1970 (5) TMI 62 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of Section 10 of the Central Sales Tax (Amendment) Ordinance, 1969 regarding exemption from tax liability for inter-State transactions where tax was collected but later refunded.

Analysis:
The judgment delivered by the Karnataka High Court, with Justice Govinda Bhat and Justice Venkataswami presiding, pertains to writ petitions challenging orders of the Commercial Tax Officer dated 30th August, 1969. The petitioner, a cotton dealer, had collected sales tax on inter-State transactions between 10th November, 1964, and 31st March, 1968, despite the Supreme Court ruling that no tax was legally leviable on such transactions. Subsequently, the petitioner refunded the tax amounts to customers. The Commercial Tax Officer held that the petitioner was not entitled to exemption under Section 10 of the Central Sales Tax (Amendment) Ordinance, 1969, as the tax was initially collected, even though it was later refunded. The petitioner contended that the effect of the refund should be considered as if no initial tax collection had occurred.

The Court analyzed Section 10 of the Ordinance, emphasizing that the objective was to exempt dealers from tax liability for inter-State sales where tax was not collected. The Court found the Commercial Tax Officer's interpretation too literal, stating that the dealer should not be liable for tax if no tax was collected during the relevant period. The Court noted that after the Supreme Court's judgment in 1964, the petitioner could not have legally collected tax on the transactions in question. Refunding the tax amounts before the Ordinance was in line with the intention of Section 10. The Court concluded that the petitioner met the requirements of Section 10 and was not liable for sales tax on the inter-State sales of cotton during the specified period. Consequently, the demands challenged in the writ petitions were quashed, and the objections against tax levy for a specific period were rejected.

In summary, the Court's judgment clarified the interpretation of Section 10 of the Central Sales Tax (Amendment) Ordinance, 1969, emphasizing the exemption from tax liability for inter-State transactions where tax was collected but later refunded. The Court ruled in favor of the petitioner, holding that the refund of tax amounts before the Ordinance was equivalent to not making the initial tax collection, thus entitling the petitioner to exemption from sales tax.