2010 (7) TMI 899 - HC - VAT and Sales Tax

Claim for additional tax under section 6C of the Karnataka Sales Tax Act - Held that - The authorities are not justified in levying tax under section 6C on the petitioner-assessee, when the exemption is granted from payment of basic tax under section 6 of the Act. Hence, the appeal is allowed. The impugned orders are hereby set aside

Summary

Issues:
Challenge to order upholding additional tax under section 6C of the Karnataka Sales Tax Act.

Analysis:
The petitioner, a registered dealer engaged in manufacturing and selling agarbathies, challenged an order subjecting them to additional tax under section 6C of the Karnataka Sales Tax Act. The assessing authority imposed the additional tax even though the tax on turnover was exempted under a specific notification. The petitioner's appeal to the Joint Commissioner of Commercial Taxes and the Karnataka Appellate Tribunal were both dismissed, leading to the petition before the High Court.

The petitioner argued that the exemption notification dated March 31, 2000, exempted the tax payable under section 6 of the Act, which also includes the turnover tax under section 6B, for specific items like raw bathi for agarbathi manufacture. Section 6C of the Act deals with the levy of additional tax, which is payable in addition to the tax under section 6. The petitioner contended that when the principal tax under section 6 is exempted, the levy of additional tax is not justified. The authorities were accused of ignoring this fundamental principle and charging additional tax without charging the principal tax.

On the other hand, the Government Advocate supported the impugned orders, arguing that the Government had the power under section 8A of the Act to issue notifications granting exemptions or reducing tax rates. The notification dated March 31, 2000, specifically exempted certain items from tax under sections 6 and 6B of the Act, including raw bathi for agarbathi manufacture.

Section 6C of the Act mandates the levy of additional tax at the rate of one percent on the total turnover liable to tax under sections 5, 5B, 5C, or 6. The court observed that when an exemption is granted from paying tax under section 6, the question of levying additional tax does not arise. The petitioner argued that since the tax under section 6C is additional to the tax under section 6, when the basic tax is exempted, the additional tax should also be exempted automatically without requiring a separate notification.

Ultimately, the High Court allowed the appeal, setting aside the impugned orders and ruling that the authorities were not justified in levying tax under section 6C when the exemption was granted from paying the basic tax under section 6 of the Act. Each party was directed to bear their own costs.