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2002 DIGILAW 759 (KER)

STATE OF KERALA v. M. R. F. LIMITED.

2002-11-20

G.SIVARAJAN, K.BALAKRISHNAN NAIR

body2002
JUDGMENT G. SIVARAJAN, J. – The matter arises under the Kerala General Sales Tax Act, 1963 (hereinafter referred to as "the Act"). The State is the revision petitioner. The assessee is the respondent. The assessment year concerned is 1987-88. The only question involved in this revision is as to whether the assessee is entitled to avail the concessional rate of tax on the sale of tyres in terms of the Notification S.R.O. No. 453/1983 for the period from December 26, 1987 to March 31, 1988 notwithstanding the supersession of the said notification by S.R.O. No. 1716/1987. The assessee-company was having two rubber purchase depots at Kottayam and Kozhikode and two sales depots at Ernakulam and Kozhikode and a factory at Vadavathoor in Kottayam District. During the assessment year 1987-88 the assessee had, inter alia, effected sale of tyres and had collected and remitted tax only at the rate of 10 per cent as against the rate of 15 per cent applicable to tyres under entry 206 of the First Schedule to the Act in the light of the notification S.R.O. No. 453/1983. The assessing authority completed the assessment for the year 1987-88 as per order dated February 27, 1998 accepting the same. Subsequently the Deputy Commissioner of Commercial Taxes, Kottayam, initiated suo motu proceedings under section 35 of the Act stating that in view of the supersession of S.R.O. No. 453/1983 by S.R.O. No. 1716/1987 dated December 26, 1987, the assessee is not eligible for the concessional rate of tax on the sale of tyres from December 26, 1987. After considering the objection filed by the assessee, the Deputy Commissioner set aside the assessment order dated February 27, 1998 and remanded the case to the assessing authority for fresh disposal in accordance with law. The assessee had challenged the said order in appeal before the Sales Tax Appellate Tribunal, Additional Bench, Kottayam, in T.A. No. 59 of 1999. The assessee and the department had filed two other appeals, i.e., T.A. Nos. 60 of 1999 and 101 of 1999 respectively on other matters with which we are not concerned in this revision. The assessee submitted before the Tribunal that S.R.O. No. 453/1983 gave reduction in rate of tax in respect of the following four items : (i) sale of light diesel vehicles, from 15 per cent to 10 per cent. 60 of 1999 and 101 of 1999 respectively on other matters with which we are not concerned in this revision. The assessee submitted before the Tribunal that S.R.O. No. 453/1983 gave reduction in rate of tax in respect of the following four items : (i) sale of light diesel vehicles, from 15 per cent to 10 per cent. (ii) Sale of motor vehicle tyres, from 15 per cent to 10 per cent. (iii) Sale of radio sets costing not more than Rs. 150 from 12 per cent to 10 per cent; and (iv) Sale of television sets, from 15 per cent to 10 per cent, but S.R.O. No. 1716/1987 while superseding S.R.O. No. 453/1983 had only touched the reduction in rate of tax in respect of sale of light diesel vehicles by giving a further reduction from 15 per cent to 4 per cent as against 15 per cent to 10 per cent under S.R.O. No. 453/1983 besides inclusion of other items covered by earlier notifications which were also superseded by S.R.O. No. 1716/1987. On that basis it was contended that the Notification S.R.O. No. 1716/1987 did not touch the item Nos. (ii), (iii) and (iv) of the Notification S.R.O. No. 453/1983 which continued even after S.R.O. No. 1716/1987. In other words, the Notification S.R.O. No. 1716/1987 had varied and further reduced the rate of tax in respect of the sale of light diesel vehicles from 15 per cent to 4 per cent as against 15 per cent to 10 per cent provided in S.R.O. No. 453/1983 and kept in tact the concession available to item Nos. (ii), (iii) and (iv) of S.R.O. No. 453/1983. According to the assessee the expression "supersession" used in S.R.O. No. 1716/1987 only means "repeal and replacement and not cancellation or mere repeal" as held by the Supreme Court in State of Orissa v. Titaghur Paper Mills Co. Ltd. [1985] 60 STC 213. It is also contended that the intention of the Government is very clear from the explanatory note to the Notification S.R.O. No. 1716/1987, which clearly provides that the purpose of issuing the notification was only to extend the reduction to all kinds of motor vehicles including three wheeled motor vehicles, bicycles and tandem cycles by reducing the rate of tax from 15 per cent to 4 per cent uniformly. The department contended before the Tribunal that the Notification S.R.O. No. 453/1983 was