1995 (9) TMI 341 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to assessment orders for levy of turnover tax under section 6B of the Karnataka Sales Tax Act, 1957.

Analysis:
The petitioners, engaged in manufacturing household plastic goods, challenged the assessment orders for the assessment years 1987-88 and 1988-89 regarding the levy of turnover tax under section 6B of the Act. The petitioners contended that since no tax was leviable on raw materials purchased by them, the purchase turnover should not be part of the total turnover for the purpose of turnover tax. The government pleader argued that rule 6 does not affect the leviability of turnover tax under section 6B.

The original section 6B was substituted to levy tax based on the total turnover of the dealer. The court upheld the constitutional validity of this provision in previous cases. The turnover tax is levied as a percentage of the total turnover of the dealer, as defined under section 2(u-2) of the Act. The definition of "total turnover" is exhaustive and not dependent on any rule for its determination.

The contention raised by the petitioners based on rule 6(1)(a) of the Rules was found fallacious. The court held that the total turnover under section 6B(1) must be read in terms of section 2(u-2) and not computed under rule 6 of the Rules. The court emphasized that the Act's provisions have an overriding effect over inconsistent rules. The determination of total turnover under rule 6 is only for calculating taxable turnover.

The court rejected the argument that rules made under the Act have the same effect as if enacted under the Act. It clarified that subordinate legislation remains subordinate to the parent Act and can be challenged if not made within the authority conferred by the Act. The court also highlighted that exemptions granted under other provisions of the Act do not affect the liability under section 6B, as explicitly stated in the Act.

In conclusion, the court dismissed the writ petitions challenging the levy of turnover tax under section 6B, stating that despite exemptions granted on raw materials and finished goods, the petitioners are liable for turnover tax. The contentions raised by the petitioners were found to have no substance, and the writ petitions were dismissed without costs.