1998 (3) TMI 654 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to levy of tax on purchases of shrimps and prawns under entry 13a of the Third Schedule to the Karnataka Sales Tax Act. Validity of entry 13a. Interpretation of section 5(1) and 5(3) of the Central Sales Tax Act. Liability of purchase tax under section 6 of the Karnataka Sales Tax Act.

Analysis:

The petitioners contested the imposition of tax on their purchases of shrimps and prawns under entry 13a of the Third Schedule to the Karnataka Sales Tax Act. This entry specified a tax rate of 4% for a certain period and 5% thereafter. The petitioners, who were final purchasers in Karnataka, exported these items. They argued that the entry was in violation of section 5(1) of the Central Sales Tax Act, relying on a previous case where purchases made for export were not taxed. However, the purchases in this case were from an unregistered dealer, triggering liability under section 6 of the KST Act. The dispute pertained to the period before the amendment introducing section 5(3) of the Central Sales Tax Act.

The Central Sales Tax Act distinguishes between sales or purchases that occasion export and those made in the course of export. The court emphasized that the purchases by exporters from unregistered dealers do not fall under the exemption provided in section 5(1) but are covered by section 5(3). The amendment to section 5 aimed to relieve the burden on penultimate sales preceding exports. The court referenced previous judgments to clarify that purchases from unregistered dealers for export do not qualify as purchases in the course of export.

The court examined the legislative intent behind the amendment to section 5(3) of the Central Sales Tax Act, which aimed to facilitate exports by exempting certain sales preceding export transactions. The court highlighted that purchases made from unregistered dealers in compliance with export orders were excluded from the exemption until the introduction of section 5(3). Consequently, the court found no illegality in the provisions of entry 13a of the Third Schedule post the enactment of section 5(3). The petitions challenging the tax levy were dismissed based on these interpretations.

In conclusion, the court upheld the levy of tax on the purchases of shrimps and prawns under entry 13a of the Karnataka Sales Tax Act, emphasizing the application of sections 5(1) and 5(3) of the Central Sales Tax Act in determining the liability of purchase tax under section 6 of the KST Act.