superseded by S.R.O. No. 1716/1987, the effect of which is that S.R.O. No. 453/1983 becomes non est from the date of S.R.O. No. 1716/1987 and thereafter the concessional rate of tax will be available only in respect of the items specified in the Notification S.R.O. No. 1716/1987. The department has also brought to the notice of the Tribunal that the Government had issued another Notification S.R.O. No. 362/1988 [G.O. (P) No. 39/88/TD] dated March 30, 1988 which provided for reduction of rate of tax, inter alia, on sale of tyres, tubes, etc., from 15 per cent to 6 per cent and submitted that this would clearly indicate that the concessional rate granted to those items in S.R.O. No. 453/1983 had been taken away by S.R.O. No. 1716/1987. The department further contended that if the Notification S.R.O. No. 453/1983 continued even after S.R.O. No. 1716/1987 in respect of the items not covered by S.R.O. No. 1716/1987 a similar supersession of S.R.O. No. 453/1983 should have been mentioned in S.R.O. No. 362/1988 or at any rate a mention would have been made about S.R.O. No. 453/1983 in the said notification. No such reference in S.R.O. No. 362/1988. The Tribunal had accepted the contention of the assessee by relying on the decision of the Supreme Court in Titaghur Paper Mills case [1985] 60 STC 213, and the explanatory note to S.R.O. No. 1716/1987 and held that the Notification S.R.O. No. 453/1983 continued to be in existence in respect of the three items not covered by S.R.O. No. 1716/1987. In that view, the Tribunal has set aside the order of the Deputy Commissioner of Commercial Taxes, Kottayam. The learned Government pleader appearing for the revision petitioner submits that the Notification S.R.O. No. 453/1983, inter alia, giving concessional rate of tax on the sale of tyres were superseded by S.R.O. No. 1716/1987 and, therefore, the concessional rate of tax on tyres is not available after December 26, 1987, i.e., the date of the said notification. The Government pleader also submits that when the Notification S.R.O. No. 1716/1987 is very clear, there is no scope for interpretation of the notification with reference to the external aids such as explanatory notes, etc. The Government pleader also submits that when the Notification S.R.O. No. 1716/1987 is very clear, there is no scope for interpretation of the notification with reference to the external aids such as explanatory notes, etc. The Government Pleader further submits that the decision of the Supreme Court in Titaghur Paper Mills case [1985] 60 STC 213, mentioned earlier has no application to the present case and that section 10 of the Act clearly gives power to the State Government to cancel or vary any notification already issued and that the effect of S.R.O. No. 1716/1987 is to cancel the earlier notification and to replace it by the present notification in a varied form. The Government Pleader also submits that this is evident from the subsequent Notification S.R.O. No. 362/1988. Shri Pathrose Mathai, the learned counsel appearing for the respondent-assessee submits that the Notification S.R.O. No. 453/1983 continued to be in force even after S.R.O. No. 1716/1987 in respect of the three items [items (ii) to (iv)] covered by S.R.O. No. 453/1983 and not touched by S.R.O. No. 1716/1987 which is evident from the explanatory note to the Notification S.R.O. No. 1716/1987. The counsel further submitted that the Supreme Court in Titaghur Paper Mills case [1985] 60 STC 213, mentioned earlier had explained the meaning of the word "supersession" as "repeal and replacement" and, therefore, unless the notification which is repealed is replaced on all matters covered by the said notification the earlier notification will stand in respect of the matters not covered by the notification repealing the earlier notification. The counsel also submits that the assessee relying on the Notification S.R.O. No. 453/1983 had collected tax in respect of the sales turnover of tyres only at the rate of 10 per cent from its customers and had remitted the same to the department. The counsel accordingly submitted that the Tribunal was perfectly justified in holding that the Notification S.R.O. No. 453/1983 governed the rate of tax on the sale of tyres by the assessee during the relevant period. As already noted, the only question required to be considered is with regard to the rate of tax on the sale of tyres during the relevant period. As per entry 206 of the First Schedule to the Act, "tyres" were taxable at the rate of 15 per cent. As already noted, the only question required to be considered is with regard to the rate of tax on the sale of tyres during the relevant period. As per entry 206 of the First Schedule to the