Judgment :- Petitioner, a registered dealer under the Karnataka Value Added Tax Act, 2003 and Rules framed thereunder, has presented this petition calling in question the vires of the words and the tax invoice or bill of sale issued in respect of the sales relating to such discount shows the amount allowed as discount in the proviso To Rule 3(2)(c) of the Karnataka Value Added Tax Rules, 2005 (for short ‘Rules’). Inserted by Notification No. FD.124.CSL.2006 dated 27/05/2006, respectively with effect from 1/4/2006 on the premise that the amendment is unreasonable, unworkable, arbitrary and impossible of being Implemented and leads to a fresh levy of tax along with penalty for no fault of the petitioner and hence, violative of Articles 14 and 19(1)(g) of the Constitution of India. The additional relief prayed for is to quash the consequent reassessment order dated 6/4/2009 under Section 39(1) of the Act Annexure-“ J ”. 2. The Petitioner, a dealer in cement manufactured in the states of Karnataka, Andhra Pradesh and Tamil Nadu, in the course of business, offers discount to its dealers in three forms namely price difference, cash discount and percentage discount. As regards price difference, it is stated that, during the first week of every subsequent month, a price is proposed and forwarded to the corporate office by the Branch office for approval and the difference between the billed price and proposed price is offered as a price difference in credit notes to dealers, which is automatically generated by a system maintained by the petitioner, however, in the subsequent month immediately on the receipt of the approval from the corporate office. In respect of cash discount, it is stated that any dealer paying the invoice amount within seven days from the date of invoice, is eligible for 2% cash discount on Invoice price during the period April and May 2006, and if the payment is made within 8 to 15 days, the dealer is offered a 1% cash discount on the invoice price and payments made beyond 15 days are not considered for cash discount. According to the petitioner, the cash discount for each month is processed in the succeeding month and accordingly credit notes are issued as required by Section 30 of the Act, a copy of one of which is at Annexure-“A”. According to the petitioner, the cash discount for each month is processed in the succeeding month and accordingly credit notes are issued as required by Section 30 of the Act, a copy of one of which is at Annexure-“A”. The Practice of extending percentage discount of 2%, it is stated depends upon the total purchase value of cement by all the dealers, which is finalized on the last date of the respective months as disclosed in one of the credit notes issued for the month of April 2006 Annexure-“ B ”. 3. The petitioner asserts that the discount offered to its customers in the aforesaid three forms, conforms to Rule 3(2) (c) of the Rules an existing prior to the amendment, for the month of April to June 2006 to arrive at taxable turnover. According to the petitioner, the practice of making over the discount to the customers was only at the end of the month and not in the bill or invoice, strictly in accordance with the rule as existing. The petitioner is said to have filed its monthly returns in form No. VAT 100 for the months of April and May, 2006 claiming discounts effected on the basis of the aforesaid three modes. The credit notes extended to the dealer discloses the discount being in conformity with section 30 of the Act, the petitioner submitted the returns for the months of April and May 2006. 4. It is the allegation of the petitioner that the State Government, by the notification, brought into force the amendment to the proviso to Rule 3(2) (c) of the Rules by inserting the said phrase, with retrospective effect from 1/4/2006, causing hardship and inconvenience in the carrying on its business. It is the further allegation of the petitioner that the 1st Respondent – Assessing Authority, while verifying the petitioner’s books, observed that a wrong claim for deduction of discount was allowed for the months of April and May 2006, not in conformity with the amended proviso to Rule 3(2) (c) of the Rules, and accordingly, disentitled a deduction of the discount, to arrive at taxable turnover. In other words, the assessing Officer noticed that the discount not shown in the invoices for the months of April and May 2006, being contrary to the amended proviso to Rule 3(2) (c) of the Rules, disallowed the discount offered to the petitioner’s customers in the credit bills raised subsequent to the completion of the sale transaction. This was followed by a show cause notice dated 22/01/2009 Annexure-“G” under Section 39(1) of the Act proposing to reassess the petitioner’s assessments for the months of April and May 2006. In response to the notice, the petitioner filed its reply dated 7/2/2009 Annexure-“H” pointing out to the fact that the amendment brought about retrospectively is unworkable, impractical, arbitrary and not possible of being implemented. Despite the reply, the 2nd respondent confirmed the proposal to disallow the discount for the months of April and May 2006, by reassessment order dated 6/4/2009 levying VAT at the rate of 12.5 % on the said amount and demand notice dated 6/4/2009, collectively marked as Annexure-“ J ” This consequently led to coercive action by way of a recovery notice dated 22.04.2009 Annexure “ K ” for recovery of Rs. 20,92,887/- including interest of Rs. 5,90,087/-. 