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Janatha Expeller Company and 9 ors. Vs. Assistant Commissioner (Assessment), Sales Tax - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKerala High Court
Decided On
Case NumberO.P. No. 3977 of 1978-F
Judge
Reported in[1982]49STC216(Ker)
AppellantJanatha Expeller Company and 9 ors.
RespondentAssistant Commissioner (Assessment), Sales Tax
Appellant Advocate S.A. Nagendran,; N.N. Divakaran Pillai and; K.B. Subhag
Respondent AdvocateGovernment Pleader
Excerpt:
.....dealer having his place of business in the state in respect of the sales by him, in the course of inter-state trade or commerce, from any such place of business of any such goods or classes of goods as may be specified in the notification, or that the tax on such sales shall be calculated at such lower rates than those specified in sub-section (1) or sub-section (2) as may be mentioned in the notification ;(b) that in respect of all sales of goods or sales of such classes of goods as may be specified in the notification, which are made, in the course of inter-state trade or commerce, by any dealer having his place of business in the state o 117/66 was issued reading as follows :in exercise of the powers conferred by sub-section (5) of section 8 of the central sales tax act, 1956 (act 74..........sales tax ordinance (9 of 1978) in respect of the sales effected by them in the course of inter-state trade. exhibit p2 which is identical to the other notices reads :on scrutiny of the returns in form no. ii filed under central sales tax for the month of april, 1978, onwards it is seen that you have not paid the additional tax due as per the kerala additional sales tax ordinance no. 9 of 1978. additional sales tax is also leviable on goods coming under section 8(2a) of the central sales tax act. you are therefore requested to pay the difference of tax for the months of april to september, 1978, within 3 days.ordinance 9 of 1978 was replaced by the kerala additional sales tax act, 1978 (act 20 of 1978), and anything done or any action taken under the ordinance is deemed to have.....
Judgment:

T. Kochu Thommen, J.

1. The petitioners are registered dealers under the Kerala General Sales Tax Act, 1963 (the 'K.G.S.T. Act'), as/well as under the Central Sales Tax Act, 1956 (the 'Central Act'). They purchase copra within the State and produce oil and cake which they sell. In respect of such sales they pay sales tax under the K.G.S.T. Act as well as under the Central Act. The petitioners are aggrieved by exhibits P2 to PI I notices calling upon them to pay the additional tax imposed under the Kerala. Additional Sales Tax Ordinance (9 of 1978) in respect of the sales effected by them in the course of inter-State trade. Exhibit P2 which is identical to the other notices reads :

On scrutiny of the returns in form No. II filed under Central sales tax for the month of April, 1978, onwards it is seen that you have not paid the additional tax due as per the Kerala Additional Sales Tax Ordinance No. 9 of 1978. Additional sales tax is also leviable on goods coming under Section 8(2A) of the Central Sales Tax Act. You are therefore requested to pay the difference of tax for the months of April to September, 1978, within 3 days.

Ordinance 9 of 1978 was replaced by the Kerala Additional Sales Tax Act, 1978 (Act 20 of 1978), and anything done or any action taken under the Ordinance is deemed to have been done or taken under the Act (see Section 3). Exhibits P2 to PI I are thus deemed to have been issued under the Act. The question is whether the petitioners are liable to pay the additional tax imposed by the State under Act 20 of 1978 in respect of inter-State sales. Section 2 of this Act reads:

2. (1) The tax payable under the Kerala General Sales Tax Act, 1963 (15 of 1963) (hereinafter referred to as the Sales Tax Act), for the Snancial year commencing on the first day of April, 1978, shall be increased by 10 per cent of such fax.

On the face of it Section 2 of Act 20 of 1978 is a levy of tax by the State in addition to the tax payable under the K. G. S. T. Act. They are both State enactments and deal with matters in respect of which the State has legislative competence. But according to the respondent who has issued exhibits P2 to PI I, the additional tax levied by the State under Act 20 of 1978 enhances by 10 per cent the tax payable under the Central Act as well as under the K. G. S. T. A8(2A) of the Central Act.

2. The competent authority to levy tax under the Central Act in respect of inter-State sale is the Central Government. Subject to this power of the Central Government, the tax payable under the Central Act shall be assessed or collected or payment thereof enforced by the authorities empowered to administer the K.G.S.T. Act. They shall exercise their power under the Central Act for and on behalf of the Central Government. The Central Act does not extend to sales which have taken place within the State. Nor does the K.G.S.T. Act or Act 20 of 1978 extend to levy authoriced under the Central Act. Neither the State Government nor the officers empowered under the K.G.S.T. Act can exercise power under the Central Act, except in so far as power is specifically granted under the Central Act. Save for the limited power recognised under Section 8(5), the tax leviable under the Central Act cannot be varied by the State Government. By resort to Act 20 of 1978 the State Government cannot enhance the tax payable under the Central Act. This appears to be the scheme of the Act.

3. I shall now deal with the relevant provisions. Section 8 of the Central Sales Tax Act reads :

8. Rates of tax on sales in the course of inter-State trade or commerce.- (1) Every dealer, who in the course of inter-State trade or commerce-

(a) sells to the Government any goods; or

(b) sells to a registered dealer other than the Government goods of the description referred to in Sub-section (3);.

shall be liable to pay tax under this Act, which shall be four per cent of his turnover.

(2) The tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of goods in the course of inter-State trade or commerce not falling within Sub-section (1)-

(a) in the case of declared goods, shall be calculated at twice the rate applicable to the sale or purchase of such goods inside the appropriate State; and

(b) in the case of goods other than declared goods, shall be calculated at the rate of ten per cent or at the rate applicable to the sale or purchase of such goods inside the appropriate State, whichever is higher;

and for the purpose of making any such calculation any such dealer shall be deemed to be a dealer liable to pay tax under the sales tax law of the appropriate State, notwithstanding that he, in fact, may not be so liable under that law.

