2011 (8) TMI 1041 - HC - VAT and Sales Tax

Summary

Issues Involved: Assessment year 2002-03 and 2003-04, Revisional jurisdiction under section 22A(1) of the Karnataka Sales Tax Act, 1957, Imposition of resale tax under section 6B of the Act, Multiple sale and levy of tax, Legal precedents and judgments.

Analysis:
The judgment of the High Court of Karnataka pertains to two separate appeals, one related to the assessment year 2002-03 and the other to the assessment year 2003-04, filed by the same assessee challenging the order passed by the Additional Commissioner of Commercial Taxes under section 22A(1) of the Karnataka Sales Tax Act, 1957. The appellant, engaged in civil contract work, assigned a part of the works contract to another registered dealer who paid tax for the turnover. Subsequently, a show-cause notice was issued proposing to levy resale tax under section 6B of the Act, leading to a series of appeals and revisions.

The key contention raised by the appellant was based on legal precedents, specifically citing the judgment of the apex court in the case of State of Andhra Pradesh v. Larsen & Toubro Ltd. and a Division Bench judgment of the High Court. The argument focused on the concept of multiple sales and the prohibition of double taxation on the same turnover. The appellant argued that the revisional authority's order imposing resale tax was contrary to the legal principles established in the mentioned judgments.

In its analysis, the High Court referred to the legal position established by the apex court and the Division Bench, emphasizing that in cases of works contracts, the property in goods used passes to the owner upon incorporation in the building, resulting in a single transaction. The court highlighted the risk of double taxation and the violation of constitutional provisions if the turnover was taxed both at the subcontractor and contractor levels without a resale taking place.

Based on the legal principles and precedents cited, the High Court allowed both appeals, setting aside the impugned order of the revisional authority and restoring the order passed by the Appellate Commissioner. The court concluded that the imposition of resale tax on the same turnover, without a resale occurring, was unsustainable and contrary to established legal interpretations. Thus, the appellant's challenge was upheld, and the original order was reinstated, providing relief to the assessee in this tax dispute.