1967 (2) TMI 83 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of subsection (2) of section 5 of the Mysore Sales Tax Act regarding liability to pay tax for a dealer registered under the Central Sales Tax Act.
2. Whether a declaration under section 8(4) of the Central Sales Tax Act qualifies the goods or the sale itself.
3. The effect of the interpretation on the liability of a dealer in Mysore State for sales made within the state.

Detailed Analysis:
The judgment by the High Court of Mysore dealt with the interpretation of subsection (2) of section 5 of the Mysore Sales Tax Act, specifically in a case where a dealer registered under the Central Sales Tax Act was assessed for sales tax despite having a turnover below the threshold. The crux of the issue revolved around whether the dealer's liability to pay tax was justified under the provisions of the State Act. The court noted that the dealer's liability hinged on the interpretation of subsection (2) of section 5, as exemption under sub-section (5) would apply if the case did not fall within the former provision.

During the relevant period, subsection (2) of section 5 stated that a dealer registered under the Central Sales Tax Act would be liable to pay tax on goods for which a declaration under section 8(4) of the Central Sales Tax Act was furnished. The court grappled with the challenge of reconciling the requirement of this declaration with the taxable event of a sale or purchase. The contention was raised that the provision seemed ineffective as a sale cannot be taxed without a corresponding declaration, which seemed unattainable in the context of the sale itself.

The court considered the arguments presented by the department, emphasizing that the provision should not be construed as ineffective merely because of interpretational challenges. The department posited that the clause regarding the declaration should be seen as qualifying the goods rather than the sale, thereby justifying the dealer's liability to pay tax on sales made within the State. This interpretation was supported by the Government Pleader, who highlighted the linkage between the declaration under the Central Act and the taxable event of a sale within Mysore State.

Ultimately, the court upheld the interpretation that tied the liability to pay tax to the circumstances under which the dealer made a declaration under the Central Sales Tax Act. The judgment reasoned that this interpretation was reasonable, considering the provisions of the Central Act and the taxable event of a sale within Mysore State. Consequently, the appeal against the Commissioner's order, which upheld the dealer's tax liability, was dismissed by the court.