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2016 (11) TMI 31 - SC - VAT and Sales TaxQuantum of surcharge - payment of Entry Tax u/s 3(3) of the Orissa Entry Tax Act, 1999 - surcharge calculated on the balance amount after deduction of the entry tax paid on the motor vehicles - whether the Surcharge under Section 5A of the OST Act is to be computed on the gross amount of sales tax or on the net amount of sales tax after setting of or deducting the amount of entry tax? - Section 5A of the OST Act - Rule 18 of the Odisha Entry Tax Rule, 1999 - Held that - It is well settled that an illustration given under the Rules does not exhaust the full content of the section which it illustrates but equally it can neither curtails nor expands its ambit. Further, surcharge is nothing but an additional tax and is payable on the sale of goods in the manner laid down for levy of surcharge. In view of the provisions contained in the OET Act, a dealer is not entitled for reduction of the amount of entry tax from the amount of tax payable before the levy of surcharge under Section 5A of the OST Act - on a conjoint reading of Section 5 of the OST Act, Section 4 of the OET Act and Rule 18 of the Rules, we are of the considered opinion that the amount of surcharge under Section 5A of the OST Act is to be levied before deducting the amount of entry tax paid by a dealer. Surchargr to be calculated on gross amount - appeal allowed - decided in favor of appellant revenue.
Issues Involved:
1. Legality of the High Court's judgment and order dated 05.01.2007. 2. Computation of surcharge under Section 5A of the Orissa Sales Tax Act, 1947 (OST Act). 3. Applicability of the Orissa Entry Tax Act, 1999 (OET Act) in the computation of surcharge. 4. Interpretation of Rule 18 of the Odisha Entry Tax Rules, 1999. 5. Clarification issued by the Finance Department, Government of Orissa, regarding surcharge calculation. Detailed Analysis: 1. Legality of the High Court's Judgment and Order Dated 05.01.2007: The appeals challenge the High Court's common judgment and order dated 05.01.2007, which allowed the petitions filed by the respondents. The Supreme Court considered whether the High Court's interpretation of the surcharge computation under the OST Act, in conjunction with the OET Act and its Rules, was legally valid. 2. Computation of Surcharge under Section 5A of the OST Act: Section 5A of the OST Act mandates that every dealer whose gross turnover exceeds rupees ten lakhs shall pay a surcharge at the rate of ten percent of the total amount of tax payable. The central question was whether this surcharge should be computed on the gross sales tax amount or the net sales tax amount after deducting the entry tax paid under the OET Act. 3. Applicability of the OET Act in the Computation of Surcharge: Section 4 of the OET Act provides for the reduction of the liability of a dealer under the Sales Tax Act to the extent of entry tax paid. However, the appellants argued that this reduction pertains only to the entry tax and does not affect the computation of surcharge under the OST Act. The Supreme Court agreed, stating that the provisions of the OET Act do not alter the mode of computation prescribed in Section 5A of the OST Act. 4. Interpretation of Rule 18 of the Odisha Entry Tax Rules, 1999: Rule 18 of the Rules provides an illustration for set-off of entry tax against sales tax. The respondents argued that the illustration supports their interpretation that surcharge should be calculated on the net amount after deducting the entry tax. However, the Supreme Court held that illustrations cannot modify the language of the statute and do not curtail or expand its ambit. The Court cited previous judgments to reinforce this principle. 5. Clarification Issued by the Finance Department, Government of Orissa: The Finance Department's letter dated 20.11.2001 clarified that surcharge under the OST Act should be calculated on the payable amount of tax due on the taxable turnover, not on the reduced sales tax amount after setting off the entry tax. The Supreme Court upheld this clarification, stating that surcharge is an additional tax and should be computed on the gross sales tax amount. Conclusion: The Supreme Court concluded that the surcharge under Section 5A of the OST Act should be computed on the gross amount of sales tax before deducting the entry tax paid under the OET Act. The impugned judgment and order dated 05.01.2007 by the High Court were set aside. The appeals were allowed, but each party was ordered to bear its own costs.
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