1982 (11) TMI 149 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to liability of sales tax, additional tax under Karnataka Sales Tax Act, Constitutional validity of section 6-B of the Act.

Analysis:

Issue 1: Liability of Sales Tax
The petitioner, a cooperative federation, challenged the liability to pay sales tax on cement handled and delivered to allottees under an agreement with the Joint Cement Controller. The petitioner contended it was not a dealer under the Act and thus not liable for sales tax. However, the Court found that as the first seller in Karnataka, the petitioner was liable to pay sales tax as per section 5(3) of the Act. The Court dismissed the argument that the petitioner was merely a handling agent, emphasizing that the petitioner's agreement indicated ownership of the cement on high seas, making it liable for sales tax.

Issue 2: Additional Tax under Section 6-B
The petitioner argued that the additional tax under section 6-B was confiscatory as it exceeded its handling charges. The Court rejected this argument, stating that the petitioner was aware of the tax provisions when entering the agreement and could have negotiated higher charges. The Court held that failure to do so did not make the tax confiscatory. The Court also noted that the petitioner had not challenged the constitutional validity of section 6-B directly.

Constitutional Validity of Section 6-B
The respondents argued that section 6-B was constitutionally valid, citing precedents where similar provisions were upheld by the Supreme Court. The Court agreed with this position and held that the petitioner's challenge based on confiscation failed. The Court emphasized that the petitioner had statutory remedies available under the Act but had not exhausted them before seeking relief under Article 226 of the Constitution.

Conclusion
The Court rejected the petitioner's contentions, upheld the liability for sales tax, and dismissed the challenge to the constitutional validity of section 6-B. The petitioner was directed to provide a bank guarantee for the demanded sum, allowing the enforcement of the guarantee by the tax authorities. The Court made no order as to costs, concluding the judgment.