1975 (11) TMI 143 - HC - VAT and Sales Tax

Summary

Issues:
Constitutional validity of section 6B and section 18(3) of the Karnataka Sales Tax Act of 1957 challenged by commission agents. Interpretation of the additional tax under section 6B as a tax on sales. Whether commission agents are liable to pay the additional tax under section 6B based on the definition of "dealer" in the Act.

Analysis:
The petitioners, commission agents in market yards, challenged the constitutional validity of section 6B and section 18(3) of the Karnataka Sales Tax Act. Section 6B imposes an additional tax on dealers with a turnover exceeding ten lakh rupees. The petitioners argued that this tax is akin to income tax and beyond the State Legislature's power under entry 54 of List II of the Constitution. However, the High Court referenced a Supreme Court decision stating that the additional tax is indeed a tax on sales, falling within the State Legislature's authority to levy taxes on the sale of goods. The Court held that the additional tax under section 6B is valid under entry 54 and dismissed the challenge based on this ground.

The petitioners contended that since dealers cannot collect the additional tax from purchasers, it does not qualify as a sales tax. However, the Court relied on previous judgments to assert that the inability to recover the tax from others does not change the nature of the tax. Referring to earlier decisions, the Court emphasized that a tax on sales can still be considered a sales tax even if the dealer cannot pass on the tax to others. Consequently, the Court rejected this argument against the validity of the additional tax under section 6B.

The Court affirmed that the impugned provisions introduced by the amending Act fall within the State Legislature's legislative power. Despite the petitioners' argument that commission agents should not be liable for the additional tax under section 6B due to the turnover of their principals, the Court declined to address this issue of statutory interpretation. The Court stated that the question of whether commission agents are liable for the tax should be determined by the authorities under the Act, and the Court did not express an opinion on this matter.

In conclusion, the High Court dismissed the petition challenging the constitutional validity of section 6B and section 18(3) of the Karnataka Sales Tax Act, holding that the additional tax under section 6B is a valid levy on sales falling within the State Legislature's authority. The Court did not delve into the specific liability of commission agents under the Act, leaving that determination to the relevant authorities.