1987 (11) TMI 352 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to sub-section (2A) of section 5 of the Kerala General Sales Tax Act, Legislative competence of State Legislature to impose turnover tax, Interpretation of turnover and taxable turnover, Constitutional validity of turnover tax, Applicability of previous Supreme Court decisions on similar cases.

Analysis:
The petitioners, registered dealers under the Kerala General Sales Tax Act, challenged sub-section (2A) of section 5 introduced by the Kerala Finance Act 18 of 1987. This sub-section imposes a turnover tax on dealers with a total turnover exceeding Rs. 25 lakhs. The challenge was based on the contention that the State Legislature lacked the competence to pass a legislation imposing a tax on turnover under entry 54 of List II of the Seventh Schedule to the Constitution. The petitioners argued that classifying dealers based on turnover covered by article 286 for levy purposes exceeded legislative competence.

The High Court referred to previous Supreme Court decisions in similar cases. In S. Kodar v. State of Kerala, Hoechst Pharmaceuticals Ltd. v. State of Bihar, and K.M. Mohamed Abdul Khader Firm v. State of Tamil Nadu, the Supreme Court upheld the legislative competence of State Legislatures to impose additional taxes on dealers based on turnover. The Court noted that the turnover tax in question was linked to taxable turnover, which falls within the legislative competence of the State Legislature.

In these previous cases, the Supreme Court held that additional taxes on turnover were constitutional and not violative of fundamental rights under the Constitution. The Court emphasized that the primary liability for payment of tax is on the dealer, and the mode of computation of additional tax linked to turnover is a valid legislative mechanism. The High Court applied the principles established in these cases to uphold the constitutional validity of the turnover tax challenged in the present case.

The High Court dismissed the original petitions, concluding that the turnover tax imposed by sub-section (2A)(i) of section 5 was within the legislative competence of the State Legislature and did not violate constitutional provisions. The Court also clarified that previous decisions referenced by the petitioners were not relevant to the present case. The petitions were dismissed without any order as to costs.

This detailed analysis of the judgment highlights the legal issues involved, the arguments presented by the petitioners, the application of relevant legal principles from previous Supreme Court decisions, and the final decision of the High Court upholding the constitutional validity of the turnover tax under challenge.