1997 (10) TMI 341 - SC - VAT and Sales Tax

Whether respondent a registered dealer under the provisions of the Karnataka Sales Tax Act 1957 is liable to pay purchase tax under the provisions of section 6 of the said Act? Held that - Appeal allowed. As it follows that by virtue of section 5(3) of the Central Sales Tax Act the sale effected by the respondent to Kalbhavi has to be regarded to be in the course of export by virtue of which fish oil was exported to a place outside the State and since this despatch was not pursuant to an intra-State sale or as a result of sale in the course of inter-State trade or commerce the said sale falls directly within the ambit of section 6 of the Act. Accordingly the Sales Tax Authorities were justified in levying purchase tax on the respondent and the High Court erred in coming to a contrary view.

Issues Involved:
1. Liability to pay purchase tax under Section 6 of the Karnataka Sales Tax Act, 1957.
2. Interpretation of Section 6 of the Karnataka Sales Tax Act.
3. Applicability of Section 5(3) of the Central Sales Tax Act, 1956.
4. Distinction between intra-State sale, inter-State sale, and sale in the course of export.

Detailed Analysis:

1. Liability to pay purchase tax under Section 6 of the Karnataka Sales Tax Act, 1957:

The primary issue in this case was whether the respondent, a registered dealer, was liable to pay purchase tax under Section 6 of the Karnataka Sales Tax Act, 1957, for purchasing fish oil from unregistered dealers and subsequently selling it to M/s. Kalbhavi Venkatarao & Bros. for export.

2. Interpretation of Section 6 of the Karnataka Sales Tax Act:

Section 6 of the Act stipulates that purchase tax is levied on taxable goods purchased by a dealer under circumstances where no tax is leviable on the sale price under Section 5, and the dealer either consumes, disposes of, or dispatches the goods outside the State, except as a direct result of inter-State trade or commerce. The High Court had interpreted this section to mean that since the respondent sold the fish oil within the State of Karnataka, the purchase did not attract purchase tax. However, the Supreme Court disagreed, stating that the High Court's interpretation was incorrect.

3. Applicability of Section 5(3) of the Central Sales Tax Act, 1956:

The Supreme Court emphasized that the sale by the respondent to Kalbhavi was the last sale preceding the export and thus fell under Section 5(3) of the Central Sales Tax Act, deeming it a sale in the course of export. This meant that no tax was levied under Section 5 of the Karnataka Sales Tax Act on this transaction. However, this did not exclude the applicability of purchase tax under Section 6 of the Karnataka Sales Tax Act.

4. Distinction between intra-State sale, inter-State sale, and sale in the course of export:

The Supreme Court clarified that the term "sale in the State" in Section 6(i) of the Karnataka Sales Tax Act refers to an intra-State sale, as opposed to a sale in the course of inter-State trade or commerce or export. The sale by the respondent to Kalbhavi, being in the course of export, could not be regarded as an intra-State sale. Thus, the respondent's transaction did not qualify for exemption from purchase tax under Section 6(i).

Conclusion:

The Supreme Court concluded that the High Court erred in its interpretation and that the respondent's sale to Kalbhavi, being in the course of export, attracted purchase tax under Section 6 of the Karnataka Sales Tax Act. The appeal was allowed, the High Court's order was set aside, and the decision of the assessing authority was restored.

Final Judgment:

The Supreme Court allowed the appeal, set aside the High Court's order, and restored the decision of the assessing authority, concluding that the respondent was liable to pay purchase tax under Section 6 of the Karnataka Sales Tax Act, 1957. There was no order as to costs.

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