Composite tax relief notification to hoteliers and restaurateurs did not survive statutory amendment and higher tax rate.

A notification granting relief to hoteliers and restaurateurs operated as a composite measure, identifying the class of dealers and prescribing a reduced tax rate under the Karnataka Sales Tax Act, 1957. When the Legislature amended the Act and increased the tax rate, the reduced rate in the notification could not continue unless the notification was severable so that the unaffected part could survive independently. The class-based relief and the reduced rate were not treated as severable. The notification therefore ceased to operate after the amendment, and the turnover became liable to tax at 5 per cent.

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Issues: Whether a notification reducing the tax rate for hoteliers and restaurateurs continued to operate after the statutory amendment increasing the rate of tax, and whether section 8-A(3-A) of the Karnataka Sales Tax Act, 1957 applied to the notification.

Analysis: The notification granted relief in two connected ways: it identified a class of dealers and it prescribed a reduced rate of tax on the relevant turnover. On that basis, it was treated as a composite notification referable to both section 8-A(1)(a) and section 8-A(1)(b) of the Karnataka Sales Tax Act, 1957. Once the Legislature amended the Act and altered the rate of tax, the reduced rate under the notification could not survive unless the notification was severable in a manner that allowed the unaffected part to continue independently. The reduced rate and the class-based relief were not treated as severable for this purpose.

Conclusion: The notification did not survive the statutory amendment, and the turnover was liable to tax at 5 per cent. The decision was against the assessee and in favour of the Revenue.

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