5. The premise on which the petitioner has called in question the vires of the provisions of the Act as unconstitutional are thus: (i) Section 29 of the Act contemplates issue of tax invoices and bills of sale by a registered dealer effecting sale of taxable goods or exempt goods along with taxable goods in excess of the prescribed value at the time of sale, on tax invoices marked as original for the sale containing the particulars prescribed and to retain a copy thereof. Rule 27 of the Rules corresponds to Section 29 of the Act. Rule 28(3) of the Rules prohibits a registered dealer from issuing more than one tax invoice in respect of any sale while Rule 29 prescribes the details of particulars to be mentioned in the invoice including the rate and amount of tax charged in respect of taxable goods as also its total value. Rule 28(3) of the Rules prohibits a registered dealer from issuing more than one tax invoice in respect of any sale while Rule 29 prescribes the details of particulars to be mentioned in the invoice including the rate and amount of tax charged in respect of taxable goods as also its total value. But, the proviso to Rule 3(2) (c) as amended by the notification impugned, mandates the petitioner to show in the invoices the discount allowed, though the state was fully aware that the invoices raised during the period April and May 2006 without showing the discount cannot be substituted by yet another invoice showing the discount contrary to section 30, and therefore, it is contended that the amended provision of Rule 3(2) (c) is unworkable. ii) The unamended Rule 3(2) (c) contemplated taxable turnover to be determined by allowing the deductions of all amounts shown as discounts from the total turnover even though the discount amount allowed was not mentioned in the invoice. Therefore, it is contended that the state cannot expect the petitioner to modify the invoice or issue a fresh invoice which would be contrary to the Act and rules. The petitioner having issued the invoices for the months of April and May 2006 without showing the deduction of the discount in the invoices, having not forseen the intention of the State to bring such an amendment creates an additional tax liability with retrospective effect which is impermissible: (iii) Section 30 of the Act contemplates issuing of credit and debit notes while the corresponding Rule 31 prescribes in what circumstances the credit and debit notes could be issued, one such being, when the value of sale is altered due to discount. The rule having been in existence from 1/4/2005 onwards, the petitioner claimed discount at the end of the month or subsequently, until after the notification impugned amending the proviso to Rule 3(2) (c) with retrospective effect from 1/4/2006. (iv) The amendment to the proviso in so far as it relates to retro activity it is urged creates an unexpected and unforeseen liability in respect of transaction previously taken place not subject to any liability. By the amendment, it is contended that the petitioner will be burdened with 12.5% tax on the discounted amount for the amounts of April and May 2006 and hence, unconstitutional. By the amendment, it is contended that the petitioner will be burdened with 12.5% tax on the discounted amount for the amounts of April and May 2006 and hence, unconstitutional. The petitioner having had the benefit of extending discount on the sale transactions by raising credit notes after the completion of the transaction and issue of invoices under the unamended Rule 3(2) (c), the subsequent amendment has the effect to increasing the tax burden, for no valid or justifiable reason thus exposing the petitioner to additional tax, penalty and interest which cannot but be termed as oppressive, irrational, impracticable and unworkable, and calling upon the petitioner to do an act contrary to the law in order to avoid the penal consequences, hence violative of Articles 14 & 19(1)(g) of the Constitution of India. (v) The notification impugned amending the proviso to the rule from an anterior date, serves no purpose and works unreasonably by placing an additional burden upon the petitioner who had by the time the notification was put into force, had issued invoices in compliance with the law as it stood then in the months of April and May 2006 and on that count, the amendment cannot be sustained on settled principles of validity and operation of retro-activity of legislation, more so in the admitted fact that the petitioner had filed its returns for the months of April and May 2006. Thus, it is contended that the notification impugned amending the rule, amounts to an irrational legislative provision with no object or purpose to achieve but only create additional burden and consequential penalty and hence violative of Articles 14 & 19(1)(g) of the Constitution of India. (vi) It is contended that the amended rule is neither curative nor declaratory of any existing law but on the other hand, creates an additional burden and hence, unconstitutional. The notification impugned creating a fresh