9911796707
TMI Blog2014 (9) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... oner, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. - STRP No. 112 of 2008 & STA Nos. 11, 12 of 2008 & Writ Appeal No. 1260 of 2006 - - - Dated:- 17-6-2013 - SHYLENDRA KUMAR D.V. AND INDRAKALA B.S., JJ. For the Appellant : T.N. Keshavamurthy, Surendran Thumbhoochetty, G. Rabinathan and M. Thirumalesh. For the Respondent : Smt. S. Sujatha, Additional Government Advocate,. ORDER:- The order of the court was made by D.V. SHYLENDRA KUMAR J.- This appeal under section 4 of the Karnataka High Court Act is by the State of Karnataka by its Finance Secretary and Office of the Deputy Commissioner of Commercial Taxes Department of the State Government and is directed against the order dated June 9, 2006 (Hindustan Petroleum Corporation Limited v. Deputy Commissioner of Commercial Taxe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e inspecting officer on noticing certain discrepancies, particularly the non-offer of the turnover for taxability under section 6B of the Act and other discrepancies, passed a provisional order covering the turnover, taxable under section 6B and as a result, passed an order on August 5, 2004 under section 28(6) of the Act. It appears in the normal course, the return also was processed and the assessment order came to be passed but we are not concerned with that here. At the same time, it should be noticed that the assessee was held liable to pay tax under section 6B of the Act and as earlier provisional assessment order in respect of this had already been done, no demand was raised but of course in the interregnum as the assessee had approached this court by filing a writ petition and the same was seized before this court, no demand was raised or issued on this part of the turnover relating to the turnover taxable under section 6B. The liability as determined under section 28(6) is the same as the liability determined under regular assessment order. 5. The respondent/dealer questioned the legality of these two orders by filing W.P. 34986 of 2004 (Hindustan Petroleum Corporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax on the turnover and therefore, there was no liability under section 6B on the petitioner/company and the reassessment order was wrong and be quashed. 8. Before the learned single judge, the writ petition was resisted by the State by filing statement of objections. It was sought to be contended that the caption given to the section cannot be a decisive factor, the liability in a taxing provision cannot be inferred by merely looking at the heading of the section but what is material is the contents of the charging section. Where the charging section creates a liability in a transaction and it is clear and unambiguous, the liability so created cannot be relieved by the heading of the section. 9. The writ petitioner would be liable to tax under section 5(3)(a) being the earliest of the dealers effecting sales of the product in the State but for the provisions of the second proviso to section 5(3)(a). Read with Explanation 2 to section 5(3)(a) and the fiction is not even considered to be the first sale of the sale by the earliest of the dealers and the second proviso to section 5(3)(a) takes care of the liability in its provision and as such there being no liability under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the learned single judge, the writ appeal is filed. 13. Before recording the submissions made at the Bar in this appeal, it is to be noticed that STRP No. 112 of 2008 and STA Nos. 11 and 12 of 2008 are also connected with this appeal and all these matters are heard together. 14. In STRP No. 112 of 2008, the sales tax revision petition under section 23(1) of the Act is by the assessee/dealer being aggrieved by the order passed by the Tribunal dated May 6, 2008 passed in STA No. 299 of 2006 dismissing the appeal of the assessee which was in turn directed against the first appellate authority which also dismissed the appeal of the assessee against the order of the three assessing authorities. The contention of the assessee that it was not liable to pay tax under section 6B in lieu for proviso to section 5(3)(a) of the Act. 15. The assessing authority had rejected such contention of the assessee that it was not liable to pay tax under section 6B in view of the fiction created by the third proviso to section 5(3)(a) and this had been successively affirmed by the first appellate authority and the Karnataka Appellate Tribunal and therefore, this revision petition by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee was liable to pay tax under section 6B for the relevant assessment year was restored. It is in this background the assessee/dealer being aggrieved has preferred these two appeals. 21. We have heard Smt. Sujatha, learned Additional Government Advocate appearing for the appellant/State in W.A. No. 1260 of 2006 and the respondent/authorities in the sales tax revision petition and in the sales tax appeals. 22. In the writ appeal the respondent/assessee-dealer is represented by Sri Rabinathan and Thirumalesh. The revision petitioner in STRP by the assessee is represented and argued by Sri Keshavamurthy-learned counsel and the sale tax appeal of the assessee, i.e., STA Nos. 11 of 2008 and 12 of 2008 are being argued by Sri Surendran Thumbhoochetty. 23. We have heard learned counsel for the State and learned counsel for the assessee at length. 