2005 (3) TMI 453 - SC - VAT and Sales Tax

Whether the parties were liable to pay differential tax during the period when the notifications were in force? Held that - Appeal dismissed. In the present case, as per the law in force, the appellants were bound to collect at 6 per cent. If the appellant chose not to collect at 6 per cent from their customers, the appellant did so at their own peril. They cannot refuse to pay the respondents tax at the rate in force at the relevant time.

Summary

Issues:
Challenge to discriminatory notifications under Karnataka Sales Tax Act, 1957 - Validity of assessment order and demand notice - Applicability of tax rate - Ignorance of law as an excuse - Interpretation of relevant legal precedents.

Analysis:

1. Challenge to Discriminatory Notifications: The case revolved around notifications issued by the State of Karnataka under the Karnataka Sales Tax Act, 1957, altering the sales tax rates for television sets and components based on their place of manufacture. The High Court had previously struck down these notifications as discriminatory, reverting the tax rate to 6 per cent. However, despite the quashing of the notifications, the State issued a subsequent notification rescinding the earlier ones.

2. Validity of Assessment Order and Demand Notice: Following the quashing of the discriminatory notifications, an assessment order was passed directing the appellants to pay tax at 6 per cent instead of the reduced rate they were previously paying. The appellants challenged this order and the subsequent demand notice through a writ petition in the Karnataka High Court, which was dismissed, leading to the present appeal.

3. Applicability of Tax Rate and Ignorance of Law: The appellants argued that they were unaware of the High Court's judgment quashing the notifications and relied on previous cases where parties were not liable for differential tax during the pendency of similar notifications. However, the Supreme Court held that ignorance of the law is not a valid excuse, and dealers were obligated to collect tax at the prevailing rate, in this case, 6 per cent.

4. Interpretation of Legal Precedents: The Court distinguished the present case from previous judgments where parties were protected from collecting differential tax due to legal restrictions. In this instance, the appellants were required by law to collect tax at 6 per cent, and any failure to do so was at their own risk. The Court emphasized that parties cannot avoid paying tax at the applicable rate based on their lack of knowledge or understanding of legal developments.

5. Conclusion: Ultimately, the Supreme Court found no merit in the appellant's arguments and upheld the judgment of the High Court, dismissing the appeal. The Court emphasized that the appellants were obligated to pay tax at the rate in force at the relevant time, regardless of their awareness of legal proceedings or judgments. The appeal was dismissed without any order as to costs.