liability, a delegated authority, without authorization under statue, cannot be permitted to do so, since if permitted, the retro-activity of the rule would result in manifest injustice and unsettling normal business practice without a sufficient policy justification and hence, opposed to Public Policy. The notification impugned creating a fresh liability, a delegated authority, without authorization under statue, cannot be permitted to do so, since if permitted, the retro-activity of the rule would result in manifest injustice and unsettling normal business practice without a sufficient policy justification and hence, opposed to Public Policy. The nature of business of the petitioner and the business practice does not permit the petitioner to go back on the contract with its clients and rework the contractual terms as also make entries in the books of account to comply with the amended provision of Rule 3(2) (c) of the Rules, and therefore, it is contended that the petitioner is put to additional burden of tax penalty and interest which is illegal. (vii) Section 88 of the Act empowers the State Government to make rules by notification and to carry out the purposes of the Act, while sub-section (4) contemplates that the rules so framed, if made retrospective in operation, to specify the reasons for making such rules and should be laid before both houses of the State Legislature as required by Section 89. According to the petitioner, the notification impugned does not provide objects and reasons nor disclose that it was laid before the Houses of the State Legislature and hence, the notification is illegal. 6. The reassessment order Annexure-“J” for the period April and May 2006 fixing the tax liability based on the amendment to the proviso to Rule 3(2) (c) is contended to be illegal unsustainable. 7. The petition is not apposed by filing Statement of objections. Nevertheless, learned counsel for the State submits that the reason for the amendment being made retroactive from 1/4/2006 was that all business transactions would fall within the financial year commencing from 1/4/2006, as empowered by sub-clause (4) of Section 88 of the Act. 8. Having heard the learned counsel for the parties, perused the pleadings, there can be no more dispute that the object of bringing into force the amendment to the proviso to Rule 3(2) (c) of the Rules was only to ensure that it would apply to all transactions for the financial year commencing from 1/4/2006 onwards. It is no doubt true that subsection (4) of Section 88 of the Act empowers the State to frame rules so as to bring them into force with retrospective effect. It is no doubt true that subsection (4) of Section 88 of the Act empowers the State to frame rules so as to bring them into force with retrospective effect. But that does not mean that the State could no so without noticing the repercussions and the adverse impact it would have on the concluded business transactions of dealers as also in the matter of accounting and securing the deduction on discount for purpose of tax, in accordance with the procedure prescribed by the unamended rule, for the months of April and May 2006. The procedure followed by the petitioner in maintaining its books of account by not showing in the sale invoice the discount offered, but did so in the form of credit notes after the completion of sale transactions, being in conformity with Section 30 of the Act, could not have disentitled the petitioner to claim the benefit of discount from out of the total taxable turnover for the months of April and May 2006. Keeping in mind the fact that the petitioner would suffer untold of hardship and inconvenience, more appropriately since the petitioner cannot go back on its contractual terms with its customers for the period April and May 2006, and revoke the transaction, prepare fresh invoices showing the discounts, so as to comply with the amended provision of Rule 3(2) (c) is illegal. Unworkable, and a cause of serious concern for the petitioner. In the circumstances, the contentions supra advanced by the petitioner, are worthy of acceptance. 9. Suffice it to state that the operation of the amended proviso to Rule 3(2) (c) of the rules with retrospective effect from 1/4/2006 being unreasonable, oppressive, unworkable, creating an additional tax liability, irrational, violative of Articles 14 and 19 (1) (g) of Constitution of India, deserves to be declared unconstitutional 10. In that view of the matter, the reassessment order annexure-“ J ” levying additional burden of tax penalty and interest and the consequent demand notice Annexure “ K ” in so far as it relates to the period April and May 2006, disallowing discount allowed to customers on the strength of credit notes raised subsequent to the tax invoices, on the premise of liability having accrued, pursuant to the amendment to the proviso to Rule 3 (2) (c) of the Rules with effect from 1/4/2006 is quashed. The phrase as inserted in the proviso to Rule 3(2) (c) and the tax invoice or bill of sale issued in respect of sales relating to such discount shows the amount allowed as discount by notification No. FD. 124 CSL 126 dated 27/05/2006, in so far as it is made retroactive from 1/4/2006 is declared unconstitutional. Writ petition is ordered accordingly.