1996 (4) TMI 467 - HC - VAT and Sales Tax

Issues Involved:
1. Interpretation of Section 6-D of the Karnataka Sales Tax Act, 1957.
2. Validity of the Commissioner's Circular No. 3/949-95 dated April 21, 1995.
3. Applicability of cess on sales or purchases outside the Bangalore City Planning Area.
4. Legislative intent behind the amendment of Section 6-D.
5. Use of budget speeches as an aid in statutory interpretation.
6. Retrospective application of the amendment to Section 6-D.

Issue-wise Detailed Analysis:

1. Interpretation of Section 6-D of the Karnataka Sales Tax Act, 1957:
The core issue revolves around whether Section 6-D imposes cess on transactions only within the Bangalore City Planning Area or on all transactions by dealers with business in that area. Section 6-D(1) states, "there shall be levied and collected by way of cess for the purpose of Bangalore Mass Rapid Transit System a tax, on sales or purchases effected by any dealer who is carrying on business within the limits of Bangalore City Planning Area, at the rate of five per cent of tax payable under the said sections."

2. Validity of the Commissioner's Circular No. 3/949-95 dated April 21, 1995:
The Commissioner interpreted Section 6-D to mean that cess is payable by all assessees with places of business within the Bangalore City Planning Area, including branches outside the area. This interpretation led to notices demanding cess on all sales or purchases, regardless of where they occurred. The court found this interpretation unauthorized and unenforceable.

3. Applicability of cess on sales or purchases outside the Bangalore City Planning Area:
The court determined that cess should only apply to transactions within the Bangalore City Planning Area. The legislative intent, as clarified by subsequent amendments and budget speeches, was to limit the cess to sales and purchases within this area. The court emphasized that the Legislature did not use the term "total turnover," which would have indicated a broader application.

4. Legislative intent behind the amendment of Section 6-D:
The amendment to Section 6-D was made to clarify that cess applies only to transactions within the Bangalore City Planning Area. This change was prompted by litigation and representations from the trade, indicating that the original language led to confusion. The amendment replaced "by any dealer who is carrying on business within the limits of Bangalore City Planning Area" with "within the limits of Bangalore City Planning Area by any dealer."

5. Use of budget speeches as an aid in statutory interpretation:
The court held that budget speeches could be used to interpret legislative intent, especially when the proposals made by the Finance Minister were accepted by the Legislature without any changes. The speeches indicated that the cess was intended to fund the Bangalore Mass Rapid Transit System and should be limited to transactions within the Bangalore City Planning Area.

6. Retrospective application of the amendment to Section 6-D:
The court found that the amendment to Section 6-D was declaratory and thus retrospective. This conclusion was based on the Finance Minister's statement that the original language led to litigation and required clarification. Declaratory statutes, which clarify existing laws, are presumed to have retrospective effect.

Conclusion:
The court declared that dealers with business within the Bangalore City Planning Area are liable to pay cess only on transactions within that area. The Commissioner's circular was quashed for misinterpreting the provisions. The court allowed the writ petitions, granting relief to the petitioners without any costs.

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