Central Arecaunt & Cocoa Marketing& Processing Co-Opera Vs. State of
Karnataka & Ors  INSC 734 (16 September 1997)
BHARUCHA, M. JAGANNADHA RAO
16TH DAY OF SEPTEMBER, 1997 PRESENT:
Mr.Justice S.P.Bharucha Hon'ble Mr.Justice M.Jagannadha Rao Joseph Vallapally, Sr.Adv.,
Mudgal, Adv. with him for the appellant.
Adv. for the Respondents.
following Judgement of the court was delivered:
appellant before us is the Central Arecaunt Marketing and Processing
Co-Operative Ltd., Mangalore. It was implied as the second respondent in writ
of 1981 filed by the respondent 2 to 19 in the karnataka High Court. The writ
Petition filed in 1981 was allowed after nine years by the High Court by Judgement
relevant facts of the case are as follows. The writ Petitioners were all
registered dealers under the Karnataka Sales Tax on the first sale in the State
and contended that thereafter they sold the same out side the State of
Karnataka and that their sales in the course of inter-state trade and commerce
were subject to tax under the Central Sales Tax Act, 1956. While so, a
notification was issued on 14/17.9.1956 under Section 8 (5) of the Central
Sales Tax Act,1956 by the State of Karnataka exempting the inter-State sales of tax-suffered arecaunt effected by
the appellant- society. The respondent - Writ Petitioners contended before the
High Court that the above notification not only impeded inter-state sales effected
by them but was also violative of Article of Article 14 of the constitutions of
India in as much as it discriminated
against the writ Petitioners, who were also registered dealers in arecaunt.
the High Court, the appellant filed a statement of objections contending that
the appellant society was sponsored by the Government of Karnataka and Kerala
and its membership consisted of growers from both the States, that therefore it
was a class by itself as compared to the writ petitioners and hence Article 14
did not apply. When the writ petition came up for hearing after 9 years in
1990, counsel for the appellant pointed out there was no evidence that any of
the writ petitioners had entered into transaction of inter-States sales, that
the exception notification dated 14/17.9.1977 had since been superseded by a
notification dated 31.3.1984 issued under Section 8 (5) of the Central Sales
Tax Act, by the State of Karnataka and the benefit of the exemption stood
extended from March 1984 to all other traders. In other words, it was pointed
out that issue itself had become academic.
High Court, Even though it noticed that the benefit of the exception
notification of September 1977 in favour of all traders was issued by march
1984, proceeded to go into the merits of the case and quashed the exemption
notification of September, 1977, without considering the peculier consequences
of such quashing as against the appellant in 1990. It is against the said Judgement
of High Court that this appeal has been preferred.
this appeal, the respondent - Writ petitioners have not chosen to appear. The
learned counsel for the State has supported the case of the appellant. It was
contended by the learned senior counsel appearing for the appellants that
before the High Court the writ petitioners did not adduce any proof of the
extent of their inter-State sales, that the notification of September, 1977 was
not hit by Article 14 because the appellant was a class by itself as it
consisted of growers from Karnataka and Kerala. Learned counsel also submitted
that the view of the subsequent notification of March, 1984 extending the
benefit of the exemption to all traders including the writ petitoners, the High
Court-while dealing with the case 1991 - ought not to have gone into the merits
and ought not to have struck down the September 1977 notification in as much as
the issue had become purely academic. Because of the exception, and the
consequent statutory prohibition against collection any tax, the appellant was
precluded from collecting any tax so as to meet any liability that might arise
in case the notification was struck down. These factors were not borne in mind
by the High Court.
view, the submissions of the learned counsel for the appellant are liable to be
accepted. The High Court had noticed that the matter had become academic and in
fact, observed at the end of the Judgement as follows:
Dattu, learned Government Pleader, pointed out of that 1977 notification had
since been superseded by 1984 notification which extended to the benefit to all
and therefore, striking down 1977 notification would be academic, It may appear
the High Court went on to observe that it was nonetheless deciding the issue,
so that in future when power is exercised by the Stated in the State, the state
could benefit by what was stated in the Judgement.
view, the High Court ought too have gone to the question merely for the purpose
of the future and, at any rate, ought to have noticed the highly inequitable
consequences of its interference so far as the appellant was given the
exemption by the State, it was challenged by the respondents, the High Court
did not suspend the notification pending the writ petition, the appellant was
statutorily prohibited from collecting the sales-tax which was exempt and when
the writ petition was allowed in 1991 quashing the exemption for September
1977, the appellant became liable to pay the tax for the period for September
1977 to march 1984.
counsel for the appellant informed us that now the Department has indeed taken
some steps to recover the tax relatable to the above period. It is also
significant that none appears for the respondent - writ petitioners and that
the state of Karnataka is supporting the appellant.
that view of the matter, we hold that the High Court ought not to have gone
into the issue on merits and even if it did, it could and should have issued
appropriate directions saving the appellant from the adverse consequence of
striking down an exemption in its favour and- an exception which while it was
in force, precluded the appellant from collecting the tax from its buyers.
the aforesaid reasons, the appeal is allowed and the judgement of the high
Court is set aside. Any demand for recovery of tax consequent upon the judgement
of the High Court will accordingly be withdrawn.