1982 (4) TMI 264 - HC - VAT and Sales Tax

Summary

Issues:
Constitutional validity of section 6 of the Karnataka Sales Tax Act, 1957 and legality of orders levying tax under section 6.

Analysis:

1. Constitutional Validity of Section 6:
The petitioner challenged the constitutional validity of section 6 of the Karnataka Sales Tax Act, 1957, arguing that it exceeded the State Legislature's competence as it imposed a tax on the manufacture of goods, a power exclusively vested in the Parliament under entry 84 of List I. The petitioner relied on the decision in Shinde Brothers v. Deputy Commissioner, Raichur AIR 1967 SC 1512 to support the contention. However, the court disagreed with the petitioner's interpretation, stating that section 6 does not levy a tax on the manufacture of goods but on the transaction of purchase or sale. The court clarified that the levy under section 6 is within the legislative competence of the State Legislature under entry 54 of List II, which allows states to enact laws levying taxes on the sale or purchase of goods.

2. Interpretation of Section 6:
The court referred to the interpretation of section 6 in the case of K. Cheyyabba v. State of Karnataka [1980] 45 STC 1, which outlined the circumstances under which the purchase turnover of a dealer becomes taxable. The court highlighted that the tax under section 6 becomes payable when a dealer purchases goods under circumstances where no tax is leviable under section 5 and manufactures goods for sale. The court emphasized that the levy under section 6 is not on the mere manufacture of goods but on the transaction of purchase or sale, thereby rejecting the petitioner's argument that it resembles excise duty.

3. Conclusion:
Based on the analysis, the court found no grounds to entertain the petitions challenging the constitutional validity of section 6 of the Karnataka Sales Tax Act, 1957. The court rejected the petitions, affirming that the levy under section 6 is within the legislative competence of the State Legislature and is a tax on the transaction of purchase or sale, not on the manufacture of goods.