Act, "tyres" were taxable at the rate of 15 per cent. However, as per Notification S.R.O. No. 453/1983 the Government, in public interest, inter alia, had granted a reduction in rate [vide item (ii)] in the tax payable under the Act on the sale of motor vehicle tyres from 15 per cent to 10 per cent. Here it must be noted that the said notification granted reduced rate of tax in respect of four items which we have already mentioned earlier in this judgment, i.e., with respect to sale of light diesel vehicles, sale of motor vehicle tyres, sale of radio sets costing not more than Rs. 150 and also with respect to sale of television sets. In respect of the items (i), (ii) and (iv) the rate of tax was reduced from 15 per cent to 10 per cent and in respect of item (iii) from 12 per cent to 10 per cent. This notification was superseded by S.R.O. No. 1716/1987 and limited the reduction in rate of tax on the sale of three items, viz., bicycle of different types, motor cycles of different types and motor vehicles and chassis of motor vehicles. It is pertinent to note here that three more notifications S.R.O. Nos. 317/1984, 1172/1987 and 1173/1987 were also superseded by the Notification S.R.O. No. 1716/1987. All those three notifications were in respect of reduction in the rate of tax on the sale of chassis of motor vehicles from 15 per cent to 6 per cent, sale of motor cars from 15 per cent to 4 per cent and sale of three wheeled motor vehicles from 15 per cent to 10 per cent. This would show that the purpose of issuing Notification S.R.O. No. 1716/1987 was to consolidate the reduction in the rate of tax in respect of sale of light diesel vehicles, sale of chassis of motor vehicles, sale of three wheeled motor vehicles and to provide for uniform rates and to grant some more reduction to motor cycles and motor vehicles and chassis of motor vehicles. It is true that the Notification S.R.O. No. 453/1983 covered three more items also which were not touched by Notification S.R.O. No. 1716/1987. However, the question to be considered is as to what is the effect of "supersession" of S.R.O. No. 453/1983 made as per S.R.O. No. 1716/1987. The Supreme Court in State of Orissa v. Titaghur Paper Mills Co. Ltd. [1985] 60 STC 213, considered a contention taken by the respondent in that case that since the two notifications dated December 29, 1977 involved in that case having been made in "supersession" of all the previous notifications issued on the subject, the effect was to wipe out all tax liability which had accrued under the notifications dated May 23, 1977. The High Court held that to hold that the liability was so wiped out would amount to giving a retrospective effect to the notifications dated December 29, 1977 and as the Legislature has not conferred upon the State Government the power to issue notifications having retrospective effect, to so hold would be to render the said notification void. The Supreme Court noted that both the notifications dated December 29, 1977 are in express terms made with effect from January 1, 1978, that they do not at all purport to have any retrospective effect and that, therefore, they could not affect the operation of the earlier notifications dated May 23, 1977 until they came into force on January 1, 1978. The Supreme Court also noted that sections 3-B and 5(1) of the Orissa Sales Tax Act in express terms confer power upon the State Government to issue notifications from time to time and that thus, the power of the State Government to issue notifications under these two sections is to be exercised by it "from time to time" and, therefore, the State Government can under section 5(1) issue a notification and repeal and replace it by another notification enhancing or lowering the rate of tax and similarly it can issue a notification under section 3-B declaring particular goods or class of goods to be liable to tax on the turnover of purchases and subsequently by another notification repeal that notification with the result that the particular goods or class of goods will from the date of such repeal be again liable to pay tax on the turnover of sales. The Supreme Court further observed at page 248 of the report as follows : "In the notifications dated December 29, 1977 the word 'supersession' is used in the same sense as the word 'repeal' or rather the words 'repeal and replacement'. The Shorter Oxford English Dictionary, Third Edition, at page 2084, defines the word 'supersession' as meaning 'the action of superseding or condition of being superseded'. Some of the meanings given to the word 'supersede' on the same page in that dictionary which are relevant for our purpose are 'to put a stop to; to render superfluous or unnecessary; to