2016 (3) TMI 1203 - SC - VAT and Sales Tax

Valuation - calculation of sales tax - entry tax - includibility - whether the entry tax amounts collected separately from the customers in the sale bills and paid to the Government will form part of turnover so as to be subjected to levy of sales tax under the KST Act? - Held that - when a registered dealer is authorised to collect any amount by way of tax that tax shall not form part of turnover - when it is found that the appellant is a registered dealer it would entail him to collect the entry tax and such an entry tax cannot be treated as forming part of the turnover - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of provisions of Karnataka Sales Tax Act and Karnataka Tax on Entry of Goods Act regarding treatment of entry tax in sales tax assessment.

Analysis:
The appellant, a dealer of paints registered under Karnataka Sales Tax Act, claimed that entry tax collected separately from customers should not be part of turnover for sales tax assessment. However, the Assessing Officer and the High Court included the entry tax in turnover for sales tax levy. The Supreme Court referred to Section 3A of Karnataka Tax on Entry of Goods Act, stating that when a registered dealer collects tax, it should not form part of turnover. The Court cited precedents to support this principle, emphasizing that if a dealer is authorized by law to pass on tax to the purchaser, it does not form part of consideration for tax levy. The Court highlighted that the High Court accepted this principle but misinterpreted Section 3A, which actually authorizes registered dealers to collect entry tax. The Court cited a previous judgment to support this interpretation and concluded that the appellant, being a registered dealer, should be allowed to collect entry tax without it forming part of turnover. The appeal was allowed, and the impugned judgment was set aside.