2002 (6) TMI 570 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Taxability of turnover related to the purchase of old gold articles from unregistered dealers.
2. Applicability of exemption under Notification No. FD 283 CSL 70(IV) dated September 10, 1970.
3. Interpretation of exemption notifications and principles of liberal vs. strict construction.

Detailed Analysis:

1. Taxability of Turnover Related to the Purchase of Old Gold Articles from Unregistered Dealers:

The appellant, an assessee under the Karnataka Sales Tax Act, 1957, was subjected to purchase tax at 4% on a turnover of Rs. 2,38,239 related to the purchase of old gold articles from unregistered dealers. The assessing authority determined the total turnover and taxable turnover as Rs. 68,54,742.85 and Rs. 43,27,924.55 respectively for the assessment year April 1, 1997, to March 31, 1998.

2. Applicability of Exemption Under Notification No. FD 283 CSL 70(IV) Dated September 10, 1970:

The appellant claimed exemption from purchase tax under the notification dated September 10, 1970, which exempts tax payable under section 6 of the Act on purchases of articles of "gold and/or silver" by a manufacturer, subject to the condition that the manufacturer proves to the satisfaction of the assessing authority that tax has been paid under section 5(1) or 5(3)(a) on articles manufactured from such purchases. The appellant contended that since the sale of mangalasutras was exempt under entry 3 of the Fifth Schedule, the corresponding purchases should also be exempt from tax.

3. Interpretation of Exemption Notifications and Principles of Liberal vs. Strict Construction:

The appellant relied heavily on the decision in Sri Virupaksha Enterprises v. Commercial Tax Officer, where a liberal interpretation was adopted to avoid discriminatory results. In that case, the court held that the benefit of exemption should not be denied due to the impossibility of compliance with proof of tax payment on sales turnover when such sales were already exempt under an earlier notification.

However, the court in the present case distinguished this situation, stating that the notification dated September 10, 1970, clearly required the payment of tax under section 5(1) or 5(3)(a) as a condition for availing the exemption. The court emphasized that the intention of the notification was not to give a dealer in gold jewellery/articles exemption at both purchase and sale points. The literal and clear wording of the notification should be adhered to, and a liberal interpretation that defeats the purpose of the notification should be avoided.

The appellant also cited the Supreme Court decision in Collector of Central Excise v. Usha Martin Industries, where it was held that input goods cleared on nil payment of excise duty should be treated as goods cleared after payment of appropriate excise duty. However, the court clarified that the interpretation of one notification cannot be applied to another if the content and intent are different.

In conclusion, the court found no reason to interfere with the order of the appellate authority, stating that the appellant did not meet the condition of paying tax under section 5(1) or 5(3)(a) for availing the exemption under the notification dated September 10, 1970. The appeal was dismissed.