KARNATAKA SEEDS Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) These three Appeals arise out of a common Judgment dated 4-1-1991 rendered in W.Ps.11813/1987 and 6022 & 6380/1988 by our learned brother Shivashankar Bhat, J.

(2.) The short facts are as follows: The appellant-Firm is a dealer in Hybrid and improved seeds. They are sold by the appellant on production in the market. Originally, seeds were taxed under Entry-9 ('cereals') of Schedule IV of the Karnataka Sales Tax Act (for short 'the Act'). The goods falling under Schedule IV are declared goods. Therefore they are protected by the Central Sales Tax Act. The rate of tax was 4%. The taxation in relation to seeds as cereals prevailed upto 1980. In some cases, the taxing authorities took the view that seeds will not fall under the entry 'cereals'. Therefore, sales tax was levied under Section 5(1) of the Act, the charging section. As a result the levy was at multiple points. Those levies were also subject to surcharge and additional tax. It may be mentioned here that this surcharge and additional tax are inapplicable to declared goods. Having regard to the differing methods of taxation, in December 1981 the Commissioner of Commercial Taxes issued a Circular and clarified the position as under:- "Different assessing officers also appear to be holding different views in this behalf. The matter has therefore been examined and the following clarification is issued: Upto 7-9-1976, foodgrains viz., rice, ragi, jola, maize, bajr, navana and samely were specified under the provision to subsection (1) of Section 5 of the KST Act, 1957. The said provision did not contemplate any distinction as between rice, ragi, jola etc., as edible grains meant for human consumption and as non- edible seeds of grains meant for sowing purposes. With effect from 8-9-1976, and by a subsequent amendment with effect from 1-9-1978, the grains in question were taken out of the provision to sub-section (1) of Section 5 and were specified under Entry No.9 of the Fourth Schedule which reads: "Entry No.9: Cereals, that is to say, paddy, rice, wheat, jowar or milo, bajra, maize, ragi, kodon, kutti and barley." The above Entry, by virtue of the qualifying words 'cereals' which means edible grains - a grain used as food, restricts its applicability only to such of the grains which are edible and are fit for human consumption. The 'certified seeds' of the grains in question are coated with poisonous preservatives and are meant for sowing purposes. They are not fit for human consumption and neither the sellers nor the buyers regard them as edible foodgrains. In this view of the matter, 'seeds' of grains which are non-edible, being coated with poisonous preservatives and meant for sowing, would be taxable under the KST Act, 1957, during the different periods as under:- "i) at 1 1/2% multipoint under the provision to sub-section (1) of Section 5 during the period upto 7-9-1976; ii) at 4% multipoint under sub-section (1) of Section 5 gtom 8-9-1976 to 14-11 -1981; iii) at 2% multipoint under the sub-section (1) of Section 5 from 15-11-1981 onwards by virtue of Government Notification No.FD 165 CSL 80 dated 10-11 -1981." As a result of this clarification and the direction, assessment of seeds had to be made under Section 5(1) of the Act. A large number of dealers came to be affected thereby. Therefore, the State of Karnataka passed Karnataka Act 27 of 1985 under which the seeds came to be included under II Schedule and Entry No.140A was introduced to the following effect: "140-A. Certified Seeds marked as poison. Four percent." It was also made clear that this Entry shall have retrospective effect from 8-9-1976 and shall continue to be in force till 4-8-1982. The net result is, between these two dates (8-9-1976 to 4-8-1986) tax was levied at 4% single point with surcharge and additional tax; the point of levy was either on the first or on the earliest successive sales in the State. Consequent to this, for the said period the appellant-Firm was assessed to sales tax not only at 4% but was also subjected to surcharge of 10% and additional tax of 12 1/2%. Aggrieved by these assessments, the appellant preferred appeals, but was unsuccessful. Thereafter, it preferred the Writ Petitions challenging the validity of Karnataka Act 27 of 1985.

(3.) Three principal contentions were raised before the learned single Judge: (i) There was no legislative competence to enact the impugned law; (ii) This is a case to which the principle of promissory estoppel would apply because it was understood by all concerned by reason of the clarification issued by the Commissioner of Commercial Taxes in December 1981 that seeds would be treated as cereals and taxed accordingly; and (iii) Inasmuch as the tax had not been collected from the purchasers at the rates to which the appellant is subjected to but only at 4%, the levy now demanded is arbitrary and unreasonable. The learned single Judge negatived all these contentions and held that the levy is one under Entry-54 of List-ll of Schedule-VII of the Constitution. The clarification issued by the Commissioner of Commercial Taxes had been upheld by a Division Bench of this Court in S.V. HALAVAPALLI AND SONS vs COMMISSIONER OF COMMERCIAL TAXES. Whatever might have been the position earlier, in so far as the period from 1-4-1980 to 8-12-1981 is concerned the direction issued by the Commissioner will govern. There can be no estoppel against a Statute. The power to enact a legislation could be exercised to give effect both prospectively and retrospectively. The mere fact that the assessee did not collect sales tax at the enhanced rate is no ground to hold that the levy is invalid. Accordingly, the learned single Judge dismissed the Writ Petitions. Hence these Appeals.