24. Appearing on behalf of the appellant/State, Smt Sujatha-learned Government Advocate has by pointing out the provisions of section 6B of the Act and the provisions of the provisos to section 5(3)(a) of the Act, has vehemently urged that the scope and ambit of section 5(3)(a) has totally been misconstrued and has not been properly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of that part of the turnover of the dealer, it does not get itself carried to liability under section 6B of the Act and the fiction created though it is held as exemption is not extended to the turnover tax liable under section 6B and likewise, the operation of the provisions under section 5(3)(a) cannot be either claimed for the benefit or cannot be extended or telescoped into the provisions of section 6B is the argument. 26. Elaborate arguments are addressed by the learned Government Advocate with regard to the meaning and understanding of resale tax and in the background of the budget speech also. Submission is that on a careful reading of the budget speech, particularly paragraphs 170, 171 and 177 which is also relied upon by the learned counsel for the assessee, it is not necessarily indicated that the levy of resale tax is only in respect of a second or subsequent transaction and the mere fact that it was mentioned as one preceding the VAT, makes liable an assessee for a multiple point levy under VAT Act whereas the levy under the Act is only a single point levy under the Karnataka Sales Tax Act showing that the assessee is entitled to pass on the tax to the purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect as the relevant period which was subject-matter of assessment by the assessing officer was from April 1, 2002 to March 31, 2003. Even in law, if by subsequent notification an entry in the table indicating the rate at which the particular item should be taxed is omitted the effect is that there is tax liability till that date and it does not become operative from an earlier date just because the Finance Minister had made a budget speech proposing certain benefits. Whatever speech might have been made by the Finance Minister, ultimately, what matters is what part of the speech is translated into statutory provision and in what manner. 28. It is submitted that it is only a caption and need not give the real purpose of the object of the levy and at any rate cannot be a guiding factor for collecting the tax. In support of such submission, reliance is placed on the decision of the Supreme Court in the case of Municipal Council, Kota v. Delhi Cloth General Mills Co. Ltd. [2001] 123 STC 49 (SC); [2001] 249 ITR 560 (SC). 29. Placing reliance on the case of the judgment of the Supreme Court in Municipal Council, Kota [2001] 123 STC 49 (SC); [2001] 249 ITR 560 (SC), the submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment Advocate submits that by pointing out to the statutory provisions and based on such judgment of this court and the Supreme Court that at the first instance, a heading resale tax in itself is not conclusive; that on a reading of section 6B, the levy is not in any way indicated to be in respect of a transaction which is second or the subsequent transaction and not on the first transaction as the language of the section indicates that every registered dealer and every dealer who is liable to get himself registered under the Act and subject to the exceptions therein is liable to tax, the only mitigating factor being that the turnover in respect of the taxes under section 6B is attracted and levied, should not have been taxed or liable to tax under section 5, 5A, 5B, 5C or 6. It is submitted in this regard that the argument of the assessee that it is exempted but it is still liable to tax, is not an argument that can be accepted as the benefit of no tax liability in the case of the assessee or dealers covered by the second and third proviso to section 5(3)(a) is given to the assessee or dealers under the very taxing provision of the charging section 5 and not by any exemption no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the budget speech, particularly paragraph 177, it is clear that it is only a levy on resale. The background in which this section, i.e., resale tax was introduced is also highlighted and explained and as noticed by the Finance Minister in the budget speech. It is contended that sale by one oil company to another oil company is not a resale and at the best it can only be a sale and not a resale. 38. It is also submitted that though under the second proviso to section 5(3)(a) by a fiction, it is deemed to be as not a sale but the product continues to be liable for tax under section 5(3)(a) but for the second proviso to section 5(3)(a) which is in the nature of exemption provision but nevertheless continues to be liable under section 5(3)(a) and therefore, section 6B cannot operate on the turnover which is without dispute covered by the second proviso to section 5(3)(a). 39. In support of his submission that heading and marginal notes have a role to play in interpreting the provision, reliance is placed by Sri Rabinathan on the judgment of the Supreme Court in the case of K.P. Varghese v. Income-tax Officer reported in [1981] 131 ITR 597 (SC). Reliance is also placed on the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Union of India v. Azadi Bachao Andolan reported in [2003] 263 ITR 706 (SC) at page 741 also supports the case of the respondent/assessee and are squarely applicable to the present situation is his submission. He alternatively submitted that without prejudice to the contentions urged on the question of liability under section 6B of the Act; that in view of the exemption under the proviso 10 to section 6B of the Act; that proviso itself seeks to exclude the liability under this provision, in any situation mentioned therein and by the same analogy it is contended that liability continues under section 5 notwithstanding second proviso to section 5(3)(a) of the Act in case of a dealer of oil products. He submitted even the operation of 10th proviso in section 6B of the Act, liability does not arise under section 6B of the Act in the case of the respondent/assessee. 