1989 (8) TMI 302 - SC - VAT and Sales Tax

Kerala High Court s order upholding its liability to the levy of surcharge under the Kerala Surcharge on Taxes Act, 1957, as amended in 1976 challenged Held that - Appeal dismissed. As during the hearing of these appeals, we adjourned the appeals to enable the assessee to move the State in this behalf but we were told that its efforts were unsuccessful. We need hardly say that the assessee will be at liberty to pursue the matter, put forward its difficulties and seek to persuade the State Government to either reduce or dispense with the surcharge in regard to cardamom sales or to sanction an increase in the rate of commission chargeable by the assessee on its cardamom sales and, failing such efforts, to challenge the validity of the levy for the future, if so advised, in appropriate proceedings.

Summary

Issues Involved:
1. Liability of the society to levy of surcharge under the Kerala Surcharge on Taxes Act, 1957.
2. Definition and treatment of "dealer" under the Kerala General Sales Tax Act, 1963.
3. Applicability of general principles of agency in the context of surcharge.
4. Financial impact on the society due to the statutory provisions prohibiting reimbursement of surcharge.

Detailed Analysis:

1. Liability of the Society to Levy of Surcharge:
The primary issue is whether the society is liable for the surcharge under the Kerala Surcharge on Taxes Act, 1957, as amended in 1976. The Kerala General Sales Tax Act, 1963, imposes sales tax on every dealer whose total turnover exceeds a specific sum. The Kerala Surcharge on Taxes Act, 1957, further imposes a surcharge on the tax payable by dealers whose turnover exceeds Rs. 30,000 a year, with increased rates for higher turnovers as per the 1976 amendment.

2. Definition and Treatment of "Dealer":
The court examined the definition of "dealer" under Section 2(viii) of the Kerala General Sales Tax Act, 1963, which includes any person carrying on the business of buying, selling, supplying, or distributing goods, including commission agents, brokers, or auctioneers. The court found that the society fits this definition as it conducts auctions and sells cardamom on behalf of its members, thus making it a dealer liable for sales tax and surcharge on its aggregate turnover.

3. Applicability of General Principles of Agency:
The society argued that as a commission agent, its liability should be coextensive with that of its principals, and it should not be liable for surcharge if the principals' turnovers do not exceed the statutory limits. The court rejected this argument, stating that the statutory provisions clearly treat a commission agent as a dealer liable for sales tax and surcharge on the entire turnover. The court emphasized that the Surcharge Act does not permit the computation of surcharge on a part of the tax determined as payable by the assessee.

4. Financial Impact on the Society:
The society contended that the statutory prohibition against collecting surcharge from purchasers or principals places it in a financial predicament, as it has to meet the surcharge liability out of its commission earnings, which are limited to 1% of the turnover. The court acknowledged this difficulty but held that the clear statutory provisions must prevail. The court suggested that the society could seek relief from the State Government or challenge the validity of the levy in appropriate proceedings if necessary.

Conclusion:
The Supreme Court affirmed the High Court's decision, holding that the society is liable for the surcharge on its aggregate turnover as a dealer under the Kerala General Sales Tax Act, 1963, and the Kerala Surcharge on Taxes Act, 1957. The court dismissed the appeals, making no order as to costs. The court also suggested that the society could pursue relief from the State Government or challenge the levy in future proceedings if advised.