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PETITIONER: THE CENTRAL ARECAUNT & COCOA MARKETING& PROCESSING CO-OPERAT

       Vs.

RESPONDENT: STATE OF KARNATAKA & ORS.

DATE OF JUDGMENT:       16/09/1997

BENCH: S.P. BHARUCHA, M. JAGANNADHA RAO

ACT:

HEADNOTE:

JUDGMENT:           THE 16TH DAY OF SEPTEMBER, 1997 PRESENT:               Hon’ble Mr.Justice S.P.Bharucha               Hon’ble Mr.Justice M.Jagannadha Rao Joseph Vallapally,  Sr.Adv., Mudgal,  Adv. with  him for the appellant. M.Veerappa, Adv. for the Respondents.                       J U D G M E N T      The following Judgement of the court was delivered:                       J U D G M E N T M.JAGANNADHA RAO,J.      The  appellant   before  us  is  the  Central  Arecaunt Marketing and  Processing Co-Operative  Ltd., Mangalore.  It was implied  as the  second respondent  in writ Petition No. 15495 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 dated 27.8.1990.      The 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.      Before 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,

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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.      The 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.      In 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.      In our 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:      "Mr.  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 be so".      But 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.      In our  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.

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Learned 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.      In 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.      For 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.