42. Sri Thirumalesh, learned counsel submits that levy of penalty was also not justified particularly as the assessee was not notified earlier; that though the learned single judge had not gone into this question, the assessee has raised this issue contention and therefore is definitely entitled to urge this issue in app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subserve the object of the Act, he submits that if a purposive interpretation is resorted in the case under section 6B of the Act also and the intention being to levy tax on resale transaction, a levy of tax in the case of sale transaction to a dealer who supplies the goods to a brand holder, the transaction being exempted in terms of third proviso to section 5(3)(a) of the Act that liability continuing, there is no liability under section 6B of the Act. All other arguments addressed on behalf of the respondent in Writ Appeal No. 1260 of 2006 by Sri Rabinathan are also adopted for the purpose of this assessee. 46. Elaborating his submission, Mr. Keshavamurthy points out that in a sale by a person like the petitioner/dealer to a brand holder by a fiction, it is deemed not a sale and the first sale is treated as a sale by the brand holder and if so, there is no sale in the eye of law and therefore, there cannot be a levy under the provisions of section 6B of the Act as there is no sale transaction at all in the hands of the petitioner to bear or constitute any part of the turnover liable to tax under section 6B of the Act. 47. Sri Surendran Thumbhoochetty, learned counsel appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellants in STA Nos. 11 of 2008 and 12 of 2008 submitted that a decision in the writ appeal in one way or the other relating to the liability of such dealers, who are covered by the second or third proviso to section 5(3)(a) of the Act in respect of liability to resale tax under section 6B of the Act equally governs the case of the revision petitioner and the appellant respectively and the argument is so far as liability of section 6B of the Act is concerned, it is one and the same, i.e., there is no tax liability under section 6B of the Act. 50. Section 6B of the Act is no doubt introduced by way of amendment to the Act and by the substitution of the earlier section 6B, which had in the name of turnover tax as per the State Act No. 5/2002 with effect from April 1, 2002. 51. This levy is a transitional levy, in the sense, it lasted only for three years, as it came to an end with the inception of the Karnataka Value Added Tax Act with effect from April 1, 2005. Budget speech of the Finance Minister on this aspect, reads as under: 177. VAT entails multi-point levy of tax at all points of production and distribution. The second and subsequent dealers in the trade channe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation that there will not be any levy of resale tax at the first transaction though it is called as resale tax. 55. Now, coming to the significance of the budget speech and the heading under marginal notes, etc., it is no doubt and as held by the Supreme Court in the two cases relied upon by learned counsel for the assessee-dealer, they are aides in construction. The question will arise only when there is a scope for construction and need for construction, etc. 56. Relevant portion of section 6B of the Act reads as under: 6B. Levy of resale tax.-(1) Every registered dealer and every dealer who is liable to get himself registered under sub-sections (1) and (2) of section 10 whose total turnover in a year is not less than the turnovers specified in the said sub-sections, shall be liable to pay tax at the rate of one and half per cent of such portion of the total turnover which is not liable to tax under sections 5, 5A, 5B, 5C or 6: ... Provided that no tax under this sub-section shall be payable on that part of such turnover which relates to,- (i) to (ix) . . . (x) the total amount paid or payable by the dealer as a consideration for the purchase of any of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven 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. A reading of relevant portion of section 5(3)(a) with its proviso as under: 5. Levy of tax on sale or purchase of goods.- (3) Notwithstanding anything contained in sub-section (1), the tax under this Act shall be levied- (a) in the case of the sale of any of the goods mentioned in column (2) of the Second Schedule, by the first or the earliest of successive dealers in the State who is liable to tax under this section, a tax at the rate specified in the corresponding entry of column (3) of the said Schedule, on the taxable turnover of sales of such dealer in each year relating to such goods: ... Provided also that in respect of sale of goods mentioned in (Serial Number 11A of Part F, Serial Number 12 of Part M and (Serial Number 5 of Part P and Serial Number 1 of Part K) of the Second Schedule, the sale by one oil company to another oil company shall not be deemed to be a sale by the first or the earliest of successive dealers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in AIR 1930 PC 129, holding that the 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. 61. Significance for our purpose is that in a taxing statute, the nomenclature or heading given is not conclusive, but to know as to what is substance of the matter, one has to go by the language of the charging section. 