(2A) Notwithstanding anything contained in Sub-section (1A) of Section 6 or Sub-section (1) or Clause (b) of Sub-section (2) of this section, the tax payable under this Act by a dealer on his turnover in so far as the turnover or any part thereof relates to the sale of any goods, the sale or, as the case may be, the purchase of which is, under the sales tax law of the appropriate State, exempt from tax generally or subject to tax generally at a rate which is lower than four par cent (whether called a tax or fee or by any other name), shall be nil or, as the case may be, shall be calculated at the lower rate.

Explanation.-For the purposes of this Sub-section a sale or purchase of any goods shall not be deemed to be exempt from tax generally under the sales tax law of the appropriate State if under that law the sale or purchase of such goods is exempt only in specified circumstances or under specified conditions or the tax is levied on the sale or purchase of such goods at specified stages or otherwise than with reference to the turnover of the goods.

(3)...

(4) ...

(5) Notwithstanding anything contained in this section, the State Government may, if it is satisfied that it is necessary so to do in the public interest, by notification in the official Gazette, and subject to such conditions as may be specified therein, direct,-

(a) that no tax under this Act shall be payable by any dealer having his place of business in the State in respect of the sales by him, in the course of inter-State trade or commerce, from any such place of business of any such goods or classes of goods as may be specified in the notification, or that the tax on such sales shall be calculated at such lower rates than those specified in Sub-section (1) or Sub-section (2) as may be mentioned in the notification ;

(b) that in respect of all sales of goods or sales of such classes of goods as may be specified in the notification, which are made, in the course of inter-State trade or commerce, by any dealer having his place of business in the State or by any class of such dealers as may be specified in the notification to any person or to such class of persons as may be specified in the notification, no tax under this Act shall be payable or the tax on such sales shall be calculated at such lower rates than those specified in Sub-section (1) or Sub-section (2) as may be mentioned in the notification.

4. Sub-section (2A) of Section 8 is a curb on the power to levy tax under Sub-sections (1) and (2)(b) of that section. Where in respect of sale within the State certain goods are exempt from tax under the State law or subject to tax at x rate lower than four per cent, then, in respect of such goods sold in the course of inter-State trade or commerce, the tax payable under the Central Act shall be nil, or as the case may be, shall be calculated at the lower rate. Sub-section (5) of Section 8 is also a fetter on the power to levy tax. That fetter applies de hors the rate of tax payable under the State law on the sale of goods effected within the State. Whether or not the tax levied under the State law in respect of notified goods is more than the tax payable under the Central Act, the State Government may, in the public interest and subject to such conditions as it may impose, direct that, in respect of the sale of such goods in the course of inter-State trade or commerce, the tax payable shall be nil or shall be calculated at a rate lower than what is specified under Sub-section (1) or (2) of Section 8. The curb imposed by Sub-section (2A) or Sub-section (5) on the power under Section 8(1) and (2) is meant to protect the State economy in relation to categories of specified goods. While Sub-section (2A) is applicable only where the tax levied under the State law in respect of particular goods sold within the State is either nil or at a rate lower than four per cent, Sub-section (5) is applicable, irrespective of the rate of levy under the State Act. Sub-section (5) is a positive power conferred on the State Government to reduce the rate of tax or remove tax altogether in respect of notified goods sold in inter-State trade or commerce. This is a power to reduce tax or exempt from tax and not to enhance the tax. Sub-section (2A) however involves no such conferment of power on the State. It operates independently, provided the conditions prevail, namely, exemption from tax or reduced rate of tax under the State law for identical goods sold within the State. Neither provision allows enhancement of tax in any event. It was in exercise of the power vested in the State Government under Sub-section (5) of Section 8 of the Central Act that Notification S.R.O. No. 117/66 was issued reading as follows :

In exercise of the powers conferred by Sub-section (5) of Section 8 of the Central Sales Tax Act, 1956 (Act 74 of 1956), the Government of Kerala being satisfied that it is necessary so to do in the public interest, hereby direct that in respect of coconut oil and its cake the tax payable under the said Act by an oil miller having his place of business in the State of Kerala in respect of the sale by him from such place of business of the said goods in the course of inter-State trade or commerce shall be calculated at 1 per cent on the sale price of the goods so sold subject to the condition that the turnover of coconut or copra, from which the said goods were produced by him in his mill within the State, is assessed to tax or is liable to tax at his hands under the Kerala General Sales Tax Act, 1963 (Act 15 of 1963).

This notification shall come into force on and with effect from 1-4-1966.

Accordingly, subject to the condition mentioned in the notification, the levy in respect of coconut oil and cake sold in the course of inter-State trade or commerce shall be calculated only at 1 per cent of the sale price. This notification is still in force. Admittedly the petitioners come within the scope of S.R.O. No. 117/66.

By the impugned notices the petitioners are called upon to pay the additional tax imposed under Section 2 of Act 20 of 1978 in respect of inter-State sales. This is manifestly incorrect. Reliance by the respondent on Section 8(2A) of the Central Act for this purpose is totally misconceived. The respondent has, in the first place, no power to enhance the tax leviable under Section 8 of the Central Act. In the second place the additional tax levied under Act 20 of 1978 has no application whatever to the provisions of Section 8 of the Central Act. For both these reasons exhibits P2 to P11 are made without jurisdiction and they are accordingly declared to be void. The O.P. is allowed in the above terms. No costs.


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