1963 (3) TMI 44 - HC - VAT and Sales Tax

Issues Involved:

1. Interpretation of the expression "sale by the first or the earliest of successive dealers in the State who is liable to tax under this section" in Section 5(3)(a) of the Mysore Sales Tax Act, 1957.
2. Applicability of sales tax to transactions involving coffee seeds purchased before but sold after the Act came into force.
3. Impact of Section 40 and Section 43 of the Mysore Sales Tax Act, 1957 on the assessment of sales tax.
4. Validity of the decision in B. P. Krishnamurthy v. State of Mysore regarding the first or earliest dealer liable to tax under Section 5(3)(a).

Detailed Analysis:

1. Interpretation of the Expression "Sale by the First or the Earliest of Successive Dealers in the State Who is Liable to Tax Under This Section" in Section 5(3)(a) of the Mysore Sales Tax Act, 1957:

The principal question was the meaning of the expression "sale by the first or the earliest of successive dealers in the State who is liable to tax under this section" found in Section 5(3)(a) of the Act. The court examined whether this referred to the first dealer selling the goods after the Act came into force or included dealers who sold goods before the Act but were liable to tax under the Act due to subsequent transactions. The court concluded that the language of Section 5(3)(a) does not explicitly state that the first dealer must be the one who sells after the Act came into force. Therefore, the interpretation should consider the normal meaning, which includes the first or earliest dealer irrespective of when the sale took place. The court found no provision in the Act indicating that the first dealer mentioned in Section 5(3)(a) is the first dealer after the Act came into force.

2. Applicability of Sales Tax to Transactions Involving Coffee Seeds Purchased Before but Sold After the Act Came into Force:

The respondents purchased coffee seeds before October 1, 1957, but sold them after this date when the Act came into force. The court examined whether these sales were liable to sales tax. It was argued that the respondents were not the first or earliest dealers liable to tax under Section 5 because they purchased the seeds from other dealers before the Act's commencement. The court noted that Section 5(3)(a) imposes a single point tax on the first or earliest dealer in the State liable to tax, and this does not necessarily mean the first dealer after the Act came into force. The court concluded that if the respondents were not the first or earliest of successive dealers, they could not be taxed for the turnover in question.

3. Impact of Section 40 and Section 43 of the Mysore Sales Tax Act, 1957 on the Assessment of Sales Tax:

Section 40 repeals the previous sales tax laws but preserves obligations and liabilities already accrued. Section 43(1) states that any person assessed or assessable to tax under the repealed enactments during the assessment year before the Act's commencement is liable for tax on their total turnover during that period. Section 43(2) specifies that for the period after the Act's commencement, the dealer is liable to tax under the new Act. The court concluded that the turnover before the Act should be assessed under the old laws, and the turnover after October 1, 1957, should be assessed under the new Act. Therefore, the respondents' turnover relating to transactions after October 1, 1957, is governed by the new Act.

4. Validity of the Decision in B. P. Krishnamurthy v. State of Mysore Regarding the First or Earliest Dealer Liable to Tax Under Section 5(3)(a):

The court revisited the decision in B. P. Krishnamurthy v. State of Mysore, which held that the first or earliest dealer for the purpose of Section 5(3) is the one who sells the goods after the Act came into force. The court expressed doubt about this decision, noting that there is no clear provision in Section 5(3) indicating that the first dealer must be the one selling after the Act's commencement. The court overruled the decision in B. P. Krishnamurthy, concluding that the first or earliest dealer liable to tax under Section 5(3)(a) can include those who sold goods before the Act but are liable to tax due to subsequent transactions.

Conclusion:

The court concluded that under Section 5(3)(a) of the Mysore Sales Tax Act, 1957, if any sale or sales of specified goods took place before the Act's commencement, no tax is leviable on a sale of those goods after the Act's commencement if any of the earlier dealers are liable to tax under Section 5 due to subsequent transactions. The view that the first or earliest dealer must be determined only with reference to the period after the Act came into force was overruled. The reference was answered accordingly.

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