi and village industries commission alone or in other words to all its various outlets and units and that this exemption or concession cannot be extended to private parties even if they stock and sell the goods manufactured and sold by the commission. in our considered view, having regard to the fact that it is well-settled law that in matters relating to exemption from the levy of tax that the provisions have got to be applied with a level of rigour and do not admit to any laxity, that it would be difficult to find fault with the line of reasoning and the conclusions adopted by the revisional authority in this regard;m.f. saldanha, j.1. the appellants who style themselves as a khadi bhandar and are doing business in mangalore have assailed the correctness of revisional order passed under section 22a(1) of the karnataka sales tax act, 1957. by his order dated january 17, 1998 the additional commissioner of commercial taxes has set aside the appellate order passed by the joint commissioner of commercial taxes (appeals), mangalore, dated december 23, 1996. the point in issue revolves around the question as to whether various items sold by the appellants which according to them come under the approved category of products manufactured and sold by the khadi and village industries commission, would be exempt from sales tax or not. the original assessing authority by order dated august 25, 1995 rejected the contention put forward by the appellants that they would qualify for such exemption and it was against this order that the appellants filed an appeal. the appellate authority through a detailed speaking order upheld the plea principally on the basis of a circular dated july 6, 1992 wherein the state government has referred to a government order dated september 27, 1990 setting out the industrial policy resolution which states as follows :'in order to give a boost to artisans and khadi and village industries (kvi) sector, which would also serve the objective of rural industrialisation, all products manufactured in kvi sector shall be exempt from sales tax.'the government had specified that this exemption would be available effectively to khadi and village industries units established and existing as on october 1, 1990. we are not very much concerned about the time-factor because there is no controversy with regard to this aspect of the case. the appellants have produced the requisite documentary evidence to indicate that they have been authorised by the zonal certification committee of khadi and village industries commission to do business in the items in question at various places in south canara district. they have also produced the renewal certificates and even with regard to the factual position as to whether or not they are duly and fully authorised to sell these products, that there is no dispute. having regard to the generality of the provisions under which the exemption was specially granted under the karnataka sales tax act the appellate authority modified the original assessment order and upheld the appellant's contention that they would qualify for exemption from sales tax in respect of those products that come within this category alone. we need to clarify here that the appellate authority was required to make this distinction because the appellants were doing business in certain products which would go outside the ambit of this class of products. it is against this order that the revisional authority issued a show cause notice to the appellants and after hearing them reversed the appellate order. the line of reasoning adopted by the revisional authority proceeds on the footing that the relevant circular issued by the state government prescribing the exemption referred to the dual aspects of manufacture and sale and the revisional authority essentially disqualified the appellants from exemption on the ground that in his view unless the assessee was also concerned with the manufacturing process that the party would not qualify for exemption prescribed. it is against this order that the present appeal has been directed.2. we have heard the appellant's learned counsel as also the learned government advocate on merits. with regard to the factual position, we need to record that the learned government advocate was quick to bring it to our notice that the appellants are a private party who have been duly authorised or in other words licensed by the khadi and village industries commission to stock and sell several products manufactured and sold by the commission. the learned government advocate submitted that the totality of the intention expressed by the state government in the circulars in question very clearly limits the exemption to the business activities of the khadi and village industries commission alone or in other words to all its various outlets and units and that this exemption or concession cannot be extended to private parties even if they stock and sell the goods manufactured and sold by the commission. as against this position, the appellant's learned counsel has vehemently submitted that this would be a hyper technical approach and she pointed out to us that for obvious reasons, since the khadi and village industries commission would necessarily have limited outlets that there was nothing to preclude the commission from authorising private parties who conform to their terms and conditions from stocking and selling their products. the submission did meet with considerable favour since we did find that it would be arbitrary and unreasonable on the part of the court to specifically read something into the circulars which was not specifically and unequivocally stated in the form of prohibition