62. Smt S. Sujatha, learned Additional Government Advocate, on the other hand, has placed reliance on the decisions of this court in the case of Amberkar Pre Stressed Products [2010] 32 VST 444 (Karn) and submitted that irrespective of the budget speech, what matters ultimately is what part of the speech is translated into statutory provision and submission that budget speech though it was called resale tax , and ultimately section 6B was legislated with the caption levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acceptable argument as we find that section 6B of the Act is governed by the provisos appended to this section and the proviso to section 5(3) (a) of the Act are only for the purpose of liability under section 5 of the Act and not for all other purposes. 70. The learned single judge in allowing the writ petition has proceeded on the premise that the position of law and the facts are as in the case of Madhur Trading Co. [1993] 90 STC 537 (Karn), holding that in view of the fiction deeming transaction to be not a sale under second and third proviso in respect of situations covered by it, the turnover even for the purpose of section 6B of the Act is not a sale and therefore no tax is leviable, etc. 71. In our considered opinion, the learned single judge was in error in following the judgment of the Division Bench of this court in the case of Madhur Trading Co. [1993] 90 STC 537 (Karn). In fact, the distinction made in respect of the very decision by subsequent single Bench decision of this court in the case of Universal Transformers [2003] 133 STC 356 (Karn) where distinction was made for the purpose of section 6B of the Act, turnover tax as it existed then and for the levy get ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmission is that exemption provision does not extinguish the liability and it is only because of the liability exemption is necessary. In support of this proposition, strong reliance is placed on the judgment of the Supreme Court in the case of Associated Cement Companies Ltd. v. State of Bihar reported in [2004] 137 STC 389 (SC). 76. This is a case which arose under the provisions of the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale therein Act and by exemptions provided for in terms of the provisions of Industrial Policy of the Bihar State, providing for exemption of tax in certain situations. The exemption was in respect of such of those new units or existing units which have come up with additional production capacity with regard to sales tax and equally applicable to other taxes like entry tax, etc. There was also deduction allowed from out of sales tax liability from out of the tax paid under the said Act, etc. 77. In this case, disallowance of deduction from the sales tax liability by the authorities and as had been approved by the High Court was reversed by the Supreme Court holding that exemption given in respect of that part of the turnov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not sale in the hands of the first dealer and therefore there is no charge. This case is distinguishable from the case decided by the Supreme Court in the case of Associated Cement Companies Ltd. [2004] 137 STC 389 (SC) where it was a case of exemption notification independently. 80. It is in this background that we have to hold that the 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. 81. One another argument on behalf of the assessee-dealer is that on the same analogy and in view of the tenth proviso to section 6B of the Act also, the assessee is not liable to tax under section 6B of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and assessment was reopened and assessee had in fact filed return earlier and had disclosed this turnover, but had claimed exemption and this was not in any way disputed by the Department; that the turnover had been subjectmatter of examination though not for the purpose of levy, under section 6B of the Act, but for other purposes under the very enactment and therefore it is submitted that there is no wilful default or suppression within the meaning of the provisions of section 12A(1A) of the Act. 86. On the other hand, learned Additional Government Advocate has pointed out to the preamble to the levy of penalty in the order of the assessing authority and it is noticed that the assessee had not declared the turnover for the purpose of levy under section 6B of the Act and in fact no monthly statements showed the subject turnover and claimed any exemption; that it was not disclosed at all; that the assessing authority had also recorded a finding that books of accounts of the assessee for the assessment year 2002-03 which was produced for examination also did not disclose transaction of sale of goods taxable under section 5 of the Act. The correctness of the statement is dispu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The disputed turnover being not taxed either under section 5 or under sections 5A, 5B, 5C or 6 of the Act, can constitute very much part of the taxable turnover under section 6B of the Act and therefore liability arises. 90. The argument of the assessee that tenth proviso operates on them is also rejected by holding that the tenth proviso has no application to the writ petitioner-dealer or the dealers in the revision petition and the sales tax appeal. 91. In the result, Writ Appeal No. 1260 of 2006 is allowed. The impugned order passed by the learned single judge is set aside and the writ petition is dismissed. Parties are left to bear their own costs. 92. Substantial question of law for the examination of which ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
