1986 (7) TMI 384 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of provisions under Kerala Additional Sales Tax Act, 1978 regarding inter-State sales turnover of coconut oil and cake.
2. Applicability of section 8(2A) of the Central Sales Tax Act in relation to additional sales tax under Act 20 of 1978.
3. Examination of the powers of the State Government under section 8(5) of the Central Sales Tax Act.
4. Determination of the correct sales tax law applicable to inter-State sales for the purpose of additional tax levy.

Analysis:

Issue 1: The respondents, registered firms dealing in coconut oil and cakes, contended that their inter-State turnover should be assessed at one percent of the sale price based on a notification by the Kerala Government. The High Court examined the provisions of the Kerala Additional Sales Tax Act, 1978, and the Central Sales Tax Act to determine the tax liability on inter-State sales of specific goods. The Court held that the additional tax under Act 20 of 1978 was not applicable to inter-State sales of coconut oil and cake, as per the specific notification issued by the State Government.

Issue 2: The revenue argued that section 8(2A) of the Central Sales Tax Act should be considered for levying additional sales tax under Act 20 of 1978. However, the Court rejected this argument, emphasizing that the powers conferred on the State Government under section 8(5) of the Central Sales Tax Act were crucial in determining the tax liability on inter-State sales. The Court concluded that the additional tax levy under Act 20 of 1978 was not justified based on the provisions of section 8(2A) of the Central Sales Tax Act.

Issue 3: The Court analyzed the authority of the State Government under section 8(5) of the Central Sales Tax Act, which allows for exemptions or lower tax rates on inter-State sales. It was established that the State Government had validly issued a notification reducing the tax rate on coconut oil and cake sold in inter-State trade. This power of the State Government to alter tax rates independently of other provisions was a significant factor in determining the tax liability in this case.

Issue 4: The Court clarified that the correct sales tax law applicable to inter-State sales for the purpose of additional tax levy was the Central Sales Tax Act. The provisions of the Kerala Additional Sales Tax Act, 1978, were deemed inapplicable to situations where inter-State sales were to be taxed under specific sections of the Central Sales Tax Act. The Court held that Act 20 of 1978 did not levy sales tax on the goods in question for inter-State sales, further reinforcing the inapplicability of the additional tax levy.

In conclusion, the High Court dismissed the writ appeal, affirming the judgment that the levy of additional sales tax under Act 20 of 1978 on inter-State sales taxable under section 8 of the Central Sales Tax Act was unauthorized and illegal. The Court upheld the decision that the provisions of Act 20 of 1978 were not applicable to the tax liability of inter-State sales under the Central Sales Tax Act.