2008 (7) TMI 940 - HC - VAT and Sales Tax

Whether the first respondent is justified in setting aside the order of the second respondent dated October 20, 2004 in rejecting the concessional rate of tax at four per cent on the supply made by the appellant to taluk panchayat in terms of the notification dated March 30, 1996? Held that - From the perusal of section 8A that the Government may extend the benefit of tax either by reducing it or granting concessional rate to any particular class of persons and the same has to be interpreted considering the background of such instructions. In the instant case though taluk panchayats, zilla panchayats or gram panchayat are created under the one Act, in the first notification concessional rate of taxes has been shown to zilla panchayats only. Subsequently, in the year 1999, such benefit is also extended to taluk panchayats and gram panchayats. We have noticed that in the second notification concessional rate of tax granted to taluk panchayats and grama panchayats is with prospective effect and not from retrospective effect. Therefore, if the goods are supplied by the assessee to the taluk panchayat, the assessee cannot rely upon the first notification and at best if any supply is made subsequent to second notification, such concession can be made applicable. Even otherwise we cannot consider assessee as an aggrieved person. If the taluk panchayat has purchased A.C. sheets from the assessee, it is for the taluk panchayat to pay the tax as prescribed under the Sales Tax Act. Therefore, we do not see any merit in this appeal.

Summary

Issues:
Challenge to orders passed by Additional Commissioner of Commercial Tax regarding concessional tax rates on supplies made to taluk panchayat.

Analysis:
The appeal challenged orders passed by the Additional Commissioner of Commercial Tax, Zone I, Bangalore, regarding the concessional tax rates on supplies made to the taluk panchayat. The Additional Commissioner issued a show-cause notice stating that the order passed by the Joint Commissioner of Commercial Tax (Appeals) needed revision as it was considered prejudicial to the revenue. The dispute arose from the interpretation of notifications dated March 30, 1996, and February 19, 1999, regarding concessional rates of tax on sales to various government departments, including zilla panchayats. The assessee contended that the second notification clarified and extended the benefit to taluk panchayats as well, while the Additional Commissioner disagreed, citing section 8A of the Karnataka Sales Tax Act. The Additional Commissioner set aside the Joint Commissioner's order and restored the assessing authority's decision, leading to the appeal.

The substantial question of law raised in the appeal was whether setting aside the Joint Commissioner's order regarding concessional tax rates on supplies to taluk panchayat was justified. The appellant relied on legal precedents to argue for a liberal interpretation of the notifications and the extension of benefits to taluk panchayats based on the creation of local bodies by the government. The appellant highlighted the need for a rational construction of statutory provisions to avoid unjust results. On the other hand, the Government advocate emphasized section 8A(1)(b) and (2) to support the contention that exemptions or reductions in tax rates notified for specific classes of persons cannot be extended to other classes without proper notification.

The court analyzed the provisions of section 8A, noting the government's power to notify exemptions or reductions in tax rates for specified classes of persons. The court emphasized that the benefit of tax concessions must be interpreted in line with the legislative intent behind such notifications. The court observed that while zilla panchayats were initially granted concessional tax rates, taluk panchayats and gram panchayats were included in a subsequent notification with prospective effect. Therefore, the court concluded that the appellant could not rely on the first notification for supplies to taluk panchayats unless made after the second notification. The court also highlighted that the liability to pay tax rested with the taluk panchayat for purchases made, and the appellant could not claim aggrievement in this scenario. Consequently, the court dismissed the appeal, stating that no substantial question of law arose in the case.

In conclusion, the judgment upheld the decision of the Additional Commissioner of Commercial Tax, dismissing the appeal challenging the orders passed regarding concessional tax rates on supplies made to the taluk panchayat. The court's analysis focused on the interpretation of statutory provisions, the background of notifications, and the legislative intent behind granting tax concessions to specific classes of persons, ultimately leading to the dismissal of the appeal.