make of no effect; to annul; to take the place of (something set aside or abandoned); to succeed to the place occupied by; to supply the place of a thing'. Webster's Third New International Dictionary at page 2296 defines the word 'supersession' as 'the state of being superseded : removal and replacement'. Thus, by using in the notifications dated December 29, 1977 the expression 'in supersession of all previous notifications' all that was done was to repeal and replace the previous notifications by new notifications. By repealing and replacing the previous notifications by other notifications, the result was not to wipe out any liability accrued under the previous notifications. If this contention of the respondents were to be accepted, the result would be startling. It would mean, for example, that when a notification has been issued under section 5(1) prescribing a rate of tax, and that notification is later superseded by another notification further enhancing the rate of tax, all tax liability under the earlier notification is wiped out and no tax can be collected by the State Government in respect of any transactions effected during the period when the earlier notification was in force." As already noted, the Supreme Court was concerned only with the question as to whether the effect of superseding an earlier notification by a subsequent notification is to wipe out all the liabilities under the earlier notification and the Supreme Court has held that by repealing and replacing the previous notifications by other notifications the result was not to wipe out any liability accrued under any previous notifications. Further it must be noted that the supersession is of one notification by another notification and therefore when a notification is superseded by another notification, the superseded notification thereafter does not survive and becomes inoperative. Further it must be noted that the supersession is of one notification by another notification and therefore when a notification is superseded by another notification, the superseded notification thereafter does not survive and becomes inoperative. Only the liabilities incurred will survive. The earlier notification will have effect till its supersession and the same will be ineffective only from the date of such supersession. S.R.O. No. 453/1983 was a notification which was issued in supersession of the S.R.O. No. 98/1982 which provided for reduced rate of tax on light diesel vehicles, motor vehicle tyres and television sets from 15 per cent to 9 per cent and on radio sets liable to pay licence fees of Rs. 7.50 only per year from 12 per cent to 9 per cent. The Government after superseding the said notification dealt with all the four items in the Notification S.R.O. No. 453/1983. However the Government while issuing S.R.O. No. 1716/1987 superseding S.R.O. No. 453/1983 did not choose to include the items (ii) to (iv) in S.R.O. No. 453/1983 in the said notification. In fact the Government had issued a separate Notification S.R.O. No. 362/1988 providing for reduction in the rate of tax in respect of 11 items including tyres and tubes of bicycles and tandem cycles (item No. 2), tyres, tubes and flaps for motor vehicles including trucks, buses, motor cycles, motor scooters, mopeds and motorists (item No. 10) with effect from April 1, 1988, from 6 per cent to 4 per cent in the case of tyres of bicycles and tandem cycles and from 15 per cent to 6 per cent in respect of other items mentioned above. Of course, in that notification also radio and television sets were not included. Whatever it may be, going by the meaning of the word "supersession" as understood by the Supreme Court in Titaghur Paper Mills case [1985] 60 STC 213, mentioned supra the effect of S.R.O. No. 1716/1987 is to repeal the earlier Notification S.R.O. No. 453/1983 and to replace the same to the extent covered by the Notification S.R.O. No. 1716/1987. The expression "repeal" is generally used in the context of an enactment whereas in the case of a notification it can only mean cancellation. So the word "supersession" in the context of a notification means cancellation and replacement. The expression "repeal" is generally used in the context of an enactment whereas in the case of a notification it can only mean cancellation. So the word "supersession" in the context of a notification means cancellation and replacement. Section 10 of the Act gives power to the State Government to make an exemption or reduction in the rate, either prospectively or retrospectively, in respect of any tax payable under the Act in the public interest and by issuing a notification in the gazette. This exemption can be on the sale or purchase of any specified