1992 (3) TMI 329 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of Section 15A-I of the Bombay Sales Tax Act, 1959.
2. Validity of the trade circular dated March 31, 1983.
3. Impact of the 1984 amendment to Section 15A-I.
4. Correct method of computing additional tax under Section 15A-I.

Issue-wise Detailed Analysis:

1. Interpretation of Section 15A-I of the Bombay Sales Tax Act, 1959:
The central issue is the correct interpretation of Section 15A-I, which deals with the levy of additional tax on dealers whose turnover exceeds Rs. 10 lakhs a year. The section was introduced to raise resources for the Employment Guarantee Scheme and mandates a 12% additional tax on the tax payable by the dealer. The court emphasized that the term "payable" refers to the net amount after adjustments for set-offs and drawbacks, aligning with the dictionary meaning of "payable" as the sum of money that is justly due or legally enforceable.

2. Validity of the trade circular dated March 31, 1983:
The trade circular issued on March 31, 1983, by the Commissioner of Sales Tax, claimed that additional tax should be calculated on the gross tax payable before deductions or set-offs. The court found this circular to be based on a misinterpretation of the Supreme Court's decision in S. Kodar v. State of Kerala. The Supreme Court had stated that additional tax is an enhancement in the rate of sales tax but did not address the method of its computation. The court ruled that the circular misreads Section 15A-I and is inconsistent with the Act's provisions.

3. Impact of the 1984 amendment to Section 15A-I:
The 1984 amendment to Section 15A-I added the words "on the sales and purchases at the rates of sales tax or purchase tax, as the case may be," but did not alter the fundamental principle that additional tax should be computed on the net tax payable after adjustments. The court reiterated that the term "payable" in the amended section still refers to the amount after deducting set-offs and drawbacks. The amendment did not support the department's claim that additional tax should be calculated on the gross tax payable.

4. Correct method of computing additional tax under Section 15A-I:
The court concluded that the correct interpretation of Section 15A-I requires additional tax to be computed on the net amount of tax payable after adjustments for set-offs and drawbacks. The court emphasized that the department's method, as per the circular dated March 31, 1983, was incorrect and contrary to the statutory provisions. The computation of additional tax must align with the method prescribed by Section 6 of the Act, which involves calculating the tax payable in accordance with the Act and Rules.

Conclusion:
The court disposed of the petition by directing that the returns filed by the company should be finalized by computing additional tax on the net amount of tax payable after adjustments for set-offs under the Act and the Rules. This ruling applies to cases where the returns are not yet finalized by the original assessing authority or the appellate authority. The petition was disposed of without any order as to costs.