SAILESH AND CO Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) In these writ petitions, the Notification of the Government dated February 14, 1989, issued under section 8A of the Karnataka Sales Tax Act, 1957 (in short "the Act") is challenged. In the said notification, the Government of Karnataka exempted the tax payable by a dealer under section 5 of the Act, on the sale of ceramic tiles manufactured in his unit located in notified industrially backward areas of Karnataka, for a period of two years from the date of the publication of the notification. All the petitioners are dealers in ceramic tiles manufactured outside the State. The contention of the petitioners is that by virtue of the notification issued by the Government giving total exemption to the tiles manufactured in the notified industrially backward areas in the State of Karnataka, a discrimination is brought about in the matter of levy of sales tax on the same class of dealers.

(2.) The effect of the notification is that the petitioners have to pay the tax on their turnover, whereas the manufacturers within the State have the benefit of exemption, if they satisfy the conditions of the notification. The contention is that discrimination is brought about in the matter of levy between the same class of dealers and it is violation of article 14 of the Constitution. But, the question that really arises on these facts is, whether the Government is competent to issue the impugned notification by virtue of the power conferred on it under section 8A of the Act. The Supreme Court had occasion to deal with similar notification issued by the State of Gujarat under section 49(2) of the Gujarat Sales Tax Act, 1969, reducing the rate of tax on the locally manufactured electronic goods. That notification was challenged by the dealers importing similar goods from outside the State who had to pay higher tax. The petitioners challenged the notification under article 32 of the Constitution and the decision of the Supreme Court is reported in [1988] 70 STC 52; AIR 1988 SC 2038 as Weston Electroniks v. State of Gujarat. In that case, the contention of the dealers was that they were adversely affected by the notification issued by the State of Gujarat, in that, different rates of sales tax were levied on electronic goods imported into the State of Gujarat and goods manufactured within that State. The Supreme Court held, upholding the notification on the ground that reduction of tax rate in the case of goods manufactured locally was extended in order to provide an incentive for encouraging local manufacturing units. The contentions of the petitioners were rejected taking the view that no discrimination could be spelled out from the impugned notification (sic) [Their Lordships of the Supreme Court have, on the contrary, struck down the notification reserving a lower rate for local manufacturers].

(3.) In another case Bharat General and Textile Industries Ltd. v. State of Maharashtra JT1988 (4 )SC 204 , 1988 (2 )SCALE944 , 1989 Supp(1 )SCC153 , [1988 ]Supp3 SCR72 , [1989 ]72 STC354 (SC ) the notification of Government of Maharashtra granting full tax exemption under the Bombay Sales Tax Act, 1959, to new units started in backward areas, was challenged. In the said case, the State of Maharashtra had granted total exemption to new units producing edible as well as non-edible oil. The said notification was upheld by the Supreme Court on the ground that the concession was extended by the State Government by exercise of the power vested under the provisions of the State Act, and such exercise fell purely within the domain of the executive and it is not for the court to see that other edible units also derived huge benefits on account of the exemption. The reason for upholding the notification, in the Supreme Court's view, was that the said exemption to new units was felt necessary since new entrants to the industry would constitute a specified class by themselves in contra-distinction with the class of sales and purchases effected by the older and seasoned units.