Sales tax exemption for cottage oil industry validly withdrawn where amended rules confined relief to village industries outside municipal limits.

Rule 25A validly supplied the conditions for the sales tax exemption under entry 28 of the Fifth Schedule to the Karnataka Sales Tax Act, because the Act made the exemption subject to the prescribed conditions and limitations. The amended rule confined the concession to village industries operating outside city or municipal limits, and the petitioners admitted that their oil industry operated within the municipal limits of Gadag-Betegeri. The amendment did not prohibit their trade; it only withdrew the earlier exemption and exposed their turnover to tax. The challenge to the amendment itself failed, so the impugned notices were not without authority of law.

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Issues: Whether the amendment to rule 25A of the Karnataka Sales Tax Rules, 1957 could validly withdraw the sales tax exemption earlier available to cottage oil industry producers under entry 28 of the Fifth Schedule to the Karnataka Sales Tax Act, and whether the impugned notices issued to tax the petitioners' turnover were without authority of law.

Analysis: Section 8 of the Karnataka Sales Tax Act exempts only those goods specified in the Fifth Schedule subject to the conditions and exceptions contained in that Schedule. Entry 28 of the Fifth Schedule, as amended, made the exemption available only to products of prescribed village industries satisfying the prescribed conditions and limitations. Since the word "prescribed" is defined to mean prescribed by the Rules, rule 25A validly supplied the relevant conditions. The amended rule required the industry to be outside the limits of a city or municipality, and the petitioners admittedly operated within the municipal limits of Gadag-Betegeri. The amendment did not prohibit their trade; it only removed the earlier exemption and subjected the turnover to tax. There was no successful challenge to the validity of the amendment itself.

Conclusion: The amended rule validly withdrew the exemption for the petitioners, and the impugned notices were not unlawful.

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