1983 (2) TMI 243 - SC - VAT and Sales Tax

Whether the levy of additional tax under the Orissa Additional Sales Tax Act, 1975 (Orissa Act 24 of 1975) as amended by the Orissa Additional Sales Tax (Amendment) Act, 1979 ( the amending Act ) is a single point levy or a multi-point levy? Held that - Appeal allowed. Any dealer who is not liable to pay tax under the principal Act either by reason of his not having sufficient gross turnover or by reason of exemption given under section 7 of the principal Act is not liable to pay additional tax under the Act. If a dealer is exempted by the State Government under the second proviso to section 3(1) of the Act he is also not liable to pay the additional tax under the Act.The turnover in respect of goods whose sales or purchases are not taxable under the principal Act in the hands of any dealer by reason of section 8 of the principal Act is not liable to the payment of additional sales tax under the Act. The turnover in respect of sales and purchases of declared goods is not taxable under the Act by reason of the first proviso to section 3(1) of the Act. Any other turnover which is exempted by the State Government under the second proviso to section 3(1) of the Act is also not taxable under the Act. The levy of the additional tax on the gross turnover of a dealer under section 3 of the Act is subject to these conclusions.

Issues Involved:
1. Whether the levy of additional tax under the Orissa Additional Sales Tax Act, 1975, as amended by the Orissa Additional Sales Tax (Amendment) Act, 1979, is a single point levy or a multi-point levy.

Issue-wise Detailed Analysis:

1. Legislative History and Principal Act Provisions:
The Orissa Sales Tax Act, 1947 (Orissa Act 14 of 1947), is a law for levying taxes on the sale or purchase of goods. Section 4(1) of the principal Act imposes tax liability on every dealer whose gross turnover exceeds Rs. 50,000. The principal Act defines "gross turnover" and "turnover of sales" and "turnover of purchases". Section 8 of the principal Act is significant as it prescribes that the same goods shall not be taxed at more than one point in the same series of sales or purchases by successive dealers, emphasizing a single point levy to prevent price escalation and make tax collection convenient.

2. Orissa Additional Sales Tax Act, 1975:
The Orissa Additional Sales Tax Act, 1975, levied additional sales tax on certain classes of dealers, enhancing their tax liability under the principal Act by specified percentages, but prohibited passing the tax burden to consumers. This Act was virtually an amendment to the principal Act, following the pattern of the Tamil Nadu Additional Sales Tax Act, 1970.

3. Amendment by the Orissa Additional Sales Tax (Amendment) Act, 1979:
The 1979 amendment altered the levy pattern, making the additional tax a percentage of the annual gross turnover of a dealer. The prohibition on passing the additional tax to consumers was removed. The amendment, however, did not clarify whether the additional tax was a single point or multi-point levy, leading to controversies.

4. High Court's Judgment:
The High Court concluded that the Act was independent of the principal Act, providing for a different base and scheme. It held that the additional tax was an independent liability and not subject to the single point levy principle of the principal Act.

5. Supreme Court's Analysis:
The Supreme Court disagreed with the High Court, emphasizing that section 3(2) of the Act made the provisions of the principal Act mutatis mutandis applicable to the additional tax. The term "mutatis mutandis" means with necessary changes in points of detail, indicating that the State Legislature did not intend to depart substantially from the principal Act except where expressly provided. The additional sales tax was in the nature of a surcharge, and the two Acts had to be read together as one.

6. Application of Section 8 of the Principal Act:
The Supreme Court held that section 8 of the principal Act, which prescribes a single point levy, is applicable to the additional tax under the Act. The additional tax should be levied on the gross turnover taxable under the principal Act. The Court rejected the argument that section 8 should be confined to the principal Act, noting that section 3(2) of the Act made section 8 applicable to the additional tax.

7. Exemptions and Anomalies:
The Court addressed anomalies that would arise if the department's contention were accepted. It clarified that a dealer not liable to pay tax under the principal Act due to insufficient turnover or exemptions is also not liable to pay additional tax under the Act. The Government's notification exempting turnover relating to goods exempted under the principal Act from additional tax was deemed redundant.

Conclusion:
The Supreme Court declared that the additional tax under the Act can be levied and collected in accordance with the conclusions that it is subject to the single point levy principle of the principal Act. The appeals were allowed, and the High Court's judgment was set aside. There was no order as to costs.

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