or restriction. we have carefully read and re-read the circulars most of which, as is typical with government documents are not only ambiguous but are not very happily worded but we have been able to glean from them that the concession attaches to this class and category of products because it is the intention of the government to boost the manufacture of these products in rural areas and to give a special impetus to the sale of these products principally in the urban areas. this being the dominant intention we do find considerable merit in the submission canvassed by the appellant's learned counsel that parties such as the appellants before us who are fully authorised to act as licensees or agents of the commission as far as the legal status is concerned or as franchisees to use a more current business phrase, would still have to be regarded on par with the commission's own sales outlets for purposes of levy of sales tax and that no specific distinction can be made on this ground.3. the appellant's learned counsel severely attacked the correctness of the reasoning adopted by the revisional authority when she pointed out that it was wholly erroneous to insist that the particular shop or outlet which claims the exemption must also be linked with the manufacturing process. her submission was that where the circulars use the expression 'manufactured and sold' that it is only descriptive in so far as the government was restricting the exemption to the products manufactured by the khadi and village industries commission and not by other parties and sold by the commission or parties duly authorised by the commission in this regard. the learned counsel was quick to demonstrate to us that if the department's interpretation were to be upheld that it would disqualify all those outlets which were not directly linked to the manufacturing areas and that it would frustrate the whole purpose of granting the exemption by providing for different standards depending on the location of the outlets. as against this contention, the learned government advocate sought to defend the order by contending that the manufacture and sale are two continuous aspects and that one cannot be delinked from the other and it was his submission that these words have been used in the figurative sense in order to ensure that the exemption is not claimed by outsiders who would not be otherwise entitled to it as much as the institutions who may have nothing to do with the khadi and village industries commission but who are doing business in these same products. on a very clear study of the circulars that have been relied on by the revisional authority but more importantly, on an overall appraisal of the totality of the provisions we find that the line of reasoning by the revisional authority in this regard is based on a literal interpretation of the government notification dated june 19, 1991 on which the learned government advocate has placed heavy reliance. it is true that the notification in question restricts the benefits to goods of this category 'manufactured and sold by new industrial units....' and it is for this reason that the revisional authority held that the appellants would be totally disqualified from the exemption in question. in our considered view, having regard to the fact that it is well-settled law that in matters relating to exemption from the levy of tax that the provisions have got to be applied with a level of rigour and do not admit to any laxity, that it would be difficult to find fault with the line of reasoning and the conclusions adopted by the revisional authority in this regard; though it may be carrying things too far to hold that every outlet must be one connected with the manufacturing unit on the second aspect, namely that the benefit would be restricted, having regard to the wording of this circular, the conclusion arrived at by the revisional authority is a possible point of view.4. there is however another aspect to the entire dispute in so far as even though this angle of the law was not either argued or rejected by the revisional authority the appellant's learned counsel drew our attention to the specific provisions of schedule v of the act wherein we do find that there is a blanket exemption that would be available to all such goods or products manufactured by the khadi and village industries commission and sold not only by them but even their authorised representatives as much as the petitioners. this exemption is clear and unambiguous and consequently, despite the fact that learned government advocate has vehemently submitted that it would be restricted only to the commission and its own outlets we find that the legislature has extended the benefit to authorised dealers and stockists such as the petitioner. furthermore, on a careful study of the entries in question we find that the benefit really attaches itself to the products, viz., those of the items that are manufactured and sold by the khadi and village industries commission and not by any other third parties but that the benefit of the exemption has been extended to various agents or dealers such as the appellants. in this view of the matter, the interference by the revisional authority would still be unjustified because the appellants even if they do not qualify by virtue of the provisions of the circulars would still be entitled to avail of the benefits by virtue of the provisions of schedule v of the karnataka sales tax act. it is on this ground, that we are required to set aside the revisional order in question and restore the earlier order.5. the appeal accordingly succeeds. in the circumstances of the case there shall be no order as to costs.