1981 (12) TMI 151 - HC - VAT and Sales Tax

Summary

Issues:
1. Liability of petitioners to pay additional tax under the Kerala Additional Sales Tax Act, 1978 in respect of inter-State sales.
2. Interpretation of Section 2 of Act 20 of 1978 regarding the levy of additional tax.
3. Competency of the State Government to enhance tax payable under the Central Sales Tax Act, 1956.
4. Analysis of relevant provisions of the Central Sales Tax Act, specifically Section 8(2A) and Section 8(5).
5. Examination of Notification S.R.O. No. 117/66 issued under Section 8(5) of the Central Act and its applicability to the case at hand.

Detailed Analysis:
1. The petitioners, registered dealers under the Kerala General Sales Tax Act and the Central Sales Tax Act, were issued notices to pay additional tax under the Kerala Additional Sales Tax Act, 1978 for sales made in the course of inter-State trade. The question arose whether the petitioners were liable to pay the additional tax imposed by the State under the said Act. The notices were deemed to have been issued under the Act, and the court had to determine the validity of such imposition.

2. Section 2 of Act 20 of 1978 mandated an increase of 10% in the tax payable under the Kerala General Sales Tax Act for the financial year starting from April 1, 1978. The State contended that this additional tax would apply to sales under the Central Sales Tax Act as well. However, the court analyzed the language of the provision and emphasized that the State lacked the authority to enhance the tax payable under the Central Act, as it was beyond its legislative competence to do so.

3. The judgment delved into the competency of the State Government to levy taxes under the Central Sales Tax Act in the context of inter-State sales. It highlighted that the Central Government held the authority to levy tax on inter-State sales, and the State's power was limited to administering and enforcing the tax on behalf of the Central Government. The State could not independently enhance the tax payable under the Central Act, except where specific powers were granted.

4. Detailed analysis of Section 8(2A) and Section 8(5) of the Central Sales Tax Act was provided. Section 8(2A) restricted the levy of tax under certain circumstances, particularly when goods sold within the State were exempt or subject to a lower tax rate. On the other hand, Section 8(5) empowered the State Government to reduce or exempt tax on notified goods sold in inter-State trade in the public interest. The judgment clarified that these provisions did not allow for the enhancement of tax, emphasizing the protective nature of the provisions in relation to State economy.

5. The judgment scrutinized Notification S.R.O. No. 117/66 issued under Section 8(5) of the Central Act, which directed the calculation of tax at a reduced rate for specific goods sold in inter-State trade. It was noted that the petitioners fell within the scope of this notification, further reinforcing the State's authority to reduce tax rates but not to enhance them. The impugned notices demanding additional tax under Act 20 of 1978 were deemed void for lack of jurisdiction, and the petitioners were absolved from the liability to pay such tax.

Overall, the judgment provided a comprehensive analysis of the legal provisions governing the imposition of taxes under State and Central Acts, clarifying the limits of State authority in enhancing tax liabilities under the Central Sales Tax Act in the context of inter-State sales.