1980 (8) TMI 188 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to a notice of demand under the Karnataka Sales Tax Act, 1957 for additional tax due, liability of a commission agent for payment of sales tax, interpretation of turnover in relation to known principals, legality of the demand for additional tax, maintainability of the writ petition.

Analysis:
The petitioner challenged a notice of demand issued by the Commercial Tax Officer under section 12-B(1) of the Karnataka Sales Tax Act, 1957, demanding payment of additional tax for the months of July, August, and September, 1975. The petitioner, a dealer and commission agent, contended that the turnover included his own trade and trade on behalf of known principals, who had turnovers below ten lakhs, hence no additional tax was due. The Commercial Tax Officer insisted on additional tax based on the turnover aggregation, leading to a legal dispute (paragraphs 1-3).

The petitioner's counsel argued that as a commission agent, the petitioner is liable to pay tax only on transactions carried out on behalf of the principal, not on his own turnover. Citing legal precedents, the counsel emphasized that the turnover of the principal must exceed ten lakhs to impose additional tax on the agent. However, the court noted that for the period in question, the turnover did not reach ten lakhs, making the demand for additional tax unwarranted. The court found the demand untenable due to the lack of a completed assessment (paragraphs 4).

In response to the petition, the counter-affidavit raised a procedural issue on the maintainability of the writ petition. However, the court concluded that the demand was unjustified under the Act, as there was no assessment conducted, denying the petitioner a right to appeal based solely on the notice of demand. Consequently, the court quashed the notice of demand and directed the respondent not to enforce it, ruling in favor of the petitioner (paragraphs 5-6).

In summary, the court upheld the petitioner's challenge to the notice of demand for additional tax, emphasizing the correct interpretation of turnover in relation to known principals and the lack of a legal basis for the demand. The judgment favored the petitioner, declaring the demand as unwarranted and ordering its quashing.