1991 (8) TMI 304 - HC - VAT and Sales Tax

Issues Involved:
1. Levy of sales tax on pens costing less than Rs. 10 per piece.
2. Interpretation of Section 5(1) and Section 5(3)(a) of the Karnataka Sales Tax Act, 1957.
3. Legislative intent regarding the taxation of low-priced pens.
4. Validity of the reopening of assessment under Section 12-A of the Act.
5. Prospective versus retrospective application of tax exemption notifications.

Detailed Analysis:

1. Levy of Sales Tax on Pens Costing Less Than Rs. 10 Per Piece:
The petitioner, a registered dealer under the Karnataka Sales Tax Act, 1957, challenged the levy of sales tax under Section 5(1) on pens costing less than Rs. 10 per piece. The assessing authority initially exempted these pens from tax, but this decision was later reversed under Section 12-A, leading to the imposition of a 7% tax on the turnover of low-priced pens.

2. Interpretation of Section 5(1) and Section 5(3)(a) of the Karnataka Sales Tax Act, 1957:
Section 5(1) mandates that every dealer pay tax on their taxable turnover at a prescribed rate, which was 7% during the relevant period. Section 5(3)(a) specifies that certain goods listed in the Second Schedule are subject to a single-point tax at the first or earliest dealer level. Pens costing Rs. 10 and above were listed in the Second Schedule, subject to an 8% tax, but the schedule was silent on pens costing less than Rs. 10. Consequently, the court held that low-priced pens were taxable under Section 5(1).

3. Legislative Intent Regarding the Taxation of Low-Priced Pens:
The petitioner argued that the classification of pens into those costing Rs. 10 and above and those costing less was intended to exclude low-priced pens from taxation to benefit poorer consumers. However, the court found no legislative intent to permanently exempt low-priced pens from taxation. The court cited precedents, emphasizing that it cannot supply omissions in the law or interpret statutes based on supposed legislative intent when the language is clear and unambiguous.

4. Validity of the Reopening of Assessment Under Section 12-A of the Act:
The assessing authority initially exempted low-priced pens from tax, but this decision was reopened under Section 12-A, which allows for reassessment if turnover has escaped assessment. The court upheld the reopening, noting that the Commissioner of Commercial Taxes had clarified that low-priced pens were taxable under Section 5(1), as they were not included in the Second Schedule.

5. Prospective Versus Retrospective Application of Tax Exemption Notifications:
The petitioner contended that a notification issued on August 7, 1986, which exempted low-priced pens from tax, should reflect the legislative intent to exempt these pens from the beginning. However, the court noted that the notification was prospective and did not grant retrospective exemption. The court emphasized that it is not within its power to retrospectively apply exemptions unless explicitly stated by the Legislature.

Conclusion:
The court dismissed the revision petition, holding that low-priced pens were taxable under Section 5(1) of the Karnataka Sales Tax Act, 1957, as they were not covered by the Second Schedule. The court found no legislative intent to permanently exempt these pens from taxation and upheld the reopening of the assessment under Section 12-A. The prospective nature of the exemption notification issued on August 7, 1986, was also affirmed. The petition was dismissed without any order as to costs.

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