2010 (7) TMI 930 - HC - VAT and Sales Tax

Whether the petitioner is liable to pay purchase tax under section 6 of the Karnataka Sales Tax Act, 1957? Held that - The Karnataka Sales Tax Act in its definition of dealer in section 2(1)(k) of the Act includes a nonresident dealer within the scope of the said definition. The petitioner is in fact a nonresident dealer within the meaning of the said Act and therefore, he is liable to pay tax. It is not a case of solitary transaction as contended by the petitioner. In that view of the matter, all the three authorities on proper appreciation of the factual aspects of the case keeping in mind the legal position, have rightly held tax is payable under section 6(2) of the Act. Therefore, we do not see any infirmity in the order passed by the Appellate Tribunal which calls for interference and therefore, the petition is rejected at the stage of admission itself.

Issues Involved:
1. Liability to pay purchase tax under Section 6 of the Karnataka Sales Tax Act, 1957.
2. Definition and scope of "dealer" under the Karnataka Sales Tax Act.
3. Applicability of tax on a solitary transaction.
4. Jurisdictional aspects concerning non-resident dealers.

Detailed Analysis:

1. Liability to Pay Purchase Tax Under Section 6 of the Karnataka Sales Tax Act, 1957:
The primary issue is whether the petitioner is liable to pay purchase tax under Section 6 of the Karnataka Sales Tax Act, 1957. The authorities, including the Karnataka Appellate Tribunal, confirmed that the petitioner is liable to pay this tax. The petitioner, a registered dealer in Gujarat, purchased plant and machinery from an unregistered dealer (the official liquidator of M/s. Powerflow Ltd.). The assessing authority and subsequent appellate authorities held that since the machinery had not suffered tax under Section 5 of the Act, the petitioner was liable to pay tax under Section 6.

2. Definition and Scope of "Dealer" Under the Karnataka Sales Tax Act:
The petitioner argued that he was not required to register as a dealer under the Karnataka Sales Tax Act because he did not carry on business in Karnataka. However, the court noted that the petitioner is a registered dealer in Gujarat and deals in the resale of machinery. The Karnataka Sales Tax Act defines a "dealer" in Section 2(1)(k) to include non-resident dealers. The court concluded that the petitioner, being a registered dealer engaged in the business of resale, fits within this definition.

3. Applicability of Tax on a Solitary Transaction:
The petitioner contended that the purchase was a solitary transaction, not subject to tax under Section 6. The court referenced several Supreme Court judgments, which clarified that a solitary or casual transaction does not make one a dealer. However, the court distinguished this case by emphasizing that the petitioner is a regular dealer in Gujarat, engaged in the business of resale. The purchase in Karnataka, though solitary, was in the course of his business. Therefore, the court held that the petitioner could not claim exemption based on the solitary nature of the transaction.

4. Jurisdictional Aspects Concerning Non-Resident Dealers:
The court addressed the jurisdictional issue of whether a dealer must conduct regular business in Karnataka to be liable under the Act. It concluded that the Karnataka Sales Tax Act's definition of "dealer" includes non-resident dealers. Therefore, even though the petitioner's primary business operations were in Gujarat, his purchase in Karnataka fell within the scope of the Act. The court emphasized that the petitioner's status as a registered dealer in Gujarat and his business activities in resale sufficed to establish his liability under the Karnataka Sales Tax Act.

Conclusion:
The court rejected the petition, affirming the decisions of the lower authorities. It held that the petitioner, being a registered dealer in Gujarat and engaged in the business of resale, was liable to pay purchase tax under Section 6 of the Karnataka Sales Tax Act for the machinery purchased in Karnataka. The court found no merit in the petitioner's arguments regarding the solitary nature of the transaction and the jurisdictional scope of the Act.

← Previous Next →