2003 (9) TMI 729 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether asphalting of roads amounts to the construction of roads under the Karnataka Sales Tax Act, 1957.
2. Whether the penalty levied on the petitioner for non-payment of sales tax is justified.

Detailed Analysis:

Issue 1: Asphalting of Roads as Construction
The petitioner, a contractor and registered dealer under the Karnataka Sales Tax Act, 1957, was assessed to pay sales tax for asphalting roads for the assessment years 1987-88 to 1992-93. The assessing officer, followed by the Joint Commissioner of Commercial Taxes (Appeals) and the Tribunal, concluded that asphalting amounted to construction under item 6 of the Sixth Schedule of the Act.

The petitioner argued that only the construction of buildings, bridges, roads, etc., attracts sales tax, not asphalting or repair. He relied on the principle of ejusdem generis and the Allahabad High Court's decision in Anurag Enterprises v. State of U.P., which held that only civil works akin to construction are taxable.

The Government Advocate countered that asphalting and repair fall under construction, as indicated by the word "etc." in item 6 and the definition of works contract under section 2(1)(v-i) of the Act, which includes repair, improvement, or modification.

The Court emphasized the strict interpretation of taxing statutes, where ambiguity favors the taxpayer. It noted that the word "like" in item 6 is illustrative, indicating the nature of the work, and should not be extended to include asphalting or repair. The Court referenced several Supreme Court rulings, including Janapada Sabha, Chhindwara v. Central Provinces Syndicate Ltd. and Commissioner of Income-tax v. Kasturi and Sons Ltd., which stress that taxing statutes must be interpreted strictly based on the language used.

The Court concluded that asphalting or repairing roads does not equate to construction under item 6 of the Sixth Schedule. The word "like" must be given its proper meaning, and the statute's language does not support an extended interpretation to include asphalting or repair. The Court also referred to the Allahabad High Court's decision in Anurag Enterprises, which applied the principle of ejusdem generis to restrict the scope of civil works to those similar to construction.

Issue 2: Penalty for Non-Payment of Sales Tax
Given the Court's decision on the first issue, the petitioner is not liable to pay tax for asphalting roads. Consequently, the penalty for non-payment of sales tax is also unsustainable. The Court held that the imposition of the penalty is unjustified as the petitioner did not deliberately evade tax.

Conclusion:
The Court set aside the orders of the Karnataka Appellate Tribunal, the Joint Commissioner of Commercial Taxes (Appeals), and the assessing officer. The petitions were allowed, and no costs were awarded. The Additional Government Advocate was given four weeks to file a memo of appearance. Petitions allowed.