1990 (7) TMI 320 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to the legality of a notice issued under the Karnataka Sales Tax Act proposing to tax the turnover that had allegedly escaped assessment.

Analysis:
The petitioner, a manufacturer and dealer of high density polyethylene woven sacks, challenged a notice issued under the Karnataka Sales Tax Act proposing to tax the turnover that had escaped assessment. The notice was based on the argument that a surcharge introduced under section 6-C of the Act had changed the rate of tax, rendering a previous notification reducing the tax rate ineffective. The petitioner contended that the surcharge did not alter the tax rate and therefore, the notification reducing the tax rate from 4% to 2% remained valid. Additionally, the petitioner argued that an amendment in 1986 clarified that the surcharge under section 6-C did not change the tax rate. The Court agreed with the petitioner's arguments, stating that the surcharge under section 6-C only levied an additional charge on the tax payable and did not alter the tax rate. The Court highlighted that the legislative amendment in 1986 explicitly clarified this position, confirming that the surcharge did not change the tax rate.

The Court allowed the writ petition, setting aside the impugned notice and directing the respondents not to take any further action based on the notice. The judgment emphasized that the surcharge under section 6-C did not modify the tax rate, affirming the validity of the notification reducing the tax rate on high density polyethylene woven sacks. The Court's decision was based on the interpretation of the relevant provisions of the Karnataka Sales Tax Act and the clarification provided by the legislative amendment in 1986.