goods or class of goods, at all points or at a specified point or points in the series of sales or purchases by successive dealers or any such sale or purchase made by any specified class of persons in regard to the whole or any part of their turnover. Sub-section (2) also provides that reduction in the rate of tax notified under sub-section (1) may extend to the whole State or to any specified area or areas therein and may be subject to such restrictions and conditions as may be specified in the notification. Sub-section (3) gives specific power to the Government by notification in the gazette, to cancel or vary any notification issued under sub-section (1). Thus, it is clear that the Government have got power under section 10(1) to issue notification in the gazette, in public interest, either granting exemption or reduction in the rate in respect of any tax payable under the Act on the sale or purchase of any specified class of goods or by any specified class of persons in regard to the whole or any part of their turnover either to the whole State or to any specified area or areas therein. Section 10(2)(b) gives power to the Government to impose conditions and restrictions for such grant of exemption or reduction. The power to grant exemption or reduction in the rate of tax can be exercised either prospectively or retrospectively. However, the cancellation or the variation of the notification issued under sub-section (1) can only be prospective. Thus, it is clear that the Government has got the power either to cancel or vary a notification issued under sub-section (1). The power to grant exemption or reduction in the rate of tax can be exercised either prospectively or retrospectively. However, the cancellation or the variation of the notification issued under sub-section (1) can only be prospective. Thus, it is clear that the Government has got the power either to cancel or vary a notification issued under sub-section (1). The effect of the word "supersession" used in S.R.O. No. 1716/1987 would mean that what is done is to cancel the earlier Notification S.R.O. No. 453/1983 and to confine the reduction only to some item covered by the earlier notification with further relief. This can be understood as variation of the Government Notification S.R.O. No. 453/1983 also. The Notification S.R.O. No. 1716/1987 is clear that it supersedes/repeals the earlier Notification S.R.O. No. 453/1983 and grants the benefit of reduction in the rate of tax only in respect of certain items covered by the S.R.O. No. 453/1983. As held by the Supreme Court in Titaghur Paper Mills case [1985] 60 STC 213 mentioned above the effect of supersession of a notification by a subsequent notification is that the earlier notification comes to an end from the date of the latter notification without wiping out the consequences of the earlier notification which was in force till such date. Subsequent Notification S.R.O. No. 362/1988 also makes the position clear that the reduced rate of tax on the sale of tyres is granted only from April 1, 1988. In other words, for the period from December 26, 1987 till March 31, 1988 there was no reduction in the rate of tax on the sale of tyres. Notifications granting exemption/reduction in the rate of tax payable under the Act must be strictly construed and the question of seeking extraneous aid for interpretation of the notification arises only when the notification is ambiguous. In this context, it is relevant to note the observation of the Supreme Court in State of Kerala v. Vattukalam Chemical Industries [2001] 124 STC 233; (2002) 10 KTR 69 (SC). "Learned counsel for the assessee sought to rely upon the objects of the notification in aid of the interpretation that he sought to place upon it. In this context, it is relevant to note the observation of the Supreme Court in State of Kerala v. Vattukalam Chemical Industries [2001] 124 STC 233; (2002) 10 KTR 69 (SC). "Learned counsel for the assessee sought to rely upon the objects of the notification in aid of the interpretation that he sought to place upon it. The language of the notification being crystal-clear; no external aid to its construction is required." For all these reasons, we are of the view that the Tribunal is in error in holding that the Notification S.R.O. No. 453/1983 continued to be in existence even after the date of S.R.O. No. 1716/1987 in so far as the reduction in the rate of tax on the sale of tyres from 15 per cent to 10 per cent. We accordingly set aside the order of the Tribunal in T.A. No. 59 of 1999 and restore the order of the assessing authority as affirmed by the first appellate authority on this issue. This tax revision case is allowed as above. Petition allowed.