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2002 (9) TMI 494 - SC - VAT and Sales Tax


Issues:
1. Challenge against retrospective operation of the explanation to the first proviso to sub-section (1-A) of section 5 of the Karnataka Sales Tax Act, 1957.
2. Validity of the legislation imposing a burden of tax retrospectively.
3. Relief sought by the appellants due to economic loss and hardship.
4. Interpretation of the proviso and the impact of the explanation on taxable turnover.
5. Permissibility of passing the burden of tax to consumers by dealers.
6. Legal provisions prohibiting collection of excess tax by dealers and penalties for contravention.
7. Judicial discretion in granting relief from the burden of tax legally payable.
8. Legitimacy of retrospective taxation and considerations of reasonableness and arbitrariness.

Analysis:
1. The appeals challenged the retrospective operation of the explanation to the first proviso to sub-section (1-A) of the Karnataka Sales Tax Act, inserted in 1996 with effect from 1988. The High Court upheld the retrospective aspect, leading to the appeals before the Supreme Court.
2. The legislation imposing tax retrospectively was deemed valid by the Court, emphasizing that occasional hiccups in business due to such measures are not uncommon, and the retrospective effect was considered reasonable and not arbitrary.
3. The appellants sought relief due to economic loss and hardship resulting from the retrospective tax burden. However, the Court denied relief, stating that the burden of tax legally payable cannot be relieved based on the interpretation of the law.
4. The Court provided an in-depth analysis of the proviso and the impact of the explanation on taxable turnover, clarifying that the explanation merely clarified the existing liability and did not impose a new burden of tax with retrospective effect.
5. Dealers were reminded of the permissibility to pass the burden of tax to consumers but within the limits set by the legislation to prevent excess collection from consumers.
6. Legal provisions prohibiting dealers from collecting excess tax and penalties for contravention were highlighted, emphasizing the importance of adhering to the prescribed tax collection limits.
7. The Court exercised judicial discretion in granting a payment plan for the sales tax levied during a specific period, allowing appellants to pay in installments to ease the financial burden.
8. The legitimacy of retrospective taxation was discussed, with the Court concluding that the retrospective effect, in this case, was not unreasonably harsh to invalidate the explanation. The appeals were ultimately dismissed with no order as to costs.

 

 

 

 

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