1998 (9) TMI 615 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the authorities were justified in subjecting the "purchase turnover" of raw bathies from unregistered dealers to the levy of turnover tax (TOT) under section 6B of the Karnataka Sales Tax Act, 1957, despite the exemption from purchase tax under section 6 due to a government notification.

Issue-wise Detailed Analysis:

1. Justification of Levying TOT on Purchase Turnover of Raw Bathies:

The petitioner, a partnership firm engaged in manufacturing and selling agarbathies, contested the assessment order which levied TOT at 1.75% on the purchase turnover of raw bathies from unregistered dealers. The petitioner argued that since the purchase tax on raw bathies was exempted by a government notification under section 8A, it should not be included in the total taxable turnover for TOT purposes.

Relevant Provisions and Definitions:

The Act provides for the levy of sales tax (section 5B), purchase tax (section 6), and turnover tax (TOT) (section 6B). Section 6B mandates TOT on the "total turnover" if it exceeds a specified amount, irrespective of whether the turnover is liable to tax under any other provision of the Act. Section 8A empowers the government to exempt or reduce tax on specified goods or classes of persons.

Definitions under section 2:
- "Taxable turnover" (section 2(u-1)): Turnover liable to tax after deductions, excluding inter-State trade or commerce and export/import transactions.
- "Total turnover" (section 2(u-2)): Aggregate turnover in all goods, including inter-State trade or commerce and export/import transactions, whether or not liable to tax.
- "Turnover" (section 2(v)): Aggregate amount for which goods are bought or sold or otherwise disposed of.

Court's Reasoning and Precedents:

The court referred to previous judgments (B.P. Automobiles, Shantilal & Brothers, Jain Industrial Corporation, and S.N. Guggari and Company) which clarified that "total turnover" under section 6B should be interpreted as per section 2(u-2) and not as computed under rule 6 of the Karnataka Sales Tax Rules, 1957. The court emphasized that exemptions from tax under other provisions do not affect liability under section 6B, as the legislature explicitly stated that TOT applies "whether or not the whole or any portion of such turnover is liable to tax under any other provisions of this Act."

The court rejected the petitioner's argument that "total turnover" should be either sales or purchases, not both. It clarified that "total turnover" under section 2(u-2) includes the aggregate turnover of both purchases and sales, irrespective of tax liability on individual components.

Conclusion:

The court concluded that the authorities were justified in including the purchase value of raw bathies in the "total turnover" for TOT purposes, despite the exemption from purchase tax under section 6. The petition was dismissed, affirming that the "total turnover" for section 6B includes all purchases and sales, whether or not liable to tax under other provisions.

Petition dismissed.