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Surgihalli Veerabhadrappa Sons and Co. and anr. Vs. the State of Karnataka and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKarnataka High Court
Decided On
Case NumberWrit Petition Nos. 13453 and 13454 of 1982
Judge
Reported in1982(2)KarLJ187; [1983]54STC28(Kar)
ActsKarnataka Sales Tax Act, 1957 - Sections 5, 5(3), 5(4), 5(5) and 6
AppellantSurgihalli Veerabhadrappa Sons and Co. and anr.
RespondentThe State of Karnataka and ors.
Advocates:B.V. Katageri, Adv.
Excerpt:
.....purchase or sale of good is respect of which alone the state legislature has competence to make a law levying taxes under entry 54 of list ii, and therefore it is invalid. as the levy, as held in cheyyabba's case [1980] 45 stc 1, is in the nature of tax on sale or purchase, as the case may be, and in respect of transactions carried on by a dealer in the course of business, the levy is perfectly within the legislative competence of the state legislature under entry 54 of list ii......and converting the same into rice and selling it. 3. section 6 of the 'act' reads as follows : '6. levy of purchase tax under certain circumstances. - subject to the provisions of sub-section (5) of section 5, every dealer who is the course of his business purchases any taxable goods in circumstances in which no tax under section 5 is leviable on the sale price of such goods and, (i) either consumes such goods in the manufacture of other goods for sale or otherwise or disposes of such goods in any manner other than by way of sale in the state, or (ii) despatches them to a place outside the state except as a direct result of sale or purchase in the course of inter-state trade or commerce, shall be liable to pay tax on the purchase price of such goods at the same rate at which it would.....
Judgment:
ORDER

Rama Jois, J.

1. In these two writ petitions, the petitioner, who is the same in both the petitions, has questioned the constitutional validity of section 6 of the Karnataka Sales Tax Act, 1957 (hereinafter referred to as the 'Act'), and the legality of the orders made thereunder levying tax under section 6 of the 'Act'.

2. The facts of the case in brief are as follows :

The petitioner is a partnership firm dealing mainly in paddy and rice. The business of the petitioner consists in the purchase of paddy from growers and converting the same into rice and selling it.

3. Section 6 of the 'Act' reads as follows :

'6. Levy of purchase tax under certain circumstances. - Subject to the provisions of sub-section (5) of section 5, every dealer who is the course of his business purchases any taxable goods in circumstances in which no tax under section 5 is leviable on the sale price of such goods and,

(i) either consumes such goods in the manufacture of other goods for sale or otherwise or disposes of such goods in any manner other than by way of sale in the State, or

(ii) despatches them to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce,

shall be liable to pay tax on the purchase price of such goods at the same rate at which it would have been leviable on the sale price of such goods under section 5 :

Provided that this section shall not apply -

(i) in respect of sale or purchase of goods specified in the Fourth Schedule -

(a) which are taxable at the point of purchase; and

(b) which have already been subjected to tax under sub-section (4) of section 5;

(ii) in respect of sale or purchase of goods specified in the Second Schedule which have already been subject to tax under clause (a) of sub-section (3) of section 5.'

4. According to the above provision, a dealer who is the course of his business purchases any commodity taxable under the provisions of the 'Act' under circumstances under which no tax is leviable under section 5 of the 'Act' would become liable to pay tax on the purchase price at the rate prescribed in the 'Act' if he does any of the acts specified in the said section. This section came up for interpretation in K. Cheyyabba v. State of Karnataka [1980] 45 STC 1. After analysing the wording of the section, the circumstance under which tax becomes leviable and payable under section 6 of the 'Act' it was stated as follows :

'A careful and proper analysis of section 6 of the Act discloses that the purchase turnover of a dealer becomes taxable under the following circumstances : If, after having purchased the goods in the course of his business and under circumstances in which no tax is leviable under section 5, he does any one of the following acts with reference to such goods :

(i) consumes the goods in the manufacture of other goods for sale;

(ii) consumes the goods otherwise than in the process of manufacture;

(iii) disposes of the goods otherwise than by sale in the State;

(iv) despatches the goods outside the State otherwise than in the course in inter-State trade or commerce.'

5. In these cases, the petitioner had purchased paddy and manufactured rice out of it for purposes of sale. Therefore, under the impugned orders he is called upon to pay tax under section 6 of the 'Act' on the purchase price of paddy.

6. Sri B. V. Katageri, the learned counsel for the petitioner, contends as follows :

The power to levy excise duty is exclusively vested in the Parliament under entry 84 of List I of the Seventh Schedule to the Constitution. The excise duty is leviable on the manufacture of goods. The nature of levy under section 6 of the 'Act' is on the manufacture of goods, and it is not a levy on either purchase or sale of good is respect of which alone the State Legislature has competence to make a law levying taxes under entry 54 of List II, and therefore it is invalid.

In support of his contention, he relied on the decision in Shinde Brothers v. Deputy Commissioner, Raichur : [1967]1SCR548b . In particular he invited my attention to para 49 of the judgment. He submitted that applying the ratio of the said judgment, it should be held that section 6 is unconstitutional as beyond the legislative power of the State. In my view, the learned counsel for the petitioner is placing a wrong construction on section 6 and making it a ground for having the section struck down on the ground that the State Legislature has no competence to enact it.

7. From the relevant portion of the judgment in Cheyyabba's case [1980] 45 STC 1 extracted earlier, it is seen that the tax under section 6 of the 'Act' becomes payable inter alia if a dealer had purchased goods in the course of his business and under circumstances under which no tax was leviable under section 5 of the 'Act' and manufactured goods out of it for purposes of sale. Thus it will be seen that the levy under section 6 is on the transaction of purchase or sale, as the case may be, and not on mere manufacture of goods. For instance, if a person were to purchase goods not in the course of his business even under circumstances under which no tax was leviable under section 5 of the 'Act' and manufactured goods out of them for his own consumption and not for sale, he would not become liable to pay tax under the said section. Therefore, the levy under section 6 of the 'Act' cannot be construed as being of the nature of excise duty as contended for the petitioners. As the levy, as held in Cheyyabba's case [1980] 45 STC 1, is in the nature of tax on sale or purchase, as the case may be, and in respect of transactions carried on by a dealer in the course of business, the levy is perfectly within the legislative competence of the State Legislature under entry 54 of List II.

8. For the above reasons, I do not find any ground to entertain these petitions. The petitions are rejected.


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