1974 (9) TMI 101 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Constitutionality of sub-section (2) of section 6-A of the Karnataka Sales Tax Act.
2. Alleged violation of Article 19(1)(g) of the Constitution.
3. Alleged inconsistency with section 15(a) of the Central Sales Tax Act.
4. Burden of proof regarding tax liability under sub-section (2) of section 6-A.

Detailed Analysis:

1. Constitutionality of sub-section (2) of section 6-A of the Karnataka Sales Tax Act:

The petitioners argued that sub-section (2) of section 6-A is unconstitutional. They claimed it allowed taxing authorities to levy purchase tax on the turnover of cardamom at more than one point within the State, contrary to section 15(a) of the Central Sales Tax Act. The court, however, held that sub-section (2) of section 6-A is a machinery provision, not a charging section, and should be interpreted to make the charge effective. The court cited precedents from the Supreme Court, such as India United Mills Ltd. v. Commissioner of Excess Profits Tax, and Gursahai Saigal v. Commissioner of Income-tax, to support the interpretation that machinery provisions are designed to effectuate the charging sections.

2. Alleged violation of Article 19(1)(g) of the Constitution:

The petitioners contended that sub-section (2) of section 6-A imposes an unreasonable burden on dealers, violating Article 19(1)(g) of the Constitution. The court rejected this argument, stating that the provision aims to ensure that the turnover of declared goods does not escape tax at the prescribed point. The court reasoned that the dealer is in a better position than the department to collect information about whether the turnover has suffered tax earlier. Therefore, casting the burden on the dealer to establish that the turnover has suffered tax earlier is not an unreasonable restriction on the right to carry on business.

3. Alleged inconsistency with section 15(a) of the Central Sales Tax Act:

The petitioners argued that sub-section (2) of section 6-A is inconsistent with section 15(a) of the Central Sales Tax Act, which states that the turnover of declared goods should not be subject to sales tax at more than one point. The court distinguished this case from Bhawani Cotton Mills Ltd. v. State of Punjab, where the Supreme Court invalidated a provision due to the lack of a clear point of taxation. The court noted that sub-section (2) of section 6-A is a rule of evidence and not a charging section. It concluded that the provision does not violate section 15(a) since it merely requires the dealer to prove that the turnover has already been subjected to tax.

4. Burden of proof regarding tax liability under sub-section (2) of section 6-A:

The petitioners claimed that the burden placed on the dealer under sub-section (2) of section 6-A is onerous, especially in transactions involving unregistered dealers. The court dismissed this argument, stating that the dealer always knows the vendor from whom he purchased the goods and can ascertain the necessary information to support his case. The court also rejected the contention that sub-section (2) should receive the same interpretation as sub-section (1) of section 6-A, which places the burden of proving certain special facts on the dealer. The court emphasized that sub-section (2) clearly states that in the absence of acceptable evidence, the dealer's turnover should be presumed taxable.

Conclusion:

The court concluded that sub-section (2) of section 6-A does not suffer from any of the infirmities suggested by the petitioners. The provision is neither unconstitutional nor inconsistent with section 15(a) of the Central Sales Tax Act. The burden placed on the dealer is reasonable and necessary to prevent tax evasion. Consequently, the petitions were dismissed.