2000 (6) TMI 776 - HC - VAT and Sales Tax

Summary

Issues:
1. Classification of waste paper for taxation under the Karnataka Sales Tax Act, 1957.
2. Interpretation of entry 3 of Part P of the Second Schedule to the Act.

Issue 1: Classification of waste paper for taxation under the Karnataka Sales Tax Act, 1957:
The case involved a dispute regarding the classification of waste paper for taxation purposes under the Karnataka Sales Tax Act, 1957. The assessing authority initially subjected the turnover relating to waste paper to tax as unscheduled goods under section 5(1) of the Act at a rate of 10 per cent. The first appellate authority upheld this decision, relying on the Supreme Court's interpretation in State of Uttar Pradesh v. Kores (India) Ltd. The Supreme Court had held that the term "paper" should be understood in the commercial sense, excluding items like carbon paper. However, the Karnataka Appellate Tribunal, in the second appeal, disagreed with this interpretation and allowed the appeal, treating the sale transactions of waste paper as liable to tax under entry 3 of Part P of the Second Schedule to the Act.

Issue 2: Interpretation of entry 3 of Part P of the Second Schedule to the Act:
The State, feeling aggrieved, filed a revision petition challenging the Tribunal's decision. The State contended that waste paper should not be considered "paper" falling under entry 3 of Part P of the Second Schedule to the Act, which would result in a lower tax rate. The State argued that the Tribunal erred in its interpretation and application of the law. The Court analyzed the relevant provisions of the Act, particularly section 5(1) and 5(3)(a), along with the specific language of entry 3 of Part P of the Second Schedule. The Court noted that the description of "paper" in entry 3 was exhaustive and inclusive, encompassing various types of paper, including carbon paper, but excluding specific types like photographic paper. The Court emphasized that waste paper fell under the definition of "paper" as per the entry, despite not being suitable for certain traditional paper uses like writing or printing.

In conclusion, the Court dismissed the revision petition, upholding the Tribunal's decision. The Court reasoned that waste paper, even if not suitable for traditional paper uses, would still fall under entry 3 of Part P of the Second Schedule as long as it met the definition of "paper." The Court highlighted previous judicial interpretations supporting the broad definition of "paper" in tax schedules. The judgment clarified the classification of waste paper for taxation under the Act, emphasizing the inclusive nature of the definition of "paper" in the relevant entry.