1994 (9) TMI 315 - HC - VAT and Sales Tax

Issues Involved:

1. Whether the Tribunal was right in finding that no turnover tax can be levied under section 5(2A) of the Kerala General Sales Tax Act, 1963, on the tax collected by the assessee.
2. Whether the Tribunal was right in holding that the turnover on which tax is leviable under sub-section (1) or sub-section (2) of section 5 is specifically excluded from the purview of turnover tax, under section 5(2A) of the Act.
3. Whether the sales tax collected by the assessee is liable to be excluded as per proviso to section 5(2A) of the Kerala General Sales Tax Act.
4. Whether the finding and conclusion arrived at by the Tribunal is justified in law.

Detailed Analysis:

Issue 1: Levy of Turnover Tax on Sales Tax Collected

The court examined whether the sales tax collected by the assessee forms part of the turnover for the purpose of levying turnover tax under section 5(2A) of the Kerala General Sales Tax Act, 1963. The Tribunal had concluded that sales tax collected by a dealer and shown separately in the bills must be excluded while determining the taxable turnover for levying turnover tax. The court upheld this view, emphasizing that the proviso to section 5(2A) excludes such sales tax from the turnover on which turnover tax is levied. The court referred to the definitions of "taxable turnover," "total turnover," and "turnover" under section 2(xxv), (xxvi), and (xxvii) respectively, and concluded that the sales tax collected does not form part of the taxable turnover for the purpose of turnover tax.

Issue 2: Exclusion of Turnover on Which Tax is Leviable Under Section 5(1) or 5(2)

The court analyzed the proviso to section 5(2A), which states that no turnover tax shall be payable on that part of the turnover on which tax is leviable under sub-section (1) or sub-section (2) of section 5. The court clarified that the turnover on which sales tax is levied under these sub-sections is not subject to turnover tax. The court explained that the aggregate amounts for which goods are either first sold or last purchased, which include sales tax collected, are excluded from turnover tax. This interpretation aligns with the legislative intent to avoid double taxation on the same turnover.

Issue 3: Exclusion of Sales Tax Collected as per Proviso to Section 5(2A)

The court reviewed various judicial precedents to determine whether sales tax collected by the dealer forms part of the turnover. Cases such as George Oakes Pvt. Ltd. v. State of Madras and State of Kerala v. N. Ramaswami Iyer and Sons supported the view that sales tax collected by the dealer forms part of the price and hence the turnover. However, the court distinguished these cases based on the specific provisions of the Kerala General Sales Tax Act and the proviso to section 5(2A). The court concluded that the sales tax collected by the dealer, if shown separately in the bills, is excluded from the turnover for the purpose of turnover tax.

Issue 4: Justification of Tribunal's Findings

The court found that the Tribunal's findings were justified in law. The Tribunal correctly interpreted the proviso to section 5(2A) in excluding the sales tax collected from the turnover for the purpose of turnover tax. The court noted that the legislative intent behind the introduction of turnover tax was to tax those sales which were not subjected to sales tax, as highlighted in the Finance Minister's budget speech accompanying the Finance Bill, 1987.

Conclusion:

The court answered the questions of law in favor of the assessee and against the department. The Tribunal was correct in holding that no turnover tax can be levied on the sales tax collected by the assessee, and that the turnover on which tax is leviable under sub-section (1) or sub-section (2) of section 5 is excluded from the purview of turnover tax under section 5(2A). The sales tax collected by the assessee is liable to be excluded as per the proviso to section 5(2A). Consequently, the petition was dismissed, and leave to appeal to the Supreme Court was refused.

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