Prospective withdrawal of tax exemption and limits on recovery powers under land revenue law

An exemption granted by an earlier notification under the Karnataka Sales Tax Act, 1957 and not limited to a fixed period could be withdrawn prospectively by a later notification; in the absence of an enforceable promise for a definite duration, promissory estoppel did not apply. Recovery of sales tax arrears as arrears of land revenue authorised attachment and sale, but did not imply a power of forfeiture, which is penal in nature and must be expressly conferred by statute, so the forfeiture order was quashed. A recovery proclamation or restraint notice issued to prevent alienation of property was treated as a permissible recovery measure and was not invalid.

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Issues: (i) Whether the exemption granted under the earlier notification issued under section 8A of the Karnataka Sales Tax Act, 1957 could be withdrawn prospectively by a later notification; (ii) whether the Tahsildar had power to pass an order of forfeiture while recovering sales tax arrears as arrears of land revenue; and (iii) whether the recovery proclamation or restraint notice issued in aid of recovery was invalid.

Issue (i): Whether the exemption granted under the earlier notification issued under section 8A of the Karnataka Sales Tax Act, 1957 could be withdrawn prospectively by a later notification.

Analysis: The earlier notification granted exemption without a definite time-limit. The later notification omitted the relevant entry and thereby withdrew the exemption with effect from the date of its issue. The exemption was not treated as a permanent grant for all times to come, and the absence of a fixed period meant that the State could vary or cancel it in exercise of the power under section 8A. Since no specific promise of continuation for a fixed period was held out, promissory estoppel was held inapplicable.

Conclusion: The withdrawal of exemption by the later notification was upheld and the challenge failed.

Issue (ii): Whether the Tahsildar had power to pass an order of forfeiture while recovering sales tax arrears as arrears of land revenue.

Analysis: The statutory scheme permitted recovery of tax dues as arrears of land revenue and authorised attachment and sale of property, but it did not confer any express power of forfeiture. Forfeiture being penal in nature, such power could not be implied in the absence of clear statutory authorization. The court distinguished recovery from forfeiture and held that the cited provisions did not support the impugned order.

Conclusion: The forfeiture order was illegal and was quashed in favour of the assessee.

Issue (iii): Whether the recovery proclamation or restraint notice issued in aid of recovery was invalid.

Analysis: The notice was treated as a direction not to alienate property and not as a substantive forfeiture or an invalid attachment proceeding. Recovery of tax dues through the mechanism of land revenue recovery was held permissible, and resort to multiple lawful recovery modes was not prohibited. On that basis, the notice was not found unsustainable.

Conclusion: The challenge to the proclamation or restraint notice failed.

Final Conclusion: The writ petition succeeded only to the extent that the forfeiture order was set aside, while the remaining challenge to the exemption withdrawal and recovery action was rejected.

Ratio Decidendi: A tax exemption granted for an indefinite period under a statutory notification may be withdrawn prospectively unless the statute or notification creates an enforceable promise for a fixed duration, and a recovery officer cannot assume a power of forfeiture unless it is expressly conferred by statute.

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