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2014 (9) TMI 174 - HC - VAT and Sales TaxTax liability under section 6B of the Karnataka Sales Tax Act, 1957 - sale from one oil company to another oil company - levy of resale tax - fiction created by the third proviso to section 5(3)(a) - whether the order passed by the learned single judge holding that the assessee has no liability under section 6B of the Act is sustainable or not - Held that - On a reading of section 6B of the Act, it is obvious that the liability under this section is on all registered dealers and those who are liable to get registered in respect of their total turnover but excluding such part of the turnover in respect of which the dealer is liable to pay tax under sections 5A, 5B, 5C or 6 of the Act. That means the turnover which is liable for tax in these sections is kept out of the purview of the resale tax under section 6B of the Act. The argument on behalf of the assessee-dealers is that though they enjoy exemption either under the second proviso to section 5(3)(a) of the Act, as in the case of the writ petitioner, or under the third proviso of section 5(3)(a) of the Act, as in the case of the revision petitioner and the appellant in revision petition and sales tax appeal respectively, such turnover, i.e., part of the turnover of sales or transfer from one oil company to another oil company and turnover relating to sale of goods by manufacture and supply of goods to a brand owner to market under its brand name continues to be liable though they may get such exemption under section 5 of the Act. This argument is fallacious for the reason that under the proviso to section 5(3)(a) of the Act, tax liability is exonerated on such dealers and they neither pay tax nor are they liable in respect of such part of the turnover under section 5 of the Act. The other sub-sections and levy of tax under sections 5A, 5B, 5C or 6 of the Act being in the alternative, they are not liable under any of these other provisions also and therefore even in respect of such turnover which is a transfer from one oil company to another, supply of goods by manufacturer to a brand holder, it is nevertheless, forming part of the turnover for the purpose of section 6B of the Act is not acceptable. On perusal of the charging section, section 6B of the Act which is an independent charging section, it is quite clear as to the nature of levy and the situation when the levy is attracted. In fact, reliance placed by the learned Government Advocate on the judgment of the Supreme Court in the case of Municipal Council, Kota v. Delhi Cloth & General Mills Co. Ltd. 2001 (3) TMI 91 - SUPREME Court wherein the Supreme Court had an occasion to consider the nature of levy under that Act which was captioned dharmada , caption though was water tax is not tax on water nor was on its production and applying this ratio, holding that the real character or nature of levy alone is determinative and not nomenclature, motive or wrong reasons, etc., and had concluded that dharmada levy raised for specific purposes, it was, nevertheless, in the nature of an octroi and did not amount to double taxation and therefore was a levy in the competence of State Legislature. Liability under provisions of section 6B of the Act from the scope of which is excluded that part of the turnover which is liable to tax under sections 5, 5A, 5B, 5C and 6 of the Act and in the instant case we are concerned only with the dealers who are governed by the second and third provisos to section 5(3)(a) of the Act and in their hands there is no liability under section 5(3)(a) of the Act and therefore such part of the turnover which is not having liability under section 5(3)(a) of the Act in the hands of the dealers concerned, nevertheless, can, definitely, form subject-matter of levy of the tax under section 6B of the Act. If the fiction created under the proviso to section 5(3)(a) of the Act cannot be extended, then we notice that for the applicability of tenth proviso to section 6B of the Act and on the language of the tenth proviso, no case is made out for the assessee-dealer either about the amount paid or payable by the dealer as consideration for purchase of any of the goods in respect of which tax is leviable at the point of sale, in particular, in fact at the point of sale there is no liability and therefore payment of any tax at the point of sale in the hands of such dealers covered by second and third provisos to section 5(3)(a) of the Act does not arise. Therefore, tenth proviso to section 6B of the Act has no application to the assessees. The assessees are not liable to tax under section 5 of the Act as no liability was created in terms of the proviso to section 5(3)(a) of the Act, liability that matters for the purpose of section 6B of the Act being such part of the turnover in respect of which there is no liability under sections 5, 5A, 5B, 5C and 6 of the Act and there being no liability as noticed above, provisions of section 6B of the Act in respect of disputed turnover is very much attracted. - Decided against assessee.
Issues Involved:
1. Liability of the respondent under Section 6B of the Karnataka Sales Tax Act, 1957. 2. Interpretation of the term "resale tax" under Section 6B. 3. Applicability of the second and third provisos to Section 5(3)(a) of the Act. 4. Impact of the budget speech on the interpretation of Section 6B. 5. Justification for the levy of penalty under Section 12A(1A) of the Act. Detailed Analysis: 1. Liability of the Respondent under Section 6B of the Karnataka Sales Tax Act, 1957: The appeal was filed by the State of Karnataka against the order relieving the respondent from tax liability under Section 6B of the Act. The court examined whether the turnover of the respondent, an oil company, was liable for resale tax under Section 6B. The respondent argued that their sales to other oil companies did not constitute "resale" and thus were not liable under Section 6B. However, the court concluded that Section 6B imposes a tax on every registered dealer's turnover not liable under Sections 5, 5A, 5B, 5C, or 6, and the respondent's turnover fell within this scope. 2. Interpretation of the Term "Resale Tax" under Section 6B: The respondent contended that "resale tax" implied a tax only on second or subsequent sales, not on the first sale. The court, however, emphasized that the heading "resale tax" is not decisive. The substance of the charging section, which mandates tax on the total turnover excluding parts already taxed under other sections, was clear and unambiguous. The court held that the term resale tax does not restrict the levy to only subsequent sales. 3. Applicability of the Second and Third Provisos to Section 5(3)(a) of the Act: The respondent argued that the second proviso to Section 5(3)(a) exempts sales between oil companies from being deemed as the first sale. The court clarified that these provisos apply only to Section 5(3)(a) and do not extend to Section 6B. The fiction created by these provisos does not affect the independent charging section of Section 6B. Therefore, the turnover exempt under Section 5(3)(a) still forms part of the taxable turnover under Section 6B. 4. Impact of the Budget Speech on the Interpretation of Section 6B: The respondent relied on the Finance Minister's budget speech, which referred to the introduction of a resale tax to prepare for VAT. The court noted that while budget speeches can aid interpretation, they are not conclusive. The statutory language of Section 6B, which clearly defines the tax liability, prevails over the budget speech. The court held that the budget speech does not restrict the levy to only subsequent sales. 5. Justification for the Levy of Penalty under Section 12A(1A) of the Act: The respondent argued against the penalty imposed for non-disclosure of tax liability under Section 6B. The court found that the respondent had not disclosed the turnover for tax purposes under Section 6B and had claimed exemptions without proper declaration. The court upheld the penalty, noting that the respondent's conduct constituted wilful non-disclosure, justifying the penalty under Section 12A(1A). Conclusion: The court concluded that the respondent is liable to pay tax under Section 6B of the Karnataka Sales Tax Act, 1957, despite the term "resale tax" and the provisions of Section 5(3)(a). The budget speech does not alter the clear statutory language. The penalty for non-disclosure was justified. The appeal by the State was allowed, and the writ petition by the respondent was dismissed. The court also dismissed the related sales tax revision petition and appeals, affirming the Tribunal's orders.
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