1989 (2) TMI 386 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether additional sales tax and surcharge should be taken into account for granting exemption under the Kerala General Sales Tax Act.
2. Whether the assessing authority can levy additional sales tax and surcharge on exempted turnover.

Analysis:

Issue 1: The case involves tax revision cases filed by the Revenue under section 41 of the Kerala General Sales Tax Act, 1963 pertaining to the assessment years 1980-81, 1981-82, and 1982-83. The key question is whether additional sales tax and surcharge should be considered for granting exemption under a government notification. The assessee, a small-scale industries unit, claimed exemption under the notification for the turnover of goods produced and sold by the unit. The dispute arose regarding the inclusion of additional sales tax and surcharge in the exemption calculation.

Issue 2: The contention of the assessee was that when tax is exempted, additional sales tax and surcharge should not be levied. The assessing authority disagreed and included these components in the tax computation. The Appellate Assistant Commissioner upheld the inclusion of additional sales tax and surcharge, stating that the exemption was conditional and subject to certain limits. However, the Sales Tax Appellate Tribunal ruled in favor of the assessee, citing a Supreme Court decision that dealers not liable to pay tax are exempt from additional sales tax. The Tribunal held that when sales turnover is exempted, additional sales tax and surcharge cannot be levied.

The High Court analyzed the relevant provisions of the Kerala General Sales Tax Act and other related Acts. It noted that while the tax payable on the turnover of goods produced and sold by the unit was exempted under the notification, the exemption applied to the tax and not the goods themselves. The Court explained that the liability to pay additional sales tax and surcharge arises only when there is a liability to pay the tax under the Kerala General Sales Tax Act. Therefore, when the turnover is exempted from sales tax, there should be no levy of surcharge.

The Court clarified that for determining cumulative tax concessions, the assessing authority must consider the aggregate amount of tax, additional tax, and surcharge. While the authority can compute the tax, including additional tax and surcharge, for granting exemption, no surcharge should be demanded if the assessee is eligible for exemption from sales tax. The Court allowed the tax revision cases, directing the assessing authority to recompute the tax payable for the assessment years in accordance with the judgment.