2020 (2) TMI 375 - SC - VAT and Sales Tax

Sales tax exemption or deferral of sales tax - Section 6 of the Karnataka Sales Tax Act, 1957 - HELD THAT - Acquisition is the act by which a person acquires property in a thing. Acquire is to become the owner of the property. One can, therefore, acquire a property either by voluntary or involuntary transfer. But the Sales Tax Act applies only to sale as defined in the Act. Under clause (ff) of Section 2 of the Act it is defied as a transfer of property. As purchase is only a different, aspect of sale, looked at from the stand point of the purchaser, and as the Act imposes tax at different points in respect of sales, having regard to the purpose of the sale, it is unreasonable to assume that the Legislature contemplated different categories of transactions when the taxable event is at the purchase point. Whether it is sale or purchase the transaction is the same. If it was a transfer inter vivos, in the case of a sale, it must equally be so in the case of a purchase. Context, consistency and avoidance of anomaly demand a restricted meaning. That it must only mean transfer is also made clear by the nature of the transactions excluded from the acquisition, namely, mortgage, hypothecation, charge or pledge-all of them belong to the species of transfer. We must, therefore, hold that the expression acquisition in clause (ff) of Section 2 of the Act means only transfer . The fact remains that the appellant, after recall of the entire decision, participated in the appeal proceedings before the Division Bench and argued the matter on merits. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Delay in filing appeals condonation
2. Interpretation of Industrial Policy, 1996 regarding sales tax exemption
3. Distinction between sale and purchase tax under the policy

Analysis:
1. The appellant argued against the High Court entertaining the appeals without condoning the delay in filing. The Supreme Court found the delay of 71 and 283 days justifiable with sufficient explanation from the respondent(s) and ordered condonation in the interest of justice.

2. The core issue revolved around the interpretation of the Industrial Policy, 1996, specifically regarding sales tax exemption. Referring to the decision in "Malnad Areca Processing and Marketing Limited vs. Deputy Commissioner of Commercial Taxes," the Court emphasized that the policy only provided for sales tax concession and incentives, not purchase tax exemption.

3. The appellant contended that the policy should extend benefits for purchase tax as well, citing the inclusion of their industry in Appendix-IV. However, the Court rejected this argument, stating that the essence of the policy remained unchanged, and inclusion in the appendix did not alter the nature of the benefits provided.

4. The Court also referenced the Constitution Bench decision in Devi Das Gopal Krishnan to distinguish between sale and purchase within the taxation framework. It highlighted that the State could levy tax at both sale and purchase points, emphasizing the distinction between the two transactions.

5. Another aspect addressed was a technical plea regarding the exercise of jurisdiction by the High Court in recalling a decision. The Court found that the appellant's participation in the proceedings after the recall precluded undoing the judgment, which aligned with the legal principles established in the Malnad case.

6. Ultimately, the Supreme Court dismissed the appeals, affirming the High Court's decision based on the interpretation of the Industrial Policy and the legal principles governing sales and purchase tax distinctions. All pending applications were also disposed of in light of the judgment.