1991 (12) TMI 254 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of "total turnover" in exemption notifications under the Karnataka Sales Tax Act, 1957.
2. Applicability of the definition of "total turnover" from the Act to the notifications.
3. Anomalous consequences of different interpretations of "total turnover."
4. Validity of the condition imposed by the exemption notifications.

Detailed Analysis:

1. Interpretation of "total turnover" in exemption notifications under the Karnataka Sales Tax Act, 1957:

The primary issue in these appeals is whether the term "total turnover" in the exemption notifications should be interpreted as the turnover of handmade washing soaps alone, as contended by the assessees, or as the turnover of all goods dealt by the dealer, including handmade washing soaps, as contended by the Revenue. The notifications in question reduce the tax rate on the sale of handmade washing soaps to 4%, provided the dealer's total turnover does not exceed Rs. 10,00,000 in a year.

2. Applicability of the definition of "total turnover" from the Act to the notifications:

The Revenue argued that the definition of "total turnover" in section 2(1)(u-2) of the Karnataka Sales Tax Act, 1957, should apply to the notifications. This definition includes the aggregate turnover in all goods of a dealer at all places of business in the State. The Revenue relied on the judgment in BY. Automobiles v. State of Karnataka, where it was held that the expression "total turnover" in section 6B(1) should be read in accordance with the definition in section 2(1)(u-2). The Bombay High Court's decision in Commissioner of Sales Tax v. Radha Dyeing and Printing Mills also supported this view, stating that expressions in notifications should bear the same meaning as in the Act, unless repugnant to the context.

3. Anomalous consequences of different interpretations of "total turnover":

The assessees argued that interpreting "total turnover" to include all goods would lead to anomalies. For instance, a dealer with a turnover of less than Rs. 10,00,000 in handmade washing soaps but higher turnover in other goods would lose the benefit of the notifications. Conversely, a dealer with a total turnover of less than Rs. 10,00,000 in all goods, including handmade washing soaps, would benefit. They relied on the principle from Maxwell on Interpretation of Statutes, which allows modifying the meaning of words to avoid absurdity or contradiction.

4. Validity of the condition imposed by the exemption notifications:

The court found the language of the notifications clear, stating that the rate of tax on handmade washing soaps is reduced to 4% if the dealer's total turnover does not exceed Rs. 10,00,000. The term "total turnover" was interpreted to include the turnover of all goods, not just handmade washing soaps. This interpretation aligns with the definition in section 2(1)(u-2) and avoids rendering the word "total" otiose.

The court noted that the power to exempt or reduce tax under section 8-A of the Act includes the authority to impose conditions, such as the total turnover limit. The purpose of the notifications is to assist smaller dealers in handmade washing soaps, provided their overall turnover is below Rs. 10,00,000.

The court rejected the assessees' reliance on the Bombay High Court's judgment in Commissioner of Sales Tax v. Punjab National Hotel, as the context and language of the notifications in that case differed. Similarly, the Madhya Pradesh High Court's judgments in Hiranand Tejumal v. Commissioner of Sales Tax and M.P. Shoe House v. State of M.P. were found inapplicable due to differences in context and statutory language.

Conclusion:

The appeals were allowed, and the orders under appeal were set aside. The writ petitions filed by the assessees were dismissed, with no order as to costs. The court upheld the interpretation that "total turnover" in the notifications includes the turnover of all goods dealt by the dealer.